[Federal Register Volume 73, Number 223 (Tuesday, November 18, 2008)]
[Rules and Regulations]
[Pages 68502-69380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-26212]



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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, 416, and 419



Medicare Program: Changes to the Hospital Outpatient Prospective 
Payment System and CY 2009 Payment Rates; Changes to the Ambulatory 
Surgical Center Payment System and CY 2009 Payment Rates; Hospital 
Conditions of Participation: Requirements for Approval and Re-Approval 
of Transplant Centers To Perform Organ Transplants--Clarification of 
Provider and Supplier Termination Policy Medicare and Medicaid 
Programs: Changes to the Ambulatory Surgical Center Conditions for 
Coverage; Final Rule

  Federal Register / Vol. 73, No. 223 / Tuesday, November 18, 2008 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 416, and 419

[CMS-1404-FC; CMS-3887-F; CMS-3835-F-1]
RIN 0938-AP17; RIN 0938-AL80; RIN 0938-AH17


Medicare Program: Changes to the Hospital Outpatient Prospective 
Payment System and CY 2009 Payment Rates; Changes to the Ambulatory 
Surgical Center Payment System and CY 2009 Payment Rates; Hospital 
Conditions of Participation: Requirements for Approval and Re-Approval 
of Transplant Centers To Perform Organ Transplants--Clarification of 
Provider and Supplier Termination Policy Medicare and Medicaid 
Programs: Changes to the Ambulatory Surgical Center Conditions for 
Coverage

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

ACTION: Final rule with comment period; final rules.

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SUMMARY: This final rule with comment period revises the Medicare 
hospital outpatient prospective payment system to implement applicable 
statutory requirements and changes arising from our continuing 
experience with this system, and to implement a number of changes made 
by the Medicare Improvement for Patients and Providers Act of 2008. In 
this final rule with comment period, we describe the changes to the 
amounts and factors used to determine the payment rates for Medicare 
hospital outpatient services paid under the prospective payment system. 
These changes are applicable to services furnished on or after January 
1, 2009.
    In addition, this final rule with comment period updates 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 final rule with 
comment period, we set forth the applicable relative payment weights 
and amounts for services furnished in ASCs, specific HCPCS codes to 
which these changes apply, and other pertinent ratesetting information 
for the CY 2009 ASC payment system. These changes are applicable to 
services furnished on or after January 1, 2009.
    In this document, we are responding to public comments on a 
proposed rule and finalizing updates to the ASC Conditions for Coverage 
to reflect current ASC practices and new requirements in the conditions 
to promote and protect patient health and safety.
    Further, this final rule also clarifies policy statements included 
in responses to public comments set forth in the preamble of the March 
30, 2007 final rule regarding the Secretary's ability to terminate 
Medicare providers and suppliers (that is, transplant centers) during 
an appeal of a determination that affects participation in the Medicare 
program.

DATES: Effective Dates: The provisions of this rule are effective 
January 1, 2009, except for amendments to 42 CFR 416.2, 416.41 through 
416.43, and 416.49 through 416.52 are effective on May 18, 2009. The 
policy clarification set forth in section XVIII of the preamble of this 
rule is effective December 18, 2008.
    Comment Period: We will consider comments on the payment 
classifications assigned to HCPCS codes identified in Addenda B, AA, 
and BB to this final rule with comment period with the ``NI'' comment 
indicator, and on other areas specified throughout this rule, received 
at one of the addresses provided in the ADDRESSES section, no later 
than 5 p.m. EST on December 29, 2008.
    Application Deadline--New Class of New Technology Intraocular 
Lenses: Request for review of applications for a new class of new 
technology intraocular lenses must be received by 5 p.m. EST on March 
2, 2009.

ADDRESSES: In commenting, please refer to file code CMS-1404-FC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions for 
``Comment or Submission'' and enter the file code 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-FC, 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-FC, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses:
    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.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.
    Applications for a new class of new technology intraocular lenses: 
Requests for review of applications for a new class of new technology 
intraocular lenses must be sent by regular mail to: ASC/NTIOL, Division 
of Outpatient Care, Mailstop C4-05-17, Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FOR FURTHER INFORMATION CONTACT: Alberta Dwivedi, (410) 786-0378, 
Hospital outpatient prospective payment issues.
    Dana Burley, (410) 786-0378, Ambulatory surgical center issues.
    Suzanne Asplen, (410) 786-4558, Partial hospitalization and 
community mental health center issues.
    Sheila Blackstock, (410) 786-3502, Reporting of quality data 
issues.
    Jacqueline Morgan, (410) 786-4282, Joan A. Moliki, (410) 786-5526, 
Steve Miller, (410) 786-6656, and Jeannie Miller, (410) 786-3164, 
Ambulatory

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surgical center Conditions for Coverage issues.
    Marcia Newton, (410) 786-5265, and Karen Tritz, (410) 786-8021, 
Clarification of provider and supplier termination policy 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 Final Rule With Comment 
Period

AAAASF American Association for Accreditation of Ambulatory Surgical 
Facilities
AAAHC Accreditation Association for Ambulatory Health Care
ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AMA American Medical Association
AMP Average manufacturer price
AOA American Osteopathic Association
APC Ambulatory payment classification
ASC Ambulatory Surgical Center
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 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, Public Law 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
CfC Condition for Coverage
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, Public Law 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, Public Law 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, 
Public Law 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
IPPE Initial preventive physical examination
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, Public Law 109-
432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public 
Law 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
OIG [HHS] Office of the Inspector General
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
QAPI Quality Assessment and Performance Improvement
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, Public Law 
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., XVI., XVII., and XIX. through XXIII. of this final rule with 
comment period and in Addenda A, B, C (Addendum C is available on the 
Internet only; we refer readers to section XIX. of this final rule with 
comment period), D1, D2, E, L, and M to this final rule with comment 
period. The provisions related to the revised ASC payment system are 
included in sections XV. and XIX. through XXIII. of this final rule 
with comment period and in Addenda AA, BB, DD1, DD2, and EE

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to this final rule with comment period. (Addendum EE is available on 
the Internet only; we refer readers to section XIX. of this final rule 
with comment period.)
    In this document, we also address changes to the ASC Conditions for 
Coverage (CfCs). The provisions relating to the ASC CfCs are included 
in sections XV., XIX., XX.B., and XXIII. of this document. In addition, 
in this document, we clarify policy regarding the Secretary's ability 
to terminate Medicare providers and suppliers (in this case, transplant 
centers) during an appeal of a determination that affects participation 
in the Medicare Program. This clarification is included in section 
XVIII. of this document.

Table of Contents

I. Background for the OPPS
    A. Legislative and Regulatory Authority for the Hospital 
Outpatient Prospective Payment System
    B. Excluded OPPS Services and Hospitals
    C. Prior Rulemaking
    D. APC Advisory Panel
    1. Authority of the APC Panel
    2. Establishment of the APC Panel
    3. APC Panel Meetings and Organizational Structure
    E. Provisions of the Medicare, Medicaid, and SCHIP Extension Act 
of 2007
    1. Increase in Physician Payment Update
    2. Extended Expiration Date for Cost-Based OPPS Payment for 
Brachytherapy Sources and Therapeutic Radiopharmaceuticals
    3. Alternative Volume Weighting in Computation of Average Sales 
Price (ASP) for Medicare Part B Drugs
    4. Extended Expiration Date for Certain IPPS Wage Index 
Geographic Reclassification and Special Exceptions
    F. Provisions of the Medicare Improvements for Patients and 
Providers Act of 2008
    1. Improvements to Coverage of Preventive Services
    2. Extended Expiration Date for Certain IPPS Wage Index 
Geographic Reclassifications and Special Exceptions
    3. Increase in Physician Payment Update
    4. Extension of Expiration Date for Cost-Based OPPS Payment for 
Brachytherapy and Therapeutic Radiopharmaceuticals
    5. Extension and Expansion of the Medicare Hold Harmless 
Provision Under the OPPS for Certain Hospitals
    G. Summary of the Major Contents of the CY 2009 OPPS/ASC 
Proposed Rule
    1. Updates Affecting OPPS Payments
    2. OPPS Ambulatory Payment Classification (APC) Group Policies
    3. OPPS Payment for Devices
    4. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals
    5. Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    6. OPPS Payment for Brachytherapy Sources
    7. OPPS Payment for Drug Administration Services
    8. OPPS Payment for Hospital Outpatient Visits
    9. Payment for Partial Hospitalization Services
    10. Procedures That Will Be Paid Only as Inpatient Services
    11. OPPS Nonrecurring Technical and Policy Clarifications
    12. OPPS Payment Status and Comment Indicators
    13. OPPS Policy and Payment Recommendations
    14. Update of the Revised Ambulatory Surgical Center (ASC) 
Payment System
    15. Reporting Quality Data for Annual Payment Rate Updates
    16. Healthcare-Associated Conditions
    17. Regulatory Impact Analysis
    H. Public Comments Received in Response to the CY 2009 OPPS/ASC 
Proposed Rule
    I. Public Comments Received in Response to the November 27, 2007 
OPPS/ASC Final Rule With Comment Period
    J. Proposed Rule on ASC Conditions for Coverage
    K. Medicare Hospital Conditions of Participation: Requirements 
for Approval and Re-Approval of Transplant Programs To Perform 
Transplants--Clarification of Provider and Supplier Termination 
Policy
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Use of Single and Multiple Procedure Claims
    c. Calculation of CCRs
    (1) Development of the CCRs
    (2) Charge Compression
    2. Calculation of Median Costs
    a. Claims Preparations
    b. Splitting Claims and Creation of ``Pseudo'' Single Claims
    (1) Splitting Claims
    (2) Creation of ``Pseudo'' Single Claims
    c. Completion of Claim Records and Median Cost Calculations
    d. 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. 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)
    (5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    3. Calculation of OPPS Scaled Payment Weights
    4. Changes to Packaged Services
    a. Background
    b. Service-Specific Packaging Issues
    (1) Package Services Addressed by APC Panel Recommendations
    (2) Intravenous Immune Globulin (IVIG) Preadministration-Related 
Services
    (3) Other Service-Specific Packaging Issues
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default CCRs
    E. OPPS Payments to Certain Rural and Other Hospitals
    1. Hold Harmless Transitional Payment Changes Made by Public Law 
110-275 (MIPPA)
    2. Adjustment for Rural SCHs Implemented in CY 2006 Related to 
Public Law 108-173 (MMA)
    F. Hospital Outpatient Outlier Payments
    1. Background
    2. Outlier Calculation
    3. Outlier Reconciliation
    G. Calculation of an Adjusted Medicare Payment from the National 
Unadjusted Medicare Payment
    H. Beneficiary Copayments
    1. Background
    2. Copayment Policy
    3. Calculation of an Adjusted Copayment Amount for an APC Group
III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New HCPCS and CPT Codes
    1. Treatment of New HCPCS Codes Included in the April and July 
Quarterly OPPS Updates for CY 2008
    2. Treatment of New Category I and III CPT Codes and Level II 
HCPCS Codes
    B. OPPS Changes--Variations Within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. Exceptions to the 2 Times Rule
    C. New Technology APCs
    1. Background
    2. Movement of Procedures from New Technology APCs to Clinical 
APCs
    D. OPPS APC-Specific Policies
    1. Apheresis and Stem Cell Processing Services
    a. Low Density Lipoprotein (LDL) Apheresis (APC 0112)
    b. Bone Marrow and Stem Cell Processing Services (APC 0393)
    2. Genitourinary Procedures
    a. Implant Injection for Vesicoureteral Reflex (APC 0163)
    b. Laparoscopic Ablation of Renal Mass (APC 0132)
    c. Percutaneous Renal Cryoablation (APC 0423)
    d. Magnetic Resonance Guided Focused Ultrasound (MRgFus) 
Ablation of Uterine Fibroids (APC 0067)
    e. Prostatic Thermotherapy (APC 0429)
    3. Nervous System Procedures
    a. Magnetoencephalography (MEG) (APC 0067)
    b. Chemodenervation (APC 0204)
    4. Ocular Procedures
    a. Suprachoroidal Delivery of Pharmacologic Agent (APC 0237)
    b. Scanning Opthalmic Imaging (APC 0230)
    5. Orthopedic Procedures
    a. Closed Treatment Fracture of Finger/Toe/Trunk (APCs 0129, 
0138, and 0139)

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    b. Arthroscopic and Other Orthopedic Procedures (APCs 0041 and 
0042)
    c. Surgical Wrist Procedures (APCs 0053 and 0054)
    d. Intercarpal or Carpometacarpal Arthroplasty (APC 0047)
    e. Insertion of Posterior Spinous Process Distraction Device 
(APC 0052)
    6. Radiation Therapy Services
    a. Proton Beam Therapy (APCs 0664 and 0667)
    b. Implantation of Interstitial Devices (APC 0310)
    c. Stereotactic Radiosurgery (SRS) Treatment Delivery Services 
(APCs 0065, 0066, and 0067)
    7. Other Procedures and Services
    a. Negative Pressure Wound Therapy (APC 0013)
    b. Endovenous Ablation (APCs 0091 and 0092)
    c. Unlisted Antigen Skin Testing (APC 0341)
    d. Home International Normalized Ratio (INR) Monitoring (APC 
0607)
    e. Mental Health Services (APCs 0322, 0323, 0324, and 0325)
    f. Trauma Response Associated With Hospital Critical Care 
Services (APC 0618)
IV. OPPS Payment for Devices
    A. Pass-Through Payments for Devices
    1. Expiration of Transitional Pass-Through Payments for Certain 
Devices
    a. Background
    b. Final Policy
    2. Provisions for Reducing Transitional Pass-Through Payments To 
Offset Costs Packaged Into APC Groups
    a. Background
    b. Final Policy
    B. Adjustment to OPPS Payments for No Cost/Full Credit and 
Partial Credit Devices
    1. Background
    2. APCs and Devices Subject to the Adjustment Policy
V. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Drugs and Biologicals With Expiring Pass-Through Status in CY 
2008
    3. Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2009
    4. Reduction of Transitional Pass-Through Payments for 
Diagnostic Radiopharmaceuticals To Offset Costs Packaged Into APC 
Groups
    B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
Without Pass-Through Status
    1. Background
    2. Criteria for Packaging Drugs, Biologicals, and 
Radiopharmaceuticals
    a. Background
    b. Drugs, Biologicals, and Therapeutic Radiopharmaceuticals
    c. Payment for Diagnostic Radiopharmaceuticals and Contrast 
Agents
    3. Payment for Drugs and Biologicals Without Pass-Through Status 
That Are Not Packaged
    a. Payment for Specified Covered Outpatient Drugs
    b. Payment Policy
    c. Payment for Blood Clotting Factors
    4. Payment for Therapeutic Radiopharmaceuticals
    a. Background
    b. Payment Policy
    5. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, but Without OPPS Hospital 
Claims Data
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Estimate of Pass-Through Spending
VII. OPPS Payment for Brachytherapy Sources
    A. Background
    B. OPPS Payment Policy
VIII. OPPS Payment for Drug Administration Services
    A. Background
    B. Coding and Payment for Drug Administration Services
IX. OPPS Payment for Hospital Outpatient Visits
    A. Background
    B. Policies for Hospital Outpatient Visits
    1. Clinic Visits: New and Established Patient Visits
    2. Emergency Department Visits
    3. Visit Reporting Guidelines
X. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update
    C. Policy Changes
    1. Policy to Deny Payment for Low Intensity Days
    2. Policy to Strengthen PHP Patient Eligibility
    3. Partial Hospitalization Coding Update
    D. Separate Threshold for Outlier Payments to CMHCs
XI. Procedures That Will Be Paid Only as Inpatient Procedures
    A. Background
    B. Changes to the Inpatient List
XII. OPPS Nonrecurring Technical and Policy Changes and 
Clarifications
    A. Physician Supervision of HOPD Services
    B. Reporting of Pathology Services for Prostrate Saturation 
Biopsy
    C. Changes to the Initial Preventive Physical Examination (IPPE)
    D. Reporting of Wound Care Services
    E. Standardized Cognitive Performance Testing
XIII. OPPS Payment Status and Comment Indicators
    A. OPPS Payment Status Indicator Definitions
    1. Payment Status Indicators To Designate Services That Are Paid 
Under the OPPS
    2. Payment Status Indicators To Designate Services That Are Paid 
Under a Payment System Other Than the OPPS
    3. Payment Status Indicators To Designate Services That Are Not 
Recognized Under the OPPS but That May Be Recognized by Other 
Institutional Providers
    4. Payment Status Indicators To Designate Services That Are Not 
Payable by Medicare on Outpatient Claims
    B. 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. Ambulatory Surgical Centers: Updates and Revisions to the 
Ambulatory Surgical Center Conditions for Coverage and Updates to 
the Revised Ambulatory Surgical Center Payment System
    A. Legislative and Regulatory Authority for the ASC Conditions 
for Coverage
    B. Updates and Revisions to the ASC Conditions for Coverage
    1. Background
    2. Provisions of the Proposed and Final Regulations
    a. Definitions (Sec.  416.2)
    b. Specific Conditions for Coverage
    (1) Condition for Coverage: Governing Body and Management (Sec.  
416.41)
    (2) Condition for Coverage: Quality Assessment and Performance 
Improvement (QAPI) (Sec.  416.43)
    (3) Condition for Coverage: Laboratory and Radiologic Services 
(Sec.  416.49)
    (4) Condition for Coverage: Patients Rights (Sec.  416.50)
    (5) Condition for Coverage: Infection Control (Sec.  416.51)
    (6) Condition for Coverage: Patient Admission, Assessment and 
Discharge (Sec.  416.52)
    c. Comments Outside the Scope of the Proposed Rule
    C. Updates of the Revised ASC Payment System
    1. Legislative Authority for the ASC Payment System
    2. Prior Rulemaking
    3. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC Covered Surgical Procedures and Covered Ancillary 
Services
    D. Treatment of New Codes
    1. Treatment of New Category I and III CPT Codes and Level II 
HCPCS Codes
    2. Treatment of New Level II HCPCS Codes Implemented in April 
and July 2008
    E. Update to the List of ASC Covered Surgical Procedures and 
Covered Ancillary Services
    1. Covered Surgical Procedures
    a. Additions to the List of ASC Covered Surgical Procedures
    b. Covered Surgical Procedures Designated as Office-Based
    (1) Background
    (2) Changes to Covered Surgical Procedures Designated as Office-
Based for CY 2009
    c. Covered Surgical Procedures Designated as Device-Intensive
    (1) Background
    (2) Changes to List of Covered Surgical Procedures Designated as 
Device-Intensive for CY 2009
    d. Surgical Procedures Removed from the OPPS Inpatient List for 
CY 2009

[[Page 68506]]

    2. Covered Ancillary Services
    F. ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
    1. Payment for Covered Surgical Procedures
    a. Background
    b. Update to ASC Covered Surgical Procedure Payment Rates for CY 
2009
    c. Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    2. Payment for Covered Ancillary Services
    a. Background
    b. Payment for Covered Ancillary Services for CY 2009
    G. New Technology Intraocular Lenses (NTIOLs)
    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
    4. Payment Adjustment
    5. ASC Payment for Insertion of IOLs
    6. Announcement of CY 2009 Deadline for Submitting Requests for 
CMS Review of Appropriateness of ASC Payment for Insertion of an 
NTIOL Following Cataract Surgery
    H. ASC Payment and Comment Indicators
    1. Background
    2. ASC Payment and Comment Indicators
    I. Calculation of the ASC Conversion Factor and ASC Payment 
Rates
    1. Background
    2. 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 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
    3. Reporting Hospital Inpatient Quality Data for Annual Payment 
Update
    B. Hospital Outpatient Measures for CY 2009
    C. Quality Measures for CY 2010 and Subsequent Calendar Years 
and the Process To Update Measures
    1. Quality Measures for CY 2010 Payment Determinations
    2. Process for Updating Measures
    3. Possible New Quality Measures for CY 2011 and Subsequent 
Calendar Years
    D. Payment Reduction for Hospitals That Fail To Meet the HOP 
QDRP Requirements for the CY 2009 Payment Update
    1. Background
    2. 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 HOPD 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. Data Validation Requirements for CY 2010
    b. Alternative Data Validation Approaches for CY 2011
    F. Publication of HOP QDRP Data
    G. HOP QDRP Reconsideration and Appeals Procedures
    H. Reporting of ASC Quality Data
    I. FY 2010 IPPS Quality Measures under the RHQDAPU Program
XVII. Healthcare-Associated Conditions
    A. Background
    B. Expanding the Principles 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. Medicare Hospital Conditions of Participation: Requirements 
for Approval and Re-Approval of Transplant Programs To Perform 
Transplants; Clarification of Provider and Supplier Termination 
Policy
XIX. Files Available to the Public Via the Internet
    A. Information in Addenda Related to the CY 2009 Hospital OPPS
    B. Information in Addenda Related to the CY 2009 ASC Payment 
System
XX. Collection of Information Requirements
    A. Legislative Requirement for Solicitation of Comments
    B. ASC Conditions for Coverage Collections
    1. Condition for Coverage--Governing Body and Management (Sec.  
416.41)
    2. Condition for Coverage--Quality Assessment and Performance 
Improvement (Sec.  416.43)
    3. Condition for Coverage--Patient Rights (Sec.  416.50)
    4. Condition for Coverage--Patient Admission, Assessment and 
Discharge (Sec.  416.52)
    5. Revisions to the CfCs on Infection Control in This Final Rule 
(Sec.  416.51)
    C. Associated Information Collections Not Specified in 
Regulatory Text
XXI. Waiver of Proposed Rulemaking
XXII. Response to Comments
XXIII. 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 Final Rule With Comment 
Period
    1. Alternatives Considered
    a. Alternatives Considered for Payment of Multiple Imaging 
Procedures
    b. Alternatives Considered for the HOP QDRP Requirements for the 
CY 2009 Payment Update
    c. Alternatives Considered Regarding OPPS Cost Estimation for 
Relative Payment Weights
    2. Limitation of Our Analysis
    3. Estimated Effects of This Final Rule With Comment Period on 
Hospitals
    4. Estimated Effects of This Final Rule With Comment Period on 
CMHCs
    5. Estimated Effects of This Final Rule With Comment Period on 
Beneficiaries
    6. Conclusion
    7. Accounting Statement
    C. Effects of ASC Payment System Changes in This Final Rule With 
Comment Period
    1. Alternatives Considered
    a. Office-Based Procedures
    b. Covered Surgical Procedures
    2. Limitations of Our Analysis
    3. Estimated Effects of This Final Rule With Comment Period on 
ASCs
    4. Estimated Effects of This Final Rule With Comment Period on 
Beneficiaries
    5. Conclusion
    6. Accounting Statement
    D. Effects of Final Requirements for Reporting of Quality Data 
for Annual Hospital Payment Update
    E. Effects of ASC Conditions for Coverage Changes in This Final 
Rule
    1. Effects on ASCs
    a. Effects of the Governing Body and Management Provision
    b. Effects of the QAPI Provision
    c. Effects of the Laboratory and Radiologic Services Provision
    d. Effects of the Patient Rights Provision
    e. Effects of the Infection Control Provision
    f. Effects of the Patient Admission, Assessment and Discharge 
Provision
    2. Alternatives Considered
    a. Alternatives to the Governing Body and Management Provision
    b. Alternatives to the QAPI Provision
    c. Alternatives to the Patient Rights Provision
    d. Alternatives to the Discharge Provision
    3. Conclusion
    F. Executive Order 12866
Regulation Text
Addenda
    Addendum A--OPPS APCs for CY 2009
    Addendum AA--ASC Covered Surgical Procedures for CY 2009 
(Including Surgical Procedures for Which Payment Is Packaged)
    Addendum B--OPPS Payment by HCPCS Code for CY 2009
    Addendum BB--ASC Covered Ancillary Services Integral to Covered 
Surgical Procedures for CY 2009 (Including Ancillary Services for 
Which Payment Is Packaged)
    Addendum D1--OPPS Payment Status Indicators
    Addendum DD1--ASC Payment Indicators
    Addendum D2--OPPS Comment Indicators
    Addendum DD2--ASC Comment Indicators
    Addendum E--HCPCS Codes That Would Be Paid Only as Inpatient 
Procedures for CY 2009

[[Page 68507]]

    Addendum EE--Surgical Procedures Excluded from Payment in ASCs
    Addendum L--Out-Migration Adjustment
    Addendum M--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. The Medicare Prescription 
Drug, Improvement, and Modernization Act (MMA) of 2003 (Pub. L. 108-
173) also amended Section 1833(t) of the Act. The Deficit Reduction Act 
(DRA) of 2005 (Pub. L. 109-171), enacted on February 8, 2006, also made 
additional changes in the OPPS. In addition, the Medicare Improvements 
and Extension Act under Division B of Title I of the Tax Relief and 
Health Care Act (MIEA-TRHCA) of 2006 (Pub. L. 109-432), enacted on 
December 20, 2006, made further changes in the OPPS. 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. We also note that the Medicare Improvements for Patients and 
Providers Act (MIPPA) of 2008 (Pub. L. 110-275), enacted on July 15, 
2008, made further changes to the OPPS. A discussion of these changes 
related to the MMSEA are included in sections I.E., II.C., V., and VII. 
of this final rule with comment period and those related to the MIPPA 
are included in sections I.F., II.C., II.E.1., V., VII., and XII.C.
    The OPPS was first implemented for services furnished on or after 
August 1, 2000. Implementing regulations for the OPPS are located at 42 
CFR Part 419.
    Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the ambulatory payment 
classification (APC) group to which the service is assigned. We use the 
Healthcare Common Procedure Coding System (HCPCS) codes (which include 
certain Current Procedural Terminology (CPT) codes) and descriptors to 
identify and group the services within each APC group. The OPPS 
includes payment for most hospital outpatient services, except those 
identified in section I.B. of this final rule with comment period. 
Section 1833(t)(1)(B)(ii) of the Act provides for Medicare payment 
under the OPPS for hospital outpatient services designated by the 
Secretary (which includes partial hospitalization services furnished by 
community mental health centers (CMHCs)) and hospital outpatient 
services that are furnished to inpatients who have exhausted their Part 
A benefits, or who are otherwise not in a covered Part A stay. Section 
611 of Public Law 108-173 added provisions for Medicare coverage for 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 Public Law 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

[[Page 68508]]

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 Public Law 
108-173 and Public Law 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, 
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.
    On July 18, 2008, we issued in the Federal Register (73 FR 41416) a 
proposed rule for the CY 2009 OPPS/ASC payment system to implement 
statutory requirements and changes arising from our continuing 
experience with both systems. Subsequent to issuance of the CY 2009 
OPPS/ASC proposed rule, we published in the Federal Register on August 
11, 2008 a correction notice (73 FR 46575) to replace Table 30 included 
the CY 2009 OPPS/ASC proposed rule.

D. APC Advisory Panel

1. Authority of the APC Panel
    Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 
the BBRA, and redesignated by section 202(a)(2) of the BBRA, requires 
that we consult with an outside panel of experts to review the clinical 
integrity of the payment groups and their weights under the OPPS. The 
Act further specifies that the panel will act in an advisory capacity. 
The Advisory Panel on Ambulatory Payment Classification (APC) Groups 
(the APC Panel), discussed under section I.D.2. of this final rule with 
comment period, fulfills these requirements. The APC Panel is not 
restricted to using data compiled by CMS, and 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 (currently employed full-time, 
not as consultants, in their respective areas of expertise) subject to 
the OPPS, reviews clinical data and advises CMS about the clinical 
integrity of the APC groups and their payment weights. The APC Panel is 
technical in nature, and it 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 on 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 15 subsequent 
meetings, with the last meeting taking place on August 27 and 28, 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.'' As stated in 
the CY 2009 OPPS/ASC proposed rule (73 FR 41421), we are accepting this 
recommendation and are referring to the subcommittee by its new name, 
as appropriate, throughout this final rule with comment period. 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 August 2008 APC Panel meeting. 
At that meeting, the Panel recommended that the work of these three 
subcommittees continue, and we are accepting that recommendation. All 
subcommittee recommendations are discussed and voted upon by the full 
APC Panel.
    Discussions of the recommendations resulting from the APC Panel's 
March and August 2008 meetings are included in the sections of this 
final rule that are specific to each recommendation. For

[[Page 68509]]

discussions of earlier APC Panel meetings and recommendations, we refer 
readers to previously published hospital OPPS final rules, the Web site 
mentioned earlier in this section, or the FACA database at http://fido.gov/facadatabase/public.asp.
    During the comment period for the CY 2009 OPPS/ASC proposed rule, 
we received several public comments regarding representation on the APC 
Panel.
    Comment: Several commenters requested that CMS include a designated 
ASC representative on the APC Panel. The commenters believed that, 
because the ASC payment system is based on the same APC groups and 
relative payment weights as the OPPS, ASC representation on the APC 
Panel would ensure input from representatives of all the care settings 
providing surgical services whose payment groups and payment weights 
are affected by the OPPS.
    Response: We acknowledge that the revised ASC payment system 
provides Medicare payment to ASCs for surgical procedures that is 
based, in most cases, on the relative payment weights of the OPPS. 
However, CMS is statutorily required to have an appropriate selection 
of representatives of ``providers'' as members of the APC Panel.
    Specifically, the current APC Panel charter requires that ``Each 
Panel member must be employed full-time by a hospital, hospital system, 
or other Medicare provider subject to payment under the OPPS,'' which 
does not include ASCs because ASCs are not providers. We refer readers 
to section 1833(t)(9)(A) of the Act and Sec.  400.202 of our 
regulations for specific requirements and definitions. The charter must 
comply with the statute, which does not include representatives of 
suppliers on the APC Panel. However, we understand the concerns of 
commenters regarding their interest in ASC input on the APC Panel now 
that the ASC payment system is based on the OPPS relative payment 
weights.

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, includes the following 
provisions that affect the OPPS and the revised ASC payment system:
1. Increase in Physician Payment Update
    Section 101 of the MMSEA provided a 0.5 percent increase in the 
physician payment update from January 1, 2008 through June 30, 2008; 
revised the Physician Assistance and Quality Initiative Fund, and 
extended through 2009 the physician quality reporting system. We refer 
readers to section XV. of this final rule with comment period 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.B.4. and VII. of this final rule with comment 
period for discussion of this provision. We also note that section 142 
of Public Law 110-275 further extended this provision, as discussed in 
section I.F.4. of this final rule with comment period.
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) of the Act to 
provide for application of alternative volume weighting in computing 
the ASP for payment of Medicare 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 final rule with comment period.
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). We refer readers to 
section II.C. of this final rule with comment for discussion of this 
provision. We also note that section 124 of Public Law 110-275 further 
extended this provision through September 30, 2009, as discussed under 
section I.F.2. of this final rule with comment period.

F. Provisions of the Medicare Improvements for Patients and Providers 
Act of 2008

    The Medicare, Improvements for Patients and Providers Act (MIPPA) 
of 2008 (Pub. L. 110-275), enacted on July 15, 2008, includes the 
following provisions that affect the OPPS and the revised ASC payment 
system:
1. Improvements to Coverage of Preventive Services
    Section 101(b) of the MIPPA amended section 1861 of the Act, as 
amended by section 114 of the MMSEA, to make several changes to the 
Initial Preventive Physical Examination (IPPE) benefit, including 
waiving the deductible and extending the period of eligibility for an 
IPPE from 6 months to 12 months after the date of the beneficiary's 
initial enrollment in Medicare Part B. Section 101(b) of the MIPPA also 
removed the screening electrocardiagram (EKG) as a mandatory 
requirement that is part of the IPPE and required that there be 
education, counseling, and referral for an EKG, as appropriate, for a 
once-in-a-lifetime screening EKG performed as a result of a referral 
from an IPPE. The facility service for the screening EKG (tracing only) 
is payable under the OPPS when it is the result of a referral from an 
IPPE. The amendments apply to services furnished on or after January 1, 
2009. We refer readers to section XII.C. of this final rule for 
discussion of the HCPCS codes to be used for the IPPE and screening EKG 
and the OPPS payment rates for services under this provision for CY 
2009.
2. Extended Expiration Date for Certain IPPS Wage Index Geographic 
Reclassifications and Special Exceptions
    Section 124 of the MIPPA extended through September 30, 2009 the 
hospital wage index reclassifications for hospitals reclassified under 
section 508 of the MMA. MIPPA also extended through the last date of 
the extension of the reclassifications under section 106(a) of the 
MIEA-TRHCA certain special exception wage indices referenced in the FY 
2005 IPPS final rule (69 FR 49105 and 49107) and that were extended by 
section 117(a)(2) of the MMSEA. We refer readers to section II.C. of 
this final rule with comment period for discussion of this provision.
3. Increase in Physician Payment Update
    Section 131 of MIPPA increased the conversion factor by 1.1 percent 
for CY 2009 and required that CY 2008 and CY 2009 payment updates have 
no effect on payment rates for CY 2010 and subsequent years under the 
MPFS. We

[[Page 68510]]

refer readers to section XV.F. of this final rule with comment period 
for discussion of the effect of this provision on payment for covered 
office-based surgical procedures and covered ancillary services paid 
under the ASC payment system.
4. Extension of Expiration Date for Cost-Based OPPS Payment for 
Brachytherapy and Therapeutic Radiopharmaceuticals
    Section 142 of the MIPPA amended section 1833(t)(16)(C) of the Act, 
as amended by section 106(a) of the MMSEA, and further extended the 
payment period for brachytherapy devices sources and therapeutic 
radiopharmaceuticals based on hospital's charges adjusted to cost 
through December 31, 2009. We refer readers to sections V.B.4. and VII. 
of this final rule with comment period for discussions of this 
provision. We also refer readers to section XV.F. of this final rule 
with comment period for discussion of the effect of this provision on 
covered ancillary services paid under the ASC payment system.
5. Extension and Expansion of the Medicare Hold Harmless Provision 
Under the OPPS for Certain Hospitals
    Section 147 of the MIPPA amended section 1833(t)(7)(D)(i) of the 
Act by extending the hold harmless payments (85 percent of the 
difference between the prospective payment system amount under the OPPS 
and the pre-BBA amount) for covered OPD services furnished by rural 
hospitals with 100 beds or less through December 31, 2009. It also 
expanded the same hold harmless payments to SCHs with 100 beds or fewer 
for covered OPD services furnished on or after January 1, 2009, and 
before January 1, 2010. We refer readers to section II.E. of this final 
rule with comment period for discussion of this provision.

G. Summary of the Major Contents of the CY 2009 OPPS/ASC Proposed Rule

    A proposed rule appeared in the July 18, 2008 Federal Register (73 
FR 41416) that set forth proposed changes to the Medicare hospital OPPS 
for CY 2009 to implement statutory requirements and changes arising 
from our continuing experience with the system and to implement certain 
new statutory provisions. In addition, we proposed changes to the 
revised Medicare ASC payment system for CY 2009, including updated 
payment weights and covered ancillary services based on the proposed 
OPPS update. Finally, we set forth proposed quality measures for the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP) for 
reporting quality data for annual payment rate updates for CY 2010 and 
subsequent calendar years, the requirements for data collection and 
submission for the annual payment update, and a proposed reduction in 
the OPPS payment for hospitals that fail to meet the HOP QDRP 
requirements for CY 2009, in accordance with the statutory requirement. 
The following is a summary of the major changes included in the CY 2009 
OPPS/ASC proposed rule:
1. Updates Affecting OPPS Payments
    In section II. of the proposed rule, we set forth--
     The methodology used to recalibrate the proposed APC 
relative payment weights.
     The proposed 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. OPPS Ambulatory Payment Classification (APC) Group Policies
    In section III. of the proposed rule, we discussed the proposed 
additions of new procedure codes to the APCs; our proposal to establish 
a number of new APCs; and our analyses of Medicare claims data and 
certain recommendations of the APC Panel. We also discussed the 
application of the 2 times rule and proposed exceptions to it; proposed 
changes to specific APCs; and proposed movement of procedures from New 
Technology APCs to clinical APCs.
3. OPPS Payment for Devices
    In section IV. of the proposed rule, we discussed proposed 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. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    In section V. of the proposed rule, we discussed 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. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    In section VI. of the proposed rule, we discussed the estimate of 
CY 2009 OPPS transitional pass-through spending for drugs, biologicals, 
and devices.
6. OPPS Payment for Brachytherapy Sources
    In section VII. of the proposed rule, we discussed our proposal 
concerning coding and payment for brachytherapy sources.
7. OPPS Payment for Drug Administration Services
    In section VIII. of the proposed rule, we set forth our proposed 
policy concerning payment and coding for drug administration services.
8. OPPS Payment for Hospital Outpatient Visits
    In section IX. of the 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. Payment for Partial Hospitalization Services
    In section X. of the proposed rule, we set forth our proposed 
payment for partial hospitalization services, including the proposed 
separate threshold for outlier payments for CMHCs.
10. Procedures That Will Be Paid Only as Inpatient Procedures
    In section XI. of the proposed rule, we discussed the procedures 
that we proposed to remove from the inpatient list and assign to APCs.

[[Page 68511]]

11. OPPS Nonrecurring Technical and Policy Clarifications
    In section XII. of the proposed rule, we set forth our nonrecurring 
technical issues and policy clarifications.
12. OPPS Payment Status and Comment Indicators
    In section XIII. of the proposed rule, we discussed our proposed 
changes to the definitions of status indicators assigned to APCs and 
presented our proposed comment indicators for the final rule with 
comment period.
13. OPPS Policy and Payment Recommendations
    In section XIV. of the proposed rule, we addressed 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. Update of the Revised Ambulatory Surgical Center Payment System
    In section XV. of the proposed rule, we discussed the proposed 
update of the revised ASC payment system payment rates for CY 2009.
15. Reporting of Hospital Outpatient Quality Data for Annual Hospital 
Payment Rate Updates and CY 2009 Payment Reduction
    In section XVI. of the proposed rule, we discussed the proposed 
quality measures for reporting hospital outpatient quality data for the 
annual payment update factor for CY 2010 and subsequent calendar years, 
set forth the requirements for data collection and submission for the 
annual payment update, and proposed 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 the proposed rule, we discussed 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 the proposed rule, we set forth an analysis of 
the impact the proposed changes would have on affected entities and 
beneficiaries.

H. Public Comments Received in Response to the CY 2009 OPPS/ASC 
Proposed Rule

    We received approximately 2,390 timely pieces of correspondence 
containing multiple comments on the CY 2009 OPPS/ASC proposed rule. We 
note that we received some comments that were outside the scope of the 
CY 2009 OPPS/ASC proposed rule, including public comments on new CY 
2009 HCPCS codes that were not presented in the CY 2009 OPPS/ASC 
proposed rule. These comments are not addressed in this CY 2009 OPPS/
ASC final rule with comment period. New CY 2009 HCPCS codes are 
designated with comment indicator ``NI'' in Addenda B, AA, and BB to 
this final rule with comment period, to signify that their CY 2009 
interim OPPS and/or ASC treatment is open to public comment on this 
final rule with comment period. Summaries of the public comments that 
are within the scope of the proposals and our responses to those 
comments are set forth in the various sections of this final rule with 
comment period under the appropriate headings.

I. Public Comments Received on the November 27, 2007 OPPS/ASC Final 
Rule With Comment Period

    We received approximately 507 timely items of correspondence on the 
CY 2008 OPPS/ASC final rule with comment period, some of which 
contained multiple comments on the interim APC assignments and/or 
status indicators of HCPCS codes identified with comment indicator 
``NI'' in Addendum B to that final rule with comment period. Summaries 
of those public comments on topics open to comment in the CY 2008 OPPS/
ASC final rule with comment period and our responses to them are set 
forth in the various sections of this final rule with comment period 
under the appropriate headings.

J. Proposed Rule on ASC Conditions for Coverage

    On August 31, 2007, we published in the Federal Register (72 FR 
50470) a proposed rule to update the ASC Conditions for Coverage (CfCs) 
by revising some of the definitions and revising the CfCs on governing 
body and management and laboratory and radiologic services to reflect 
current ASC practices; and to add several new CfCs on quality 
assessment and performance improvement, patient rights, and patient 
admission, assessment, and discharge to promote and protect patient 
health and safety.
    We received 30 timely items of correspondence on this proposed 
rule. We present a summary of the provisions of the proposed rule, a 
summary of the public comments received and our responses, and the 
final policy provisions in section XV.B. of the preamble of this 
document. (Hereinafter, we refer to this proposed rule as the 2007 ASC 
CfCs proposed rule.)

K. Medicare Hospital Conditions of Participation: Requirements for 
Approval and Re-Approval of Transplant Programs To Perform 
Transplants--Clarification of Provider and Supplier Termination Policy

    In section XVIII. of this document, we are clarifying policy set 
forth in responses to public comments on a March 30, 2007 final rule 
(72 FR 15198) regarding the Secretary's ability to terminate Medicare 
providers and suppliers (in this case, transplant centers) during an 
appeal of a determination that affects participation in the Medicare 
program.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
and revise the relative payment weights for APCs at least annually. In 
the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we 
explained in detail how we calculated the relative payment weights that 
were implemented on August 1, 2000 for each APC group. 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.
    For CY 2009, we proposed 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 proposed to recalibrate the relative payment weights for each 
APC based on claims and cost report data for outpatient services. We 
proposed to use the most recent available data to construct the 
database for calculating APC group weights. Therefore, for the purpose 
of recalibrating the final APC relative payment weights for CY 2009, we 
used approximately 140 million final action

[[Page 68512]]

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 final rule with comment period 
on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/.)
    Of the 140 million final action claims for services provided in 
hospital outpatient settings used to calculate the CY 2009 OPPS payment 
rates for this final rule with comment period, approximately 107 
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 107 million claims, 
approximately 49 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). From 
the remaining 58 million claims, we created approximately 99 million 
single records, of which approximately 67 million were ``pseudo'' 
single claims (created from 26 million multiple procedure claims using 
the process we discuss later in this section). Approximately 617,000 
claims trimmed out on cost or units in excess of + /-3 standard 
deviations from the geometric mean, yielding approximately 99 million 
single bills for median setting. This number of ``pseudo'' and 
``natural'' single bills is comparable to the 97 million single bills 
that we used in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66589). In prior rules, we have reported the percentage of claims 
that we were able to use to estimate APC median costs. However, our 
refinement to the bypass process to accommodate the multiple imaging 
composite methodology described in section II.A.2.e.(5) of this final 
rule with comment period currently prevents us from providing an 
accurate percentage. Because our refinement increased the number of 
``pseudo'' single bills, we are confident that we are using a high 
percentage of claims to estimate the final CY 2009 APC median costs. We 
provide greater detail on this refinement in our claims accounting 
narrative for this final rule with comment period that is posted on the 
CMS Web site.
    As proposed, the APC relative weights and payments for CY 2009 in 
Addenda A and B to this final rule with comment period were calculated 
using claims from CY 2007 that were processed on or before June 30, 
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 proposed to convert to relative 
payment weights for purposes of calculating the CY 2009 payment rates.
    We did not receive any public comments on our proposal to base the 
CY 2009 APC relative weights on the most currently available cost 
reports and on claims for services furnished in CY 2007. Therefore, for 
this reason and the reasons noted above in this section, we are 
finalizing our data source for the recalibration of the CY 2009 APC 
relative payment weights as proposed, without modification, as 
described in this section of this final rule with comment period.
b. Use of Single and Multiple Procedure Claims
    For CY 2009, in general, we proposed to continue to use single 
procedure claims to set the medians on which the APC relative payment 
weights would be based, with some exceptions as discussed below (73 FR 
41423). We generally use single procedure claims to set the median 
costs for APCs because we believe that the OPPS relative weights on 
which payment rates are based should 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 the first 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 
final rule with comment period for discussion of the use of claims to 
establish median costs for composite APCs.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41423), we proposed to 
continue to apply these processes to enable us to use as much claims 
data as possible for ratesetting for the CY 2009 OPPS. This process 
enabled us to create, for this final rule with comment period, 
approximately 67 million ``pseudo'' single claims, including multiple 
imaging composite ``single session'' bills (we refer readers to section 
II.A.2.e.(5) of this final rule with comment period for further 
discussion), and approximately 32 million ``natural'' single bills. For 
this final rule with comment period, ``pseudo'' single procedure bills 
represent 68 percent of all single bills used to calculate median 
costs.
    In the CY 2009 OPPS/ASC proposed rule (73FR 41424 through 41429), 
we proposed to bypass 452 HCPCS codes for CY 2009 that were identified 
in Table 1 of the proposed rule. We proposed 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) was open to public comment. We removed 
two HCPCS codes from the CY 2008 bypass list for the 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

[[Page 68513]]

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 proposed to add to the bypass list all HCPCS codes not 
on the CY 2008 bypass list that, using the APC Panel data, met the same 
previously established empirical criteria for the bypass list that are 
summarized below. We assumed that the representation of packaging in 
the single claims for any given code was comparable to packaging for 
that code in the multiple claims. The proposed criteria for the bypass 
list were:
     There are 100 or more single claims for the code. This 
number of single claims ensures that observed outcomes are sufficiently 
representative of packaging that might occur in the multiple claims.
     Five percent or fewer of the single claims for the code 
have packaged costs on that single claim for the code. This criterion 
results in limiting the amount of packaging being redistributed to the 
separately payable procedure remaining on the claim after the bypass 
code is removed and ensures that the costs associated with the bypass 
code represent the cost of the bypassed service.
     The median cost of packaging observed in the single claims 
is equal to or less than $50. This limits the amount of error in 
redistributed costs.
     The code is not a code for an unlisted service.
    In addition, we proposed to continue to include on 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. Some of these codes were identified by CMS medical 
advisors and some were identified in prior years by commenters with 
specialized knowledge of the services they requested be added to the 
bypass list. To ensure clinical consistency in our treatment of related 
services, we also proposed 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 enabled 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 was that the packaged costs associated with 
add-on drug administration services were 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 also proposed to add HCPCS code G0390 (Trauma response team 
activation associated with hospital critical care service) because we 
thought it was 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 had not 
added HCPCS code G0390 to the bypass list, we would have had 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 had any properly coded ``natural'' single bills for HCPCS code 
G0390. Including HCPCS code G0390 on the bypass list allowed 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 were 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 could not assess whether HCPCS code G0390 would meet the 
empirical criteria for inclusion on the bypass list because we had no 
``natural'' single claims for HCPCS code G0390.
    As a result of the multiple imaging composite APCs that we proposed 
to establish for CY 2009 as discussed in section II.A.2.e.(5) of this 
final rule with comment period, we noted that 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, were identified first. 
These HCPCS codes were 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'' were 
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. For this final rule with comment period, we 
then reassessed the claims without suppression of the ``overlap bypass 
codes'' under our longstanding ``pseudo'' single process to determine 
whether we could convert additional claims to ``pseudo'' single claims. 
(We refer readers to section II.A.2.c. of this final rule with comment 
period for further discussion of the treatment of ``overlap bypass 
codes.'') This process also created multiple imaging composite ``single 
session'' bills that could be used for calculating composite APC median 
costs. ``Overlap bypass codes'' that would be members of the proposed 
multiple imaging composite APCs were identified by asterisks (*) in 
Table 1 of the CY 2009 OPPS/ASC proposed rule.
    Table 1 published in the CY 2009 OPPS/ASC proposed rule included 
the proposed list of bypass codes for CY 2009. As noted in that 
proposed rule (73 FR 41424 through 41429), that list contained bypass 
codes that were appropriate to claims for services in CY 2007 and, 
therefore, included codes that were deleted for CY 2008. Moreover, 
there were codes on the proposed bypass list that were new for CY 2008 
and which we indicated were appropriate additions to the bypass list in 
preparation for use of the CY 2008 claims for creation of the CY 2010 
OPPS. We specifically requested public comment on the proposed CY 2009 
bypass list.
    Comment: Several commenters indicated that review of the CY 2007 
claims data on which the CY 2009 proposed OPPS was based revealed that 
fewer than 10 percent of the billed lines for radiation oncology 
guidance codes were used in setting the proposed CY 2009 OPPS payment 
rates. They also asserted that more than a third of the billed lines 
for Image Guided Radiation Therapy (IGRT) services were being packaged 
into the single bills for services that are totally unrelated to 
radiation oncology services, such as clinic visits. They believed that 
this misassignment may have occurred in part as a result of the 
inclusion of radiation oncology services on the bypass list.
    Response: We examined the combinations of codes that occurred on 
claims that contained guidance codes for radiation oncology services, 
specifically CPT codes 76950 (Ultrasonic guidance for placement of 
radiation therapy fields); 76965 (Ultrasonic guidance for interstitial 
radioelement application); 77014 (Computed tomography guidance for 
placement of radiation therapy fields); 77417 (Therapeutic radiology 
port film(s)); and 77421 (Stereoscopic X-ray guidance for localization 
of target volume for the delivery of radiation therapy), in our 
proposed rule data. We found that, on some claims, the costs of

[[Page 68514]]

image guidance for radiation therapy services were being packaged into 
the costs of other services such as visits, or were not available to be 
correctly packaged. Therefore, those costs were not being appropriately 
packaged into the radiation oncology services to which they were 
incidental and supportive.
    Our analysis indicated that the inclusion of radiation oncology 
codes that failed to meet the empirical criteria for inclusion of the 
codes on the bypass list was the most likely source of the problem. We 
were unable to ensure that the radiation oncology codes that failed the 
empirical criteria could be retained on the bypass list with confidence 
that they would not result in incorrect or missing packaging for 
guidance services. We therefore removed from the proposed CY 2009 
bypass list all codes in the radiation oncology series of CPT, 
specifically ranging from CPT code 77261 (Therapeutic radiology 
treatment planning; simple) through and including CPT code 77799 
(Unlisted procedure, clinical brachytherapy), that did not meet the 
empirical criteria for inclusion on the bypass list based on CY 2009 
proposed rule data. We had added many of these codes to the bypass list 
after reviewing and accepting the recommendations of several commenters 
to past OPPS proposed rules who believed that the codes were 
appropriate for inclusion on the bypass list (71 FR 67970 and 72 FR 
66591), although they failed to meet the empirical criteria for 
inclusion on the bypass list.
    Removing these codes from the bypass list for the CY 2009 OPPS 
resulted in a reduction of approximately 1 million ``pseudo'' single 
procedure claims but we believe that it resulted in more appropriate 
assignment of packaged costs. In some cases, the removal of these codes 
from the bypass list increased the median costs of APCs to which 
radiation oncology services are assigned (for example, APC 0412 (IMRT 
Treatment Delivery) and APC 0304 (Level I Therapeutic Radiation 
Treatment Preparation)) and in other cases it reduced the ``pseudo'' 
single bills that were available to be used to set median costs and led 
to decreases in medians that were calculated using the smaller set of 
single procedure claims (for example, APC 8001 (LDR Prostate 
Brachytherapy Composite)).
    On balance, we believe that removing these codes from the bypass 
list is the most appropriate approach for this final rule with comment 
period to ensure that packaged costs are correctly captured in 
ratesetting. Although we have removed all codes in the radiation 
oncology series that do not meet the empirical criteria for inclusion 
on the bypass list for this CY 2009 final rule with public comment 
period, we will continue to examine the claims data for these codes, 
and particularly for the APCs for which the number of usable claims 
declined. We hope to determine if there are specific codes in the 
radiation oncology series that do not meet the empirical bypass list 
criteria but which could be safely added back to the bypass list 
without resulting in inappropriate packaging, in order to enable the 
use of more claims data for radiation oncology services.
    Comment: One commenter expressed support for the ratesetting 
methodology using single and ``pseudo'' single claims and recommended 
that CMS continue to use methodologies that improve the overall 
accuracy of the cost estimate calculations.
    Response: We appreciate the commenter's support. We will continue 
to use our established methodologies and continue to evaluate 
additional refinements and improvements to our methodologies, with the 
goal of achieving appropriate and accurate estimates of the costs of 
services in the HOPD.
    Comment: One commenter supported inclusion of HCPCS code G0340 
(Image-guided robotic linear accelerator-based stereotactic 
radiosurgery, delivery including collimator changes and custom 
plugging, fractionated treatment, all lesion, per session, second 
through fifth session, maximum) on the bypass list.
    Response: We appreciate the commenter's support and have continued 
to include HCPCS code G0340 on the CY 2009 bypass list.
    Comment: One commenter requested clarification regarding the 
standards by which codes are added to the bypass list, believing that 
CMS' proposal to include HCPCS code G0390 on the bypass list would 
affect the billing of the code.
    Response: The purpose of the bypass list is to isolate resource 
costs associated with an individual service through identifying the 
costs of HCPCS codes with little or no packaging and using that cost 
data to create ``pseudo'' single claims. The remaining costs of other 
services on the claim are then evaluated to determine if the claim 
qualifies as a single bill that can be used for ratesetting. The use of 
empirical criteria and clinical assessment ensure that there is minimal 
and infrequent packaging associated with services on the bypass list, 
making additional ``pseudo'' single claims for the bypass services 
available for ratesetting and potentially making the claims with the 
bypass code's costs removed appropriate for ratesetting for other 
services on the same claim. In the case of HCPCS code G0390 and CPT 
code 99291, as described above, inclusion of HCPCS code G0390 on the 
bypass list allows us to develop more accurate estimates of the median 
costs of CPT code 99291 and HCPCS code G0390 than otherwise would be 
possible. However, the bypass list is only used for data purposes and 
has no effect on how hospitals report services on claims. We fully 
expect hospitals to continue reporting HCPCS code G0390 when a critical 
care visit qualifies for trauma activation, in accordance with our 
instructions in the Medicare Claims Processing Manual, Pub. 100-04, 
Chapter 4, Section 160.1.
    Comment: One commenter recommended that CPT code 90768 (Intravenous 
infusion, for therapy, prophylaxis, or diagnosis (specify substance or 
drug): Concurrent infusion (List separately in addition to code for 
primary procedure)) be included on the bypass list in order to ensure 
consistency with the treatment of other drug administration codes.
    Response: We have not added CPT code 90768 to the bypass list 
because our CY 2009 policy unconditionally packages payment for this 
service and, therefore, it is not a candidate for the bypass list. The 
purpose of the bypass list is to develop ``pseudo'' single claims so 
that there are more data available to determine the median costs of 
separately payable services for ratesetting purposes. Including 
packaged codes would be contrary to the purpose of the bypass list. For 
further discussion of packaged payment in CY 2009 for CPT code 90768, 
we refer readers to section VIII.B. of this final rule with comment 
period.
    Comment: One commenter suggested that CMS claims data for CY 2007 
showed a number of guidance and radiological supervision and 
interpretation ``dependent'' HCPCS codes are not on claims with paid 
procedures in many cases, due in part to the interaction with the 
bypass list, and therefore, their costs are not used in ratesetting. 
They urged CMS to ensure that the packaging and composite methodologies 
are meeting the goals of capturing accurate multiple claims data.
    Response: The empirical criteria through which most codes are added 
to the bypass list are set to limit bypass codes to those codes which 
seldom have packaging, and when packaging exists, ensure limited 
packaging associated with the code. This is to ensure that any 
remaining packaging left after removal of the bypass codes would be 
minimal

[[Page 68515]]

and uncommon. As discussed above in response to the comment on image 
guidance for radiation oncology services, we have made some changes to 
the final CY 2009 bypass list to remove certain radiation oncology 
codes from the bypass list that do not meet the empirical criteria. 
Those bypass list changes ensure that the packaged costs of image 
guidance services for radiation therapy are not lost or misdirected to 
payment for other unrelated services. Furthermore, we have reviewed the 
other guidance HCPCS codes that are unconditionally packaged under the 
CY 2009 OPPS, and we do not believe that there are other HCPCS codes 
included on the bypass list that fail to meet the empirical criteria 
and to which the packaged costs of these other guidance services would 
be appropriately assigned. Thus, we do not believe that other changes 
to the bypass list to appropriately capture and assign the costs of 
other guidance services are necessary.
    With regard to the radiological supervision and interpretation 
HCPCS codes, these codes are conditionally packaged codes assigned 
status indicator ``Q2'' (``T-packaged'') to reflect that their payment 
would be packaged when one or more surgical procedures (status 
indicator ``T'') are provided on the same day, but otherwise they would 
be separately paid. The determination of packaged versus separately 
payable status is made for radiological supervision and interpretation 
codes prior to application of the bypass list to develop ``pseudo'' 
single claims. Of note, there are only 22 ``T'' status codes on the 
bypass list, out of a total of 424 final bypass codes, and many of the 
``T'' status codes on the bypass list are minor skin treatment 
procedures. Most of these ``T'' status procedures currently meet the 
empirical criteria for inclusion on the bypass list, so we do not 
believe that radiological supervision and interpretation services 
generally appear on claims with only those ``T'' status procedures or 
would be appropriately packaged with those procedures. Therefore, we 
continue to believe that the costs of packaged radiological supervision 
and interpretation services are being appropriately captured for 
purposes of ratesetting, and those costs are not being lost or 
misassigned due to an interaction with the bypass list.
    After consideration of the public comments received, we are 
adopting, as final, the proposed ``pseudo'' single claims process and 
the final CY 2009 bypass list of 424 HCPCS codes, as displayed in Table 
1 below. This list has been modified from the CY 2009 proposed list, 
with the removal of certain HCPCS codes as discussed above in this 
section.

   Table 1--Final CY 2009 Bypass Codes for Creating ``Pseudo'' Single
                   Claims for Calculating Median Costs
------------------------------------------------------------------------
                                                              ``Overlap
        HCPCS code                  Short descriptor            bypass
                                                               codes''
------------------------------------------------------------------------
0144T                       CT heart w/o dye; qual calc....  ...........
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 ear wax........  ...........
69220                       Clean out mastoid cavity.......  ...........
70030                       X-ray eye for foreign body.....  ...........
70100                       X-ray exam of jaw..............  ...........
70110                       X-ray exam of jaw..............  ...........
70120                       X-ray exam of mastoids.........  ...........
70130                       X-ray exam of mastoids.........  ...........
70140                       X-ray exam of facial bones.....  ...........
70150                       X-ray exam of facial bones.....  ...........
70160                       X-ray exam of nasal bones......  ...........
70200                       X-ray exam of eye sockets......  ...........
70210                       X-ray exam of sinuses..........  ...........
70220                       X-ray exam of sinuses..........  ...........
70250                       X-ray exam of skull............  ...........
70260                       X-ray exam of skull............  ...........
70328                       X-ray exam of jaw joint........  ...........
70330                       X-ray exam of jaw joints.......  ...........
70336                       Magnetic image, jaw joint......           *
70355                       Panoramic x-ray of jaws........  ...........
70360                       X-ray exam of neck.............  ...........
70370                       Throat x-ray & fluoroscopy.....  ...........
70371                       Speech evaluation, complex.....  ...........
70450                       Ct head/brain w/o dye..........           *
70480                       Ct orbit/ear/fossa w/o dye.....           *
70486                       Ct maxillofacial w/o dye.......           *
70490                       Ct soft tissue neck w/o dye....           *
70544                       Mr angiography head w/o dye....           *
70551                       Mri brain w/o dye..............           *
71010                       Chest x-ray....................  ...........
71015                       Chest x-ray....................  ...........
71020                       Chest x-ray....................  ...........
71021                       Chest x-ray....................  ...........
71022                       Chest x-ray....................  ...........
71023                       Chest x-ray and fluoroscopy....  ...........
71030                       Chest x-ray....................  ...........
71034                       Chest x-ray and fluoroscopy....  ...........
71035                       Chest x-ray....................  ...........
71100                       X-ray exam of ribs.............  ...........
71101                       X-ray exam of ribs/chest.......  ...........
71110                       X-ray exam of ribs.............  ...........
71111                       X-ray exam of ribs/chest.......  ...........
71120                       X-ray exam of breastbone.......  ...........
71130                       X-ray exam of breastbone.......  ...........
71250                       Ct thorax w/o dye..............           *
72010                       X-ray exam of spine............  ...........
72020                       X-ray exam of spine............  ...........
72040                       X-ray exam of neck spine.......  ...........
72050                       X-ray exam of neck spine.......  ...........
72052                       X-ray exam of neck spine.......  ...........
72069                       X-ray exam of trunk spine......  ...........
72070                       X-ray exam of thoracic spine...  ...........
72072                       X-ray exam of thoracic spine...  ...........
72074                       X-ray exam of thoracic spine...  ...........
72080                       X-ray exam of trunk spine......  ...........
72090                       X-ray exam of trunk spine......  ...........
72100                       X-ray exam of lower spine......  ...........
72110                       X-ray exam of lower spine......  ...........
72114                       X-ray exam of lower spine......  ...........

[[Page 68516]]

 
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..........  ...........
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....  ...........
77301                       Radiotherapy dose plan, imrt...  ...........
77315                       Teletx isodose plan complex....  ...........
77336                       Radiation physics consult......  ...........
77401                       Radiation treatment delivery...  ...........
80500                       Lab pathology consultation.....  ...........
80502                       Lab pathology consultation.....  ...........
85097                       Bone marrow interpretation.....  ...........
86510                       Histoplasmosis skin test.......  ...........
86850                       RBC antibody screen............  ...........
86870                       RBC antibody identification....  ...........
86880                       Coombs test, direct............  ...........
86885                       Coombs test, indirect, qual....  ...........
86886                       Coombs test, indirect, titer...  ...........
86890                       Autologous blood process.......  ...........

[[Page 68517]]

 
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                       Immunohistochemistry...........  ...........
88346                       Immunofluorescent study........  ...........
88347                       Immunofluorescent study........  ...........
88348                       Electron microscopy............  ...........
88358                       Analysis, tumor................  ...........
88360                       Tumor immunohistochem/manual...  ...........
88361                       Tumor immunohistochem/comput...  ...........
88365                       Insitu hybridization (fish)....  ...........
88368                       Insitu hybridization, manual...  ...........
88399                       Surgical pathology procedure...  ...........
89049                       Chct for mal hyperthermia......  ...........
89230                       Collect sweat for test.........  ...........
89240                       Pathology lab procedure........  ...........
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                       Electroretinography............  ...........
92285                       Eye photography................  ...........
92286                       Internal eye photography.......  ...........
92520                       Laryngeal function studies.....  ...........
92541                       Spontaneous nystagmus test.....  ...........
92546                       Sinusoidal rotational test.....  ...........
92548                       Posturography..................  ...........
92552                       Pure tone audiometry, air......  ...........
92553                       Audiometry, air & bone.........  ...........
92555                       Speech threshold audiometry....  ...........
92556                       Speech audiometry, complete....  ...........
92557                       Comprehensive hearing test.....  ...........
92567                       Tympanometry...................  ...........
92582                       Conditioning play audiometry...  ...........
92585                       Auditor evoke potent, compre...  ...........
92603                       Cochlear implt f/up exam 7 >...  ...........
92604                       Reprogram cochlear implt 7 >...  ...........
92626                       Eval aud rehab status..........  ...........
93005                       Electrocardiogram, tracing.....  ...........

[[Page 68518]]

 
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...  ...........
99241                       Office consultation............  ...........
99242                       Office consultation............  ...........
99243                       Office consultation............  ...........
99244                       Office consultation............  ...........
99245                       Office consultation............  ...........
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...  ...........

[[Page 68519]]

 
G0376                       Smoke/tobacco counseling >10...  ...........
G0389                       Ultrasound exam AAA screen.....  ...........
G0390                       Trauma Respons w/hosp criti....  ...........
M0064                       Visit for drug monitoring......  ...........
Q0091                       Obtaining screen pap smear.....  ...........
------------------------------------------------------------------------

c. 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41429), we proposed 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 
proposed 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 proposed 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 in the cost report.
    At the August 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.
    We received no public comments on this proposal and, therefore, we 
are finalizing our proposal for CY 2009, without modification, to 
calculate hospital-specific overall and departmental CCRs as described 
above in this section.
(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 incorporate 
aggregation bias, undervaluing high cost items and overvaluing low cost 
items when 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 CMS began setting 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 capture better the variation in cost and charges 
for individual services when calculating costs for the IPPS relative 
weights across services in the same cost center. 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 revenue codes associated with the 
cost center in the claims data. 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).
    We did not propose any changes to address charge compression for CY 
2008. 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 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 or, at least, similar approaches 
to address the issue. Finally, we noted that we wished to assess the

[[Page 68520]]

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 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,'' 
which became available at the time of the publication of the CY 2009 
OPPS/ASC proposed rule. The RTI final 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_200807_Final.pdf.
    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 and constitute the minimum set of cost centers that 
must be reported on the Medicare hospital cost report if a hospital 
includes that cost center in its own internal accounts. Nonstandard 
cost centers are additional common cost centers available to hospitals 
for reporting when preparing their Medicare hospital cost report. To 
the extent hospitals provide services captured by nonstandard cost 
centers, they should report the relevant nonstandard cost centers as 
well, if the service is captured in a separate account and qualifies as 
a cost center in accordance with the Provider Reimbursement Manual 
(PRM)-I, Section 2302.8. 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 for charge 
compression 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 these distortions may have 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. 
Although RTI endorsed short-term regression-based adjustments, RTI 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 were not discussed in the CY 
2009 OPPS/ASC proposed rule, nor are they discussed in this final rule 
with comment. 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

[[Page 68521]]

Calculating APC and MS-DRG Relative Payment Weights,'' July 2008), we 
did not propose to adopt any short-term adjustments to OPPS payment 
rate calculations for CY 2009 (73 FR 41430 through 41431). Furthermore, 
the numerous and substantial changes that RTI recommended 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41431), we did not 
propose to adopt, but specifically requested general public comments 
on, several of RTI's recommended accounting-based changes pertaining to 
the cost report as discussed below because we plan to consider the 
public comments in our current revision of the Medicare hospital cost 
report and for CY 2010 OPPS ratesetting. 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, 
we indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 41431) that 
the requested 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 final rule (73 FR 48467 through 
48468), 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 PRM-II. We indicated that we now believe the revised 
cost report may not be available until cost reporting periods starting 
after the Spring of 2009. Because there is generally a 3-year lag 
between the availability of cost report data for IPPS and OPPS 
ratesetting purposes in a given calendar year, we may be able to use 
data from the revised cost report form for CY 2012 or CY 2013 OPPS 
relative weights.
    In the FY 2009 IPPS final rule, we finalized our proposal for both 
OPPS and IPPS to add one cost center to the cost report so that, in 
general, the costs and charges for relatively inexpensive medical 
supplies would be reported separately from the costs and charges for 
more expensive implantable devices (such as pacemakers and other 
implantable devices). Specifically we will create one cost center for 
``Medical Supplies Charged to Patients'' and one cost center for 
``Implantable Devices Charged to Patients.'' This change ultimately 
will split the current CCR for Medical Supplies and Equipment into one 
CCR for medical supplies and another CCR for implantable devices. In 
response to support from a majority of commenters on the FY 2009 IPPS 
proposed rule, we finalized a definition of the Implantable Devices 
Charged to Patients cost center as capturing the costs and charges 
billed with the following UB-04 revenue codes: 0275 (Pacemaker), 0276 
(Intraocular lens), 0278 (Other implants), and 0624 (FDA 
investigational devices). Identifying most implantable devices based on 
the existing revenue code definitions is the most straightforward and 
easiest means of capturing device costs, although some charge 
compression will remain in the resulting device and supply CCRs. 
Hospitals are already familiar with National Uniform Billing Committee 
(NUBC) billing instructions, and we believe this definition will 
minimize the disruption to hospitals' accounting and billing systems. 
For a complete discussion of the proposal, public comments, and our 
responses, we refer readers to section II.E.4. of the FY 2009 IPPS 
final rule (73 FR 48458 through 45467).
    RTI's first set of 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 
identify provider-specific cost centers and ultimately 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 did not propose to adopt any of the short-
term accounting changes, including text searches of providers' line 
descriptions to more appropriately classify nonstandard cost centers 
and changes to the revenue code-to-cost center crosswalk. As indicated 
in the CY 2009 OPPS/ASC proposed rule (73 FR 41431), we stated that we 
would modify the cost report preparation software. This revision will 
print a brief fixed description next to each nonstandard cost center 
number, while continuing to allow the hospital to enter a description, 
and will be incorporated in the 2009 Medicare hospital cost report 
preparation software.
    With regard to revisions to the cost center aggregation table, we 
specifically invited 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 also specifically requested public comment on creation of new 
nonstandard cost centers for services that are well represented in line 
descriptions reported with ``other ancillary services'' and other 
outpatient nonstandard cost centers, but for which no specific 
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) (73 FR 41431).
    Comment: Many commenters expressed support for refining the 
Healthcare Cost Report Information System (HCRIS) database that CMS 
uses for ratesetting by using text string searches to reassign cost 
center lines based on the description entered by the hospital, in order 
to mitigate hospital error in assigning a nonstandard HCRIS cost center 
code. Commenters viewed this change as a way to improve the accuracy of 
the CCRs derived from the cost report for cost estimation, without 
imposing additional burden on hospitals. Many commenters also supported 
CMS' modification to add fixed descriptions to nonstandard cost center 
lines in the cost reporting software, with the caveat that hospitals 
continue to be allowed to enter their own nonstandard cost center 
descriptions. The commenters believed that this change would improve 
the quality and consistency of hospital reporting. One commenter 
indicated that CMS should clarify instructions about the specific cost 
centers that should be reported on nonstandard lines. Another commenter 
noted that a cost center for patient education could be difficult to 
report because patient education can take place across multiple 
departments and reclassifying costs could be challenging. Many 
commenters supported RTI's recommendation to modify the cost 
aggregation table to

[[Page 68522]]

eliminate duplicative or misplaced nonstandard cost centers but 
emphasized that hospitals should not be required to report the revised 
cost centers. A number of commenters supported the addition of 
nonstandard cost centers that also have a UB-04 revenue code, including 
Cardiac Rehabilitation, Patient Education, Hyperbaric Oxygen Therapy, 
and Lithotripsy.
    Response: With regard to modifying the cost reporting preparation 
software to impose fixed descriptions for nonstandard cost centers, we 
stated in the CY 2009 OPPS/ASC proposed rule (73 FR 41431) that we 
would make this change in the cost reporting preparation software 
accompanying the revised Medicare hospital cost report form. Should 
release of the revised form be delayed, we will make this change for 
the next release of the cost report preparation software. Hospitals 
will continue to be able to enter their own description of the 
nonstandard cost center. This modification will act as a quality check 
for hospitals to review their choice of nonstandard cost center code 
and encourage hospitals to more accurately report their nonstandard 
cost centers without significantly increasing provider burden.
    We appreciate the commenters' argument that text string searches 
could refine submitted cost report data without imposing hospital 
burden. However, we will not implement RTI's recommended text string 
search algorithm for CY 2009 because it would introduce significant 
changes in APC median costs in concentrated areas with significant 
Medicare charges and utilization and because it would represent a major 
shift in the current way we use cost report data. Our preference in the 
median cost development process has been to accept the information 
submitted by hospitals as it is received, only trimming egregiously 
erroneous data through conservative statistical methods in order to 
maintain the integrity of the original data set. Modifying the data 
from its submitted form based on assumptions about the data typically 
would be contrary to our principle of using the data as submitted by 
hospitals. Further, implementing an algorithm that reassigns 
nonstandard cost center lines based on their HCRIS descriptions would 
entail assumptions about what that hospital's written description means 
and what the data represent. For example, RTI reassigned cost center 
lines with combined descriptions, such as ``Radiation and Oncology,'' 
to the cost center with the highest dollar volume, in this case 
Radiation Therapy. However, we are not confident that the assumptions 
underlying these reassignments are correct. We will continue to examine 
the quality of the data submitted by hospitals and may consider 
implementing the text string searches in the future.
    While many commenters expressed general support for RTI's 
recommendation to eliminate duplicative nonstandard cost centers with 
low volume from the cost aggregation table, we continue to consider 
whether we should retain these cost centers. We note that RTI's 
analysis only included an examination of the nonstandard cost centers 
from more recent cost reports. Observing data from older cost reports 
may have led RTI to conclude that the same nonstandard cost centers 
would nonetheless be necessary. For continuity with historical cost 
report data, at this time we do not plan to eliminate any duplicative 
nonstandard cost centers from the cost center aggregation table.
    As part of its recommendation for modifications to the cost 
aggregation table, RTI suggested adding new nonstandard cost centers 
for hospital departments that were well represented in the cost report 
data and had an associated UB-04 revenue code but lacked their own 
nonstandard cost center, specifically Cardiac Rehabilitation, Patient 
Education, Hyperbaric Oxygen Therapy, and Lithotripsy. Many commenters 
were supportive of these changes, believing that these cost centers 
would result in more accurate cost estimates for the services in 
question, but they were concerned about additional burden associated 
with reporting new cost centers. One commenter indicated that reporting 
patient education could be difficult.
    We do not expect additional burden for reporting these new 
nonstandard cost centers to be significant because hospitals that 
provide these services and maintain a separate account for each of 
these services in their internal accounting records to capture the 
costs and charges are currently required, in accordance with Sec.  
413.53(a)(1), to report these cost centers in the cost report, even if 
CMS does not identify a nonstandard cost center code for the 
department(s). Specifically, under those regulations defining the 
departmental method of cost apportionment, the hospital must separately 
apportion the costs of each ancillary department. CMS defines a cost 
center in PRM-I, Section 2302.8, as an organizational unit, generally a 
department or its subunit, having a common functional purpose for which 
direct and indirect costs are accumulated, allocated, and apportioned. 
Hospitals that do not maintain distinct departments or accounts in 
their internal accounting systems for Cardiac Rehabilitation, 
Hyperbaric Oxygen Therapy, or Lithotripsy would not be required to 
report these nonstandard cost centers. We plan to include nonstandard 
cost center codes for Cardiac Rehabilitation, Hyperbaric Oxygen 
Therapy, and Lithotripsy on the revised Medicare hospital cost report 
form that we provide to the public for comment through the PRA process, 
because we believe these changes will facilitate more accurate cost 
reporting for these services.
    With regard to ``patient education,'' we agree with the commenter 
that ``education'' may not be sufficiently definitive to serve as a 
useful cost center. We will review RTI's findings on the presence of 
patient education in the HCRIS data to see if we should narrow the 
scope of this label to improve its usefulness as a nonstandard cost 
center. Based on this review, we may include a nonstandard cost center 
like Patient Education on the revised Medicare hospital cost report 
form that we provide for public comment through the PRA process.
    In summary, CMS continues to examine ways in which it can improve 
the cost reporting process. We have already implemented the minor 
change in the cost reporting software by imposing fixed descriptions on 
nonstandard cost centers. We also plan to add the new nonstandard cost 
centers for Cardiac Rehabilitation, Hyperbaric Oxygen Therapy, and 
Lithotripsy, as well as potentially a nonstandard cost center like 
Patient Education, to the nonstandard list when we revise the Medicare 
hospital cost report form. We will consider the appropriateness of the 
text string searches for future ratesetting.
    Comment: One commenter requested that CMS issue a detailed written 
explanation of CMS's processes for collecting, reviewing, and 
aggregating data, and reviewing and adjusting cost data to arrive at 
median cost amounts, specifically in the context of hyperbaric oxygen 
therapy services.
    Response: This final rule with comment period contains a 
comprehensive discussion of the process through which we use cost 
report and claims data to arrive at median costs in sections II.A.1. 
and II.A.2. The claims accounting narrative mentioned earlier, 
available on the CMS Web site, offers a detailed breakdown of the 
processing logic CMS uses to refine the claims data set, as well as 
exact

[[Page 68523]]

counts of claims involved in each stage of that process.
    CMS also requested comment in the CY 2009 OPPS/ASC proposed rule 
(73 FR 41431) on RTI's recommended changes to the OPPS revenue code-to-
cost center crosswalk. We indicated that 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 (RTI report, ``Refining Cost to Charge 
Ratios for Calculating APC and MS-DRG Relative Payment Weights,'' July 
2008). Throughout the July 2008 final report, RTI used a subscripting 
nomenclature developed from CMS's aggregation table to identify cost 
centers. To disentangle the combined impact of these changes and 
clearly communicate RTI's recommended changes in current HCRIS cost 
center numbers, we made available on the CMS Web site a revised (RTI-
recommended) crosswalk using current standard and nonstandard cost 
centers codes 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 final rule with 
comment period at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage. We did not include RTI's recommended new 
nonstandard cost centers in this revised crosswalk as they are not yet 
active.
    We specifically requested public comment on the numerous changes 
included in this crosswalk (73 FR 41431). We were interested in public 
opinion about 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, which is the 
traditional default 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).
    Comment: Some commenters supported full adoption of the RTI-
recommended revenue code-to-cost center crosswalk, which included 
expanded and revised crosswalks. Others believed that they could not 
comment on the proposal, including the addition of default CCRs for 
cardiology, therapy, and clinic services, until CMS provides additional 
information comparing the cost-based weights under the current and RTI-
recommended crosswalks that would illustrate the impact of these 
changes. Other commenters wondered whether the crosswalk would be 
applied under both the IPPS for estimating DRG relative weights and the 
OPPS for estimating APC relative weights.
    One commenter requested that CMS update the revenue code-to-cost 
center crosswalk to reflect the cost report change finalized in the FY 
2009 IPPS final rule to create a new implantable device cost center. 
Some commenters expressed support for using cost center 4300 
(Radioisotope) as a primary cost converter for the nuclear medicine 
revenue code series 0340 to 0349, which includes revenue codes for 
nuclear medicine and radiopharmaceuticals. One commenter believed that 
cost center 2500 (Adults and Pediatrics (General Routine Care)) offered 
the appropriate CCR for estimating costs from charges on revenue code 
0762 (Observation Room), instead of cost center 6200 (Observation 
Beds). Another commenter recommended removing cost center 3540 
(Prosthetic Devices) as the primary CCR for revenue code 0275 
(Pacemaker) and only keeping cost center 5500 (Medical Supplies Charged 
to Patients) in the crosswalk. The same commenter pointed out that 
hospitals frequently bill certain imaging services under revenue code 
0361 (Operating Room Services: Minor Surgery) because of billing 
requirements by Medicare Administrative Contractors (MACs) and non-
Medicare payers. This practice ensures that a radiology CCR would not 
be used to estimate costs for these radiology services under the OPPS 
cost methodology.
    Response: The RTI-recommended revenue code-to-cost center crosswalk 
included significant changes from the current OPPS crosswalk that would 
impact the APC relative payment weights considerably. While several of 
RTI's recommendations to improve CMS' processes for estimating costs 
from charges would apply to both the IPPS and the OPPS, the revenue 
code-to-cost center crosswalk is specific to the OPPS. We agree with 
the commenters that observing the actual median costs associated with 
the revised crosswalk would help to inform public comment. We note that 
the majority of the changes detailed under the (RTI--1) column in 
Attachment 4a of RTI's final report are attributable to the revised 
crosswalk (RTI report, ``Refining Cost to Charge Ratios for Calculating 
APC and MS-DRG Relative Payment Weights,'' July 2008). Like many 
commenters, we also believe that RTI's recommended changes are 
improvements. For example, we expect that default CCRs for clinic 
services, cardiology, and therapy that are specific to those types of 
services would be appropriate for more accurately estimating cost when 
the hospital has not reported a clinic, cardiology, or therapy cost 
center. However, we understand that commenters may not have been able 
to fully absorb the changes discussed in RTI's report and would benefit 
from a streamlined comparison of median costs that isolates changes 
attributable to the revenue code-to-cost center crosswalk.
    We did not receive many detailed comments about specific revenue 
code and cost center relationships in the crosswalk, and we will 
therefore not adopt significant changes to the crosswalk until we 
provide such a comparison. Informed analysis and public comment 
regarding the RTI-recommended changes to the revenue code-to-cost 
center crosswalk would help to ensure that any final changes would be 
appropriate and likely to result in more accurate data. We will update 
the revenue code-to-cost center crosswalk when the new device cost 
centers and new nonstandard cost centers are included in the Medicare 
hospital cost report form and corresponding HCRIS database.
    We appreciate the small number of commenters who provided 
thoughtful input on specific adjustments to the revenue code-to-cost 
center crosswalk. We will consider these and any further public 
comments regarding RTI's recommended revisions to the revenue code-to-
cost center crosswalk as we consider crosswalk revisions for future 
OPPS updates. We are not adopting RTI's revised revenue code-to-cost 
center crosswalk for the CY 2009 OPPS. Furthermore, we intend to 
explore

[[Page 68524]]

differences between revenue code billing requirements set by 
contractors and NUBC revenue code definitions.
    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 improved 
data for cost estimation in these areas is a desirable goal. However, 
we historically have received mixed support for regression-adjusted 
CCRS through both the IPPS and OPPS regulatory process. For this 
reason, 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. We specifically did not 
propose to adopt regression-adjusted CCRs for the CY 2009 OPPS. In the 
FY 2009 IPPS final rule (73 FR 48457), we emphasized our fundamental 
goal of improving cost report accounting data through revisions to the 
cost report and our support of education initiatives, rather than 
introducing short-term statistical adjustments.
    Comment: Many commenters expressed general support for all of RTI's 
recommended regression-adjusted CCRs to improve the overall accuracy of 
the OPPS relative weights. One commenter specifically noted that CMS 
should not delay applying regression-based adjustments to CCRs for APC 
payment calculations because the agency chose not to implement 
regression-adjusted CCRs for FY 2009 IPPS payments. Some commenters 
supported the CMS' decision not to implement the short-term statistical 
adjustments recommended by RTI. A number of commenters believed that 
actual hospital data should be used for ratesetting to ensure accuracy 
in payment rates. Other commenters did not support the adoption of 
regression-adjusted CCRs until CMS could provide enough information to 
show the payment impact and redistribution of costs. A few commenters 
noted that CMS should actually propose specific refinements and discuss 
the methodology behind such a proposal. Many commenters requested that 
CMS proceed with caution with regard to making any changes that could 
significantly affect the payment system.
    Numerous commenters expressed support for the use of regression-
adjusted CCRs for devices in order to improve short-term accuracy in 
the OPPS relative payment weights by addressing charge compression 
arising from use of a single CCR for supplies and devices. These 
commenters viewed regression-adjusted CCRs as a suitable temporary 
adjustment for charge compression until CCRs for the new Implantable 
Devices Charged to Patients cost center, finalized in the FY 2009 IPPS 
final rule (73 FR 48458 through 48469), become available in CY 2012 or 
CY 2013. Many commenters saw regression-adjusted CCRs for devices as a 
necessary solution that would be immediately available and appropriate, 
especially because they believed that other options, such as provider 
education, could not address the issue of highly variable markup rates 
compressed by a single CCR during cost estimation. Those commenters 
offered varied suggestions for implementing regression-adjusted CCRs 
for devices, including phasing in adoption of regression-adjusted 
device CCRs over several years, using the regression-adjusted CCRs to 
check the validity of early cost report data for the new cost center, 
and using the device regression-adjusted CCR to soften CCR changes due 
to new implantable devices cost report data.
    Several commenters supported the use of regression-adjusted CCRs 
for drugs, but most commenters focused their comments about charge 
compression in drug payment on CMS' proposal to create two new cost 
centers for drugs with high and low pharmacy overhead costs, 
respectively, which is discussed in more detail in section V.B.3. of 
this final rule with comment period. Many commenters specifically 
opposed the concept of regression-adjusted CCRs for radiology services, 
noting that RTI's results for the CT Scanning and MRI cost centers were 
inaccurate due to error in capital cost allocation for specialized 
imaging services which resulted in inappropriately low relative 
weights.
    Response: As noted above in the preceding three paragraphs, we once 
again received numerous mixed comments on the use of regression-
adjusted CCRs, comparable to the type of comments received on the FY 
2009 IPPS proposed rule. While we appreciate commenters' continued 
thoughtful comments on this issue, we did not propose to adopt 
regression-adjusted CCRs for the CY 2009 OPPS, as we have received 
mixed support for this approach in the past. As such, we are not 
implementing regression-adjusted CCRs for CY 2009. We continue to 
emphasize our preference for long-term cost reporting changes and broad 
education initiatives to address the accuracy of the data, rather than 
short-term statistical adjustments. With regard to devices, CMS 
finalized a proposal in the FY 2009 IPPS final rule to disaggregate the 
medical supplies CCR into one cost center for medical supplies and one 
for implantable devices (73 FR 48458 through 48467). This change to the 
cost report will influence both the IPPS and OPPS relative weights. We 
believe that, ultimately, improved and more precise cost reporting is 
the best way to minimize charge compression and improve the accuracy of 
the cost weights. With regard to radiology, we agree with the 
commenters that the hospital community could benefit from education on 
Medicare hospital cost report requirements for allocation of fixed 
capital and moveable equipment indirect costs to improve the accuracy 
of cost reporting for specialized imaging services.
    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 in 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.
    As noted above in this section, we will assess further steps we can 
take to educate hospitals about 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. Standard cost centers are preprinted in the CMS-approved 
cost report software and constitute the minimum set of cost centers 
that must be reported on the Medicare hospital cost report as

[[Page 68525]]

required in Section 2302.8 of the PRM-I if the hospital creates a 
separate account for the service in its accounting system. RTI noted 
that many hospitals combine costs and charges for standard costs 
centers, especially therapeutic radiology and nuclear medicine 
services, under the diagnostic radiology cost center (RTI report, 
``Refining Cost to Charge Ratios for Calculating APC and MS-DRG 
Relative Payment Weights,'' July 2008). In the CY 2009 OPPS/ASC 
proposed rule (73 FR 41431 through 41432), we specifically asked for 
public comment on the reasons for this aggregation and other relatively 
common deviations from cost reporting instructions, such as a failure 
to report the standard cost center 4700 (Blood Storing, Processing & 
Transportation) when the hospital bills Medicare for blood products 
that have storage and processing costs and charges.
    With regard to creating new standard lines in the cost report, in 
addition to our proposal to add a standard cost center for Implantable 
Devices Charged to Patients in the FY 2009 IPPS proposed rule, we 
proposed to add two standard cost centers, one for Drugs with High 
Overhead Cost Charged to Patients and one for Drugs with Low Overhead 
Cost Charge to Patients, in the CY 2009 OPPS/ASC proposed rule. We 
discuss our decision not to finalize this proposal to create two new 
cost centers for drugs in our discussion of payment for the acquisition 
and pharmacy overhead costs associated with separately payable drugs 
and biologicals in section V.B.3. of this final rule with comment 
period.
    As we indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 
41432), 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 hospitals 
currently report costs and charges for these cost centers. RTI 
identified almost 1,000 cost center lines for CT scanning, MRI, and 
cardiac catheterization each in the one year of HCRIS data used for 
RTI's study. Many more hospitals than this bill distinct charges for 
these services, and we are confident that many hospitals maintain a 
separate account for these services in their accounting system. While 
we currently use available nonstandard cost center CCRs for cost 
estimation under the OPPS, creating standard lines for common advanced 
imaging services, such as CT Scanning and MRI, and a common cardiac 
diagnostic service, Cardiac Catheterization, would encourage more 
providers to report cost and charge information separately for these 
services. Although we did not propose to create these cost centers, in 
the CY 2009 OPPS/ASC proposed rule (73 FR 41432), we specifically 
invited public comment on the appropriateness of creating standard cost 
centers for CT Scanning, MRI, and Cardiac Catheterization to consider 
in our revision of the Medicare hospital cost report form. We recognize 
that improved allocation of moveable equipment costs based on dollar 
value, the recommended allocation statistic, would be important to 
ensure improved accuracy in ratesetting if we were to make these cost 
centers standard.
    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 in the cost report within the context of the 
Medicare policies in PRM-I, Section 2307, and PRM-II, Chapter 36, 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.
    We received numerous comments about potential revisions to the cost 
report and recommendations to improve the cost report form and cost 
report process. A summary of the comments and our responses follow.
    Comment: Many commenters urged CMS to use caution when making 
incremental changes to the cost report, but also suggested that a more 
comprehensive effort be made to improve the cost reporting process. 
Several commenters noted that changes to the cost report to improve the 
accuracy of prospective payment system weights impose hospital burden 
without adding additional revenue to the system and may counteract 
their purpose by requesting a level of precision that hospitals cannot 
provide. Some commenters requested that CMS make cost report changes 
consistent across the inpatient and outpatient payment systems. One 
commenter requested that CMS coordinate cost report requirements with 
those required by State Medicaid programs. Other commenters suggested 
that CMS undertake educational efforts providing greater detail on how 
to comply with regulations and manual instructions, how to file a cost 
report, how to evaluate a completed cost report for accuracy, and the 
consequences of noncompliance. Many commenters noted that hospitals do 
not know what CMS wants them to do when completing the cost report and 
urged CMS to provide explicit cost report guidance on direct expense 
assignment, capital expense assignment, allocation of overhead, and 
matching gross revenue, in order to reduce hospital reporting burden 
and to ensure that hospitals have both the direction and knowledge to 
comply. One commenter suggested that even if hospitals recognized 
problems in their internal cost reporting process, they would continue 
their erroneous reporting practice in order to achieve base year 
consistency. A number of commenters also requested that CMS instruct 
Medicare contractors to audit cost reports more closely.
    Several commenters specifically addressed the new Implantable 
Devices Charged to Patients cost center finalized in the FY 2009 IPPS 
final rule. These commenters requested that CMS carefully choose an 
appropriate overhead allocation statistic to ensure that overhead 
allocation would not undermine the potential accuracy in CCR data 
behind CMS' proposal to create a new cost center. They requested that 
CMS undertake an educational campaign to describe appropriate practices 
for distinguishing between devices and supplies. Some commenters also 
requested that CMS develop mechanisms to validate the accuracy of data 
from the new cost center.
    In response to CMS' inquiry regarding the failure of hospitals to 
report costs and charges for cost center 4700 (Blood Storing, 
Processing, and Transfusion), several commenters indicated that even 
though hospitals are required to bill costs and charges under revenue 
code 0391 (Administration, Processing and Storage for Blood and Blood 
Components; Administration (eg, Transfusion)) and capture those costs 
in cost center 4700 in the cost report, as indicated in the FY 2009 
IPPS final rule (73 FR 48466), hospitals do not report costs and 
charges for cost center 4700 because there are no specific cost report 
instructions. The commenters suggested that CMS define a formula-driven 
expense reclassification method.
    Response: We appreciate the thoughtful public input on clarifying 
cost report instructions and the cost reporting process. We recognize 
that there are areas of concern with the cost report, and we are taking 
steps to address some of them. These include finalizing a new cost 
center for implantable devices, adding fixed descriptions to HCRIS cost 
center codes in the cost report preparation software, and engaging in 
provider educational efforts to help educate providers

[[Page 68526]]

regarding the proper accounting of costs in the cost report. While 
these efforts are being made to help address charge compression and 
improve the accuracy of cost report data, more fundamentally, they will 
improve the cost reporting process itself.
    We are currently in the process of making revisions to the Medicare 
cost report form, and we will consider the commenters' many concerns 
and recommendations summarized above in our revisions. Changes to the 
Medicare hospital cost report will be incorporated into both the IPPS 
and OPPS relative weights. Under the effort to update the cost report 
and eliminate outdated requirements in conjunction with the PRA, 
changes to the cost report form and cost report instructions will be 
made available to the public for comment. The commenters will have an 
opportunity to suggest more comprehensive reforms and to request more 
detailed instructions, and similarly will be able to make suggestions 
for ensuring that these reforms are made in a manner that is not 
disruptive to hospitals' billing and accounting systems and are within 
the guidelines of Medicare principles of reimbursement and generally 
accepted accounting principles (GAAP). We welcome further comment on 
changes to the revised Medicare hospital cost report through the PRA 
process.
    Many State Medicaid programs use the Medicare cost report to 
determine Medicaid payments, including Medicaid Disproportionate Share 
Hospital (DSH) payments. Therefore, it is important for hospitals to 
complete the Medicare cost report in accordance with the Medicare 
reimbursement and cost reporting policies. With regard to reporting 
costs and charges for cost center 4700, we note that CMS provides 
instructions in PRM-II, Section 3610, Line 47 for this cost center.
    While we always are open to incorporating refinements in our cost 
report instructions as requested by numerous commenters, we note that 
CMS cannot provide as much specificity in instructions as some 
commenters have requested, as discussed below. While CMS is responsible 
for issuing cost reporting instructions that are clear, hospitals are 
required to complete the cost report in a manner that is appropriate 
for their internal accounting system structure (42 CFR 413.20) and that 
is within the framework of Medicare reimbursement principles and cost 
report instructions. With regard to the overhead allocation basis for 
the new implantable devices cost center, CMS will recommend an 
allocation basis as it does with all overhead allocation. However, 
hospitals may use a different statistic if approved by the hospital's 
Medicare contractor, in accordance with PRM-I, Section 2313.
    Comment: Many commenters did not support requiring hospitals to 
report all standard cost centers that describe services the hospitals 
provide.
    Response: In accordance with the principle of departmental 
apportionment of costs at Sec.  413.53, hospitals are required to 
report separately the costs and charges for each ancillary department 
for which charges are customarily billed. Section 2302.8 of the PRM-I 
defines a cost center as an organizational unit, generally a department 
or its subunit, having a common functional purpose for which direct and 
indirect costs are accumulated, allocated and apportioned. Language in 
the PRM-II, Chapter 36, incorporated these policies when establishing 
the standard ancillary cost centers in the cost report. Therefore, the 
standard cost centers constitute the most minimum set of common cost 
centers hospitals are required to report, assuming they maintain a 
separate account for those services in the internal accounting systems.
    We recognize that not all cost centers, whether standard or 
nonstandard, apply to all providers. For example, where a provider 
furnishes all radiological services in a single department and their 
records are maintained in that manner, the provider would currently 
enter a single entry identifying all radiological services on the 
Radiology-Diagnostic line of Worksheet A and make no entries on the 
Radiology-Therapeutic line and Radioisotopes line of the cost report. 
However, currently, if these radiological services were furnished in 
three separate departments (cost centers), then the corresponding 
department data should also be accumulated as such in the provider's 
accounting system and recorded similarly in the cost report.
    Comment: While some commenters expressed agreement in theory with 
establishing standard cost centers for CT Scanning, MRI, and Cardiac 
Catheterization, many expressed significant concern with their actual 
implementation. The commenters believed that allocating costs for these 
services to specific cost centers could prove difficult, especially for 
cardiac catheterization, and would in most cases be an estimate. Some 
commenters warned that smaller hospitals might not have accounting 
systems that allow matching costs to revenue in departments for these 
diagnostic services. One commenter suggested that hospitals frequently 
are slow to adopt new cost centers and that CMS should consider 
requiring all providers to use the new cost centers. Some commenters 
wanted to ensure that these services met CMS' definition for reporting 
as a separate and distinct cost center. A number of commenters 
requested that CMS delay implementation of these changes to the cost 
report to allow industry-led initiatives to improve cost reporting, 
especially capital cost finding, to take effect. Other commenters 
believed that the agency should fully understand hospital costs for CT 
and MRI before adding the standard cost centers. One commenter 
suggested that failure to establish cost centers for CT Scanning and 
MRI would amount to a violation of the Administrative Procedures Act 
(APA) because the final regulation must have some rational connection 
with the facts.
    Response: RTI recommended these standard cost centers in order to 
separately capture cost and charge data for high volume services 
contributing to aggregation bias in the OPPS relative weights. Although 
we did not propose to adopt these cost centers as standard cost 
centers, we believe that doing so would help provide more accurate cost 
estimates for CT scans, MRI, and Cardiac Catheterization, coupled with 
improved hospital allocation of moveable equipment costs based on 
dollar value or direct assignment, if the criteria in PRM-I, Section 
2307 are met. All of these departments already are nonstandard cost 
centers, and, therefore, we believe that they meet CMS' definition of 
separate and distinct cost centers, if a hospital maintains separate 
departments for these services and establishes separate accounts for 
them in its internal accounting system.
    We will review these comments again, should we consider proposing 
additional standard cost centers in the cost report in future years.
    We do not understand the comments concerning the APA. We did not 
propose to adopt these three cost centers; we only requested comment on 
RTI's recommendation. Further, RTI and commenters acknowledge that 
hospitals do not appear to be appropriately allocating capital costs to 
these specialized imaging cost centers, potentially using ``square 
feet'' as the allocation basis rather than the recommended allocation 
basis of ``dollar value.'' Finally, commenters will have an opportunity 
to provide further input on revisions to the Medicare hospital cost 
report form through a notice and comment process as we pursue changes 
to the cost report through the PRA process.

[[Page 68527]]

    Comment: Many commenters asked CMS to consider whether separate 
cost centers for a variety of services should be created, such as Type 
B emergency departments, in order to develop more accurate CCRs, 
particularly in the context of potentially significant changes to the 
cost report form. Other commenters recommended that CMS limit cost 
report changes to cost center lines that have significant accuracy 
problems in their current CCRs, so as not to place undue burden on 
hospitals.
    Response: The commenters will have an opportunity to provide 
further input on revisions to the Medicare hospital cost report form 
through the PRA notice and comment process anticipated later this year. 
We note that RTI could not consider Type B emergency department visits 
specifically in its analysis because Type B visits do not have a unique 
UB-04 revenue code. Still, most commenters believed that the issue of 
medical devices and supplies represented the most significant area of 
charge compression and further changes to the cost report and 
associated hospital reporting burden would not be warranted by 
potential improvements in payment accuracy. We understand the 
hospital's increased administrative burden that may result from changes 
to the cost report because we have been told that changes to the cost 
report involve significant accounting and billing modifications. 
However, we note that most of the cost centers discussed in this 
section are for departments or accounts that cost report data indicate 
are already established within many hospitals' internal accounting 
systems. As to the potential new billing requirements, we do not 
believe most cost report changes would require significant billing 
modifications if the hospital uses the most detailed UB-04 revenue 
codes available. In summary, we will keep these comments in mind as we 
consider other revisions to the Medicare hospital cost report.
    Comment: Some commenters were very concerned with the results of 
RTI's analysis, which observed very low CCRs for CT scanning and MRI. 
They attributed this finding to a common hospital practice of 
allocating fixed capital and moveable equipment costs using a per 
square footage allocation statistic, rather than one that more 
appropriately associates the high capital and equipment costs with the 
CT and MRI cost centers. Some commenters believed that RTI's 
conclusions were unjustified because RTI assumed that the full cost of 
these specialized imaging services was fully captured by the CT and MRI 
nonstandard cost centers. Many commenters requested more guidance 
regarding how to properly allocate moveable equipment capital costs, 
including the practice of direct assignment of equipment depreciation 
and lease costs, and generally supported an educational initiative 
about capital cost finding. Most commenters supported allocating 
overhead based on direct assignment or dollar value of depreciation and 
lease costs.
    Response: We agree that cost allocation of the capital costs (for 
example, depreciation or rental) of expensive moveable equipment using 
``square feet'' as the allocation basis may lead to inaccuracies in 
cost estimates, as the allocation basis bears no direct relationship to 
the cost being allocated. Because the CMS-recommended allocation basis 
for moveable equipment capital costs is ``dollar value,'' we suggest 
that hospitals use that basis rather than ``square feet'' to allocate 
the moveable equipment capital costs. (We refer readers to Section 3617 
of PRM-II and column header on Worksheet B-1.) We note that ``dollar 
value'' in the context of PRM-II, Section 3617 means the ``cost of the 
equipment'' rather than ``depreciation expense and lease costs'' as the 
commenters mentioned. We fully support industry-led hospital 
educational initiatives related to capital cost finding, including 
direct assignment. As to the cost finding, the policies in PRM-I, 
Section 2313 permit a hospital to request that its Medicare contractor 
approve a different allocation basis than the CMS-recommended basis if 
the use of the basis results in more appropriate and more accurate 
allocations. Hospitals may also directly assign the capital-related 
cost if such assignment meets all the criteria of PRM-I, Section 2307. 
However, we specify in PRM-I, Section 2307.A that, ``Direct assignment 
of cost is the process of assigning directly allocable costs of a 
general service cost center (we refer readers to Section 2302.9 of PRM-
I) to all cost centers receiving service from that cost center based 
upon actual auditable usage'' and that, ``The direct assignment of 
costs must be made as part of the provider's accounting system with 
costs recorded in the ongoing normal accounting process.'' Therefore, 
these policies prohibit a hospital from directly assigning moveable 
equipment capital or building and fixture costs to, for example, only a 
CT Scanning, MRI, or Radiology-Diagnostic cost center(s), and 
allocating those moveable equipment capital or building and fixture 
costs applicable to all the other cost centers through the stepdown 
process. We note that these policies for allocating moveable equipment 
and building and fixture costs not only impact the accuracy of the OPPS 
cost estimates, but also impact the calculation of reimbursement for 
hospitals paid under cost reimbursement (such as cancer hospitals or 
CAHs).
2. Calculation of Median Costs
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate the final OPPS payment rates for CY 
2009. The hospital OPPS page on the CMS Web site on which this final 
rule with comment period is posted provides an accounting of claims 
used in the development of the final rates at: http://www.cms.hhs.gov/HospitalOutpatientPPS. The accounting of claims used in the development 
of this final rule with comment period is included on the Web site 
under supplemental materials for the CY 2009 final rule with comment 
period. That accounting provides additional detail regarding the number 
of claims derived at each stage of the process. In addition, below we 
discuss the files of claims that comprise the data sets that are 
available for purchase under a CMS data user contract. Our CMS Web 
site, http://www.cms.hhs.gov/HospitalOutpatientPPS, includes 
information about purchasing the following two OPPS data files: ``OPPS 
Limited Data Set'' and ``OPPS Identifiable Data Set.'' These files are 
available for the claims that were used to calculate the final payment 
rates for the CY 2009 OPPS.
    As proposed, 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 final rule with comment 
period.
a. Claims Preparation
    We used the CY 2007 hospital outpatient claims processed on and 
before June 30, 2008, to set the final 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,

[[Page 68528]]

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 107 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 
final 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 HCRIS. We used the most recent 
available cost report data, in most cases, cost reports beginning in CY 
2006. As proposed, for this final rule with comment period, we used the 
most recently submitted cost reports to calculate the CCRs to be used 
to calculate median costs for the 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 final rule with comment period 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, the revenue code-to-cost center 
crosswalk, to match a cost center to every possible revenue code 
appearing in the outpatient claims that is relevant to OPPS services, 
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 revenue code-to-
cost center crosswalk is available for inspection and comment on the 
CMS Web site: http://www.cms.hhs.gov/HospitalOutpatientPPS. Revenue 
codes not used to set medians or to model impacts are identified with 
an ``N'' in the revenue code-to-cost center crosswalk. We note that as 
discussed in section II.A.1.c.(1) of this final rule with comment 
period, we removed 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 the CY 2009 OPPS/ASC proposed 
rule contained a list of the revenue codes we proposed to package. 
Revenue codes not included in Table 2 were 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 during development 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 final rule with comment 
period.
    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. 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.
    We did not receive any public comments on our CY 2009 proposal to 
prepare the claims to be split into usable groups and, therefore, we 
are finalizing our proposal without modification.

[[Page 68529]]

b. Splitting Claims and Creation of ``Pseudo'' Single Claims
(1) Splitting 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.) In the CY 2009 
OPPS/ASC proposed rule (73 FR 41434), we proposed 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 proposed 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 final rule with comment 
period, we proposed to assign these new status indicators to facilitate 
identification of the different categories of codes. We proposed to 
treat these codes in the same manner for data purposes for CY 2009 as 
we treated them for CY 2008. Specifically, we proposed 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 final 
rule with comment period.
    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 therapy services 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 have assigned 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 final rule with comment period. Claims that contain 
codes to which we have assigned status indicator ``Q3'' (composite APC 
members) appear in both the data of the single and multiple major files 
used in this final rule with comment period, depending on the specific 
composite calculation.
    Comment: One commenter asked that CMS make the preliminary 
packaging and composite data available to the public for review as soon 
as possible. In addition, several commenters requested that CMS make 
packaging data available to the public, including utilization rates and 
median costs for packaged services, and general payment calculations, 
to allow more transparency in the OPPS ratesetting process.
    Response: We make available a considerable amount of data for 
public analysis each year and, while we are not developing and 
providing to the public the extensively detailed information that 
commenters requested, we provide the public use files of claims and a 
detailed narrative description of our data process that the public can 
use to perform any desired analyses. In addition, we believe that the 
commenters must examine the data themselves to develop the specific 
arguments to support their requests for changes to payments under the 
OPPS. In fact, several commenters submitted detailed analyses of how 
often certain packaged services were provided with specific independent 
services, and the amount by which packaged costs contribute to the 
payment rate for the

[[Page 68530]]

independent service. We understand that the OPPS is a complex payment 
system and that it is impossible to easily determine the quantitative 
amount of packaged costs present in the median cost for every 
independent service. However, based on the complex and detailed 
comments that we received, commenters are clearly able to perform 
meaningful analyses based on the public claims data available at this 
time.
    After consideration of the public comments received on our proposed 
process of organizing claims by type, we are finalizing our CY 2009 
proposal, without modification.
(2) Creation of ``Pseudo'' Single Claims
    As proposed, to develop ``pseudo'' single claims for this final 
rule with comment period, 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 final rule with comment period 
to remove separately payable procedures that we determined contained 
limited or no packaged costs or that were otherwise suitable for 
inclusion on the bypass list from a multiple procedure bill. When one 
of the two separately payable procedures on a multiple procedure claim 
was on the bypass list, we split the claim into two ``pseudo'' single 
procedure claim records. The single procedure claim record that 
contained the bypass code did not retain packaged services. The single 
procedure claim record that contained the other separately payable 
procedure (but no bypass code) retained the packaged revenue code 
charges and the packaged HCPCS code charges. We 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.
    Where only one unit of one of an ``overlap bypass code'' appeared 
on a claim with only one unit of another separately paid code, for the 
CY 2009 OPPS/ASC proposed rule 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.
    Comment: Several commenters urged CMS to use as much claims data as 
possible to set the CY 2009 OPPS median costs.
    Response: We agree that it is preferable to use as much claims data 
as possible to maximize the extent to which the median costs for any 
given service or APC accurately reflect the relative costs of the 
services. Although as discussed in section II.A.1.b. of this final rule 
with comment period, the removal of radiation oncology codes that did 
not pass the empirical criteria from the bypass list for this final 
rule with comment period resulted in a smaller number of ``pseudo'' 
single claims, we were able to revise our treatment of the ``overlap 
bypass codes'' to enable us to use the claims data that remained on the 
claim after removal of the line-item cost for the bypass code when only 
one unit of one separately paid code remained on the claim. We refer 
readers to section II.A.1.b. of this final rule with comment period for 
further discussion of this change.
    For this final rule with comment period, we created ``pseudo'' 
single claims from the remaining information on these claims. We 
assessed the claim to determine if, after removal of all lines for 
bypass codes, including the ``overlap bypass codes,'' a single unit of 
a single separately paid code remained on the claim. If so, we 
attributed the packaged costs on the claim to the single unit of the 
single remaining separately paid code other than the bypass code to 
create a ``pseudo'' single claim. This allowed us to use more claims 
data for ratesetting purposes for this final rule with comment period.
    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''), and 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

[[Page 68531]]

``Q2,'' we then assessed the claims to determine if the criteria for 
the multiple imaging composite APCs, discussed in section II.A.2.e.(5) 
of this final rule with comment period, were met. Where the criteria 
for the 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 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 packaged 
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.
    Comment: One commenter suggested that the handling of status 
indicator ``Q1'' (``STVX-packaged'') and ``Q2'' (``T-packaged'') 
conditionally packaged codes at the beginning of the ratesetting 
process rather than in later stages packaged more lines than were 
necessary or appropriate. The commenter suggested that applying the 
packaging determination of the conditionally packaged code in later 
stages would allow lines that would otherwise be packaged to be used 
for ratesetting.
    Response: The purposes of the various methods through which we 
develop ``pseudo'' single claims is to isolate the resource cost of a 
service in situations where that otherwise might not be possible. In 
the case of the status indicator ``Q1'' and ``Q2'' conditionally 
packaged codes, we only used lines that would actually be paid 
separately under the final CY 2009 payment policies in estimating 
median costs in order to accurately estimate the costs of these 
services when they would be separately payable. The commenter's 
suggested methodology would result in our incorporation of lines that 
would be packaged when processed through the I/OCE, which we believe to 
be inappropriate in the ``pseudo'' single claim development process 
that we use to estimate the costs of services that would be separately 
payable.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, for the process 
by which we develop ``pseudo'' single claims, for this final rule with 
comment period.
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 final rule with 
comment period, the costs of those lines for codes with status 
indicator ``Q1'' or ``Q2'' when they are not separately paid), and the 
costs of packaged revenue codes into the cost of the single major 
procedure remaining on the claim.
    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) and that we used for packaging costs in 
median calculation. As a result of that analysis, we used the packaged 
revenue codes for CY 2009 that are displayed in Table 2 below. We 
received no public comments on the revenue codes that we proposed to 
package for CY 2009 and, therefore, we are finalizing the list of 
packaged revenue codes as proposed, without modification, as shown in 
Table 2 below.
    In this final rule with comment period, we replaced the NUBC 
standard abbreviations for the revenue codes listed in Table 2 of the 
CY 2009 OPPS/ASC proposed rule with the most current NUBC description 
of the revenue code categories and subcategories to better articulate 
the meanings of the revenue codes. However, while the labeling for the 
packaged revenue codes changed, the list of revenue codes shown in 
Table 2 has not changed from the revenue codes that we proposed to 
package for CY 2009 as displayed in Table 2 of the CY 2009 OPPS/ASC 
proposed rule (73 FR 41436 through 41437) and which we are finalizing 
for the CY 2009 OPPS. In the course of making the changes in labeling 
for the revenue codes in Table 2, we noticed some changes to revenue 
categories and subcategories that we believe warrant further review for 
future OPPS updates. Although we are finalizing the list of packaged 
revenue codes in Table 2 for CY 2009, we intend to assess the NUBC 
revenue codes to determine whether any changes to the list of packaged 
revenue codes should be proposed for the CY 2010 OPPS. We welcome 
public input and discussion during the comment period of this final 
rule with comment period on the packaged revenue codes listed in Table 
2, for purposes of assisting us in this assessment of revenue codes. 
When submitting comments, commenters should remember that the OPPS pays 
not only for services furnished to hospital outpatients but also pays 
for a limited set of services furnished to inpatients who do not have 
Part A coverage of hospital services furnished on the date on which the 
service is furnished. Payment under the OPPS for these services, which 
are reported on 12X bill types, may lead to the appropriate packaging 
of some costs reported on inpatient revenue codes for purposes of the 
OPPS ratesetting.

                 Table 2--CY 2009 Packaged Revenue Codes
------------------------------------------------------------------------
        Revenue code                          Description
------------------------------------------------------------------------
0250........................  Pharmacy; General Classification.
0251........................  Pharmacy; Generic Drugs.
0252........................  Pharmacy; Non-Generic Drugs.
0254........................  Pharmacy; Drugs Incident to Other
                               Diagnostic Services.
0255........................  Pharmacy; Drugs Incident to Radiology.
0257........................  Pharmacy; Non-Prescription.
0258........................  Pharmacy; IV Solutions.
0259........................  Pharmacy; Other Pharmacy.

[[Page 68532]]

 
0260........................  IV Therapy; General Classification.
0262........................  IV Therapy; IV Therapy/Pharmacy Svcs.
0263........................  IV Therapy; IV Therapy/Drug/Supply
                               Delivery.
0264........................  IV Therapy; IV Therapy/Supplies.
0269........................  IV Therapy; Other IV Therapy.
0270........................  Medical/Surgical Supplies and Devices;
                               General Classification.
0271........................  Medical/Surgical Supplies and Devices; Non-
                               sterile Supply.
0272........................  Medical/Surgical Supplies and Devices;
                               Sterile Supply.
0273........................  Medical/Surgical Supplies and Devices;
                               Take Home Supplies.
0275........................  Medical/Surgical Supplies and Devices;
                               Pacemaker.
0276........................  Medical/Surgical Supplies and Devices;
                               Intraocular Lens.
0278........................  Medical/Surgical Supplies and Devices;
                               Other Implants.
0279........................  Medical/Surgical Supplies and Devices;
                               Other Supplies/Devices.
0280........................  Oncology; General Classification.
0289........................  Oncology; Other Oncology.
0343........................  Nuclear Medicine; Diagnostic
                               Radiopharmaceuticals.
0344........................  Nuclear Medicine; Therapeutic
                               Radiopharmaceuticals.
0370........................  Anesthesia; General Classification.
0371........................  Anesthesia; Anesthesia Incident to
                               Radiology.
0372........................  Anesthesia; Anesthesia Incident to Other
                               DX Services.
0379........................  Anesthesia; Other Anesthesia.
0390........................  Administration, Processing and Storage for
                               Blood and Blood Components; General
                               Classification.
0399........................  Administration, Processing and Storage for
                               Blood and Blood Components; Other Blood
                               Handling.
0560........................  Home Health (HH)--Medical Social Services;
                               General Classification.
0569........................  Home Health (HH)--Medical Social Services;
                               Other Med. Social Service.
0621........................  Medical Surgical Supplies--Extension of
                               027X; Supplies Incident to Radiology.
0622........................  Medical Surgical Supplies--Extension of
                               027X; Supplies Incident to Other DX
                               Services.
0624........................  Medical Surgical Supplies--Extension of
                               027X; FDA Investigational Devices.
0630........................  Pharmacy--Extension of 025X; Reserved.
0631........................  Pharmacy--Extension of 025X; Single Source
                               Drug.
0632........................  Pharmacy--Extension of 025X; Multiple
                               Source Drug.
0633........................  Pharmacy--Extension of 025X; Restrictive
                               Prescription.
0681........................  Trauma Response; Level I Trauma.
0682........................  Trauma Response; Level II Trauma.
0683........................  Trauma Response; Level III Trauma.
0684........................  Trauma Response; Level IV Trauma.
0689........................  Trauma Response; Other.
0700........................  Cast Room; General Classification.
0709........................  Cast Room; Reserved.
0710........................  Recovery Room; General Classification.
0719........................  Recovery Room; Reserved.
0720........................  Labor Room/Delivery; General
                               Classification.
0721........................  Labor Room/Delivery; Labor.
0732........................  EKG/ECG (Electrocardiogram); Telemetry.
0762........................  Specialty Room--Treatment/Observation
                               Room; Observation Room.
0801........................  Inpatient Renal Dialysis; Inpatient
                               Hemodialysis.
0802........................  Inpatient Renal Dialysis; Inpatient
                               Peritoneal Dialysis (Non-CAPD).
0803........................  Inpatient Renal Dialysis; Inpatient
                               Continuous Ambulatory Peritoneal Dialysis
                               (CAPD).
0804........................  Inpatient Renal Dialysis; Inpatient
                               Continuous Cycling Peritoneal Dialysis
                               (CCPD).
0809........................  Inpatient Renal Dialysis; Other Inpatient
                               Dialysis.
0810........................  Acquisition of Body Components; General
                               Classification.
0819........................  Inpatient Renal Dialysis; Other Donor.
0821........................  Hemodialysis-Outpatient or Home;
                               Hemodialysis Composite or Other Rate.
0824........................  Hemodialysis-Outpatient or Home;
                               Maintenance--100%.
0825........................  Hemodialysis-Outpatient or Home; Support
                               Services.
0829........................  Hemodialysis-Outpatient or Home; Other OP
                               Hemodialysis.
0942........................  Other Therapeutic Services (also see 095X,
                               an extension of 094x); Education/
                               Training.
------------------------------------------------------------------------

    In addition, we excluded (1) claims that had zero costs after 
summing all costs on the claim and (2) claims containing packaging flag 
number 3. Effective for services furnished on or after July 1, 2004, 
the 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 or MAC 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

[[Page 68533]]

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 proposed 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 58 million 
claims were left for this final rule with comment period. Using these 
58 million claims, we created approximately 99 million single and 
``pseudo'' single claims, of which we used 99 million single bills 
(after trimming out approximately 617,000 claims as discussed above in 
this section) in the final CY 2009 median development and ratesetting.
    We used the remaining claims to calculate the final CY 2009 median 
costs for each separately payable HCPCS code and each APC. The 
comparison of HCPCS code-specific 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 median costs 
and public comments received on the CY 2009 OPPS/ASC proposed rule and 
reassigned HCPCS codes to different APCs where we believed that it was 
appropriate. Section III. of this final rule with comment period 
includes a discussion of certain HCPCS code assignment changes that 
resulted from examination of the median costs, review of the public 
comments, and for other reasons. The APC medians were recalculated 
after we reassigned the affected HCPCS codes. Both the HCPCS code-
specific 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.
    Comment: Several commenters objected to the volatility of the OPPS 
rates from year to year. These commenters asserted that the absence of 
stability in the OPPS rates creates budgeting, planning, and operating 
problems for hospitals, and that as more care is provided on an 
outpatient, rather than inpatient basis, the need for stable payment 
rates from one year to the next becomes more important to hospitals. 
Some commenters suggested that we limit reductions in APC payments to a 
set amount. One commenter suggested that we reexamine the billing 
system.
    Response: There are a number of factors pertinent to the OPPS that 
may cause median costs to change from one year to the next. Some of 
these are a reflection of hospital behavior, and some of them are a 
reflection of fundamental characteristics of the OPPS as defined in 
statute. For example, the OPPS payment rates are based on hospital cost 
report and claims data. However, hospital costs and charges change each 
year and this results in both changes to the CCRs taken from the most 
currently available cost reports and also differences in the charges on 
the claims that are the basis of the calculation of the median costs on 
which OPPS rates are based. Similarly, hospitals adjust their mix of 
services from year to year by offering new services and ceasing to 
furnish services or changing the proportion of the various services 
they furnish, which has an impact on the CCRs that we derive from their 
cost reports. CMS cannot stabilize these hospital-driven fundamental 
inputs to the calculation of OPPS payment rates.
    Moreover, there are other essential elements of the OPPS which 
contribute to the changes in relative weights each year. These include, 
but are not limited to, reassignments of HCPCS codes to APCs to rectify 
2 times violations as required by the law, to address the costs of new 
services, to address differences in hospitals' costs that may result 
from changes in medical practice, and to respond to public comments. 
Our efforts to improve payment accuracy may also contribute to payment 
volatility in the short run, as may be the case when we are eventually 
able to use more specific CCRs to estimate the costs of implantable 
devices, based on the final policy that we adopted to disaggregate the 
single cost center for medical supplies into two more specific cost 
centers, as described in the FY 2009 IPPS final rule (73 FR 48458 
through 48467). Moreover, for some services, we cannot avoid using 
small numbers of claims, either because the volume of services is 
naturally low or because the claims data do not facilitate the 
calculation of a median cost for a single service. Where there are 
small numbers of claims that are used in median calculation, there is 
more volatility in the median cost from one year to the next. Lastly, 
changes to OPPS payment policy (for example, changes to packaging) also 
contribute to some extent to the fluctuations in the OPPS payment rates 
for the same services from year to year.
    We cannot avoid the naturally occurring volatility in the cost 
report and claims data that hospitals submit and on which the payment 
rates are based. Moreover (with limited exceptions), we are required by 
law to reassign HCPCS codes to APCs where it is necessary to avoid 2 
times violations. However, we have made other changes to resolve some 
of the other potential reasons for instability from year to year. 
Specifically, we continue to seek ways to use more claims data so that 
we have fewer APCs for which there are small numbers of single bills 
used to set the APC median costs. Moreover, we have tried to eliminate 
APCs with very small numbers of single bills where we could do so. We 
recognize that changes to payment policies, such as the packaging of 
payment for ancillary and supportive services and the implementation of 
composite APCs, may contribute to volatility in payment rates in the 
short term, but we believe that larger payment packages and bundles 
should help to stabilize payments in future years by enabling us to use 
more claims data and by establishing payments for larger groups of 
services.
    Comment: Some commenters asked that CMS provide an adjustment for 
medical education costs under the OPPS because many of the costs of 
teaching services are now incurred in the HOPD as services previously 
furnished only in the inpatient setting are now being furnished in the 
HOPD. These commenters stated that CMS indicated that it would study 
the costs and payment differential among different classes of providers 
in the April 7, 2000 OPPS final rule but has not done so. They 
recommended that CMS study whether the hospital outpatient costs of 
teaching hospitals are higher than the costs of other hospitals for 
purposes of determining whether there should be a teaching hospital 
adjustment. The

[[Page 68534]]

commenters explained that their internal analysis of 2006 Medicare cost 
reports showed that the average outpatient margins were -27.3 for major 
teaching hospitals, -13.0 for other teaching hospitals, and -15.2 for 
nonteaching hospitals. They believed that these findings demonstrated 
that the hospital outpatient costs of major teaching hospitals are 
significantly greater than the costs of other hospitals. The commenters 
requested that CMS conduct its own analysis and that if that analysis 
showed a difference due to the unique missions of teaching hospitals, 
CMS should add a teaching adjustment to the OPPS.
    Response: Unlike payment under the IPPS, the law does not provide 
for payment for indirect medical education costs to be made under the 
OPPS. Section 1833(t)(2)(E) of the Act, as added by section 4523 of the 
BBA, states that the Secretary shall establish, in a budget neutral 
manner ``* * * other adjustments as determined to be necessary to 
ensure equitable payments, such as adjustments for certain classes of 
hospitals.'' We have not found such an adjustment to be necessary to 
ensure equitable payments to teaching hospitals and, therefore, have 
not developed such an adjustment. We do not believe an indirect medical 
education add-on payment is appropriate in a budget neutral payment 
system where such changes would result in reduced payments to all other 
hospitals. Furthermore, in this final rule with comment period, we have 
developed payment weights that we believe provide appropriate and 
adequate payment for the complex medical services, such as visits 
requiring prolonged observation, new technology services, and device-
dependent procedures, which we understand are disproportionately 
furnished by teaching hospitals. We note that teaching hospitals 
benefit from the CY 2009 recalibration of the APCs in this final rule 
with comment period. The final CY 2009 impacts by class of hospital are 
displayed in Table 51 in section XXIII.B. of this final rule with 
comment period.
    After consideration of the public comments received, we are 
finalizing our proposed CY 2009 methodology for calculating the median 
costs upon which the CY 2009 OPPS payment rates are based.
    In some cases, APC median costs are calculated using variations of 
the process outlined above. Section II.A.2.d. of this final rule with 
comment period that follows addresses the calculation of single APC 
criteria-based median costs. Section II.A.2.e. of this final rule with 
comment period discusses the calculation of composite APC criteria-
based median costs. Section X.B. of this final rule with comment period 
addresses the methodology for calculating the median cost for partial 
hospitalization services.
d. Calculation of Single Procedure APC Criteria-Based Median Costs
(1) Device-Dependent APCs
    Device-dependent APCs are populated by CPT 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).
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41437), we proposed 
for CY 2009 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 proposed to calculate the medians for device-dependent APCs for CY 
2009 using only the subset of single procedure claims from CY 2007 
claims data that pass the procedure-to-device and device-to-procedure 
edits; do not contain token charges (less than $1.01) 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 believe that this methodology gave 
us the most appropriate proposed rule 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 
showed 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, APC 0106 (Insertion/
Replacement of Pacemaker Leads and/or Electrodes), APC 0225 
(Implantation of Neurostimulator Electrodes, Cranial Nerve), and APC 
0418 (Insertion of Left Ventricular Pacing Electrode) demonstrated 
median decreases of 26 percent, 52 percent, and 47 percent, 
respectively. As indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 
41437), 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 OPPS 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 found that hospitals 
frequently billed a procedure code for 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 OPPS 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 proposed decreases to the median costs of APCs 0106, 0225, and 0418 
for CY 2009 were consistent with what we expected, based on what we 
understood to be the nature of the services and the costs of correctly 
coded devices. In the CY 2009 OPPS/ASC proposed rule (73 FR 41438), we 
also noted an anticipated decrease in our frequency of single procedure 
claims 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 procedure claims for the lead/electrode 
implantation procedures.
    At the August 2008 meeting of the APC Panel, one presenter stated 
that the proposed decrease in payment for CY 2009 for APC 0225, which 
includes a procedure to implant a neurostimulator electrode for vagus 
nerve stimulation (VNS), would make VNS too costly for

[[Page 68535]]

providers and beneficiaries relative to its OPPS payment. The presenter 
requested that CMS reassign CPT code 64553 (Percutaneous implantation 
of neurostimulator electrodes, cranial nerve) to APC 0040 (Percutaneous 
Implantation of Neurostimulator Electrodes, Excluding Cranial Nerve), 
leaving CPT code 64573 (Incision for implantation of neurostimulator 
electrodes, cranial nerve) as the only code in APC 0225 (CPT code 64573 
describes the lead implantation for VNS). The presenter argued that the 
procedure described by CPT code 64553 is more similar clinically and in 
terms of resource utilization to the procedures assigned to APC 0040 
than to the other procedure assigned to APC 0225. The presenter also 
requested that, after reassigning CPT code 64553 to APC 0040, CMS 
calculate the payment rate for APC 0225 using only claims for patients 
with epilepsy. According to the presenter, in May 2007, CMS issued a 
National Coverage Determination (NCD) denying Medicare coverage of VNS 
for the treatment of depression, while maintaining coverage for certain 
epilepsy indications. The presenter stated that it was possible the 
Medicare noncoverage of VNS for depression may have confused hospital 
providers, leading to incorrect hospital coding and submission of 
epilepsy claims. In response to this two-part request, the APC Panel 
recommended that CMS reassign CPT code 64553 to APC 0040, and that CMS 
recalculate the median cost of APC 0225 based solely on claims for CPT 
code 64573. The APC Panel did not make a recommendation related to the 
requester's second request, to include only claims with epilepsy 
indications in ratesetting for APC 0225. We discuss our response to 
these two APC Panel recommendations below under the comments and 
responses section of this section of this final rule with comment 
period.
    We also indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 
41438), that APC 0625 (Level IV Vascular Access Procedures) as 
configured for CY 2008 and calculated based on CY 2007 claims data also 
demonstrated 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 approximately $2,092 calculated for CPT 
code 36566 from those claims was accurate and appropriately reflected 
correct hospital reporting of the procedure and the associated device. 
Furthermore, because of the decrease in the median cost for CPT code 
36566, we proposed to reassign the code to APC 0623 (Level III Vascular 
Access Procedures), which had a proposed median cost of approximately 
$1,939. We also proposed to delete APC 0625 because no other procedures 
would map to this APC if CPT code 36566 was reassigned.
    In addition, we noted 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 (73 FR 41438) and to a single provider furnishing 
the majority of the services. 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, particularly for low volume device-
dependent APCs such as APC 0681, for which the proposed median cost 
increased approximately 37 percent from CY 2007 to CY 2008.
    Comment: Many commenters supported the CMS proposal to set the 
median costs for device-dependent APCs using the standard device-
dependent APC ratesetting methodology in CY 2009, and expressed 
appreciation of CMS' efforts to use only those claims that reflect the 
full costs of devices in ratesetting for device-dependent APCs. One 
commenter remarked that the methodology of using only those claims that 
include the appropriate device HCPCS codes to calculate payment rates 
for procedures that require a device to be implanted or used results in 
payment rates that more appropriately reflect the costs associated with 
device-dependent APCs. The commenter supported the proposed payment 
increases for APC 0385 (Level I Prosthetic Urological Procedures) and 
APC 0386 (Level II Prosthetic Urological Procedures) in particular. 
Some commenters supported the mandatory reporting of all HCPCS device 
C-codes, and urged CMS to continue educating hospitals on the 
importance of accurate coding for devices, supplies, and other 
technologies. Those commenters recommended that CMS focus on educating 
providers on the accurate use of supply codes, particularly HCPCS code 
A4306 (Disposable drug delivery system, flow rate of less than 50 ml 
per hour), which the commenters believed was reported inappropriately 
by many hospitals.
    Several commenters also requested that CMS exclude claims from 
ratesetting in CY 2010 and beyond that contain the ``FC'' modifier, 
indicating the procedure was performed using a device for which the 
hospital received partial credit. According to the commenters, 
exclusion of these claims is necessary to ensure that only claims that 
contain the full costs of devices are included in ratesetting.
    Response: We appreciate the commenters' support of the standard 
device-dependent APC ratesetting methodology. We agree that accurate 
reporting of device, supply, and technology charges will help to ensure 
that these items are appropriately accounted for in future years' OPPS 
payment rates. We encourage stakeholders to carefully review HCPCS code 
descriptors, as well as any guidance CMS may have provided for specific 
HCPCS codes. In addition, we have provided further instructions on the 
billing of medical and surgical supplies in the October 2008 OPPS 
update (Transmittal 1599, Change Request 6196, dated September 19, 
2008). For HCPCS codes that are paid under the OPPS, providers may also 
submit inquiries to the AHA Central Office on HCPCS, which serves as a 
clearinghouse on the proper use of Level I HCPCS codes for hospital 
providers and certain Level II HCPCS codes for hospitals, physicians, 
and other health professionals. Inquiries must be submitted using the 
approved form, which may be downloaded from the AHA Web site (http://www.ahacentraloffice.org) and either faxed to 312-422-4583 or mailed 
directly to the AHA Central Office: Central Office on HCPCS, American

[[Page 68536]]

Hospital Association, One North Franklin, Chicago, IL 60606.
    The ``FC'' modifier became effective January 1, 2008, and will be 
present for the first time on claims used in OPPS ratesetting for CY 
2010. Any refinements to our standard device-dependent APC ratesetting 
methodology for years beyond CY 2009 would be addressed in future 
rulemaking.
    Comment: Several commenters remarked that the CY 2009 OPPS/ASC 
proposed rule included several reductions to the payments for device-
dependent APCs that they believe may threaten medical technology 
innovation and patient access. The commenters made the general 
recommendation that CMS study further the claims for any APC for which 
the calculated payment reduction would be greater than 10 percent and 
take action to correct issues that may reduce these payments 
artificially. The commenters further recommended that CMS limit the 
reduction in payment that any device-dependent APC may experience in 1 
year to 10 percent. Other commenters expressed concerns specifically 
about the proposed payment reductions for APCs 0106 and 0418, arguing 
that the proposed payment rates would not cover outpatient hospital 
costs associated with providing the procedures assigned to these APCs, 
and that CMS should take steps to stabilize payment for these APCs to 
protect beneficiary access.
    Several commenters also requested that CMS reassign CPT code 64553 
from APC 0225 to APC 0040 as a means to address what they perceived to 
be inadequate payment for the only other procedure assigned to APC 
0225, which is described by CPT code 64573, consistent with the 
recommendation made by the APC Panel at its August 2008 meeting. These 
commenters argued that the procedure described by CPT code 64553 is 
more similar clinically and/or in terms of resource utilization to 
procedures that are assigned to APC 0040, because these procedures have 
median costs that more closely approximate the median cost of CPT code 
64553 and involve the percutaneous implantation of neurostimulator 
electrodes through an introducer needle. They asserted that CPT code 
64573, in contrast, describes electrode placement by using a scalpel to 
incise skin. In addition to requesting the reassignment of CPT code 
64553 to APC 0040, some commenters asked CMS to calculate the median 
cost for CPT code 64573 using only single procedure claims with an 
epilepsy diagnosis code that is consistent with CMS' NCD for VNS, 
effective May 4, 2007.
    Response: We do not agree that it is necessary to implement a 
payment reduction limit of 10 percent or take other steps to stabilize 
payment for device-dependent APCs in CY 2009. We reviewed the data for 
all device-dependent APCs with significant changes in median costs from 
CY 2008 to CY 2009, as is our usual practice, to ensure there are no 
data errors that would inappropriately or artificially impact the 
median costs. We found no reason to believe that the claims used to 
calculate the median costs for all device-dependent APCs, including 
those with median costs that declined for CY 2009 relative to CY 2008, 
did not appropriately reflect hospitals' relative costs for providing 
those services as reported to us in the claims and cost report data. 
Because we believe the device-dependent APC median costs appropriately 
reflect hospital costs, implementing a payment reduction limit would 
artificially and inaccurately inflate payment rates. As described 
previously in this section and in the CY 2009 OPPS/ASC proposed rule 
(73 FR 41437 through 41438), the decreases in median costs for three 
APCs involving electrode/lead implantation, APCs 0106, 0225, and 0418, 
are expected and appropriate based on what we understand to be the 
nature of the services included in these APCs and the costs of 
correctly coded devices. We believe that the median costs calculated 
for these APCs were inappropriately high in years prior to CY 2009 due 
to widespread errors in how hospitals billed for the implantation of 
leads/electrodes and the pulse generators connected to the leads/
electrodes. Prior to CY 2007, hospitals frequently billed a procedure 
code for lead/electrode implantation with device HCPCS codes for a 
lead/electrode and the more costly pulse generator, but failed to 
report a procedure code for the implantation of the pulse generator. As 
a result, hospitals received only one APC payment for implanting both 
the electrode/lead and the pulse generator when they should have 
received separate APC payments for both the electrode/lead implantation 
and the pulse generator implantation. These hospital billing errors 
also resulted in the inappropriate attribution of the pulse generator 
costs to the median costs for the APCs for the less expensive 
electrode/lead implantation procedures.
    The implementation of device-to-procedure edits in CY 2007 
corrected these incorrect and incomplete billing practices by requiring 
hospitals to include a procedure code for pulse generator implantation 
when they report a device HCPCS code for a pulse generator or to remove 
the device HCPCS code for the pulse generator from the claim if it was 
not furnished. As described above in this section, prior to CY 2007, 
some hospitals billed a procedure code for lead/electrode implantation 
with device HCPCS codes for both a lead/electrode and the more costly 
pulse generator, but did not bill a procedure code for implantation of 
the pulse generator. This practice resulted in an erroneous single 
procedure claim that was used for ratesetting in years prior to CY 
2009. However, beginning in CY 2007, hospitals reported such services 
with a procedure code for lead/electrode implantation, a device HCPCS 
code for the lead/electrode, a procedure code for pulse generator 
implantation, and a device HCPCS code for the pulse generator 
(resulting in a multiple procedure claim that would not be used for 
ratesetting). Thus, for the first time in CY 2009, we no longer have 
single procedure claims available for ratesetting that would result in 
the inappropriate attribution of pulse generator costs to lead/
electrode implantation APCs. Where the edits result in hospitals 
billing both the CPT code for the insertion of the leads and the CPT 
code for the implantation of the device, hospitals are being correctly 
paid considerably more than they were being paid when they were billing 
incorrectly. Therefore, we believe that the device-to-procedure edits 
result both in more accurate claims payment and more appropriate 
relative weights for these services.
    We agree with the commenters and the APC Panel that the procedure 
described by CPT code 64553 is more similar clinically and in terms of 
resource utilization to procedures that are assigned to APC 0040 than 
to the other procedure assigned to APC 0225. Therefore, for CY 2009, we 
are accepting the APC Panel's recommendation and reassigning the 
procedure described by CPT code 64553 to APC 0040, and changing the 
title of APC 0040 to ``Percutaneous Implantation of Neurostimulator 
Electrode.'' As a result of our decision to reassign CPT code 64553 
from APC 0225 to APC 0040, CPT code 64573 is the only CPT code assigned 
to APC 0225. Consistent with the APC Panel's second recommendation, we 
are recalculating the median cost of APC 0225 based solely on claims 
for CPT code 64573.
    We do not agree with the commenters that we should calculate the 
median cost for CPT code 64573 using only single procedure claims with 
an epilepsy diagnosis code based on CMS'

[[Page 68537]]

NCD for VNS therapy, effective May 4, 2007. OPPS payment rates 
typically apply regardless of the medical condition for which a device 
is used; thus, APC median costs are developed based on claims for all 
patient diagnoses. Furthermore, we note that the NCD for VNS made 
effective on May 4, 2007, establishes noncoverage of VNS specifically 
for indications of depression. We examined the diagnosis codes present 
on the single procedure claims for CPT code 64573 that we would use in 
ratesetting, and found that, while diagnosis codes for epilepsy most 
commonly appeared on the claims, most nonepilepsy diagnoses present on 
the claims were for conditions other than depression. As such, the 
recommendation by some commenters to utilize only those claims with an 
epilepsy diagnosis for ratesetting would result predominantly in the 
exclusion of claims with diagnoses other than depression, to which the 
VNS national noncoverage decision does not apply. Therefore, we find no 
basis to deviate from our standard device-dependent APC ratesetting 
methodology, which does not take into consideration patient diagnoses, 
and we will not exclude claims for VNS therapy with diagnoses other 
than epilepsy from ratesetting.
    Comment: One commenter stated that, while the standard device-
dependent APC ratesetting methodology of using single procedure claims 
for calculating median costs is appropriate for many device-dependent 
APCs, this approach distorts and undervalues payment for those services 
where multiple device-dependent procedures are conducted within the 
same session. The commenter pointed out, as an example, that the lead/
electrode implantation procedures assigned to APC 0225 are frequently 
performed with pulse generator implantation procedures assigned to APC 
0039 (Level I Implantation of Neurostimulator). The commenter also 
noted that, according to an analysis of CY 2007 claims data available 
for the CY 2009 OPPS/ASC proposed rule, claims for device-dependent 
APCs more commonly include multiple procedures than claims for other 
types of APCs. The commenter encouraged CMS to develop a methodology to 
ensure that packaged costs can be allocated across multiple procedures 
performed on the same date of service. Until such a methodology can be 
implemented, the commenter asked that CMS institute a payment reduction 
limit of no more than 10 percent annually for device-dependent APCs 
such as APC 0225 with a large proportion of multiple procedure claims. 
Other commenters shared similar concerns about the use of single 
procedure claims in ratesetting for device-dependent APCs and suggested 
that CMS implement a composite payment methodology for certain 
procedures assigned to device-dependent APCs for which relatively few 
correctly coded single procedure claims are available for ratesetting, 
specifically those procedures involving the implantation of a cardiac 
resynchronization therapy defibrillator (CRT-D) or cardiac 
resynchronization therapy pacemaker (CRT-P).
    Response: We do not agree that it is necessary, as one commenter 
suggested, to establish a payment reduction limit for APC 0225, or any 
other device-dependent APC, until we have developed a methodology for 
device-dependent ratesetting that can incorporate data from multiple 
procedure claims. For all OPPS services, we continue our efforts to use 
the data from as many multiple procedure claims as possible, through 
approaches such as use of the bypass list and date splitting of claims 
as described further in section II.A. of this final rule with comment 
period, and through methodologies such as increased packaging and 
composite APCs. We believe that the standard device-dependent APC 
ratesetting methodology currently provides the most appropriate median 
costs for device-dependent APCs in which the hospital incurs the full 
cost of the device. As we discuss above in this section, we believe 
that decreases in the median costs for APC 0225 and other device-
dependent APCs involving lead/electrode implantation are appropriate 
and attributable to the correction of inaccurate and incomplete 
hospital billing practices. However, we recognize the importance of 
maximizing our utilization of claims data, especially of claims that 
reflect common clinical scenarios, and that the number of single 
procedure claims available for ratesetting for many device-dependent 
APCs comprise a very low proportion of total bills for procedures that 
map to those APCs. We will continue to examine ways to utilize more 
claims data to set payment rates under the OPPS, including payment 
rates for device-dependent APCs, and appreciate the commenters' 
thoughtful suggestions. We refer readers to section II.A.2.e. of this 
final rule with comment period for a detailed summary of the public 
comments related to the establishment of a composite payment 
methodology for procedures involving CRT-D and CRT-P devices and our 
responses.
    Comment: Several commenters requested that CMS alter the standard 
device-dependent APC ratesetting methodology in order to utilize data 
from multiple procedure claims for APC 0222 (Level II Implantation of 
Neurostimulator). They noted that, for CY 2008, CMS reconfigured the 
APC assignments for implantable neurostimulators to accommodate the 
inclusion of procedures involving both nonrechargeable and rechargeable 
neurostimulators (the pass-through status for which expired in CY 2007) 
and improve resource homogeneity among the neurostimulator APCs. The 
commenters further noted that the revised configuration provides 
payment for procedures involving mostly nonrechargeable neurostimulator 
technology (that is, cranial, sacral, gastric, or other peripheral 
neurostimulators) through two APCs--APC 0039 (Level I Implantation of 
Neurostimulator) and APC 0315 (Level III Implantation of 
Neurostimulator)--while establishing a single APC, APC 0222, for spinal 
neurostimulator implantation, which commonly utilizes either 
rechargeable or nonrechargeable technologies. The commenters summarized 
CMS' assessment in the CY 2008 OPPS/ASC final rule with comment period 
that, to the extent rechargeable spinal neurostimulators become the 
dominant device implanted in procedures described by the only CPT code 
assigned to APC 0222, CPT code 63685 (Insertion or replacement of 
spinal neurostimulator pulse generator or receiver, direct or inductive 
coupling), the median cost for APC 0222 may increase to reflect 
contemporary utilization patterns.
    The commenters raised concerns that analyses of the CY 2007 claims 
data demonstrate that the evolution to rechargeable spinal 
neurostimulators, while occurring in clinical practice and seen in the 
total billed claims, is not well represented in single procedure claims 
used for ratesetting for APC 0222. As a result, the commenters stated, 
the use of single procedure claims in the calculation of the median 
costs for APC 0222 systematically underestimates the use and cost of 
rechargeable neurostimulators. According to the data provided by the 
commenters, rechargeable neurostimulators are present on only 40 to 43 
percent of single procedure claims, as opposed to 57 to 60 percent of 
all claims (both single and multiple procedure) for APC 0222. If CMS 
were to replace the device cost estimated for single procedure claims 
with the device cost estimated for total claims, the commenters stated, 
the median cost for APC 0222 would increase by 7 percent.

[[Page 68538]]

One commenter also contended that the median line-item device cost for 
neurostimulator generators was 17 percent lower in ``pure single 
claims'' when compared to all claims assigned to APC 0222. Another 
commenter noted that neurostimulator implantation procedures are 
reported with two separately payable CPT codes and consequently almost 
always appear on multiple procedure claims. The commenter argued that 
the single procedure claims used in ratesetting are either replacement 
procedures or incorrectly coded claims and do not reflect clinical 
practice in terms of either procedural frequency or cost.
    Several commenters recommended that CMS calculate the payment rate 
for APC 0222 using the median device cost for rechargeable and 
nonrechargeable neurostimulators from all claims and the median 
procedure cost for CPT code 63685 from single procedure claims, arguing 
that larger claim samples lead to more accurate payment rates. The 
commenters stated that this would be an extension of CMS' process of 
using ``pseudo'' single procedure claims to calculate median costs, and 
would be consistent with CMS' focus on converting multiple procedure 
claims to ``pseudo'' single procedure claims in order to maximize the 
use of claims data in calculating median costs for OPPS ratesetting. 
According to the commenters, this approach would result in a 7 percent 
increase in the median cost for APC 0222 compared to the median cost 
calculated for the CY 2009 OPPS/ASC proposed rule.
    Another commenter expressed the same concern that rechargeable 
neurostimulator costs were underrepresented in the claims data used to 
establish the median cost for APC 0222 and urged CMS to split APC 0222 
into separate APCs based on whether a rechargeable or nonrechargeable 
spinal neurostimulator generator is utilized. Alternatively, the 
commenter asked CMS to consider a ratesetting methodology that, similar 
to the method offered by other commenters, would incorporate data from 
single and multiple procedure claims and result in a 9-percent increase 
in the median cost for APC 0222.
    Response: We do not believe it is necessary or appropriate to alter 
our ratesetting methodology for device-dependent APC 0222. We believe 
that the revised neurostimulator APC configuration adopted in CY 2008, 
and our standard device-dependent APC ratesetting methodology, allow us 
to calculate appropriate OPPS payment rates for procedures involving 
spinal neurostimulators. The foundation of a system of relative weights 
is the relativity of the costs of all services to one another, as 
derived from a standardized system that uses standardized inputs and a 
consistent methodology. Adoption of a ratesetting methodology for APC 
0222 that is different from our standard device-dependent APC 
ratesetting would undermine this relativity. A policy to provide 
different payments for the same procedures according to the types of 
devices implanted also would not be consistent with our overall 
strategy under the OPPS to encourage hospitals to use resources more 
efficiently by increasing the size of the payment bundles, as we 
described in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66715 through 66716).
    According to information provided by certain manufacturers of 
rechargeable neurostimulators in response to the CY 2008 OPPS/ASC final 
rule with comment period, rechargeable neurostimulators are clinically 
indicated in only a subset of patients for whom spinal neurostimulation 
is a treatment option. These manufacturers estimated that approximately 
35 percent of these patients are candidates for rechargeable spinal 
neurostimulators, although this proportion may be higher (72 FR 66715). 
We note that, according to the data analysis submitted by the 
commenters, rechargeable neurostimulators were used in 40 to 43 percent 
of spinal neurostimulator implantation procedures included on single 
procedure claims for APC 0222 in CY 2007, and in 57 to 60 percent of 
spinal neurostimulator implantation procedures included on all claims 
(both single and multiple procedure) for APC 0222 in CY 2007. 
Therefore, the rate of implantation of rechargeable neurostimulators in 
Medicare beneficiaries in CY 2007 in the hospital outpatient setting 
appears to have met or exceeded the expectations of certain 
manufacturers that were expressed in their comments to the CY 2008 
OPPS/ASC final rule with comment period. Based on these reported 
analyses, rechargeable neurostimulator technology appears to have been 
widely adopted into medical practice, and we expect that our CY 2009 
OPPS payment rates will provide continued access to this technology for 
those patients for whom rechargeable neurostimulators are clinically 
indicated.
    Comment: Several commenters stated that the proposed national 
unadjusted CY 2009 OPPS payment rate for cochlear implantation is 
significantly less than the average cost for the hospital to acquire 
the cochlear device and the associated costs to provide the 
implantation procedure and may impede patient access to this 
technology. The cochlear device implantation procedure is described by 
CPT code 69930 (Cochlear device implantation, with or without 
mastoidectomy), the only CPT code assigned to APC 0259 (Level VII ENT 
Procedures). The commenters remarked that, although the proposed CY 
2009 OPPS payment rate is higher than the CY 2008 OPPS payment rate, it 
is also less than the OPPS national unadjusted CY 2007 OPPS payment 
rate, and occurs at a time when device costs and related hospital costs 
continue to rise. Some commenters stated that the true cost of the 
cochlear implant procedure, including the device and related surgical 
costs, is between $35,000 and $40,000, depending on the specific 
devices and services required for a given patient, while other 
commenters indicated that the cost to hospitals is approximately 
$32,000. Several commenters recommended that CMS adjust the median cost 
upon which the OPPS payment rate for APC 0259 is based by substituting 
a weighted average selling price of $24,500 for the median device cost 
from the CY 2007 OPPS claims of $18,420, where this selling price was 
calculated based on hospital invoice data supplied separately by the 
two leading cochlear implant manufacturers. The commenters indicated 
that this methodology would result in a median cost for APC 0259 of 
$30,037. Other commenters referenced a 2006 analysis, which found the 
average cost of cochlear implant procedures to be approximately 
$33,364, and asked that CMS reconsider establishing payment based on 
this figure.
    The commenters also expressed concern about the proposed assignment 
and payment rate of procedures involving auditory osseointegrated 
devices, the pass-through status for which will expire on December 31, 
2008. The commenters noted that CMS proposed in the CY 2009 OPPS/ASC 
proposed rule to package payment for these devices, described by HCPCS 
code L8690 (Auditory osseointegrated device, includes all internal and 
external components), into payment for their associated implantation 
procedures, described by CPT codes 69714 (Implantation, osseointegrated 
implant, temporal bone, with percutaneous attachment to external speech 
processor/cochlear stimulator; without mastoidectomy); 69715 
(Implantation, osseointegrated implant, temporal bone, with 
percutaneous attachment to external speech processor/cochlear

[[Page 68539]]

stimulator; with mastoidectomy); 69717 (Replacement (including removal 
of existing device), osseointegrated implant, temporal bone, with 
percutaneous attachment to external speech processor/cochlear 
stimulator; without mastoidectomy); and 69718 (Replacement (including 
removal of existing device), osseointegrated implant, temporal bone, 
with percutaneous attachment to external speech processor/cochlear 
stimulator; with mastoidectomy). Citing the CMS proposal to assign 
these implantation procedures to APC 0425 (Level II Arthroplasty or 
Implantation with Prosthesis) for CY 2009, the commenters stated that 
the proposed payment rate for APC 0425 would be insufficient to 
guarantee continued patient access to auditory osseointegrated devices 
and argued that the appropriate payment for procedures involving these 
devices should at least approximate the sum of the CY 2008 OPPS payment 
rate for APC 0256 (Level VI ENT Procedures), the APC to which the 
auditory osseointegrated device implantation procedures were assigned 
in CY 2007, and the average sales price for auditory osseointegrated 
devices, which they report totals $8,826 ($2,539 for APC 0256 plus 
$6,287 for device costs). The commenters also remarked that auditory 
osseointegrated device implantation procedures are clinically 
dissimilar to the other procedures assigned to APC 0425 and recommended 
that CMS establish a new APC for procedures involving osseointegrated 
devices. According to the commenters, APC 0425 is an inappropriate APC 
assignment for osseointegrated device implantation procedures because 
it is comprised of less device-intensive orthopedic procedures for the 
restoration of joint functioning. The commenters also stated that a 
training and audit process for the billing offices of hospitals 
performing osseointegrated device implantation procedures revealed 
widespread billing and coding errors, and indicated that these billing 
errors may contribute to a median cost calculation for osseointegrated 
device implantation procedures that is too low.
    Response: We disagree with the commenters that it would be 
appropriate to use external pricing information in place of the costs 
derived from the claims and Medicare cost report data for APC 0259 or 
APC 0425 because we believe that to do so would distort the relativity 
that is so fundamental to the integrity of the OPPS. We have not 
systematically used external data to validate the median costs derived 
from claims data because external data lack relativity to the estimated 
costs derived from the claims and cost report data and generally are 
not appropriate for determining relative weights that result in payment 
rates. As described earlier in this section and in previous final rules 
such as the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66742), the foundation of a system of relative weights is the 
relativity of the costs of all services to one another, as derived from 
a standardized system that uses standardized inputs and a consistent 
methodology.
    We also do not agree that auditory osseointegrated device 
implantation procedures are so clinically dissimilar to the other 
procedures assigned to APC 0425 that their assignment to that APC is 
not warranted. All procedures assigned to APC 0425 involve the 
implantation of a prosthestic device into bone. In regard to the 
commenters' concerns that billing and coding errors may have 
contributed to an inaccurate median cost calculation for APC 0425, we 
note that, because APC 0425 is a device-dependent APC, we calculated 
the median cost for osseointegrated device implantation procedures 
using only correctly coded claims that included the HCPCS device code 
for the osseointegrated device, L8690, along with an appropriate 
procedure code. Effective January 1, 2009, we also will implement 
procedure-to-device edits that require all hospitals paid under the 
OPPS to report HCPCS code L8690 whenever they report an osseointegrated 
device implantation procedure described by CPT codes 69714, 69715, 
69717, and 69718. We also will implement the appropriate device-to-
procedure edits to ensure that when HCPCS code L8690 is reported, an 
appropriate implantation procedure code is also included on the claim.
    Comment: One commenter accepted CMS' consistent reliance on claims 
data to establish the CY 2009 OPPS/ASC proposed rule median cost for 
CPT code 36566 of $2,092, but disagreed with the proposed reassignment 
of CPT code 36566 to APC 0623 and urged CMS to maintain APC 0625. While 
the median cost for CPT code 36566 is very similar to the median costs 
of other procedures assigned to APC 0623, the commenter stated that the 
amounts will likely diverge in the future.
    Response: We do not believe it would be appropriate to maintain an 
APC that is not necessary to classify services into groups that are 
similar clinically and in terms of resource utilization based on 
purported anticipated future costs. We continue to believe that CPT 
code 36566 is most appropriately assigned to APC 0623 for CY 2009, as 
we proposed, based on consideration of the procedure's clinical and 
resource characteristics. We reassess the composition of APCs, 
including reviewing the median costs of individual HCPCS codes, 
annually when we have new claims and Medicare cost report data and 
propose those changes through our annual rulemaking cycle that we 
believe are necessary to maintain the clinical and resource homogeneity 
of APCs based on that updated data. To the extent that the median cost 
of CPT code 36566 changes significantly in the future, we may propose 
future changes to the CPT code's assignment if we determine that a 
different APC would be more appropriate.
    After consideration of the public comments received, we are 
finalizing our proposed CY 2009 payment policies for device-dependent 
APCs, with modification to reassign CPT code 64553 from APC 0225 to APC 
0040. The CY 2009 OPPS payment rates for device-dependent APCs are 
based on their median costs calculated from CY 2007 claims and the most 
recent cost report data, using only claims that pass the device edits, 
do not contain token charges for devices, and do not have a modifier 
signifying that the device was furnished without cost or with full 
credit. We continue to believe that the median costs calculated from 
the single bills that meet these three criteria represent the most 
valid estimated relative costs of these services to hospitals when they 
incur the full cost of the devices required to perform the procedures. 
The CY 2009 device-dependent APCs are listed in Table 3 below.

                                     Table 3--CY 2009 Device-Dependent APCs
----------------------------------------------------------------------------------------------------------------
           Final CY 2009 APC            Final CY 2009 status indicator              CY 2009 APC title
----------------------------------------------------------------------------------------------------------------
0039..................................  S.............................  Level I Implantation of Neurostimulator.
0040..................................  S.............................  Percutaneous Implantation of
                                                                         Neurostimulator Electrodes.

[[Page 68540]]

 
0061..................................  S.............................  Laminectomy, Laparoscopy, or Incision
                                                                         for Implantation of Neurostimulator
                                                                         Electrodes.
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 or Implantation
                                                                         with Prosthesis.
0427..................................  T.............................  Level II Tube or Catheter Changes or
                                                                         Repositioning.
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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41439), we proposed to 
continue to establish payment rates for blood and blood products for CY 
2009 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 proposed 
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 
median costs upon which the proposed CY 2009 payment rates for blood 
and blood products were 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. 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).
    As we indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 
41439), we 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

[[Page 68541]]

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 will result in median costs for blood and 
blood products that appropriately 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 final rule with comment 
period, we also proposed 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 will be made to hospitals that fail to report the 
hospital outpatient quality data, as discussed in section XVI.D.2. of 
this final rule with comment period.
    Comment: One commenter remarked that the proposed blood-specific 
CCR methodology accurately reflects the relative estimated costs of 
blood and blood products for hospitals without blood cost centers and 
for these products in general. The commenter encouraged CMS to continue 
the historical practice of providing separate payments for blood and 
blood products through APCs, rather than packaging their payment into 
payments for the procedures with which they are administered. Another 
commenter stated that the proposed payment rates for many blood and 
blood products are less than the actual acquisition costs, particularly 
for high volume blood products. The commenter noted that the proposed 
payment rate for the most commonly transfused blood product, leukocyte-
reduced red blood cells described by HCPCS code P9016 (Red blood cells, 
leukocytes reduced, each unit), is less than hospitals' average 
acquisition cost for the product (not including overhead, storage, 
handling, and wastage) according to a nationwide survey of 2006 blood 
costs. The survey was conducted by the American Association of Blood 
Banks under a contract with HHS and includes data from approximately 
1,700 hospitals. The commenter noted that since 2006, the year for 
which cost data were collected, the costs of acquiring blood products 
have continued to increase due to new safety advances and increasingly 
expensive donor recruitment and retention efforts. The commenter 
recommended that CMS continue to increase payments for blood products, 
particularly leukocyte-reduced red blood cells, to bridge the perceived 
gap between Medicare payments and the actual costs incurred by 
hospitals.
    Response: We continue to believe that using blood-specific CCRs 
applied to hospital claims data results in payments that appropriately 
reflect hospitals' relative costs of providing blood and blood products 
as reported to us by hospitals. We do not believe it is necessary or 
appropriate to incorporate external survey data into our ratesetting 
process for blood and blood products because, in a relative weight 
system, it is the relativity of the costs to one another, rather than 
absolute cost, that is most important for setting payment rates. 
External data lack relativity to the estimated costs derived from the 
claims and cost report data and generally are not appropriate for 
determining relative weights that result in payment rates. We note that 
median costs per unit (calculated using the blood-specific CCR 
methodology) for this final rule with comment period increase from CY 
2008 for 16 of the top 20 highest volume blood products.
    Comment: One commenter asked that CMS reconsider the proposed 
payment rate of approximately $30 for HCPCS code P9011 (Blood, split 
unit), indicating that this payment rate was much lower than the CY 
2008 payment rate of approximately $149 and would fail to cover the 
costs of split units of blood. The commenter also was concerned that 
the proposed payment decrease would result in insufficient Medicaid 
payment for transfusions involving split blood products.
    Response: We do not agree that it would be appropriate to deviate 
from our standard methodology of using blood-specific CCRs to calculate 
the median cost upon which payment is based for HCPCS code P9011, 
despite the significant decrease in median cost from the CY 2006 claims 
data used for ratesetting in CY 2008 relative to the CY 2007 claims 
data used for ratesetting in CY 2009. We believe that some variation in 
relative costs from year to year is to be expected in a prospective 
payment system, particularly for low volume items such as HCPCS code 
P9011. We also note that, because HCPCS code P9011 is defined only as a 
split unit of blood and no particular designation is made within the 
code's descriptor as to the type or volume of blood product that makes 
up the split unit reported, the median cost for this HCPCS code also 
may vary based upon the types and volumes of split products hospitals 
report using HCPCS code P9011.
    Public comments on Medicaid payment for blood and blood products 
are not within the scope of this CY 2009 OPPS/ASC final rule with 
comment period, as it is only within our purview to establish payment 
rates for HOPDs that receive payment under the OPPS for services 
furnished to Medicare beneficiaries.
    We also note that it is our common practice to review significant 
changes in median costs from year to year and from the proposed rule to 
the final rule for a given calendar year. Although a handful of HCPCS 
codes experienced decreases in median cost for CY 2009 from the 
proposed rule to this final rule with comment period, most notably 
HCPCS codes P9011 and P9043 (Infusion, plasma protein fraction (human), 
5%, 50ml), we determined that the decreases in median cost were due to 
contributions of additional claims and revised cost report data. For 
all APCs whose payment rates are based upon relative payment weights, 
we note that the quality and accuracy of reported units and charges 
significantly influence the final median costs that are the basis for 
our payment rates, especially for low volume items and services. Beyond 
our standard OPPS trimming methodology (described in section II.A.2. of 
this final rule with comment period) that we apply to those claims that 
have passed various types of claims processing edits, it is not our 
policy to judge the accuracy of hospital coding and charging for 
purposes of ratesetting.
    After consideration of the public comments received, we are 
finalizing, without modification, our CY 2009 proposal to calculate the 
median costs upon which the CY 2009 payment rates for blood and blood 
products are based using the blood-specific CCR methodology that we 
have utilized since CY 2005. We continue to believe this methodology is 
the best mechanism to deal with the absence of a blood-specific CCR for 
hospitals that do not use the blood cost center. We believe that 
continuing with this methodology, which takes into account the unique 
charging and cost accounting structure of each provider, results in 
median costs for blood and blood products that appropriately reflect 
the relative estimated costs of these products. As discussed in section 
XIII.A.1. of this final rule with comment period, we also are 
finalizing our proposal to create status indicator ``R'' to denote 
blood and blood products in Addendum B to this final rule with comment 
period for publication and payment purposes.

[[Page 68542]]

(3) Single Allergy Tests
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41439 through 41440), 
we proposed 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 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, as noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41439), 
our CY 2007 claims data available for that rule for APC 0381 did not 
reflect improved and more consistent hospital billing practices of 
``per test'' for single allergy tests. The median cost of APC 0381, 
calculated for the proposed rule according to the standard single 
claims OPPS methodology, was 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 2008, we 
calculated a proposed ``per unit'' median cost for APC 0381 of $25, 
based upon 520 claims containing multiple units or multiple occurrences 
of a single CPT code. For a full discussion of this methodology, we 
refer readers to the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66737).
    We did not receive any public comments on our CY 2009 proposal for 
payment of single allergy tests. Therefore, we are finalizing our CY 
2009 proposal, without modification, to calculate a ``per unit'' median 
cost for APC 0381 as described above in this section. The final CY 2009 
median cost of APC 0381 is approximately $23.
(4) Echocardiography Services
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41440), we proposed to 
continue the packaging of payment for all contrast agents into the 
payment for the associated imaging procedure for CY 2009, as we did in 
CY 2008. For echocardiography services, we proposed 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 code-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 code-
specific median costs.
    As provided for under 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 
HCPCS C-codes when performing echocardiography procedures with contrast 
or without contrast followed by with contrast.
    As noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41440), 
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 proposed to again use the methodology that we used to 
set the CY 2008 payment rate for APC 0128 (72 FR 66645). That is, we 
isolated single and ``pseudo'' single claims in our database that 
included those CPT codes in the range of 93303 through 93350 as 
described above in this section 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. 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

[[Page 68543]]

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.
    Comment: One commenter noted that a new CPT code will be available 
in CY 2009 that combines spectral and color Doppler with transthoracic 
echocardiography. The commenter stated that hospitals using this code 
in CY 2009 will be able to assign costs to this new code, but expressed 
concern as to how CMS plans to provide payment for the years before 
claims data are available.
    Response: Typically, our process for providing payment for CPT 
codes that are newly recognized under the OPPS for payment in the 
upcoming calendar year is to provide interim APC assignments in the 
final rule with comment period for that upcoming year. The APC 
assignment of these codes is then open to comment on that final rule. 
We note that there are circumstances regarding the new CPT code 
referenced by the commenter, CPT 93306 (Echocardiography, 
transthoracic, real-time with image documentation (2D), includes M-mode 
recording, when performed, complete, with spectral Doppler 
echocardiography, and with color flow Doppler echocardiography), that 
contributed to our CY 2009 interim APC assignment for that code. There 
were also several factors that contributed to our decision regarding 
the final APC assignment for CPT code 93307 for CY 2009.
    First, as discussed above in this section, in CY 2008, we 
implemented HCPCS C-codes for hospitals to identify echocardiography 
procedures provided with contrast, or without contrast followed by with 
contrast. As these data are not yet available for ratesetting for CY 
2009, we used the same process for CY 2009 as we did for CY 2008 to 
separately identify echocardiography services provided with contrast 
and those provided without contrast.
    Second, the American Medical Association (AMA) revised several CPT 
codes in the 93000 series to more specifically describe particular 
services provided during echocardiography procedures. The CY 2009 
descriptor for CPT code 93306 essentially includes the services 
described in CY 2008 by CPT codes 93307 (Echocardiography, 
transthoracic, real-time with image documentation (2D) with or without 
M-mode recording; complete); 93320 (Doppler echocardiography, pulsed 
wave and/or continuous wave with spectral display; complete) and 93325 
(Doppler echocardiography color flow velocity mapping). Therefore, in 
CY 2008, the service described in CY 2009 by new CPT code 93306 is 
reported with three CPT codes, specifically CPT codes 93307, 93320, and 
93325, and the hospital receives separate payment for CPT code 93307 
through APC 0269, into which payment for the other two services is 
packaged. The revised CY 2009 descriptor of CPT code 93307 
(Echocardiography, transthoracic, real-time with image documentation 
(2D), includes M-mode recording, when performed, complete, without 
spectral or color Doppler echocardiography) explicitly excludes 
services described by CPT codes 93320 and 93325.
    To determine the hospital costs of CPT codes 93306 and 93307 under 
CY 2009 definitions for purposes of CY 2009 ratesetting, we redefined 
our CY 2007 single and ``pseudo'' single claims. We began by redefining 
the single claims for CPT code 93307 billed with packaged CPT codes 
93320 and 93325 as single claims for CPT code 93306. We identified 
almost 600,000 CY 2007 single and ``pseudo'' single claims for CPT code 
93306. We then limited the single claims for CPT code 93307 to reflect 
the newly revised descriptor for CY 2009, that is, those claims where 
CPT code 93307 was not billed with either packaged CPT code 93320 or 
CPT code 93325. We identified roughly 13,000 single and ``pseudo'' 
single claims for revised CPT code 93307.
    Having created claims that reflected CY 2009 definitions, we then 
followed our proposed CY 2009 methodology for calculating HCPCS code-
specific median costs for these echocardiography procedures with and 
without contrast by dividing the new set of single and ``pseudo'' 
single claims for CPT codes 93306 and 93307 into those billed without 
and with contrast agents. We first calculated a HCPCS code-specific 
median cost for new CPT code 93306 when it was billed without contrast. 
We had over 500,000 claims that fit this criterion, and the median cost 
for this service was approximately $425. We then calculated a HCPCS 
code-specific median cost for CPT code 93307 under the newly revised 
descriptor for CY 2009 without contrast. We had approximately 13,000 
claims that fit this criterion. The median cost for this service was 
approximately $256.
    In addition, as discussed above in this section, in CY 2008, we 
began providing separate payment for echocardiography services that are 
performed with contrast through APC 0128. In accordance with this 
policy and the revised and new CPT codes, we calculated a HCPCS code-
specific median cost for new CPT code 93306 using the set of redefined 
single claims billed with contrast. Over 9,000 claims met this 
criterion, and the median cost for CPT code 93306 with contrast was 
approximately $569. Consistent with our CY 2008 policy of providing 
HCPCS C-codes for billing the ``with contrast'' form of the 
echocardiography CPT code, we identified this set of claims to 
represent new HCPCS code C8929 (Transthoracic echocardiography with 
contrast, or without contrast followed by with contrast, real-time with 
image documentation (2D), includes M-mode recording, when performed, 
complete, with spectral Doppler echocardiography, and with color flow 
Doppler echocardiography).
    Finally, we calculated a HCPCS code-specific median cost for CPT 
code 93307 using single claims for CPT code 93307 under the newly 
revised descriptor for CY 2009 when billed with contrast. We had 168 
claims that fit this criterion, and the median cost for this service 
was approximately $376. We identified this set of claims to represent 
revised HCPCS code C8923 (Transthoracic echocardiography with contrast, 
or without contrast followed by with contrast, real-time with image 
documentation (2D), includes M-mode recording, when performed, 
complete, without spectral or color Doppler echocardiography). Based on 
their HCPCS code-specific median costs, we have assigned new CPT code 
93306 (with a median cost of approximately $425 based on the 
methodology described above in this section) without contrast to APC 
0269 for CY 2009 on an interim basis. In addition, we have reassigned 
CPT code 93307 without contrast, using the updated CPT descriptor and 
the criteria described above in this section to develop a median cost 
of approximately $256, to APC 0697 for CY 2009. We have assigned new 
HCPCS code C8929 on an interim basis and revised HCPCS code C8923 on a 
final basis to APC 0128. All codes with interim assignments are 
designated with comment indicator ``NI'' in Addendum B to this final 
rule with comment period, and their OPPS treatment is open to comment 
in this final rule with comment period.
    Comment: One commenter disagreed with the proposed payment for 
fetal echocardiography services in general, while several other 
commenters suggested that the proposed assignment of CPT code 76825 
(Echocardiography,

[[Page 68544]]

fetal, cardiovascular system, real time with image documentation (2D), 
with or without M-mode recording) to APC 0266 (Level II Diagnostic and 
Screening Ultrasound) and CPT code 76826 (Echocardiography, fetal, 
cardiovascular system, real time with image documentation (2D), with or 
without M-mode recording; follow-up or repeat study) to APC 0265 (Level 
I Diagnostic and Screening Ultrasound) did not provide an accurate 
representation of the resources required by these two CPT codes. These 
commenters noted that the resources required to perform these 
procedures differ substantially from the other services included in 
APCs 0265 and 0266 and that resource use exceeds that for comparable 
studies on adults. In addition, the commenters suggested that CMS 
reassign CPT code 76825 to APC 0269 and CPT code 76826 to APC 0697.
    Response: We agree with the commenters that the services described 
by CPT codes 76825 and 76826 are most appropriately grouped with the 
services assigned to APCs 0269 and 0697, respectively. The resource use 
and clinical characteristics of these fetal echocardiography services 
resemble those of nonfetal echocardiography services also assigned to 
APCs 0269 and 0697 for CY 2009. Therefore, we are reassigning CPT code 
76825 to APC 0269, and CPT code 76826 to APC 0697 for CY 2009. In 
reference to the general comment regarding fetal echocardiography 
services, we note that CPT codes 76827 (Doppler echocardiography, 
fetal, pulsed wave and/or continuous wave with spectral display; 
complete) and 76828 (Doppler echocardiography, fetal, pulsed wave and/
or continuous wave with spectral display; follow-up or repeat study) 
are also included in this general service type. We have reviewed the 
proposed APC assignments of these two CPT codes, and we have concluded 
that the clinical characteristics of these services and their HCPCS 
code-specific median costs from hospital claims data (approximately $92 
and $77, respectively) are similar to those of other services also 
assigned to APC 0265, which has a final CY 2009 APC median cost of 
approximately $61. Therefore, in the absence of specific 
recommendations to move these codes to another APC or other detailed 
information from commenters in support of their reassignment, we 
believe that CPT codes 76827 and 76828 are most appropriately assigned 
to APC 0265 for CY 2009, as we proposed.
    Comment: One commenter agreed with our procedure regarding 
identifying those echocardiography procedures with and without contrast 
until the specific HCPCS C-code data are available for ratesetting 
purposes. However, the commenter expressed concern that because of low 
utilization of contrast for echocardiography procedures, the median 
cost for APC 0128 may not accurately reflect all of the resources 
required to provide contrast echocardiography services. The commenter 
suggested that CMS review those echocardiography procedures that are 
performed with contrast and consider creating more than one APC that 
includes echocardiography services performed with contrast.
    Response: We have reviewed the HCPCS code-specific median costs for 
echocardiography services performed with contrast in our CY 2007 claims 
data, and we continue to believe that the median cost of APC 0128 
accurately reflects the hospital costs of performing echocardiography 
procedures with contrast. We see no need, based on clinical 
characteristics or median costs as reflected in the hospital claims 
data, to develop another APC for certain echocardiography procedures 
with contrast. Only two services assigned to APC 0128 for CY 2009 are 
significant procedures, specifically with contrast studies described by 
CPT code 93306 (based on the subset of claims that met our criteria 
described above in this section) and CPT code 93350, with median costs 
of approximately $569 and $537, respectively. Other echocardiography 
services are rarely provided with contrast to Medicare beneficiaries. 
Furthermore, we believe that the final OPPS coding and payment 
methodology for echocardiography services 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.
    After consideration of the public comments received, we are 
finalizing our CY 2009 payment proposals for echocardiography services, 
with modification to reassign CPT code 93307 to APC 0697 and to assign 
new CPT code 93306 to APC 0269 based on their revised and new CY 2009 
CPT code descriptors, respectively. In addition, we are reassigning CPT 
code 76825 and CPT code 76826 for fetal echocardiography services to 
APC 0269 and APC 0697, respectively. The final echocardiography APCs 
and their CY 2009 median costs are listed in Table 4 below.

                 Table 4--CY 2009 Echocardiography APCs
------------------------------------------------------------------------
                                                           Final CY 2009
                                                            approximate
    Final CY 2009 APC            CY 2009 APC title          APC median
                                                               cost
------------------------------------------------------------------------
0128.....................  Echocardiogram with Contrast.            $553
0269.....................  Level II Echocardiogram                   422
                            Without Contrast Except
                            Transesophageal.
0270.....................  Transesophageal                           539
                            Echocardiogram Without
                            Contrast.
0697.....................  Level I Echocardiogram                    249
                            Without Contrast Except
                            Transesophageal.
------------------------------------------------------------------------

(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

[[Page 68545]]

procedures require the use of at least 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).
    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-
radiolabeled product 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 CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/ 01_
overview.asp.
    The CY 2008 OPPS claims that are subject to the procedure-to-
radiolabeled product 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, in the CY 2009 OPPS/ASC proposed 
rule (73 FR 41440), we proposed 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, including but not limited to diagnostic 
radiopharmaceuticals, from the procedure-to-radiolabeled product 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 final rule with comment period, to calculate median costs for 
nuclear medicine procedures and their associated APCs.
    We identified those APCs containing nuclear medicine procedures 
that would be subject to this methodology under our CY 2009 proposal in 
Table 4 of the CY 2009 OPPS/ASC proposed rule, and shown below in Table 
5. 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.
    During its March 2008 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 discuss, below, our response to these APC Panel 
recommendations along with our response to public comments.
    Comment: A number of the commenters opposed CMS' proposed policy to 
package payment for all diagnostic radiopharmaceuticals into their 
associated nuclear medicine procedure. They noted that the majority of 
diagnostic radiopharmaceuticals are not interchangeable, and for that 
reason, the CMS policy of packaging all diagnostic radiopharmaceuticals 
into their associated nuclear medicine procedure does not foster 
hospital efficiencies. Some of these commenters expressed concern that 
packaging diagnostic radiopharmaceuticals into the payment for 
associated nuclear medicine procedures results in overpayment of many 
procedures, especially those using existing lower-cost 
radiopharmaceuticals, while the bundled payment would be insufficient 
for newer, and likely more expensive, radiopharmaceuticals.
    In addition, the commenters requested that if CMS continues to 
package payment for diagnostic radiopharmaceuticals into payment for 
their associated nuclear medicine procedures, CMS should revise the 
nuclear medicine APCs to provide differential payments for nuclear 
medicine procedures when used with different radiopharmaceuticals. 
Several commenters identified the series of tumor/infection imaging 
APCs, including APCs 0406 (Level I Tumor/Infection Imaging), 0408 
(Level III Tumor/Infection Imaging), and 0414 (Level II Tumor/Infection 
Imaging), for CMS' attention to ensure appropriate payment for low 
volume, high cost radiopharmaceuticals. One commenter specifically 
suggested a composite APC for specific combinations of a tumor imaging 
scan and certain diagnostic radiopharmaceuticals. Several commenters 
noted that there is wide variation in the costs of diagnostic 
radiopharmaceuticals, and that composite APCs for specific combinations 
of procedures and diagnostic radiopharmaceuticals would be necessary to 
ensure adequate payment to hospitals using expensive diagnostic 
radiopharmaceuticals. Other commenters suggested that the significant 
clinical and resource diversity of radiopharmaceuticals packaged into 
nuclear imaging procedures amounted to a violation of the 2 times rule. 
The commenters explained that just as diagnostic radiopharmaceuticals 
are not interchangeable, certain radiopharmaceuticals are indicated for 
particular types of diseases, such as cancer, and are not clinically 
similar to other radiopharmaceuticals used for other purposes, such as 
tumor imaging.
    Response: We understand that the selection of a diagnostic 
radiopharmaceutical for a particular nuclear medicine procedure is a 
complex decision based on many factors, including patient-specific

[[Page 68546]]

factors, and that not every diagnostic radiopharmaceutical is fully 
interchangeable with others. However, as stated in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66617), we believe that 
nonspecific packaging (as opposed to selected code packaging) based on 
combinations of items and services observed on hospital claims is fully 
appropriate because of the myriad combinations of items and services 
that can be appropriately provided together. Under the OPPS, we package 
payment for ancillary, supportive, and interrelated items and services 
into payment for the independent services they accompany. As we discuss 
in section II.A.4. of this final rule with comment period, packaging 
promotes hospital efficiencies through numerous means, not only just 
through the choice of which radiopharmaceutical to use for a specific 
nuclear medicine scan. While all diagnostic radiopharmaceuticals may 
not be interchangeable, we believe that packaging the costs of 
diagnostic radiopharmaceuticals, however differential those costs may 
be, into the payment for nuclear medicine services that use these 
products is appropriate, whether there is one product or multiple 
products that could be used to furnish the particular service provided 
to an individual patient. The OPPS has a history of packaging items 
that are not necessarily interchangeable. It is our longstanding 
practice to package payment for nonpass-through implantable medical 
devices into payment for the procedure in which they are used, 
notwithstanding that there may be different devices or combinations of 
devices that could be used to furnish a service. (For a more complete 
discussion of the history of packaging items, we refer readers to the 
CY 2008 OPPS/ASC final rule with comment period at 72 FR 66639.) 
Therefore, in combination with our understanding that a diagnostic 
radiopharmaceutical is never provided without an accompanying nuclear 
medicine scan, we believe that it is appropriate to package the payment 
for all diagnostic radiopharmaceuticals into the payment for the 
associated nuclear medicine procedure.
    With regard to suggested composites or other revisions designed to 
isolate specific nuclear medicine scans with a subset of diagnostic 
radiopharmaceuticals, we do not believe that the inability to 
substitute one diagnostic radiopharmaceutical for another is a 
compelling reason for creating composite APCs, as explained below. We 
developed composite APCs to provide a single payment for two or more 
services that are typically performed together during a single clinical 
encounter and that result in the provision of a complete service. 
Composite APCs differ from packaging. Composite APCs provide a single 
payment for specific combinations of independent services that would 
otherwise be separately payable if they were not provided together, 
while packaging entails associating the cost of ancillary, supportive, 
and interrelated services and supplies with a distinct service or 
composite service. Composite APCs are intended to expand the OPPS 
payment bundles to encourage hospital efficiencies. Providing a single 
payment for a specific combination of a diagnostic radiopharmaceutical 
with a particular nuclear medicine procedure would not constitute a 
composite APC and would provide no incentives for hospital efficiency. 
From the perspective of value-based purchasing, we see no benefit to 
paying for many individual diagnostic radiopharmaceutical and nuclear 
medicine procedure combinations over paying separately for both the 
item and service, beyond an appearance of bundling. Such an approach 
would add complexity to ratesetting and would create challenges and 
cost instability because payments would be based on data from small 
numbers of claims for certain HCPCS code pairs. As noted above, there 
are many items and services that we package under the OPPS that are 
similarly not interchangeable with other related items and services.
    We understand that by packaging payment for a range of products 
such as diagnostic radiopharmaceuticals, payment for the associated 
nuclear medicine procedure may be more or less than the hospital's cost 
for these services in a given case. As stated in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66639), we note that the most 
fundamental characteristic of a prospective payment system is that 
payment is to be set at an average for the service, which, by 
definition, means that some services are paid more or less than 
average. As explained above in this section, in order to more 
accurately account for these packaged services, for CY 2009 
ratesetting, we used only correctly coded claims for nuclear medicine 
procedures that contained a radiolabeled product in calculating the CY 
2009 median costs for APCs including nuclear medicine procedures.
    We discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66640) the issue of variability in radiopharmaceutical costs or 
other packaged costs creating potential 2 times violations. We note 
that 2 times violations are specific to the total cost of the primary 
service, nuclear medicine scans in this case, including packaged costs. 
We have performed our standard review of the APCs using updated CY 2007 
claims data for this final rule with comment period and, as a result, 
have not identified any 2 times violations in the APCs containing 
nuclear medicine procedures, when calculated as described above. (For 
more information on the 2 times rule, we refer readers to sections 
III.B.2. and 3. of this final rule with comment period.)
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to set the 
payment rates for APCs containing nuclear medicine procedures based on 
those claims that also contain a radiolabeled product to ensure that 
the costs of diagnostic radiopharmaceuticals are appropriately packaged 
into the costs of nuclear medicine procedures. The CY 2009 APCs to 
which nuclear medicine procedures are assigned and for which we 
required radiolabeled products on the nuclear medicine procedure claims 
used for ratesetting are displayed in Table 5 below.
    Comment: Several commenters cited concerns regarding the proposed 
APC assignments and proposed payment rates for a number of the nuclear 
medicine procedures. These commenters noted that the APC assignments of 
certain nuclear medicine procedures led to clinically diverse 
procedures being grouped together for payment purposes. Furthermore, 
they added that, in some cases, nuclear medicine procedures with very 
different resource requirements, such as positron emission tomography 
(PET) and PET/computed tomography (CT) scans, were grouped together.
    Specifically, one commenter requested that (1) CPT code 78645 
(Cerebrospinal fluid flow, imaging (not including introduction of 
material); shunt evaluation) be reassigned from APC 0403 (Level I 
Nervous System Imaging) to APC 0402 (Level II Nervous System Imaging); 
(2) CPT code 78608 (Brain imaging, positron emission tomography (PET); 
metabolic evaluation) be reassigned from APC 0308 (Non-Myocardial 
Positron Emission Tomography (PET) Imaging) to a more appropriate APC; 
and (3) CPT codes 78000 (Thyroid uptake; single determination) and 
78001 (Thyroid uptake; multiple determinations) be reassigned from APC 
0389 (Level I Non-imaging Nuclear Medicine) to APC 0392

[[Page 68547]]

(Level II Non-imaging Nuclear Medicine).
    Response: We have performed our annual review of all the procedures 
and APC groupings for this final rule with comment period based on 
updated CY 2007 claims data. The HCPCS code-specific median cost of CPT 
code 78645 is approximately $208 based on 425 single claims, which is 
reasonably close to the median cost of APC 0403 of approximately $182, 
where we proposed to assign the service. The commenter recommended 
assignment of CPT code 78645 to APC 0402, in the same nervous system 
imaging series, with an APC median cost of approximately $536. Based on 
this review of costs, we continue to believe CPT code 78645 is most 
appropriately assigned to APC 0403 as we proposed, as the HCPCS code-
specific median cost of CPT code 78645 is more comparable to the level 
of hospital resources that are reflected in the median cost of APC 0403 
than the level of resources reflected in the median cost of APC 0402.
    There is a single APC for nonmyocardial PET scans, APC 0308, with a 
median cost of approximately $1,014. The median costs of all CPT codes 
assigned to that APC, including CPT codes for PET scans and PET/CT 
scans and CPT code 78608 for a metabolic evaluation of the brain using 
PET, range from approximately $891 to $1,164, demonstrating very 
significant resource similarity. Therefore, we do not agree with 
commenters that the proposed configuration of APC 0308 should be 
modified because all of these nonmyocardial services that use PET 
technology demonstrate very similar costs and share clinical similarity 
as well.
    With regard to the thyroid scans described by CPT codes 78000 and 
78001, these procedures have HCPCS code-specific median costs of 
approximately $109 and $117, respectively, very close to the median 
cost of APC 0389 of approximately $115, where we proposed to assign 
them. There is only one other service, with one single claim, assigned 
to APC 0389, other than an unlisted code whose data do not contribute 
to ratesetting for the APC. Therefore, these two CPT codes determine 
the median cost of APC 0389. In contrast, the median cost of APC 0392, 
their recommended placement according to the commenter, is 
approximately $161, substantially greater than the median costs of the 
two thyroid studies. Therefore, we do not believe any changes to the 
proposed APC assignments of CPT codes 78000 or 78001 are justified.
    Comment: Several commenters disagreed with the proposed payment 
rate for myocardial PET scan services because they believed that the 
payment rate is based on inadequate hospital data consisting of fewer 
than 2,800 claims. They stated that the CY 2009 proposed payment rate 
of approximately $1,143 for myocardial PET scan services decreased 18 
percent compared to the CY 2008 payment rate of approximately $1,400 
for these services. The commenters believed that the proposed payment 
rate for APC 0307 (Myocardial Positron Emission Tomography (PET) 
Imaging) is substantially less than the cost of providing the services 
involved, including the use of a relatively costly diagnostic 
radiopharmaceutical. They urged CMS to accept external data in light of 
the limited hospital claims data in order to set the payment rate for 
myocardial PET scans. If external data are not used for CY 2009 
ratesetting, the commenters alternatively recommended that CMS freeze 
the payment rate for myocardial PET scans at the CY 2008 payment rate 
of approximately $1,400 for CY 2009 to ensure greater stability in 
payment. Some commenters asserted that the payment rates for myocardial 
PET studies have shown significant volatility over the past 4 years, 
and requested that CMS refrain from implementing the proposed payment 
reduction and work towards stabilizing the payment rate. One commenter 
suggested placing all three myocardial PET scan CPT codes, that is 
78459, 78491, and 78492, in New Technology APC 1516 (New Technology--
Level XVI ($1400--$1500)), with a proposed CY 2009 payment rate of 
$1,450, for at least 2 years, to stabilize the payment for these 
services. Another commenter urged CMS to carefully review the claims 
data in setting the final payment rate for APC 0307.
    Response: Analysis of the CY 2007 hospital outpatient claims data 
revealed that the HCPCS code-specific median costs for all three 
myocardial PET scan procedures that we proposed to retain in APC 0307 
are about the same. Specifically, the HCPCS code-specific median costs 
of the three myocardial PET scan procedures are as follows: (1) For CPT 
code 78459, the median cost is approximately $924 based on 118 single 
claims; (2) For CPT code 78491, the median cost is approximately $1,410 
based on 28 single claims; and (3) For CPT code 78492, the median cost 
is approximately $1,142 based on 1,809 single claims. In setting the CY 
2009 payment rates for the myocardial PET scan services, according to 
our standard ratesetting methodology for clinical APCs to which nuclear 
medicine procedures are assigned, we used only those claims with a 
radiolabeled product reported, to ensure correctly coded claims. We 
packaged the cost of the diagnostic radiopharmaceuticals used in the 
studies into payment for the scans, as discussed in detail in section 
V.B.2.c. of this final rule with comment period. We believe that all of 
the myocardial PET scan procedures are appropriately assigned to APC 
0307 based on consideration of their clinical characteristics and 
resource costs.
    While we utilized external data in the early years of the OPPS for 
ratesetting for a few services, we now rely on the cost data from 
claims as the system has matured and we have gained additional 
experience in ratesetting for HOPD services. The foundation of a system 
of relative weights like the OPPS is the relativity of the costs of all 
services to one another, as derived from a standardized system that 
uses standardized inputs and a consistent methodology. Adoption of a 
ratesetting methodology for APC 0307 that is different from ratesetting 
for other APCs containing nuclear medicine procedures would undermine 
this relativity. We believe that we have sufficient claims data for the 
myocardial PET scan services upon which to base the CY 2009 final 
payment rates. In fact, the total number of claims for these services 
has increased steadily over the past several years. There were 2,576 
claims for CY 2004; 2,874 claims for CY 2005; 3,094 claims for CY 2006; 
and 3,537 claims for CY 2007, the most recent year of claims available 
for CY 2009 ratesetting. The historical variability in OPPS payment for 
myocardial PET scan services does not appear to have affected the 
access of Medicare beneficiaries to these services. Given that these 
services have been assigned to APC 0307 since CY 2007, with payment 
based on the most current hospital claims and Medicare cost report 
data, we believe we are providing a stable and consistent payment 
methodology that appropriately reflects the hospital resources required 
for myocardial PET scans. Therefore, we see no reason to ``freeze'' the 
payment for myocardial PET scans at the CY 2008 rate when we have 
updated hospital claims information available for ratesetting.
    Further, we do not agree with the recommendation to assign 
myocardial PET scan services to New Technology APC 1516, because these 
services are established OPPS services of moderate volume, with 
historical claims data available for a number of past years, and they 
do not fit the general criteria for services considered to be new

[[Page 68548]]

technology services under the OPPS. We continue to believe that 
assignment of CPT codes 78459, 78491, and 78492 to APC 0307 ensures 
appropriate payment for the services. Assignment to New Technology APC 
1516, which has a CY 2009 payment rate of $1,450, would result in 
overpayment for myocardial PET scan services according to our most 
recent hospital cost data.
    Comment: One commenter expressed concern with the proposed 
assignment of the multiple myocardial PET scan procedure, specifically 
CPT code 78492, to the same APC as the single myocardial PET scan 
procedure, specifically CPT code 78491, and believed this approach 
would significantly underpay providers for multiple scanning 
procedures. The commenter stated that multiple scans require greater 
hospital resources, as well as increased scan times, than single scans, 
and argued that the proposal would result in underpayment to the 
facilities providing multiple scan services. The commenter further 
asserted that the proposed significant reduction in payment from CY 
2008 to CY 2009 would impact patient access to these services. The 
commenter urged CMS to reevaluate the claims data for APC 0307 to 
distinguish between the resources necessary to provide single versus 
multiple imaging studies before finalizing the proposed CY 2009 payment 
rate for myocardial PET scan services.
    Response: Based on our CY 2007 claims data used for this final rule 
with comment period, the HCPCS code-specific median costs for all three 
myocardial PET scan services that we proposed to assign to APC 0307 are 
similar. Approximately 93 percent of the CY 2007 claims for myocardial 
PET scans are for CPT code 78492 for multiple scans, while only 
approximately 1 percent are for CPT code 78491, the single scan CPT 
code referenced by the commenter. The median cost for CPT code 78492 of 
approximately $1,142 is actually less than the median cost of CPT code 
78491 of approximately $1,410, a counterintuitive finding that is 
likely the result of very few claims for CPT code 78491 from a small 
number of hospitals. Nevertheless, the assignment of single myocardial 
PET scan procedures to the same APC as multiple scan procedures has 
very little effect on the payment rate for APC 0307, which is largely 
driven by the majority of claims for multiple scan procedures. As we 
explained previously in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68040 through 68041) and the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66718), based on the CY 2007 claims data 
used for this final rule with comment period, we believe that the 
assignment of CPT codes 78459, 78491, and 78492 to a single clinical 
APC for CY 2009 is appropriate because the CY 2007 claims data used for 
CY 2009 ratesetting do not support a payment differential between 
single and multiple myocardial PET scan services.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to continue to 
assign CPT codes 78459, 78491, and 78492 for myocardial PET scan 
services to APC 0307, with a final APC median cost of approximately 
$1,131 for CY 2009.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposals, without modification, for the 
configurations of APCs containing nuclear medicine procedures. The 
final APC assignments of all CPT codes for nuclear medicine procedures 
are displayed in Addendum B to this final rule with comment period.
    Comment: With regard to the procedure-to-radiolabeled product 
claims processing edits, some commenters suggested that CMS create a 
modifier or a HCPCS code for hospitals to use when the hospital 
performs the nuclear medicine scan but does not supply the radiolabeled 
product. The commenters noted that this would be an appropriate 
situation for a reduction to payment for the nuclear medicine procedure 
in order to offset the packaged diagnostic radiopharmaceutical costs 
not incurred by the hospital when the hospital does not provide the 
radiopharmaceutical.
    Response: It continues to be our expectation that, in accordance 
with the hospital bundling requirements, hospitals will provide both 
the diagnostic radiopharmaceutical and the nuclear medicine procedure 
because administration of the diagnostic radiopharmaceutical is an 
essential part of the nuclear medicine study. As we stated in the April 
7, 2000 OPPS final rule (65 FR 18440), ``All diagnostic tests that are 
furnished by a hospital, directly or under arrangements, to a 
registered hospital outpatient during an encounter at a hospital are 
subject to the bundling requirements.'' We further explained that the 
hospital is not responsible for billing the diagnostic test if a 
hospital patient leaves the hospital and goes elsewhere to obtain the 
diagnostic test. However, when reporting a nuclear medicine procedure 
provided in the HOPD, the administration of the radiopharmaceutical is 
not separately reported because the administration is considered to be 
integral to the performance of the nuclear medicine procedure. 
Therefore, we would expect that the radiopharmaceutical and the 
accompanying nuclear medicine procedure that make up the complete 
service ``furnished to hospital patients, must be provided directly or 
under arrangements by the hospital and only the hospital may bill the 
program,'' as we also stated in the August 2, 2000 OPPS final rule (65 
FR 18440).
    We have provided a specific accommodation for one rare circumstance 
where the HOPD does not furnish a diagnostic radiopharmaceutical (or 
other radiolabeled product) prior to performing a nuclear medicine 
procedure. In the particular case where a Medicare beneficiary receives 
a radiolabeled product as a hospital inpatient and then requires a 
nuclear medicine procedure as a hospital outpatient but does not 
require administration of a diagnostic radiopharmaceutical, as of 
October 2008, we have instructed hospitals to report HCPCS code C9898 
(Radiolabeled product provided during a hospital inpatient stay) with a 
token charge of less than $1.01 so that the claims for the nuclear 
medicine procedure may process to payment. In this situation, which we 
have been told is rare, the patient would not receive a radiolabeled 
product in the HOPD. We believe the hospital should receive payment for 
the nuclear medicine procedure provided in the HOPD and the hospital 
bundling rules would not present a problem because the radiolabeled 
product furnished to an inpatient was not provided for purposes of the 
nuclear medicine study. HCPCS code C9898 is recognized as a 
radiolabeled product code for purposes of the procedure-to-radiolabeled 
product edits incorporated in the I/OCE. However, we do not believe 
that the development of a modifier, additional HCPCS codes, or an 
offset methodology for other circumstances, such as the patient 
receiving a radiopharmaceutical in the physician's office when the 
nuclear medicine procedure is provided in the HOPD, would be 
appropriate because of the hospital bundling requirements. Moreover, in 
those situations where an exception is made, such as when a beneficiary 
is administered a therapeutic radiopharmaceutical as part of a hospital 
inpatient stay and then returns to the HOPD for a nuclear medicine scan 
without needing a diagnostic radiopharmaceutical to be administered for 
the study, we do use

[[Page 68549]]

these claims for ratesetting purposes. We believe that just as these 
situations are representative of the use of a nuclear medicine scan, it 
is also appropriate to include them for ratesetting purposes.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to provide 
payment for nuclear medicine procedures on OPPS claims that pass the 
procedure-to-radiolabeled product edits incorporated in the I/OCE, 
without additional provisions for bypassing those edits or offsetting 
the packaged diagnostic radiopharmaceutical costs included in the 
procedure payment if the radiopharmaceutical is administered outside 
the HOPD.
    In summary, because we are continuing to package payment for 
diagnostic radiopharmaceuticals in CY 2009 as discussed further in 
section V.B.2.c. of this final rule with comment period, we are 
finalizing our CY 2009 proposal, without modification, to set the 
nuclear medicine procedure payment rates based on those correctly coded 
claims that pass the claims processing edits that ensure that a 
radiolabeled product is included on the nuclear medicine procedure 
claim. We also are finalizing the proposed APC configurations for those 
APCs to which nuclear medicine procedures are assigned. In doing so, we 
are accepting the APC Panel's March 2008 recommendation to continue to 
package payment for diagnostic radiopharmaceuticals for CY 2009. In 
addition, we are accepting another APC Panel recommendation from March 
2008 to 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.

      Table 5--APCs Where Nuclear Medicine Procedures Are Assigned With Median Costs Calculated From Claims With an Associated Radiolabeled Product
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Final CY 2009 APC                                                            CY 2009 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.
--------------------------------------------------------------------------------------------------------------------------------------------------------

(6) Hyperbaric Oxygen Therapy
    Since the implementation of the 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 OPPS 
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. The 
comments on the CY 2005 OPPS 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 4 years. In the CY 
2009 OPPS/ASC proposed rule (73 FR 41442), we proposed to continue 
using the same methodology to estimate a ``per unit'' median cost for 
HCPCS code C1300 for CY 2009 of approximately $103, using 71,866 claims 
with multiple units or multiple occurrences.
    Comment: One commenter suggested that the payment rate per unit for 
HBOT was too low relative to the commenter's incurred costs for the 
hyperbaric oxygen and equipment. The commenter further encouraged CMS 
to instruct providers to be sure their charges are appropriate and 
offer providers specific billing guidance and instruction by providing 
examples of charging by the ``unit'' for multiple 30 minute sessions. 
The commenter noted that per unit billing can be confusing.
    Response: In response to the comment on the adequacy of the 
proposed payment rate, the proposed methodology represents our best

[[Page 68550]]

approach to estimating a valid median cost upon which to base a payment 
rate for HBOT services for CY 2009, in the context of the per 30 minute 
time period specified in the HCPCS code descriptor for HCPCS code 
C1300. All OPPS payment rates are based on the middle or median 
estimated cost of providing a service or group of services. For any 
given service or group of services, we expect that some hospitals will 
incur costs higher than the payment rate and some less.
    We agree with the commenter on the importance of having accurate 
claims data as part of our median cost calculation and that unit 
billing can be challenging. For all services, we do expect hospitals 
participating in the OPPS to be familiar with CPT and HCPCS code 
descriptors and to bill accordingly. We provide general direction on 
billing units for HCPCS codes under the OPPS in the Medicare Claims 
Processing Manual, Pub. 100-04, Chapter 4, Section 20.4. We note that 
HCPCS code C1300 has been in use for some time. Our analysis of claims 
for HCPCS code C1300 for the CY 2005 OPPS proposed rule indicated that 
many hospitals understand unit billing for HCPCS code C1300. We 
observed that most hospitals billed 3 or 4 units for an HBOT session, 
and these multiple unit claims are the claims we used for rateseting 
for CY 2009.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, to continue to 
use our established ratesetting methodology for calculating the median 
cost of APC 0659 for payment of HBOT, with a final CY 2009 APC median 
cost of approximately $101.
(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 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).
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41442), we proposed to 
continue to use for CY 2009 our established ratesetting methodology for 
calculating the median cost of APC 0375 (Ancillary Outpatient Services 
When Patient Expires), and we proposed to continue to make one payment 
under APC 0375 for the services that meet the specific conditions for 
using modifier -CA. We proposed to 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.
    As discussed in the CY 2009 OPPS/ASC proposed rule (73 FR 41442), 
we believe that hospitals are reporting the -CA modifier according to 
the policy initially established in CY 2003. We noted that the claims 
frequency for APC 0375 has been relatively stable over the past few 
years. Although the proposed median cost for APC 0375 was slightly 
lower for CY 2009 than the final median cost 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 
as long as hospitals continue judicious reporting of the -CA modifier. 
Table 5 of the CY 2009 OPPS/ASC proposed rule showed the number of 
claims and the median cost for APC 0375 from CY 2006 to CY 2008. For CY 
2009, the final median cost for APC 0375 of approximately $5,545 is 
slightly higher than the CY 2008 and proposed CY 2009 median costs.
    We did not receive any public comments regarding this proposal. 
Therefore, we are finalizing our CY 2009 proposal, without 
modification, to continue to use our established ratesetting 
methodology for calculating the median cost of APC 0375, which has a 
final CY 2009 APC median cost of approximately $5,545.
    Table 6 below shows the number of claims and the final median cost 
for APC 0375 from CY 2006 to CY 2009.

Table 6--Claims for Ancillary Outpatient Services When Patient Expires (-
                 CA Modifier) for CYs 2006 Through 2009
------------------------------------------------------------------------
                                                       Final approximate
     Prospective payment year        Number of claims   APC median cost
------------------------------------------------------------------------
CY 2006...........................                370             $2,717
CY 2007...........................                260              3,549
CY 2008...........................                183              4,945
CY 2009...........................                168              5,545
------------------------------------------------------------------------

e. 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

[[Page 68551]]

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 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 the CY 2009 OPPS/ASC 
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 earlier, and taking into consideration the recommendation of 
the APC Panel from its March 2008 meeting that we continue pursuing a 
radioimmunotherapy composite APC, we did not propose a composite APC 
payment for radioimmunotherapy for CY 2009, as discussed further in 
section V.B.4. of this final rule with comment period. However, in the 
CY 2009 OPPS/ASC proposed rule (73 FR 41450), we proposed 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 final rule with comment period. We also proposed to continue for 
CY 2009 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, 
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 final rule with comment period (73 
FR 41443).
    Comment: Many commenters supported the development and 
implementation of composite APCs as a mechanism to encourage efficient 
and effective care and to use multiple procedure claims that otherwise 
would not be available for ratesetting because they include multiple 
separately payable procedures furnished on the same date of service. 
The commenters remarked that the number of single bills available for 
ratesetting for certain procedures (particularly those requiring coding 
combinations to represent a complete service) remain a very small 
percentage of total billed claims, and recommended that CMS develop 
composite APCs in several clinical areas in order to improve OPPS 
payment accuracy and include more correctly coded, multiple procedure 
claims in ratesetting. For example, several commenters urged CMS to 
create composite APCs for procedures involving cardiac 
resynchronization therapy defibrillator (CRT-D) or cardiac 
resynchronization therapy pacemaker (CRT-P) devices. The commenters 
argued that the procedures involved in the implantation of CRT-D and 
CRT-P devices are major, separately payable services that, if correctly 
coded, are always represented by the submission of at least two CPT 
codes. A number of commenters recommended the development of 
``composite'' APCs to address their concerns regarding the proposed 
packaging of certain items and services, specifically suggesting the 
creation of ``composite'' APC payments for various combinations of 
individual services and specific packaged items or services, such as 
bronchoscopy procedures with endobronchial ultrasound or nuclear 
medicine procedures combined with specific diagnostic 
radiopharmaceuticals.
    In contrast to the commenters requesting that CMS create additional 
composite APCs, several commenters remarked generally that CMS should 
proceed cautiously as it expands service bundling, and should not 
implement additional composite methodologies until adequate data are 
available to evaluate the effectiveness and impact on beneficiary 
access to care of the composite policies implemented in CY 2008. Some 
commenters urged CMS to reevaluate the concept of composite APCs to 
ensure they are truly meeting the objective of encouraging more cost 
efficient care, are not unfairly penalizing hospitals because of the 
acuity of the patients they treat, and are not making the system 
unnecessarily complex.
    Response: We agree with commenters that the composite APC model is 
an important and effective mechanism for promoting efficiency and 
paying more appropriately for packages of services. The composite 
payment methodology also enables us to use more claims data and 
generates payment rates that more accurately reflect the reality of how 
hospitals furnish services. Therefore, we will carefully explore the 
commenters' suggestions for additional composite APCs when we assess 
what payment policy changes might be appropriate in the future. We also 
will consider bringing these and other composite ideas to the APC Panel 
for further discussion.
    We believe we are proceeding at an appropriate pace in the 
development of composite APCs. We did not receive any comments on the 
CY 2009 OPPS/ASC proposed rule indicating there were access problems 
resulting from the implementation of composite APCs in CY 2008. 
Furthermore, we believe that the composite payment methodology improves 
the accuracy of OPPS payment, and we would not expect access problems 
or other difficulties to arise from a methodology that utilizes more 
complete and valid claims in ratesetting than our standard APC 
ratesetting methodology. We also do not agree that the composite 
methodology makes the OPPS payment system unnecessarily complex, 
because it utilizes data from multiple procedure claims as reported by 
hospitals and does not require hospitals to change their coding and 
billing practices in any way.
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66650), our initial work on developing composite APCs arose, in 
part, from our attempts to develop an approach to utilize common 
multiple procedure claims that were not otherwise available for 
ratesetting because they included multiple separately payable 
procedures furnished on the same date of service. Composite APCs were 
designed to expand the payment bundles of the OPPS by providing a 
single payment for the totality of care provided in a hospital 
outpatient encounter that would be reported with two or more HCPCS 
codes for otherwise separately payable component services. Similarly, 
in CY 2008 the expanded unconditional packaging of items and services 
also allowed us to use more claims data from what would otherwise be 
multiple procedure claims and to expand the OPPS payment bundles. We do 
not consider some of the recommendations by commenters to provide 
unique payments for specific combinations of separately payable 
services with certain packaged items and services to be

[[Page 68552]]

``composite'' APCs that move toward a single payment for that totality 
of a service because, in such cases, we are already providing only a 
single payment for the totality of the service, including the packaged 
items and services. Such an approach would lead to smaller OPPS payment 
bundles, would not utilize additional multiple procedure claims, and 
would reduce the incentives for hospital efficiency created by 
packaging payment.
    After consideration of the public comments received, for CY 2009 we 
are finalizing our proposal, without modification, to continue our 
established composite APC policies for extended assessment and 
management, LDR prostate brachytherapy, cardiac electrophysiologic 
evaluation and ablation, and mental health services, 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 final rule with comment period. We also are 
implementing a new composite payment methodology for multiple imaging 
services provided on the same date of service, as discussed further in 
section II.A.2.e.(5) of this final rule with comment period.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41443), we proposed 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 for CY 2009. In 
addition, we proposed 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 (73 FR 41443) for CY 2009. 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 
(Transmittals 82 and 1145), dated February 8, 2008, and we did not 
propose to change these criteria for the CY 2009 OPPS (73 FR 41443).
    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). In the CY 2009 OPPS/ASC proposed rule (73 FR 41443), we did not 
propose 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41444), we proposed to 
continue the extended assessment and management composite APC payment 
methodology for APCs 8002 and 8003 for CY 2009. As stated earlier, we 
also proposed 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 
proposed 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'' that is reported 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:

[[Page 68553]]

     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 
proposed 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 CY 2009 median costs. The proposed CY 
2009 median cost resulting from this process for composite APC 8002 was 
approximately $364, which was calculated from 14,968 single and 
``pseudo'' single bills that met the required criteria. The proposed CY 
2009 median cost for composite APC 8003 was approximately $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 final rule 
with comment period, in the CY 2009 OPPS/ASC proposed rule (73 FR 
41444), we proposed to reassign HCPCS code G0384 from APC 0608 (Level 5 
Hospital Clinic Visits) to APC 0616 (Level 5 Emergency Visits) for CY 
2009. Consistent with this change for CY 2009, in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41444), we also proposed 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 final rule 
with comment period 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 final rule with 
comment period, for CY 2009, in the CY 2009 OPPS/ASC proposed rule (73 
FR 41520 through 41521), we proposed to replace current status 
indicator ``Q'' with three new separate status indicators: ``Q1,'' 
``Q2,'' and ``Q3'' for CY 2009. In the CY 2009 OPPS, ASC proposed rule 
(73 FR 41520 through 41521), we indicated our belief 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 proposed 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 proposed 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.
    At its March 2008 meeting, the APC Panel recommended that CMS 
provide additional data related to the frequency and median cost for 
the extended assessment and management composite APCs and length-of-
stay frequency distribution data for observation services, with 
additional detail at the 24-48 hour and greater than 48 hour levels. At 
the APC Panel's August 2008 meeting, we provided the additional data as 
requested. After reviewing the data presented, the APC Panel requested 
that additional data on observation services with longer lengths of 
stay, analyzed by hospital characteristics, be presented at the next 
meeting of the APC Panel, that is, the APC Panel's first CY 2009 
meeting. In addition, the APC Panel requested that an analysis of CY 
2008 claims data for clinic visits, emergency department visits (Type A 
and Type B), and extended assessment and management composite APCs be 
presented at the first CY 2009 meeting of the APC Panel.
    At its August 2008 meeting, the APC Panel also recommended that CMS 
adopt the CY 2009 proposals related to the extended assessment and 
management composite APCs, especially in reference to the inclusion of 
the Level 5 Type B emergency department visit HCPCS code in APC 8003 
(Level II Extended Assessment and Management Composite). Finally, the 
APC Panel recommended continuation of the Visits and Observation 
Subcommittee's work. We are accepting each of the APC Panel's 
recommendations and will provide additional data and analyses as 
requested at the first CY 2009 meeting of the APC Panel.
    Comment: Several commenters expressed continued support for payment 
of composite APC 8003, which includes a high level emergency department 
visit or critical care billed with observation services. In addition, 
several commenters supported CMS' proposal to include the Level 5 Type 
B ED visits, reported with HCPCS code G0384, to the eligibility 
criteria for payment of composite APC 8003 (Level II Extended 
Assessment and Management Composite). Another commenter asserted that 
the extended assessment and management APC criteria are arbitrary 
because they do not include lower level emergency department and clinic 
visits. The latter commenter believed that observation care is 
medically necessary in association with low level visits in some cases 
and that the observation care is often identical to the observation 
provided to individuals in association with high level visits. 
Therefore, the commenter concluded that the proposed composite payment 
criteria were arbitrary because no payment is made for the medically 
necessary observation care provided in association with a low level 
visit.
    Response: We appreciate the commenter's support for continued 
payment of the extended assessment and management composite APCs and 
for the addition of HCPCS code G0384 to the eligibility criteria for 
payment of composite APC 8003.
    In response to the commenter who stated that the composite APC 
payment criteria are arbitrary, payment for all

[[Page 68554]]

observation care is packaged under the OPPS but, as we explained in the 
CY 2008 OPPS/ASC final rule with comment period (72 FR 66648), we 
believe that observation care only rises to the level of a major 
component service that could be paid through a composite APC when it is 
provided for 8 hours or more in association with a high level clinic or 
emergency department visit. Therefore, we do not believe it would be 
appropriate to provide payment for observation care in association with 
a low level clinic or emergency department visit through a composite 
APC because we do not believe that two major component services are 
provided in such cases.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66649), we estimated that roughly 90 percent of the instances of 
separately payable observation care reported in CY 2006 would be 
eligible for payment through composite APCs 8002 and 8003, using the CY 
2008 final criteria. We continue to believe that most instances of 
observation that were separately payable in CY 2006 would have been 
eligible for payment under composite APCs 8002 and 8003 under the CY 
2009 OPPS. In addition, some of the packaged observation care that was 
provided in CY 2006 would now be eligible for payment through composite 
APCs 8002 and 8003 because we eliminated the diagnosis requirement for 
CY 2008. However, for observation care provided under circumstances 
that do meet the criteria for composite APC payment, including 
observation in association with low level clinic or emergency 
department visits, we continue to believe that the observation is 
ancillary and supportive to those other services provided to the 
patient on the same day. Therefore, in such cases, hospitals would 
receive payment for the observation care as it is packaged into payment 
for the other separately payable services, such as the low level clinic 
or emergency department visit.
    After consideration of the public comments received and the 
recommendations of the APC Panel, we are finalizing our CY 2009 
proposals, without modification, for payment of composite APCs 8002 and 
8003. The CY 2008 criteria and payment methodology finalized for 
composites APCs 8002 and 8003 will continue, consistent with the APC 
Panel's August 2008 recommendation in support of our CY 2009 proposals 
for payment of extended assessment and management composite APCs. As 
discussed in section IX.B. of this final rule with comment period, we 
are also finalizing our proposal to reassign HCPCS code G0384 from APC 
0608 (Level 5 Hospital Clinic Visits) to APC 0616 (Level 5 Emergency 
Visits). Moreover, we are finalizing our CY 2009 proposal, without 
modification, to include HCPCS code G0384 in the criteria that 
determine eligibility for payment of composite APC 8003, consistent 
with the APC Panel's August 2008 recommendation that we should adopt 
this proposal. The final CY 2009 median cost for composite APC 8002 is 
approximately $367, which was calculated from 17,501 single and 
``pseudo'' single bills that met the required criteria. The final CY 
2009 median cost for composite APC 8003 is approximately $660, which 
was calculated from 150,088 single and ``pseudo'' single bills that met 
the required criteria.
    Finally, as discussed in section XIII.A.1, of this final rule with 
comment period, we are finalizing our CY 2009 proposal to replace 
current status indicator ``Q'' with three new separate status 
indicators: ``Q1,'' ``Q2,'' and ``Q3.'' Therefore, each of the direct 
admission, clinic, and emergency department visit codes that may be 
paid through composite APCs 8002 and 8003 are assigned status indicator 
``Q3'' (Codes that May be Paid Through a Composite APC) for CY 2009 in 
Addendum B to this final rule with comment period.
    As we indicated in 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 visits. We 
continue not to 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. We would also remind 
readers that reasonable and necessary observation care is a supportive 
and ancillary service for which payment is always packaged. When the 
criteria for payment of either composite APC 8002 or 8003 are met, then 
the costs associated with observation care reported with HCPCS code 
G0378 are attributed to the total costs of that composite APC. When the 
criteria are not met, the costs of observation care are packaged with 
the costs of the separately payable independent services on the claim, 
usually the clinic or emergency department visit. Those costs are 
reflected in the APC payments for the independent services. Therefore, 
payment is made for observation care as part of the payment for the 
independent service. The absence of separate payment for observation 
care does not equate to the absence of Medicare coverage for the 
service.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41444), we also 
proposed 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.
    We did not receive any public comments concerning this proposal. 
Therefore, we are finalizing our CY 2009 proposal, without 
modification, for separate or composite APC payment of HCPCS code G0379 
under the same circumstances as the final CY 2008 policy. If the 
criteria for separate or composite APC payment are not met, payment for 
HCPCS code G0379 is packaged into payment for the other separately 
payable services provided.
(2) 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 
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

[[Page 68555]]

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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41445), we proposed to 
continue paying for LDR prostate brachytherapy services in CY 2009 
using the composite APC methodology proposed and implemented for CY 
2008. That is, we proposed 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 0651 (Complex 
Interstitial Radiation Source Application) to which CPT codes 55875 and 
77778 are assigned respectively; median costs for APCs 0163 and 0651 
would continue to be calculated using single procedure claims. We note 
that we inadvertently cited APC 0313 instead of APC 0651 as the 
assigned APC for CPT code 77778 in the CY 2009 OPPS/ASC proposed rule 
at 73 FR 41445. However, the correct APC (0651) assignment for CPT code 
77778 was included in Addenda B and M to the proposed rule, and our CY 
2009 proposal was to continue to assign CPT code 77778 to APC 0651. As 
discussed in section XIII.A.1. of this final rule with comment period, 
we also proposed 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. In the CY 2009 OPPS/ASC 
proposed rule (73 FR 41520 through 41521), we proposed 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 for CY 2009.
    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 was based. The proposed 
median cost for composite APC 8001 for CY 2009 was approximately 
$3,509. This was 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 was 
slightly less than $3,581, the sum of the proposed median costs for 
APCs 0163 and 0651 ($2,388 + $1,193), the APCs to which CPT codes 55875 
and 77778 map if one service is billed on a claim without the other. We 
stated in the CY 2009 OPPS/ASC proposed rule (73 FR 41445) that we 
believe the proposed CY 2009 median cost for composite APC 8001 of 
approximately $3,509, calculated from claims we believe to be correctly 
coded, would result in a reasonable and appropriate payment rate for 
this service in CY 2009.
    Comment: One commenter supported the continuation of the LDR 
prostate brachytherapy composite APC but urged CMS to closely monitor 
utilization to ensure access to this therapy is not compromised by this 
change in payment policy.
    Response: We appreciate the commenter's thoughts on the LDR 
prostate brachytherapy composite APC. As stated previously, we believe 
that the composite payment methodology improves the accuracy of OPPS 
payment, and we would not expect access problems or other difficulties 
to arise from a methodology that utilizes more complete and valid 
claims in ratesetting than our standard APC ratesetting methodology for 
the services described by CPT codes 55875 and 77778 when performed 
together on the same date of service. When the CY 2008 claims become 
available for the CY 2010 OPPS rulemaking cycle, we will examine 
utilization of LDR prostate brachytherapy services to ensure no 
inappropriate changes in utilization have occurred.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, to continue 
paying for LDR prostate brachytherapy services using the composite APC 
methodology implemented for CY 2008. We were able to use 845 claims 
that contained both CPT codes 77778 and 55875 to calculate the median 
cost upon which the CY 2009 final payment for composite APC 8001 is 
based. The final median cost for composite APC 8001 for CY 2009 is 
approximately $2,967. We note that this is a decrease in median cost 
compared to the CY 2009 OPPS/ASC proposed rule in which we calculated a 
proposed median cost for this composite APC of approximately $3,509. We 
also note that there is a significant decrease in the number of claims 
used for calculating the median cost for APC from the CY 2009 proposed 
rule to this final rule with comment period.
    We believe that the decreases in both the median cost for APC 8001 
and the number of claims used to calculate the median cost are 
attributable to the removal of CPT codes in the radiation oncology 
series of CPT codes from the

[[Page 68556]]

bypass list in response to public comments because the codes did not 
meet the empirical criteria for inclusion on the bypass list, as 
discussed in section II.A.1.b.of this final rule with comment period. 
We believe that some of the CPT codes that were removed from the bypass 
list, which are paid separately in addition to the LDR prostate 
brachytherapy composite APC, occur so frequently on claims that meet 
the criteria for LDR prostate brachytherapy composite payment that 
their removal from the bypass list resulted in the significant drop in 
the number of claims that could be used to calculate the median cost 
for APC 8001. However, our final CY 2009 median cost for APC 8001 
should be a more accurate reflection of the cost of the services for 
which the composite payment is made than the proposed CY 2009 median 
cost, because it is most likely that the packaged costs that should 
have been associated with the radiation oncology codes on the bypass 
list were wrongly attributed to the cost of the LDR prostate 
brachytherapy composite APC in the CY 2009 proposed rule, as discussed 
in more detail in response to public comments in section II.A.1.b. of 
this final rule with comment period. The APC 8001 median cost that we 
calculated for this final rule with comment period no longer includes 
the packaging that should have been attributed to the codes that were 
on the bypass list but did not meet the empirical criteria for the 
bypass list. Moreover, the line-item costs for the radiation oncology 
codes that failed the empirical criteria for the bypass list are no 
longer being used as ``pseudo'' single claims without their associated 
packaging to set the payment rates for those codes. The median costs 
for these codes should also be more accurate because the ``pseudo'' 
single procedure claims that lacked the appropriate packaging are no 
longer being used to set the medians for them.
    The final CY 2009 median cost for composite APC 8001 of 
approximately $2,967 is slightly less than $3,163, the sum of the 
median costs for APC 0163 and APC 0651 ($2,316 + $847), the APCs to 
which CPT codes 55875 and 77778 map if one service is billed on a claim 
without the other. These CPT codes are assigned status indicator ``Q3'' 
in Addendum B to this final rule with comment period to identify their 
status as potentially payable through a composite APC. Their composite 
APC assignment is identified in Addendum M to this final rule with 
comment period.
(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 hospital outpatient setting. 
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 costs 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 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 was 
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. Table 9 in the CY 2008 OPPS/ASC final rule with 
comment period, and Table 6 in the CY 2009 OPPS/ASC proposed rule, 
reprinted as Table 7 below, identified the CPT codes that were 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41446), we proposed to 
continue paying for cardiac electrophysiologic evaluation and ablation 
services in CY 2009 using the composite APC methodology established for 
CY 2008. Consistent with our CY 2008 practice, we would not use the 
claims that met the composite payment 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 were 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 final rule with comment period, we also proposed 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. Furthermore, 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 the CY 2009 
OPPS/ASC 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 was an 
increase

[[Page 68557]]

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 
stated in the CY 2009 OPPS/ASC proposed rule (73 FR 41446) that we 
believe that the proposed median cost of $9,174 calculated from a high 
volume of correctly coded multiple procedure claims resulted 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 of the CY 2009 OPPS/ASC proposed 
rule, reprinted as Table 7 below, listed the groups of procedures upon 
which we proposed to base composite APC 8000 for CY 2009.
    Comment: One commenter expressed support for CMS' proposal to 
continue using the composite APCs created in CY 2008, in particular the 
composite APC for cardiac electrophysiologic evaluation and ablation 
services.
    Response: We appreciate the commenter's support for the composite 
payment methodology in general and the composite APC for cardiac 
electrophysiologic evaluation and ablation in particular.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, to continue 
paying for cardiac electrophysiologic evaluation and ablation services 
using the composite APC methodology implemented for CY 2008. For this 
final rule with comment period, we were able to use 6,105 claims from 
CY 2007 containing a combination of group A and group B codes and 
calculated a final median cost of approximately $9,206 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 final median cost of $9,206 
calculated from a high volume of correctly coded multiple procedure 
claims results in an accurate and appropriate final 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 7, below, lists the groups of 
procedures upon which we are basing composite APC 8000 for CY 2009. 
These CPT codes are assigned status indicator ``Q3'' in Addendum B to 
this final rule with comment period to identify their status as 
potentially payable through a composite APC. Their composite APC 
assignment is identified in Addendum M to this final rule with comment 
period.

 Table 7--Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which Composite APC 8000
                                                    Is Based
----------------------------------------------------------------------------------------------------------------
                                                                                   Final single    Final CY 2009
 Codes used in combinations: At least one in Group A and one in   CY 2009  HCPCS   code CY 2009         SI
                             Group B                                   code             APC         (composite)
----------------------------------------------------------------------------------------------------------------
                                                     Group A
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
Comprehensive electrophysiologic evaluation with right atrial              93619            0085              Q3
 pacing and recording, right ventricular pacing and recording,
 His bundle recording, including insertion and repositioning of
 multiple electrode catheters, without induction or attempted
 induction of arrhythmia........................................
Comprehensive electrophysiologic evaluation including insertion            93620            0085              Q3
 and repositioning of multiple electrode catheters with
 induction or attempted induction of arrhythmia; with right
 atrial pacing and recording, right ventricular pacing and
 recording, His bundle recording................................
----------------------------------------------------------------------------------------------------------------
                                                     Group B
----------------------------------------------------------------------------------------------------------------
Intracardiac catheter ablation of atrioventricular node                    93650            0085              Q3
 function, atrioventricular conduction for creation of complete
 heart block, with or without temporary pacemaker placement.....
Intracardiac catheter ablation of arrhythmogenic focus; for                93651            0086              Q3
 treatment of supraventricular tachycardia by ablation of fast
 or slow atrioventricular pathways, accessory atrioventricular
 connections or other atrial foci, singly or in combination.....
Intracardiac catheter ablation of arrhythmogenic focus; for                93652            0086              Q3
 treatment of ventricular tachycardia...........................
----------------------------------------------------------------------------------------------------------------

(4) Mental Health Services Composite APC (APC 0034)
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41446), we proposed 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 for CY 2009. 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 final 
rule with comment period, we proposed 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 proposed to delete for CY 2009 (73 
FR 41446). 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. In the CY 2009 OPPS/ASC proposed rule 
(73 FR 41446 through 41447), we proposed to set the CY 2009 payment 
rate for mental health

[[Page 68558]]

composite APC 0034 at the same rate as APC 0173, which is the maximum 
partial hospitalization per diem payment. In the proposed rule, we 
explained that we believed this APC payment 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 proposed 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 proposed 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 was 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. In the CY 2009 OPPS/ASC 
proposed rule (73 FR 41447), we proposed to apply this status indicator 
policy to the HCPCS codes that were assigned to composite APC 0034 in 
Addendum M to the proposed rule. We also proposed 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. As 
we noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41447), this 
proposed status indicator change should have no practical implications 
for hospitals from a billing or payment perspective. Rather, we 
believed that it would be more appropriate to assign status indicator 
``S'' to an APC that describes mental health services that are provided 
outside of a partial hospitalization program (73 FR 41447). We refer 
readers to section XIII.A. of this final rule with comment period for a 
complete discussion of status indicators and our status indicator 
changes for CY 2009.
    Comment: Several commenters were concerned that claims data from 
CMHCs and hospitals were used to calculate the proposed payment for APC 
0173. The payment for APC 0173 would be the upper limit of payment a 
hospital could receive for outpatient mental health services provided 
in one day. These commenters believed that hospital cost data, and not 
CMHC cost data, should be used to set payment rates for hospital 
services. One commenter believed that the proposed payment rate for APC 
0173 was too low and, therefore, established the mental health cap on 
payment of HOPD mental health services at an inappropriately low 
payment rate. The commenter noted that most patients receiving hospital 
outpatient mental health services generally receive four or more 
services per day, for 1 to 3 days. In these cases, according to the 
commenter, if an HOPD provided four particular mental health services 
in one day, that department of the hospital would receive full payment 
for the first two services, partial payment for the third service, and 
no payment for the fourth service.
    Response: As discussed in detail in section X. of this final rule 
with comment period, the payment rates for APCs 0172 and 0173 are set 
consistent with hospital-only cost data for CY 2009, instead of using 
both hospital and CMHC cost data. This final policy results in an 
increase of the median cost of APC 0173 from approximately $174 as 
proposed to approximately $200, using hospital-only cost data. 
Hospital-only data have been used in the past to set the PHP payment 
rates when the CMHC data were unavailable or too volatile to use. This 
year using the CMHC data would significantly reduce the current rate 
and negatively impact hospital-based PHPs. Additionally, using only the 
hospital-based PHP data results in a Level II Partial Hospitalization 
rate (APC 0173) that is close to the current payment level ($203). 
Therefore, we are finalizing the two-tiered payment rates as proposed, 
but using hospital-based PHP data only.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66739), 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. The mental health payment limitation 
will rise and fall in the same manner as payment for partial 
hospitalization services. We note that our final CY 2009 policy which 
sets the payment rate for APC 0173 for partial hospitalization services 
based on hospital-only cost data for CY 2009 results in payment for APC 
0034, the limit on aggregate payment for specified less intensive 
mental health services provided on one day in the HOPD, to now be based 
on hospital cost data, as requested by several commenters.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to limit the 
aggregate

[[Page 68559]]

payment for specified less intensive outpatient mental health services 
furnished on the same date by a hospital to the payment for a day of 
partial hospitalization, specifically APC 0173. For CY 2009, we are 
also finalizing, without modification, our proposal to change the 
status indicator from ``Q'' to ``Q3'' for those HCPCS codes that 
describe the specified mental health services to which APC 0034 
applies. For CY 2009, we also are finalizing the proposal to change the 
status indicator for APC 0034 from ``P'' to ``S.''
    (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 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 for the proposed CY 2006 OPPS and MPFS multiple imaging 
payment reduction policy 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. The 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, the 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 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

[[Page 68560]]

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 adoption of 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 procedures 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 procedures 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 final rule with comment period 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 procedures that are included in the 11 CY 2008 MPFS imaging 
families, and in addition, we incorporated the 10 HCPCS codes that were 
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 
corresponded to the larger APC groups of services paid under the OPPS 
relative to the service-specific payment under the MPFS. We believed 
that these larger OPPS imaging families were 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 procedures of the same modality involving 
noncontiguous body areas to require duplicate facility 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 believed it was less appropriate 
for a single, session-based OPPS composite imaging payment. In 
addition, we estimated that 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 were within the same imaging 
modality and involved 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 procedures for OPPS ratesetting, 
in general, is their inclusion on our bypass list and contribution to 
creating ``pseudo'' single claims, particularly those procedures 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 final rule with comment period. 
In beginning to model these potential multiple imaging composite APCs 
for the CY 2009 OPPS/ASC proposed rule, 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 for the CY 2009 OPPS/ASC proposed rule, we removed any 
HCPCS codes in the OPPS imaging families that overlapped 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 appeared in Table 7 of the CY 2009 OPPS/ASC 
proposed rule. 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. For the CY 2009 OPPS/ASC proposed rule, 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.
    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. The ultrasound studies proposed for inclusion in the 
multiple imaging composite policy 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

[[Page 68561]]

HCPCS code that was performed with contrast, we classified the ``single 
session'' bill as ``with contrast.'' For both CT and CTA, and MRI and 
MRA, some claims classified as ``with contrast'' contained one or more 
``without contrast'' HCPCS code. 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.
    For the CY 2009 OPPS/ASC proposed rule, we were able to identify 
1.7 million ``single session'' claims out of an estimated 3 million 
potential composite cases from our ratesetting claims database to 
calculate the proposed median costs for the 5 OPPS multiple imaging 
composite APCs. We specifically noted that the proposed CY 2009 payment 
rates for multiple imaging services provided during the same session 
and within the same OPPS imaging family were based entirely on median 
costs derived empirically from OPPS claims and Medicare cost report 
data.
    In general, we found that the per procedure 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 procedure 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). 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 were consistent with our 
expectations. Because the OPPS cost-based payment weight methodology 
estimates a standard cost per imaging procedure for each hospital, 
these results suggested that the imaging composite ``single session'' 
claims disproportionately represented services furnished by more 
efficient providers that frequently performed more than one imaging 
procedure during a single session. The lower cost claims also may have 
included more providers that reported costs and charges for nonstandard 
cost centers for advanced imaging on their Medicare hospital cost 
reports.
    In light of these findings, we determined that a proposal to revise 
our methodology for paying for multiple imaging procedures was 
warranted because the current OPPS policy of providing a full APC 
payment for each imaging procedure 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, in the CY 2009 OPPS/ASC proposed rule (73 FR 41450 
through 41451), we proposed 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 were: 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 procedure 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 calculated the composite APC payment amounts empirically 
from estimated costs on claims for multiple imaging procedures provided 
in a single session. This proposed composite methodology for multiple 
imaging services paralleled the payment methodologies that we proposed 
for other composite APCs under the CY 2009 OPPS. Table 8 of the CY 2009 
OPPS/ASC proposed rule presented 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 proposed payment rates for these composite APCs were 
based.
    During the August 2008 APC Panel meeting, the APC Panel recommended 
that CMS work with stakeholders to review the proposed multiple imaging 
composite APCs and to assess the potential impact of the proposal on 
Medicare beneficiaries affected by trauma or cancer.
    Comment: Some commenters stated that the proposed multiple imaging 
composite payment methodology would improve the accuracy of OPPS 
payment for imaging services and that CMS should implement the policy 
as proposed. In particular, MedPAC stated that the proposed multiple 
imaging composite APCs are consistent with larger payment bundles and 
should increase hospitals' incentives to furnish care efficiently. 
MedPAC further asserted that the multiple imaging composite policy 
could serve as a starting point for creating more comprehensive payment 
bundles that reflect encounters or episodes of care.
    However, many commenters urged CMS to perform additional data 
analyses of CY 2007 claims with multiple imaging services and, 
depending on the results, modify the final policy to ensure sufficient 
payments are made to hospitals for providing an appropriate number of 
imaging services. In particular, commenters indicated that the proposed 
policy could have a disproportionately negative effect on cancer 
centers and trauma units, where patients frequently require more than 
two imaging services and hospitals have limited flexibility to gain 
greater efficiencies. The commenters also questioned the adequacy of 
the proposed multiple imaging composite payment rates for sessions 
involving three or more or four or more procedures, particularly in the 
case of CT and CTA procedures, expressing general concern that the 
proposed payment rates would limit beneficiary access to imaging 
services. According to these commenters, the proposed policy could 
create incentives for hospitals to require patients who need more than 
two imaging procedures to return for additional visits if the costs for 
sessions in which more than two procedures are performed far exceed the 
multiple imaging composite APC payment rates. Some commenters also 
requested that CMS thoroughly evaluate the impact of the multiple 
imaging composite APCs after the policy has been implemented to ensure 
that hospitals are being adequately compensated for providing multiple 
imaging services. Other commenters remarked generally that CMS should 
proceed cautiously as it expands service bundling, should accompany 
composite proposals with data and a clear and transparent description 
of the data-generating process, and should not implement additional 
composite methodologies until adequate data are available to evaluate 
the effectiveness

[[Page 68562]]

and impact on beneficiary access to care of the composite policies 
implemented in CY 2008.
    In order to address perceived payment inadequacies or incentives 
for hospitals to require patients to return on separate days for 
multiple imaging services, the commenters suggested a variety of 
alternative approaches to the proposed multiple imaging composite 
payment methodology, such as a multiple imaging payment reduction 
policy for second and subsequent imaging procedures, additional 
composite APCs for sessions involving three or more imaging procedures, 
or an exemption from composite payment for multiple imaging services 
provided to cancer or trauma patients. One commenter specifically 
recommended two new composite APCs for CT scans of the chest, abdomen, 
and pelvis with and without contrast.
    Some commenters, however, opposed the implementation of any payment 
policy to account for the efficiencies of multiple imaging procedures 
provided during the same session, arguing that the OPPS cost-based 
methodology already incorporates the efficiencies of performing 
multiple procedures during the same session. They believed that adding 
a composite policy essentially ``double counts'' imaging efficiencies. 
One commenter opposed the policy because, according to the commenter, 
hospitals do not have the option of refusing to provide services that 
are ordered by a physician, and cannot control the cost of providing a 
service in relationship to the cost of the equipment. Another commenter 
noted that MRI equipment costs are fixed in the short term.
    Response: We have reviewed all of the public comments we received 
on the proposed multiple imaging composite methodology, and we have 
decided to finalize our proposal to provide a single composite payment 
each time a hospital bills more than one procedure from an imaging 
family on a single date of service for CY 2009. We appreciate the 
commenters' thoughtful observations and suggestions.
    In response to the commenters' concerns about the adequacy of the 
proposed composite APC payment rates for sessions involving more than 
two imaging procedures, we analyzed data from the CY 2007 claims from 
which the median costs used to calculate those payment rates were 
calculated. We found that the vast majority of CY 2007 claims used for 
ratesetting included two procedures, ranging from 73 percent of 
multiple imaging procedure claims for APC 8008, to 97 percent of 
multiple imaging procedure claims for APC 8004. We do not believe that, 
in aggregate, OPPS payment for multiple imaging services will be 
inadequate under the multiple imaging composite payment methodology, 
even considering the minority of cases in which hospitals provide more 
than two imaging procedures on a single date of service. The median 
costs upon which the payment rates for the multiple imaging composite 
APCs are based are calculated using CY 2007 claims that would have 
qualified for composite payment, including those with only two imaging 
procedures and those with substantially higher numbers of imaging 
procedures. Payment based on a measure of central tendency is a 
principle of any prospective payment system. In some individual cases 
payment exceeds the average cost and in other cases payment is less 
than the average cost. On balance, however, payment should approximate 
the relative cost of the average case, recognizing that, as a 
prospective payment system, the OPPS is a system of averages.
    Furthermore, the purpose of the composite payment methodology 
overall is to establish incentives for efficiency through larger 
payment bundles. Based on our observations of only small to moderate 
percentages of single sessions with three or more imaging procedures, 
we do not believe it would be appropriate to create additional multiple 
imaging composite APCs for sessions involving more than two or three 
imaging procedures. The various suggestions by some commenters 
regarding the creation of additional composite APCs for payment of 
three or more procedures or for specific combinations of scans all 
would remove some of the efficiency incentives associated with a single 
bundled payment and would make the multiple imaging policy more closely 
resemble standard payment for single procedures. Additional composite 
APCs would not be consistent with encouraging value-based purchasing 
under the OPPS. We note that the OPPS does have an outlier policy for 
cases involving extremely high costs, as discussed in section II.F. of 
this final rule with comment period.
    We also do not believe that the multiple imaging composite payment 
methodology will inhibit beneficiary access to imaging services, 
because the policy will result in only relatively modest payment 
redistributions in the short term. We estimate that total payment 
impact among classes of hospitals attributable to changes in imaging 
payment will be relatively small, and we expect that the multiple 
imaging composite policy will redistribute about 0.4 percent of total 
OPPS payment. We believe this policy does more to redesign incentives 
in providing imaging services than to significantly reduce imaging 
payment to hospitals for CY 2009.
    Further, we do not agree with some commenters that the multiple 
imaging composite payment methodology would result in hospitals 
requiring patients who need more than two imaging procedures to return 
for additional visits. We do not believe that, in general, hospitals 
would routinely and for purposes of financial gain put patients at 
unnecessary risk of harm from radiation or contrast exposure, or 
inconvenience them or risk lack of timely follow up to the point of 
making them return to the hospital on separate days to receive 
medically necessary diagnostic studies. However, we note that we do 
have the capacity to examine our claims data for patterns of fragmented 
care. If we were to find a pattern in which a hospital appears to be 
fragmenting care across multiple days, we could refer it for review by 
the Quality Improvement Organizations (QIOs) with respect to the 
quality of care furnished, or for review by the Program Safeguard 
Contractors of claims against the medical record, as appropriate to the 
circumstances we found.
    In addition, we explored data from the CY 2007 claims from which 
the median costs used to calculate the multiple imaging composite APC 
payment rates were calculated in response to comments that the policy 
would have a disproportionate effect on cancer centers and trauma units 
and the recommendation by the APC Panel at its August 2008 meeting, 
which we are accepting. An analysis of diagnosis codes present on the 
CY 2007 multiple imaging ``single session'' claims did show more 
variability in the number of scans for cancer patients compared to 
other types of patients, consistent with commenters' concerns. We saw 
that, for several of the more commonly reported cancer diagnoses, more 
than half of the patients received more than two imaging procedures, 
while lower proportions of other types of patients received more than 
two imaging procedures on a single date of service. We did not observe 
the same pattern for trauma diagnoses. We do not believe that the 
higher rate of variability that we observed in the number of scans 
cancer patients receive was so extreme, however, that the mix of 
services hospitals provide to patients with diagnoses other than cancer 
would not balance out higher numbers of scans for cancer patients.

[[Page 68563]]

    We do not have a current list of cancer centers other than those 
held permanently harmless under section 1833(t)(7)(D)(ii) of the Act or 
a current list of hospitals with significant trauma units in order to 
assess outcomes for these particular classes of hospitals. However, as 
noted above, we do not estimate significant redistributions among 
hospitals as a result of this policy. Further, the goal of introducing 
a single composite payment for any multiple imaging session is to 
encourage hospitals to consider their patterns of service provision in 
general, and not payment per patient. Therefore, we do not believe that 
the multiple imaging composite methodology will result in 
disproportionate effects on either hospitals with cancer centers or 
trauma units, and we do not agree with some commenters that it would be 
appropriate to exempt services provided to cancer and trauma patients 
from the multiple imaging composite APC payment policy. We see no 
justification for paying differently for the same imaging services 
according to patient diagnosis or care setting, because we believe that 
most hospitals demonstrate sufficient variability in the number of 
imaging procedures they provide to a single patient on the same day 
that it is unlikely that certain hospitals would disproportionately 
experience negative financial effects from the multiple imaging 
composite APC payment policy.
    We also do not agree that the multiple imaging composite APCs are 
unnecessary, as some commenters argued, because the OPPS cost-based 
methodology already incorporates the efficiencies of performing 
multiple imaging procedures during the same session. While we agree 
that efficiencies due to multiple imaging procedures are generally 
reflected in hospitals' CCRs used to develop costs, we believe that the 
advantage of a composite methodology for imaging services is that it 
allows us to use naturally occurring multiple procedure claims to 
calculate the median costs for sessions involving multiple procedures, 
rather than using single procedure claims which do not reflect as 
accurately how hospitals provide care in those instances. The lower per 
case median cost for multiple imaging services suggests that hospitals 
providing more multiple imaging services generally have lower costs. We 
note that a small increase in the median cost of standard (sole 
service) APCs accompanied our lower multiple imaging composite APC 
median costs. The multiple imaging policy does not ``double count'' 
efficiencies for imaging; rather, it more accurately estimates the 
costs of single versus multiple imaging sessions.
    We believe that we are proceeding with an appropriate level of 
caution, as several commenters recommended, by developing one new 
composite APC policy for CY 2009. We did not receive any comments to 
the CY 2009 OPPS/ASC proposed rule indicating there were access 
problems resulting from the implementation of composite APCs in CY 
2008, which was consistent with our expectations given the composite 
methodology improves the accuracy of the OPPS payment rates by 
utilizing more complete and valid claims in ratesetting. With regard to 
providing data and a transparent methodology, we point out that we make 
our claims data available to the public, and we discuss our calculation 
of these multiple imaging composite APC payment rates in both this 
section and in section II.A.1. of the CY 2009 OPPS/ASC proposed rule 
(73 FR 41423 through 41425). We also have a claims accounting narrative 
available under supporting documentation for this final rule with 
comment period on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/.
    We disagree with commenters who asserted that we should not 
implement the multiple imaging composite methodology because hospitals 
do not have the option of refusing to provide services that are ordered 
by a physician, and cannot control the cost of providing a service in 
relationship to the cost of the equipment. While physicians, rather 
than hospital staff, may order specific services for patients, 
hospitals decide what services they will and will not furnish, and how 
they will furnish those services. We also disagree that fixed capital 
equipment costs are a deterrent to implementing a multiple imaging 
composite payment methodology. As discussed earlier, data analyses 
performed for the CY 2009 OPPS/ASC proposed rule showed that some 
hospitals are more efficient than other hospitals when providing 
multiple imaging services. A prospective payment system sets payments 
based on a median or average cost to encourage providers to carefully 
consider their costs of providing services, and in any individual case 
payment may exceed the average or median cost. We would expect less 
efficient hospitals to construct ways to become more efficient, such as 
negotiating lower costs on equipment, even if they do not have the 
latitude to perform fewer imaging services.
    Comment: Some commenters urged CMS to standardize cost reporting 
for both advanced imaging procedures and other problematic cost centers 
before it makes any methodological changes to OPPS payment 
methodologies, including a composite policy for multiple imaging 
procedures. According to the commenters, additional efficiencies can 
only be gained from improved accuracy in cost reporting for diagnostic 
radiology services, including use of several standard cost centers for 
diagnostic imaging services. The commenters were concerned that 
observed efficiencies in the multiple imaging composite median costs 
are the result of inaccurate cost report data only and do not reflect 
true efficiencies from multiple imaging services provided during a 
single session. These commenters stated that the implementation of 
separate cost centers for CT and MRI procedures, as recommended in the 
July 2008 report by RTI entitled, ``Refining Cost to Charge Ratios for 
Calculating APC and DRG Relative Payment Weights,'' would provide much 
more accurate charge and cost data for these imaging modalities, and 
that the efficiencies associated with providing multiple imaging 
procedures in a single session may only be discernable once these data 
are available. The commenters recommended that CMS analyze claims data 
for a 2 to 3 year period following cost reporting changes before 
considering a multiple imaging composite payment methodology.
    Response: As discussed in section II.A.1.c.(2) of this final rule 
with comment period, we agree with commenters that improved and more 
precise cost reporting would improve OPPS payment accuracy. Even if we 
were to make changes to create new diagnostic radiology cost centers 
for CT and MRI procedures as recommended by the commenters for future 
years, it would be several years after initial implementation before 
data would be available to reevaluate OPPS payment rates for imaging 
services. In the meantime, we see no reason not to move forward with 
other changes in OPPS payment policies, such as the multiple imaging 
composite APC payment methodology, that could improve the accuracy of 
OPPS payment rates and promote efficiency among hospitals. The most 
recent hospital cost report data are the best and most consistent 
estimate of relative costs that we have available to us for all 
hospitals for all hospital services. We will continue to use these data 
to estimate APC median costs. Our goal in creating this new payment 
structure is to encourage long-term efficiencies in the provision of

[[Page 68564]]

multiple imaging services. Should improved, revised cost report data 
become available for CT and MRI procedures, our composite methodology 
would automatically incorporate that additional precision into the 
multiple imaging composite APC median cost estimates.
    Comment: Several commenters expressed concern that the proposed 
composite payment methodology for multiple imaging procedures may not 
comply with the statutory requirement in section 1833(t)(2)(G) of the 
Act that the OPPS provide payment for imaging services furnished with 
and without contrast through separate payment groups. They requested 
that CMS not use data from services performed without contrast to set 
the payment rates for the ``with contrast'' composite APCs, arguing 
that the inclusion of cost data from procedures performed without 
contrast in the median cost calculation for the ``with contrast'' 
composite APCs may fail to capture the full costs of imaging services 
provided with contrast agents. A handful of commenters sought 
clarification about whether CMS had included ``single session'' claims 
that incorporated ``without contrast'' HCPCS codes in the ``with 
contrast'' composite. Another commenter requested that the more costly 
CT and MRI studies performed without contrast and then followed by 
contrast, and described by a single combination CPT code, be paid 
through separate composite APCs. According to the commenter, the 
inclusion of these procedures with other ``with contrast'' studies 
would cause their median payment level to decrease.
    Response: We believe that the composite payment methodology for 
multiple imaging procedures complies with the statutory requirement in 
section 1833(t)(2)(G) of the Act that the OPPS provide separate payment 
groups for imaging services provided with and without contrast. As 
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66650), section 1833(t)(1)(B) of the Act permits us to define what 
constitutes a covered HOPD ``service'' for purposes of payment under 
the OPPS, and we have not restricted a ``service'' to a single HCPCS 
code. Defining the service paid under the OPPS by combinations of HCPCS 
codes for procedures that are commonly performed in the same encounter 
and that result in the provision of a complete service enables us to 
use more claims data and establish payment rates that we believe more 
appropriately capture the costs of services paid under the OPPS. 
Consistent with our statutory flexibility to define what constitutes a 
service under the OPPS, we have redefined an imaging service for 
purposes of the multiple imaging composite methodology as a ``single 
session'' involving multiple imaging procedures within an imaging 
family performed on the same date of service. Furthermore, if a 
contrast agent is provided to a Medicare beneficiary as part of any 
imaging procedure furnished during that single imaging session, then we 
have defined that session as a ``with contrast'' imaging session to 
allow for payment through a separate group from a ``without contrast'' 
single imaging session.
    Therefore, in order to calculate the median costs for the multiple 
imaging composite APCs, we designate an entire session as a ``with 
contrast'' service and use the claim to calculate the median cost for 
the ``with contrast'' composite APC when at least one of the imaging 
procedures within an imaging family performed on the same date of 
service involves contrast. If none of the imaging procedures within an 
imaging family performed on the same date of service involve contrast, 
we designate the entire session a ``without contrast'' service and use 
the claim to calculate the median cost for the ``without contrast'' 
composite APC.
    The statutory requirement that we create separate payment groups to 
classify imaging procedures performed with contrast and without 
contrast allows us to recognize that imaging services involving 
contrast require different hospital resources than imaging services 
performed without contrast. As shown in Table 8 below, the median costs 
upon which payment rates are calculated for the ``with contrast'' 
composite APCs (APC 8006 and APC 8008) are higher than the median costs 
for the ``without contrast'' composite APCs (APC 8005 and APC 8007). We 
believe that when multiple imaging services are provided in a single 
imaging session and only one of the studies uses contrast, hospitals 
still incur many of the same costs as they would incur if all of the 
studies used contrast, such as a screening by hospital staff for 
patient allergies, the establishment of venous access, and the 
initiation of necessary monitoring. As such, we would not expect that 
the costs of sessions involving a ``with contrast'' procedure along 
with other ``with contrast'' procedures in the same family would differ 
significantly from the costs of sessions involving a ``with contrast'' 
procedure and procedures that do not involve contrast. Our analysis of 
the CY 2007 claims data used to calculate the median costs for the 
multiple imaging composite APCs supported this argument. If we were to 
remove all ``single session'' claims that included procedures both with 
contrast and without contrast from the median cost calculation of the 
two ``with contrast'' composite APCs, the impact on the APC median 
costs would be negligible--the median cost for APC 8006 would increase 
by less than 1 percent, and the median cost for APC 8008 would increase 
by only 4 percent.
    In addition, we do not believe it would be appropriate to create a 
separate composite APC for payment of CT or MRI procedures performed 
without contrast and then followed by contrast, as described by a 
single combination CPT code. In effect, these codes already describe a 
multiple imaging session--a ``without contrast'' imaging service 
followed by a ``with contrast'' imaging service. This is comparable to 
some of the other ``single session'' claims in the CT/CTA and MRI/MRA 
``with contrast'' composite APCs (APC 8006 and APC 8008, respectively), 
in that these composite APCs incorporate in some ``single session'' 
claims certain ``without contrast'' imaging services. We believe that 
our definition of a single session with contrast as including the costs 
associated with providing a contrast agent for any one or more 
individual procedures appropriately places these combination CPT codes 
in APCs 8006 and 8008 and meets the statutory requirements.
    Finally, we agree with several commenters that APC 8004 includes 
only ultrasound studies performed without contrast. Should we revise 
the HCPCS codes in APC 8004 to include ultrasound imaging services 
performed with contrast in the future, we would create a new composite 
APC for ``with contrast'' ultrasound procedures to comply with section 
1833(t)(2)(G) of the Act.
    In summary, we believe the payment differential between the ``with 
contrast'' composite APCs and the ``without contrast'' composite APCs 
is appropriate, regardless of whether or not the other imaging 
procedures provided within the same session as an imaging procedure 
performed with contrast are also performed with contrast. We believe we 
are in full compliance with the statutory requirement that we create 
groups of covered OPPS services that utilize contrast agents and those 
that do not utilize contrast agents by redefining multiple imaging 
services provided in one encounter as a ``single session'' in which 
more than one procedure from an imaging family is provided on the same 
date of service and assigning ``with

[[Page 68565]]

contrast'' composite APCs when at least one of the procedures involves 
contrast.
    Comment: One commenter stated that, before implementing the 
multiple imaging composite policy, CMS should consult with relevant 
stakeholders about which CPT codes should be subject to the policy. The 
commenter also urged CMS to provide hospitals with instructions to 
continue coding for packaged and bundled services to ensure adequate 
data collection. Another commenter stated that CMS should delay 
implementation of the multiple imaging composite policy to allow 
hospitals that use the charging of single CPT codes to determine staff 
levels and productivity to adjust to the proposed changes. One 
commenter recommended that CMS work with the AMA to create new CPT 
codes that describe combined procedures so that providers could use 
those codes when they provide multiple imaging services in a single 
session. The commenter argued that utilization of such codes would be 
easier for providers and would facilitate the capturing of charge data 
that could be used to create new APCs or payment policies that reflect 
economies of scale for combined procedures reported through claims 
data.
    Response: Consistent with our standard process for securing the 
views of stakeholders through the rulemaking cycle, we published a 
detailed account of the multiple imaging composite payment methodology 
proposed for CY 2009 in the CY 2009 OPPS/ASC proposed rule (73 FR 41447 
through 41451) and requested comment. Table 8 of the CY 2009 OPPS/ASC 
proposed rule presented the HCPCS codes comprising the three OPPS 
imaging families and five composite APCs that would be created under 
the multiple imaging composite proposal for CY 2009. We did not receive 
any comments on the particular imaging HCPCS codes or the families of 
codes we proposed for composite payment. Therefore, we will apply the 
multiple imaging composite methodology to the HCPCS codes listed in 
Table 8 below, for CY 2009. These HCPCS codes are assigned status 
indicator ``Q3'' in Addendum B to this final rule with comment period 
to identify their status as potentially payable through a composite 
APC. Their composite APC assignments are identified in Addendum M to 
this final rule with comment period.
    We continue to encourage hospitals to report the HCPCS codes and 
associated charges for all services they provide, taking into 
consideration all CPT, CMS, and local Medicare contractor instructions, 
whether payment for those HCPCS codes is packaged or separately 
provided. We note that the multiple imaging composite APC payment 
policy should have no operational impact on hospital billing practices, 
because hospitals should continue reporting the same HCPCS codes they 
currently use to report imaging procedures. The I/OCE will assess 
claims to determine whether a composite APC or a standard (sole 
service) imaging APC should be assigned. We believe that an advantage 
of the multiple imaging composite methodology is that it can improve 
the accuracy of OPPS payment without imposing burdens on hospitals to 
use different codes or change the way they report services.
    We do not agree with the commenter that it would be necessary to 
create new CPT codes that describe combined services to ease the burden 
of hospital billing and improve claims data for ratesetting. As 
discussed earlier, certain combination CPT codes, specifically those 
single codes that describe imaging procedures without contrast and then 
followed by contrast, already allow for hospitals to report commonly 
performed combinations of imaging procedures in one anatomic area using 
a single CPT code. Hospitals can continue to use existing codes to 
report combined services by reporting multiple HCPCS codes, and for 
ratesetting, we use the charges reported to us by hospitals for 
combined services to calculate composite APC payment rates.
    Comment: The commenters asked for clarifications and offered 
recommendations regarding how the multiple imaging composite policy 
would be implemented. A few commenters also requested that CMS clarify 
what constitutes a ``single session'' and provide guidance on how 
hospitals are to bill and receive payment for multiple imaging 
procedures provided on the same date of service but during different 
encounters. According to the commenters, a composite payment would not 
be appropriate in such cases because facility resources are expended 
each and every time a patient is seen for a separate procedure. Some 
commenters suggested CMS address these cases by allowing the use of the 
``59'' modifier to signify a distinct procedural service and 
implementing I/OCE logic that would not assign composite payment in 
those instances. Other commenters stated that hospitals would not track 
whether multiple scans took place during single or separate sessions on 
the same day, and asked that CMS provide standard (sole service) APC 
payment when hospitals provide imaging services that would otherwise be 
subject to the composite methodology on the same date of service but at 
different times.
    Response: A single imaging session for purposes of the multiple 
imaging composite APC payment policy involves more than one procedure 
within the same family provided on a single date of service. We believe 
that composite payment is appropriate even when procedures are provided 
on the same date of service but at different times, because hospitals 
do not expend the same facility resources each and every time a patient 
is seen for a distinct imaging service in a separate imaging session. 
In most cases, we expect that patients in these circumstances would 
receive imaging procedures at different times during a single prolonged 
hospital outpatient encounter. The efficiencies that may be gained from 
providing multiple imaging procedures during a single session are 
achieved in ways other than merely not having to reposition the 
patient. For example, a patient who has two MRI procedures three hours 
apart during a single hospital outpatient encounter would not have to 
be registered again, and hospital staff might not have to explain the 
procedure in detail prior to the second scan. In the case of multiple 
procedures involving contrast that are provided at different times 
during a single hospital outpatient encounter, establishment of new 
intravenous access for the second study would not be necessary. Even if 
the same level of efficiencies could not be gained for multiple imaging 
procedures performed on the same date of service but at different 
times, we expect that any higher costs associated with these cases 
would be reflected in the claims data and cost reports we use to 
calculate the median costs for the multiple imaging composite APCs, and 
therefore, in the payment rates for the multiple imaging composite 
APCs. We do not believe it is necessary or appropriate for hospitals to 
report imaging procedures provided on the same date of service but 
during different encounters any differently than they would report 
imaging procedures performed consecutively with no time in between.
    In all cases, hospitals that furnish more than one imaging 
procedure to a Medicare beneficiary in the HOPD on the same date of 
service must bill all imaging services on the same claim. We expect to 
carefully monitor any changes in billing practices on a service-
specific and hospital-specific basis to determine whether there is 
reason to request that QIOs review the quality of care furnished or to 
request that Program Safeguard Contractors review the claims against 
the medical record.

[[Page 68566]]

    Comment: Several commenters asked whether the multiple imaging 
composite policy would affect application of section 5102(b)(1) of the 
Deficit Reduction Act (DRA), which requires CMS to cap the technical 
component of the MPFS payment amount by the OPPS payment amount for 
certain imaging procedures. One commenter asked if the savings from 
this proposal are budget neutral.
    Response: The payment comparison for the DRA cap on the MPFS 
technical component payment for imaging services will continue to be 
made between the applicable MPFS technical component payment and the 
payment for the standard (sole service) imaging APC payment for 
services subject to the cap, even if multiple MPFS imaging services 
subject to the DRA cap are provided in one imaging session.
    Modest imaging savings from the multiple imaging composite 
methodology of 0.4 percent are budget neutral and are redistributed to 
other services paid under the OPPS for CY 2009.
    In summary, after consideration of the public comments received, we 
are adopting our CY 2009 proposal, without modification, to utilize the 
three OPPS imaging families discussed above in this section, 
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 multiple imaging 
composite APCs for CY 2009 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). The 
composite APCs have status indicators of ``S,'' signifying that payment 
for the APC is not reduced when it appears on the same claim with other 
significant procedures.
    We will provide one composite APC payment each time a hospital 
bills more than one procedure described by the HCPCS codes in an 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 will 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, will be paid according to the standard OPPS methodology 
through the standard (sole service) imaging APCs to which they are 
assigned in CY 2009. Hospitals will continue to use the same HCPCS 
codes to report imaging procedures, and the I/OCE will determine when 
combinations of imaging procedures qualify for composite APC payment or 
map to standard (sole service) APCs for payment. We will make a single 
payment for those imaging procedures that qualify for composite APC 
payment, as well as any packaged services furnished on the same date of 
service.
    To calculate the final rule median costs for the five multiple 
imaging composite APCs, we removed any HCPCS codes in the OPPS imaging 
families that overlapped 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 the multiple imaging composite APC median costs appear 
in Table 9 below. (We refer readers to section II.A.1.b. of this final 
rule with comment period 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 reassess the remaining 
multiple procedure claims using the full bypass list and bypass 
process. This enhanced our proposed rule methodology of only 
identifying line-item costs 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 as 
potential ``pseudo'' single bills for use in calculating the median 
costs for sole imaging services. For this final rule with comment 
period, we not only made ``pseudo'' single bills out of line-items for 
the HCPCS codes in the OPPS imaging families overlapping with the HCPCS 
codes on the bypass list, which appear in Table 9 below, but we 
reassessed each claim after removing these line-items in order to see 
if we could make other ``pseudo'' single bills. That is, we assessed 
whether a single separately paid service remained on the claim after 
removing line-items for the ``overlap bypass codes.'' In particular, 
this change significantly increased the number of single bills 
available for APC 0274 (Myelography) for this final rule with comment 
period. We were able to identify 1.8 million ``single session'' claims 
out of an estimated 3 million potential composite cases from our 
ratesetting claims database, or over half of all eligible claims, to 
calculate median costs for the 5 final CY 2009 OPPS multiple imaging 
composite APCs.

 Table 8--OPPS Imaging Families and Multiple Imaging Procedure Composite
                                  APCs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
                          Family 1--Ultrasound
------------------------------------------------------------------------
Final CY 2009 APC 8004 (Ultrasound     Final CY 2009 Approximate APC
 Composite)                             Median Cost = $188
------------------------------------------------------------------------
    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.

[[Page 68567]]

 
    76857............................  Us exam, pelvic, limited.
------------------------------------------------------------------------
             Family 2--CT and CTA with and without Contrast
------------------------------------------------------------------------
Final CY 2009 APC 8005 (CT and CTA     Final CY 2009 Approximate APC
 without Contrast Composite) *          Median Cost = $406
------------------------------------------------------------------------
    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.
    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.
------------------------------------------------------------------------
Final CY 2009 APC 8006 (CT and CTA     Final CY 2009 Approximate APC
 with Contrast Composite)               Median Cost = $621
------------------------------------------------------------------------
    70487............................  Ct maxillofacial w/dye.
    70460............................  Ct head/brain w/dye.
    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.
    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.
------------------------------------------------------------------------
             Family 3--MRI and MRA with and without Contrast
------------------------------------------------------------------------
Final CY 2009 APC 8007 (MRI and MRA    Final CY 2009 Approximate APC
 without Contrast Composite) *          Median Cost = $695
------------------------------------------------------------------------
    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.

[[Page 68568]]

 
    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.
    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.
------------------------------------------------------------------------
Final CY 2009 APC 8008 (MRI and MRA    Final CY 2009 Approximate APC
 with Contrast Composite)               Median Cost = 968
------------------------------------------------------------------------
    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.
    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.
    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.
    C8918............................  MRA w/cont, pelvis.
    C8920............................  MRA w/o fol w/cont, pelvis.
------------------------------------------------------------------------
* 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 8005.
* 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.


  Table 9--OPPS Imaging Family Services Overlapping With HCPCS Codes on
                         the 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.
76776........................  Us exam k transpl w/doppler.
76856........................  Us exam, pelvic, complete.
76870........................  Us exam, scrotum.
76857........................  Us exam, pelvic, limited.
------------------------------------------------------------------------

[[Page 68569]]

 
             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.
73221........................  Mri joint upr extrem w/o dye.
73718........................  Mri lower extremity w/o dye.
73721........................  Mri jnt of lwr extre w/o dye.
------------------------------------------------------------------------

3. Calculation of OPPS Scaled Payment Weights
    Using the APC median costs discussed in sections II.A.1. and 2. of 
this final rule with comment period, we calculated the final relative 
payment weights for each APC for CY 2009 shown in Addenda A and B to 
this final rule with comment period. In years prior to CY 2007, we 
standardized all the relative payment weights to APC 0601 (Mid Level 
Clinic Visit) because 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 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 proposed 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 budget neutral manner. Budget neutrality ensures that 
estimated aggregate payments under the OPPS for CY 2009 are neither 
greater than nor less than the estimated aggregate payments that would 
have been made without the changes. To comply with this requirement 
concerning the APC changes, we proposed to compare aggregate payments 
using the CY 2008 scaled relative weights to aggregate payments using 
the CY 2009 unscaled relative weights. Again this year, we included 
payments to CMHCs in our comparison. Based on this comparison, we 
adjusted the unscaled 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 the CY 2009 OPPS/ASC 
proposed rule (73 FR 41452). 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.
    Section 1833(t)(14)(H) of the Act, as added by section 621(a)(1) of 
Public Law 108-173, states that, ``Additional expenditures resulting 
from this paragraph shall not be taken into account in establishing the 
conversion factor, weighting and other adjustment factors for 2004 and 
2005 under paragraph (9) but shall be taken into account for subsequent 
years.'' Section 1833(t)(14) of the Act provides the payment rates for 
certain ``specified covered outpatient drugs.'' Therefore, the cost of 
those specified covered outpatient drugs (as discussed in section V. of 
this final rule with comment period) is included in the budget 
neutrality calculations for the CY 2009 OPPS.
    We did not receive any public comments on the proposed methodology 
for calculating scaled weights from the median costs for the CY 2009 
OPPS. Therefore, we are finalizing our proposed methodology, without 
modification, including updating of the budget neutrality scaler for 
this final rule with comment period,

[[Page 68570]]

as we proposed. Under this methodology, the final unscaled payment 
weights were adjusted by a weight scaler of 1.3585 for this final rule 
with comment period. The final scaled relative payment weights listed 
in Addenda A and B to this final rule with comment period incorporate 
the recalibration adjustments discussed in sections II.A.1. and 2. of 
this final rule with comment period.
4. 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 final rule with comment period.
    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 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

[[Page 68571]]

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.c. of this final rule with comment 
period.
    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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41453), we proposed 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 for CY 2009. We proposed to 
create and assign status indicators ``Q1'' (``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 final rule with comment 
period for a complete discussion of status indicators and our status 
indicator changes for CY 2009.
    While most conditionally packaged HCPCS codes are assigned to only 
one of the conditionally packaged categories described above, in the CY 
2009 OPPS/ASC proposed rule (73 FR 41453), we proposed to assign one 
particular HCPCS code to two conditionally packaged categories for CY 
2009. Specifically, we proposed 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 proposed to assign this code status 
indicator ``Q2'' in Addendum B and ``Q3'' in Addendum M, to signify its 
dual treatment. For CY 2009, we proposed 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 APC 0662 (CT Angiography) and its corresponding payment 
rate displayed in Addendum B to this final rule with comment period.
    We received many public comments related to the CY 2009 proposals 
for payment of packaged services that are not drugs. We have responded 
to public comments on the packaging of payment for drugs, including 
contrast media and diagnostic radiopharmaceuticals, in section V.B.2.c. 
of this final rule with comment period.
    Comment: Several commenters were pleased that CMS did not propose 
to extend packaging to additional categories of services for CY 2009. 
These commenters believed that it was appropriate for CMS to study the 
effects of newly packaging many services for CY 2008 before choosing to 
package additional services. One commenter asked that we reconsider all 
packaging in general because of the adverse financial impact it has on 
some hospitals.
    Many commenters recommended that CMS define principles and/or 
thresholds to determine whether a HCPCS code should be packaged, 
consistent with the August 2008 APC Panel recommendation that CMS 
establish a threshold (for example, a proportion of cases in which the 
service is provided ancillary and dependent to another service, rate of 
change in utilization over time, and market penetration) when packaging 
will be considered. While the APC Panel recommendation was discussed in 
the context of packaging intravascular ultrasound, intracardiac 
echocardiography, and fractional flow reserve, those general comments 
related to a threshold are summarized here.
    One commenter suggested the following packaging principles: 
packaging should be reserved for higher-volume, lower-cost, minor and 
ancillary services that are frequently performed with an independent 
service; low volume procedures performed only occasionally in 
conjunction with the independent service should not be packaged; 
device-dependent procedures or procedures utilizing both single-use 
devices and capital equipment designed exclusively for use with that 
unique service should not be packaged; add-on codes that are 
infrequently performed among all cases of the independent services they 
accompany should not be packaged; and exceptions to the packaging 
policy should be permitted when packaging could unreasonably impede 
access to valuable technologies. Many commenters suggested that 
resource costs should be considered when determining whether to package 
services, in accordance with MedPAC's comment, which stated that 
packaging should be reserved for ``ancillaries that are frequently 
provided or inexpensive in relation to the associated independent 
service.'' Another commenter recommended that CMS should only package 
items that have substitutes; that CMS should take cost and volume into 
consideration when determining whether to package a service; and that 
CMS should package the charges for packaged services in a logical and 
more deliberate manner, ensuring that packaged costs representing 
dependent services are allocated only to corresponding independent 
services. One commenter suggested that CMS should only package payment 
for a dependent service if the payment rate for the independent service 
increases appropriately. Many commenters recommended that CMS consider 
a simple cost threshold, similar to the $60 per day drug packaging 
threshold that CMS proposed would determine whether payment for most 
drugs would be packaged or separately paid in CY 2009.
    Response: We agree with the commenters that we should examine 
claims data from CY 2008 that reflect the first year of a significant 
change in packaging under the OPPS and note that we did not propose to 
package additional large categories of services for CY 2009 because we 
wanted a chance to study the effects of packaging payment. We will have 
CY 2008 claims available for the CY 2010 rulemaking cycle and will 
determine at that time whether it would be appropriate to propose to 
package additional categories of services. As noted below in section 
II.A.4.b.(1) of this final rule with comment period, we plan to review 
CY

[[Page 68572]]

2008 claims data with the APC Panel to assess any changes in 
utilization patterns of packaged services as previously recommended by 
the APC Panel.
    While we are not adopting additional packaging principles or a 
nondrug packaging threshold for CY 2009, we understand the concerns of 
the commenters and are committed to considering this issue further in 
the future, balancing the concerns of the commenters with our goal of 
continuing to encourage efficient use of hospital resources. The 
criteria that the commenters provided are focused almost exclusively on 
preventing packaging, rather than on determining when packaging would 
be appropriate. We believe that packaging is appropriate when the 
nature of a service is such that it is supportive and ancillary to 
another service, whether or not the dependent service is always 
furnished with the independent service and regardless of the cost of 
the supportive ancillary service. For example, we do not want to create 
financial incentives to use one form of guidance instead of another, or 
to use guidance all the time, even if a procedure could be performed 
safely without guidance. In addition, it is not clear whether one set 
of packaging principles or one threshold could apply to the wide 
variety of services paid under the OPPS. Moreover, we are fully 
committed to continuing to advance value-based purchasing by Medicare 
in the hospital outpatient setting, to further the focus on value of 
care rather than volume, and we believe that packaging payment into 
larger payment bundles under the OPPS is an appropriate component of 
our strategy.
    In general, we believe that packaging should reflect the reality of 
how services are furnished and reported on claims by hospitals. We 
believe that nonspecific packaging (as opposed to selected code 
packaging) based on combinations of services observed on hospital 
claims is appropriate because of the myriad combinations of services 
that can be appropriately provided together. As explained in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66617), we have 
used this approach to ratesetting throughout the history of the OPPS, 
and note that payment for APC groups currently reflects significant 
nonspecific packaging in many cases. We do not agree with the 
commenters that we should only package services that are low cost 
ancillary and supportive services that appear frequently with an 
independent service. To adopt that policy would essentially negate the 
concept of averaging that is an underlying premise of a prospective 
payment system because we would package only services that would 
increase the payment for the independent service, and hospitals would 
not have a particular incentive to provide care more efficiently.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to package 
payment for five categories of ancillary and supportive services for CY 
2009, specifically guidance services, image processing services, 
intraoperative services, imaging supervision and interpretation 
services, and observation services, that are provided in association 
with independent, separately paid services, without a specific 
threshold for the cost or utilization of those supportive services. The 
final CY 2009 payment policies for contrast media and diagnostic 
radiopharmaceuticals are discussed in section V.B.2.b. of this final 
rule with comment period.
b. Service-Specific Packaging Issues
(1) Packaged Services Addressed by the 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 final rule with comment period 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 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 packaging approach, we applied 
the packaging criteria noted above in this section 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. (Recommendation 1)
    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.
    (Recommendation 2)
    3. HCPCS code A4306 (Disposable drug delivery system, flow rate of 
less than 50 mL per hour) remain packaged for CY 2009. (Recommendation 
3)
    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). (Recommendation 4)
    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

[[Page 68573]]

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). 
(Recommendation 5)
    6. CMS continue to package diagnostic radiopharmaceuticals for CY 
2009. (Recommendation 6)
    7. The Packaging Subcommittee continue its work. (Recommendation 7)
    In addition, the Packaging Subcommittee reported its findings to 
the APC Panel at its August 2008 meeting. The APC Panel accepted the 
report of the Packaging Subcommittee, heard presentations on several 
packaged services, discussed the deliberations of the Packaging 
Subcommittee and recommended that--
    8. CMS pay separately for the following IVUS, ICE, and FFR 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); 93662 
(Intracardiac echocardiography during therapeutic/diagnostic 
intervention, including imaging supervision and interpretation); 93571 
(Intravascular Doppler velocity and/or pressure derived coronary flow 
reserve measurement (coronary vessel or graft) during coronary 
angiography including pharmacologically induced stress, initial 
vessel); and 93572 (Intravascular Doppler velocity and/or pressure 
derived coronary flow reserve measurement (coronary vessel or graft) 
during coronary angiography including pharmacologically induced stress, 
each additional vessel).
    The APC Panel further recommended that CMS establish a threshold 
(for example, a proportion of cases in which the service is provided 
ancillary and dependent to another service, rate of change in 
utilization over time, and market penetration) when packaging will be 
considered. The APC Panel also recommended that CMS reconsider 
packaging these codes after 2 years of claims data are available from 
their period of payment as a separate service. (Recommendation 8)
    9. CMS pay separately for radiation therapy guidance for 2 years 
and then reevaluate packaging on the basis of claims data. The APC 
Panel further recommended that CMS evaluate possible models for 
threshold levels for packaging radiation therapy guidance and other new 
technologies. (Recommendation 9)
    10. The Packaging Subcommittee continue its work. (Recommendation 
10)
    We address each of these recommendations in turn in the discussion 
that follows.
Recommendation 1 and Recommendation 9
    We indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 41454) 
that we are adopting this APC Panel recommendation for CY 2009 and as 
requested, we provided data related to radiation oncology guidance 
services to the Data Subcommittee at the APC Panel's August 2008 
meeting. The APC Panel at its August 2008 meeting recommended that CMS 
pay separately for image-guidance for radiation therapy (IGRT) for 2 
years and then reevaluate packaging on the basis of claims data. The 
APC Panel further recommended that CMS evaluate possible models for 
threshold levels for packaging radiation therapy guidance and other new 
technologies.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41454), we proposed to 
maintain the packaged status of radiation oncology guidance services 
for CY 2009. Specifically, we proposed to continue to package payment 
for the services reported with CPT codes 76950 (Ultrasonic guidance for 
placement of radiation therapy fields); 76965 (Ultrasonic guidance for 
interstitial radioelement application); 77014 (Computed tomography 
guidance for placement of radiation therapy fields); 77417 (Therapeutic 
radiation port film(s)); and 77421 (Stereoscopic X-ray guidance for 
localization of target volume for the delivery of radiation therapy). 
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 noted that 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 creates 
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 saw no basis for 
treating radiation oncology services differently from other guidance 
services that are ancillary and dependent to the procedures they 
facilitate.
    Comment: Several commenters asked that CMS pay separately for IGRT 
guidance that represent new guidance technologies for at least the 
first 2 to 3 years of the use of the new service so that diffusion of 
the new service is not compromised by the absence of separate payment 
for it and that CMS evaluate possible models for threshold levels for 
packaging radiation therapy guidance and other new technologies. The 
commenters objected to the continued packaging of these services for CY 
2009 on the basis that packaging creates significant financial 
disincentives to the use of these services which they believed enhance 
the quality of care. These commenters believed that packaging will 
delay adoption of new technologies by hospitals and that this will 
hinder access to improved care for Medicare beneficiaries. They 
suggested that advances in radiation therapy delivery are associated 
with higher technical costs and more demanding, time-consuming services 
that ensure the safe delivery of high quality care. The commenters 
asked that if CMS continues to package these services, it should 
closely monitor the impact of packaging imaging guidance on the quality 
of care furnished to Medicare beneficiaries and to provide transparent 
and meaningful data associated with the packaging, which would allow 
stakeholders to determine if payment for imaging guidance technology is 
reasonable and appropriate. Several commenters raised concern that the 
packaging policy for new guidance technologies may make it more 
difficult for new services to be approved for payment under New 
Technology APCs if CMS considers guidance to be supportive and 
ancillary, rather than a separately paid complete service.

[[Page 68574]]

    Response: From the perspective of the Medicare program as a value-
based purchaser, we believe that packaged payment causes hospitals to 
carefully consider whether the purchase of or use of a technology is 
appropriate in an individual case, while separate payment may create 
incentives to furnish services regardless of whether they are the most 
appropriate for an individual patient's particular needs. We also 
believe that where new technologies are proven to improve the quality 
of care, their utilization will increase appropriately, whether the 
payment for them is packaged or not. Moreover, we note that the history 
of technology development shows that new technologies do not 
necessarily result in the forecasted improvements over existing 
technologies. Often a period of some years of broad use is necessary to 
effectively assess whether the new technology improves, harms, or 
yields no improvement in patient health and quality of life. 
Furthermore, we also do not believe that hospitals would fail to 
provide services to Medicare beneficiaries while furnishing the same 
services to other patients with the same clinical needs, because to do 
so would jeopardize the hospital's continued participation in Medicare. 
Specifically, under Sec.  489.53, CMS may terminate the Medicare 
participation of a hospital that places restrictions on the persons it 
will accept for treatment and either fails to exempt Medicare 
beneficiaries from those restrictions or to apply them to Medicare 
beneficiaries the same as to all other persons seeking treatment. We 
have already addressed the issue of establishing a threshold for a 
determination of whether to package a service in our response to 
general comments on packaging above in this section.
    We understand the concerns of the commenters who noted that it may 
be harder for new guidance services to become eligible for assignment 
to a New Technology APC. As we stated in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66621), we assess applications for New 
Technology APC placement on a case-by-case basis. The commenters are 
correct that, to qualify for New Technology APC placement, the service 
must be a complete service, by which we mean a comprehensive service 
that stands alone as a meaningful diagnostic or therapeutic service. To 
the extent that a service for which New Technology APC status is being 
requested is ancillary and supportive of another service, for example, 
a new intraoperative service or a new guidance service, we might not 
consider it to be a complete service because its value is as part of an 
independent service. However, if the entire, complete service, 
including the guidance component of the service, for example, is 
``truly new,'' as we explained that term at length in the November 30, 
2001 final rule (66 FR 59898) which sets forth the criteria for 
eligibility for assignment of services to New Technology APCs, we would 
consider the new complete procedure for New Technology APC assignment. 
As stated in that November 30, 2001 final rule, by way of examples 
provided, ``The use of a new expensive instrument for tissue 
debridement or a new, expensive wound dressing does not in and of 
itself warrant creation of a new HCPCS code to describe the instrument 
or dressing; rather, the existing wound repair code appropriately 
describes the service that is being furnished * * *'' (66 FR 59898). 
This example may be applicable for some new guidance technologies as 
well.
    The OPPS pays for certain new technology services through New 
Technology APC assignment. One of the criteria requires the new 
technology service to be a complete service. If we were to pay 
separately for new guidance technologies, in many cases hospitals would 
receive duplicate payment when providing a comprehensive, independent 
service, through payment for the independent service that already has 
guidance costs packaged into its payment rate and the new guidance 
service that was provided separate payment. In addition, if we were to 
pay separately for new guidance technologies, we would create a payment 
incentive to use one form of guidance instead of another. Therefore, by 
packaging payment for all forms of guidance, we specifically encourage 
hospitals to utilize the most cost effective and clinically 
advantageous method of guidance that is appropriate in each situation 
by providing hospitals with the maximum flexibility associated with a 
single payment for the independent procedure.
    We further note that the OPPS pays separately for new items through 
the pass-through payment provisions for drugs, biologicals, and device 
categories. The criteria for a drug, biological, or device category to 
be eligible for pass-through payment status are different than the 
criteria for a new service to be eligible for assignment to a New 
Technology APC. These criteria and processes are listed on the CMS Web 
site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp#TopOfPage. One requirement for separate pass-through 
payment for implantable devices, which are all packaged if they do not 
have pass-through status, is that the applicant for the pass-through 
device category must demonstrate that use of the device results in 
substantial clinical improvement in the diagnosis or treatment of a 
Medicare beneficiary in comparison with currently available tests or 
treatments. Thus, in some cases we may not pay separately under the 
pass-through provisions for some new or modified implantable devices 
because the evidence to support substantial clinical improvement may 
not be available early in the device's use. Instead, like new or 
modified guidance or other nonimplantable technologies that are not 
complete services, the cost of the new or modified device is 
incorporated into the OPPS payment rates for the associated procedures 
as the device is adopted into medical practice and its utilization 
increases, and OPPS payment rates come to reflect hospital charges for 
the new or modified device. In many cases, the new or modified device 
may be replacing a predecessor device whose cost is already reflected 
in the OPPS payments for the associated procedures. As stated in the 
``Innovator's Guide to Navigating CMS,'' posted on the CMS Web site at 
http://www.cms.hhs.gov/CouncilonTechInnov/Downloads/InnovatorsGuide8_25_08.pdf , CMS pays for many new technologies under various payment 
systems, including the OPPS, without requiring an explicit payment 
decision by CMS.
    Comment: Several commenters objected to the packaging of IGRT 
guidance because they believed that there is a fundamental difference 
between diagnostic imaging support services, which they suggested may 
be more easily correlated with specific independent procedures, and 
therapeutic imaging guidance services, which they stated are used to 
enhance the precise delivery of many different radiation therapy 
procedures. They believed that CMS should not package IGRT guidance 
services because they cannot be identified with a single specific 
therapeutic service.
    Response: We disagree that IGRT guidance services are so 
fundamentally different in function from other imaging support services 
that the packaging policy is inappropriately applied to them. In both 
cases, the dependent services are being furnished to support a service 
that could be performed independently of the image guidance service, 
whether on the same day or soon thereafter. Moreover, we do not believe 
that diagnostic imaging support services are necessarily more

[[Page 68575]]

specifically linked to any one specific diagnostic service than are the 
IGRT guidance services, nor do we believe that this is relevant in 
considering whether the service can be appropriately packaged. 
Therefore, we do not believe that there is a fundamental distinction 
between IGRT and other guidance services that causes packaging to be 
inappropriate for the IGRT subset of these services.
    Comment: A number of commenters indicated that packaging for 
radiation therapy guidance was particularly inappropriate because the 
OPPS payments for the separately paid independent services were 
simultaneously reduced. The commenters explained that their review of 
the CY 2007 claims data on which the proposed CY 2009 OPPS payment 
rates are based revealed that fewer than 10 percent of the billed lines 
for these radiation therapy guidance codes were used in setting the 
proposed CY 2009 OPPS payment rates. They also stated that more than 
one-third of the billed lines for IGRT guidance services were being 
packaged into single claims for services that are totally unrelated to 
radiation oncology. These commenters believed that this may occur in 
part as a result of the inclusion of radiation oncology services on the 
bypass list, but that nevertheless, it is inequitable and inappropriate 
to impose a packaging policy for IGRT guidance that does not package 
the costs of these services into payment for the associated radiation 
oncology services. Moreover, the commenters feared that the problem of 
packaged costs that were lost in ratesetting would be exacerbated in 
the future because hospitals would cease to report the IGRT services 
they provide because no separate payment would be made. Without 
reporting of the HCPCS codes, the commenter asserted, the costs of IGRT 
guidance would not be available to be packaged in ratesetting for 
radiation oncology services.
    Response: In response to the commenters' concerns with the data, we 
examined our claims data and determined that the inclusion on the 
bypass list of certain radiation oncology CPT codes, specifically 77261 
(Therapeutic radiology treatment planning, simple) through and 
including 77799 (Unlisted procedure clinical brachytherapy), may be 
responsible for the loss or misassignment of packaging for the IGRT 
guidance codes. A number of these codes had been historically included 
on the bypass list based on clinical evaluation and past public 
comments although they failed to meet the empirical criteria for 
inclusion on the bypass list. Therefore, for CY 2009, we are removing 
those radiation oncology codes from the bypass list that do not meet 
the empirical criteria. We discuss these changes to the bypass list in 
section II.A.1.b. of this final rule with public comment period.
    As a result of these changes to the bypass list, the median costs 
for APCs 0412 (IMRT Treatment Delivery) and 0304 (Level I Therapeutic 
Treatment Preparation) increased by more than 9 percent compared to the 
median costs used to calculate the proposed CY 2009 OPPS payment rates. 
Furthermore, Table 10 below displays the historical and final CY 2009 
payment rates for the common combination of intensity modulated 
radiation therapy (IMRT) described by CPT code 77418 (Intensity 
modulated treatment delivery, single or multiple fields/arcs, via 
narrow spatially and temporally modulated beams, binary, dynamic MLC, 
per treatment session) and IGRT guidance described by CPT code 77421 
(Stereoscopic X-ray guidance for localization of target volume for the 
delivery of radiation therapy). Packaging payment for IGRT guidance 
services notably increases the payment rate for IMRT. Specifically, the 
packaging of IGRT guidance services results in an approximately $50 
increase to the CY 2009 median cost for APC 0412, the APC that includes 
IMRT, as compared to the APC's median cost without packaged IGRT 
guidance.

 Table 10--Historical Payment for Radiation Treatment and IGRT Guidance
                                Services
------------------------------------------------------------------------
                               CY 2006    CY 2007    CY 2008    CY 2009
------------------------------------------------------------------------
Payment for Radiation              $319       $336       $348       $411
 Treatment--IMRT (CPT code
 77418).....................
Payment for IGRT Guidance            75         67      N/A *      N/A *
 (CPT Code 77421)...........
Total Payment for IMRT &            394        403        348        411
 IGRT Guidance..............
------------------------------------------------------------------------
* Packaged payment.

    On the other hand, as a result of these changes to the bypass list 
we were unable to use nearly a million claims that would otherwise have 
been used, in whole or in part, to calculate median costs for the 
radiation oncology APCs and other APCs. Moreover, the median costs for 
some of the radiation oncology APCs declined, most notably the 
brachytherapy source application APCs, 0651 (Complex interstitial 
radiation source application); 0312 (Radioelement applications); and 
8001 (Low dose rate prostate brachytherapy). As we discuss in section 
II.A.1.b. of this final rule with comment period, we are exploring 
whether we can identify specific radiation oncology codes that could 
safely be added back into the bypass list that would enable us to use 
more claims data for these APCs without the effect of loss or 
misassignment of packaging. We welcome comments on the specific 
radiation oncology CPT codes that would achieve this goal. However, for 
CY 2009, we will base payments on the median costs calculated from the 
smaller number of single bills for the brachytherapy source application 
APCs that result from the removal of radiation oncology codes that do 
not meet the empirical bypass list criteria from the bypass list 
because we want to ensure that all costs of IGRT guidance services are 
packaged appropriately for CY 2009 ratesetting.
    We strongly encourage hospitals to report a charge for each 
packaged service they furnish, either by billing the packaged HCPCS 
code and a charge for that service if separate reporting is consistent 
with CPT and CMS instructions, by increasing the charge for the 
separately paid associated service to include the charge for the 
packaged service, or by reporting the charge for the packaged service 
with an appropriate revenue code but without a HCPCS code. Any of these 
means of charging for the packaged service will result in the costs of 
the packaged service being incorporated into the cost we estimate for 
the separately paid service. We believe that hospitals will continue to 
charge for these packaged services, individually or as part of the 
charge for the independent service, because hospitals must charge all 
payers the same amount for services they furnish to patients and 
because some other payers pay a percentage of charges. To fail to 
charge for the packaged service would result in immediately reduced 
payment from sources other than Medicare, and over

[[Page 68576]]

time, could also lead to a reduction in payment under the OPPS.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to package 
payment for all IGRT guidance services into payment for the separately 
paid independent services to which they are ancillary and supportive. 
We will base all final CY 2009 payments on claims data derived with the 
use of a bypass list that has been revised to remove the radiation 
oncology services that do not meet the empirical criteria. We are not 
adopting the APC Panel recommendation to pay separately for radiation 
therapy guidance for CY 2009. We will consider the issue of a threshold 
for packaging, as recommended by the APC Panel, in the future, 
balancing the concerns over access to high quality medical care with 
the goal of continuing to encourage efficient use of hospital 
resources.
Recommendation 2
    We indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 41454) 
that we are adopting this APC Panel recommendation. For CY 2009, we 
proposed 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 assign it to APC 0624 
(Phlebotomy and Minor Vascular Access Device Procedures), the same APC 
to which we proposed to assign CPT code 36591 (Collection of blood 
specimen from a completely implantable venous access device). CPT code 
36591 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. 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.
    In summary, for CY 2009, we proposed to change the packaged status 
of CPT code 36592 from unconditionally packaged to conditionally 
packaged, as an ``STVX-packaged code,'' which was 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 in section 
II.A.4.a. of this final rule with comment period, for CY 2009, we 
proposed 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 proposed 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. of this final rule with comment period for a complete 
discussion of status indicators and our status indicator changes for CY 
2009.
    Comment: One commenter requested that CMS change the status of CPT 
code 36592 from unconditionally to conditionally packaged, treating it 
like CPT code 36591. The commenter 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. Several other commenters 
noted that they supported the proposal to assign status indicator 
``Q1'' to CPT code 36592 for CY 2009.
    Response: We appreciate the commenters' support. We agree that the 
resource costs associated with CPT code 36592 may be similar to the 
resource costs associated with CPT code 36591. When CY 2008 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.
    Comment: One commenter asked whether hospitals must follow the 
parenthetical CPT guidance listed immediately following the code 
descriptor that states that CPT code 36592 may not be reported with any 
other service. The commenter asked why CMS proposed to change the 
status of this code from unconditionally packaged to conditionally 
packaged if the code descriptor states that this code would never be 
provided with another service. The commenter contended that there does 
not appear to be any reason to treat this code as conditionally 
packaged.
    Response: Hospitals must follow the coding guidance provided by 
CPT. We are not recommending that hospitals report CPT code 36592 every 
time it is performed, even if provided at the same time as another 
procedure or visit. Our proposed payment policy would ensure that, if 
CPT code 36592 was reported with other services paid under the OPPS, 
hospitals would not receive separate payment. Therefore, our payment 
proposal to conditionally package CPT code 36592 is consistent with the 
reporting guidance provided by CPT.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, and adopting the 
APC Panel's recommendation to conditionally package CPT code 36592 as 
an ``STVX-packaged code'' for CY 2009. This CPT code will be paid 
separately through APC 0624 when criteria for packaged payment are not 
met. As noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41454), we 
expect hospitals to follow the CPT guidance related to CPT codes 36591 
and 36592 regarding when these services should be appropriately 
reported.
Recommendation 3
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41455), we indicated 
that we are adopting this APC Panel recommendation. For CY 2009, we 
proposed 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 
nonimplantable supplies, into payment for the procedures in which the 
supplies are used. We first discussed this code with the APC Panel in 
March 2007. During the APC Panel's March 2007 meeting, a manufacturer 
noted in a presentation that a particular disposable drug delivery 
system reported with HCPCS code A4306 is specifically used to treat 
postoperative pain. The manufacturer requested that this code be moved 
to its own APC for CY 2008 in order for the service to receive separate 
payment. During its September 2007 meeting, the APC Panel recommended 
that CPT code A4306 remain packaged for CY 2008 and asked CMS to 
present additional data regarding this code 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

[[Page 68577]]

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 proposed to maintain the unconditionally 
packaged status of HCPCS code A4306 for CY 2009.
    Comment: One commenter believed that hospitals are misreporting CPT 
code A4306, leading to inaccurate cost estimates and payment rates. The 
commenter asked CMS to clarify that this supply code is for single use 
infusion pump devices used for chemotherapy, not syringes for 
chemotherapy or pain drugs. The commenter also asked CMS to clarify 
that hospitals should not report HCPCS code A4306 for syringes 
prefilled with sodium chloride or other material.
    Response: In general, it is not our practice to provide specific 
coding guidance regarding permanent Level II HCPCS codes, such as HCPCS 
code A4306. As noted in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66669), we encourage interested parties to submit any 
questions or requests for clarification of the HCPCS codes to the AHA 
coding clinic.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, and adopting the 
APC Panel recommendation to maintain the unconditionally packaged 
status of HCPCS code A4306.
Recommendation 4
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41455), we indicated 
that we are adopting this APC Panel recommendation. For CY 2009, we 
proposed 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 (e.g., 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 proposed 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 in section II.A.4.a. of this final rule with comment 
period, for CY 2009, we proposed 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 proposed 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. of this final rule with 
comment period for a complete discussion of status indicators and our 
status indicator changes for CY 2009.
    In summary, for CY 2009, we proposed 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 paid 
separately.
    Comment: Several commenters supported the CY 2009 proposal to 
change the status indicator for CPT code 74305 from ``N'' to ``Q2,'' 
with assignment to APC 0263 when it would be paid separately. One 
commenter requested that CMS change the status indicator of this code 
retroactive to January 1, 2008, when this code became unconditionally 
packaged.
    Response: We are pleased that commenters supported this proposal. 
We established the final unconditionally packaged status of CPT code 
74305 for CY 2008 through the CY 2008 OPPS/ASC rulemaking cycle. We 
note that we proposed to unconditionally package CPT code 74305 in the 
CY 2008 OPPS/ASC proposed rule and we did not receive any public 
comments opposing this proposal. Therefore, we finalized our policy to 
unconditionally package CPT code 74305 for CY 2008.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, and adopting the 
APC Panel recommendation to conditionally package CPT code 74305 as a 
``T-packaged code'' for CY 2009, with payment through APC 0263 when the 
criteria for packaged payment are not met.
Recommendation 5 and Recommendation 8
    For CY 2009, we proposed 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). Our CY 
2009 proposal indicated that we are not adopting the APC Panel's 
recommendation to pay separately for these intraoperative intravascular 
ultrasound (IVUS) and

[[Page 68578]]

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 are 
provided in the same operative session as the independent procedure, we 
packaged their payment into the OPPS payment for the independent 
procedure performed in CY 2008. We believe these IVUS and ICE services 
are always integral to and dependent upon the independent 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 
acknowledged in the CY 2009 OPPS/ASC proposed rule 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 (73 FR 41456). 
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 hospitals, we do not believe that beneficiary 
access to care would be harmed by packaging payment for IVUS and ICE 
services. We noted 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, 
in the CY 2009 OPPS/ASC proposed rule (73 FR 41456), we indicated that 
we saw 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 proposed to maintain the unconditionally packaged 
status of CPT codes 37250, 37251, 92978, 92979, and 93662 for CY 2009.
    As noted above in this section, during its August 2008 meeting, the 
APC Panel discussed these services and recommended that CMS pay 
separately for CPT codes 37250, 37251, 92978, 92979, 93662, as well as 
93571 (Intravascular Doppler velocity and/or pressure derived coronary 
flow reserve measurement (coronary vessel or graft) during coronary 
angiography including pharmacologically induced stress, initial 
vessel); and 93572 (Intravascular Doppler velocity and/or pressure 
derived coronary flow reserve measurement (coronary vessel or graft) 
during coronary angiography including pharmacologically induced stress, 
each additional vessel).
    In addition, the APC Panel further recommended that CMS establish a 
threshold (for example, a proportion of cases in which the service is 
provided ancillary and dependent to another service, rate of change in 
utilization over time, and market penetration) when packaging will be 
considered. The APC Panel also recommended that CMS reconsider 
packaging these codes after it has 2 years of claims data available 
from their period of payment as a separate service.
    Comment: Many commenters were disappointed that CMS did not propose 
to provide separate payment for CPT codes 37250, 37251, 92978, 92979, 
and 93662 for CY 2009, in accordance with the March 2008 APC Panel 
recommendation, and requested that CMS adopt the APC Panel's August 
2008 recommendation to pay separately for these services (and CPT codes 
93571 and 93572) for CYs 2009 and 2010. These commenters believed that 
separate payment for 2 years would allow CMS to accurately capture cost 
data. Other commenters clarified that services should only be eligible 
for packaging if they have been separately payable for 2 years, thereby 
enabling CMS to capture complete cost data. The commenters indicated 
that payment for the independent procedures provided in conjunction 
with IVUS are not sufficient to cover the incremental cost of providing 
IVUS. The commenters also were concerned that packaging these 
technologies creates a strong disincentive for hospitals to use these 
important technologies. Other commenters requested that CMS develop a 
composite APC whose payment criteria would be met when IVUS, ICE, or 
FFR are provided.
    The commenters estimated the IVUS and ICE are utilized in less than 
10 percent of Medicare beneficiaries undergoing a diagnostic cardiac 
catheterization procedure, or other related procedures, which results 
in their costs having little or no impact on the payment for the 
independent procedure. Furthermore, many commenters emphasized that 
limited access to these technologies would result in greater 
utilization of interventional procedures that could have been avoided 
had these interventions been used. One commenter disputed describing 
FFR services as ``ancillary'' and stated that they are ``decisional'' 
and, therefore, should not be packaged, or should become conditionally 
packaged. Several commenters were concerned that packaged payment would 
create a significant financial disincentive to provide these services. 
The commenters also noted that these procedures should not be described 
as ``intraoperative'' because they precede the independent procedure, 
and may even result in

[[Page 68579]]

canceling the independent procedure. One commenter acknowledged the 
reference in the CY 2009 OPPS/ASC proposed rule (73 FR 41555 to 41556) 
that CMS does not believe that beneficiary access would be harmed, but 
asked CMS to provide support for this assumption. Another commenter 
indicated that even with separate payment in the past, only a small 
number of hospitals purchased this technology. Therefore, the commenter 
was concerned that with packaged payment, access to this technology 
would be even more severely limited. Many commenters developed and 
shared criteria and/or principles that they suggested should dictate 
whether an item or service is eligible for packaged payment, both for 
determining the packaged status of IVUS, ICE, and FFR, as well as other 
services.
    Response: We appreciate the many detailed comments related to the 
packaged status of IVUS, FFR, and ICE services. We acknowledge that the 
costs associated with packaged services may contribute more or less to 
the median cost of the independent service, depending on how often the 
dependent service is billed with the independent service. It is our 
goal to adhere to the principles inherent in a prospective payment 
system and to encourage hospitals to utilize resources in a cost-
effective manner. In this case, hospitals may choose whether to utilize 
IVUS, FFR, and ICE services, balancing the needs of the patient with 
the costs associated with the services.
    We note that IVUS, ICE, and FFR services had been separately 
payable under the OPPS prior to CY 2008, and hospitals were paid 
separately each time they provided IVUS, ICE, or FFR services. In 
addition, according to several manufacturers, these technologies are 
not new and have been widely available for at least the past 5 to 10 
years. In fact, every one of the CPT codes describing IVUS and ICE 
services (CPT codes 37250, 37251, 92978, 92979, and 93662) has been 
separately payable under the OPPS since CY 2001, or earlier. FFR 
services (CPT code 93571 and 93572) have been separately payable since 
CY 2005.
    In general, we believe that hospitals adopt technologies when it is 
clinically advantageous and financially feasible to do so. The fact 
that these technologies have not been provided by a larger number of 
hospitals prior to CY 2008 is, therefore, not a function of separate 
versus packaged Medicare hospital outpatient payment. We do not believe 
that packaged payment is harming access to these technologies that have 
been separately paid for many years. Similarly, we do not believe that 
another 2 years of separate payment is necessary to increase Medicare 
beneficiaries' access to these services.
    We also do not agree that beneficiary access to care will be harmed 
by packaging payment for these 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 will institutionalize 
approaches to providing necessary services more efficiently. Where this 
review results in the reductions in services that are only marginally 
beneficial, we believe that this could improve rather than harm the 
quality of care for beneficiaries because every service furnished in a 
hospital carries some level of risk to the patient. Similarly, where 
this review results in the concentration of some services in a reduced 
number of hospitals in the community, we believe that the quality of 
care and hospital efficiency may both be enhanced as a result. The 
medical literature shows that concentration of services in certain 
hospitals often results in both greater efficiency and higher quality 
of care for patients.
    We continue to believe that IVUS, FFR, and ICE are dependent 
services that are always provided in association with independent 
services. Those independent services may be diagnostic and/or 
therapeutic or interventional. This is different than stating that 
every angioplasty or other related independent procedure utilizes IVUS, 
FFR, or ICE. In fact, all of the codes about which we received public 
comments are listed as add-on codes in the CY 2007 CPT book. While we 
agree that some of these services may contribute to decisionmaking 
regarding a potential therapeutic procedure, we still believe that 
these services are never provided without another independent service 
that is separately paid under the OPPS also performed on the same day. 
Therefore, we do not believe it would be appropriate to conditionally 
package CPT codes 93571 and 93572, or any of the other IVUS or ICE 
services.
    We have responded to public comments related to general packaging 
criteria, thresholds, and/or principles earlier in this section. After 
consideration of the public comments received, we are finalizing our CY 
2009 proposal, without modification, to unconditionally packaged 
payment for IVUS, ICE, and FFR services for CY 2009. We are not 
adopting the APC Panel recommendation to pay separately for these 
services. We will discuss these services with the APC Panel at its 
first 2009 meeting, in addition to reviewing CY 2008 claims data with 
the APC Panel to assess any changes in utilization patterns of the 
packaged services as previously recommended by the APC Panel.
Recommendation 6
    We indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 41456) 
that we are adopting this APC Panel recommendation. For CY 2009, we 
proposed to maintain the packaged status of diagnostic 
radiopharmaceuticals. This recommendation is discussed in detail in 
section V.B.2.b. of this final rule with comment period.
Recommendation 7 and Recommendation 10
    In response to the APC Panel's recommendation for the Packaging 
Subcommittee to remain active until the next APC Panel meeting, we note 
that the APC Panel Packaging Subcommittee remains active, and 
additional issues and new data concerning the packaging status of codes 
will be shared for its consideration as information becomes available. 
We continue to encourage submission of common clinical scenarios 
involving currently packaged HCPCS codes to the Packaging Subcommittee 
for its ongoing review, and we also encourage recommendations of 
specific services or procedures whose payment would be most 
appropriately packaged under the OPPS. Additional detailed suggestions 
for the Packaging Subcommittee should be submitted by e-mail to 
[email protected] with Packaging Subcommittee in the subject line.
    Comment: Several commenters supported the recommendation that the 
Packaging Subcommittee continue, noting that they rely on the 
Subcommittee to thoroughly review data and carefully deliberate 
regarding the proper packaged status of various services.
    Response: We are pleased that commenters support the work of the 
Packaging Subcommittee. The Packaging Subcommittee will continue to 
remain active.
(2) IVIG Preadministration-Related Services
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41456 and 41457), we 
proposed 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

[[Page 68580]]

globulin is a complicated biological product that is purified from 
human plasma obtained from human plasma donors. 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 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 final 
rule with comment period. 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 OPPS payments for drug administration 
services are discussed in section VIII.B. of this final rule with 
comment period.
    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 CYs 2006, 2007, and 2008 in order to assist in ensuring 
appropriate access to IVIG during a period of market instability due, 
in part, to the implementation of the new ASP payment methodology for 
IVIG drugs. The preadministration-related payment was designed to pay 
the hospital for the added costs of obtaining the IVIG and scheduling 
the patient infusion during a period of market uncertainty. Under the 
CYs 2006 and 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 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. In the CY 2009 OPPS/ASC proposed rule (73 FR 41457), we 
noted 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. During the 
third quarter of CY 2006, 56 percent of IVIG sales to hospitals and 
over 59 percent of IVIG sales to physicians by the three largest 
distributors occurred at prices below the Medicare payment amounts. We 
reviewed national CY 2006 and CY 2007 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. 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 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 
gathered for the services described by HCPCS code G0332 since CY 2006, 
including the line-item median cost for the code of approximately $37 
from CY 2007 claims data, indicated 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 indicated in the CY 2009 OPPS/ASC proposed rule our belief 
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 (73 FR 41457). Therefore, we proposed to assign status 
indicator ``N'' to HCPCS code G0332 for CY 2009.
    For CY 2009, under the MPFS, a proposal was made to discontinue 
payment for HCPCS code G0332 for CY 2009 (73 FR 38518).
    Comment: Most commenters opposed the elimination of the 
preadministration-related payment in CY 2009. A few commenters 
requested that the preadministration services payment become permanent 
for both the OPPS and the MPFS. Some commenters stated that the market 
conditions for IVIG are not fundamentally different than they were when 
CMS initially instituted the preadministration services payment in CY 
2006. The commenters requested that CMS continue the separate payment 
until there is more stability in the IVIG market. Several commenters 
stated that the information CMS presented in the CY 2009 OPPS/ASC 
proposed rule did not conclusively prove that the IVIG market was 
stabilizing. They alleged that significant access problems remain.
    In response to the findings of the OIG report, some commenters 
stated that the lag inherent to the ASP pricing system may have played 
a role in substantially increasing the percentage of IVIG sales at 
prices below the Medicare payment amounts in the third quarter of 2006. 
The preadministration-related services payment was cited as providing 
some assistance to physicians and hospitals who are experiencing 
problems obtaining IVIG. Several commenters noted that the OIG report 
could be interpreted as leaving a large percentage of hospitals and 
physicians unable to acquire IVIG at prices below Medicare's payment 
amounts. Many commenters stated that they did not believe the 
introduction of new brand-specific reporting codes for IVIG would 
result in a more stable marketplace.
    One commenter presented patient surveys conducted in CYs 2006, 
2007, and 2008 which described access limitations and shifts in the 
site of service. These surveys were limited in size and surveyed only 
patients receiving IVIG for primary immune

[[Page 68581]]

deficiency. Another commenter referred to a report on IVIG issued in 
February 2007 entitled, Analysis of Supply, Distribution, Demand and 
Access Issues Associated with Immune Globulin Intravenous, prepared by 
the Eastern Research Group under contract (Contract No. 
HHSP23320045012XI) to the Assistant Secretary of Planning and 
Evaluation in HHS, and cited this report as an important source of 
information on IVIG usage and patient access.
    Response: The separate payment for IVIG preadministration-related 
services was designed to pay the hospital for the additional, unusual, 
and temporary costs associated with obtaining IVIG products and 
scheduling patient infusions during a temporary period of market 
instability. This payment was never intended to subsidize the OPPS 
payment for drugs made under the ASP methodology.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41457), we referred to 
data from the OIG study that indicated that for the third quarter of 
2006, just over half of IVIG sales to hospitals and physicians were at 
prices below Medicare payment amounts. Relative to the previous three 
quarters, this represented a substantial increase of the percentage of 
sales with prices below Medicare amounts. We agree with the commenters 
that it is likely that the increased ASP payments were the result of 
previous price increases from past quarters influencing future ASP 
data. Furthermore, we believe that the new HCPCS codes for IVIG 
products allow the hospital to report and receive payment for the 
specific product furnished to the patient.
    We stated clearly in the CY 2006 OPPS final rule with comment 
period (70 FR 68649 through 68650) that the preadministration-related 
services payment policy was a temporary measure to pay hospitals for 
the unusual and temporary costs associated with procuring IVIG. We 
expected that these costs would decline over time as hospitals became 
more familiar with the nuances of the IVIG market and the availability 
of the limited primary and secondary suppliers in their areas.
    We did not reference the report conducted by the Eastern Research 
Group (Contract No. HHSP23320045012XI) in the CY 2009 OPPS/ASC proposed 
rule. As the commenter noted, this report provides important 
comprehensive background on the IVIG marketplace, such as an analysis 
of the IVIG supply and distribution, and an analysis of the demand for 
and utilization of IVIG products, including how they are administered 
and paid, as well as information from the industry and others on 
physician and patient problems with access to IVIG. The study is a 
collection of multisource information and provides an understanding of 
the IVIG marketplace. One limitation of the study is that it depicts 
the market only up through the first quarter of CY 2006 and it does not 
include detailed information on IVIG pricing as was provided in the OIG 
report. The OIG report also contains data from a later time period 
because it includes data through the third quarter of CY 2006.
    We note, based on the information that follows, that the IVIG 
market today appears more stable than it was in CY 2006. We have 
reviewed national CY 2006 and CY 2007 claims data for IVIG drug 
utilization, as well as the utilization of the preadministration-
related services HCPCS code. These data show a modest increase in the 
utilization of IVIG and the preadministration-related services code in 
both physicians' offices and HOPDs from CY 2006 to CY 2007, after a 
period of decreased IVIG utilization in physicians' offices with a 
shift of IVIG infusions to the HOPD in the previous year, which suggest 
that IVIG pricing and access may be improving.
    There were about 3.1 million units of IVIG administered in 
physicians' offices in CY 2006, and 7.3 million units in HOPDs. In CY 
2007, those numbers rose to estimates of 3.3 million units and 8.1 
million units in the physician's office and HOPD settings, 
respectively. Under the OPPS, the total number of days of IVIG 
increased modestly from CY 2006 to CY 2007, from 113,000 to 119,000. 
Aggregate allowed IVIG charges in the physician's office setting for CY 
2006 were $82 million, while total payments (including beneficiary 
coinsurance) under the OPPS were $184 million for the same time period. 
In CY 2007, aggregate allowed charges in the physician's office setting 
are estimated at $98 million, while total OPPS payments are estimated 
at $246 million.
    In summary, beginning in CY 2007, IVIG utilization increased 
modestly in both the physician's office setting and the HOPD, after a 
prior shift to the hospital and away from the physicians' offices, 
presumably reflecting increasing availability of IVIG and appropriate 
payment for the drug in both settings.
    According to information on the Plasma Protein Therapeutics 
Association (PPTA) Web site regarding the supply of IVIG, in the past 
year, while the supply has spiked at various times throughout the year, 
the supply has remained above or near the 12-month moving average. 
While we acknowledge that the supply is only one of several factors 
that influence the market, we believe that an adequate supply is one 
significant factor that contributes to better access to IVIG for 
patients.
    Therefore, because HCPCS code G0332 meets our historical criteria 
for packaged payment under the OPPS, because we paid separately for 
these services on a temporary basis only for 3 years, 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 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.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to package 
payment for IVIG preadministration-related services described by HCPCS 
code G0332 for CY 2009. The treatment of payment for preadministration-
related services under the MPFS is addressed separately in that CY 2009 
final rule with comment period. We will continue to work with IVIG 
stakeholders to understand their concerns regarding the pricing of IVIG 
and Medicare beneficiary access to this important therapy.
    HCPCS code G0332 will be deleted effective January 1, 2009. 
Therefore, hospitals should report charges for IVIG preadministration-
related services in the same manner as hospitals report 
preadministration-related services charges for other drugs. Hospitals 
may include the charge for IVIG preadministration-related services on a 
claim in the charge for the associated drug administration service, in 
the charge for the IVIG product infused, on an uncoded revenue code 
line, or in another appropriate manner.
(3) Other Service-Specific Packaging Issues
    Based on our CY 2009 proposal to maintain the unconditionally and 
conditionally packaged payment for services in the seven categories 
that we originally packaged for CY 2009 (guidance services, image 
processing services, intraoperative services, imaging supervision and 
interpretation services, diagnostic radiopharmaceuticals, contrast 
media, and observation services), we received a number of public 
comments on individual services that were not specifically discussed in 
the CY 2009 OPPS/ASC proposed rule or for which

[[Page 68582]]

the APC Panel made no specific recommendations.
    Comment: Several commenters were concerned that the proposal to 
package payment for electrodiagnostic guidance for chemodenervation 
procedures, specifically, CPT codes 95873 (Electrical stimulation for 
guidance in conjunction with chemodenervation (List separately in 
addition to code for primary procedure)), and 95874 (Needle 
electromyography for guidance in conjunction with chemodenervation 
(List separately in addition to code for primary procedure)). These 
commenters indicated that chemodenervation involves the injection of 
chemodenervation agents, such as botulinum toxin, to control the 
symptoms associated with dystonia and other disorders. According to the 
commenters, physicians often, but not always, use electromyography or 
electrical stimulation guidance to guide the needle to the most 
appropriate location. The commenters were concerned that the proposal 
to package payment for these guidance services may discourage 
utilization of this particular form of guidance, even when medically 
appropriate. One commenter also noted that even if the median cost for 
the chemodenervation procedures increased, the payment rate would not 
increase because chemodenervation procedures are only a small 
proportion of all claims in their proposed APC.
    Response: We note that the cost of the chemodenervation guidance 
services will generally be reflected in the median cost for the 
independent HCPCS code as a function of the frequency that 
chemodenervation services are reported with that particular HCPCS code. 
We recognize that in some cases supportive and ancillary dependent 
services are furnished at high frequency with independent services, and 
in other cases, they are furnished with independent services at a low 
frequency. We believe that packaging should reflect the reality of how 
services are furnished. While the commenters are correct that the 
chemodenervation procedures reflect only approximately 3 percent of the 
services that comprise APC 0204 (Level I Nerve Injections), and 
approximately 20 percent of the services that comprise APC 0205 (Level 
II Nerve Injections), we note that they appropriately map to these APCs 
both clinically and in terms of resource use. We also note that CPT 
codes 64613 (Chemodenervation of muscle(s); neck muscle(s) (eg, for 
spasmodic torticollis, spasmodic sysphonia) and 64614 (Chemodenervation 
of muscle(s); extremity(s) and/or trunk muscle(s) (eg, for dystonia, 
cerebral palsy, multiple sclerosis) are assigned to APC 0205 for CY 
2009, which has a higher payment rate than APC 0204, where they were 
assigned for CY 2008, based on our annual review of clinical and 
resource homogeneity.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to package 
payment for chemodenervation guidance services described by CPT codes 
95873 and 95874 for CY 2009.
    Comment: One commenter requested separate payment for CPT codes 
0174T (Computer-aided detection (CAD) (computer algorithm analysis of 
digital image data for lesion detection) with further physician review 
for interpretation and report, with or without digitization of film 
radiographic images, chest radiograph(s), performed concurrent with 
primary interpretation (List separately in addition to code for primary 
procedure)) and 0175T (Computer-aided detection (CAD) (computer 
algorithm analysis of digital image data for lesion detection) with 
further physician review for interpretation and report, with or without 
digitization of film radiographic images, chest radiograph(s), 
performed remote from primary interpretation), and expressed concern 
that CMS' CY 2009 proposal did not adopt the March 2007 APC Panel 
recommendation related to these services. Another commenter stated that 
computer-aided detection services should not be treated as image 
processing services because they require extensive performance testing 
by the Food and Drug Administration (FDA), as compared to general image 
processing services that are not required to meet the same performance 
standards.
    Response: During its March 2007 meeting, the APC Panel recommended 
conditional packaging for CPT code 0175T, but did not recommend a 
change to the unconditionally packaged status of CPT code 0174T. As 
discussed extensively in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66667), after thorough discussion with the APC Panel and 
repeated review by our medical advisors, we continue to believe that 
these codes are appropriately unconditionally packaged. Because CPT 
codes 0174T and 0175T are supportive ancillary services that fit into 
the ``image processing'' category, we packaged payment for all image 
processing services in CY 2008, and we proposed to continue packaging 
all image processing services in CY 2009. We believe it is appropriate 
to maintain the packaged status of these codes because we received no 
additional data subsequent to the CY 2009 OPPS/ASC proposed rule that 
convinced us to change this policy.
    An image processing service processes and integrates diagnostic 
test data that were captured during another independent procedure. 
Computer-aided detection services, which incorporate pattern 
recognition and image analysis of x-rays or other radiologic studies to 
aid radiologists in the detection of abnormalities, meet this 
definition. Therefore, we continue to believe that computer-aided 
detection services fit into the image processing category, despite any 
additional requirements that may apply for FDA approval.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to 
unconditionally package payment for chest x-ray CAD services described 
by CPT codes 0174T and 0175T for CY 2009. We are also finalizing our CY 
2009 proposal, without modification, to unconditionally package payment 
for all image processing services.
    Comment: Several commenters were concerned that some ``stand-
alone'' procedures and services were proposed with status indicator 
``N'' for the CY 2009 OPPS. When a hospital provides these services 
without any other service on the same day, these commenters pointed out 
that the hospital would not receive any payment for the services. 
Several commenters cited CPT code 77014 (Computed tomography guidance 
for placement of radiation therapy fields) as an example of a service 
that may be performed by Hospital A, while Hospital B provides the 
associated main independent procedure, the radiation therapy. The 
commenters noted that in the situation described, Hospital A would not 
receive any payment and Hospital B would receive payment that included 
payment for CPT code 77014 and, therefore, they requested that CMS 
treat CPT code 77014 as a conditionally packaged code, rather than an 
unconditionally packaged code. Other commenters described a clinical 
scenario in which one hospital would provide both services, but on 
different days, and requested that CMS assign a conditionally packaged 
status indicator to CPT code 77014 so that the hospital would receive 
payment for services provided on each day. One commenter also noted 
that it is possible for Hospital A to provide guidance services 
associated with placement of a breast wire or clips prior to the breast 
biopsy procedure that would be performed by Hospital B. The latter 
commenter stated

[[Page 68583]]

that in many instances, Hospital A would not provide the services under 
arrangement with Hospital B. The commenter further noted that if 
Hospital A were to bill the service to CMS, the bill would be returned 
to the provider because there would be no separately payable service on 
the claim.
    Response: CMS medical advisors reevaluated every unconditionally 
packaged HCPCS code, as well as clinical scenarios related to those 
packaged codes, and determined that the unconditionally packaged status 
of every code is appropriate, except for CPT code 76936 (Ultrasound 
guided compression repair of arterial pseudoaneurysm or arteriovenous 
fistulae (includes diagnostic ultrasound evaluation, compression of 
lesion and imaging)).
    For CY 2008, we unconditionally packaged CPT code 76936 because we 
classified it as a guidance service, and we packaged all guidance 
services beginning in CY 2008. We did not receive any public comments 
on the CY 2008 OPPS/ASC proposed rule requesting that we unpackage 
payment for this code. However, because this code describes a vascular 
repair procedure, of which image guidance is a component, upon further 
examination we believe that separate payment is the most appropriate 
payment methodology for the service. Therefore, for CY 2009, CPT code 
76936 is assigned to APC 0096 (Non-Invasive Vascular Studies), with 
status indicator ``S.''
    CMS medical advisors specifically reviewed the clinical scenarios 
surrounding CPT code 77014 offered by the commenters and determined 
that its unconditional packaged status is appropriate. If we were to 
treat CPT code 77014 as a conditionally packaged code, we would create 
an incentive for a hospital to provide this service on a different day 
than other services related to radiation therapy, whereas when this 
code is unconditionally packaged, the hospital has an incentive to 
provide the service described by CPT code 77014 at the most appropriate 
time, from the perspective of the patient and hospital. We believe that 
it would be uncommon for one hospital to provide the guidance service 
described by CPT code 77014 and another hospital to provide radiation 
therapy. Section 1866 of the Act sets forth the requirements for 
provider enrollment. More specifically, section 1866(a)(1)(H) of the 
Act states, ``in the case of hospitals which provide services for which 
payment may be made under this title and in the case of critical access 
hospitals which provide critical access hospital services, to have all 
items and services (other than physicians' services as defined in 
regulations for purposes of section 1862(a)(14), and other than 
services described by section 1861(s)(2)(K), certified nurse-midwife 
services, qualified psychologist services, and services of a certified 
registered nurse anesthetist) (I) that are furnished to an individual 
who is a patient of the hospital, and (II) for which the individual is 
entitled to have payment made under this title, furnished by the 
hospital or otherwise under arrangements (as defined in section 
1861(w)(1)) made by the hospital.'' In other words, each Medicare-
participating hospital must agree to furnish directly all covered 
nonphysician facility services required by its patients (inpatients and 
outpatients) or to have the services furnished under arrangement (as 
defined in section 1861(w)(1) of the Act). In addition, Sec.  
410.27(a)(1)(i) through (iii) further requires that payment is made for 
hospital outpatient services (1) furnished by or under arrangement by 
the hospital, (2) as an integral though incidental part of the 
physician's services, and (3) in the hospital or at a department of the 
provider that has provider-based status in relation to the hospital, as 
defined in Sec.  413.65. That means when a patient requires a 
particular service ordered by the physician, such as the radiation 
therapy services in question, the hospital would be responsible for 
ensuring that service is provided directly or that the hospital 
arranges for the service to be provided in that hospital or in a 
provider-based department of that hospital. Both the independent 
service, here the radiation therapy, and the dependent guidance service 
are necessary to perform the radiation therapy. If the services cannot 
all be provided by the hospital, whether directly or under arrangement 
as required in Sec.  410.27(a), then the hospital would discharge the 
patient and refer that patient to another provider to receive the 
services.
    If one hospital provided the service described by CPT code 77014 on 
one day, and the same hospital provided radiation therapy services on 
another day, as long as both services were reported on one claim, we 
would package payment across the dates of service. This was discussed 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66637) in 
the context of diagnostic radiopharmaceuticals that may be provided on 
a day prior to an independent procedure. In light of the ability of 
``natural'' singles claims to package costs across days, we believe 
that our standard OPPS ratesetting methodology of using median costs 
calculated from claims data would adequately capture the costs of CPT 
code 77014 associated with radiation therapy services that are not 
provided on the same date of service.
    CMS medical advisors also reviewed the clinical scenarios 
surrounding CPT codes 19290 (Preoperative placement of needle 
localization wire, breast); 19291 (Preoperative placement of needle 
localization wire, breast; each additional lesion) (List separately in 
addition to code for primary procedure)); and 19295 (Image guided 
placement, metallic localization clip, percutaneous, during breast 
biopsy (List separately in addition to code for primary procedure)). 
Our rationale for unconditionally packaging this service is parallel to 
the rationale described for unconditionally packaging CPT code 77014. 
As stated above, we believe that it would be very unlikely that one 
hospital would perform the preoperative wire placement in the breast 
and then send the patient to another facility for the breast biopsy 
procedure both because it would be potentially difficult and 
uncomfortable for the beneficiary and because this care pattern would 
not conform to the requirements of the statute and regulations that the 
hospital must furnish directly or arrange to have furnished all 
services required by its patients.
    In response to the commenter who stated that a claim without any 
separately payable services would be returned to the provider, as we 
stated in the CY 2007 OPPS final rule with comment period (71 FR 
67995), claims with only packaged codes and no separately payable codes 
are processed by the I/OCE and rejected for payment, but are included 
in the national claims history file that we analyze and use to set 
payment rates. Therefore, we have hospital claims data for packaged 
codes that are provided without any separately payable service.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal to unconditionally package all HCPCS 
codes for services assigned status indicator ``N'' in Addendum B to 
this final rule with comment period, with modification to provide 
separate payment for CPT code 76936, assigned status indicator ``S,'' 
through APC 0096 for CY 2009.
    Comment: Many commenters requested separate payment for CPT code 
31620 (Endobronchial ultrasound (EBUS) during bronchoscopic diagnostic 
or therapeutic intervention(s) (List

[[Page 68584]]

separately in addition to code for primary procedure)). The commenters 
noted that the payment rate for performing a bronchoscopy with EBUS 
dropped significantly between CYs 2007 and 2009, from approximately 
$2,500 to approximately $700, and they are concerned that beneficiary' 
access to care will be limited if hospitals are no longer financially 
able to offer this important clinical tool. The commenters indicated 
that EBUS is only represented on a small portion of bronchoscopy 
claims. The commenters believed that packaging payment for EBUS will 
result in more mediastinoscopies, a more invasive and costly procedure. 
One commenter asserted that EBUS should be unpackaged to correct the 
violation of the 2 times rule for the APCs (specifically APC 0076 
(Level I Endoscopy Lower Airway)) that contain bronchoscopy procedures. 
The commenters recommended various ideas for creation of composite APCs 
that would include payment for EBUS, when performed. Several commenters 
requested that CMS unpackage payment for certain ultrasound guidance 
services, for similar reasons.
    Response: We do not agree that beneficiary access to care will be 
harmed or that the number of mediastinoscopies will increase as a 
result of packaging payment for CPT code 31620. We believe that 
packaging created incentives for hospitals and 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. If this review 
results in the concentration of some services in a reduced number of 
hospitals in the community, we believe that the quality of care and 
hospital efficiency may both be enhanced as a result. The medical 
literature shows that concentration of services in certain hospitals 
often results in both greater efficiency and higher quality of care for 
patients. As we have stated previously, the median cost for a 
particular independent procedure generally will be higher as a result 
of added packaging, but also could change little or be lower because 
median costs typically do not reflect small distributional changes and 
because changes to the packaged HCPCS codes affect both the number and 
composition of single bills and the mix of hospitals contributing those 
single bills. In this case, our data indicate increased packaged costs 
associated with the services into which CPT code 31620 is packaged, 
ultimately increasing the APC payment rates for bronchoscopy 
procedures. We will include the CY 2008 claims data for CPT code 31620 
from its first year of packaged payment in our analysis recommended by 
the APC Panel to assess changes in utilization patterns that may 
accompany packaged payment.
    Regarding the comment about the 2 times rule violations for 
bronchoscopy APCs, because we have traditionally paid for a service 
package under the OPPS as represented by a HCPCS code for the major 
procedure that is assigned to an APC group for payment, we assess the 
applicability of the 2 times rule to services at the HCPCS code level, 
not at a more specific level based on the individual intraoperative 
service that may be performed during an independent service reported 
with a HCPCS code for the major service. If the use of a very expensive 
intraoperative service in a clinical scenario causes a specific 
procedure to be much more expensive for the hospital than the APC 
payment, we consider such a case to be the natural consequence of a 
prospective payment system that anticipates that some cases will be 
more costly and other less costly than the procedure payment. In 
addition, very high cost cases could be eligible for outlier payment. 
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.
    While the proposed configuration of APC 0076 did not violate the 2 
times rule, we note that we have slightly reconfigured APC 0076 for 
this final rule with comment period as a result of our medical 
advisors' regular review of all APCs for clinical and resource 
homogeneity, using updated final rule data. Specifically, CPT code 
31615 (Tracheobronchoscopy through established tracheostomy incision) 
is reassigned from APC 0076 to APC 0252 (Level III ENT Procedures) for 
CY 2009.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification to package 
payment for EBUS and ultrasound guidance services for CY 2009.
    We have responded to public comments related to potential composite 
APCs in section II.A.2.e. of this final rule with comment period.

B. 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 final hospital market basket 
increase for FY 2009 published in the IPPS final rule on August 19, 
2008 is 3.6 percent (73 FR 48759). To set the 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 3.6 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 requirements and the payment reduction for 
hospitals that fail to meet those requirements, we refer readers to 
section XVI. of this final rule with comment period.
    In accordance with section 1833(t)(9)(B) of the Act, we further 
adjusted the conversion factor for CY 2009 to ensure that any revisions 
we are making to our updates for a revised wage index and rural 
adjustment are made on a budget neutral basis. We calculated an overall 
budget neutrality factor of 1.0013 for wage index changes by comparing 
total payments from our simulation model using the FY 2009 IPPS final 
wage index values as finalized to those payments using the current (FY 
2008) IPPS wage index values. For CY 2009, we did not propose a change 
to our rural adjustment policy. Therefore, the budget neutrality factor 
for the rural adjustment is 1.000.
    For this final rule with comment period, we estimated that allowed 
pass-through spending for both drugs and biologicals and devices for CY 
2009 would equal approximately $33.3 million, which represents 0.11 
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 0.11 percent 
estimate for CY 2009 pass-through spending. Finally, estimated payments 
for outliers remain at 1.0 percent of total OPPS payments for CY 2009.
    The market basket increase update factor of 3.6 percent for CY 
2009, the required wage index budget neutrality adjustment of 
approximately 1.0013, and the adjustment of 0.02 percent of projected 
OPPS spending for the difference in the pass-through set aside resulted 
in a full market basket conversion factor for CY 2009 of

[[Page 68585]]

$66.059. 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 1.6 percent. This resulted in a reduced market basket 
conversion factor for CY 2009 of $64.784 for those hospitals that fail 
to meet the HOP QDRP requirements.
    Comment: One commenter requested that CMS update the conversion 
factor using the final FY 2009 IPPS market basket increase update 
factor of 3.6 percent rather than the proposed FY 2009 IPPS market 
basket increase update factor of 3.0 percent.
    Response: We agree and have applied the final FY 2009 IPPS market 
basket increase update factor of 3.6 percent to calculate the CY 2009 
OPPS conversion factor. When we developed the CY 2009 OPPS/ASC proposed 
rule, the FY 2009 IPPS market basket increase update factor of 3.6 
percent had not yet been finalized. Therefore, we could not use it to 
update the proposed CY 2009 OPPS conversion factor. As is our 
longstanding policy, when developing the proposed OPPS update for a 
given calendar year, we use the most current IPPS market basket update 
factor available for the year applicable to the OPPS update and adopt 
that finalized IPPS value when we develop the final rule with comment 
period for the OPPS update.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, to update the 
conversion factor by the FY 2009 IPPS market basket increase update 
factor of 3.6 percent, resulting in a final full conversion factor of 
$66.059 and in a reduced conversion factor of $64.784 for those 
hospitals that fail to meet the HOP QDRP reporting requirements.

C. 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 final rule 
with comment period.
    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 did not propose to revise this policy for the CY 
2009 OPPS. We refer readers to section II.G. of this final rule with 
comment period for a description and example of how the wage index for 
a particular hospital is used to determine the payment for the 
hospital.
    As discussed in section II.A.2.c. of this final rule with comment 
period, 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 proposed 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 final 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. We refer 
readers to the FY 2009 IPPS final rule (73 FR 48563 through 48592) and 
to the Federal Register notice published subsequent to that final rule 
on October 3, 2008 (73 FR 57888) for a detailed discussion of recent 
changes to the FY 2009 IPPS wage indices, including adoption of a 3-
year transition from a national budget neutrality adjustment to a 
State-level budget neutrality adjustment for the rural and imputed 
floors. 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 indices that we proposed to adopt in the CY 2009 
OPPS/ASC proposed rule include all reclassifications that are approved 
by the Medicare Geographic Classification Review Board (MGCRB) for FY 
2009. We note that reclassifications under section 508 of Public Law 
108-173 and certain special exception reclassifications that were 
extended by section 106(a) of the MIEA-TRHCA and section 117(a)(1) of 
the MMSEA (Pub. L. 110-173) were set to terminate September 30, 2008. 
Section 117(a)(2) of the MMSEA also extended certain special exception 
reclassifications. 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, 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). However, because we 
implemented the special exception wage indices for certain hospitals on 
a calendar year cycle for OPPS, we extended special exception wage 
indices through December 31, 2008, in order to give these hospitals the 
special exception wage indices under the OPPS

[[Page 68586]]

for the same time period as under the IPPS.
    Since issuance of the CY 2009 OPPS/ASC proposed rule, section 124 
of Public Law 110-275 (MIPPA) further extended geographic 
reclassifications under section 508 and certain special exception 
reclassifications until September 30, 2009. We did not make any 
proposals related to these provisions for the CY 2009 OPPS wage indices 
in our proposed rule, since the MIPPA was enacted after issuance of the 
CY 2009 OPPS/ASC proposed rule. In accordance with section 124 of 
Public Law 110-275, for CY 2009, we are adopting all section 508 
geographic reclassifications through September 30, 2009. Similar to our 
treatment of section 508 reclassifications extended under the MMSEA as 
described above, hospitals with section 508 reclassifications will 
revert to their home area wage index, with out-migration adjustment if 
applicable, from October 1, 2009, to December 31, 2009. As we did for 
CY 2008, we also are extending the special exception wage indices for 
certain hospitals through December 31, 2009, under the OPPS in order to 
give these hospitals the special exception wage indices under the OPPS 
for the same time period as under the IPPS. We refer readers to the 
Federal Register notice published subsequent to the FY 2009 IPPS final 
rule for a detailed discussion of the changes to the wage indices as 
required by section 124 of the Public Law 110-275 (73 FR 57888).
    For purposes of the OPPS, we proposed 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 in the Federal Register notice that provides final FY 2009 
IPPS wage indices published subsequent to the FY 2009 IPPS final rule 
(73 FR 57988) identifies counties eligible for the out-migration 
adjustment and providers receiving the adjustment. As we have done in 
prior years, we are reprinting Table 4J, as Addendum L to this final 
rule with comment period, with the addition of non-IPPS hospitals that 
will 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 indices 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 proposed 
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 final rule with comment period), 
which includes non-IPPS hospitals paid under the OPPS, we are not 
reprinting the finalized 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, 
readers will find a link to the final FY 2009 IPPS wage index tables as 
finalized.
    Comment: Several commenters supported the CMS proposal to extend 
the IPPS wage indices to the OPPS in CY 2009 as we have done in 
previous years. One commenter praised the adoption of reclassifications 
approved by the MGCRB. Another commenter supported the extension of the 
special exception reclassifications for certain hospitals through 
December 31, 2008 for the OPPS.
    Response: We appreciate the support expressed by the commenters for 
our proposed CY 2009 wage index policies, as well as our CY 2008 policy 
that extended the special exception wage indices through December 31, 
2008. As discussed earlier, in implementing section 124 of Public Law 
110-275, we also are extending the special exception wage indices 
through December 31, 2009, under the OPPS. With regard to adopting 
reclassifications approved by the MGCRB, we note that under the OPPS we 
adopt the IPPS wage indices in their entirety, including wage index 
reclassifications. Therefore, any reclassifications approved for a 
hospital would apply to payment under both the IPPS and the OPPS.
    Comment: One commenter opposed CMS' implementation of the FY 2009 
IPPS wage indices in the OPPS in light of the revisions to the 
reclassification average hourly wage comparison criteria, as finalized 
in the FY 2009 IPPS final rule. Specifically, the commenter suggested 
that CMS consider the redistributional effects of implementing the 
changes to the comparison threshold. In addition, the commenter stated 
that a change in the reclassification comparison criteria, coupled with 
CMS' implementation of a transitional within-State rural floor budget 
neutrality adjustment, could have a substantially negative effect on 
hospitals located in rural markets.
    Response: We appreciate the comment concerning our revision to the 
reclassification average hourly wage comparison criteria as discussed 
in the FY 2009 IPPS final rule (73 FR 48568). Our consistent policy has 
been to adopt the IPPS fiscal year wage indices for use under the OPPS, 
including IPPS policy on geographic reclassification. While the 
commenter discussed the redistributional effects of changes made in the 
IPPS rulemaking process, the inherent policy rationales underlying such 
changes were not discussed. The policy rationales for an update to the 
geographic reclassification wage comparison criteria and budget 
neutrality for the rural and imputed floors were fully discussed during 
the FY 2009 IPPS rulemaking process, and hospitals had the opportunity 
to comment specifically on such policy rationales during that process.
    Comment: One commenter expressed concern about the impact of the 
wage index on hospital payment for specific APCs. In particular, the 
commenter argued that 60 percent, the current percentage of the APC 
payment that is adjusted for variation in labor-related costs, is too 
large of a percentage for APCs that incorporate high cost technologies, 
implantable devices, and drugs, and instead suggested a labor rate 
split of 20 percent (based on the commenter's data) for APCs that 
include high device or supply costs. The commenter suggested a labor-
related share of 20 percent for APCs 0107 (Insertion of Cardioverter-
Defibrillator); 0108 (Insertion/Replacement/Repair of Cardioverter-
Defibrillator Leads); 0222 (Level II Implantation of Neurostimulator); 
0225 (Implantation of Neurostimulator Electrodes, Cranial Nerve); 0227 
(Implantation of Drug Infusion Device); 0315 (Level III Implantation of 
Neurostimulator); 0418 (Insertion of Left Ventricular Pacing Elect.); 
0654 (Insertion/Replacement of a Permanent Dual Chamber Pacemaker); 
0655 (Insertion/Replacement/Conversion of a Permanent Dual Chamber 
Pacemaker); 0656 (Transcatheter Placement of Intracoronary Drug-Eluting 
Stents); and others that CMS believes would meet the criteria discussed 
by the commenter.
    Moreover, regarding the effects of wage adjustment on hospital 
payment for certain services, MedPAC noted that the effect of charge 
compression on OPPS payment for services where devices make up a large 
percentage of the costs of the service tend to be exacerbated among 
hospitals in low-wage areas and counteracted in high-wage areas because 
CMS wage adjusts a portion of the device cost, which typically exceeds 
40 percent of the APC payment. The MedPAC suggested that CMS 
overadjusts for the labor costs in these services and stated its plan 
to

[[Page 68587]]

evaluate CMS' method for adjusting payments for variations in labor 
costs.
    Response: We do not believe it is appropriate to vary the 
percentage of the national payment that is wage adjusted for different 
services provided under the OPPS. Such a change could not be considered 
without first assessing its impact on the OPPS labor-related share 
calculation. The OPPS labor-related share of 60 percent was determined 
through regression analyses conducted for the initial OPPS proposed 
rule (63 FR 47581) and recently confirmed for the CY 2006 OPPS final 
rule with comment period (70 FR 68556). The labor-related share is a 
provider-level adjustment based on the relationship between the labor 
input costs and a provider's average OPPS unit cost, holding all other 
things constant. While numerous individual services may have variable 
labor shares, these past analyses identified 60 percent as the 
appropriate labor-related share across all types of outpatient services 
and are the basis for our current policy. The provider-level adjustment 
addresses payment for all services paid under the OPPS. We look forward 
to reviewing the results of MedPAC's evaluation of the CMS method for 
adjusting payment for variation in labor costs in light of differences 
in labor-related costs for device-implantation services, as well as any 
recommendations it may provide regarding the OPPS wage adjustment 
policy.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to use the final 
FY 2009 IPPS wage indices to adjust the OPPS standard payment amounts 
for labor market differences.

D. 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, in addition to adjusting hospitals' charges reported on 
claims to costs. 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 the predetermined 
ceiling threshold for a valid CCR) or for hospitals whose most recent 
cost report reflects an all-inclusive rate status (Medicare Claims 
Processing Manual, Pub. 100-04, Chapter 4, Section 10.11). As proposed, 
in this final rule with comment period, we are updating the default 
ratios for CY 2009 using the most recent cost report data, and we are 
codifying our 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 final rule with comment period where we 
discuss our final policy for default CCRs, including setting the 
ceiling threshold for a valid CCR, as part of our broader 
implementation of an outlier reconciliation process similar to that 
implemented under the IPPS.
    For CY 2009, we used our standard methodology of calculating the 
statewide average default CCRs using the same hospital overall CCRs 
that we use to adjust charges to costs on claims data. Table 9 
published in the CY 2009 OPPS/ASC proposed rule listed the proposed CY 
2009 default urban and rural CCRs by State and compared them to last 
year's default CCRs. These CCRs are the ratio of total costs to total 
charges from each hospital'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 the CY 2009 OPPS/ASC 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. We have since updated the cost report data we use to 
calculate CCRs with additional cost reports ending in CYs 2006 and 
2007. For this final rule with comment period, 53 percent of the 
submitted cost reports utilized in the default ratio calculation are 
for CY 2006 and 46 percent are for CY 2007. For Maryland, we use an 
overall weighted average CCR for all hospitals in the nation as a 
substitute for Maryland CCRs. Few hospitals 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 CYs 2008 and 2009 are modest and the few significant 
changes are associated with a small number of hospitals.
    We did not receive any public comments concerning our CY 2009 
proposal to apply our standard methodology of calculating the statewide 
average default CCRs using the same hospital overall CCRs that we use 
to adjust charges to costs on claims data. Public comments on setting 
the threshold for determining a valid CCR are discussed in section 
II.F. of this final rule with comment period. Therefore, we are 
finalizing the statewide average default CCRs as shown in Table 11 
below for OPPS services furnished on or after January 1, 2009.

                                    Table 11--CY 2009 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
                                                                                               Previous default
                   State                             Urban/rural             Final CY 2009     CCR (CY 2008 OPPS
                                                                              default CCR         final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA....................................  RURAL.......................               0.562               0.537
ALASKA....................................  URBAN.......................               0.345               0.351
ALABAMA...................................  RURAL.......................               0.221               0.228
ALABAMA...................................  URBAN.......................               0.202               0.213
ARKANSAS..................................  RURAL.......................               0.256               0.266
ARKANSAS..................................  URBAN.......................               0.268               0.270
ARIZONA...................................  RURAL.......................               0.267               0.264

[[Page 68588]]

 
ARIZONA...................................  URBAN.......................               0.226               0.232
CALIFORNIA................................  RURAL.......................               0.219               0.232
CALIFORNIA................................  URBAN.......................               0.218               0.218
COLORADO..................................  RURAL.......................               0.346               0.355
COLORADO..................................  URBAN.......................               0.248               0.254
CONNECTICUT...............................  RURAL.......................               0.372               0.391
CONNECTICUT...............................  URBAN.......................               0.322               0.339
DISTRICT OF COLUMBIA......................  URBAN.......................               0.329               0.346
DELAWARE..................................  RURAL.......................               0.302               0.302
DELAWARE..................................  URBAN.......................               0.349               0.400
FLORIDA...................................  RURAL.......................               0.204               0.219
FLORIDA...................................  URBAN.......................               0.189               0.198
GEORGIA...................................  RURAL.......................               0.267               0.279
GEORGIA...................................  URBAN.......................               0.251               0.269
HAWAII....................................  RURAL.......................               0.367               0.373
HAWAII....................................  URBAN.......................               0.344               0.317
IOWA......................................  RURAL.......................               0.439               0.349
IOWA......................................  URBAN.......................               0.294               0.325
IDAHO.....................................  RURAL.......................               0.449               0.445
IDAHO.....................................  URBAN.......................               0.419               0.414
ILLINOIS..................................  RURAL.......................               0.280               0.286
ILLINOIS..................................  URBAN.......................               0.266               0.271
INDIANA...................................  RURAL.......................               0.298               0.313
INDIANA...................................  URBAN.......................               0.295               0.301
KANSAS....................................  RURAL.......................               0.300               0.318
KANSAS....................................  URBAN.......................               0.238               0.240
KENTUCKY..................................  RURAL.......................               0.236               0.244
KENTUCKY..................................  URBAN.......................               0.255               0.262
LOUISIANA.................................  RURAL.......................               0.283               0.271
LOUISIANA.................................  URBAN.......................               0.258               0.277
MARYLAND..................................  RURAL.......................               0.303               0.308
MARYLAND..................................  URBAN.......................               0.276               0.284
MASSACHUSETTS.............................  URBAN.......................               0.328               0.338
MAINE.....................................  RURAL.......................               0.452               0.433
MAINE.....................................  URBAN.......................               0.428               0.424
MICHIGAN..................................  RURAL.......................               0.317               0.331
MICHIGAN..................................  URBAN.......................               0.321               0.318
MINNESOTA.................................  RURAL.......................               0.488               0.499
MINNESOTA.................................  URBAN.......................               0.348               0.342
MISSOURI..................................  RURAL.......................               0.269               0.289
MISSOURI..................................  URBAN.......................               0.282               0.292
MISSISSIPPI...............................  RURAL.......................               0.261               0.267
MISSISSIPPI...............................  URBAN.......................               0.209               0.217
MONTANA...................................  RURAL.......................               0.455               0.453
MONTANA...................................  URBAN.......................               0.439               0.450
NORTH CAROLINA............................  RURAL.......................               0.272               0.286
NORTH CAROLINA............................  URBAN.......................               0.292               0.321
NORTH DAKOTA..............................  RURAL.......................               0.369               0.379
NORTH DAKOTA..............................  URBAN.......................               0.354               0.378
NEBRASKA..................................  RURAL.......................               0.345               0.347
NEBRASKA..................................  URBAN.......................               0.283               0.290
NEW HAMPSHIRE.............................  RURAL.......................               0.350               0.375
NEW HAMPSHIRE.............................  URBAN.......................               0.296               0.337
NEW JERSEY................................  URBAN.......................               0.257               0.276
NEW MEXICO................................  RURAL.......................               0.263               0.275
NEW MEXICO................................  URBAN.......................               0.328               0.353
NEVADA....................................  RURAL.......................               0.312               0.329
NEVADA....................................  URBAN.......................               0.192               0.200
NEW YORK..................................  RURAL.......................               0.412               0.417
NEW YORK..................................  URBAN.......................               0.388               0.402
OHIO......................................  RURAL.......................               0.353               0.354
OHIO......................................  URBAN.......................               0.258               0.268
OKLAHOMA..................................  RURAL.......................               0.278               0.288
OKLAHOMA..................................  URBAN.......................               0.238               0.245
OREGON....................................  RURAL.......................               0.318               0.321
OREGON....................................  URBAN.......................               0.374               0.366
PENNSYLVANIA..............................  RURAL.......................               0.284               0.298
PENNSYLVANIA..............................  URBAN.......................               0.232               0.241
PUERTO RICO...............................  URBAN.......................               0.519               0.474
RHODE ISLAND..............................  URBAN.......................               0.294               0.308

[[Page 68589]]

 
SOUTH CAROLINA............................  RURAL.......................               0.242               0.258
SOUTH CAROLINA............................  URBAN.......................               0.240               0.244
SOUTH DAKOTA..............................  RURAL.......................               0.336               0.334
SOUTH DAKOTA..............................  URBAN.......................               0.267               0.289
TENNESSEE.................................  RURAL.......................               0.244               0.256
TENNESSEE.................................  URBAN.......................               0.221               0.241
TEXAS.....................................  RURAL.......................               0.257               0.271
TEXAS.....................................  URBAN.......................               0.238               0.242
UTAH......................................  RURAL.......................               0.413               0.416
UTAH......................................  URBAN.......................               0.430               0.406
VIRGINIA..................................  RURAL.......................               0.257               0.268
VIRGINIA..................................  URBAN.......................               0.266               0.275
VERMONT...................................  RURAL.......................               0.406               0.416
VERMONT...................................  URBAN.......................               0.422               0.340
WASHINGTON................................  RURAL.......................               0.349               0.358
WASHINGTON................................  URBAN.......................               0.342               0.368
WISCONSIN.................................  RURAL.......................               0.399               0.384
WISCONSIN.................................  URBAN.......................               0.346               0.362
WEST VIRGINIA.............................  RURAL.......................               0.293               0.298
WEST VIRGINIA.............................  URBAN.......................               0.349               0.360
WYOMING...................................  RURAL.......................               0.418               0.449
WYOMING...................................  URBAN.......................               0.331               0.351
----------------------------------------------------------------------------------------------------------------

E. OPPS Payment to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes Made by Public Law 110-
275 (MIPPA)
    When the OPPS was implemented, every provider was eligible to 
receive an additional payment adjustment (called either transitional 
corridor payment or transitional outpatient payment (TOPS)) if the 
payments it received for covered OPD services under the OPPS were less 
than the payment it would have received for the same services under the 
prior reasonable cost-based system (referred to as the pre-BBA amount). 
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 to this provision, cancer 
hospitals and children's hospitals, 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 
Public Law 108-173 amended section 1833(t)(7)(D)(i) of the Act to 
extend these payments through December 31, 2005, for rural hospitals 
with 100 or fewer beds. Section 411 also extended the transitional 
corridor payments to SCHs located in rural areas for services furnished 
during the period that began 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 Public Law 108-173, for rural hospitals having 100 or 
fewer beds and SCHs located in rural areas expired on December 31, 
2005.
    Section 5105 of Public Law 109-171 reinstituted the 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 provider's pre-BBA 
amount, 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 Public Law 109-171 
through Transmittal 877, issued on February 24, 2006. In the 
Transmittal, 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. In the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68010), we stated that EACHs were 
not eligible for TOPs under Public Law 109-171. However, we stated they 
were 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) of our regulations to reflect the requirements of 
Public Law 109-171.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated 
that, effective for services provided on or after January 1, 2009, 
rural hospitals having 100 or fewer beds that are not SCHs would no 
longer be eligible for TOPs, in accordance with section 5105 of Public 
Law 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC 
proposed rule, section 147 of Public Law 110-275 amended section 
1833(t)(7)(D)(i) of the Act by extending the period for TOPs to rural 
hospitals with 100 beds or fewer, for 1 year, for services provided 
before January 1, 2010. Section 147 of Public Law 110-275 also extended 
TOPs to SCHs (including EACHs) with 100 or fewer beds for covered OPD 
services provided on or after January 1, 2009, and before January 1, 
2010. In accordance with section 147 of Public Law 110-275, when the 
OPPS payment is less than the provider's pre-BBA amount, the amount of 
payment is increased by 85 percent of the amount of the difference 
between the two payment systems for CY 2009.
    Comment: Several commenters supported the legislative extension of 
TOPs to small rural hospitals and small SCHs for services provided 
before January 1, 2010, under section 147 of Public Law 110-275.
    Response: We appreciate the commenters' support.

[[Page 68590]]

    In this final rule with comment period, we are revising Sec. Sec.  
419.70(d)(2) and (d)(4) and adding a new paragraph (d)(5) to 
incorporate the provisions of section 147 of Public Law 110-275. We 
note that our interpretation of the term ``beds,'' as is used in the 
regulation for determining the number of beds in a hospital, is 
consistent with how that term is defined in our established hold 
harmless policy in Sec.  419.70, as stated in the April 7, 2000, OPPS 
final rule with comment period (65 FR 18501). In addition, while we 
were reviewing Sec.  419.70(d)(2) in order to incorporate the change 
provided by section 147 of Pub. L. 110-275, we realized that our use of 
the word ``paragraph'' was incorrect. Specifically, the provision 
states that for covered hospital outpatient services furnished in a 
calendar year from January 1, 2006, through December 31, 2009, for 
which the prospective payment amount is less than the pre-BBA amount, 
the amount of payment under this paragraph is increased by the amount 
of the difference. We note that if the prospective payment amount is 
less than the pre-BBA amount, payments under this part (Part 419), not 
paragraph, are increased. Therefore, in order to more precisely capture 
our existing policy and to correct an inaccurate cross reference, we 
are substituting the word ``part'' for ``paragraph.''
    In addition, in our review of Sec.  419.70 to implement section 147 
of Public Law 110-275, we discovered that the cross-references in 
paragraphs (e), (g), and (i) of Sec.  419.70 were incorrect. Paragraph 
(e) defines the term ``prospective payment system amount'' which is 
used throughout Sec.  419.70. However, the language in paragraph (e) 
incorrectly references ``this paragraph'' rather than ``this section.'' 
We are making a technical correction to this cross-reference to correct 
the error and to accurately reflect the current policy. In addition, 
paragraph (g) of Sec.  419.70 states that ``CMS makes payments under 
this paragraph * * *'' Because paragraph (g) is intended to specify how 
additional OPPS payments will be made to hospitals and CMHCs that 
result from the application of the transitional adjustments set forth 
in the entire Sec.  419.70, in this final rule with comment period, we 
are correcting the cross-reference in paragraph (g) by removing 
``paragraph'' and replacing it with ``section'' to correct the error 
and to accurately reflect the current policy. Similarly, paragraph (i) 
of Sec.  419.70 cross-references the additional payments as those made 
under paragraph (i) rather than as those made under the entire Sec.  
419.70. Therefore, in this final rule with comment period, we also are 
correcting this cross-reference error to read ``section'' to accurately 
reflect the current policy.
2. Adjustment for Rural SCHs Implemented in CY 2006 Related to Public 
Law 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 sources, and services paid under the pass-
through payment policy in accordance with section 1833(t)(13)(B) of the 
Act, as added by section 411 of Public Law 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, for the CY 2006 OPPS, we finalized a payment adjustment for 
rural SCHs of 7.1 percent for all services and procedures paid under 
the OPPS, excluding drugs, biologicals, brachytherapy sources, and 
services paid under the pass-through payment policy in accordance with 
section 1833(t)(13)(B) of the Act.
    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 Public Law 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 may review the adjustment 
in the future and, if appropriate, would revise the adjustment. We 
provided the same 7.1 percent adjustment to rural SCHs again in CY 
2008.
    For the CY 2009 OPPS, we proposed to continue our current policy of 
a budget neutral 7.1 percent payment adjustment 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.
    For CY 2009, we proposed to include brachytherapy sources in the 
group of services eligible for the 7.1 percent payment increase because 
we proposed to pay them for CY 2009 at prospective rates based on their 
median costs as calculated from historical claims data. However, 
subsequent to issuance of the CY 2009 OPPS/ASC proposed rule, section 
142 of Public Law 110-275 amended section 1833(t)(16)(C) of the Act by 
extending payment for brachytherapy sources at charges adjusted to cost 
for services provided prior to January 1, 2010. Our consistent policy 
has been to exclude items paid at charges adjusted to cost from the 7.1 
percent payment adjustment. Therefore, consistent with past policy, 
brachytherapy sources will not be eligible for the 7.1 percent payment 
adjustment for CY 2009.
    Statutory provisions to pay for brachytherapy sources and other 
items under the OPPS at charges adjusted to cost have been common over 
the history of the OPPS. In the past, we updated the regulations at 
Sec.  419.43(g)(4) each year to exclude those items paid at charges 
adjusted to cost by identifying those items specifically. However, for 
administrative ease and convenience, we are now updating Sec.  
419.43(g)(4) to specify in a general manner that items paid at charges 
adjusted to cost by application of a hospital-specific CCR are excluded 
from the percent payment adjustment in Sec.  419.43(g)(2). We note that 
Sec.  419.43(g)(4) currently specifically identifies devices or 
brachytherapy consisting of a seed or seeds (including a radioactive 
source) as being excluded from the payment adjustment in Sec.  
419.43(g)(2) (because they are paid at charges adjusted to cost). In 
addition, section 147 of Public Law 110-275 also provides that 
brachytherapy sources and therapeutic radiopharmaceuticals are paid at 
charges adjusted to cost for a specified time period. We believe that 
it would be administratively burdensome to amend the regulations in 
this final rule with comment period to specifically identify these 
items as exclusions and then to engage in notice and comment rulemaking 
to later delete their reference upon the sunset of the provision if we 
were to adopt a different payment methodology. As indicated above in 
this section, we believe that the most logical approach is to exclude 
all

[[Page 68591]]

items paid at charges adjusted to cost as determined by hospital-
specific CCRs.
    In addition, as noted in the CY 2009 OPPS/ASC proposed rule (73 FR 
41461), 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.
    Comment: Several commenters supported the proposed 7.1 percent 
payment adjustment for rural SCHs. The commenters further requested 
that CMS finalize the proposal to apply the 7.1 percent payment 
adjustment to rural SCHs for CY 2009 despite the extension of TOPs to 
small SCHs for CY 2009. The commenters noted that the 7.1 percent 
adjustment and TOPs for CY 2009 apply to classes of hospitals that only 
partially overlap, specifically, the 7.1 percent adjustment applies to 
rural SCHs of any size while TOPs apply to all small SCHs (urban and 
rural) and small rural hospitals. In addition, the commenters stated 
that the purpose of the 7.1 percent adjustment is to compensate rural 
SCHs because they are costlier than other classes of hospitals, while 
the purpose of TOPs is to compensate certain hospitals for some of the 
money that these hospitals would otherwise have received for hospital 
outpatient services under a cost-based system.
    Response: We will continue to apply the 7.1 percent payment 
adjustment to rural SCHs and provide TOPS to small SCHs (including 
EACHs) and small rural hospitals for CY 2009. We acknowledge that small 
rural SCHs are potentially eligible for both the 7.1 percent payment 
adjustment and TOPs, assuming all eligibility criteria are met.
    Comment: One commenter requested that CMS extend the 7.1 percent 
payment adjustment to all SCHs, not just rural SCHs, under the 
equitable adjustment authority in section 1833(t)(2)(E) of the Act. The 
commenter described the necessary access to services that urban SCHs 
provide and highlighted the fact that both urban and rural SCHs have 
been recognized for special protections by Congress in other payment 
systems because they are the sole source of inpatient hospital services 
reasonably available to Medicare beneficiaries. The commenter also 
referenced a comment and data analysis that the commenter previously 
submitted to CMS in response to the CY 2006 OPPS proposed rule.
    Response: As we have noted previously in response to a similar 
comment in the CY 2006 OPPS final rule with comment period (70 FR 68560 
and 68561), the statutory authority for the rural adjustment relies 
upon a comparison of costs between urban and rural hospitals. Extending 
this adjustment to urban SCHs under our equitable adjustment authority 
would require urban SCHs to demonstrate strong empirical evidence that 
they are significantly more costly than other urban hospitals. We could 
not find any strong empirical evidence suggesting that urban SCHs are 
significantly more costly than other urban hospitals. In the CY 2006 
OPPS final rule with comment period, we noted that urban SCHs' costs 
closely resembled urban hospitals' costs. While some urban SCHs may 
have unit costs as high as those of rural SCHs, many clearly did not. 
Accordingly, we are not adopting the commenters' suggestions to extend 
the rural adjustment to urban SCHs.
    Comment: Several commenters requested that CMS provide adequate 
notice if the Agency plans to reassess the 7.1 percent adjustment in a 
future year. One commenter requested that CMS provide adequate notice 
and a comment period prior to applying a new adjustment, particularly 
if a decrease in the adjustment were to be proposed. Another commenter 
requested that CMS provide notice at least 12 months prior to 
implementing a change in the adjustment, to allow hospitals time to 
adjust their annual budget, of which expected payment is a key 
component.
    Response: As noted earlier, 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. According to our usual practice, we would perform the 
initial analysis on the most complete claims data available at the time 
the proposed rule is published. We would propose a new adjustment for 
rural hospitals or some class of rural hospitals, if appropriate, with 
an expected implementation date of January 1 of the next calendar year, 
because the annual proposed rule is the means we use to propose OPPS 
updates and changes in policies for the upcoming calendar year. Upon 
review of the public comments that we would expect to receive and our 
analysis of fully complete claims data, we would finalize a payment 
adjustment, if appropriate, effective January 1 of the next calendar 
year.
    After consideration of the pubic comments received, we are 
finalizing our CY 2009 proposal, without modification, to apply the 7.1 
percent payment adjustment to rural SCHs for all services and 
procedures paid under the OPPS in CY 2009, excluding drugs, 
biologicals, services paid under the pass-through payment policy, and 
items paid at charges adjusted to cost. We are revising the regulations 
at Sec.  419.43(g)(4) to specify in general terms that items paid at 
charges adjusted to costs by application of a hospital-specific CCR are 
excluded from the 7.1 percent payment adjustment.

F. 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 
CYs 2005, 2006, and 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 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. In the CY 2009 OPPS/ASC proposed 
rule (73 FR 41462), we estimated total outlier payments as a percent of 
total CY 2007 OPPS payment, using available CY 2007 claims and the 
revised OPPS expenditure estimate, to be approximately 0.9 percent. For 
CY 2007, the estimated outlier payment was set at

[[Page 68592]]

1.0 percent of the total aggregated OPPS payments. Having all CY 2007 
claims, we continue to observe outlier payments of 0.9 percent of the 
total aggregated OPPS payment. Therefore, for CY 2007 we paid 
approximately 0.1 percent less than the CY 2007 outlier target of 1.0 
percent of the total aggregated OPPS payments.
    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 the 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 the aggregate 
total payments under the OPPS. Using the same set of CY 2007 claims and 
CY 2008 payment rates, we currently estimate that the outlier payments 
for CY 2008 would be approximately 0.73 percent of the total CY 2008 
OPPS payments. The difference between 1.0 percent and 0.73 percent is 
reflected in the regulatory impact analysis in section XXIII.B. of this 
final rule with comment period. 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 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
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41462), we proposed to 
continue our policy of estimating outlier payments to be 1.0 percent of 
the estimated aggregate total payments under the OPPS for outlier 
payments in CY 2009. We proposed that a portion of that 1.0 percent, 
specifically 0.07 percent, would be allocated to CMHCs for PHP 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.D. of this final rule with comment 
period.
    To ensure that the estimated CY 2009 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we proposed 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 (73 FR 41462). This proposed threshold reflected the 
methodology discussed below in this section, as well as the proposed 
APC recalibration for CY 2009.
    We calculated the fixed-dollar threshold for the CY 2009 OPPS/ASC 
proposed rule using largely the same methodology as we did in CY 2008. 
For purposes of estimating outlier payments for the CY 2009 OPPS/ASC 
proposed rule, we used the CCRs available in the April 2008 update to 
the Outpatient Provider Specific File (OPSF). The OPSF contains 
provider specific data, such as the most current CCR, which is 
maintained by the Medicare contractors and used by the OPPS PRICER to 
pay claims. The claims that we use to model each OPPS update lag by 2 
years. For the CY 2009 OPPS/ASC proposed rule, we used CY 2007 claims 
to model the CY 2009 OPPS. In order to estimate the CY 2009 hospital 
outlier payments for the CY 2009 OPPS/ASC 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 we 
used was 1.0585. The methodology for determining this charge inflation 
factor was discussed in the FY 2009 IPPS proposed rule (73 FR 23710 
through 23711) and the FY 2009 IPPS final rule (73 FR 48763). 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 proposed 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 proposed to apply an adjustment of 0.9920 
to the CCRs that were 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) 
and the FY 2009 IPPS final rule (73 FR 48763).
    Therefore, to model hospital outliers for the CY 2009 OPPS/ASC 
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 estimated 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 proposed to continue to make an 
outlier payment that equals 50 percent of the amount by which the cost 
of furnishing the service exceeds 1.75 times the APC payment amount 
when both the 1.75 multiple threshold and the fixed-dollar $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 would be 
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 QDRP requirements, we proposed that the 
hospitals' costs would be compared to the reduced payments for purposes 
of

[[Page 68593]]

outlier eligibility and payment calculation (73 FR 41462 through 
41463). 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 conformed 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 final rule with 
comment period.
    Comment: Several commenters supported the increase in the fixed-
dollar threshold for CY 2009 in order to maintain the target outlier 
spending percentage of 1 percent of estimated total OPPS payments. 
Other commenters believed that the proposed outlier fixed-dollar 
threshold was inappropriate and should be reduced because CMS has not 
spent all the funds set aside for outlier payments in prior years. One 
commenter suggested that because the outlier pool has been greater than 
the need in prior years, CMS should either reduce the set-aside amount 
and retain those dollars in the OPPS ratesetting structure or lower the 
fixed-dollar threshold so that there is a zero-balance at the end of 
the year.
    Another commenter suggested that outlier payments potentially be 
discontinued because certain organizations had not received outlier 
payments for some years. Several commenters did not support the 
proposed increase in the outlier threshold because they believed that 
consistent increases in the level of the outlier threshold reduced 
their hospitals' ability to capture additional reimbursement for high 
cost cases and put downward pressure on their hospitals' Medicare 
revenues.
    A few commenters suggested that the fixed-dollar threshold remain 
at the CY 2008 level of $1,575. Some commenters recommended that the 
threshold be proportionally reduced based on the percentage difference 
between target and actual outlier spending. One commenter suggested 
that because CMS modeled only 0.8 percent of total payments made in 
outlier payments for CY 2008 in the impact table for the CY 2009 OPPS/
ASC proposed rule (73 FR 41559), CMS should proportionally lower the 
proposed threshold to $1,440. Another commenter believed that the 
outlier pool should be increased to 2 percent of total OPPS payments, 
with corresponding thresholds of 1.5 times the APC payment amount and 
$1,175 based on their analysis on their hospital's costs and payments. 
Some commenters asked CMS to increase the OPPS outlier payment 
percentage from 50 percent to 80 percent to mirror inpatient outlier 
payments. One commenter requested that CMS increase outlier 
reimbursement to help teaching hospitals that provide complex 
outpatient services and incur significant costs. Another commenter 
suggested that the additional packaging by CMS would result in reduced 
outlier payments.
    Response: In CY 2009, we proposed that outlier payments would be 
1.0 percent of total estimated OPPS payments for outlier payments. In 
general, outlier payments are intended to ensure beneficiary access to 
services by having the Medicare program share in the financial loss 
incurred by a provider associated with individual, extraordinarily 
expensive cases. Because the OPPS makes separate payment for many 
individual services, there is less financial risk associated with the 
OPPS payment than, for example, with the DRG payment under the IPPS. 
Although some commenters suggested an increase to 2.0 percent of total 
estimated payment, we continue to believe that an outlier target 
payment percentage of 1.0 is appropriate because the OPPS largely pays 
hospitals a separate payment for most major services, which mitigates 
significant financial risk for most encounters, even complex ones. We 
acknowledge that teaching hospitals provide complex outpatient services 
and incur costs, but they also receive separate OPPS payment for most 
major services provided in a single encounter. Further, in a budget 
neutral system, increasing the percent of total estimated payments 
dedicated to outlier payments would reduce individual APC prospective 
payments.
    Although the OPPS makes separate payment for most major services, 
we continue to believe that outlier payments are an integral component 
of the OPPS and that the small amount of OPPS payments targeted to 
outliers serve to mitigate the financial risk associated with extremely 
costly and complex services. In allocating only 1.0 percent of total 
estimated payments for outlier payments, the OPPS does not pay as much 
in total outlier payments as certain other payment systems. Instead, 
the OPPS concentrates a small amount of funds on extreme cases. For 
this reason, it is not unanticipated that some hospitals would not 
receive any OPPS outlier payments in any given year.
    We believe that the estimated total CY 2009 outlier payments will 
meet the target of 1.0 percent of total estimated OPPS payments. 
Historically, OPPS outlier payments have exceeded the percentage of 
total estimated OPPS payments dedicated to outlier payments. Only for 
CY 2007 was actual outlier spending less than the target percentage of 
aggregate OPPS payments in that year, and only by 0.1 percent. We note 
that we estimated a larger difference between modeled outlier payment 
as a percentage of spending for CY 2007 and the CY 2007 1.0 percent 
outlay in the CY 2008 OPPS/ASC final rule with comment period. Further, 
the CY 2007 fixed-dollar threshold was higher, $1,825, than the CY 2008 
threshold of $1,575, potentially increasing the likelihood that outlier 
payments would meet the target estimated spending percentage for CY 
2008. Therefore, we are not convinced that we will not meet the 
estimated 1.0 percent outlay in outlier payments in CY 2008.
    As discussed above in this section, we modeled the proposed fixed 
dollar threshold of $1,800 incorporating all proposed CY 2009 OPPS 
payment policies using CY 2007 claims, our best available charge and 
cost inflation assumptions, and CY 2008 CCRs. Because our estimates 
account for anticipated inflation in both charges and costs, we 
generally expect our threshold to increase each year. We would not 
retain the threshold at $1,575 because we believe this threshold would 
lead us to pay more than 1.0 percent of total estimated OPPS payment in 
outlier payments for CY 2009. The proposed fixed-dollar threshold also 
reflected any proposed changes in packaging for CY 2009. Because 
packaging also is considered in the cost estimation portion of the 
outlier eligibility and payment calculations, any proposed increase in 
packaging policy would not automatically lead to less outlier payments 
as one commenter suggested. This is because the costs of packaged items 
are distributed among the items and services eligible for outliers, 
increasing the likelihood that those eligible items and services would 
receive outlier payments.
    We believe that our proposed methodology uses the best information 
we have at this time to yield the most accurate prospective fixed-
dollar outlier threshold for the CY 2009 OPPS. The hospital multiple 
and fixed-dollar outlier thresholds are important parts of a 
prospective payment system and

[[Page 68594]]

should be based on projected payments using the latest available 
historical data, without adjustments for prior year actual 
expenditures. We do not adjust the prospective threshold for prior year 
differences in actual expenditure of outlier payments.
    We do not believe it would be appropriate to increase the payment 
percentage to 80 percent of the difference between the APC payment and 
the cost of the services in order to align it with the IPPS outlier 
policy. In a budget neutral system with a specified amount dedicated to 
outlier payments, the payment percentage and fixed-dollar threshold are 
related. Raising the payment percentage would require us to 
significantly increase the fixed-dollar threshold to ensure that the 
estimated CY 2009 OPPS payments would not exceed the amount dedicated 
to outlier payments. The payment percentage also reflects the general 
level of financial risk. The 50 percent payment percentage under the 
OPPS corresponds to the lower financial risk presented by the OPPS 
cases compared to the IPPS, which largely makes a single payment for a 
complete episode-of-care.
    Comment: One commenter supported the proposal to make brachytherapy 
sources eligible for outlier payments.
    Response: In the CY 2009 OPPS/ASC proposed rule (73 FR 41502), we 
proposed prospective payment based on median costs for brachytherapy 
sources and proposed to assign brachytherapy sources to status 
indicator ``U.'' Subsequent to the issuance of the CY 2009 OPPS/ASC 
proposed rule, Congress enacted Public Law 110-275, which further 
extended the payment period for brachytherapy sources based on a 
hospital's charges adjusted to cost through CY 2009. In receiving 
payment at charges adjusted to cost, the outlier policy would no longer 
apply to brachytherapy sources because outlier eligibility and payment 
are calculated based on the difference between APC payment and 
estimated cost. Outlier payments are designed to buffer losses when 
hospital costs greatly exceed prospective payments. When section 142 of 
Public Law 110-275 once again continued payment for brachytherapy 
sources at charges adjusted to cost for CY 2009, we revisited Sec.  
419.43(f) of our regulations. Under Sec.  419.43(f) of the regulations, 
we exclude certain items and services from qualification for outlier 
payments. We note that our longstanding policy has been that an item or 
service paid at charges adjusted to cost by a hospital-specific CCR is 
ineligible for outlier payments. This amendment does not alter our 
longstanding and consistent policy regarding the exclusion of drugs and 
biologicals that are assigned to separate APCs and items that are paid 
at charges adjusted to cost by application of a hospital-specific CCR. 
An item or service paid at charges adjusted to cost does not qualify 
for an outlier payment because the outlier eligibility calculation is 
based on the difference between APC payment and cost, where cost is 
estimated at charges adjusted to cost. When the APC payment for items 
is made at charges adjusted to cost, there is no difference between the 
APC payment and estimated cost and thus no outlier payment can be 
triggered. We believed it was administratively simpler to amend Sec.  
419.43(f) to exclude in a general manner items or services paid at 
charges adjusted to cost by application of a hospital-specific CCR from 
eligibility for an outlier payment, consistent with our historical 
policy, rather than amending the regulations to specifically cite each 
item or service that is excluded from an outlier payment because it is 
paid at charges adjusted to costs, currently brachytherapy sources and 
pass-through devices. Consequently, we are making a conforming 
technical amendment to Sec.  419.43(f) to specify that items and 
services paid at charges adjusted to cost by application of a hospital-
specific CCR are excluded from qualification for the payment adjustment 
under paragraph (d)(1) of this section [419.43].
    In addition, we note that the estimated cost of pass-through 
devices will continue to be used in outlier payment and eligibility 
calculations as specified in Sec.  419.43(d)(1)(i)(B). Specifically, 
this regulation text codifies the statutory provision of 
1833(t)(5)(A)(i)(II) of the Act which requires that estimated payment 
for transitional pass-through devices be added to the APC payment 
amount for the associated procedure when determining outlier 
eligibility for the associated surgical procedure. However, we are 
making a technical correction to Sec.  419.43(d)(1)(i)(B) to 
appropriately reference Sec.  419.66. While Sec.  419.43(d)(1)(i)(B) 
discusses the use of the pass-through payment in determining outlier 
eligibility, it currently incorrectly references paragraph (e) which 
discusses budget neutrality, instead of Sec.  419.66 which sets for the 
specific rules on pass-through payments for devices. Thus, we are 
deleting the reference to the phrase ``paragraph (e) of this section'' 
and in its place substituting the correct cite ``Sec.  419.66.'' Pass-
through devices are paid at charges adjusted to cost, and thus are not 
eligible to receive outlier payments on their own.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal for the outlier calculation, without 
modification, as outlined below.
3. Final Outlier Calculation
    For CY 2009, we are applying the overall CCRs from the July 2008 
OPSF file with a CCR adjustment factor of 0.9920 to approximate CY 2009 
CCRs to charges on the final CY 2007 claims that were adjusted to 
approximate CY 2009 charges (using the final charge inflation factor of 
1.1204). These are the same CCR adjustment and charge inflation factors 
that we used to set the IPPS fixed-dollar threshold for FY 2009 (73 FR 
48763). We simulated the estimated aggregate CY 2009 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 estimated total outlier payments equaled 1.0 percent 
of aggregated estimated total CY 2009 payments. We estimate that a 
fixed-dollar threshold of $1,800, combined with the multiple threshold 
of 1.75 times the APC payment rate, will allocate 1.0 percent of 
estimated aggregated total CY 2009 OPPS payments to outlier payments.
    In summary, for CY 2009 we will continue to make an outlier payment 
that equals 50 percent of the amount by which the cost of furnishing 
the service exceeds 1.75 times the APC payment amount when both the 
1.75 multiple threshold and the fixed-dollar $1,800 threshold are met. 
For CMHCs, if a CMHC provider's cost for partial hospitalization 
exceeds 3.40 times the APC payment rate, the outlier payment is 
calculated as 50 percent of the amount by which the cost exceeds 3.40 
times the APC payment rate. We estimate that this threshold will 
allocate 0.12 percent of outlier payments to CMHCs for PHP outlier 
payments.
4. Outlier Reconciliation
    As provided in section 1833(t)(5) of the Act, and described in the 
CY 2001 OPPS 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

[[Page 68595]]

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 prospective 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41463), for CY 2009, 
we proposed 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 that are based on the latest settled cost report and 
current charges that creates 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 proposed to take 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 final rule with comment period. 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 proposed to update our regulations to codify 
two existing longstanding OPPS policies related to CCRs, as discussed 
in further detail below in this section. In addition to codifying two 
longstanding policies related to CCRs, we also proposed a new provision 
giving CMS the ability to specify an alternative CCR and allowing 
hospitals to request a new CCR based on substantial evidence. Finally, 
we proposed 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 proposed to require 
reconciliation of outlier payments in certain circumstances. We stated 
our belief that these proposed changes would address most of the 
current vulnerabilities present in the OPPS outlier payment system.
    First, we proposed to update the regulations to codify two existing 
outlier policies (73 FR 41463). 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 
proposed to revise 42 CFR 419.43 to add two new paragraphs (d)(5)(ii) 
and (d)(5)(iii). Specifically, we proposed 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 proposed 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 specified 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 also proposed 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 final rule with comment 
period for a more 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 proposed to reevaluate the upper threshold and 
propose a new upper threshold, if appropriate, through rulemaking each 
year.

[[Page 68596]]

    These improvements would somewhat mitigate, but would 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 proposed two new policies to more fully address the 
vulnerabilities described above. Specifically, we proposed new Sec.  
419.43(d)(5)(i) that stated 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 proposed 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 in this section, we also proposed new Sec.  419.43(d)(5)(iv), now 
(d)(6), to allow Medicare contractors the administrative discretion to 
reconcile hospital or CMHC cost reports under certain circumstances.
    We also proposed 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 in this section 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 proposed that this reconciliation process would only 
apply to those services provided on or after January 1, 2009 (73 FR 
41464). 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 believed 
effectuating this policy based upon date of service could be less 
burdensome for hospitals. We specifically solicited public comment 
related to the effective date for the reconciliation process that would 
be most administratively feasible for hospitals and CMHCs. We noted 
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 proposed 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 
further proposed 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 would 
reflect the most accurate cost data. We did not propose to apply 
reconciliation to services and items not otherwise subject to outlier 
payments, including items and services paid at charges adjusted to cost 
(73 FR 41464).
    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 
the change in total outlier payments for a cost reporting period using 
a revised CCR.
    Similar to the IPPS, we also proposed to adjust the amount of final 
outlier payments determined during reconciliation for the time value of 
money (73 FR 41464). 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 believed it would be necessary to adjust the amount 
of the final outlier payment to reflect the time value of the funds for 
that time period. Therefore, we proposed 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 (73 FR 41464 through 41465). 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 reflected the hospital's or 
CMHC's approximate marginal costs in excess of the APC payments for 
services, taking into consideration the applicable outlier thresholds.
    Despite the fact that each individual facility's outlier payments 
may be subject to adjustment when the cost report is settled, we noted 
our continued belief 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 
would be intended only to adjust actual outlier payments so that they 
most closely reflected true costs rather than artificially inflated 
costs. These adjustments would be made irrespective of whether total 
outlier spending targets were met or not.
    In the CY 2009 OPP/ASC proposed rule (73 FR 41465), we did not 
propose to make any changes to the method that

[[Page 68597]]

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 to 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 proposed 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 continue to believe that it would 
be neither necessary nor appropriate to make such an aggregate 
retroactive adjustment.
    Comment: Some commenters were opposed to outlier reconciliation 
because they believed that the concept of reconciliation is contrary to 
the nature of a prospective payment system. One commenter asserted that 
the proposed reconciliation process would be administratively 
burdensome to hospitals due to the volume of outpatient encounters and 
number of claims involved. Another commenter believed that hospitals, 
which typically increase charges at the beginning of each fiscal year, 
should not have to be held to a prior period CCR for settlement 
purposes. One commenter suggested that the impact of the outlier 
reconciliation be identified, and should the impact grow too large, 
that it be included in the development of the outlier thresholds. 
Another commenter sought alternatives to the reconciliation process and 
suggested controlling outlier payments through the percentage of 
payments set aside for outlier payments, as well as more timely 
settlement of cost reports to avoid the need for reconciliation. 
Several commenters suggested waiting until the newly revised cost 
reporting forms are in place before implementing the outlier 
reconciliation proposal in order to assess changes to the CCRs and 
potentially use more accurate CCRs for outlier payment.
    Many commenters recommended that the effective date for 
implementation of the outlier reconciliation policy be the first cost 
reporting period in CY 2009. Several commenters sought further 
clarification regarding the expected outlier reconciliation thresholds, 
as well as the reasoning behind their development. Some commenters 
believed that the OPPS reconciliation policy should implement the same 
outlier reconciliation thresholds as the IPPS, or should use them as a 
guide in developing OPPS-specific thresholds. A few commenters 
recommended that the CCR fluctuation threshold should be the same as in 
the IPPS because the same data from the cost report would be used in 
both cases. Many commenters believed that the outlier reconciliation 
policy should be applied on a limited basis.
    Response: According to commenters, the concept of reconciliation is 
contrary to the idea of a prospective payment system. We believe it is 
contrary to the concept of a prospective payment system for hospitals 
to be able to increase outlier payments by manipulating their charges 
for the current year. We believe that reconciliation would help address 
this vulnerability in outlier payment, without affecting the overall 
prospective nature of the OPPS. Any action regarding reconciling the 
outlier payments of an individual hospital would not affect the 
predictability of the system because we are not proposing to make any 
adjustments to the prospectively set outlier multiple and fixed-dollar 
thresholds and payment methodology. We will continue to use the best 
data available to set the annual OPPS outlier thresholds. Hospitals 
would continue to be capable of calculating any outlier payments they 
would receive, using information that is readily available to them 
through their accounting systems. While we are finalizing the proposed 
outlier reconciliation policy, as described above, we are not making 
retroactive adjustments to our outlier threshold to meet a dedicated 
percentage of total payments set aside for outlier payments. This 
approach maintains the prospective nature of the OPPS outlier payment 
and will enable hospitals to approximate their outlier payments and 
potential eligibility for reconciliation.
    In section II.A.1.c. of this final rule with comment period, we 
indicate that we are updating the Medicare hospital cost report form 
and that we plan to publish this form for public comment. It is 
possible that the new cost report form could lead to more accurate 
overall CCRs. Although some commenters suggested that we postpone the 
implementation of the outlier reconciliation policy until the revised 
cost report form is available to capitalize on this potential for 
improved accuracy, we do not believe that minor improvements in the 
accuracy of the overall CCR, a gross measure, warrant delaying outlier 
reconciliation. In order to determine an effective date for the policy 
that would minimize the administrative burden of the outlier 
reconciliation process, we specifically solicited public comment 
regarding the effective implementation date of this policy. We have 
considered the comments regarding the effective implementation date of 
the outlier reconciliation process and believe that the first cost 
reporting period of CY 2009 would be the most appropriate start date. 
Therefore, we expect that for hospital outpatient services furnished 
during the cost reporting periods beginning on or after January 1, 
2009, that if the hospital qualifies for reconciliation, the amount of 
outlier payments will be recalculated using the actual CCR computed 
from the relevant cost report and claims data for each service 
furnished during the cost reporting period and that any difference in 
aggregate outlier payment, adjusted for the time value of money, will 
be handled at cost report settlement.
    While we recognize the burden involved in potentially subjecting 
hospitals to an outlier reconciliation process, we believe that 
appropriate outlier reconciliation thresholds will ensure that the 
limited resources of Medicare contractors are focused upon those 
hospitals that appear to have disproportionately benefited from the 
time lag in updating their CCRs. We intend to issue manual instructions 
in the near future to assist Medicare

[[Page 68598]]

contractors in implementing the outlier reconciliation provision for CY 
2009. In those manual instructions, we will issue thresholds for 
Medicare contractors to use to determine when a hospital or CMHC will 
qualify for reconciliation for the first cost reporting period 
beginning on or after January 1, 2009.
    We recognize the commenters' concerns regarding the reconciliation 
thresholds that we would set to focus on those hospitals whose charging 
structures fluctuate significantly. In considering reconciliation 
thresholds for the OPPS, we have used the existing IPPS thresholds as a 
guide in identifying hospitals in which outlier reconciliation would be 
appropriate. For cost reports beginning in CY 2009, we are considering 
instructing Medicare contractors to conduct reconciliation for 
hospitals and CMHCs whose actual CCRs at the time of cost report 
settlement are found to be plus or minus 10 percentage points from the 
CCR used during the cost reporting period to make outlier payments, and 
for hospitals that have total OPPS outlier payments that exceed 
$200,000. The change in CCR threshold would be the same threshold used 
under the IPPS. We are still considering whether to adopt an outlier 
payment threshold specifically for CMHCs. The hospital outlier payment 
threshold of $200,000 serves the same purpose as the IPPS $500,000 
threshold, but is proportional to OPPS outlier payments. We estimate 
that the $200,000 threshold would identify roughly the same number of 
hospitals as the IPPS threshold of $500,000. We believe that these 
thresholds would appropriately identify hospitals receiving outlier 
payments that are substantially different from the ones indicated by 
their actual costs and charges, while ensuring limited application of 
the outlier reconciliation policy. Hospitals exceeding these thresholds 
during their applicable cost reporting periods would become subject to 
reconciliation of their outlier payments. These thresholds would be 
reevaluated annually and, if necessary, modified each year in order to 
ensure that reconciliation is performed on a limited basis and focused 
on those hospitals that appear to have disproportionately benefited 
from the outlier payment vulnerabilities. As under the IPPS, we also 
retain the discretion to recommend other hospitals' cost reports for 
reconciliation.
    As under the IPPS, we did not propose to adjust the fixed-dollar 
threshold or amount of total OPPS payment set aside for outlier 
payments for reconciliation activity. As noted above in this section, 
the predictability of the fixed-dollar threshold is an important 
component of a prospective payment system. We would not adjust the 
prospectively set threshold for the amount of payment reconciled at 
cost report settlement. Our outlier threshold calculation assumes that 
CCRs accurately estimate hospital costs based on information available 
to us at the time we set the prospective fixed-dollar outlier 
threshold. For these reasons, we are not making any assumptions about 
the effects of reconciliation on the outlier threshold calculation.
    With regard to other suggested alternatives to an outlier 
reconciliation process, we note that more timely cost report settlement 
would not address the fundamental vulnerability in using a prior period 
CCR to project cost in the prospective payment year. While timely cost 
report settlement is valuable, significant differences might still 
exist between the actual CCR and the one used to estimate cost in the 
outlier payment calculation. We also clarify that hospitals would not 
be held to a prior period CCR for settlement. The reconciliation 
process will ensure that CMS uses an actual year CCR for cost report 
settlement when outlier payments are significant and may not have been 
accurate.
    Comment: Some commenters supported the proposal to substitute CCRs 
based on the most recent cost report or other alternate CCRs where 
appropriate. Several commenters recommended changes to the regulation 
text that would more specifically delineate the situations in which CMS 
could specify an alternative CCR, believing that the proposed 
regulation text placed no limits on the circumstances in which an 
alternative CCR could be applied. Some commenters requested that CMS 
automatically notify a provider if its CCR is three standard deviations 
below the geometric mean and potentially replace those CCRs with a 
statewide CCR. They believed that this would protect the Medicare 
program against CCR manipulation and do more to correct both 
``underpayments'' and ``overpayments'' of outliers as they occur.
    Response: Although we recognize the commenters' concern regarding 
situations in which CMS could direct Medicare contractors to use an 
alternative CCR, we believe we must retain the flexibility to quickly 
respond should we uncover excessive discrepancies between anticipated 
actual CCRs and the ones being used to estimate costs for outlier 
payments. This could entail observation of significant increases in a 
hospital's or CMHC's charges over a short period of time, potentially 
to garner greater outlier payments, but also could occur if a hospital 
accepted assignment in a change of ownership and needed CMS to quickly 
change the CCR being used for payment in order to help the new owners 
avoid reconciliation. We believe that limiting the circumstances in 
which CMS could specify an alternative CCR would limit our ability to 
respond quickly. We do not anticipate using that authority frequently. 
It likely would be isolated to situations where immediate action would 
be necessary.
    Some commenters requested that a statewide CCR be used as a 
substitute in situations where CCRs fall three standard deviations 
below the geometric mean, similar to the policy for excessively high 
CCRs. We believe that the CCR of hospitals who have CCRs that fall 
below three standard deviations below the geometric mean is an accurate 
reflection of the relationship between their costs and charges. 
Implementing a statewide floor would provide an incentive for hospitals 
to take advantage of the policy by manipulating their charging 
structures so that their hospital-specific CCR would be replaced by a 
statewide CCR. We have previous experience under the IPPS outlier 
policy with hospitals increasing their charges significantly in order 
to lower their CCRs, resulting in assignment of the statewide average. 
This manipulation would allow hospitals to reach a higher estimation of 
cost than actually exists. No similar incentive exists for hospitals to 
increase their CCRS to the ceiling. In the FY 2004 IPPS final rule (68 
FR 34500), we removed the IPPS requirement that hospitals with a CCR 
below the floor be assigned the statewide average and we have adopted 
the same policy in manual instructions for the OPPS, as noted above. 
For CY 2009, we estimate the upper threshold at which we would 
substitute to the statewide CCR for a hospital's CCR to be 1.3.
    Comment: One commenter supported the time value of money adjustment 
which would be included in situations where outlier reconciliation 
applied. Other commenters did not support the time value of money 
adjustment because of the recent experience under the IPPS. The IPPS is 
still finalizing the technical methodology for conducting accurate 
reconciliation and the commenters did not want to be penalized for 
holding outlier overpayments while waiting for reconciliation. One 
commenter argued against the time value of money adjustment because the 
commenter believed there was insufficient information about how the 
calculation

[[Page 68599]]

would be conducted. A commenter believed that interest should only be 
accrued if a provider did not pay in a timely manner the amount due to 
Medicare after being issued a Notice of Program Reimbursement at cost 
report settlement.
    Response: The time value of money adjustment was proposed to 
address the outlier payment vulnerability that would remain even after 
a cost report reconciliation policy was in place. Outlier payments are 
uniquely susceptible to manipulation because hospitals set their own 
charging structure and can change it during a cost reporting period 
without the Medicare contractor's knowledge. By manipulating its CCRs, 
a hospital could inappropriately gain excess payments from the Medicare 
Trust Fund on a short-term basis. We believe that the current IPPS 
situation, where hospitals must wait to reconcile cost reports until 
CMS can operationally refine the system of IPPS outlier reconciliation, 
is unique and that adjustment for the time value of money makes sense 
for long-term implementation. Furthermore, the provision offers 
hospitals the same interest adjustment should CMS owe hospitals 
additional outlier payments. We specify the time value of money 
calculation in the Medicare Claims Processing Manual, Pub 100-04, 
Chapter 3, Section 20.1.2.7. For the OPPS, we intend to employ the same 
calculation, and we will use the same index, which is the monthly rate 
of return that the Medicare Trust Fund earns.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, with modification, for an OPPS outlier 
reconciliation policy. We are implementing the outlier reconciliation 
policy for each hospital and CMHC for services furnished during cost 
reporting periods beginning in CY 2009, and we are including an 
adjustment for the time value of money. We have modified Sec.  
419.43(d)(6) to reflect this change to the effective date. We also 
reorganized the provisions of Sec.  419.43(d)(5) and Sec.  419.43(d)(6) 
to better separate the concept of CCRs and outlier reconciliation 
processes. In reviewing our proposed regulation text for outlier 
reconciliation, we noted that use of ``Reconciliation'' was not the 
appropriate title for Sec.  419.43(d)(5), which included both CCRs and 
the reconciliation process itself. We have modified our regulation text 
to separately identify the concepts of CCRs and reconciliation and have 
labeled Sec.  419.43(d)(5) as ``Cost-to-Charge Ratios for Calculating 
Charges Adjusted to Cost'' and Sec.  419.43(d)(6) as 
``Reconciliation.''

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 
Sec. Sec.  419.31, 419.32, 419.43 and 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 final rule with comment period and the relative weight 
determined under section II.A. of this final rule with comment period. 
Therefore, the national unadjusted payment rate for most APCs contained 
in Addendum A to this final rule with comment period and for most HCPCS 
codes to which separate payment under the OPPS has been assigned in 
Addendum B to this final rule with comment period was calculated by 
multiplying the final CY 2009 scaled weight for the APC by the final 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 Hospital Outpatient Quality Data 
Reporting Program (HOP QDRP) requirements. For further discussion of 
the payment reduction for hospitals that fail to meet the requirements 
of the HOP QDRP, we refer readers to section XVI.D. of this final rule 
with comment period.
    We demonstrate in the steps below how to determine the APC payment 
that will be made in a calendar year under the OPPS to a hospital that 
fulfills the HOP QDRP requirements and to a hospital that fails to meet 
the HOP QDRP requirements for a service that has any of the following 
status indicator assignments: ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' 
``S,'' ``T,'' ``V,'' or ``X'' (as defined in Addendum D1 to this final 
rule with comment period), in a circumstance in which the multiple 
procedure discount does not apply and the procedure is not bilateral. 
We note that, as discussed in section VII.B. of this final rule with 
comment period, brachytherapy sources, to which we proposed assigning 
status indicator ``U'' for CY 2009, are required by section 142 of 
Public Law 110-275 to be paid on the basis of a hospital's charges 
adjusted to cost. Therefore, these items are not subject to the annual 
OPPS payment update factor and, therefore, will not be subject to the 
CY 2009 payment reduction for a hospital's failure to meet the HOP QDRP 
requirements.
    Individual providers interested in calculating the payment amount 
that they specifically will receive for a specific service from the 
national unadjusted payment rates presented in Addenda A and B to this 
final rule with comment period 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 
the requirements of the HOP QDRP as the ``full'' national unadjusted 
payment rate. We refer to the national unadjusted payment rate for 
hospitals that fail to meet the requirements of the HOP QDRP as the 
``reduced'' national unadjusted payment rate. The ``reduced'' national 
unadjusted payment rate is calculated by multiplying the 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 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 OPPS 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 and 
identifies the labor-related portion of a specific payment rate for the 
specific service.


[[Page 68600]]


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 MGCRB, section 1886(d)(8)(B) 
``Lugar'' hospitals, and section 401 of Public Law 108-173. In the CY 
2009 OPPS/ASC proposed rule (73 FR 41466), we noted that the 
reclassifications of hospitals under section 508 of Public Law 108-173 
were scheduled to expire on September 30, 2008 and would not be 
applicable to FY 2009 and, therefore, would not apply to the CY 2009 
OPPS. However, section 124 of Public Law 110-275 extended these 
reclassifications and special exception wage indices through September 
30, 2009. For further discussion of the changes to the FY 2009 IPPS 
wage index, as applied to the CY 2009 OPPS, we refer readers to section 
II.C. of this final rule with comment period. The wage index values 
include the occupational mix adjustment described in section II.C. of 
this final rule with comment period that was developed for the final FY 
2009 IPPS payment rates published in the Federal Register on August 19, 
2008 (73 FR 48778) and finalized in a subsequent document published in 
the Federal Register on October 3, 2008 (73 FR 57888 through 58017).
    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 Public Law 
108-173. Addendum L to this final rule with comment period contains the 
qualifying counties and the final wage index increase developed for the 
FY 2009 IPPS published in the FY 2009 IPPS final rule as Table 4J (73 
FR 48883 through 48898) and finalized in a subsequent document 
published in the Federal Register on October 3, 2008 (73 FR 57988). 
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 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 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 and 
applies the rural adjustment for rural SCHs.

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 
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 CY 2009 full national unadjusted payment rate for 
APC 0019 is $295.69. The reduced national unadjusted payment rate for a 
hospital that fails to meet the HOP QDRP requirements is $290.07. 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 1.2996. The labor portion of the full national unadjusted 
payment is $230.56 (.60 * $295.69 * 1.2996). The labor portion of the 
reduced national unadjusted payment is $226.18 (.60 * $290.07 * 
1.2996). The nonlabor portion of the full national unadjusted payment 
is $118.27 (.40 * $295.69). The nonlabor portion of the reduced 
national unadjusted payment is $116.02 (.40 * $290.07). The sum of the 
labor and nonlabor portions of the full national adjusted payment is 
$348.83 ($230.56 + $118.27). The sum of the reduced national adjusted 
payment is $342.20 ($226.18 + $116.02).
    We did not receive any public comments concerning our proposed 
methodology for calculating an adjusted payment from the national 
unadjusted Medicare payment amount for CY 2009. Therefore, we are 
finalizing our proposed CY 2009 methodology, without modification.

H. 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.
2. Copayment Policy
    For CY 2009, we proposed to determine copayment amounts for new

[[Page 68601]]

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 proposed 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 
national unadjusted copayment amounts for services payable under the 
OPPS that will be effective January 1, 2009, are shown in Addenda A and 
B to this final rule with comment period. As discussed in section 
XVI.D. of this final rule with comment period, we are finalizing our 
proposal for CY 2009 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.
    We did not receive any public comments regarding this proposal. 
Therefore, we are finalizing our CY 2009 proposal for determining APC 
copayment amounts, without modification.
3. Calculation of an Adjusted Copayment Amount for an APC Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its HOP QDRP 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 24.306 percent of the full 
national unadjusted payment rate of $295.69.
    The formula below is a mathematical representation of Step 1 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 final rule with comment period. Calculate the rural adjustment for 
eligible providers as indicated in section II.G. of this final rule 
with comment period.
    Step 3. Multiply the percentage calculated in Step 1 by the payment 
rate calculated in Step 2. The result is the wage-adjusted copayment 
amount for the APC.
    The formula below is a mathematical representation of Step 3 and 
applies the beneficiary percentage to the adjusted payment rate for a 
service calculated under section II.G. of this final rule with comment 
period, with and without the rural adjustment, to calculate the 
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 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.981.
    The unadjusted copayments for services payable under the OPPS that 
will be effective January 1, 2009, are shown in Addenda A and B to this 
final rule with comment period. We note that the national unadjusted 
payment rates and copayment rates shown in Addenda A and B to this 
final rule with comment period reflect the full market basket 
conversion factor increase, as discussed in section XVI.D. of this 
final rule with comment period.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

A. OPPS Treatment of New HCPCS and CPT Codes

1. 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 (Transmittal 1536, Change Request 6094, dated June 19, 
2008) of the CY 2008 OPPS.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41467), we also 
solicited public comment on the status indicators, APC assignments, and 
payment rates of these codes, which were listed in Table 10 and Table 
11 of that proposed rule and now appear in Tables 12 and 13, 
respectively, of this final rule with comment period. Because of the 
timing of the proposed rule, the codes implemented through the July 
2008 OPPS update were not included in Addendum B to the proposed rule. 
We proposed 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 this final rule with comment period for CY 
2009, which is consistent with our annual OPPS update policy. The HCPCS 
codes implemented through the April 2008 OPPS update and displayed in 
Table 10 were included in Addendum B to the proposed rule, where their 
proposed payment rates also were shown.
    For CY 2009, the CMS HCPCS Workgroup created permanent HCPCS J-
codes for four codes that were implemented in April 2008 and one code 
that was implemented in July 2008. Consistent with our general policy 
of using permanent HCPCS codes, if appropriate, rather than HCPCS C-
codes

[[Page 68602]]

or Q-codes for the reporting of drugs under the OPPS in order to 
streamline coding, we display the new HCPCS J-codes in Tables 12 and 13 
that replace the HCPCS C-codes or Q-codes, effective January 1, 2009. 
Specifically, J1267 (Injection, doripenem, 10 mg) replaces C9241; J7186 
(Injection, antihemophilic factor viii/von willebrand factor complex 
(human), per factor viii i.u.) replaces Q4096; J1459 (Injection, immune 
globulin (Privigen), intravenous, non-lyophilized (e.g., liquid), 500 
mg) replaces Q4097; J1750 (Injection, iron dextran, 50 mg) replaces 
Q4098; and J1453 (Injection, fosaprepitant, 1 mg) replaces C9242. The 
HCPCS J-codes describe the same drugs and the same dosages as the HCPCS 
C-codes and Q-codes that will be deleted, effective December 31, 2008. 
We note that HCPCS C-codes and Q-codes are temporary national HCPCS 
codes. To avoid duplication, temporary national HCPCS codes, such as C, 
G, K, and Q-codes, are generally deleted once permanent national HCPCS 
codes are created that describe the same item, service, or procedure. 
Because HCPCS codes J1267, J1453, and J1459 describe the same drugs and 
the same dosages that are currently designated by HCPCS codes C9241, 
C9242, and Q4097, respectively, we are continuing their pass-through 
status in CY 2009, and are assigning the HCPCS J-codes to the same APCs 
and status indicators as their predecessor HCPCS C-codes, as shown in 
Tables 12 and 13. Specifically, HCPCS code J1267 is assigned to the 
same APC (9241) and status indicator (``G'') as HCPCS code C9241, HCPCS 
code J1453 is assigned to the same APC (9242) and status indicator 
(``G'') as HCPCS code C9242, and HCPCS code J1459 is assigned to the 
same APC (1214) and status indicator (``G'') as HCPCS code Q4097.
    In addition, new HCPCS code Q4114 (Allograft, Integra Flowable 
Wound Matrix, injectable, 1 cc) for January 1, 2009 replaces HCPCS code 
C9357. Because HCPCS code Q4114 describes the same biological and 
dosage descriptor as its predecessor HCPCS code, HCPCS code Q4114 is 
assigned the same status indicator as HCPCS code C9357 (``G'') and 
continues its pass-through status in CY 2009.
    Except for the public comments that we received concerning the 
three new HCPCS G-codes for home sleep tests, we did not receive any 
public comments regarding the proposed APC and status indicator 
assignments for any of the other new HCPCS codes that were implemented 
in either April 2008 or July 2008. Therefore, for CY 2009, we are 
adopting as final the designated APCs for the replacement HCPCS J-
codes, specifically J1267, J1453, J1459, J1750, and J7186, as well as 
HCPCS codes C9356, C9358, and Q4114, as shown in Tables 12 and 13 
below, and in Addendum B to this final rule with comment period.
    Comment: One commenter did not understand why the three home sleep 
testing HCPCS G-codes, that is G0398, G0399, and G0400, were recognized 
under the OPPS when it was the commenter's understanding that HCPCS G-
codes are to be used only for physician billing. The commenter also 
requested clarification on the following issues: (1) The intended 
method for hospitals and independent diagnostic testing facilities 
(IDTFs) to bill for outpatient home sleep testing; (2) whether CMS will 
pay hospitals and IDTFs for home sleep testing that meets the criteria 
for CPT code 95806; (3) the relationship between CPT code 95806 (Sleep 
study, simultaneous recording of ventilation, respiratory effort, ecg 
or heart rate, and oxygen saturation, unattended by a technologist) and 
the new HCPCS G-codes, and how hospitals, IDTFs and physicians might 
properly code for a procedure that fulfills both descriptions; and (4) 
whether CMS will allow separate billing for the technical and 
professional components of this service by physicians and facilities.
    Response: HCPCS G-codes are not limited to physician reporting. 
Since implementation of the OPPS in August 2000, Medicare has 
recognized HCPCS G-codes for reporting under the OPPS for hospital 
outpatient services. HCPCS G-codes are a subset of the Level II HCPCS 
codes and describe temporary procedures and services that are not 
described by any CPT codes. Created by CMS, this subset of codes is 
updated on a quarterly basis and may be reported by providers for any 
health insurers for various sites of services. While the codes may be 
used by any health insurers, it is up to the individual insurers to 
provide guidance on the reporting of these codes.
    CMS created three new HCPCS G-codes, specifically G0398, G0399, and 
G0400, that were implemented on March 13, 2008, to describe the various 
types of home sleep tests that Medicare determined could be used to 
allow for coverage of continuous positive airway pressure (CPAP) 
therapy based upon a diagnosis of obstructive sleep apnea (OSA) 
according to a home sleep study. CMS reconsidered its 2005 NCD 
regarding CPAP therapy for OSA, effective March 13, 2008, to allow for 
coverage of CPAP therapy based on a diagnosis of OSA from a home sleep 
study. This NCD does not ensure coverage of sleep testing, but rather 
states when CPAP therapy is covered as a result of clinical evaluation 
and a positive sleep test.
    The OPPS makes payment only to hospitals for their facility 
services, not to physicians or IDTFs. We proposed to assign these new 
HCPCS G-codes to APCs for payment under the OPPS because we believe 
these diagnostic services may be provided by HOPDs to Medicare 
beneficiaries. Because these new HCPCS G-codes specify home sleep 
studies and CPT code 95806 only refers to an unattended sleep study, 
hospitals providing home sleep studies should report the more specific 
HCPCS G-codes under these circumstances, according to the general 
coding principle that the most specific code should be reported for a 
service, unless CMS or Medicare contractors have provided other 
instructions.
    Comment: One commenter expressed concern regarding the proposed 
payment rates for the three new HCPCS G-codes for home sleep studies. 
The commenter indicated that the proposed payment rate of approximately 
$153 for APC 0213 (Level I Extended EEG and Sleep Studies) to which 
these HCPCS codes were proposed for assignment is inappropriate. The 
commenter further stated that it appears that CMS's decision to use CPT 
code 95806 as the benchmark in setting the payment rates for these new 
HCPCS G-codes is flawed. The commenter asserted that CPT code 95806 was 
created in 1998 and is seldom reported and, therefore, does not 
appropriately reflect the current costs of providing home sleep 
testing. The commenter requested that CMS take into consideration the 
current cost of portable monitors, staff time, and administrative 
support associated with home sleep testing in determining the 
appropriate payment rate for these new services. The commenter 
suggested that the payment rate for HCPCS G-codes G0398, G0399, and 
G0400 should be about $550.
    Response: Based on consultation with our medical advisors and on 
our review of the components of these services, we believe that home 
sleep testing is most appropriately assigned to APC 0213, as proposed. 
In determining the payment rates for HCPCS G-codes G0398, G0399, and 
G0400, we took into consideration the clinical and resource 
characteristics associated with providing home sleep testing. As has 
been our policy, we will analyze the hospital resource costs for home 
sleep testing in order to determine in the future whether proposals of 
alternative APC assignments may be warranted once we have hospital 
claims

[[Page 68603]]

data for these HCPCS G-codes. Since these codes were implemented in 
July 2008, the CY 2010 OPPS/ASC rulemaking cycle will be the first time 
that we will have cost data for these new HCPCS codes available for 
analysis.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to assign new 
HCPCS codes G0398, G0399, and G0400 to APC 0213, with a final CY 2009 
APC median cost of approximately $150.

                               Table 12--New HCPCS Codes Implemented in April 2008
----------------------------------------------------------------------------------------------------------------
                                                                                       Final CY 2009
           CY 2008 HCPCS code              CY 2009 HCPCS    CY 2009 long descriptor        status       Final CY
                                               code                                      indicator      2009 APC
----------------------------------------------------------------------------------------------------------------
C9241...................................           J1267  Injection, doripenem, 10                 G        9241
                                                           mg.
Q4096...................................           J7186  Injection, antihemophilic                K        1213
                                                           factor viii/von
                                                           willebrand factor complex
                                                           (human), per factor viii
                                                           i.u.
Q4097...................................           J1459  Injection, immune globulin               G        1214
                                                           (Privigen), intravenous,
                                                           non-lyophilized (e.g.
                                                           liquid), 500 mg.
Q4098...................................           J1750  Injection, iron dextran,                 K        1237
                                                           50 mg.
----------------------------------------------------------------------------------------------------------------


                               Table 13--New HCPCS Codes Implemented in July 2008
----------------------------------------------------------------------------------------------------------------
                                                                                       Final CY 2009
           CY 2008 HCPCS code              CY 2009 HCPCS    CY 2009 long descriptor        status       Final CY
                                               code                                      indicator      2009 APC
----------------------------------------------------------------------------------------------------------------
C9242...................................           J1453  Injection, fosaprepitant,                G        9242
                                                           1 mg.
C9356...................................           C9356  Tendon, porous matrix of                 G        9356
                                                           cross-linked collagen and
                                                           glycosaminoglycan matrix
                                                           (TenoGlide Tendon
                                                           Protector Sheet), per
                                                           square centimeter.
C9357...................................           Q4114  Allograft, Integra                       G        1251
                                                           Flowable Wound Matrix,
                                                           injectable, 1 cc.
C9358...................................           C9358  Dermal substitute, native,               G        9358
                                                           non-denatured collagen
                                                           (SurgiMend Collagen
                                                           Matrix), per 0.5 square
                                                           centimeters.
G0398...................................           G0398  Home sleep study test                    S        0213
                                                           (HST) with type II
                                                           portable monitor,
                                                           unattended; minimum of 7
                                                           channels: EEG, EOG, EMG,
                                                           ECG/heart rate, airflow,
                                                           respiratory effort and
                                                           oxygen saturation.
G0399...................................           G0399  Home sleep test (HST) with               S        0213
                                                           type III portable
                                                           monitor, unattended;
                                                           minimum of 4 channels: 2
                                                           respiratory movement/
                                                           airflow, 1 ECG/heart rate
                                                           and 1 oxygen saturation.
G0400...................................           G0400  Home sleep test (HST) with               S        0213
                                                           type IV portable monitor,
                                                           unattended; minimum of 3
                                                           channels.
----------------------------------------------------------------------------------------------------------------

2. 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, which are released in 
the summer through the fall of each year for annual updating, effective 
January 1, in the final rule with comment period 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'' are open to public comment in this final rule with 
comment period. In the CY 2009 OPPS/ASC proposed rule (73 R 41468), we 
proposed 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, are listed in Addendum B to this 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, in the CY 2009 OPPS/ASC proposed rule (73 FR 41468), 
we proposed to continue our policy of the last 3 years of recognizing 
new mid-year CPT codes, generally Category III CPT codes, that the AMA 
releases in January for implementation the following July through the 
OPPS quarterly update process. Therefore, for CY 2009, we proposed to 
include in Addendum B to this 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, are flagged with comment indicator ``NI'' in 
Addendum B to this final rule with comment period, to indicate that we 
have assigned them an interim payment status which is subject to public 
comment. Category III CPT codes implemented in July 2008, which 
appeared in Table 12 of the CY 2009 OPPS/ASC proposed rule and now in 
Table 14 below, were open to public comment in the proposed rule, and 
we are finalizing their CY 2009 status in this final rule with comment 
period.
    We did not receive any public comments on the proposed CY 2009 
assignment of status indicator ``M'' to CPT codes 0188T (Remote real-
time interactive videoconferenced critical care, evaluation and 
management of the critically ill or critically injured patient; first 
30-74 minutes) and 0189T (Remote real-time interactive videoconferenced 
critical care, evaluation and management of the critically ill or

[[Page 68604]]

critically injured patient; each additional 30 minutes) and on the 
assignment of status indicator ``T'' to CPT code 0190T (Placement of 
intraocular radiation source applicator) in APC 0237 (Level II 
Posterior Segment Eye Procedures). Therefore we are finalizing these 
proposed assignments for CY 2009, without modification.
    Comment: One commenter was concerned with the proposed assignment 
of new CPT code 0191T (Insertion of anterior segment aqueous drainage 
device, without extraocular reservoir; internal approach) to APC 0234 
(Level III Anterior Segment Eye Procedures) and recommended that the 
procedure be reassigned to APC 0673 (Level IV Anterior Segment Eye 
Procedures). According to the commenter, CPT code 0191T, which became 
effective July 1, 2008, uses a bypass device that routes fluid around 
the diseased part of a patient's aqueous drainage apparatus. The 
commenter indicated that there is significant resource dissimilarity 
between CPT code 0191T and other procedures assigned to APC 0234. The 
commenter argued that the procedure is more similar in resources to 
procedures assigned to APC 0673. The commenter explained that other 
procedures assigned to APC 0673 almost always use either a permanently 
implanted device or a permanent graft, while those assigned to APC 0234 
do not. The commenter stated that CPT code 0191T requires the use of a 
costly implantable device, like other procedures assigned to APC 0673. 
The commenter also believed that the clinical characteristics of 
procedures already assigned to APC 0673 are more similar to CPT code 
0191T than those assigned to APC 0234 because APC 0673 includes only 
procedures that treat glaucoma with intraocular surgery using a device 
to assist with aqueous outflow. According to the commenter, CPT code 
66180 (Aqueous shunt to extraocular reservoir (e.g., Molteno, Schocket, 
Denver-Krupin)), which has the largest number of claims among 
procedures assigned to APC 0673, describes aqueous bypass surgery that 
serves the same purpose as the procedure described by CPT code 0191T. 
Finally, the commenter explained that the device used in CPT code 0191T 
is currently being studied in a FDA investigational device exemption 
(IDE) clinical trial.
    Response: We assigned new Category III CPT code 0191T to APC 0234, 
effective July 1, 2008, and announced this assignment in the July 2008 
OPPS update (Transmittal 1536, Change Request 6094, dated June 19, 
2008). In the CY 2009 OPPS/ASC proposed rule (73 FR 41469), we proposed 
to continue this assignment for CY 2009 with a proposed payment rate of 
approximately $1,576. The commenter did not identify a predecessor CPT 
code for this surgical procedure, and there is limited clinical 
experience with this surgical procedure at this time. Nevertheless, 
based on our understanding of the clinical and resource characteristics 
of this surgical procedure, we continue to believe it is most 
appropriately assigned to APC 0234 in order to achieve the greatest 
clinical and resource homogeneity among the APC groups for anterior 
segment eye procedures. Further, we anticipate that the CY 2008 partial 
year hospital claims data for CPT code 0191T will first be available in 
CY 2009 for the CY 2010 OPPS/ASC rulemaking cycle. At that time we will 
review the assignment of this CPT code for CY 2010.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to assign CPT 
code 0191T to APC 0234, with a final CY 2009 APC median cost of 
approximately $1,543.
    Comment: Many commenters requested that CPT code 0192T (Insertion 
of anterior segment aqueous drainage device, without extraocular 
reservoir; external approach) be reassigned to APC 0673 (Level IV 
Anterior Segment Eye Procedures) from APC 0234 (Level III Anterior 
Segment Eye Procedures), where it was proposed for CY 2009 assignment. 
Several commenters reported that prior to July 1, 2008, when CPT code 
0192T became effective, most providers reported this procedure with CPT 
code 66180 (Aqueous shunt to extraocular reservoir (e.g., Molteno, 
Schocket, Denver-Krupin)).
    One commenter calculated a median cost of $2,806 using 19 single 
procedure OPPS claims for anterior segment eye procedures from 13 
hospitals that the commenter believed represent services that would now 
be reported with CPT code 0192T. The commenter concluded that the 
analysis supported the request to assign CPT code 0192T to APC 0673, 
which had a proposed rule median cost of $2,631, while APC 0234 had a 
proposed rule median cost of only $1,573. The commenter pointed out 
that 17 of the 19 CY 2007 claims used for the analysis were coded with 
CPT code 66180, which was proposed for assignment to APC 0673 for CY 
2009, indicating that the procedure and device costs of CPT code 0192T 
were reflected in claims data for APC 0673. The commenter estimated 
that about one third of the CY 2007 claims for CPT code 66180 represent 
procedures that would now be reported with CPT code 0192T. Furthermore, 
the commenter asserted that none of the procedures currently assigned 
to APC 0234 includes either a permanently implanted or high cost 
disposable device, while procedures assigned to APC 0673 utilize such 
devices.
    The commenter also believed that the procedures assigned to APC 
0673 are more clinically similar to CPT code 0192T than those assigned 
to APC 0234. The commenter noted that APC 0673 contains procedures, 
such as CPT code 66180, which primarily treat glaucoma with intraocular 
surgery using a device that assists with aqueous outflow. The commenter 
believed that assignment of CPT code 0192T to APC 0234 could result in 
limited patient access to that procedure.
    Some commenters argued that payment for the aqueous shunt device 
should be paid separately from the hospital payment for the surgical 
procedure. Many commenters believed that the procedure described by CPT 
code 0192T is safer, more effective, and has fewer complications than 
trabeculectomy because the new procedure does not excise tissue but 
instead uses a shunt to bypass the trabecular tissue.
    Response: We assigned new Category III CPT code 0192T to APC 0234 
effective July 1, 2008, and announced this assignment in the July 2008 
OPPS update (Transmittal 1536, Change Request 6094, dated June 19, 
2008). In the CY 2009 OPPS/ASC proposed rule (73 FR 41469), we proposed 
to continue this APC assignment for new CPT code 0192T, with a proposed 
payment rate of approximately $1,576 for CY 2009. We agree with the 
commenters that new CPT code 0192T has associated implantable device 
costs that may not be fully reflected in the costs of other services 
assigned to APC 0234. It is our established OPPS policy to package 
payment for all implantable devices without pass-through status into 
payment for the associated surgical procedures. Therefore, we will not 
provide separate payment under the OPPS for the aqueous shunt required 
for CPT code 0192T. Moreover, CPT code 66180, which is assigned to APC 
0673 for CY 2009, reportedly was often used to bill Medicare prior to 
July 1, 2008, for the procedure now described by CPT code 0192T. 
Therefore, the costs of CPT code 66180 from hospital claims data may 
partially reflect the costs of CPT code 0192T, as these two CPT codes 
are clinically similar. CPT code 66180 has a final CY 2009 median cost 
of approximately $2,772 and APC 0673 has a median cost of approximately 
$2,644.

[[Page 68605]]

Therefore, we agree with the commenters that APC 0673 is the most 
appropriate APC assignment for CPT code 0192T for CY 2009.
    After consideration of the public comments received, we are 
modifying our CY 2009 proposal for payment of CPT 0192T and reassigning 
it to APC 0673, with a final CY 2009 APC median cost of approximately 
$2,644.
    The final CY 2009 status indicators and APC assignments of the 
Category III CPT codes implemented in July 2008 are included in Table 
14, below, as well as in Addendum B to this final rule with comment 
period.

                            Table 14--Category III CPT Codes Implemented in July 2008
----------------------------------------------------------------------------------------------------------------
                                                                 Final CY 2009
       CY 2009 HCPCS code            CY 2009 long descriptor         status             Final CY 2009 APC
                                                                   indicator
----------------------------------------------------------------------------------------------------------------
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   0673.
                                   segment aqueous drainage
                                   device, without extraocular
                                   reservoir; external
                                   approach.
----------------------------------------------------------------------------------------------------------------

B. 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 final rule 
with comment period); (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 final rule 
with comment period.
    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 (LDR) prostate brachytherapy, cardiac 
electrophysiologic evaluation and ablation, and mental health services. 
In the CY 2009 OPPS/ASC proposed rule (73 FR 41450), we also proposed a 
composite APC payment methodology for multiple imaging services for CY 
2009. Further discussion of composite APCs is included in section 
II.A.2.e. of this final rule with comment period.
    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 final rule with comment period).
    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

[[Page 68606]]

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''). 
In the CY 2009 OPPS/ASC proposed rule (73 FR 41469), we proposed 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 for CY 
2009.
    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 
mainly in sections III.C. and III.D. of this final rule with comment 
period.
    In addition to the assignment of specific services to APCs that we 
discussed with the APC Panel, we also identified APCs with 2 times 
violations that were not specifically discussed with the APC Panel but 
for which we proposed changes to their HCPCS codes' APC assignments in 
Addendum B to the CY 2009 OPPS/ASC proposed rule. In these cases, to 
eliminate a 2 times violation or to improve clinical and resource 
homogeneity, we proposed to reassign the codes to APCs that contain 
services that are similar with regard to both their clinical and 
resource characteristics (73 FR 41470). In the CY 2009 OPP/ASC proposed 
rule (73 FR 41470), we also proposed to rename existing APCs, 
discontinue existing APCs, or create new clinical APCs to complement 
proposed HCPCS code reassignments for CY 2009. In many cases, the 
proposed HCPCS code reassignments and associated APC reconfigurations 
for CY 2009 included in the CY 2009 OPPS/ASC proposed rule were related 
to changes in median costs of services that were observed in the CY 
2007 claims data newly available for the CY 2009 ratesetting. We also 
proposed changes to the status indicators for some codes that were not 
specifically and separately discussed in the proposed rule. In these 
cases, we proposed to change the status indicators for some codes 
because we believed that another status indicator would more accurately 
describe their payment status from an OPPS perspective based on the 
policies that we proposed for CY 2009 or because we proposed new status 
indicators to differentiate a related group of services from other 
services that previously shared the same status indicator (73 FR 
41470).
    Addendum B to the CY 2009 OPPS/ASC proposed rule identified with 
comment indicator ``CH'' those HCPCS codes for which we proposed 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'' were an exception to this 
identification practice because they were not flagged with comment 
indicator ``CH'' in Addendum B to the CY 2009 OPPS/ASC proposed rule. 
Because these proposed changes in status indicators were designed to 
facilitate policy transparency and operational logic rather than to 
reflect changes in OPPS payment policy for these services, we believed 
that identifying these HCPCS codes with ``CH'' could be confusing to 
the public.
    We received several public comments on our proposed separation of 
status indicator ``Q'' into three distinct status indicators, 
specifically ``Q1,'' ``Q2,'' or ``Q3,'' for purposes of policy 
transparency and administrative ease. This proposal, including the 
public comments received and our response to them, is discussed in 
section XIII.A. of this final rule with comment period.
3. Exceptions to the 2 Times Rule
    As discussed earlier, we may make exceptions to the 2 times limit 
on the variation of costs within each APC group in unusual cases such 
as low-volume items and services. Taking into account the APC changes 
that we proposed for CY 2009 based on the APC Panel recommendations 
discussed mainly in sections III.C. and III.D. of this final rule with 
comment period, the other proposed changes to status indicators and APC 
assignments as identified in Addendum B to the CY 2009 OPPS/ASC 
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 of the CY 2009 OPPS/ASC proposed rule listed 12 APCs that 
we proposed 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 
proposed for CY 2009. The median costs for hospital outpatient services 
for these and all other APCs that were used in the development of the 
CY 2009 OPPS/ASC proposed rule and this final rule with comment period 
can be found on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp.
    For the CY 2009 OPPS/ASC proposed rule, we based the listed 
exceptions to the 2 times rule on claims data from January 1, 2007, 
through September 30, 2007. For this final rule with comment period, we 
used claims data from January 1, 2007, through December 1, 2007. Thus, 
after responding to all of the public comments on the CY 2009 OPPS/ASC 
proposed rule and making changes to APC assignments based on those 
comments, we analyzed the CY 2007 claims data used for this final rule 
with comment period to identify the APCs with 2 times rule violations.
    Based on the final CY 2007 claims data, we found that there were 14 
APCs with 2 times rule violations, an increase of 2 APCs from the 
proposed rule. We have not included in this count those APCs where a 2 
times violation is not a relevant concept, such as APC 0375 (Ancillary 
Outpatient Service When Patient Expires), with an APC median cost set 
based on multiple procedure claims, so that we have identified only 
final APCs, including those with

[[Page 68607]]

criteria-based median costs, such as device-dependent APCs, with 2 
times violations. We applied the criteria as described earlier to 
identify the APCs that are exceptions to the 2 times rule for CY 2009, 
and as noted below, have identified the additional APCs that have met 
the criteria for exception to the 2 times rule for this final rule with 
comment period. These APC exceptions are listed in Table 15 below.
    Comment: One commenter supported the continued exception of APC 
0303 (Treatment Device Construction) to the 2 times rule for CY 2009. 
The commenter agreed that, based on the CY 2007 claims data, CMS' 
proposed assignment of the following three CPT codes to APC 0303 was 
appropriate: 77332 (Treatment devices, design and construction; simple 
(simple block, simple bolus)); 77333 (Treatment devices, design and 
construction; intermediate (multiple blocks, stents, bite blocks, 
special bolus)); and 77334 (Treatment devices, design and construction; 
complex (irregular blocks, special shields, compensators, wedges, molds 
or casts)). Noting that the 2 times violation was not extreme, the 
commenter believed that the proposed exception was appropriate because 
the services within APC 0303 are clinically comparable.
    Response: We appreciate the commenter's support for our proposal.
    After consideration of all of the public comments received and our 
review of the CY 2007 claims data used for this final rule with comment 
period, we are finalizing our proposal to exempt 12 APCs from the 2 
times rule for CY 2009, with modification. We are increasing the list 
of APC exceptions from 12 to 14 APCs to also include APCs 0341 (Skin 
Tests) and 0367 (Level I Pulmonary Test) for CY 2009. Our final list of 
the 14 APC exceptions to the 2 times rule for CY 2009 is displayed in 
Table 15 below.

     Table 15--Final APC Exceptions to the 2 Times Rule for CY 2009
------------------------------------------------------------------------
          Final CY 2009 APC                    CY 2009 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.
0341.................................  Skin Tests.
0367.................................  Level I Pulmonary Test.
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. 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 sufficient data to enable us 
to move the procedure to a clinically appropriate APC. However, in 
cases where we find that our original New Technology APC assignment was 
based on inaccurate or inadequate information (although it was the best 
information available at the time), 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, in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41471), we proposed to retain services within New 
Technology APC groups until we gather sufficient claims data to enable 
us to assign the service to a clinically appropriate APC for CY 2009. 
The flexibility associated with this policy allows us to move a service 
from a New Technology APC in less than 2 years if sufficient data are 
available. It also allows us to retain a service in a New Technology 
APC for more than 2 years if sufficient hospital claims data upon which 
to base a decision for reassignment have not been collected.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2009 proposal, without modification, to retain 
services within New Technology APCs until we gather sufficient claims 
data to assign the services to a clinically appropriate APC. Thus, a 
service can be assigned to a New Technology APC for more than 2 years 
if we have insufficient claims data to reassign the service to a 
clinical APC, or it could be reassigned to a clinical APC in less than 
2 years if we have adequate claims data.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41471), we stated that 
we believed we had sufficient claims data to propose reassigning the 
following three HCPCS codes, which we stated represent services 
assigned to New Technology APCs in CY 2008, to

[[Page 68608]]

clinically appropriate APC for CY 2009: 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). These three procedures have been 
assigned to their New Technology APCs for at least 3 years, thereby 
providing us with data from at least 2 years of hospital claims upon 
which we based the proposed reassignments for CY 2009. In addition, as 
we indicated in the CY 2009 OPPS/ASC proposed rule, we believe that 
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, in 
the CY 2009 OPPS/ASC proposed rule , we proposed to reassign these 
three procedures to clinically appropriate APCs, utilizing their CY 
2007 claims data to develop the clinical APC median costs upon which 
payments would be based for CY 2009. As shown in Table 14 of the CY 
2009 OPPS/ASC proposed rule, we proposed to reassign HCPCS code C9725 
from New Technology APC 1507--Level VII ($500-$600) to APC 0164 (Level 
II Urinary and Anal Procedures), with a proposed payment rate of 
approximately $145; to reassign HCPCS code 9726 from New Technology APC 
1508--Level VIII ($600-$700) to APC 0028 (Level I Breast Surgery), with 
a proposed payment rate of approximately $1,412; and to reassign HCPCS 
code C9727 from New Technology 1510-Level X ($800-$900) to APC 0252 
(Level III ENT Procedures), with a proposed payment rate of 
approximately $509.
    Further, in the CY 2009 OPPS/ASC proposed rule (73 FR 41471), we 
proposed to delete HCPCS code C9723 (Dynamic infrared blood perfusion 
imaging (diri)) that has been assigned to New Technology APC 1502 (New 
Technology--Level II ($50-$100)) since it was implemented in April 
2005. Based on our claims data for the past 3 years, which have shown 
no utilization for HCPCS code C9723, we proposed to delete this HCPCS 
code on December 31, 2008.
    Comment: Several commenters disagreed with the proposed 
reassignment of HCPCS code C9725 and asserted that the CY 2007 claims 
data included only two single claims for HCPCS code C9725 and, 
therefore, these data provided an insufficient basis for reassigning 
this service from New Technology APC 1507 to APC 0164, which has a 
proposed payment rate of approximately $145. They argued that the 
procedures in APC 0164 are not clinically similar or comparable in cost 
to HCPCS code C9725. The commenters believed that the procedures 
included in APC 0164 require less time and physician skill than HCPCS 
code C9725 and that they do not require the use of a temporary 
implanted device for treatment delivery as does HCPCS code C9725. The 
commenters recommended that, for CY 2009, CMS retain HCPCS code C9725 
in its current New Technology APC with a payment rate of approximately 
$550 for at least 1 more year, or reassign it to APC 0155 (Level II 
Anal/Rectal Procedures), which has a proposed payment rate of 
approximately $804, because they believed that APC 0155 would be a more 
appropriate assignment for HCPCS code 9725 based on consideration of 
its clinical characteristics and resource costs.
    Response: We do not agree that that we should continue to assign 
HCPCS code C9725 to New Technology APC 1507, as explained below. HCPCS 
code C9725 was assigned to New Technology 1507 with a payment rate of 
approximately $550 when it was implemented on October 1, 2005. At this 
point, the service has been assigned to a New Technology APC for over 3 
years. We believe that reassigning this service to a clinical APC is 
appropriate for CY 2009, because this service is clinically similar to 
other services currently paid under the OPPS and because it has resided 
in a New Technology APC for over 3 years.
    At the August 2008 APC Panel meeting, a public comment letter on 
the CY 2009 OPPS/ASC proposed rule was discussed that requested that 
the APC Panel recommend that CMS reassign HCPCS code C9725 to APC 0155 
(Level II Anal/Rectal Procedures) rather than to APC 0164, as proposed, 
on the basis of its clinical similarity to other procedures in APC 
0155. The proposed CY 2009 payment rate of APC 0155 is approximately 
$804. The APC Panel did not agree that HCPCS code C9725 is comparable 
to the procedures in APC 0155, but the APC Panel recommended that CMS 
reassign the HCPCS code C9725 to an appropriate device-dependent APC 
based on median cost data.
    Further analysis of the latest CY 2007 claims data used for this 
final rule with comment period revealed limited data for HCPCS code 
C9725, with variable costs over the past 3 years, leading us to 
conclude that this service is rarely performed on Medicare 
beneficiaries in the HOPD. We do not agree with the commenters' 
recommendation to either retain this procedure in New Technology APC 
1507 for 1 more year or to reassign it to clinical APC 0155 in the 
Anal/Rectal Procedures series for CY 2009. Currently we do not have an 
identified device-dependent APC under the OPPS that would be an 
appropriate assignment for HCPCS code C9725, and there is no Level II 
HCPCS code that describes the device that is inserted into the body 
that would be reported with the procedure. Therefore, we are not 
adopting the APC Panel's recommendation to assign the service to an 
appropriate device-dependent APC for CY 2009.
    However, after reexamining the clinical characteristics of HCPC 
code C9725, the limited claims data, and our expectations regarding the 
cost of the procedure, we reevaluated our proposed assignment for HCPCS 
code C9725 and believe that this service would be more appropriately 
assigned to APC 0148 (Level I Anal/Rectal Procedures), based on 
considerations of the service's clinical and resource characteristics. 
Moreover, several commenters recommended an APC assignment for HCPCS 
code C9725 in this same clinical series. APC 0148 has a final median 
cost of approximately $378 for CY 2009, and we believe this APC will 
ensure appropriate payment for HCPCS code C9725.
    After consideration of the public comments received and the APC 
Panel recommendation, in this final rule with comment period, we are 
modifying our CY 2009 proposal and reassigning HCPCS code C9725 to APC 
0148 (instead of APC 0164), with a final CY 2009 APC median cost of 
approximately $378 for CY 2009.
    Comment: One commenter supported the proposed reassignment of HCPCS 
code C9726 from New Technology APC 1508 to APC 0028 for CY 2009, with a 
proposed payment rate of approximately $1,412.
    Response: We appreciate the commenter's support.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, to reassign 
HCPCS code C9726 to APC 0028, with a final CY 2009 APC median cost of 
approximately $1,387.
    We did not receive any public comments on the proposed assignment 
of HCPCS code C9727 to APC 0252 or our proposal related to the deletion 
of HCPCS code C9723. Therefore, we are finalizing our CY 2009 
proposals, without modification, to reassign HCPCS code C9727 to APC 
0252, which has a final CY 2009 APC median cost of approximately $486 
and to discontinue HCPCS code C9723 on December 31,

[[Page 68609]]

2008. Table 16, below, lists the final CY 2009 APC assignments and 
status indicators for HCPCS codes C9725, C9726, and C9727.

                Table 16--CY 2009 APC Reassignments of New Technology Procedures to Clinical APCs
----------------------------------------------------------------------------------------------------------------
                                                                                 CY 2008    Final CY    Final CY
           CY 2009 HCPCS code             CY 2009 short descriptor  CY 2008 SI     APC       2009 SI      2009
----------------------------------------------------------------------------------------------------------------
C9725..................................  Placement of endorectal            S        1507          T        0148
                                          intracavitary applicator
                                          for high intensity
                                          brachytherapy.
C9726..................................  Placement and removal (if          S        1508          T        0028
                                          performed) of applicator
                                          into breast for
                                          radiation therapy.
C9727..................................  Insertion of implants              S        1510          T        0252
                                          into the soft palate;
                                          minimum of three
                                          implants.
----------------------------------------------------------------------------------------------------------------

D. OPPS APC-Specific Policies

1. Apheresis and Stem Cell Processing Services
a. Low-Density Lipoprotein (LDL) Apheresis (APC 0112)
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41798), we proposed to 
continue our CY 2008 assignment of CPT code 36516 (Therapeutic 
apheresis; with extracorporeal selective adsorption or selective 
filtration and plasma reinfusion) to APC 0112 (Apheresis and Stem Cell 
Procedures) with a proposed payment rate of approximately $2,020. The 
CY 2008 payment rate for this service is approximately $1,949.
    Comment: One commenter argued that the CY 2007 claims data for CPT 
code 36516 are skewed and would result in a CY 2009 payment rate for 
APC 0112 that is unacceptably low for hospitals. The commenter stated 
that LDL apheresis is the only procedure that can be reported 
accurately using CPT code 36516. According to the commenter, far fewer 
hospitals have the capability to perform this procedure than hospitals 
that are billing CPT code 36516 on OPPS claims. Furthermore, the 
commenter asserted that hospitals systematically underreport costs for 
CPT code 36516, resulting in a median cost for CPT code 36516 that is 
undervalued by an estimated $1,000, and a median cost for APC 0112 that 
is undervalued by an estimated $150 to $200. The commenter recommended 
that CMS initiate an investigation or provide instruction on how to 
rectify the misreporting of the procedure described by CPT code 36516, 
and remove all claims for CPT code 36516 from the median calculation 
upon which the payment rate for APC 0112 is based.
    Response: We do not believe it is necessary to alter our standard 
OPPS ratesetting methodology to exclude claims for CPT code 36516 from 
the median cost calculation for APC 0112 in order to ensure appropriate 
payment to hospitals that will ensure access to care in CY 2009. The 
payment rate for APC 0112 has steadily increased since CY 2006, when 
the OPPS payment rate was approximately $1,570. We also note that 
procedures described by CPT code 36516 comprise only 11 percent of the 
CY 2007 single claims for all services that are used to calculate the 
median cost of APC 0112. Furthermore, according to the commenter's 
analysis, removing several hundred claims for CPT code 36516 from the 
calculation of the median cost of APC 0112 would lead to only a small 
change of $150 to $200 in the APC's median cost.
    We have no reason to believe that hospitals are misreporting 
services with CPT code 36516 and note that we do not specify the 
methodologies that hospitals must use to set charges for this, or any 
other, procedure. The calculation of OPPS payment weights that reflect 
the relative resources required for HOPD services is the foundation of 
the OPPS, and we also see no reason why hospitals would systemically 
underreport the costs of the procedure described by CPT code 36516.
    We rely on hospitals to bill all HCPCS codes accurately in 
accordance with their code descriptors and CPT and CMS instructions, as 
applicable, and to report charges on claims and charges and costs on 
their Medicare cost report appropriately. In both the January 2005 OPPS 
quarterly update, Transmittal 423, Change Request 3632, issued on 
January 6, 2005, and the January 2006 OPPS quarterly update, 
Transmittal 804, Change Request 4250, issued on January 3, 2006, we 
provided instructions to hospitals on how to correctly report items and 
services associated with the procedure described by CPT code 36516. 
Specifically, we instructed hospitals to bill supply charges either by 
including them in the charge for CPT code 36516 or by using an 
appropriate supply revenue code when using CPT code 36516 to report 
extracorporeal selective absorption of selective filtration and plasma 
reinfusion for indications such as familial hypercholesterolemia. We 
further emphasized that, in every case, hospitals should report the 
codes that most accurately describe the therapeutic apheresis service 
that is being furnished. We continue to expect hospitals to report the 
services described by CPT code 36516 accurately as we have instructed, 
and see no current basis for questioning the charges hospitals report 
on their claims and on their Medicare cost reports for this service.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, to calculate the 
payment rate for APC 0112 by applying our standard OPPS ratesetting 
methodology that relies on all single claims for all procedures 
assigned to the APC. The final CY 2009 median cost of APC 0112 is 
approximately $1,988.
b. Bone Marrow and Stem Cell Processing Services (APC 0393)
    For CY 2008, we discontinued recognizing HCPCS code G0267 (Bone 
marrow or peripheral stem cell harvest, modification or treatment to 
eliminate cell type(s)) for depletion services for hematopoietic 
progenitor cells) for payment under the OPPS and deleted the HPCPCS 
code effective January 1, 2008 (72 FR 66821 through 66823). Instead, we 
recognized the specific CPT codes that describe these services, which 
include: CPT codes 38210 (Transplant preparation of hematopoietic 
progenitor cells; specific cell depletion within harvest, T-cell 
depletion); 38211 (Transplant preparation of hematopoietic progenitor 
cells; tumor cell depletion); 38212 (Transplant preparation of 
hematopoietic progenitor cells; red blood cell removal); 38213 
(Transplant preparation of hematopoietic progenitor cells; platelet 
depletion); 38214 (Transplant preparation of hematopoietic progenitor 
cells; plasma (volume) depletion); and 38215 (Transplant preparation of 
hematopoietic progenitor cells; cell

[[Page 68610]]

concentration in plasma, mononuclear, of buffy coat layer).
    For CY 2008, we assigned CPT codes 38210 through 38215 to APC 0393 
with other red blood cell and plasma handling and testing services and 
renamed APC 0393 ``Hematologic Processing and Studies'' so that the APC 
title more accurately describes all the services assigned to the APC. 
We maintained a status indicator of ``S'' for APC 0393. The data for 
the predecessor code, HCPCS code G0267, was also assigned to APC 0393. 
The CY 2008 payment for APC 0393 is approximately $363, based on an APC 
median cost of approximately $397, the same median cost as HCPCS code 
G0267 in CY 2008. As we stated in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66823), it is consistent with our general 
practice under the OPPS to make payment based on historical claims data 
for the predecessor HCPCS code until we have more specific hospital 
resource data available to assess the specific CPT codes for possible 
APC reassignment. In the CY 2009 OPPS/ASC proposed rule, we did not 
propose to change the APC assignments for CPT codes 38210 through 38215 
for CY 2009. The CY 2009 proposed payment for APC 0393 was 
approximately $398.
    Comment: One commenter asserted that CPT codes 38210 and 38211 were 
inappropriately assigned to APC 0393 because the other services in APC 
0393 are not related to stem cell purification and transplantation and 
because the supplies and clinical staff costs are significantly more 
than the proposed payment rate for these two services. The commenter 
recommended that CMS reassign these services to APC 0112 (Apheresis and 
Stem Cell Procedures), reasoning that the codes for T-cell and tumor 
cell depletion are more similar clinically and in terms of costs to 
other services assigned to APC 0112.
    Response: As we stated in the CY 2008 OPS/ASC final rule with 
comment period (72 FR 66823), we believe that our assignment of CPT 
codes 38210 through 38215 to APC 0393 will pay appropriately for these 
CPT codes while we collect more specific data on their individual 
resource costs. We continue to believe that the two specific services 
for T-cell or tumor cell depletion during preparation of hematopoietic 
progenitor cells for transplantation are more clinically similar to 
those services in APC 0393 than in APC 0112, which contains procedures 
for extracorporeal adsorption during therapeutic apheresis that 
involves reinfusion of plasma into the patient and bone marrow and stem 
cell collection and transplantation, rather than cell processing. We 
note that the final median cost for APC 0112 for CY 2009, is 
approximately $1,988, while the final median cost for APC 0393 is 
approximately $391. There were no claims submitted for CPT code 38210 
in CY 2008. In addition, there was one claim for CPT code 38211 
available for ratesetting, with a median cost of about $201. Further, 
there were 125 claims for HCPCS code G0267 available for ratesetting, 
with a final median cost of $391. Based on these cost data, we continue 
to believe that APC 0393 will pay more appropriately for CPT codes 
38210 and 38211 while we collect more specific data on their individual 
resource costs.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, to maintain CPT 
codes 38210 and 38211 in APC 0393, with a final CY 2009 APC median cost 
of approximately $391.
2. Genitourinary Procedures
a. Implant Injection for Vesicoureteral Reflux (APC 0163)
    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 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. From the perspective of these stakeholders, the CY 2008 
assignment of CPT code 52327 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 codes lack the specificity 
needed to properly account for the cost of the ureteral implant, 
dextranomer/hyaluronic acid, the only FDA approved product for the 
procedure. In addition to receiving several letters on this subject, we 
also met with 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). 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, with a 
stated cost of $1,045 per milliliter. The APC Panel recommended that 
CMS consider reassigning CPT code 52327 to a more appropriate APC.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41477), we proposed to 
reassign CPT code 52327 from APC 0162 to APC 0163 (Level IV 
Cystourethroscopy and other Genitourinary Procedures), with a proposed 
payment rate of approximately $2,392.
    Comment: One commenter supported the proposed reassignment of CPT 
code 52327 from APC 0162 to APC 0163. However, the commenter expressed 
concern that the proposed payment rate for the service is still 
inadequate. The commenter contended that until hospitals are able to 
report the implant material with a separate HCPCS code, the procedure 
would continue to be inadequately paid under APC 0163. Another 
commenter also expressed support for the proposed reassignment of CPT 
code 52327 to APC 0163 from APC 0162. However, the commenter noted that 
the proposed increase in payment was less than the cost of a single 
vial of the implant material and that it is not uncommon for more than 
one vial to be used during a procedure. The commenter argued that 
Medicare claims data do not accurately reflect the cost of the implant 
for several reasons, specifically that the procedure is primarily a 
pediatric procedure with few Medicare claims and that there is no 
unique HCPCS code to describe the implant product.
    Response: We appreciate the commenters' support for our proposal to 
reassign CPT code 52327 from APC 0162 to APC 0163 for CY 2009. We 
continue to believe that APC 0163 will provide appropriate payment for 
this surgical procedure, including the cost of the ureteral implant 
material, in CY 2009. As we noted in the CY 2009 OPPS/ASC proposed rule 
(73 FR 41477), a number of the procedures also assigned to APC 0163 are 
clinically similar to CPT code 52327, involving the use of a cystoscope 
and the implantation of devices.
    There is a new Level II HCPCS code for CY 2009, HCPCS code L8604 
(Injectable bulking agent, dextranomer/hyaluronic acid copolymer 
implant, urinary tract, 1 ml), that describes an implant that may be 
used in the procedure reported with CPT code 52327. However, with the 
exception of implantable devices that are subject to

[[Page 68611]]

transitional pass-through payment for a limited time period, under the 
OPPS, regardless of the availability of HCPCS codes specific to 
implantable devices, Medicare makes payment for those implantable 
devices through payment for the associated surgical procedure. 
According to our regulations at Sec.  419.2(b), 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, HCPCS code L8604 is assigned 
an interim CY 2009 status indicator of ``N'' in Addendum B to this 
final rule with comment period, to indicate that its payment is 
unconditionally packaged in all cases. We also note that, because HCPCS 
code L8604 is a new code for CY 2009, it is assigned comment indicator 
``NI'' in Addendum B to this final rule with comment period, indicating 
that its interim OPPS treatment is open to public comment on this final 
rule with comment period.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to reassign CPT 
code 52327 from APC 0162 to APC 0163, with a final CY 2009 APC median 
cost of approximately $2,316.
b. Laparoscopic Ablation of Renal Mass (APC 0132)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue the 
assignment of CPT code 50542 (Laparoscopy, surgical; ablation of renal 
mass lesion(s)) to APC 0132 (Level III Laparoscopy), with a proposed 
payment rate of approximately $4,715. The CY 2008 payment rate for APC 
0132 is approximately $4,437.
    Comment: Several commenters disagreed with the proposed continued 
assignment of CPT code 50542 to APC 0132. They indicated that the 
service described by CPT code 50542 is not similar, in terms of 
clinical characteristics or resource costs, to the other procedures in 
APC 0132. The commenters further asserted that APC 0132 does not 
accurately reflect the hospital costs required to perform the procedure 
on an outpatient basis, which may be performed by cryoablation or 
radiofrequency ablation. They recommended that CMS create a new 
clinical APC in the laparoscopy series in order to improve both the 
clinical and resource homogeneity of the laparoscopy APCs and reassign 
CPT code 50542 to this new clinical APC.
    Response: CPT code 50542 was implemented on January 1, 2003, and 
from CYs 2003 through 2005, this service was assigned to APC 0131 
(Level II Laparoscopy). As discussed in the CY 2006 OPPS final rule 
with comment period (70 FR 68604), a CY 2006 OPPS proposed rule 
commenter recommended that we reassign CPT code 50542 from APC 0131 to 
APC 0132 to adequately pay for the cost of performing this procedure. 
We examined our CY 2004 hospital outpatient claims used for CY 2006 
ratesetting and concluded that a reassignment to APC 0132 was 
warranted. For CY 2009, our analysis of the CY 2007 hospital outpatient 
claims data used for CY 2009 ratesetting revealed a HCPCS code-specific 
median cost of approximately $8,225 for CPT code 50542, which is 
substantially higher than the APC median cost of approximately $4,515 
for APC 0132. We also found, after further examination of all of the 
procedures currently assigned to APC 0132, that CPT code 47370 
(Laparoscopy, surgical, ablation of one or more liver tumor(s); 
radiofrequency) that describes another laparoscopic ablation procedure 
has a HCPCS code-specific median cost of approximately $6,520, which is 
also significantly higher than the median cost for APC 0132. While 
there are numerous procedures assigned to APC 0132, most are low volume 
and only 1 procedure has significant volume consisting of 862 single 
claims, with a HCPCS code-specific median cost of approximately $4,651, 
significantly lower than the median costs of the 2 ablation procedures. 
Based on these findings, we believe that creation of a new clinical 
APC, specifically APC 0174 (Level IV Laparoscopy) with status indicator 
``T,'' and the reassignment of both CPT codes 50542 and 47370 for 
laparoscopic ablation procedures to this new APC, are the most 
appropriate approaches to ensuring clinical and resource homogeneity 
within APC 0132 and new APC 0174.
    After consideration of the public comments received, we are 
modifying our CY 2009 proposed configuration of APC 0132 by reassigning 
CPT codes 50542 and 47370 from APC 0132 to new clinical APC 0174 for 
laparoscopic procedures, which has a final CY 2009 APC median cost of 
approximately $7,731. Reconfigured APC 0132 has a final CY 2009 APC 
median cost of approximately $4,515.
c. Percutaneous Renal Cryoablation (APC 0423)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue to 
assign CPT code 50593 (Ablation, renal tumor(s), unilateral, 
percutaneous, cryotherapy) to APC 0423 (Level II Percutaneous Abdominal 
and Biliary Procedures) for CY 2009, with a proposed payment rate of 
approximately $3,028. This CPT code was new in CY 2008; however, the 
same service was previously described by CPT code 0135T (Ablation renal 
tumor(s), unilateral, percutaneous, cryotherapy). We note that in CY 
2007, based upon the APC Panel's recommendation made at its March 2006 
meeting, we reassigned CPT code 50593 (then CPT code 0135T) from APC 
0163 (Level IV Cystourethroscopy and other Genitourinary Procedures) to 
APC 0423, with a payment rate of approximately $2,297 in CY 2007. We 
expected hospitals, when reporting CPT code 50593, to also report the 
device HCPCS code, C2618 (Probe, cryoablation), associated with the 
procedure.
    Comment: Several commenters disagreed with the proposed continued 
APC assignment of CPT code 50593 to APC 0423. The commenters believed 
that the proposed payment rate for APC 0423 does not accurately reflect 
the costs incurred by hospitals that perform CPT code 50593, and 
recommended that CMS assign this procedure to its own APC and base 
payment for that APC on the mean cost of CPT code 50593. They also 
believed that the proposed inadequate payment rate for CPT code 50593 
is attributable to the use of claims data that do not accurately 
capture the full costs of CPT code 50593.
    Response: Based on our review of the procedures assigned to APC 
0423, the public comments received, and the CY 2006 recommendation of 
the APC Panel regarding renal cryoablation, we believe that we have 
appropriately assigned CPT code 50593 to APC 0423 for CY 2009 based on 
clinical and resource considerations. We continue to believe that CPT 
code 50593 is appropriately assigned to APC 0423 because it is grouped 
with other procedures that share similar clinical and resource 
characteristics. Further examination of the procedures assigned to APC 
0423 revealed that the HCPCS code-specific median costs of these 
services are all similar, ranging from $2,875 to $3,959.
    In regard to the commenters' request that CMS assign CPT code 50593 
to its own APC and provide payment based on the mean cost of this 
procedure, it has been our policy since the implementation of the OPPS 
that the

[[Page 68612]]

final APC relative weights and payment rates are based on median 
hospital costs, not mean costs, for the clinical APC groups. The OPPS 
relies on the relativity of costs for procedures as reported by 
hospitals in establishing payment rates, and we do not believe it would 
be appropriate to utilize a different payment methodology based on mean 
cost for one APC, while the payment rates for the other clinical APCs 
would be based on median costs. Mean and median costs are two different 
statistical measures of central tendency and, based on common 
distributions, mean costs typically are higher than median costs. 
Therefore, we do not believe it would be appropriate to use a 
combination of these measures to establish the payment weights for 
different clinical APCs under the OPPS.
    Comment: Some commenters requested that CMS designate CPT code 
50593 as a device-dependent procedure. They requested that CMS 
establish a claims processing edit to ensure that the device HCPCS code 
C2618 (Probe, cryoablation), used during the procedure, is reported on 
percutaneous renal cryoablation claims to ensure correctly coded claims 
for future ratesetting that accurately reflect hospitals' costs for CPT 
code 50593. Commenters indicated that the failure of hospitals to 
report the device HCPCS C-code for the cryoablation probe on claims 
leads to an underestimation of hospital costs for the procedure.
    Response: We acknowledge the concerns raised by the commenters 
regarding hospitals' failure to report the device HCPCS code C2618 with 
the procedure in many cases. We further examined our CY 2007 claims 
data used for this final rule with comment period to determine the 
frequency of billing CPT code 50593 with and without HCPCS code C2618. 
Our analysis revealed that the CY 2009 final rule median cost for CPT 
code 50593 of approximately $3,959, based on 118 single bills used for 
CY 2009 ratesetting, falls within the range for those procedures billed 
with and without the device HCPCS code C2618. Specifically, our data 
showed a median cost of approximately $4,632 based on 48 single bills 
for procedures reported with the device HCPCS code C2618 and a median 
cost of about $2,924 based on 71 single bills for those procedures 
billed without the device HCPCS C-code. (We note that of the 119 single 
bills available for CY 2009 ratesetting, we trimmed 1 claim with 
excessively high cost when setting the CY 2009 final rule median.) Even 
considering only those claims for percutaneous renal cryoablation with 
the device HCPCS code and higher median cost, the procedure would be 
appropriately assigned to APC 0423 based on that cost. As a result of 
this analysis, which showed that both claim subsets could be 
appropriately mapped to APC 0423 based on their costs, we believe it 
continues to be appropriate to use all single claims for CPT code 50593 
for ratesetting and that the procedure is appropriately assigned to APC 
0423.
    Further, we do not agree that we should create a claims processing 
edit for CPT code 50593 and HCPCS code C2618 for the cryoablation 
probe, nor do we believe that we should identify any individual HCPCS 
codes as device-dependent HCPCS codes under the OPPS for CY 2009. We 
create device edits, when appropriate, for procedures assigned to 
device-dependent APCs, where those APCs have been historically 
identified under the OPPS as having very high device costs. Because APC 
0423 is not a device-dependent APC and the costs of percutaneous renal 
cryoablation with and without HCPCS code C2618 are both within the 
range of costs for procedures assigned to APC 0423, we are not creating 
claims processing edits for CY 2009. Furthermore, in the case of APC 
0423, we note that while all of the procedures assigned to this APC 
require the use of implantable devices, for many of the procedures 
there are no Level II HCPCS codes that describe all of the technologies 
that may be used in the procedures. Therefore, it would not be possible 
for us to develop procedure-to-device edits for most of the CPT codes 
assigned to the APC.
    We remind hospitals that they must report all of the HCPCS codes 
that appropriately describe the items used to provide services, 
regardless of whether the HCPCS codes are packaged or paid separately. 
If hospitals use more than one probe in performing CPT code 50593, we 
expect hospitals to report this information on the claim and adjust 
their charges accordingly. Hospitals should report the number of 
cryoablation probes used to perform CPT code 50593 as the units of 
HCPCS code C2618 which describes these devices, with their charges for 
the probes. Since CY 2005, we have required hospitals to report device 
HCPCS codes for all devices used in procedures if there are appropriate 
HCPCS codes available. In this way, we can be confident that hospitals 
have included charges on their claims for costly devices used in 
procedures when they submit claims for those procedures.
    After consideration of all the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to continue to 
assign CPT code 50593 to APC 0423, which has a final CY 2009 APC median 
cost of approximately $3,003.
d. Magnetic Resonance Guided Focused Ultrasound (MRgFUS) Ablation of 
Uterine Fibroids (APC 0067)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue to 
assign CPT codes 0071T (Focused ultrasound ablation of uterine 
leiomyomata, including MR guidance; total leiomyomata volume less than 
200 cc of tissue) and 0072T (Focused ultrasound ablation of uterine 
leiomyomata, including MR guidance; total leiomyomata volume greater or 
equal to 200 cc of tissue) to APC 0067 (Level III Stereotactic 
Radiosurgery, MRgFUS, and MEG), with a payment rate of approximately 
$3,664. The CY 2008 payment rate for these services is approximately 
$3,930. Further, at its August 2008 meeting, the APC Panel recommended 
that CMS maintain the APC assignment for both procedures, specifically 
CPT codes 0071T and 0072T, to APC 0067, similar to the recommendation 
the APC Panel made for these procedures at its March 2007 meeting.
    Comment: Several commenters commended CMS for its proposal to 
assign the MRgFUS procedures, specifically CPT codes 0071T and 0072T, 
to APC 0067 because of their clinical similarity to other services also 
assigned to that APC. However, the commenters disagreed with the 
proposed payment rate of $3,664 for these procedures. They claimed that 
the payment rate for the procedures continues to be lower than the 
hospital costs incurred to provide the services and does not accurately 
reflect all of the components required to perform the MRgFUS 
procedures. They asserted that the proposed payment rate does not 
include payment for the treatment planning required to perform the 
procedure. The commenters recommended that CMS reassign CPT codes 0071T 
and 0072T to another APC in the same clinical series, specifically APC 
0127 (Level IV Stereotactic Radiosurgery, MRgFUS, and MEG), with a 
proposed payment rate of approximately $7,608, because assignment to 
this APC would provide more appropriate payment for the hospital 
resources needed to perform the procedures.
    Response: We disagree that the MRgFUS procedures are clinically 
similar to the single multi-source cobalt-based stereotactic 
radiosurgery (SRS) service that is currently assigned to APC 0127, and 
which we believe requires significantly greater hospital resources.

[[Page 68613]]

The SRS procedure is generally performed on intracranial lesions, and 
requires immobilization of the patient's head using a frame that is 
applied to the skull. Several hundred converging beams of gamma 
radiation are then applied to the target lesion, requiring their 
accurate placement to the fraction of a millimeter. In contrast, during 
MRgFUS, magnetic resonance imaging guidance is utilized to confirm 
tissue heating, while multiple sonications at various points in the 
fibroid treatment area are executed until the entire target volume has 
been treated.
    Our analysis of the latest CY 2007 hospital outpatient claims data 
indicates that MRgFUS procedures are rarely performed on Medicare 
beneficiaries. As we stated in the CY 2006 OPPS final rule with comment 
period (70 FR 68600) and in the CYs 2007 and 2008 OPPS/ASC final rules 
with comment period (71 FR 68050 and 72 FR 66710, respectively), 
because treatment of uterine fibroids is most common among women 
younger than 65 years of age, we expect very limited Medicare claims 
for these procedures. In fact, for claims submitted from CYs 2005 
through 2007, our claims data showed that there were only two claims 
for CPT code 0071T in CY 2005, one claim in CY 2006, and again only one 
claim in CY 2007. There were no claims submitted for CPT code 0072T 
from CYs 2005 through 2007. Therefore, we have no reliable information 
from hospital claims regarding the costs of MRgFUS procedures. However, 
we continue to believe that the clinical and expected resource 
characteristics for these procedures resemble the first or complete 
session linear accelerator-based SRS treatment delivery services that 
also are assigned to APC 0067.
    Further, in response to a public comment letter that was presented 
at its August 2008 meeting, the APC Panel reiterated its March 2007 
recommendation to maintain the current placement of CPT codes 0071T and 
0072T in APC 0067 for CY 2009. At that meeting, a stakeholder reported 
that the reason for requesting the reassignment of the MRgFUS 
procedures from APC 0067 to APC 0127 is to set the standard payment 
rate for other payers because many of them base their payment rates on 
Medicare rates. We remind hospitals that the payment rates set for the 
services, procedures, and items paid under the OPPS are based mainly on 
costs from hospitals' claims, and are established in accordance with 
the payment policies of the OPPS to provide appropriate payment for the 
care of Medicare beneficiaries. Non-Medicare payers set their own 
payment rates based on their payment policies.
    After consideration of the public comments received and the APC 
Panel recommendations from its March 2007 and August 2008 meetings, we 
are finalizing our CY 2009 proposal, without modification, to continue 
to assign CPT codes 0071T and 0072T to APC 0067, with a final CY 2009 
APC median cost of approximately $3,718.
e. Prostatic Thermotherapy (APC 0429)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue the 
assignment of CPT codes 53850 (Transurethral destruction of prostate 
tissue; by microwave thermotherapy) and 53852 (Transurethral 
destruction of prostate tissue; by radiofrequency thermotherapy) to APC 
0429 (Level V Cystourethroscopy and other Genitourinary Procedures) for 
CY 2009, with a proposed payment rate of approximately $3,016.
    Comment: One commenter, who stated that CPT codes 53850 and 53852 
were assigned to APC 0163, urged CMS to investigate whether these 
procedures were correctly assigned to APC 0163 as the commenter 
believed that APC 0429 would be a more appropriate assignment for the 
procedures based on clinical and resource considerations. The commenter 
recommended that the APC assignments of CPT codes 53850 and 53852 be 
discussed at the next APC Panel meeting.
    Response: As we stated in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66709), as part of our annual review, we examine 
the APC assignments for all items and services under the OPPS for 
appropriate placements in the context of our proposed policies for the 
update year. This review involves careful and extensive analysis of our 
hospital outpatient claims data, as well as input from our medical 
advisors, the APC Panel, and the public. As stated in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66709), we agreed with a 
commenter on the CY 2008 OPPS/ASC proposed rule that reassignment of 
CPT codes 53850 and 53852 to APC 0429 with a CY 2008 median cost of 
approximately $2,844 would be appropriate, based on their clinical and 
resource similarities with other procedures to destroy prostate tissue 
also residing in that APC. We proposed to continue to assign these two 
procedures to APC 0429 for CY 2009; therefore, our proposed assignment 
already reflected the commenter's requested assignment. Consequently, 
because CPT codes 53850 and 53852 are already assigned to APC 0429, we 
do not see the need to discuss this issue at the next APC Panel 
meeting.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, to continue to 
assign CPT codes 53850 and 53852 to APC 0429, with a final CY 2009 APC 
median cost of approximately $2,958.
3. Nervous System Procedures
a. Magnetoencephalography (MEG) (APC 0067)
    APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS and MEG), 
with a proposed CY 2009 payment rate of approximately $3,664, contains 
five HCPCS codes: CPT code 95965 (Magnetoencephalography, recording and 
analysis; for spontaneous brain magnetic activity (e.g., epileptic 
cerebral cortex)); HCPCS code G0173 (Linear accelerator-based 
stereotactic radiosurgery, complete course of therapy in one session); 
HCPCS code G0399 (Image-guided robotic linear accelerator-based 
stereotactic radiosurgery, complete course of therapy in one session or 
first session of fractionated treatment); CPT code 0071T (Focused 
ultrasound ablation of uterine leiomyomata, including MR guidance; 
total leiomyomata volume less than 200 cc of tissue); and CPT code 
0072T (Focused ultrasound ablation of uterine leiomyomata, including MR 
guidance; total leiomyomata volume greater or equal to 200 cc of 
tissue). In March 2007, the APC Panel recommended that CPT code 95965 
be placed in APC 0067. Given the clinical and resource similarities 
among CPT code 95965 and the other existing codes in APC 0067, we 
agreed and reassigned CPT code 95965 to APC 0067, to which it was 
assigned for the CY 2008 OPPS with a payment rate of approximately 
$3,930. At its August 2008 meeting, the APC Panel recommended that CMS 
retain CPT code 95965 in APC 0067 for CY 2009.
    Comment: One commenter objected to the proposed reduction in 
payment for APC 0067, on the basis that it would reduce, by 
approximately $300, the CY 2009 payment for the service reported under 
CPT code 95965, compared to the CY 2008 payment rate. The commenter 
asked that CMS determine whether the claims from the hospital in which 
the commenter furnished services were included in the set of single 
bills used to calculate the proposed payment rate.
    Response: Our final rule data show a median cost for APC 0067 of 
approximately $3,718 and a median cost for CPT code 95965 of 
approximately

[[Page 68614]]

$2,227. We agree with the APC Panel that CPT code 95965 is clinically 
compatible with the other services assigned to APC 0067 and that the 
median cost for CPT code 95965, while somewhat lower than the median 
costs of the other services also assigned to the APC, is consistent 
with the CPT code's assignment to APC 0067. The process we use to 
select the claims used in the calculation of the OPPS rates is 
discussed in section II. of this final rule with comment period. We 
make the claims we use for ratesetting available for public examination 
and analysis through the limited and identifiable OPPS data sets so 
that the public may review them if there are questions about particular 
claims used to set the rates under the OPPS. Information on these files 
is available on the CMS Web site at: http://www.cms.hhs.gov/LimitedDataSets/06_HospitalOPPS.asp.
    After consideration of the public comment received, we are 
retaining the assignment of CPT code 95965 to APC 0067 for CY 2009, as 
recommended by the APC Panel, with a final CY 2009 APC median cost of 
approximately $3,718.
b. Chemodenervation (APC 0204)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue our 
assignment of CPT code 64612 (Chemodenervation of muscle(s); muscle(s) 
innervated by facial nerve (e.g., for blepharospasm, hemifacial spasm) 
to APC 0204 (Level I Nerve Injections), with a proposed payment rate of 
approximately $165. The CY 2008 payment rate for this service is 
approximately $148. In addition, for CY 2009, we proposed to reassign 
CPT codes 64613 (Chemodenervation of muscle(s); neck muscle(s) (e.g., 
for spasmodic torticollis, spasmodic dysphonia)) and 64614 
(Chemodenervation of muscle(s); extremity(s) and/or trunk muscle(s) 
(e.g., for dystonia, cerebral palsy, multiple sclerosis)) from APC 0204 
to APC 0206 (Level II Nerve Injections), with a proposed payment rate 
of approximately $243.
    Comment: Several commenters requested that CMS reassign CPT code 
64612 from APC 0204 to APC 0206, the same APC to which CMS proposed to 
assign CPT codes 64613 and 64614. Commenters claimed that CPT code 
64612 is clinically similar and comparable in resource use to CPT codes 
64613 and 64614 and, therefore, believed that CPT code 64612 should 
also be assigned to APC 0206.
    Response: CPT code 64612 has a HCPCS code-specific median cost of 
approximately $138, based on over 5,000 single claims, and we proposed 
to assign this service to APC 0204, which has a final median cost of 
approximately $161. We believe that APC 0204 appropriately reflects the 
hospital resource characteristics of CPT code 64612 and provides 
appropriate payment to hospitals for this service. Further, we believe 
that other procedures currently assigned to APC 0204 are similar to CPT 
code 64612 with respect to their clinical characteristics.
    In contrast, CPT code 64613 has a HCPCS code-specific median cost 
of approximately $197 based on approximately 5,700 single claims. 
Similarly, CPT code 64614 has a HCPCS code-specific median cost of 
approximately $217 based on over 5,700 single claims data. We proposed 
to assign both of these services to APC 0206, which has a final APC 
median cost of approximately $236. Our CY 2007 claims data used for 
this final rule with comment period revealed that the hospital resource 
costs for CPT codes 64613 and 64614 are significantly greater than the 
hospital resource costs of CPT code 64612. Therefore, we believe the 
proposed assignment of CPT code 64612 to APC 0204 is appropriate for CY 
2009, while CPT codes 64613 and 64614 are more appropriately assigned 
to APC 0206.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to assign CPT 
code 64612 to APC 0204, with a final CY 2009 APC median cost of 
approximately $161.
4. Ocular Procedures
a. Suprachordial Delivery of Pharmacologic Agent (APC 0237)
    In Addendum B to the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66997), we assigned CPT code 0186T comment indicator 
``NI'' to indicate that it was a new code for CY 2008 with an interim 
payment status subject to public comment following publication of that 
rule. In that same final rule with comment period, we also made an 
interim assignment of CPT code 0186T to APC 0236 (Level II Posterior 
Segment Eye Procedures), with a payment rate of approximately $1,161. 
CPT code 0186T was released by the AMA on July 1, 2007, and was 
implemented on January 1, 2008. 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.
    We did not receive any public comments regarding the interim 
assignment of CPT code 0186T to APC 0236 for CY 2008.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41472), we proposed to 
reassign CPT code 0186T (Suprachordial delivery of pharmacologic agent 
(does not include supply of medication)) to APC 0237 (Level II 
Posterior Segment Eye Procedures), from APC 0236, which we proposed to 
delete for CY 2009. As stated earlier, this CPT code was released by 
CPT on July 1, 2007, and implemented on January 1, 2008; therefore, we 
had no CY 2007 claims data for this service upon which to base our CY 
2009 proposal.
    We proposed to reassign CPT code 0186T to APC 0237, with a proposed 
CY 2009 payment rate of approximately $1,449, based upon our review and 
analysis of the clinical and resource costs associated with CPT code 
0186T. We agreed with a presenter at the March 2008 APC Panel meeting 
that the most appropriate CY 2009 APC assignment for the procedure is 
APC 0237. 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 currently is assigned to APC 0672 (Level IV Posterior Segment Eye 
Procedures). 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 that 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41472), we accepted 
the recommendation of the APC Panel and

[[Page 68615]]

stated that we would 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/
ASC rulemaking cycle.
    Comment: One commenter agreed with the proposed reassignment of CPT 
code 0186T to APC 0237. The commenter believed that the resource costs 
of the procedure reported with CPT code 0186T best matched those of the 
other eye procedures also assigned to APC 0237.
    Response: We appreciate the commenter's support for our proposal.
    We are finalizing our CY 2009 proposal, without modification, to 
assign CPT code 0186T to APC 0237, with a final CY 2009 APC median cost 
of approximately $1,442. We are accepting the APC Panel's March 2008 
recommendation, and we 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.
b. Scanning Ophthalmic Imaging (APC 0230)
    CPT code 0187T (Scanning computerized ophthalmic diagnostic 
imaging, anterior segment, with interpretation and report, unilateral) 
was released by the AMA 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 CPT code 0187T to APC 0230 (Level I Eye Tests & 
Treatments) with a payment rate of approximately $38. We also assigned 
this CPT 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 
longstanding policy, we do not respond to public comments submitted on 
the OPPS/ASC final rule with comment period regarding these interim 
assignments in the proposed OPPS/ASC rule for the following calendar 
year. However, we do review and take into consideration these public 
comments received during the development of the proposed rule when we 
evaluate APC assignments for the following year, and we respond to them 
in the final rule for that following calendar year.
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue the 
assignment of CPT code 0187T to APC 0230, with a proposed payment rate 
of approximately $42 for CY 2009.
    Comment: One commenter on the CY 2008 OPPS/ASC final rule with 
comment period requested that CMS reassign CPT code 0187T from APC 0230 
to APC 0266 (Level II Diagnostic and Screening Ultrasound), which is 
the APC assigned to CPT code 76513 (Ophthalmic ultrasound, diagnostic; 
anterior segment ultrasound, immersion (water bath) b-scan or high 
resolution biomicroscopy). The commenter indicated that CPT code 76513 
is very similar to CPT code 0187T because both procedures require 
imaging of the anterior segment of the eye, use similar resources, and 
utilize the same level of technical expertise in performing the 
procedures. However, the commenter cited a difference between the two 
procedures regarding how images are acquired. Specifically, the 
commenter explained that CPT code 0187T generates images based on 
light, whereas CPT code 76513 generates images by ultrasound.
    Response: Based on our review of the clinical characteristics of 
the procedure and its expected resource costs, we continue to believe 
that APC 0230 is the most appropriate assignment for CPT code 0187T. We 
will reevaluate this APC assignment for future OPPS updates as 
additional information becomes available to us. We expect claims data 
for CPT code 0187T to be first available for the CY 2010 OPPS/ASC 
rulemaking cycle.
    We did not receive any public comments on our proposal to continue 
to assign CPT code 0187T to APC 0230 for CY 2009. Therefore, we are 
finalizing our CY 2009 proposal, without modification, to assign CPT 
code 0187 to APC 0230, with a final CY 2009 APC median cost of 
approximately $42.
5. Orthopedic Procedures
a. Closed Treatment of Fracture of Finger/Toe/Trunk (APCs 0129, 0138, 
and 0139)
    We received a comment in response 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 because 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 without the benefit of public comment 
for CY 2008 could result in a reconfiguration of APC 0043 that did not 
reflect improved clinical and resource homogeneity. Therefore, we did 
not reconfigure APC 0043 for CY 2008, and we finalized a payment rate 
for APC 0043 of approximately $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. We also explained that that 
there were only 13 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 had 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. We also stated that we 
would bring this APC issue to the attention of the APC Panel at its 
March 2008 meeting, and we specifically invited public recommendations 
on potential alternative APC configurations for the services assigned 
to APC 0043 for consideration for the CY 2009 OPPS rulemaking cycle. We 
did not receive any public comments on this APC issue in response to 
the CY 2008 OPPS/ASC final rule with comment period.
    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 that 
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

[[Page 68616]]

adopt this approach, and we accepted the APC Panel's recommendation for 
CY 2009. Therefore, in the CY 2009 OPPS/ASC proposed rule (73 FR 
41472), we proposed three new APCs to replace APC 0043, with proposed 
configurations as displayed in Table 15 of the proposed rule for CY 
2009.
    Based on these configurations, proposed new APC 0129 (Level I 
Closed Treatment Fracture Finger/Toe/Trunk) had 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) had a proposed APC median cost of approximately $397, with 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) had a proposed APC median cost of 
approximately $1,340, with one significant volume HCPCS code whose 
median cost was approximately $1,574.
    We further stated in the CY 2009 OPPS/ASC proposed rule (73 FR 
41473) that while all three proposed APCs contained many procedures 
that were very low in volume, this reconfiguration reflected an attempt 
to realign the procedures previously assigned to APC 0043 into more 
homogeneous APC groups based on their clinical characteristics and 
resource costs. Therefore, in the CY 2009 OPPS/ASC proposed rule, we 
proposed 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.
    Comment: Several commenters commended CMS for reconfiguring APC 
0043 into the proposed three new APCs 0129, 0138, and 0139.
    Response: We appreciate the commenters' support for our proposal.
    For this final rule with comment period, we analyzed our CY 2007 
claims data used for CY 2009 OPPS ratesetting, and determined that the 
final median costs for proposed new APCs 0129, 0138, and 0139 are 
relatively similar to those for the CY 2009 OPPS/ASC proposed rule. 
Specifically, APC 0129 has a final APC median cost of approximately 
$103, with the HCPCS code-specific median costs of the significant 
procedures ranging from approximately $68 to $123, compared to a 
proposed APC median cost of approximately $104. APC 0138 has a final 
APC median cost of approximately $397, with one significant procedure 
with a HCPCS code-specific median cost of approximately $396, compared 
to a proposed APC median cost of approximately $397. Finally, APC 0139 
has a final APC median cost of about $1,283, with one significant 
volume HCPCS code whose median cost is approximately $1,393, compared 
to a proposed APC median cost of approximately $1,340.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to delete APC 
0043 and reassign the HCPCS codes previously assigned to APC 0043 to 
new APCs 0129, 0138, and 0139, with final CY 2009 APC median costs of 
approximately $103, $397, and $1,283, respectively.

                     Table 17--Final APCs for Closed Treatment Fracture of Finger/Toe/Trunk
----------------------------------------------------------------------------------------------------------------
                                                                                        Final CY 2009
                                             Final CY                                    approximate    Final CY
            CY 2009 HCPCS code                2009 SI      CY 2009 short descriptor      APC median     2009 APC
                                                                                            cost
----------------------------------------------------------------------------------------------------------------
21800.....................................          T   Treatment of rib fracture....            $103       0129
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.....  ..............  .........

[[Page 68617]]

 
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....  ..............  .........
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..  ..............  .........
20660.....................................          T   Apply, rem fixation device...            $397       0138
22310.....................................          T   Treat spine fracture.........  ..............  .........
23520.....................................          T   Treat clavicle dislocation...  ..............  .........
23525.....................................          T   Treat clavicle dislocation...  ..............  .........
23545.....................................          T   Treat clavicle dislocation...  ..............  .........

[[Page 68618]]

 
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.....  ..............  .........
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.......  ..............  .........
22315.....................................          T   Treat spine fracture.........          $1,283       0139
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.......  ..............  .........
----------------------------------------------------------------------------------------------------------------

b. Arthroscopic and Other Orthopedic Procedures (APCs 0041 and 0042)
    For CY 2009, we proposed the following two primary APCs for 
arthroscopic procedures: (1) APC 0041 (Level I Arthroscopy), comprised 
of 44 procedures with a proposed CY 2009 payment rate of approximately 
$1,933; and (2) APC 0042 (Level II Arthroscopy), comprised of 30 
procedures with a proposed payment rate of approximately $3,233. The CY 
2008 payment rates for APCs 0041 and 0042, with the same APC 
configurations as proposed for CY 2009, are approximately $1,833 and 
$2,911, respectively.
    Comment: The commenters stated that the proposed configurations of 
arthroscopic procedures assigned to APCs 0041 and 0042 fail to 
appropriately recognize the distinct clinical and resource features of 
the wide range of arthroscopic procedures now being provided to 
Medicare beneficiaries. Furthermore, they believed that there are 
services proposed for assignment to APC 0042 that are not arthroscopies 
and should be reassigned to APC 0052 (Level IV Musculoskeletal 
Procedure Except Hand and Foot). The commenters indicated that, as 
proposed, CMS data include a significant number of procedures in which 
the payment would be less than the median cost of the procedure. They 
believed that this problem was compounded by the reduced payments made 
for the procedures in ASCs. The commenters argued that the low level of 
payment for these APCs would result in barriers to high quality of care 
in the ASC setting. Specifically, the commenters requested that CMS 
reassign CPT codes 27412 (Autologous chondrocyte implantation, knee) 
and 27415 (Osteochondral allograft, knee, open) to APC 0052 because 
these are not arthroscopic procedures. They believed that these two 
procedures were clinically similar to procedures in APC 0052 and that 
their median costs were more similar to the median costs for other 
services in APC 0052.
    The commenters further requested that CMS create 11 new arthroscopy 
APCs to ensure that the services within the arthroscopy APCs are 
clinically homogenous and contain only those procedures that are 
similar in terms of resource utilization. Specifically, the commenters 
requested that CMS restructure the arthroscopy APCs to reflect the 
following clinical categories: Diagnostic arthroscopies, lower 
extremity versus upper extremity arthroscopies without implants, and 
lower extremity versus upper extremity arthroscopies with implants. The

[[Page 68619]]

commenters believed that these clinical distinctions parallel the 
distinctions CMS has created for other classes of procedures, including 
other orthopedic procedures, and would more accurately and equitably 
reflect the clinical characteristics and resource utilization of the 
services provided. The commenters further asked that CMS consider the 
new APCs with implants to be device-dependent APCs so that they may be 
considered to be device-intensive for ASC ratesetting purposes in order 
to ``pass through'' the cost of the implants in the ASC payment.
    Response: As a result of the concerns raised by the commenters, we 
reviewed the clinical characteristics and HCPCS code-specific median 
costs from the CY 2007 claims data for all procedures we proposed to 
assign to APCs 0041, 0042, and 0052 for CY 2009. Based on our findings 
from this review, we agree with the commenters that the procedures 
reported by CPT codes 27412 and 27415 are not arthroscopic procedures, 
that they are more clinically similar to the procedures in APC 0052, 
and that their median costs are better aligned with the median costs 
for services assigned to APC 0052. Therefore, we are reassigning CPT 
codes 27412 and 27415 to APC 0052 for CY 2009.
    While we appreciate the commenters' suggestion that we create 11 
new APCs for arthroscopic procedures, we believe that existing clinical 
APCs 0041 and 0042 sufficiently account for the different clinical and 
resource characteristics of these procedures. To reduce the size of the 
APC payment groups and establish new APC payment groups to pay more 
precisely would be inconsistent with our overall strategy to encourage 
hospitals to use resources more efficiently by increasing the size of 
the payment bundles. Moreover, many of the services that are assigned 
to APCs 0041 and 0042 are low volume services, with even fewer single 
claims available for ratesetting. Including low volume services in APCs 
with clinically similar higher volume services and similar median costs 
generates more stability in the payment rates that are set for these 
low volume services.
    We also considered whether it would be appropriate to create two 
new APCs as requested by the commenters to isolate the arthroscopic 
procedures that the commenters indicate require implants. Our review of 
the CPT code definitions for the services that commenters would define 
as requiring implants and our understanding of the resources required 
to perform the procedures indicate that, for most of these procedures, 
implanted devices are not always required to perform the service and 
that in a number of cases, the ``implant'' is actually a supply or 
graft rather than an implantable device that would contribute to the 
APC's estimated device cost. Therefore, we do not believe that there is 
justification to create new APCs for these procedures or to designate 
them as device-dependent APCs. We refer readers to section XV.E.1.c. of 
this final rule with comment period for an explanation of the 
methodology used to calculate the payment rates for device-intensive 
procedures under the revised ASC payment system.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposed configuration of APCs 0041 and 0042, 
with the modification that we are reassigning CPT codes 27412 and 27415 
from APC 0042 to APC 0052. The final CY 2009 APC median costs of APCs 
0041, 0042, and 0052 are approximately $1,899, $3,178, and $5,592, 
respectively.
c. Surgical Wrist Procedures (APCs 0053 and 0054)
    For CY 2009, we proposed to retain the CY 2008 configuration of the 
HCPCS codes in APCs 0053 (Level I Hand Musculoskeletal Procedures) and 
0054 (Level II Hand Musculoskeletal Procedures), with proposed payment 
rates of approximately $1,116 and $1,851, respectively. The CY 2008 
payment rates for APCs 0053 and 0054, with the same APC configurations 
as proposed for CY 2009, are approximately $1,049 and $1,676, 
respectively.
    Comment: One commenter asked that CMS reassign a number of CPT 
codes for surgical wrist procedures to alternative APCs, where they 
would reside with similar wrist procedures. They requested the 
following moves: (1) CPT code 25111 (Excision of ganglion, wrist 
(dorsal or volar); primary) from APC 0053 to APC 0049 (Level I 
Musculoskeletal Procedures Except Hand and Foot); (2) CPT code 25112 
(Excision of ganglion, wrist (dorsal or volar); recurrent) from APC 
0053 to APC 0049; (3) CPT code 25210 (Carpectomy; one bone) from APC 
0054 to APC 0050 (Level II Musculoskeletal Procedures Except Hand and 
Foot); (4) CPT code 25215 (Carpectomy; all bones of proximal row) from 
APC 0054 to APC 0050; (5) CPT code 25394 (Osteoplasty, carpal bone, 
shortening) from APC 0053 to APC 0051 (Level III Musculoskeletal 
Procedures Except Hand and Foot); (6) CPT code 25430 (Insertion of 
vascular pedicle into carpal bone (eg, Hori procedure)) from APC 0054 
to APC 00051; (7) CPT code 25431 (Repair of nonunion of carpal bone 
(excluding carpal scaphoid (navicular))(includes obtaining graft and 
necessary fixation), each bone) from APC 0054 to APC 0051; and (8) CPT 
code 25820 (Arthrodesis, wrist; limited, without bone graft (eg, 
intercarpal or radiocarpal) from APC 0053 to APC 0052 (Level IV 
Musculoskeletal Procedures Except Hand and Foot). The commenter 
believed that these wrist procedures typically have the same costs of 
personnel, supplies, and implants as the procedures assigned to the 
APCs in which the commenter recommended placement. Moreover, the 
commenter also suggested that the wrist procedures are more clinically 
similar to other surgical procedures already assigned to the APCs in 
which the commenter recommended placement.
    Response: We agree with most of the commenter's recommendations and 
are reassigning the CPT codes to the recommended APCs for CY 2009 to 
improve clinical and resource homogeneity, with one exception. We do 
not agree that CPT code 25820 is most appropriately assigned to APC 
0052. We have 123 total CY 2007 claims for this procedure, with 30 
claims available for ratesetting. The median cost of the procedure is 
approximately $4,029, which falls between the median costs of APCs 0051 
and 0052, Levels III and IV Musculoskeletal Procedures Except Hand and 
Foot, with APC median costs of approximately $2,929 and $5,592, 
respectively. Other wrist arthrodesis procedures are currently assigned 
to both APCs 0051 and 0052 under the OPPS, and we note that the 
procedure described by CPT code 25820 is a limited procedure without a 
bone graft, in comparison with other complete arthrodesis procedures 
that may utilize a graft. Therefore, based on clinical and resource 
considerations, we believe CPT code 25820 is most appropriately 
reassigned to APC 0051 for CY 2009.
    After consideration of the public comments received, we are 
modifying our CY 2009 proposed configurations for APCs 0049, 0050, 
0051, 0053, and 0054. Specifically, we are reassigning CPT codes 25111 
and 25112 to APC 0049; we are reassigning CPT codes 25210 and 25215 to 
APC 0050; and we are reassigning CPT codes 25394, 25430, and 25431 to 
APC 0051 for CY 2009. We also are finalizing our CY 2009 proposal to 
reassign CPT code 25820 from APC 0053 to APC 0051 for the CY 2009 OPPS. 
The final CY 2009 median costs of APCs 0049, 0050, and 0051 are 
approximately $1,406, $1,929, and $2,929, respectively.

[[Page 68620]]

d. Intercarpal or Carpometacarpal Arthroplasty (APC 0047)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue to 
assign CPT code 25447 (Arthroplasty, interposition, intercarpal or 
carpometacarpal joints) to APC 0047 (Arthroplasty without Prosthesis) 
for CY 2009, with a proposed payment rate of approximately $2,488. The 
CY 2008 payment rate for this procedure is approximately $2,287.
    At the August 2008 APC Panel meeting, a presenter requested that 
the APC Panel recommend to CMS that CPT code 25447 be reassigned to APC 
0048 (Level I Arthroplasty or Implantation with Prosthesis), because a 
costly implantable spacer device may be used when a hospital provides 
CPT code 25447. The presenter argued that the proposed payment rate of 
approximately $3,473 for APC 0048 would provide more appropriate 
payment for the procedure, and that the procedure clinically resembled 
other procedures also assigned to APC 0048. The APC Panel recommended 
that CMS maintain the assignment of CPT code 25447 in APC 0047 for CY 
2009.
    The procedure described by APC code 25447 does not always utilize 
an implantable device. We note that the median cost of CPT code 25447 
is approximately $2,445 based on over 850 single claims, very close to 
the median cost of APC 0047 of approximately $2,443 and much lower than 
the median cost of APC 0048 of approximately $3,433. Therefore, we are 
adopting the APC Panel's recommendation for CY 2009.
    We did not receive any public comments regarding our proposal. 
Therefore, we are finalizing our CY 2009 proposal, without 
modification, to assign CPT code 25447 to APC 0047, with a final CY 
2009 APC median cost of approximately $2,443.
e. Insertion of Posterior Spinous Process Distraction Device (APC 0052)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to reassign CPT 
codes 0171T (Insertion of posterior spinous process distraction device 
(including necessary removal of bone or ligament for insertion and 
imaging guidance), lumbar, single level) and 0172T (Insertion of 
posterior spinous process distraction device (including necessary 
removal of bone or ligament for insertion and imaging guidance), 
lumbar, each additional level) from APC 0050 (Level II Musculoskeletal 
Procedures Except Hand and Foot) to APC 0052 (Level IV Musculoskeletal 
Procedures Except Hand and Foot), with a proposed payment rate of 
approximately $5,615. The CY 2008 payment rate for APC 0050 is 
approximately $1,859. For CY 2007 and CY 2008, the device HCPCS code 
C1821 (Interspinous process distraction device (implantable)), used 
with CPT codes 0171T and 0172T, was assigned pass-through payment 
status and, therefore, was paid separately at charges adjusted to cost. 
As we discuss in section IV.A. of this final rule with comment period, 
the period of pass-through payment for HCPCS code C1821 expires after 
December 31, 2008. According to our usual methodology, the costs of 
devices no longer eligible for pass-through payments are packaged into 
the costs of the procedures with which the devices are reported in the 
claims data used to set the payment rates for those procedures.
    Comment: One commenter asserted that the proposed reassignment of 
CPT codes 0171T and 0172T to APC 0052 was not appropriate for a number 
of reasons. The commenter stated that the proposed median costs of CPT 
codes 0171T and 0172T of approximately $8,080 and $11,114, 
respectively, were substantially higher than the proposed median cost 
of APC 0052 of approximately $5,606. The commenter indicated that the 
median cost for the device HCPCS code C1821 that is always required for 
the procedures was $6,483, higher than the median cost of the APC to 
which the procedures were proposed for assignment. The commenter 
believed that the assignment of the procedures to APC 0052 would result 
in significant underpayment to hospitals and possibly limit patient 
access to this technology. The commenter also claimed that the 
assignment of CPT codes 0171T and 0172T to APC 0052 would violate the 2 
times rule. The commenter recommended either the assignment of CPT 
codes 0171T and 0172T to a newly created clinical APC, or the 
reassignment of CPT codes 0171T and 0172T to APC 0425 (Level II 
Arthroplasty or Implantation with Prosthesis), based on clinical and 
resource homogeneity and device-dependent status. The commenter pointed 
out that the proposed rule median cost of APC 0425 of approximately 
$7,905 was similar to the proposed rule median costs of CPT codes 0171T 
and 0172T. Finally, the commenter recommended that CMS add interspinous 
process distraction device procedures described by CPT 0171T and 0172T 
to the device-to-procedure and procedure-to-device claims processing 
edits to ensure that future claims are correctly coded, leading to more 
accurate and appropriate payment policies for the technology.
    Response. We continue to believe that APC 0052 is an appropriate 
APC assignment for CPT codes 0171T and 0172T based on consideration of 
the procedures' clinical and resource characteristics. The CY 2007 
claims data for C1821 used for this final rule with comment period show 
that the interspinous process distraction device that is used with CPT 
codes 0171T and 0172T has a line-item median cost of approximately 
$4,374, whereas the median cost of APC 0052 is significantly higher, at 
approximately $5,592.
    The HCPCS code-specific final median costs of CPT codes 0171T and 
0172T are approximately $7,748 and $10,431, respectively. However, we 
note that because CPT code 0172T is a CPT add-on code for an additional 
level that should always be reported in conjunction with CPT code 
0171T, the 5 single claims (out of 576 total claims) upon which the 
median cost of CPT code 0172T is based are likely incorrectly coded 
claims and, therefore, the median cost does not provide a valid 
estimate of the hospital resources required to perform CPT code 0172T. 
The median cost of CPT code 0171T of approximately $7,748 is the 
highest cost of the significant procedures (frequency of greater than 
1,000 single claims or frequency of greater than 99 and more than 2 
percent of the single claims in the APC) assigned to APC 0052, while 
the lowest cost significant procedure has a median cost of 
approximately $4,336. Therefore, the configuration of APC 0052 does not 
violate the 2 times rule. We continue to believe that, based on 
resource considerations, APC 0052 would provide appropriate payment for 
CPT codes 0171T and 0172T in CY 2009.
    Moreover, we note that there are several other spinal procedures 
that require the use of implantable devices that are also assigned to 
APC 0052, such as the percutaneous kyphoplasty procedures described by 
CPT code 22523 (Percutaneous vertebral augmentation, including cavity 
creation (fracture reduction and bone biopsy included when performed) 
using mechanical device, one vertebral body, unilateral or bilateral 
cannulation (e.g., kyphoplasty); thoracic) and CPT code 22524 
(Percutaneous vertebral augmentation, including cavity creation 
(fracture reduction and bone biopsy included when performed) using 
mechanical device, one vertebral body, unilateral or bilateral 
cannulation (e.g., kyphoplasty); lumbar). Therefore, we believe that 
CPT codes 0171T and 0172

[[Page 68621]]

share sufficient clinical similarity with other surgical procedures 
assigned to APC 0052 to justify their reassignment to APC 0052 for CY 
2009.
    Regarding the commenter's request that we implement device edits 
for interspinous process distraction device procedures, we note that we 
typically do not implement procedure-to-device edits where there are 
not device HCPCS codes for all possible devices that could be used to 
perform a procedure that always requires a device, and the APC is not 
designated as a device-dependent APC. APC 0052 is not a device-
dependent APC because a number of the procedures assigned to the APC do 
not require the use of implantable devices. Furthermore, in some cases 
there may not be HCPCS codes that describe all devices that may be used 
to perform the procedures in APC 0052. We recognize the additional 
burden claims processing edits, particularly for the device-to-
procedure edits, pose for hospitals, and as a result we try to limit 
edits only to those device and procedure combinations for which we 
believe costs have not been correctly captured on hospital claims. 
Hospitals had every incentive to report and charge for interspinous 
process distraction devices described by HCPCS code C1821 due to their 
separately payable pass-through status in CY 2007, and we have no 
reason to believe hospitals have not been reporting the associated 
implantation procedure codes along with HCPCS code C1821. Accordingly, 
we believe that the packaged costs of interspinous process distraction 
devices are appropriately reflected in the median costs of their 
associated implantation procedures, and that device-to-procedure edits 
would pose an unnecessary burden on hospitals.
    After consideration of the public comment received, we are 
finalizing our proposed CY 2009 assignment, without modification, of 
CPT codes 0171T and 0172T to APC 0052, with a final CY 2009 APC median 
cost of approximately $5,592.
6. Radiation Therapy Services
a. Proton Beam Therapy (APCs 0664 and 0667)
    For CY 2009, we proposed to pay for the following four CPT codes 
for proton beam therapy: 77520 (Proton treatment delivery; simple, 
without compensation); 77522 (Proton treatment delivery; simple, with 
compensation); 77523 (Proton treatment delivery; intermediate); and 
77525 (Proton treatment delivery; complex). We proposed to continue to 
assign the simple proton beam therapy procedures (CPT codes 77520 and 
77522) to APC 0664 (Level I Proton Beam Radiation Therapy), with a 
proposed payment rate of approximately $925, and the intermediate and 
complex proton beam therapy procedures (CPT codes 77523 and 77525, 
respectively) to APC 0667 (Level II Proton Beam Radiation Therapy), 
with a proposed payment rate of approximately $1,105. The CY 2008 
payment rates for these APCs are approximately $817 and $977, 
respectively.
    Comment: Several commenters supported the proposed OPPS payment 
rates for APCs 0664 and 0667. They indicated that proton beam therapy 
has numerous advantages to patients and that the proposed OPPS payment 
rates would pay appropriately for these services.
    Response: As we proposed, we are basing the final rule payment 
rates for proton beam therapy and all other services paid under the 
OPPS on the median costs we calculated using the most current claims 
and cost report data that are available to us. Therefore, for CY 2009, 
we are setting the payment rate for proton beam therapy based on median 
costs of approximately $688 for APC 0664 and approximately $822 for APC 
0667. These median costs result in modest declines in the final CY 2009 
payment rates for proton beam therapy compared to the CY 2008 payment 
rates, rather than the modest increases that were proposed.
    We explored our claims and cost report data to determine the reason 
for the change in the median costs between the proposed rule and final 
rule data. We found that there were two providers that billed Medicare 
in CY 2007 for these services. At the time we calculated the proposed 
rule median costs and payment rates, we used the most current claims 
and cost reports submitted by these hospitals. When we examined the 
final rule data for these hospitals, we found that both providers had 
submitted new cost reports subsequent to the development of the 
proposed rule data. The CCR from the new cost report for the provider 
supplying the majority of service volume in both APCs declined by more 
than 25 percent compared to the CCR calculated from the cost report 
used to determine the proposed rule costs for that provider. Therefore, 
the charges and costs from this provider significantly influenced the 
median costs for these APCs. In summary, the estimated costs of proton 
beam therapy services decreased because the most current CCRs, which 
declined compared to the CCRs used to calculate the proposed rule 
costs, were applied to charges that remained consistent from the 
proposed rule to the final rule claims. Our examination of the claims 
and cost report data showed no characteristics that would cause us to 
believe that the estimated costs for this final rule with comment 
period are inappropriate for the services furnished.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to pay for 
proton beam therapy through APCs 0664 and 0667, with payment rates 
based upon the most current claims and cost report data for these 
services. The final CY 2009 APC median costs of APCs 0664 and 0667 are 
approximately $688 and $822, respectively.
b. Implantation of Interstitial Devices (APC 0310)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to reassign 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) to APC 0310 (Level III Therapeutic 
Radiation Treatment Preparation) with a proposed payment rate of 
approximately $901, based on our review of CY 2007 claims data for the 
service and consideration of the service's clinical characteristics. 
For CY 2008, CPT code 55876 is assigned to APC 0156 (Level III Urinary 
and Anal Procedures), with a payment rate of approximately $194.
    Comment: One commenter supported the proposed reassignment of CPT 
code 55876 to APC 0310, with the proposed increase in payment for the 
service.
    Response: We appreciate the commenter's support and are finalizing, 
without modification, our CY 2009 proposal to reassign CPT code 55876 
to APC 0310, with a final CY 2009 APC median cost of approximately 
$873.
c. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 
0065, 0066, and 0067)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue to 
assign SRS CPT codes 77372 (Radiation treatment delivery, stereotactic 
radiosurgery (SRS) (complete course of treatment of cerebral lesion(s) 
consisting of 1 session); linear accelerator based) and 77373 
(Stereotactic body radiation therapy, treatment delivery, per fraction 
to 1 or more lesions, including image guidance, entire course not to 
exceed 5 fractions) status indicator ``B'' under the OPPS, to indicate 
that these CPT codes are not payable under the OPPS. Alternatively, we 
proposed to continue to recognize for separate payment the HCPCS G-
codes that describe SRS

[[Page 68622]]

treatment delivery services. Specifically, we proposed the following: 
to assign HCPCS code G0173 (Linear accelerator based stereotactic 
radiosurgery, complete course of therapy in one session) to APC 0067 
(Level III Stereotactic Radiosurgery, MRgFUS, and MEG), with a proposed 
payment rate of approximately $3,664; to assign HCPCS code G0251 
(Linear accelerator-based stereotactic radiosurgery, delivery including 
collimator changes and custom plugging, fractionated treatment, all 
lesions, per session, maximum five sessions per course of treatment) to 
APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, and MEG ), with a 
proposed payment rate of approximately $995; to assign HCPCS code G0339 
(Image-guided robotic linear accelerator-based stereotactic 
radiosurgery, complete course of therapy in one session or first 
session of fractionated treatment) to APC 0067, with a proposed payment 
rate of approximately $3,664; and to assign HCPCS code G0340 (Image-
guided robotic linear accelerator-based stereotactic radiosurgery, 
delivery including collimator changes and custom plugging, fractionated 
treatment, all lesions, per session, second through fifth sessions, 
maximum five sessions per course of treatment) to APC 0066 (Level II 
Stereotactic Radiosurgery, MRgFUS, and MEG), with a proposed payment 
rate of approximately $2,654.
    Comment: Several commenters urged CMS to recognize CPT codes 77372 
and 77373 under the OPPS rather than continuing to use the Level II 
HCPCS G-codes for SRS treatment delivery services. One commenter 
requested that CMS recognize the CPT codes to facilitate claims 
processing by non-Medicare payers who do not accept temporary HCPCS 
codes in their claims processing systems. Another commenter suggested 
that CMS recognize the SRS treatment delivery CPT codes for separate 
payment under the OPPS, and provide payment through one clinical APC. 
The commenter argued that this change would reduce the number of APCs 
for SRS treatment delivery services and provide more clarity to 
hospitals.
    Response: As we explained in both the CY 2007 OPPS/ASC final rule 
with comment period (71 FR 68025-68026) and the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66734 through 66737), we decided to 
recognize the Level II HCPCS codes, specifically HCPCS codes G0251 and 
G0340, because they are more specific in their descriptors than the CPT 
codes for SRS treatment delivery services. In the CY 2004 OPPS final 
rule with comment period (68 FR 63431) and in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66735), we also explained the 
basis for creating the Level II HCPCS codes. We continue to believe 
that the Level II HCPCS codes are more specific in their descriptors 
and more accurately reflect the SRS treatment delivery services 
provided in the hospital outpatient setting than the CPT codes for SRS 
treatment delivery services.
    Analysis of the CY 2007 claims data used for this final rule with 
comment period indicate that the HCPCS code-specific median cost is 
approximately $931 for HCPCS code G0251; approximately $2,522 for HCPCS 
code G0340; approximately $3,523 for HCPCS code G0173; and 
approximately $3,718 for HCPCS code G0339. Because the CY 2009 median 
costs of HCPCS codes G0173, G0251, G0339, and G0340 vary significantly, 
we do not believe it would be appropriate to provide OPPS payment 
through a single APC for these SRS treatment delivery services in CY 
2009. Furthermore, we have no way of crosswalking hospital costs for 
the HCPCS G-codes to the expected costs for the SRS CPT codes that 
would ensure continued accurate payment for SRS treatment delivery 
services under the OPPS if we were to recognize the CPT codes. 
Depending on the individual clinical case, the SRS treatment delivery 
services described by a single CPT code could be reported by one of 
several of the HCPCS G-codes and, similarly, the SRS treatment delivery 
services currently described by a single HCPCS G-code could be reported 
by one of several CPT codes.
    Hospitals have told us that many other payers recognize Level II 
HCPCS codes for payment, although each payer may set its own reporting 
guidelines. With respect to the identification of HCPCS codes for 
services under the OPPS, we recognize those codes that lead to the most 
appropriate payment for services under the OPPS, using CPT codes 
whenever we believe their recognition leads to accurate payment. 
Otherwise, we may determine that Level II HCPCS codes should be used 
for reporting OPPS services, as is the case for SRS services.
    Comment: Some commenters expressed concern about the difference in 
the proposed payment rate of approximately $995 for HCPCS code G0251 
and that of approximately $2,654 for HCPCS code G0340. The commenters 
found no clinical justification for the differential payment for these 
services. They believed that one technology should not be favored over 
another when both technologies provide similar radiation dose 
distribution and clinical outcomes. The commenters recommended that CMS 
recognize CPT codes 77372 and 77373 rather than use HCPCS codes G0251 
and G0340, and set the payment rate to be the same for both CPT codes. 
Another commenter requested that CMS continue to recognize the four 
HCPCS G-codes for SRS treatment delivery services and finalize their 
proposed assignments to their respective clinical APCs for CY 2009.
    Response: As we have stated previously, we believe that HCPCS codes 
G0251 and G0340 are more specific in their descriptors for SRS 
treatment delivery services than CPT codes 77372 and 77373, and 
therefore, we will continue to recognize the Level II HCPCS codes for 
SRS treatment delivery services under the OPPS.
    Based on our review of the CY 2007 claims data used for this final 
rule with comment period, we found that the costs of HCPCS codes G0251 
and G0340 differ significantly. Specifically, our CY 2007 claims data 
showed 10,022 single claims for HCPCS G0340, with a HCPCS code-specific 
median cost of approximately $2,522, whereas the median cost for HCPCS 
code G0251 based on 3,132 single claims is only approximately $931. Our 
CY 2007 claims data used for this final rule with comment period do not 
support a single payment for both services as suggested by some 
commenters, and as a result, we find no justification for setting the 
same payment rate for the CPT codes that would describe some of the 
services currently reported with HCPCS codes G025 and G0340.
    Moreover, we note that there are two additional Level II HCPCS 
codes for SRS treatment delivery services that are recognized for 
payment under the OPPS, specifically HCPCS codes G0173 and G0339, that 
describe services that could be reported under CPT code 77372 or 77373. 
These HCPCS G-codes also have median costs of approximately $3,523 and 
$3,718, respectively, significantly different from the median costs of 
HCPCS codes G0251 and G0340 and, therefore, we proposed to assign HCPCS 
codes G0173 and G0339 to a third clinical APC, that is APC 0067. We 
continue to believe that all four HCPCS G-codes for SRS treatment 
delivery services are most appropriately assigned to the three APCs in 
the Stereotactic Radiosurgery, MRgFUS, and MEG clinical series, where 
they are paid based on APC median costs that are consistent with their 
HCPCS code-specific median costs that reflect required hospital 
resources.
    After consideration of the public comments received, we are 
finalizing

[[Page 68623]]

our CY 2009 proposal, without modification, to continue to recognize 
Level II HCPCS codes G0251 and G0340, instead of CPT codes 77372 and 
77373, for the reporting of SRS treatment delivery services under the 
OPPS in CY 2009. For CY 2009, HCPCS code G0251 is assigned to APC 0065 
with a final APC median cost of approximately $931, and HCPCS code 
G0340 is assigned to APC 0066 with a final APC median cost of 
approximately $2,522. We also are finalizing our CY 2009 proposal to 
continue to recognize HCPCS codes G0173 and G0339, assigned to APC 0067 
with a final median cost of approximately $3,718, for certain SRS 
services reported in accordance with the codes descriptors of these two 
HCPCS G-codes.
    In addition, for CY 2009, the CPT Editorial Panel decided to delete 
CPT code 61793 (Stereotactic radiosurgery (particle beam, gamma ray or 
linear accelerator), one or more sessions) on December 31, 2008, and 
replace it with several new CPT codes, specifically CPT codes 61796, 
61797, 61798, 61799, 61800, 63620, and 63621, effective January 1, 
2009. Similar to its predecessor code, all of the replacement codes 
have been assigned status indicator ``B'' on an interim basis under the 
OPPS because we are continuing to recognize the HCPCS G-codes for SRS 
treatment delivery services under the OPPS in CY 2009. In accordance 
with our established policy for the treatment of new CPT codes under 
the OPPS, we also have assigned these replacement codes comment 
indicator ``NI'' in Addendum B to this final rule with comment period 
to indicate that these new CPT codes are open to public comment in this 
final rule with comment period. The replacement codes for CPT code 
61793 are displayed in Table 18 below.

Table 18--Replacement Codes for CPT Code 61793 Effective January 1, 2009
------------------------------------------------------------------------
                                                                CY 2009
        CY 2009 HCPCS code          CY 2009 long descriptor   interim SI
------------------------------------------------------------------------
61796............................  Stereotactic radiosurgery          B
                                    (particle beam, gamma
                                    ray, or linear
                                    accelerator); 1 simple
                                    cranial lesion.
61797............................  Stereotactic radiosurgery          B
                                    (particle beam, gamma
                                    ray or linear
                                    accelerator); each
                                    additional cranial
                                    lesion, simple.
61798............................  Stereotactic radiosurgery          B
                                    (particle beam, gamma
                                    ray or linear
                                    accelerator); 1 complex
                                    cranial lesion.
61799............................  Stereotactic radiosurgery          B
                                    (particle beam, gamma
                                    ray or linear
                                    accelerator); each
                                    additional cranial
                                    lesion, complex.
61800............................  Application of                     B
                                    stereotactic headframe
                                    for stereotactic
                                    radiosurgery.
63620............................  Stereotactic radiosurgery          B
                                    (particle beam, gamma
                                    ray, or linear
                                    accelerator); 1 spinal
                                    lesion.
63621............................  Stereotactic radiosurgery          B
                                    (particle beam, gamma
                                    ray or linear
                                    accelerator); each
                                    additional spinal lesion.
------------------------------------------------------------------------

7. Other Procedures and Services
a. Negative Pressure Wound Therapy (APC 0013)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to assign CPT 
codes 97605 (Negative pressure wound therapy (e.g., vacuum assisted 
drainage collection), including topical application(s), wound 
assessment, and instruction(s) for ongoing care, per session; total 
wound(s) surface area less than or equal to 50 square centimeters) and 
97606 (Negative pressure wound therapy (e.g., vacuum assisted drainage 
collection), including topical application(s), wound assessment, and 
instruction(s) for ongoing care, per session; total wound(s) surface 
area greater than 50 square centimeters) to APC 0013 (Level II 
Debridement and Destruction) for CY 2009, with a proposed payment rate 
of approximately $55. For CY 2008, CPT code 97605 is also assigned to 
APC 0013, with a payment rate of approximately $51, but CPT code 97606 
is assigned to APC 0015 (Level III Debridement and Destruction), with a 
payment rate of approximately $93. We proposed to reassign CPT code 
97606 from APC 0015 to APC 0013 for CY 2009 because its median cost of 
$75, based on the CY 2007 proposed rule claims data, indicated that the 
resource costs associated with this procedure were more similar to the 
resource costs of the procedures assigned to APC 0013 than the 
procedures assigned to APC 0015.
    Comment: One commenter requested that CMS maintain the CY 2008 
payment rates for CPT codes 97605 and 97606 in CY 2009 and noted that 
negative pressure wound therapy often requires greater time and 
resources than reflected in the proposed payment rate for CPT code 
97606. The commenter claimed that these codes are used to report 
negative pressure wound therapy for increasingly more complicated 
wounds. The commenter also requested that CMS refer both codes to the 
CPT Wound Care Workgroup for development of new code descriptors.
    Response: As a result of the concerns raised by the commenter, we 
reviewed the clinical characteristics and HCPCS code-specific median 
costs from our CY 2007 claims data for all procedures we proposed to 
assign to APCs 0013 and 0015 for CY 2009. Based on the resource costs 
associated with these codes, as reported by hospitals, we continue to 
believe that APC 0013 is the most appropriate assignment for CPT codes 
97605 and 97606. The median costs of these two services are 
approximately $64 and $74, respectively, based on thousands of single 
claims available for ratesetting. These median costs fall well within 
the range of median costs of the other significant procedures also 
assigned to APC 0013, ranging from approximately $40 to $78. In 
contrast, the median cost of APC 0015 is significantly higher, at 
approximately $98, than the median costs of the negative pressure wound 
therapy services.
    To the extent that, in the future, hospitals use these CPT codes to 
report more resource intensive services than are currently reflected in 
claims data, we would expect to see higher costs reported by hospitals 
in the future. We would reevaluate whether a different APC assignment 
was appropriate at that time. We currently do not have concerns based 
on historical patterns of hospital reporting and hospital costs about 
the CPT codes reported by hospitals for payment of negative pressure 
wound care services under the OPPS. We note that any interested party 
may refer CPT codes to the CPT Editorial Panel for reassessment.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without

[[Page 68624]]

modification, to assign CPT codes 97605 and 97606 to APC 0013, with a 
final CY 2009 APC median cost of approximately $53.
b. Endovenous Ablation (APCs 0091 and 0092)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue to 
assign CPT code 36475 (Endovenous ablation therapy of incompetent vein, 
extremity, inclusive of all imaging guidance and monitoring, 
percutaneous, radiofrequency; first vein treated) to APC 0091 (Level II 
Vascular Ligation) and to continue to assign CPT code 36478 (Endovenous 
ablation therapy of incompetent vein, extremity, inclusive of all 
imaging guidance and monitoring, percutaneous, laser; first vein 
treated) to APC 0092 (Level I Vascular Ligation), with proposed payment 
rates of approximately $2,833 and $1,781, respectively. The CY 2008 
payment rate for APC 0091 is approximately $2,714, and the CY 2008 
payment rate for APC 0092 is approximately $1,646.
    Comment: One commenter expressed concern about decreases in the 
OPPS payment for outpatient medical procedures, specifically for CPT 
codes 36475 and 36478, while the costs of supplies and malpractice 
insurance and the costs of care for the uninsured have increased.
    Response: We review, on an annual basis, the APC assignments and 
relative payment weights for services and items paid under the OPPS. 
Based on our findings, we propose to revise the APC assignments to 
account for the following factors: Changes in medical practice; changes 
in technology; addition of new services; new cost data; advice and 
recommendations from the APC Panel; and other relevant information. The 
OPPS is a budget neutral payment system, with payment for most 
individual services determined by the relative costs of the required 
hospital resources as determined from historical hospital costs for 
these services. For CY 2009, we estimate that providers overall will 
receive a 3.9 percent increase in aggregate payment under the OPPS, as 
discussed in more detail in section XXIII.B. of this final rule with 
comment period. We note that we proposed to increase the CY 2009 
payment rates for CPT codes 36475 and 36478 by approximately 5 percent, 
2 percentage points more than the proposed annual CY 2009 market basket 
update factor of 3 percent for the OPPS, based on the relative costs 
that hospitals have reported to us for these OPPS services.
    Based on our latest CY 2007 claims data, we believe that CPT code 
36475, with a final HCPCS code-specific median cost of approximately 
$2,404, is appropriately assigned to APC 0091, with a final APC median 
cost of approximately $2,828. Similarly, we believe that CPT code 
36478, with a final HCPCS code-specific median cost of approximately 
$1,853, is appropriately assigned to APC 0092, with a final APC median 
cost of approximately $1,767. Both of these procedures are clinically 
similar to other procedures also assigned to their respective APCs, and 
they are similar in terms of hospital resources to the other procedures 
assigned to their respective APCs, as reflected in their median costs.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to continue 
assignment of CPT code 36475 to APC 0091, with a final CY 2009 APC 
median cost of approximately $2,828, and CPT code 36478 to APC 0092, 
with a final CY 2009 APC median cost of approximately $1,767.
c. Unlisted Antigen Skin Testing (APC 0341)
    CPT code 86486 (Skin test; unlisted antigen, each) is a new CPT 
code for CY 2008. Therefore, in accordance with our established policy 
for the treatment of new CPT codes under the OPPS, in Addendum B to the 
CY 2008 OPPS/ASC final rule with comment period, we assigned CPT code 
86486 an interim status indicator of ``A'' (Services furnished to a 
hospital outpatient that are paid under a few schedule or payment 
system other than OPPS). In that final rule with comment period, we 
also assigned CPT code 86468 comment indicator ``NI'' to indicate that 
its OPPS treatment as a new code was open to public comment in that 
rule. As stated earlier in section III.D.4.b. of this final rule with 
comment period and in accordance with our longstanding policy, we do 
not respond to public comments submitted on the OPPS/ASC final rule 
with comment period with respect to these interim assignments in the 
proposed OPPS/ASC rule for the following calendar year. However, we do 
review and take into consideration these public comments received 
during the development of the proposed rule when we evaluate APC 
assignments for the following year, and we respond to them in the final 
rule for that following calendar year.
    In the CY 2009 OPPS/ASC proposed rule, we proposed to assign CPT 
code 86486 to APC 0341 (Skin Tests) with a status indicator of ``X'' 
and a proposed payment rate of approximately $6.
    Comment: One commenter on the CY 2008 OPPS/ASC final rule with 
comment period questioned CMS's CY 2008 interim status indicator 
assignment of ``A'' to CPT code 86486, when all of the other CPT codes 
within the same clinical series were assigned status indicator ``X'' 
and paid separately under APC 0341. The commenter requested that CMS 
review the interim status indicator assignment for CPT code 86486 and 
analyze the code's similarity to other skin tests that are assigned to 
APC 0341.
    Response: After reviewing the concerns raised by the commenter and 
the clinical and resources characteristics of CPT code 86486, we agree 
with the commenter that the service should be assigned to APC 0341 with 
a status indicator of ``X,'' and we made this proposal for CY 2009.
    We did not receive any public comments regarding our CY 2009 
proposal. Therefore, we are finalizing our CY 2009 proposal, without 
modification, to assign CPT code 86486 to APC 0341, with a final CY 
2009 APC median cost of approximately $5.
d. Home International Normalized Ratio (INR) Monitoring (APC 0607)
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue to 
assign HCPCS code G0248 (Demonstration, prior to initial use, of home 
INR monitoring for patient with either mechanical heart valve(s), 
chronic atrial fibrillation, or venous thromboembolism who meets 
Medicare coverage criteria, under the direction of a physician; 
includes: face-to-face demonstration of use and care of the INR 
monitor, obtaining at least one blood sample, provision of instructions 
for reporting home INR test results, and documentation of patient 
ability to perform testing prior to its use) and HCPCS code G0249 
((Provision of test materials and equipment for home INR monitoring of 
patient with either mechanical heart valve(s), chronic atrial 
fibrillation, or venous thromboembolism who meets Medicare coverage 
criteria; includes provision of materials for use in the home and 
reporting of test results to physician; not occurring more frequently 
than once a week) to APC 0607 (Level 4 Hospital Clinic Visits) for CY 
2009, with a proposed payment rate of approximately $106. The CY 2008 
payment rate for APC 0607 is approximately $104.
    Comment: One commenter stated that it was reasonable for CMS to 
maintain assignment of these two CPT codes to APC 0607 for CY 2009. The 
commenter stated that this assignment continues to be reasonable 
insofar as the services are clinically homogeneous and the proposed 
payment rate, although likely

[[Page 68625]]

lower than the hospital costs incurred in providing these services, 
appears to be sufficient to allow continued monitoring of utilization 
and access for at least another year. While stating that utilization of 
home INR monitoring remains very low among Medicare beneficiaries, 
especially in the hospital outpatient anticoagulation clinic setting, 
the commenter encouraged CMS to continue to monitor these codes to 
ensure proper APC assignment, as coverage for these services was 
recently expanded beyond patients with mechanical heart valves to 
include Medicare patients with chronic atrial fibrillation or venous 
thromboembolism.
    Response: We appreciate the commenter's support for our proposal. 
We agree that a much more substantial population of Medicare 
beneficiaries who undergo anticoagulation therapy may now be eligible 
for these services due to the recent expansion in Medicare coverage for 
the services reported by HCPCS codes G0248 and G0249. On an annual 
basis, we review the APC assignments and relative payment weights for 
services and items paid under the OPPS. Based on our findings, we may 
propose to revise the APC assignments to appropriately account for 
changes in medical practice or hospital costs, among other factors. We 
will continue to assess the most current claims data for HCPCS codes 
G0248 and G0249 for our future annual OPPS updates.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal, without modification, to continue the 
assignment of CPT codes G0248 and G0249 to APC 0607, with a final CY 
2009 APC median cost of approximately $111.
e. Mental Health Services (APCs 0322, 0323, 0324, and 0325)
    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 few 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 of the CY 2009 OPPS/ASC 
proposed rule are to be reported for services provided in an 
``inpatient hospital, partial hospital, or residential care facility.'' 
(Table 16 is reprinted below in this final rule with comment period as 
Table 19.) These CPT codes have been assigned to APCs 0322 (Brief 
Individual Psychotherapy) and 0323 since the implementation of the 
OPPS.

   Table 19--Inpatient Hospital, Partial Hospital, or Residential Care
                      Facility Psychotherapy Codes
------------------------------------------------------------------------
        CY 2009 HCPCS code                 CY 2009 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;
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.
------------------------------------------------------------------------


[[Page 68626]]

    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 were listed in Table 17 of the CY 2009 
OPPS/ASC proposed rule, which is reprinted below as Table 20. These CPT 
codes also have been assigned to APCs 0322 and 0323 since the 
implementation of the OPPS.

    Table 20--Office or Other Outpatient Facility Psychotherapy Codes
------------------------------------------------------------------------
        CY 2009 HCPCS code                 CY 2009 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 the CY 2009 OPPS/ASC proposed rule 
(excluding all claims for partial hospitalization services) included 
approximately 10,000 OPPS claims for CPT codes 90816 through 90829, 
compared with approximately 500,000 claims for CPT codes 90804 through 
90815. We were unclear as to what HOPD services these claims for CPT 
codes 90816 through 90829 represented and believed that these may be 
miscoded claims. We did 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, in the CY 
2009 OPPS/ASC proposed rule (73 FR 41476), we proposed to assign status 
indicator ``P'' to CPT codes 90816 through 90829 for CY 2009, 
indicating that these services may be billed appropriately and paid 
under the 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.
    For the CY 2009 OPPS/ASC proposed rule, we recalculated the median 
costs for APCs 0322 and 0323, after assigning status indicator ``P'' to 
CPT codes 90816 through 90829 (73 FR 41477). We stated in the CY 2009 
OPPS/ASC proposed rule (73 FR 41477) that, 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 that no historical hospital claims data would continue to map to 
APCs 0322 and 0323. We refer readers to section X.B. of this final rule 
with comment period for a complete discussion of the proposed CY 2009 
partial hospitalization payment policy. The CY 2009 proposed median 
costs for APCs 0322 and 0323 were approximately $88 and $108, 
respectively. This proposed new configuration for APC 0323 eliminated 
the longstanding 2 times violation for this APC, although the median 
cost remained 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. In the CY 2009 OPPS/ASC 
proposed rule (73 FR 41477), we stated that we were adopting the APC 
Panel's recommendation and, therefore, we proposed to assign status 
indicator ``P'' to CPT codes 90816 through 90829 for CY 2009.
    Comment: Several commenters requested that CMS not assign status 
indicator ``P'' to CPT codes 90804 through 90815, indicating that these

[[Page 68627]]

services are often billed by HOPDs outside of a partial hospitalization 
program.
    Response: We believe that commenters may have misunderstood our 
proposal. For CY 2009, we proposed to assign status indicator ``Q3'' 
rather than ``P'' to CPT codes 90804 through 90815. We proposed to 
assign status indicator ``P'' to CPT codes 90816 through 90829, in 
order that payment for CPT codes 90816 through 90829 would only be made 
through payment for a partial hospitalization program. We agree with 
the commenters that CPT codes 90804 through 90815 may be appropriately 
billed by HOPDs outside of a partial hospitalization program, as 
reflected in our CY 2009 proposal. Hospitals would continue to receive 
payment for CPT codes 90804 through 90815 when billed by an HOPD.
    We believe that commenters may have been confused about the 
proposal to assign status indicator ``Q3'' to CPT codes 90804 through 
90815 for CY 2009. As discussed in detail in section II.A.2.e.(4) of 
this final rule with comment period, for CY 2009 we proposed to change 
the status indicator to ``Q3'' (Codes that May be Paid Through a 
Composite APC), for the HCPCS codes that describe the specified mental 
health services to which APC 0034 (Mental Health Services Composite) 
applies. These 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. We 
proposed to apply this status indicator policy to the HCPCS codes that 
are assigned to composite APC 0034 in Addendum M to the proposed rule. 
We refer readers to section XIII.A. of this final rule with comment 
period for a complete discussion of status indicators and our status 
indicator changes for CY 2009.
    Comment: Several commenters expressed concern that the payment rate 
for APC 0325 (Group Psychotherapy) as proposed for CY 2009 reflected a 
decrease of 21.62 percent from CY 2006 to CY 2009. One commenter was 
concerned that the payment rate would be insufficient to cover its 
costs for providing mental health services, especially in a geographic 
area designated as a Mental Health Provider Shortage Area. Another 
commenter asked whether the proposed APC payment rates for APCs 0322, 
0323, 0324 (Family Psychotherapy), and 0325 were properly set based 
upon substantiated data.
    Response: Unlike APCs 0322 and 0323, we did not specifically 
discuss APCs 0324 and 0325 in the CY 2009 OPPS/ASC proposed rule 
because we did not propose any significant changes to these APCs. 
Instead, we proposed to calculate payment rates for these APCs 
following our standard OPPS ratesetting methodology.
    As one commenter noted, the payment rate for APC 0325 declined by 
17 percent between CYs 2006 and 2007 and then declined an additional 5 
percent from CY 2007 to CY 2008. The CY 2009 proposed payment rate for 
APC 0325 of approximately $63 represents an additional decrease of 1 
percent from CY 2008. However, based upon the updated CY 2007 final 
rule claims data, the CY 2009 payment rate for APC 0325 is $65, very 
similar to the CY 2008 payment rate of approximately $63. As noted in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739), we 
cannot speculate as to why the median cost of group psychotherapy 
services decreased significantly between CY 2006 and CY 2008.
    We note that we have robust claims data for the CPT codes that map 
to APC 0325. Specifically, we were able to use more than 99 percent of 
the approximately 1.5 million claims submitted by hospitals to report 
group psychotherapy services. We set the payment rates for the APCs 
containing psychotherapy services using our standard OPPS methodology 
based on relative costs from hospital outpatient claims. We have no 
reason to believe that our claims data, as reported by hospitals, do 
not accurately reflect the hospital costs of group psychotherapy 
services. It would appear that the relative cost of providing these 
mental health services in comparison with other HOPD services has 
decreased in recent years.
    Therefore, for CY 2009, we are finalizing our CY 2009 proposed 
configurations for APC 0322, 0323, 0324, and 0325, without 
modification. In doing so, we are adopting the APC Panel recommendation 
to assign status indicator ``P'' to CPT codes 90816 through 90829. The 
final CY 2009 median costs of APCs 0322, 0323, 0324, and 0325 are 
approximately $85, $105, $161, and $63, respectively.
f. 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 CYs 2007 and 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 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41471), we proposed a 
median cost for APC 0617 of approximately $488 and a median cost for 
APC 0618 of approximately $989 for CY 2009. For the CY 2009 OPPS 
ratesetting, we used claims data from CY 2007 that also included claims 
for HCPCS code G0390, as CY 2007 is the initial year that we 
established OPPS payment for HCPCS code G0390. We proposed to use the 
line-item median cost for HCPCS code G0390 in the CY 2007 claims to set 
the median cost for

[[Page 68628]]

APC 0618, as HCPCS code G0390 is the only code assigned to that APC. As 
discussed in section II.A.1.b. of this final rule with comment period, 
we proposed 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 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41472), we proposed to 
calculate the median cost for APC 0617 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 final rule with comment period for CY 2009. As 
indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 41472), 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.
    Comment: One commenter supported the proposed payment increase for 
HCPCS code G0390 from $330 in CY 2008 to $991 in CY 2009. Several 
commenters requested that CMS allow hospitals to report HCPCS code 
G0390 with CPT code 99285 (Emergency department visit for the 
evaluation and management of a patient (Level 5)), in addition to CPT 
code 99291 (and CPT code 99292, when appropriate), and stated that when 
less than 30 minutes of critical care are provided to a patient, the 
hospital may not bill CPT code 99291 and must bill another appropriate 
visit code instead, often CPT code 99285.
    Response: We appreciate the commenter's support for the proposed CY 
2009 payment for HCPCS code G0390. As noted by commenters, when less 
than 30 minutes of critical care are provided, hospitals may not bill 
CPT code 99291, according to CPT instructions, and may instead bill an 
appropriate visit code. We understand that hospitals may be reporting 
CPT code 99285 most often when less than 30 minutes of critical care 
are provided. However, we continue to believe that the 068x series 
revenue codes used to report a trauma response are most often reported 
with CPT code 99291, rather than other visit codes, and are most 
appropriately paid separately only under the circumstances that a 
Medicare beneficiary receives a significant period of critical care in 
the HOPD.
    If less than 30 minutes of critical care are provided, the payment 
for trauma response is packaged into payment for the visit code or 
other services provided to the patient. We note that the cost of trauma 
response will generally be reflected in the median cost for the visit 
code or other HCPCS code as a function of the frequency of the 
reporting of trauma response charges with the particular separately 
payable HCPCS code. Consistent with the principles of a prospective 
payment system, OPPS 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. Hospitals that bill a visit code or other 
services, as well as a charge for trauma response, may be eligible for 
outlier payment, if their costs meet the outlier threshold.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to pay 
separately for HCPCS code G0390 when billed with CPT code 99291, and to 
provide payment for HCPCS code G0390 through APC 0618, with a final CY 
2009 APC median cost of approximately $914. We are also finalizing, 
without modification, our CY 2009 proposal to calculate the median cost 
for HCPCS code G0390 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 
8003.

IV. 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 transitional pass-through payments are 
eligible 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, HCPCS code C1821 (Interspinous 
process distraction device (implantable)) and HCPCS code 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. Final Policy
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41477), we stated that 
we are implementing the final decisions that we discussed in the CY 
2008 OPPS/ASC final rule with comment period that finalize the 
expiration date of pass-through status for device categories described 
by HCPCS codes C1821 and L8690. We did not receive any public comments 
on our statement of these decisions on expiration of the HCPCS codes 
L8690 and C1821 categories. Responses to public comments regarding the 
proposed CY 2009 APC assignments for surgical procedures associated 
with HCPCS codes L8690 and C1821 and into which payment for these 
devices is packaged for CY 2009, are included in sections II.A.2.d.(1) 
and III.D.5.e. of this final rule with comment period, respectively. 
Therefore, as of January 1, 2009, we will discontinue pass-through 
payment for HCPCS device category codes C1821 and L8690. In accordance 
with our established policy, we will package the costs of the devices 
assigned to these two device categories into the costs of the 
procedures with which the devices were billed in CY 2007, the year of 
hospital claims data used for this CY 2009 OPPS update.
    We currently have no established device categories eligible for 
pass-through payment that are continuing into CY 2009. We continue to 
evaluate

[[Page 68629]]

applications for pass-through payment of medical devices 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 2009 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. 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. Final Policy
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41478), we proposed to 
continue our established policies for calculating and setting the APC 
offset amounts for each device category eligible for pass-through 
payment. We also proposed 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 already 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.
    We did not receive any public comments regarding these proposals. 
Therefore, for CY 2009, we are continuing our established policies for 
calculating and setting the APC offset amounts for each device category 
eligible for pass-through payment, and for reviewing 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.
    We note that we will also publish on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp a list of all 
procedural APCs with the CY 2009 portions of the APC payment amounts 
that we determine are associated with the cost of devices. These 
portions will be used as the APC offset amounts, and, in accordance 
with our established practice, they will be used in order to evaluate 
whether the cost of a device in an application for a new device 
category for pass-through payment is not insignificant in relation to 
the APC payment amount for the service related to the category of 
devices, as specified in our regulations at Sec.  419.66(d).

B. Adjustment to OPPS Payment for No Cost/Full Credit and Partial 
Credit Devices

1. Background
    In recent years, there have been several field actions on and 
recalls of medical devices 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 ratesetting 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 (71 FR 68071 through 68077). Hospitals are 
instructed to report no cost/full credit cases using the ``FB'' 
modifier on the line with the procedure code in which the no cost/full 
credit device is used. In cases in which the device is furnished 
without cost or with full credit, 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 device being implanted and its usual 
charge for the device for which it received full credit. In CY 2008, we 
expanded this payment adjustment policy to include cases in which 
hospitals receive partial credit 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 no cost/full credit 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. APCs and Devices Subject to the Adjustment Policy
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41478 through 41480), 
for CY 2009 we proposed to continue the policy of reducing OPPS payment 
for specified APCs 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 specified 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

[[Page 68630]]

provide equitable payment in these cases. (We refer readers to section 
II.A.2.d.(1) of this final rule with comment period 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 proposed 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 
involve 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 proposed 
to continue to restrict the devices to which 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.
    As indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 41479), 
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 no cost/full credit 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 of 
the CY 2009 OPPS/ASC proposed rule listed the proposed APCs to which 
the payment reduction policy for no cost/full credit and partial credit 
devices would apply in CY 2009 and displayed the proposed payment 
reduction percentages for both no cost/full credit and partial credit 
circumstances. Table 19 of the CY 2009 OPPS/ASC proposed rule listed 
the proposed devices to which this policy would apply in CY 2009. As 
reflected in the tables, we proposed 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 were above the 40-percent threshold based on the CY 
2007 claims data available for the proposed rule. We also proposed 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 
this APC was less than 40 percent. We stated in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41479) that we would update the lists of APCs and 
devices to which the no cost/full credit and partial credit device 
adjustment policy would apply in CY 2009 based on the final CY 2007 
claims data available for this final rule with comment period.
    Comment: One commenter supported the continuation of the current 
policy. Another commenter acknowledged an understanding of the 
rationale for the no cost/full credit and partial credit payment 
reduction policy, but expressed concerns regarding the policy's 
application in cases of device upgrades. According to the commenter, 
when a device is replaced, the old model is often no longer available 
and an upgrade is required. In such circumstances, the commenter 
asserted that the full cost of the replaced device is credited, but the 
replacement device is more expensive. The commenter objected to CMS' 
application of the full device offset amount in these cases, and 
suggested CMS develop a process that takes into account and pays for 
the excess cost of the replacement device. The commenter also noted 
that, in instances of partial credits for replacement devices, 
hospitals often do not know if they are receiving a partial credit 
until the manufacturer has inspected the device. According to the 
commenter, hospitals must then resubmit the claim after the partial 
refund is received. The commenter believed that this process requires 
manual intervention that is costly for hospitals because many material 
management systems are interfaced with billing systems and do not 
routinely match returns to specific patients. The commenter urged CMS 
to take into account the additional costs incurred by the hospital to 
track these replacement devices and the additional staff effort 
required to resubmit claims when the manufacturer provides partial 
credit for replacement devices.
    Response: We do not agree with the commenter that we need to modify 
the no cost/full credit and partial credit device adjustment policy to 
account for the cost of more expensive replacement devices when 
manufacturers provide device upgrades. We continue to believe making 
the full APC payment would result in significant overpayment because, 
as described above, we use only those claims that reflect the full 
costs of devices in ratesetting for device-dependent APCs. In cases 
where a hospital incurs a cost for a device upgrade, the difference 
between the cost of the replacement device and the full credit the 
hospital receives for the device being replaced would likely be much 
less than the full cost of the device that is included in the device-
dependent APC payment rate. To provide the full APC payment in these 
cases would favor a device upgrade, rather than replacement with a 
comparable device, in warranty or recall cases where the surgical 
procedure to replace the device is only medically necessary because of 
the original defective device, for which the manufacturer bears 
responsibility. Moreover, we also are concerned that a new policy to 
apply a smaller APC payment percentage reduction in an upgrade case, if 
we were eventually able to estimate such a percentage from sufficient 
claims data, could also favor device upgrades, rather than replacement 
with a comparable device in those situations for which the upgrade is 
only being provided because the old model failed (and for which the 
manufacturer provides a full credit) but is no longer available for use 
in the replacement procedure. We recognize that, in some cases, the 
estimated device cost, and, therefore, the amount of the payment 
reduction, will be more or less than the cost a hospital would 
otherwise incur for a no cost/full credit device. However, because 
averaging is inherent in a prospective payment system, we do not 
believe this is inappropriate. Therefore, we continue to believe that 
the full device offset reduction should be made when hospitals receive 
full credit for the cost of a replaced device

[[Page 68631]]

against the cost of a more expensive replacement device.
    Also, as stated in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68076), we do not believe it is necessary to reduce the 
amount of no cost/full credit and partial credit device adjustments to 
account for administrative costs because we believe that these costs 
are part of the payment that remains for the services furnished. We 
remind hospitals that, as outlined in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66747), they have two options to report that 
they received a partial credit of 50 percent or more of the cost of a 
replacement device: (1) Submit the claims immediately without the 
``FC'' modifier signifying partial credit for a replacement device and 
submit a claim adjustment with the ``FC'' modifier at a later date once 
the credit determination is made; or (2) hold the claim until a 
determination is made on the level of credit.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to continue the 
established no cost/full credit and partial credit device adjustment 
policy. For CY 2009, OPPS payments for implantation procedures to which 
the ``FB'' modifier is appended are reduced by 100 percent of the 
device offset for no cost/full credit cases when both a device code 
listed in Table 22, below, is present on the claim and the procedure 
code maps to an APC listed in Table 21 below. OPPS payments for 
implantation procedures to which the ``FC'' modifier is appended are 
reduced by 50 percent of the device offset when both a device code 
listed in Table 22 is present on the claim and the procedure code maps 
to an APC listed in Table 21. 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.
    In addition, we are adding, as proposed, APC 0425 (Level II 
Arthroplasty or Implantation with Prosthesis) and APC 0648 (Level IV 
Breast Surgery) and their associated devices to the lists of APCs and 
devices to which this policy applies, as shown in Tables 21 and 22, 
respectively, because the device offset percentages for these two APCs 
are above the 40-percent threshold. We are not implementing our 
proposal to remove APC 0106 (Insertion/Replacement of Pacemaker Leads 
and/or Electrodes) and device HCPCS codes associated with this APC from 
these lists because the device offset percentage for this APC is now 
above 40 percent based on updated CY 2007 claims data and the most 
recent cost report data available for this final rule with comment 
period.

       Table 21--APCs to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Applies
----------------------------------------------------------------------------------------------------------------
                                                                                   Final CY 2009   Final CY 2009
                                                                                   device offset   device offset
            Final CY 2009 APC              Final CY        CY 2009 APC title      percentage for  percentage for
                                            2009 SI                                no cost/full   partial credit
                                                                                    credit case        case
----------------------------------------------------------------------------------------------------------------
0039....................................          S   Level I Implantation of                 84              42
                                                       Neurostimulator.
0040....................................          S   Percutaneous Implantation               57              29
                                                       of Neurostimulator
                                                       Electrodes.
0061....................................          S   Laminectomy, Laparoscopy,               62              31
                                                       or Incision for
                                                       Implantation of
                                                       Neurostimulator
                                                       Electrodes.
0089....................................          T   Insertion/Replacement of                72              36
                                                       Permanent Pacemaker and
                                                       Electrodes.
0090....................................          T   Insertion/Replacement of                74              37
                                                       Pacemaker Pulse Generator.
0106....................................          T   Insertion/Replacement of                43              21
                                                       Pacemaker Leads and/or
                                                       Electrodes.
0107....................................          T   Insertion of Cardioverter-              89              45
                                                       Defibrillator.
0108....................................          T   Insertion/Replacement/                  89              44
                                                       Repair of Cardioverter-
                                                       Defibrillator Leads.
0222....................................          S   Level II Implantation of                85              42
                                                       Neurostimulator.
0225....................................          S   Implantation of                         62              31
                                                       Neurostimulator
                                                       Electrodes, Cranial Nerve.
0227....................................          T   Implantation of Drug                    82              41
                                                       Infusion Device.
0259....................................          T   Level VII ENT Procedures..              84              42
0315....................................          S   Level III Implantation of               88              44
                                                       Neurostimulator.
0385....................................          S   Level I Prosthetic                      59              29
                                                       Urological Procedures.
0386....................................          S   Level II Prosthetic                     69              34
                                                       Urological Procedures.
0418....................................          T   Insertion of Left                       71              36
                                                       Ventricular Pacing Elect.
0425....................................          T   Level II Arthroplasty or                59              29
                                                       Implantation with
                                                       Prosthesis.
0648....................................          T   Level IV Breast Surgery...              46              23
0654....................................          T   Insertion/Replacement of a              77              38
                                                       permanent dual chamber
                                                       pacemaker.
0655....................................          T   Insertion/Replacement/                  76              38
                                                       Conversion of a permanent
                                                       dual chamber pacemaker.
0680....................................          S   Insertion of Patient                    71              36
                                                       Activated Event Recorders.
0681....................................          T   Knee Arthroplasty.........              71              35
----------------------------------------------------------------------------------------------------------------


  Table 22--Devices to Which the No Cost/Full Credit and Partial Credit
                    Device Adjustment Policy Applies
------------------------------------------------------------------------
     CY 2009 device HCPCS code            CY 2009 short descriptor
------------------------------------------------------------------------
C1721.............................  AICD, dual chamber.
C1722.............................  AICD, single chamber.
C1728.............................  Cath, brachytx seed adm.
C1764.............................  Event recorder, cardiac.
C1767.............................  Generator, neurostim, imp.

[[Page 68632]]

 
C1771.............................  Rep dev, urinary, w/sling.
C1772.............................  Infusion pump, programmable.
C1776.............................  Joint device (implantable).
C1777.............................  Lead, AICD, endo single coil.
C1778.............................  Lead, neurostimulator.
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.
C1895.............................  Lead, AICD, endo dual coil.
C1896.............................  Lead, AICD, non sing/dual.
C1897.............................  Lead, neurostim, test kit.
C1898.............................  Lead, pmkr, other than trans.
C1899.............................  Lead, pmkr/AICD combination.
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.
L8685.............................  Implt nrostm pls gen sng rec.
L8686.............................  Implt nrostm pls gen sng non.
L8687.............................  Implt nrostm pls gen dua rec.
L8688.............................  Implt nrostm pls gen dua non.
L8690.............................  Aud osseo dev, int/ext comp.
------------------------------------------------------------------------

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

A. 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 also are 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. CY 2009 pass-through drugs and 
biologicals and their APCs are assigned status indicator ``G'' as 
indicated in Addenda A and B to this final rule with comment period.
    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 to be 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 Public Law 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

[[Page 68633]]

this final rule with comment period, 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 Public Law 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 on July 1, 2006, and 
includes approximately 190 of the most common Part B drugs provided in 
the physician's office setting. We note that the Part B drug CAP 
program has been postponed for CY 2009 (Medicare Learning Network (MLN) 
Matters Special Edition 0833, available via the Web site: http://www.medicare.gov). Therefore, there will be no effective Part B drug 
CAP rate for pass-through drugs and biologicals as of January 1, 2009. 
As is our standard process, we have used the Part B drug CAP rates for 
July 2008 to determine the packaging status for drugs with expiring 
pass-through status. However, effective January 1, 2009, we will use 
the amount determined under section 1842(o) of the Act for payment 
purposes for drugs and biologicals with pass-through status. If the 
Part B drug CAP program is reinstituted sometime during CY 2009, we 
will again use the Part B drug CAP rate for pass-through drugs and 
biologicals if they are a part of the Part B drug CAP program. 
Otherwise, we will continue to use the rate that would be paid in the 
physician's office setting for drugs and biologicals with pass-through 
status. The list of drugs and biologicals covered under the Part B drug 
CAP through December 31, 2008, 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 OPPS pass-through payment estimate 
for drugs and biologicals in CY 2009 is $23.3 million, which is 
discussed in section VI.B. of this final rule with comment period.
    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. 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. In the CY 2009 OPPS/ASC 
proposed rule (73 FR 41481), we proposed that the pass-through status 
of 15 drugs and biologicals would expire on December 31, 2008, as 
listed in Table 20 of the proposed rule. It is standard OPPS practice 
to delete temporary C-codes if an alternate permanent HCPCS code 
becomes available for purposes of OPPS billing and payment. Based on 
our review of the new CY 2009 HCPCS codes available at the time of this 
final rule with comment period, as noted in Table 23 below, there are 
no new permanent HCPCS codes that will be implemented in CY 2009 to 
replace HCPCS C-codes that were used in CY 2008 for drugs and 
biologicals with pass-through status.
    In addition, HCPCS code J7348 (Dermal (substitute) tissue of 
nonhuman origin, with or without other bioengineered or processed 
elements, without metabolically active elements (Tissuemend), per 
square centimeter), which was proposed for expiring pass-through status 
on December 31, 2009, has been deleted by the CMS HCPCS Workgroup, 
effective January 1, 2009. We have determined that the product(s) 
described by this HCPCS code are appropriately reported with HCPCS code 
Q4109 (Skin substitute, Tissuemend, per square centimeter), effective 
January 1, 2009. Furthermore, another HCPCS code J7349 (Dermal 
(substitute) tissue of nonhuman origin, with or without other 
bioengineered or processed elements, without metabolically active 
elements (Primatrix), per square centimeter), which was proposed for 
expiring pass-through status on December 31, 2008, also has been 
deleted, effective January 1, 2009, and product(s) described by this 
HCPCS code are appropriately reported with HCPCS code Q4110 (Skin 
substitute, Primatrix, per square centimeter).
    As we discussed in the proposed rule, 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 calendar year (which was 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 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 provide separate payment at the 
applicable relative ASP-based payment amount (which was proposed at 
ASP+4 percent for CY 2009). For drugs and biologicals that are 
currently covered under the CAP, we proposed to use the payment rates 
calculated under that program that were in effect as of April 1, 2008, 
for purposes of packaging decisions and for Addenda A and B to the 
proposed rule. As we proposed, we are updating these payment rates 
based on the CAP rates as of July 1, 2008, for packaging decisions and 
as of October 1, 2008, for purposes of Addenda A and B to this CY 2009 
OPPS/ASC final rule with comment period, as these are the most updated 
data available at the time these decisions are made.
    Three of the products with proposed expiring pass-through status 
for CY 2009 are biologicals that are solely surgically implanted 
according to their Food and Drug Administration-approved indications. 
As discussed in the proposed rule, 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). We 
note that, as discussed above, the CMS HCPCS Workgroup has deleted 
HCPCS code J7348, effective January 1,

[[Page 68634]]

2009, and we have determined that the product(s) described by this 
HCPCS code are appropriately reported with HCPCS code Q4109, effective 
January 1, 2009.
    We proposed to package payment for those implantable biologicals 
that have expiring pass-through status in CY 2009 into payment for the 
associated surgical procedure. We indicated our belief 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 
that 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 
nonbiologic 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. As 
described in the CY 2009 OPPS/ASC proposed rule (73 FR 41481), we 
believed that 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 indicated in the CY 2009 OPPS/ASC proposed rule 
(73 FR 41481) that we saw 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.
    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, because 
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, we proposed a policy 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 when their pass-through status 
expires.
    Comment: One commenter requested that CMS not end pass-through 
status for HCPCS codes C9352 and C9353 effective December 31, 2008. The 
commenter pointed out that while these two products were originally 
granted pass-through status on January 1, 2007 (and could therefore 
theoretically be eligible for another year of pass-through status under 
the OPPS), a coding change in CY 2008 was the first opportunity for 
these products to be differentiated on hospital claims. Therefore, when 
determining payment rates for CY 2009, the commenter argued that CY 
2007 claims data do not identify which product was used on the claim 
and, therefore, accurate payment cannot be determined for these 
products for CY 2009.
    In addition, the commenter stated that there were very few claims 
for these products in CY 2007. There were a total of 11 CY 2007 claims 
for these products, and only 3 were single or ``pseudo'' single claims 
used for ratesetting for the associated procedures.
    Response: HCPCS code C9350 (Microporous collagen tube of non-human 
origin, per centimeter length) was first created effective January 1, 
2007 and was assigned status indicator ``G'' (indicating pass-through 
status applied). On January 1, 2008, HCPCS code C9350 was split into 
HCPCS code C9352 and HCPCS code C9353. The products described in CY 
2007 under HCPCS code C9350 continued pass-through status under the 
HCPCS codes C9352 and C9353 in CY 2008. As stated above, pass-through 
status is required for at least 2 but not more than 3 years. We 
proposed to end pass-through status for the products described by HCPCS 
codes C9352 and C9353 because they were first approved for pass-through 
status on January 1, 2007 under HCPCS code C9350 and, therefore, would 
meet the timeframe required for pass-through status on December 31, 
2008. We do not believe the finding that these products were rarely 
used in the care of Medicare beneficiaries in CY 2007, their first year 
of pass-through payment, is sufficient justification for providing a 
third year of pass-through payment, as we have cost data that allow us 
to package payment for these implantable biologicals into payment for 
the associated procedures for CY 2009.
    We note that, unlike our standard methodology of calculating an 
estimated per day cost for items that have expiring pass-through status 
and comparing this estimate to the applicable drug packaging threshold, 
our proposal to package nonpass-through biologicals that are surgically 
inserted or implanted (through a surgical incision or a natural 
orifice) into the payment for the associated surgical procedure is not 
dependent on claims data to establish an estimated per day cost for 
each product. Rather, the packaging determination is made as a result 
of the

[[Page 68635]]

FDA-indicated implantable use of the product. Therefore, we do not 
believe that the coding change in CY 2008 and the resulting lack of 
product-specific claims data sufficiently warrant an extension of pass-
through status for the products described by HCPCS codes C9352 and 
C9353.
    Comment: A few commenters supported the proposed methodology to 
package payment for drugs and nonimplantable biologicals with expiring 
pass-through status if their estimated per day costs are less than or 
equal to the drug packaging threshold (proposed at $60 for CY 2009).
    Furthermore, several commenters supported CMS' proposal to package 
payment for implantable biologicals without pass-through status into 
the payment for the associated surgical procedure. One commenter 
recommended that CMS continue to examine the APC weights of these 
associated APCs to ensure they sufficiently account for the costs of 
the implantable biologicals. In addition, this commenter recommended 
that CMS consider developing separate APCs for surgical procedures that 
use biological and synthetic mesh from those procedures that do not use 
any type of mesh. The commenter argued that this separation would 
ensure that the APCs are similar in terms of clinical characteristic 
and resource use.
    One commenter requested an exception to the proposed packaging 
policy when the procedure including an implantable biological is billed 
using an unlisted surgical procedure code. In this specific situation, 
the commenter believed that the implantable biological should be paid 
separately whether or not it currently has pass-through status if the 
estimated per day cost is over the applicable drug packaging threshold.
    Response: We proposed to package payment for drugs and 
nonimplantable biologicals with expiring pass-through status in CY 2009 
and with estimated costs below the CY 2009 $60 drug packaging threshold 
and to continue to pay separately for these products if their estimated 
costs exceeded the threshold, consistent with our established policy 
for the past several years. We appreciate the commenters' support for 
this approach.
    In addition, we do not believe there is a need to develop separate 
APCs for surgical procedures that use biological and synthetic mesh, 
distinct from APCs for those procedures that do not use mesh. The APCs 
are groupings of services that share clinical and resource 
characteristics. The packaged costs of implantable mesh devices are 
reflected in the HCPCS code-specific median costs for the associated 
surgical procedures; thus, while we believe that, unless we find that 
APCs violate the 2 times rule or there is a concern regarding their 
clinical or resource homogeneity, we have no specific need to assign 
procedures using mesh to different APCs from procedures that do not 
implant mesh products. 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.
    Finally, we understand that one commenter was concerned that when 
implantable biologicals are used in procedures reported with unlisted 
surgical procedure CPT codes, the complete packaged payment for the 
procedure and the biological may not sufficiently cover the costs of 
the biological. We disagree with the commenter that implantable 
biologicals should be paid separately when provided with an unlisted 
surgical procedure. We acknowledge that the commenter's concern is 
based partially on our established policy to provide payment for 
unlisted codes at the lowest level clinical APC in an appropriate 
clinical series. As we do for other OPPS services, we package payment 
for certain items and services when provided with unlisted procedure 
codes. We note that this methodology is also followed when packaged 
implantable nonbiologic devices are provided with unlisted surgical 
procedure codes. We expect that stakeholders would continue to seek 
specific HCPCS codes for new procedures provided with any frequency in 
the HOPD in order to allow for more precise procedure-specific payment 
under the OPPS. We remind readers that the reporting of unlisted codes 
is meant as a temporary measure to allow payment for new and/or 
uncommon services and, therefore, the services described by unlisted 
codes vary from year-to-year.
    Comment: One commenter further recommended that CMS treat 
biologicals that are always surgically implanted or inserted and are 
approved by the FDA as devices rather than drugs for purposes of pass-
through payment. The commenter noted that this would allow all 
implantable devices, biological and otherwise, to be subject to a 
single pass-through payment policy. The commenter concluded that this 
policy change would provide consistency in billing these products as 
implanted devices during both their pass-through payment period, as 
well as after the expiration of pass-through status.
    Response: We appreciate the commenter's recommendation to treat 
biologicals that are always surgically implanted or inserted and are 
approved by the FDA as devices for purposes of pass-through payment 
under the OPPS. We did not propose such a policy for CY 2009, but we 
will consider making such a proposal for future rulemaking.
    Comment: One commenter requested special payment consideration for 
HCPCS code J1473 (Injection, idursulfase, 1mg) because this drug has 
been granted orphan drug status by the FDA. Specifically, the commenter 
requested separate payment for this drug.
    Response: In the CY 2009 OPPS/ASC proposed rule, we proposed to end 
the pass-through status of HCPCS code J1473 on December 31, 2008. As 
noted above, for drugs and biologicals (other than implantable only 
biologicals) transitioning from pass-through status, we determine the 
packaging status of each drug or biological by comparing its estimated 
per day cost to the annual drug packaging threshold for the applicable 
payment year. For CY 2009, the per day cost estimate for HCPCS code 
J1473 exceeds the $60 drug packaging threshold finalized for CY 2009 in 
section V.B.2.b. of this final rule with comment period and, therefore, 
HCPCS code J1473 will be paid separately for CY 2009.
    After consideration of the public comments received, for CY 2009, 
we are finalizing our proposed policy, without modification, 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 final methodology, HCPCS codes C9352, 
C9353, and J7348 are packaged and assigned status indicator ``N'' in 
Addendum B to this final rule with comment period. In addition, as 
proposed, any new biologicals without pass-through status that are 
surgically inserted or implanted (through a surgical incision or a 
natural orifice) will be packaged beginning in CY 2009.
    Moreover, for nonpass-through biologicals that may sometimes be 
used as implantable devices, we continue to instruct hospitals to not 
bill separately for the HCPCS codes for the products when used as 
implantable devices. This reporting ensures that the costs of these 
products that may be, but are not

[[Page 68636]]

always, used as implanted biologicals are appropriately packaged into 
payment for the associated implantation procedures when the products 
are used as implantable devices.
    For drugs and nonimplantable biologicals with expiring pass-through 
status, as proposed we have determined their final CY 2009 payment 
methodology of packaged or separate payment based on their estimated 
per day costs, in comparison with the CY 2009 drug packaging threshold.
    Finally, we are finalizing our CY 2009 proposal, without 
modification, to expire pass-through status for the 15 drugs and 
biologicals listed in Table 20 of the proposed rule and listed below in 
Table 23, effective December 31, 2008. Packaged drugs and biologicals 
are assigned status indicator ``N'' and drugs and biologicals that 
continue to be separately paid as nonpass-through products are assigned 
status indicator ``K.''

             Table 23--Drugs and Biologicals for Which Pass-Through Status Expires December 31, 2008
----------------------------------------------------------------------------------------------------------------
                                                                                  Final CY 2009    Final CY 2009
   CY 2008 HCPCS code        CY 2009 HCPCS code       CY 2009 short descriptor          SI              APC
----------------------------------------------------------------------------------------------------------------
C9352...................  C9352...................  Neuragen nerve guide, per                 N   ..............
                                                     cm.
C9353...................  C9353...................  Neurawrap nerve protector,                N   ..............
                                                     cm.
J0129*..................  J0129...................  Abatacept injection........               K             9230
J0348...................  J0348...................  Injection, anidulafungin,                 K             0760
                                                     1mg.
J0894*..................  J0894...................  Decitabine injection.......               K             9231
J1740*..................  J1740...................  Ibandronate sodium                        K             9229
                                                     injection.
J1743...................  J1743...................  Idursulfase injection......               K             9232
J2248...................  J2248...................  Micafungin sodium injection               K             9227
J2323*..................  J2323...................  Natalizumab injection......               K             9126
J2778*..................  J2778...................  Ranibizumab injection......               K             9233
J3243...................  J3243...................  Tigecycline injection......               K             9228
J3473...................  J3473...................  Hyaluronidase recombinant..               K             0806
J7348...................  Q4109...................  Tissuemend skin sub........               N   ..............
J7349...................  Q4110...................  Primatrix skin sub.........               K             1248
J9303...................  J9303...................  Panitumumab injection......               K             9235
----------------------------------------------------------------------------------------------------------------
* Indicates that the drug was paid at a rate determined by the Part B drug CAP methodology (prior to January 1,
  2009) while identified as pass-through under the OPPS.

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Status in CY 2009
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41482), we proposed 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, were listed in Table 21 of the proposed rule. 
The APCs and HCPCS codes for the proposed drugs and biologicals that 
were listed in Table 21 were assigned status indicator ``G'' in Addenda 
A and B to the 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. We stated in the proposed 
rule that, 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 the proposed rule, we believed 
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 proposed 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. In 
addition, as we consider radiopharmaceuticals to be drugs for pass-
through purposes, we proposed to provide pass-through payment for 
radiopharmaceuticals based on the ASP methodology at a rate equivalent 
to the payment rate for drugs and biologicals in the physician's office 
setting. We proposed to collect ASP data from those manufacturers that 
were able to report a patient-specific dose based on the HCPCS code 
descriptor (73 FR 41482).
    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 proposed 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. In the 
proposed rule, HCPCS codes that are offered under the CAP program as of 
April 1, 2008, were identified in Table 21 of the proposed rule with an 
asterisk.
    Comment: Several commenters supported the continued pass-through 
status in CY 2009 of specific drugs and biologicals and urged CMS to 
finalize the proposal for these items. One commenter supported the 
proposed methodology of providing payment for drugs and biologicals at 
a rate equal to the rate those drugs and biologicals would receive 
under the Part B drug CAP program or in the physician's office setting. 
The commenter stated that

[[Page 68637]]

newer drugs with pass-through status are often not part of discounting 
programs for either physicians or hospitals, and that payment parity 
for this group of drugs provides for continued access to these new 
therapies. Another commenter disagreed with the proposed payment 
methodology for drugs, biologicals, and radiopharmaceuticals that have 
pass-through status. The commenter noted that linking pass-through drug 
payment to the payment provided to physicians creates a further payment 
disadvantage for hospitals, as the commenter believed that physicians 
may charge for consulting services that assist in paying for 
physicians' costs of supplying drugs, while hospitals do not have this 
same opportunity.
    Response: As discussed above, we are directed by section 
1833(t)(6)(D) of the Act to provide payment for pass-through drugs and 
biologicals at the difference between the amount authorized under 
section 1842(o) of the Act and the portion of the otherwise applicable 
fee schedule amount that the Secretary determines is associated with 
the drug or biological (or at the Part B Drug CAP rate if the drug or 
biological is covered under the Part B drug CAP). Therefore, we are not 
able to adopt an alternative payment methodology for pass-through drugs 
and biologicals under the CY 2009 OPPS.
    Comment: A few commenters requested clarification of the criteria 
that would be used to evaluate radiopharmaceutical and contrast agent 
applications for pass-through status. In addition, some commenters 
requested that CMS clarify that new contrast agents are eligible to 
apply for pass-through status, even though they would otherwise be 
packaged.
    Response: We note that, as stated above, for pass-through purposes 
we consider radiopharmaceuticals and contrast agents to be drugs and, 
therefore, the same pass-through criteria apply. Our criteria for 
reviewing pass-through drug and biologicals applications are available 
on the CMS Web site at: http://www.cms.hhs.gov/ HospitalOutpatientPPS/ 
04_passthrough_payment.asp.
    Under the packaging methodology for diagnostic radiopharmaceuticals 
and contrast agents that we implemented in CY 2008, new diagnostic 
radiopharmaceuticals and new contrast agents without pass-thorough 
status would be packaged under the OPPS. As we are continuing our 
packaging policy for diagnostic radiopharmaceuticals and contrast 
agents for CY 2009, we will continue to package payment for all new 
diagnostic radiopharmaceuticals and contrast agents that do not have 
pass-through status in CY 2009.
    Comment: Several commenters supported the proposal to provide 
payment for pass-through diagnostic and therapeutic 
radiopharmaceuticals based on the ASP methodology. Other commenters, 
while generally in favor of using the ASP methodology for pass-through 
radiopharmaceutical payment purposes, cautioned CMS that some 
manufacturers do not have the ability to provide a patient-specific ASP 
for their product(s).
    Response: We appreciate the commenters' support for the ASP 
methodology to pay for radiopharmaceuticals with pass-through status. 
Currently, there are no radiopharmaceuticals (diagnostic or 
therapeutic) that would have pass-through status in CY 2009. For CY 
2009, we proposed to provide payment for diagnostic and therapeutic 
radiopharmaceuticals with pass-through status based on the ASP 
methodology. We proposed to collect ASP data from those manufacturers 
who were able to report a patient-specific dose based on the HCPCS code 
descriptor (73 FR 41482).
    Shortly after the issuance of our CY 2009 proposed rule, section 
142 of Public Law 110-275 (MIPPA) directed that OPPS payments for 
therapeutic radiopharmaceutical be made at hospital charges adjusted to 
cost for CY 2009. The payment methodology specified in Public Law 110-
275 also applies to any therapeutic radiopharmaceutical with pass-
through status during CY 2009. Therefore, any therapeutic 
radiopharmaceutical that is granted pass-through status for CY 2009 
will be paid based on hospital charges adjusted to cost for CY 2009.
    Consistent with OPPS payment for separately payable drugs and 
biologicals with HCPCS codes, in CY 2009, as proposed, payment for 
diagnostic radiopharmaceuticals that are granted pass-through status 
will be based on the ASP methodology. As stated above, for purposes of 
pass-through payment, we consider radiopharmaceuticals to be drugs 
under the OPPS. Therefore, if a diagnostic radiopharmaceutical receives 
pass-through status during CY 2009, we will follow the standard ASP 
methodology to determine its pass-through payment rate under the OPPS.
    We understand that not all manufacturers are in a position to 
submit patient-specific ASP data for their diagnostic 
radiopharmaceuticals. Therefore, if we do not have ASP data submitted 
under the standard ASP process to provide payment at ASP+6 percent, we 
will base the pass-through payment on the product's wholesale 
acquisition cost (WAC). If WAC data are also not available, we will 
provide payment for the pass-through diagnostic radiopharmaceutical at 
95 percent of its most recent average wholesale price (AWP).
    Comment: Some commenters suggested that CMS provide a payment, in 
addition to the relative ASP amount, for pass-through 
radiopharmaceuticals to account for nuclear medicine handling and 
compounding costs.
    Response: As stated above, we are directed by section 142 of Public 
Law 110-275 to provide payment for therapeutic radiopharmaceuticals 
with pass-through status in CY 2009 at charges adjusted to cost. 
Therefore, additional payments are not within our discretion for these 
therapeutic radiopharmaceuticals. However, as we stated in the CY 2007 
OPPS/ASC final rule with comment period (71 FR 68096), we believe that 
hospitals have the ability to set charges for items properly so that 
charges adjusted to cost can appropriately account fully for the 
acquisition and overhead costs of radiopharmaceuticals.
    We have routinely provided a single payment for drugs, biologicals, 
and radiopharmaceuticals under the OPPS to account for acquisition cost 
and pharmacy overhead costs, including compounding costs. We continue 
to believe that a single payment is appropriate for diagnostic 
radiopharmaceuticals with pass-through status in CY 2009, and that the 
payment rate of ASP+6 (or payment based on the ASP methodology) is 
adequate to provide payment for both the diagnostic radiopharmaceutical 
acquisition cost and any associated nuclear medicine handling and 
compounding costs.
    Comment: Some commenters noted that a pass-through period of 
possibly only 2 years discourages new product development, especially 
for radiopharmaceutical products. One commenter recommended providing 
pass-through payment for approved radiopharmaceuticals for a full 3-
year time period to allow hospitals time to incorporate new products 
into their chargemasters and billing practices.
    Response: As stated above, we currently do not have any 
radiopharmaceuticals, diagnostic or therapeutic, that either have been 
granted pass-through status or are under consideration for pass-through 
status at the time of this final rule with comment period. We also note 
that the OPPS pass-through provision provides for at least 2 but not 
more than 3 years of pass-through payment for drugs and biologicals 
that are approved for pass-

[[Page 68638]]

through payments. We provide an annual opportunity through the annual 
OPPS/ASC rulemaking cycle for public comment on those drugs and 
biologicals that are proposed for expiration of pass-through payment in 
the next calendar year. We often receive comments related to our 
proposed expiration of pass-through status for particular items, and we 
expect to continue to receive these comments regarding the proposed 
expiration of pass-through status for drugs and biologicals in the 
future. In this manner, we would address specific concerns about the 
pass-through period for individual drugs and biologicals in the future, 
including radiopharmaceuticals.
    After consideration of the public comments received, we are 
finalizing our proposed CY 2009 policy, with modification as noted 
below, to provide payment for pass-through drugs, including diagnostic 
radiopharmaceuticals, and biologicals based on the ASP methodology. 
This allows diagnostic radiopharmaceutical manufacturers that are able 
to provide ASP information through the established methodology to be 
paid for pass-through diagnostic radiopharmaceuticals at ASP+6 percent, 
the same rate as pass-through drugs and biologicals are paid in the 
physician's office setting. In addition, we are modifying our proposal 
to provide payment for therapeutic radiopharmaceuticals with pass-
through status based on the requirements of section 142 of Public Law 
110-275. Therefore, therapeutic radiopharmaceuticals with pass-through 
status in CY 2009 will be paid at hospital charges adjusted to cost, 
the same payment methodology as other therapeutic radiopharmaceuticals 
in CY 2009.
    The drugs and biologicals that are continuing pass-through status 
or have been granted pass-through status as of January 2009 for CY 2009 
are displayed in Table 24 below. In addition, we did not receive any 
public comments on our proposal 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, and we are finalizing this policy. 
Finally, if a drug or biological that has been granted pass-through 
status for CY 2009 becomes covered under the Part B drug CAP if the 
program is reinstituted, we will provide payment for Part B drugs that 
are granted pass-through status and are covered under the Part B drug 
CAP at the Part B drug CAP rate. Appropriate adjustments to the payment 
rates for pass-through drugs and biologicals will occur on a quarterly 
basis.

                       Table 24--Drugs and Biologicals With Pass-Through Status in CY 2009
----------------------------------------------------------------------------------------------------------------
                                                                                  Final CY 2009    Final CY 2009
   CY 2008 HCPCS code        CY 2009 HCPCS code       CY 2009 short descriptor          SI              APC
----------------------------------------------------------------------------------------------------------------
C9238...................  J1953...................  Levetiracetam injection....               G             9238
C9239...................  J9330...................  Temsirolimus injection.....               G             1168
C9240*..................  J9207...................  Ixabepilone injection......               G             9240
C9241...................  J1267...................  Doripenem injection........               G             9241
C9242...................  J1453...................  Fosaprepitant injection....               G             9242
C9243...................  J9033...................  Bendamustine injection.....               G             9243
C9244...................  J2785...................  Injection, regadenoson.....               G             9244
C9354...................  C9354...................  Veritas collagen matrix,                  G             9354
                                                     cm2.
C9355...................  C9355...................  Neuromatrix nerve cuff, cm.               G             9355
C9356...................  C9356...................  TendoGlide Tendon Prot, cm2               G             9356
C9357...................  Q4114...................  Integra flowable wound                    G             1251
                                                     matri.
C9358...................  C9358...................  SurgiMend, 0.5cm2..........               G             9358
C9359...................  C9359...................  Implant, bone void filler..               G             9359
J1300...................  J1300...................  Eculizumab injection.......               G             9236
J1571...................  J1571...................  Hepagam b im injection.....               G             0946
J1573...................  J1573...................  Hepagam b intravenous, inj.               G             1138
J3488*..................  J3488...................  Reclast injection..........               G             0951
J9225*..................  J9225...................  Vantas implant.............               G             1711
J9226...................  J9226...................  Supprelin LA implant.......               G             1142
J9261...................  J9261...................  Nelarabine injection.......               G             0825
Q4097...................  J1459...................  Inj IVIG privigen 500 mg...               G             1214
                          C9245...................  Injection, romiplostim.....               G             9245
                          C9246...................  Inj, gadoxetate disodium...               G             9246
                          C9248...................  Inj, clevidipine butyrate..               G             9248
----------------------------------------------------------------------------------------------------------------
* Indicates that the drug was paid at a rate determined by the Part B drug CAP methodology (prior to January 1,
  2009) while identified as pass-through under the OPPS.

4. 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. In the CY 2009 OPPS/ASC proposed rule (73 FR 41483), we 
proposed to continue to package payment in CY 2009 for all nonpass-
through diagnostic radiopharmaceuticals as discussed in section 
V.B.2.c. of this final rule with comment period.
    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

[[Page 68639]]

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 and final CY 2009 payment methodology is 
discussed in section V.A.3. of this final rule with comment period. 
According to our final policy and consistent with our CY 2008 final 
policy (72 FR 66755), new pass-through diagnostic radiopharmaceuticals 
will be paid at ASP+6 percent, while those without ASP information will 
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 the proposed rule and this 
final rule with comment period 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.
    The law specifies two categories of products that are eligible for 
transitional pass-through payment, specifically implantable devices and 
drugs and biologicals. Historically, in calculating the APC device 
offset amount that we have used to evaluate whether a candidate device 
category for pass-through status meets the cost significance test, we 
have calculated an amount that reflects the total packaged device costs 
for all devices that are included on the single bills mapping to the 
specific APC. This APC device offset amount is then also the amount by 
which we would reduce the pass-through payment for a device if we 
determine that the pass-through device resembles packaged predecessor 
devices.
    In the case of drugs and biologicals, we also have historically 
calculated a single APC drug amount that reflects the total packaged 
drug (including radiopharmaceutical) costs for all drugs and 
biologicals that are included on claims mapping to a specific APC. This 
is the amount that we have used to evaluate whether a candidate drug or 
biological for pass-through status meets the cost significance test. 
However, since CY 2008, we have had two major policies for the packaged 
payment of two categories of nonpass-through drugs and biologicals, 
specifically those drugs that are always packaged and those drugs that 
may be packaged. The first group of drugs and biologicals includes 
diagnostic radiopharmaceuticals and contrast agents, as well as 
implantable biologicals beginning in CY 2009, which we refer to as 
``policy-packaged'' drugs. The second group of drugs and biologicals 
includes those drugs that are subject to packaging based on their 
estimated per day costs in relationship to the annual OPPS drug 
packaging threshold, which we refer to as ``threshold-packaged'' drugs. 
We are clarifying that, for purposes of determining whether a drug or 
biological candidate for pass-through status meets the cost 
significance test, we use the appropriate ``threshold-packaged'' drug 
amount or ``policy-packaged'' drug amount to assess the criteria, based 
on the group of drugs to which the pass-through candidate drug belongs. 
Similarly, for purposes of the radiopharmaceutical offset policy, we 
utilize the ``policy-packaged'' drug amount to determine the 
appropriate APC radiopharmaceutical offset. In the case of APCs that 
contain nuclear medicine procedures, we expect that this ``policy-
packaged'' drug amount would consist almost entirely of the costs of 
diagnostic radiopharmaceuticals. It is this amount by which we would 
both assess a candidate pass-through diagnostic radiopharmaceutical's 
cost for purposes of cost significance according to Sec.  419.64(b)(2) 
and reduce the diagnostic radiopharmaceutical pass-through payment if 
we determine that the pass-through diagnostic radiopharmaceutical 
resembles packaged predecessor radiopharmaceuticals.
    As we stated in the CY 2009 OPPS/ASC proposed rule (73 FR 41483), 
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 ``policy-packaged'' 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 predecessor drug costs included in the procedural APC payment 
for the nuclear medicine procedure. In accordance with section 
1833(t)(6)(D)(i) of the Act, the otherwise applicable OPPS payment 
amount for the diagnostic radiopharmaceutical would roughly be the 
median cost of the ``policy-packaged'' drug costs for the predecessor 
radiopharmaceuticals that are packaged into the payment for the nuclear 
medicine procedure. We indicated in the proposed rule that this APC 
``policy-packaged'' drug 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 
``policy-packaged'' drugs, including diagnostic radiopharmaceuticals, 
as reflected in the most recent complete year of hospital outpatient 
claims data.
    Beginning in CY 2009, as we proposed, we would review each new 
pass-through diagnostic radiopharmaceutical on a case-by-case basis, to 
determine whether radiopharmaceutical costs associated

[[Page 68640]]

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 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 ``policy-packaged'' 
drug offset amount for the associated nuclear medicine procedure from 
the pass-through payment for the diagnostic radiopharmaceutical. As we 
proposed, we would establish the pertinent APC 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 at the time of 
issuance of the proposed rule did not yet reflect the results of these 
edits, we proposed 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 final rule 
with comment period. We proposed to use the same claims to calculate 
the APC ``policy-packaged'' drug offset amounts.
    Comment: Some commenters supported the proposed diagnostic 
radiopharmaceutical offset policy described in the CY 2009 OPPS/ASC 
proposed rule. These commenters supported CMS' proposal to apply an 
offset for pass-through diagnostic radiopharmaceuticals as it would 
ensure that duplicate payment would not be made for diagnostic 
radiopharmaceuticals by removing the radiopharmaceutical payment amount 
that is already packaged into the payment for the associated nuclear 
medicine procedure.
    Other commenters were concerned that the pass-through payment 
amount for diagnostic radiopharmaceuticals would be significantly 
reduced if the proposed offset policy is applied. Some of these 
commenters believed that the true costs of currently used diagnostic 
radiopharmaceuticals are not included in the payment for associated 
APCs because of hospital billing practices, and that using this 
unreliable hospital claims information to establish an offset amount 
would provide inadequate payment for the pass-through diagnostic 
radiopharmaceutical.
    Some commenters suggested calculating a diagnostic 
radiopharmaceutical offset on a per-nuclear medicine procedure basis. 
That is, these commenters suggested that the diagnostic 
radiopharmaceutical offset should be calculated for individual CPT 
codes, rather than for all procedures assigned to an APC, in order to 
more specifically identify the diagnostic radiopharmaceutical costs 
attributable to a specific procedure.
    Many commenters asked for further clarification regarding the 
calculation of the offsets and requested that CMS make the APC 
radiopharmaceutical offset amounts for the year publicly available for 
review by stakeholders.
    Response: As we stated in the CY 2009 OPPS/ASC proposed rule (73 FR 
41483), because of our proposed CY 2009 packaging policy for diagnostic 
radiopharmaceuticals, we believe that a payment offset policy is 
appropriate for diagnostic radiopharmaceuticals approved for pass-
through payment. An APC ``policy-packaged'' drug offset amount applied 
to diagnostic radiopharmaceuticals allows 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. As noted above, we distinguish between ``policy-packaged'' 
drugs and biologicals where a whole category of drugs or biologicals is 
packaged, regardless of an individual product's cost (such as 
diagnostic radiopharmaceuticals, contrast agents, and biologicals that 
are implantable only), from those ``threshold-packaged'' drugs and 
biologicals that are packaged because of the drug packaging threshold, 
in order to provide a more accurate offset estimate for diagnostic 
radiopharmaceutical pass-through purposes.
    We do not believe it would be appropriate to calculate the offset 
amount at the nuclear medicine procedure-specific level because OPPS 
payment for procedures is provided by APCs that group procedures that 
share clinical and resource similarities. Therefore, similar to our 
pass-through device offset policy, we will calculate the offset amount 
for pass-through diagnostic radiopharmaceuticals at the level of APCs 
because the APC reflects the OPPS payment for the specific nuclear 
medicine procedure in which the pass-through diagnostic 
radiopharmaceutical is used.
    The use of a pass-through offset amount 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, 
contrary to the commenters' concerns, we believe that we will usually 
find costs for predecessor diagnostic radiopharmaceuticals packaged 
into the existing APC payment for the nuclear medicine procedures 
associated with the new product. As we proposed, we will establish the 
pertinent APC ``policy-packaged'' drug 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.
    We will post annually on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp, a file that 
contains the three offset amounts that will be used for that year for 
purposes of evaluating cost significance for candidate pass-through 
device categories and drugs and biologicals, including diagnostic 
radiopharmaceuticals, and establishing any appropriate APC offset 
amounts. Specifically, the file will provide, for every OPPS clinical 
APC, the amounts and percentages of APC payment associated with 
packaged implantable devices, ``policy-packaged'' drugs and 
biologicals, and ``threshold-packaged'' drugs and biologicals.
    Comment: Several commenters recommended that CMS provide extensive 
education for Medicare contractors (fiscal intermediaries and A/B MACs) 
on how the offset should be applied and how payment should be made for 
pass-through diagnostic radiopharmaceuticals. One commenter requested 
that CMS provide hospital-specific education in order to prevent

[[Page 68641]]

hospitals from charging beneficiaries for any perceived difference in 
payment as a result of the offset, especially in situations where the 
beneficiary has been given an Advance Beneficiary Notice (ABN).
    Response: Our standard process is to release instructions in the 
January quarterly transmittal related to the updated OPPS policies 
finalized in the annual final rule with comment period. We will 
continue to provide instructions to our Medicare contractors on our 
policy changes in this manner, including the offset policy for 
diagnostic radiopharmaceuticals with pass-through status included in 
this final rule with comment period. Determination of offset 
eligibility and payment is determined in the OPPS PRICER, the pricing 
utility for OPPS payment. Medicare contractors have been successfully 
applying the offset policy through implementation of the OPPS PRICER 
for pass-through implantable devices for many years, and we do not 
expect that contractors will have difficulty providing appropriate 
payment for those pass-through diagnostic radiopharmaceuticals for 
which we have identified a drug offset amount.
    In addition, we remind readers that packaged items and services are 
covered and paid under the OPPS. Hospitals may only provide an ABN when 
the hospital expects that the service provided to the beneficiary will 
not be covered under any Medicare benefit category. Although hospitals 
do not receive separate payment from Medicare for packaged items and 
supplies, hospitals may not bill beneficiaries separately for any 
packaged items and supplies because those costs are recognized and paid 
within the OPPS payment rate for the associated procedure or service. 
Transmittal A-01-133, issued on November 20, 2001, explains in greater 
detail the rules regarding payment for packaged services. We believe 
that the vast majority of hospitals understand the correct use of ABNs, 
and that situations such as the one suggested the commenter would be 
rare. For more information on mandatory and voluntary uses of ABNs, we 
refer readers to the Medicare Claims Processing Manual, Pub. 100-4, 
Chapter 30, Sections 50.3.1 and 50.3.2.
    Comment: One commenter requested that CMS not apply a pass-through 
payment offset to pass-through contrast agents unless proper notice was 
provided and there was an opportunity for public comment. The commenter 
noted that the offset methodology would likely be unnecessary for 
contrast agents, as most contrast agents have per day cost estimates of 
under $60 and, therefore, are not likely to pass the cost significance 
test required for pass-through drug status.
    Response: We believe the commenter misunderstood our proposed 
offset policy. We did not make a proposal to apply a pass-through 
offset methodology for contrast agents, and we are not implementing an 
offset for pass-through contrast agents for CY 2009.
    After consideration of the public comments received, we are 
finalizing our proposal to apply an offset methodology to diagnostic 
radiopharmaceuticals that are granted pass-through status for CY 2009 
without modification. Specifically, the APC ``policy-packaged'' drug 
offset fraction for APCs containing nuclear medicine procedures in CY 
2009 is: 1 minus (the cost from single procedure claims in the APC that 
pass nuclear medicine procedure-to-radiolabeled product edits after 
removing the costs for ``policy-packaged'' drugs and biologicals 
divided by the cost from single procedure claims in the APC that pass 
the claims processing edits). To determine the actual APC offset amount 
for diagnostic radiopharmaceuticals granted pass-through status in CY 
2009, we 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 APC payment 
associated with the transitional pass-through diagnostic 
radiopharmaceutical by this amount.
    We will post annually on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp, a file that 
contains the three offset amounts that will be used for that year for 
purposes of evaluating cost significance for candidate pass-through 
device categories and drugs and biologicals, including diagnostic 
radiopharmaceuticals, and establishing any appropriate APC offset 
amounts. Specifically, the file will provide, for every OPPS clinical 
APC, the amounts and percentages of APC payment associated with 
packaged implantable devices, ``policy-packaged'' drugs and 
biologicals, and ``threshold-packaged'' drugs and biologicals.
    Table 25 displays the APCs to which nuclear medicine procedures are 
assigned in CY 2009 and for which we expect that an APC offset could be 
applicable in the case of new diagnostic radiopharmaceuticals with 
pass-through status.

 Table 25--APCs to Which Nuclear Medicine Procedures Are Assigned for CY
                                  2009
------------------------------------------------------------------------
             Final CY 2009 APC                    CY 2009 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. 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

[[Page 68642]]

associated procedure or service. (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 
Public Law 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 threshold for CY 2008, and our proposed and final approach for 
CY 2009 are discussed in more detail in section V.B.2.b. of this final 
rule with comment period.
    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 final rule with comment 
period our proposed and final CY 2009 payment policy for these anti-
emetic products.
2. Criteria for Packaging Payment for Drugs, Biologicals and 
Radiopharmaceuticals
a. Background
    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 Public Law 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.
    In addition, in CY 2008 we began distinguishing between diagnostic 
and therapeutic radiopharmaceuticals for payment purposes under the 
OPPS. We finalized a policy that identified diagnostic 
radiopharmaceuticals as those Level II HCPCS codes that include the 
term ``diagnostic'' along with a radiopharmaceutical in their long code 
descriptors. Therapeutic radiopharmaceuticals were identified as those 
Level II HCPCS codes that have the term ``therapeutic'' along with a 
radiopharmaceutical in their long code descriptors. We again noted that 
all radiopharmaceutical products fall into one category or the other; 
their use as a diagnostic radiopharmaceutical or therapeutic 
radiopharmaceutical is mutually exclusive.
b. Drugs, Biologicals, and Therapeutic Radiopharmaceuticals
    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, in the proposed rule, we proposed a packaging threshold for CY 
2009 of $60. During its March 2008 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. (For a more detailed 
discussion of the OPPS drug packaging threshold and the use of the PPI 
for prescription drugs, we refer readers to the CY 2007 OPPS/ASC final 
rule with comment period (71 FR 68085 through 68086).)
    For the fourth year, we proposed to continue exempting the oral and 
injectable forms of 5HT3 anti-emetics products from packaging, thereby 
making separate payment for all of these 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 thermotherapy and other therapies with side effects of 
nausea and vomiting, anti-emetic use is often an integral part of the 
treatment regiment. In the proposed rule, we stated our belief 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 the 
treating physician.
    Comment: Several commenters supported CMS' proposal to maintain the 
packaging threshold at $60 for CY 2009. One commenter expressed concern 
that annual increases may limit patient access to drugs in the HOPD 
setting.
    A few commenters recommended a variety of alternatives for CMS to 
consider, including: (1) Eliminating the drug packaging threshold and 
provide separate payment for all drugs; (2) permanently establishing 
the packaging threshold at $60; or (3) not increasing the drug 
packaging threshold for CY 2009. Some commenters believed that 
eliminating the drug packaging threshold would allow for parity in drug 
payment between the HOPD setting and the physician's office setting 
and, therefore, would provide transparency for beneficiaries who are 
comparing the costs of care between the two settings. In addition, 
these commenters claimed that eliminating the drug packaging threshold 
would increases the accuracy of hospital claims by providing an 
incentive to hospitals to correctly code for all drugs. Several 
commenters noted that the current packaging threshold discourages 
hospitals from using less costly packaged drugs because these drugs are 
not paid separately in the HOPD setting. Other comments believed that 
setting a permanent drug packaging threshold would eliminate the 
potential for incremental changes in the threshold

[[Page 68643]]

that could adversely affect hospital payment.
    Response: As fully discussed in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66757-66758), we continue to believe that 
unpackaging payment for all drugs, biologicals, and 
radiopharmaceuticals is inconsistent with the concept of a prospective 
payment system and that such a change could create an additional 
reporting burden for hospitals. The OPPS and the MPFS that applies to 
physician's office services are fundamentally different payment systems 
with essential differences in their payment policies and structure. 
Specifically, the OPPS is a prospective payment system, based on the 
concept of payment for groups of services that share clinical and 
resource characteristics. Payment is made under the OPPS according to 
prospectively established payment rates that are related to the 
relative costs of hospital resources for services. The MPFS is a fee 
schedule that generally provides payment for each individual component 
of a service. Consistent with the MPFS approach, separate payment is 
made for each drug provided in the physician's office, but the OPPS 
packages payment for certain drugs into the associated procedure 
payments for the APC group. Because of the different payment policies, 
differences in the degrees of packaged payment and separate payment 
between these two systems are only to be expected. In general, we do 
not believe that our packaging methodology under the OPPS results in 
limited beneficiary access to drug administration services because 
packaging is a fundamental component of a prospective payment system 
that accounts for the cost of certain items and services in larger 
payment bundles, recognizing that some clinical cases may be more 
costly and others less costly but that, on average, OPPS payment is 
appropriate for the services provided.
    We note that, in CYs 2005 and 2006, the statutorily mandated drug 
packaging threshold was set at $50, and we believe that it is currently 
appropriate to continue a modest drug packaging threshold for the CY 
2009 OPPS for the reasons set forth below. 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. Therefore, 
because of our continued belief that packaging is a fundamental 
component of a prospective payment system that contributes to important 
flexibility and efficiency in the delivery of high quality hospital 
outpatient services, we are not adopting the commenters' 
recommendations to pay separately for all drugs, biologicals, and 
radiopharmaceuticals for CY 2009 or to eliminate or to freeze the 
packaging threshold at $60.
    For purposes of this final rule with comment period, we again 
followed the CY 2007 methodology for CY 2009 and 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 ($61.95) to the nearest $5 
increment, which continued to yield a figure of $60. In performing this 
calculation, we used the most up-to-date forecasted, quarterly PPI 
estimates from CMS' OACT.
    After consideration of the public comments received, we are 
accepting the March 2008 APC Panel recommendation to continue to use 
our CY 2007 methodology of updating annually the OPPS packaging 
threshold for drugs and biologicals by the PPI for prescription drugs, 
and we are finalizing our CY 2009 proposed packaging threshold of $60, 
without modification, calculated according to the threshold update 
methodology that we began applying in CY 2007.
    Comment: Several commenters supported the proposal to continue to 
exempt the oral and injectable forms of 5HT3 anti-emetic products that 
were listed in Table 23 of the proposed rule (reprinted as Table 26 
below) from packaging, thereby making separate payment for all of the 
5HT3 anti-emetic products.
    In addition, several commenters requested that CMS apply the same 
principle to other groups of drugs in order to equalize payment 
methodologies across drugs in the same clinical group. One commenter 
suggested that CMS institute a similar policy for anticoagulant 
therapies provided in the HOPD. This commenter noted that there are 
several drug treatments for deep vein thrombosis, and that one drug 
treatment is paid separately while others are packaged. The commenter 
was concerned that these different payment methodologies provide 
hospitals an incentive to use the separately paid drugs, although the 
commenter noted that treatments are not interchangeable and that 
benefits vary by patient.
    Another commenter suggested that CMS expand the packaging threshold 
exemption to antineoplastic agents and other anticancer therapeutic 
agents. The commenter believed that anticancer agents, as a class, are 
not appropriate for packaging because of the toxicity, side effects, 
interactions with other drugs, and level of patient specificity 
associated with these therapies. Therefore, the commenter requested 
that CMS not apply the drug packaging threshold for anticancer agents 
and provide separate payment for all of these products in CY 2009.
    Response: We appreciate the support for our proposal to continue 
exempting the 5HT3 anti-emetic products from our packaging 
determination. We note that as we continue to explore the possibility 
of additional encounter-based or episode-based payment in future years, 
and as we first discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66757), we may consider additional options for 
packaging drug payment in the future. We also note that if we were to 
increase the OPPS drug packaging threshold, we might no longer need to 
make a special exemption for these products because all of the products 
might be packaged under such an approach. Similarly, a higher drug 
packaging threshold could eliminate existing disparities in payment 
methodologies for other drug groups and provide similar methods of 
payment across items in a group.
    Nevertheless, while we may be interested in alternative threshold 
methodologies for future ratesetting purposes, we realize that there 
are existing situations where drugs in a particular category vary in 
their payment treatment under the OPPS, with some drugs packaged and 
other separately paid. We believe the challenges associated with 
categorizing drugs to assess them for difference in their OPPS payment 
methodologies are significant, and we are not convinced that ensuring 
the same payment treatment for all drugs in other drug categories is 
essential at this time, beyond the proposal we made for 5HT3 
antiemetics. Therefore, we do not believe that it would be appropriate 
at this time to take any additional steps to ensure that all drugs in a 
specific category, including anticoagulants and antineoplastic agents, 
are all separately paid (or, alternatively, are all packaged), as 
requested by some commenters.

[[Page 68644]]

    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to again exempt 
the oral and injectable forms of 5HT3 antiemetic products listed in 
Table 26 below from our drug packaging methodology for CY 2009.

    Table 26--Anti-Emetics Exempted From CY 2009 OPPS Drug Packaging
                                Threshold
------------------------------------------------------------------------
         CY 2009  HCPCS code               CY 2009 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.
------------------------------------------------------------------------

    To determine their CY 2009 packaging status for the proposed rule, 
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, as 
we proposed, we used 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 CY 2009 proposed rule per day costs, we used an 
estimated payment rate for each drug and biological of ASP+4 percent 
(which is the payment rate we proposed for separately payable drugs and 
biologicals in CY 2009, as discussed in more detail in section V.B.3.b. 
of this final rule with comment period). 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 rule per day cost.
    As is our standard methodology, for CY 2009, we proposed 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 the proposed rule 
because these were the most recent data available for use at the time 
of development of the proposed rule. These data were 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 proposed per day cost. We proposed to package items 
with a per day cost less than or equal to $60 and proposed to identify 
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 displayed in Addendum B to the 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. As indicated in the proposed 
rule (73 FR 41485), only items that are identified as separately 
payable in this final rule with comment period are subject to quarterly 
updates. For our calculation of per day costs of drugs and biologicals 
in this CY 2009 OPPS/ASC final rule with comment period, as we 
proposed, we used 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. As 
proposed, we note that we also used these data for budget neutrality 
estimates and impact analyses for this CY 2009 OPPS/ASC final rule with 
comment period. As proposed, payment rates for separately payable drugs 
and biologicals included in Addenda A and B to this final rule with 
comment period are 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. Furthermore, as proposed, these 
rates will 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.
    We note that we proposed to use hospital claims data to establish 
the packaging status of therapeutic radiopharmaceuticals in our CY 2009 
OPPS/ASC proposed rule. As discussed previously, after issuance of the 
CY 2009 OPPS/ASC proposed rule, Public Law 110-275 was enacted and, as 
a result, we are required to provide payment for therapeutic 
radiopharmaceuticals at charges adjusted to cost for CY 2009. 
Therefore, we are not using hospital claims data to determine the 
packaging status of therapeutic radiopharmaceuticals based on their per 
day costs. Rather, all therapeutic radiopharmaceuticals will be paid 
separately in CY 2009 at hospital charges adjusted to cost.
    Consequently, the packaging status for some drugs and biologicals 
in this CY 2009 OPPS/ASC final rule with comment period using the 
updated data is different from the same drug's packaging status 
determined based on the data used for the proposed rule. Under such 
circumstances, as we proposed, we are applying the following policies 
to these drugs and biologicals whose relationship to the $60 threshold 
changed based on the final updated data:
     Drugs and biologicals that were paid separately in CY 2008 
and that were proposed for separate payment in CY 2009, and then have 
per day costs equal to or less than $60, based on the updated ASPs and 
hospital claims data used for this CY 2009 final rule with comment 
period, will continue to receive separate payment in CY 2009.
     Drugs and biologicals that were packaged in CY 2008 and 
that were proposed for separate payment in CY 2009, and then have per 
day costs equal to or less than $60, based on the updated ASPs and 
hospital claims data used for this CY 2009 final rule with comment 
period, will remain packaged in CY 2009.
     Drugs and biologicals for which we proposed packaged 
payment in CY 2009 but then have per day costs greater than $60, based 
on the updated ASPs and hospital claims data used for this CY 2009 
final rule with comment period, will receive separate payment in CY 
2009.
    We note that HCPCS code J8510 (Busulfan; oral, 2 mg) was paid 
separately in CY 2008 and was proposed for separate payment in CY 2009, 
but had a final per day cost of approximately $57, which is less than 
the $60 threshold, based on the updated ASPs and hospital claims data 
used for this CY 2009 final rule with comment period. HCPCS code J8510 
will continue to receive separate payment in CY 2009 according to the 
established methodology set forth above.
    In addition, there were several drugs and biologicals that we 
proposed to package in the proposed rule and that now have per day 
costs greater than $60 using updated ASPs and all of the

[[Page 68645]]

hospital claims data from CY 2007 used for this final rule with comment 
period. In accordance with our established policy for such cases, for 
CY 2009 we will pay for these drugs and biologicals separately. Table 
27 lists the drugs and biologicals that were proposed as packaged, but 
that will be paid separately in CY 2009. We note that for CY 2009, the 
CMS HCPCS Workgroup has established two new codes for the products that 
were previously assigned to HCPCS code J7341 (Dermal (substitute) 
tissue of nonhuman origin, with or without other bioengineered or 
processed elements, with metabolically active elements, per square 
centimeter) in CY 2008. HCPCS code J7341 was proposed to be packaged 
for CY 2009 but updated final rule data indicate a per day cost of over 
the $60 drug packaging threshold. As is our standard methodology, we 
are establishing separate payment for both of the new CY 2009 HCPCS 
codes, Q4102 (Skin substitute, Oasis wound matrix, per square 
centimeter) and Q4103 (Skin substitute, Oasis burn matrix, per square 
centimeter), as their predecessor code would have been separately 
payable in CY 2009.

 Table 27--Drugs and Biologicals Proposed as Packaged but With Final Per
 Day Costs Above $60, for Which Separate Payment Will Be Made in CY 2009
------------------------------------------------------------------------
         CY 2009  HCPCS code               CY 2009 short descriptor
------------------------------------------------------------------------
J0630...............................  Calcitonin salmon injection.
J1212...............................  Dimethyl sulfoxide 50% 50 ML.
J2513...............................  Pentastarch 10% solution.
J2515...............................  Pentobarbital sodium inj.
J2805...............................  Sincalide injection.
J2940...............................  Somatrem injection.
J2995...............................  Inj streptokinase /250000 IU.
J3350...............................  Urea injection.
J3473...............................  Hyaluronidase recombinant.
Q4102...............................  Oasis wound matrix skin sub.
Q4103...............................  Oasis burn matrix skin sub.
J8650...............................  Nabilone oral.
J9270...............................  Plicamycin (mithramycin) inj.
J9280...............................  Mitomycin 5 MG inj.
J9290...............................  Mitomycin 20 MG inj.
J9291...............................  Mitomycin 40 MG inj.
J9357...............................  Valrubicin injection.
------------------------------------------------------------------------

c. 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 and present data at the first CY 2009 
meeting on the usage and frequency, geographic distribution, and size 
and type of hospitals performing studies using radioisotopes in order 
to ensure that access is preserved for Medicare beneficiaries. We 
discuss our response to these APC Panel recommendations along with 
public comments we received in response to our proposed rule below.
    Comment: Several commenters disagreed with the proposal to 
distinguish between diagnostic and therapeutic radiopharmaceuticals for 
payment purposes under the OPPS. Some of these commenters noted that 
CMS' identification of HCPCS codes A9542 (Indium In-111 ibritumomab 
ituxetan, diagnostic, per study dose, up to 5 millicuries) and A9544 
(Iodine I-131 tositumomab, diagnostic, per study dose) as diagnostic 
radiopharmaceuticals was inappropriate because these 
radiopharmaceuticals function as dosimetric radiopharmaceuticals, and 
they have higher than average costs associated with their acquisition 
and significant compounding costs as compared to other nuclear medicine 
imaging agents. A few commenters explained that these are 
radiopharmaceutical products that are used as part of a therapeutic 
regimen and, therefore, should be considered therapeutic for OPPS 
payment purposes.
    Several commenters disagreed with CMS' statement that 
radiopharmaceuticals are either diagnostic or therapeutic, and that 
they are mutually exclusive. These commenters noted that some products 
serve as ``theranostics'' and can be used both as a diagnostic and a 
therapeutic radiopharmaceutical.
    Response: As discussed above, for the CY 2008 OPPS/ASC final rule 
with comment period and the CY 2009 OPPS/ASC proposed rule, we 
classified each radiopharmaceutical into one of two groups according to 
whether its long descriptor contained the term ``diagnostic'' or 
``therapeutic.'' HCPCS codes A9542 and A9544 both contain the term 
``diagnostic'' in their long code descriptors. Therefore, according to 
this methodology, we continue to classify them as diagnostic for the 
purposes of OPPS payment. While we understand that these items are 
provided in conjunction with additional supplies, imaging tests, and 
therapeutic radiopharmaceuticals for patients already diagnosed with 
cancer, we continue to believe that the purpose of administering the 
products described by HCPCS codes A9542 and A9544 is diagnostic in 
nature. As we first stated in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66641), we continue to believe that HCPCS codes 
A9542 and A9544 are diagnostic radiopharmaceuticals. While they are not 
used to diagnose disease, they are used to determine whether future 
therapeutic services would be beneficial to the patient and to 
determine how to proceed with therapy. While a group of associated 
services may be considered a therapeutic regimen by some commenters, 
HCPCS codes A9542 and A9544 are provided in conjunction with a series 
of nuclear medicine imaging scans. Many nuclear medicine studies using 
diagnostic radiopharmaceuticals are provided to patients who already 
have an established diagnosis. We do not consider HCPCS codes A9542 and 
A9544 to be therapeutic because these items are provided for the 
purpose of a diagnostic imaging procedure, and are used to identify the 
proper dose of the therapeutic agent to be provided at a later time.
    Commenters who indicated that ``theranostic'' products can be used 
as either diagnostic or therapeutic radiopharmaceuticals failed to 
provide specific product names or HCPCS codes for these products. We 
have been unable to identify any of the products that the commenters 
were referring to, and we note that all radiopharmaceuticals with HCPCS 
codes currently have either ``diagnostic'' or ``therapeutic'' in their

[[Page 68646]]

long code descriptors. We are aware that, in some cases, a patient may 
receive a therapeutic radiopharmaceutical for treatment of disease and 
the patient may not then require further administration of a diagnostic 
radiopharmaceutical for a nuclear medicine study because the patient's 
body already contains sufficient radioactivity. However, in this case, 
we would consider the original radiopharmaceutical to be a therapeutic 
radiopharmaceutical because it was administered to treat the patient's 
disease and not mainly for purposes of the nuclear medicine study.
    Comment: Several commenters objected to CMS' proposal to package 
payment for all diagnostic radiopharmaceuticals and contrast agents in 
CY 2009. A number of commenters stated that diagnostic 
radiopharmaceuticals and contrast agents with per day costs over the 
proposed OPPS drug packaging threshold are defined as specified covered 
outpatient drugs (SCODs) and, therefore, should be assigned separate 
APC payments. In particular, the commenters questioned CMS' authority 
to classify groups of drugs, such as diagnostic radiopharmaceuticals 
and contrast agents, and implement packaging and payment policies that 
do not reflect their status as SCODs. In addition, the commenters 
objected to the proposal to package payment for diagnostic 
radiopharmaceuticals and contrast agents because, as SCODs, the 
commenters believed these products were required by statute to be paid 
at average acquisition cost. The commenters explained that, when 
several different diagnostic radiopharmaceuticals or contrast agents 
may be used for a particular procedure, the costs of those diagnostic 
radiopharmaceuticals or contrast agents are averaged together and added 
to the cost for the procedure in order to determine the payment rate 
for the associated procedural APC. Therefore, the commenters argued 
that the amount added to the procedure cost through packaging, 
representing the cost of the diagnostic radiopharmaceutical or contrast 
agent, did not reflect the average acquisition cost of any one 
particular item but, rather, reflected the average cost of whatever 
items may have been used with that particular procedure.
    Response: As discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66767) and in the CY 2009 OPPS/ASC proposed rule 
(73 FR 41486), we believe diagnostic radiopharmaceuticals and contrast 
agents are different from other SCODs for several reasons. We note that 
the statutorily required OPPS drug packaging threshold has expired, and 
we continue to believe that diagnostic radiopharmaceuticals and 
contrast agents function effectively as supplies that enable the 
provision of an independent service, rather than serving themselves as 
the therapeutic modality. We packaged their payment in CY 2008 as 
ancillary and supportive services in order to provide incentives for 
greater efficiency and to provide hospitals with additional flexibility 
in managing their resources. We note that we currently classify 
different groups of drugs for specific payment purposes, as evidenced 
by our policy regarding the oral and injectable forms of the 5HT3 anti-
emetics and our drug packaging threshold.
    Although our final CY 2008 policy that we are continuing for CY 
2009, as discussed below, packages payment for all diagnostic 
radiopharmaceuticals and contrast agents into the payment for their 
associated procedures, we will continue to provide payment for these 
items in CY 2009 based on a proxy for average acquisition cost. We 
believe that the line-item estimated cost for a diagnostic 
radiopharmaceutical or contrast agent in our claims data is a 
reasonable approximation of average acquisition and preparation and 
handling costs for diagnostic radiopharmaceuticals or contrast agents, 
respectively, because, as we discussed in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66766), 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. Further, because the standard OPPS 
packaging methodology packages the total estimated cost for each 
radiopharmaceutical or contrast agent on each claim (including the full 
range of costs observed on the claims) with the cost of associated 
procedures for ratesetting, this packaging approach is consistent with 
considering the average cost for radiopharmaceuticals or contrast 
agents, rather than the median cost.
    We further note that these drugs, biologicals, or 
radiopharmaceuticals for which we have not established a separate APC 
and, therefore, for which payment would be packaged rather than 
separately provided under the OPPS, could be considered to not be 
SCODs. Similarly, drugs and biologicals with mean per day costs of less 
than $60 that are packaged and for which a separate APC has not been 
established also would not be SCODs. This reading is consistent with 
our final payment policy whereby we package payment for diagnostic 
radiopharmaceuticals and contrast agents and provide payment for these 
products through payment for their associated procedures.
    Comment: Several commenters recommended various methodologies for 
CMS to consider in the development of alternate payment mechanisms for 
identifying associated costs and providing separate payment for 
diagnostic radiopharmaceuticals. Some commenters supported the ASP 
methodology for payment of nonpass-through diagnostic 
radiopharmaceuticals and noted that it would be inconsistent for CMS to 
allow payment for diagnostic radiopharmaceuticals that have pass-
through status based on the ASP methodology, and then, after the 
diagnostic radiopharmaceutical's pass-through payment status has 
expired, package the costs present on hospital claims data. The 
commenters believed that the ASP methodology would be more reflective 
of actual diagnostic radiopharmaceutical costs and would not be subject 
to the billing inconsistencies that are present in hospital claims 
data. Therefore, the commenters concluded that it would be illogical to 
transition from an accurate methodology to estimate hospital costs 
(such as the ASP methodology) to a less accurate methodology (based on 
hospital claims data) once a product is no longer eligible for pass-
through payment.
    Some commenters were not supportive of the ASP methodology because 
they indicated that some manufacturers would be unable to report 
patient-specific doses based on the HCPCS code descriptor. The 
commenters recommended that CMS establish a methodology that is similar 
to the ASP methodology but that uses alternative data sources (such as 
nuclear pharmacies) that could be used to calculate an ASP-like figure 
for all radiopharmaceuticals.
    Other commenters suggested that CMS establish diagnostic 
radiopharmaceutical and nuclear medicine procedure composite APCs that 
group specific diagnostic radiopharmaceuticals with specific nuclear 
medicine procedures. The commenters stated that diagnostic 
radiopharmaceuticals are not interchangeable and carry high costs 
because hospitals have little or no flexibility in determining the 
diagnostic radiopharmaceutical that they must purchase because of 
product specificity and patient needs, and therefore have

[[Page 68647]]

little ability to achieve efficiency. The commenters believed that 
payment based on individualized combinations of these items and 
services would provide more accurate payment for the diagnostic 
radiopharmaceutical component of the service, and would decrease the 
payment variation (both overpayment and underpayment) for nuclear 
medicine procedures performed by hospitals that occurs under the 
current packaging methodology.
    Several commenters expressed an interest in the establishment of a 
composite APC for CPT codes 78802 (Radiopharmaceutical localization of 
tumor or distribution of radiopharmaceutical agent(s); whole body, 
single day imaging) or 78804 (Radiopharmaceutical localization of tumor 
or distribution of radiopharmaceutical agent(s); whole body, requiring 
two or more days imaging) when billed with either HCPCS code A9542 
(Indium In-111 ibritumomab ituxetan, diagnostic, per study dose, up to 
5 millicuries) or A9544 (Iodine I-131 tositumomab, diagnostic, per 
study dose).
    Response: We again note that there are currently no 
radiopharmaceuticals with pass-through status, nor do we have any pass-
through applications for radiopharmaceuticals under review at the time 
of this final rule with comment period. While we understand that the 
commenters' request for the continued use of ASP data for purposes of 
packaging costs after a diagnostic radiopharmaceutical's pass-through 
payment period has ended, based on their belief that ASP data are more 
accurate than hospital claims data, we fully expect that hospitals have 
the ability to identify and set charges for any new diagnostic 
radiopharmaceutical product accurately during its 2 to 3 year pass-
through time period while the product has the potential of being paid 
based on ASP. Packaging hospital costs based on hospital claims data is 
how all the costs of all packaged items are factored into payment rates 
for associated procedures under the OPPS. We believe that the costs 
reported on claims, as determined by hospitals, are the most 
appropriate representation of the costs of diagnostic 
radiopharmaceuticals that should be packaged into payment for the 
associated nuclear medicine procedures.
    We further note that some commenters continued to report that not 
all manufacturers would be able to submit ASP data through the 
established ASP reporting methodology. Therefore, if we were to use ASP 
data to package the costs of some diagnostic radiopharmaceuticals, but 
use hospital claims data for others, our methodologies for packaging 
the costs of diagnostic radiopharmaceuticals into their associated 
nuclear medicine procedures would be inconsistent among nuclear 
medicine procedures. The foundation of a system of relative weights is 
the relativity of the costs of all services to one another, as derived 
from a standardized system that uses standardized inputs and a 
consistent methodology. Adoption of a ratesetting methodology for 
certain APCs containing nuclear medicine procedures that is different 
from the standard APC ratesetting methodology would undermine this 
relativity. For this reason, we believe it would not be appropriate to 
use external pricing information in place of the costs derived from the 
claims and Medicare cost report data because we believe that to do so 
would distort the relativity that is so fundamental to the integrity of 
the OPPS.
    We recognize that radiopharmaceuticals are specialized products 
that have unique costs associated with them. However, we believe that 
the costs are reflected in the charges that hospitals set for them and 
in the Medicare cost report where the full costs and charges associated 
with the services are reported. Therefore, the packaged costs of 
diagnostic radiopharmaceuticals are calculated like any other OPPS 
costs and packaged into the cost of the nuclear medicine service to 
which they are ancillary and supportive. This methodology is the basis 
for the payment of nuclear medicine procedures in the same way that 
other packaged costs contribute to the payment rates for the services 
to which they are an integral part.
    We do not agree with the commenters that it would be appropriate to 
create composite APCs for combinations of certain diagnostic 
radiopharmaceuticals and nuclear medicine procedures. We discuss our 
response to these public comments in detail in section II.A.2.d.(5) of 
this final rule with comment period.
    Comment: Some commenters believed that packaging diagnostic 
radiopharmaceuticals would undermine the clinical and resource 
homogeneity of the nuclear medicine APCs, especially the cardiac 
imaging APCs, resulting in 2 times violations.
    Response: We agree that packaging the costs of ancillary and 
supportive services into the median cost of an independent service can 
change the median cost for that service and could result in 2 times 
violations. However, we disagree that we should refrain from packaging 
payment for ancillary and supportive items into the payment for the 
service in which they are used in order to prevent the occurrence of 2 
times violations. Instead, we believe that we should reconfigure APCs 
when necessary to resolve 2 times violations where they occur. Because 
we have traditionally paid for a service package under the OPPS as 
represented by a HCPCS code for the major procedure that is assigned to 
an APC group for payment, we assess the applicability of the 2 times 
rule to services at the HCPCS code level, not at a more specific level 
based on the individual diagnostic radiopharmaceuticals that may be 
utilized in a service reported with a single HCPCS code. If the use of 
a very expensive diagnostic radiopharmaceutical in a clinical scenario 
causes a specific procedure to be much more expensive for the hospital 
than the APC payment, we consider such a case to be the natural 
consequence of a prospective payment system that anticipates that some 
cases will be more costly and others less costly than the procedure 
payment. In addition, very high cost cases could be eligible for 
outlier payment. As we note elsewhere in this final rule with comment 
period, decisions about packaging and bundling payment involve a 
balance between ensuring some separate payment for individual services 
and establishing incentives for efficiency through larger units of 
payment. In the case of diagnostic radiopharmaceuticals, these products 
are part of the OPPS payment package for the procedures in which they 
are used.
    Comment: A few commenters requested that CMS specify the 
methodology used to package diagnostic radiopharmaceuticals and 
contrast agents into their associated procedures. Some of these 
commenters also requested that CMS release data that indicate that 
there is a direct relationship between the cost of diagnostic 
radiopharmaceuticals or contrast agents and the resulting increase in 
the associated procedural APC payment rate. Other commenters expressed 
disappointment that CMS was not proposing any additional payment for 
compounding and handling costs for diagnostic radiopharmaceuticals. The 
commenters pointed out that compounding costs were especially high for 
products described by HCPCS codes A9542 and A9544.
    Response: To set the payment for nuclear medicine procedures that 
require a radiolabeled product (usually a diagnostic 
radiopharmaceutical), we selected claims that contained a

[[Page 68648]]

radiolabeled product and used these selected claims (rather than all 
claims for these procedures) to set the median costs for nuclear 
medicine procedures so that we could ensure that the costs of the 
radiopharmaceutical were packaged into the median cost for the 
procedure. This methodology is discussed in detail in section 
II.A.2.d.(5) of this final rule with comment period. As we indicated in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66639), 
beginning on January 1, 2008, we implemented claims processing edits 
for procedures that we believe require a radiolabeled product, and we 
return to the provider to correct claims for nuclear medicine procedure 
that do not include a radiolabeled product. Therefore, for the CY 2010 
OPPS our claims data should include a radiolabeled product on all of 
the nuclear medicine procedure claims. As discussed below, we have not 
implemented claims processing edits that require the inclusion of 
contrast agent HCPCS codes on claims for studies provided with contrast 
but we are interested in public comment on this topic.
    According to our usual OPPS methodology, we package the costs of 
packaged items and services into the costs of the associated procedures 
on single and ``pseudo'' claims for those procedures. In the case of 
packaged diagnostic radiopharmaceuticals and contrast agents, in most 
cases packaging would be into the costs of associated nuclear medicine 
procedures and radiological studies performed with contrast, 
respectively. With respect to the request for data for these services, 
we make available a considerable amount of data for public analysis 
each year and, while we are not developing and providing the detailed 
information that commenters requested, we provide the public use files 
of claims and a detailed narrative description of our data process that 
the public can use to perform any desired analyses. In addition, we 
believe that the commenters must examine the data themselves when 
developing their comments on the OPPS/ASC proposed rules. We note that 
several commenters submitted detailed analyses of claims for packaged 
services of particular interest to them which we believe demonstrates 
that commenters are clearly able to perform meaningful analyses using 
the public claims data that we routinely make available.
    With respect to the issue of payment for compounding and handling 
of radiopharmaceutical and contrast agents, in particular the products 
described by HCPCS codes A9542 and A9544, we believe that the costs 
derived from the application of the most specific CCR to the charges 
for these products produce an estimated cost that includes the costs of 
compounding and handling of the products. We have instructed hospitals 
to include the charge for radiopharmaceutical handling and compounding 
in their charge for the radiopharmaceutical in the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68096), and hospitals have told 
us that they do so. Moreover, the costs reported in the cost report are 
for both the acquisition costs for the products and the costs of 
compounding and handling for both inexpensive and expensive products. 
Therefore, we believe that the estimated cost derived by the 
application of the CCR to the charge for the product results in an 
estimated cost that includes both the product acquisition cost and the 
compounding and handling costs of the product and that this is true 
regardless of the cost of the product.
    Comment: Some commenters expressed frustration with the I/OCE 
claims processing edits implemented in CY 2008 for nuclear medicine 
procedures that require a radiolabeled product in order for the claim 
to process to payment. The commenters reported that it has been 
administratively burdensome for hospitals to cope with these edits and 
conform claims to these requirements, and they noted that patient 
access to nuclear medicine procedures has been adversely affected.
    Specifically, some commenters observed that there are situations 
that occur in the hospital outpatient setting that are not accounted 
for in these edits. For example, hospitals sometimes provide a nuclear 
medicine imaging service to a beneficiary who has been given a 
radiopharmaceutical in another location, such as in a physician's 
office. The commenters explained that, at this time, there is no way 
for these outpatient nuclear medicine procedure claims to process to 
payment. The commenters requested that CMS create a modifier or Level 
II HCPCS code so that hospitals could indicate that special 
circumstances applied, and that a radiolabeled product was not provided 
in the HOPD setting, thereby allowing payment for the nuclear medicine 
service.
    Other commenters requested that CMS implement I/OCE edits for 
contrast agents and imaging studies provided with contrast, similar to 
the nuclear medicine procedure-to-radiolabeled product edits. The 
commenters believed that requiring hospitals to specifically report a 
contrast agent HCPCS code when performing an imaging study with 
contrast would result in more accurate claims data that fully reflected 
the costs of contrast agents.
    Finally, some commenters requested that CMS only use claims with 
diagnostic radiopharmaceuticals, or contrast agents, when calculating 
payment rates for the associated nuclear medicine procedures or imaging 
procedures, respectively.
    Response: In order to ensure that we capture appropriate diagnostic 
radiopharmaceutical costs for future ratesetting purposes once we began 
packaging payment for all of these products in CY 2008, we implemented 
nuclear medicine procedure-to-radiolabeled product claims processing 
edits in the I/OCE, effective January 2008, that required a diagnostic 
radiopharmaceutical to be present on the same claim as a nuclear 
medicine procedure for payment under the OPPS to be made. These edits 
ensure that hospitals submit correctly coded claims that report the 
HCPCS codes for the products and their charges that are necessary for 
performance of nuclear medicine procedures. We understand that the 
implementation of I/OCE claims processing edits may be challenging for 
a short period of time while hospitals become familiar with them, and 
while the edits are revised based on stakeholder feedback. However, we 
note that we implemented nuclear medicine procedure-to-radiolabeled 
product edits at the request of stakeholders based on concerns that 
hospitals were not always including a diagnostic radiopharmaceutical 
and its charge on the claim when a nuclear medicine procedure was 
provided. Stakeholders voiced complaints that these omissions led to 
inaccurate claims data for diagnostic radiopharmaceuticals and, once 
the OPPS began packaging payment for all diagnostic 
radiopharmaceuticals in CY 2008, there was inadequate payment for 
nuclear medicine procedures. We believe that the majority of hospitals 
are now able to submit claims that are able to pass these I/OCE edits, 
and that we have made the adjustments required to maintain the 
integrity of the edits while working with hospitals on special 
exceptions when a diagnostic radiopharmaceutical may not be provided 
with a nuclear medicine study. We discuss the nuclear medicine 
procedure-to-radiolabeled product edits and the evolution of our edit 
policy in greater detail in section II.A.2.d.(5) of this final rule 
with comment period. We implemented these edits because we believe that 
it is important to make sure that, when hospitals provide a packaged 
diagnostic radiopharmaceutical, the costs associated with the 
diagnostic

[[Page 68649]]

radiopharmaceutical are appropriately included on the same claim as the 
corresponding procedure to ensure that future ratesetting includes both 
the diagnostic radiopharmaceutical and the associated nuclear medicine 
procedure. These edits are especially important as payment for all 
diagnostic radiopharmaceuticals are packaged into the payment for the 
associated nuclear medicine procedure. The edits help ensure that 
hospitals are paid appropriately for diagnostic radiopharmaceutical 
costs, thus helping to maintain adequate patient access to nuclear 
medicine procedures.
    We understand that some commenters believe that contrast agents may 
benefit from a similar set of I/OCE edits, and we are specifically 
requesting public comments on this topic in the final rule with comment 
period. Given that many contrast agents are low cost products with 
limited pharmacy handling costs and that advanced imaging studies are 
very common HOPD services, we are concerned that requiring the 
reporting of a contrast agent HCPCS code on every claim for an imaging 
study that specifies ``with contrast'' in its code descriptor could be 
quite administratively burdensome for hospitals. We are interested in 
the public's opinions on whether the potential benefits in capturing 
contrast agent costs that could occur as a result of a requirement for 
specific reporting of contrast agents on claims accompanied by claims 
processing edits to return incorrectly coded claims to hospitals for 
correction would outweigh the potential hospital burden of reporting 
these products and adjusting to a new set of claims processing edits.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to continue to 
package payment for all nonpass-through diagnostic radiopharmaceuticals 
and contrast agents, regardless of their per day costs. In doing so, we 
are accepting the APC Panel's recommendation to package payment for 
diagnostic radiopharmaceuticals for CY 2009. Given the inherent 
function of contrast agents and diagnostic radiopharmaceuticals as 
ancillary and 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. In addition, as we initially established in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66768), we are 
finalizing our proposal to continue to identify diagnostic 
radiopharmaceuticals specifically as those Level II HCPCS codes that 
include the term ``diagnostic'' along with a radiopharmaceutical in 
their long code descriptors, and therapeutic radiopharmaceuticals as 
those Level II HCPCS codes that include the term ``therapeutic'' along 
with a radiopharmaceutical in their long code descriptors.
    During its March 2008 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.
    For more information on how we 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 final rule with comment period.
3. 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 
Public Law 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 Public Law 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

[[Page 68650]]

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 of the proposed rule; (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 CY 2006 claims data available 
for the CY 2008 OPPS. Both the MedPAC categories and the CY 2006 
proposed categories are identified in Table 28 below.

Table 28--Drug Overhead Category Groupings Discussed in the CY 2006 OPPS
                              Proposed Rule
------------------------------------------------------------------------
                                                         CMS proposed CY
                                                            2006 drug
MedPAC drug  overhead category        Description           overhead
                                                            category
------------------------------------------------------------------------
Category 1....................  Orals (oral tablets,    Category 1.
                                 capsules, solutions).
Category 2....................  Injection/Sterile       Category 2.
                                 Preparation (draw up
                                 a drug for
                                 administration).
Category 3....................  Single IV Solution/     Category 2.
                                 Sterile Preparation
                                 (adding a drug or
                                 drugs to a sterile IV
                                 solution) or
                                 Controlled Substances.
Category 4....................  Compounded/             Category 2.
                                 Reconstituted IV
                                 Preparations
                                 (requiring
                                 calculations
                                 performed correctly
                                 and then compounded
                                 correctly).
Category 5....................  Specialty IV or Agents  Category 3.
                                 requiring 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 of the 
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.

[[Page 68651]]

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 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. Payment Policy for CY 2009
    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

[[Page 68652]]

recommendations on the validity of this methodology and conduct an 
impact analysis, with consideration for CY 2009 rulemaking. During the 
August 2008 meeting, the APC Panel recommended that CMS continue to 
look at refining the methodology for payment of pharmacy overhead and 
handling costs, and that CMS work with stakeholders to find a feasible 
approach for payment of drugs and pharmacy overhead. Further, the APC 
Panel recommended that CMS package the cost of all drugs that are not 
separately paid at ASP+5 percent, use the difference between these 
costs and CMS' costs derived from charges to create a pool that funds 
payment for pharmacy overhead services and pay hospitals for pharmacy 
service costs using this pool by making payments based on some system 
of categorization determined by CMS. In addition, the APC Panel 
recommended that CMS take into consideration the impact on 
beneficiaries' copayments.
    Because CMS would redistribute pharmacy overhead cost when modeling 
payment rates for ratesetting, we concluded for the proposed rule that 
the suggested methodology would be administratively simple for 
hospitals. We stated our belief that that 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, in the proposed rule, we also expressed our belief 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 for drugs that are packaged into their associated 
procedures.
    In the CY 2009 OPPS/ASC proposed rule, we did not propose to adopt 
this stakeholder methodology. We noted our appreciation of this 
thoughtful approach to OPPS payment for pharmacy overhead costs, but we 
sought public comment on several issues that needed 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 an 
independent service. In addition to our packaging of relatively 
inexpensive drugs that are integral to separately payable independent 
services, we package payment under the OPPS for the costs of a variety 
of other items and services. In addition, it was not clear to us what 
approach for redistributing pharmacy overhead dollars would be most 
accurate and operationally feasible for CMS. Therefore, in the CY 2009 
OPPS/ASC proposed rule, we specifically invited public comment on this 
potential approach for estimating pharmacy overhead costs and 
redistributing pharmacy overhead payment under the OPPS.
    Comment: Several commenters were not supportive of the stakeholder 
approach to payment for pharmacy overhead costs. The commenters were 
concerned about the potential redistributive effects of the proposal 
and the impact on beneficiaries of higher copayments for separately 
payable drugs.
    However, the majority of commenters expressed support for the 
stakeholder recommendation to redistribute a portion of pharmacy 
overhead costs from payment for packaged drugs and biologicals through 
payment for the associated procedures to payment for separately payable 
drugs and biologicals in a budget neutral manner. In general, the 
commenters believed that CMS' concerns regarding the substitution of 
ASP information on hospital claims to replace the costs reported by 
hospitals would have no other implications for OPPS cost estimation 
because no other item or service has a similar market-based payment 
methodology (such as ASP) for identifying hospital costs. The 
commenters noted that CMS already uses a non-standard methodology in 
providing payment for drugs and biologicals based on the ASP 
methodology. The commenters viewed the stakeholder proposal as a more 
accurate application of the standard CMS methodology. In addition, the 
commenters believed that adoption of the stakeholder approach to 
redistribute pharmacy overhead costs more accurately to separately 
payable drugs would be necessary if CMS were to continue to package 
payment for some drugs and biologicals with per day costs at or below 
the proposed CY 2009 drug packaging threshold.
    Further, many commenters stated that the stakeholder recommendation 
for payment of drugs and pharmacy overhead costs would be 
administratively simple for hospitals to implement and would provide a 
more accurate payment solution for separately payable drugs and 
biologicals. Some commenters believed that implementing this approach 
could be relatively straightforward for CMS, and could include a 
processing step in the I/OCE that would add on the appropriate standard 
pharmacy overhead payment whenever a drug HCPCS code was billed.
    Finally, many commenters also supported the redistribution of the 
resulting pharmacy overhead payments through three payment levels based 
on the estimated pharmacy overhead resource costs specific to each drug 
HCPCS code. The commenters included suggestions for drug assignments to 
three tiers of pharmacy overhead categories and suggested that these 
additional payments could be programmed into the I/OCE so that they 
would require no additional administrative changes by hospitals.
    Many commenters concluded that the recommended stakeholder approach 
had been sufficiently reviewed by both hospital stakeholders and CMS, 
and they urged CMS to adopt this payment methodology for CY 2009.
    Response: As we stated in the CY 2009 OPPS/ASC proposed rule (73 FR 
41489 through 41490), we appreciate the creative approach to OPPS 
payment for pharmacy overhead costs as described above. We have 
continued to review and discuss this stakeholder recommendation in 
meetings with interested stakeholders and during the August 2008 APC 
Panel meeting. We remain interested in further exploring this approach 
that certain stakeholders have developed as a solution to the issue of 
uneven distribution of OPPS payment for pharmacy overhead costs, and we 
believe that such an approach, or modifications of the recommended 
approach, could potentially provide more accurate OPPS payment for 
drugs and biologicals in the future.
    However, we do not believe that it would be appropriate to adopt 
such a payment approach for CY 2009 that is so different from our 
proposal for several reasons. First, 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. Similarly, in the Medicare Claims Processing Manual (Pub. 100-
04, Chapter 17, Section 90.2), we have instructed hospitals to include 
both acquisition costs and pharmacy overhead or nuclear medicine 
handling

[[Page 68653]]

costs in their line-item charges for drugs, biologicals, and 
radiopharmaceuticals. Beyond drugs and biologicals, we expect that 
hospitals consider costs when setting charges for all hospital 
services. We believe that hospitals have internal policies for setting 
charges and are internally consistent when setting charges, although 
the manner in which charges are set relative to cost likely varies by 
hospital. Application of a hospital-specific CCR to estimate costs for 
purposes of OPPS ratesetting creates cost estimates that are internally 
consistent with the hospital's charging structure and retain the 
variability in charges, and variability in cost by association, 
experienced by each hospital. We observe a wide range in our estimates 
of costs for various drugs and biologicals, suggesting that hospitals 
have different estimated costs for these items. In part, our 
longstanding policy to accept hospital charge data as they are reported 
by hospitals is an attempt to appropriately capture the variability in 
hospitals' unique charges that reflects real differences in cost and 
other efficiencies at each hospital. Further, for all services, 
external estimates of cost created outside the hospital's billing and 
accounting information would not be based on the relative estimated 
costs for the hospital. We also utilize hospital charge data as 
reported by hospitals to avoid inappropriately redistributing money 
based on external estimates of costs from widely different sources. The 
stakeholder recommendation would eliminate the expected variability in 
hospitals' costs for drugs that are packaged into their associated 
procedures and substitute a static, external estimate of cost for one 
that would otherwise be established by the hospital's internal billing 
and accounting structure. While certain stakeholders have demonstrated 
how this approach would impact the median costs for drug administration 
services, the concept of substituting external cost estimates for 
certain items or services in the context of an otherwise internally 
consistent relative cost structure has importance for packaging costs 
in other APCs.
    Second, because we have not yet fully analyzed a comprehensive drug 
payment methodology that would follow this general approach, nor have 
we provided sufficient information on the impacts of this proposal to 
the public, we do not believe that adopting this approach for CY 2009 
would be appropriate. Therefore, we are not accepting the APC Panel's 
August 2008 recommendation to redistribute the pharmacy overhead costs 
currently associated with packaged drugs to a pool that would pay for 
pharmacy services, and pay for these pharmacy services by making 
payments based on a system of drug categorization established by CMS. 
As we did not propose a methodology like the stakeholder's model or the 
APC Panel's recommended approach, or a variation of that model, for the 
CY 2009 OPPS, we have not assessed the impact such a change would have 
on payment for other OPPS services, including those services with 
significant packaged drug costs, on payment to different classes of 
hospitals, or on beneficiary copayments. However, we are particularly 
interested in further exploring this approach, especially in light of 
the overwhelming lack of public support for our proposal to split the 
5600 (Drugs Charged to Patients) cost center on the Medicare cost 
report into two new cost centers, Drugs With High Overhead Cost Charged 
To Patients and Drugs With Low Overhead Cost Charged To Patients, as 
discussed in more detail below.
    As we explained in the CY 2009 OPPS/ASC proposed rule, 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 
recommended 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 recommended that CMS create a new standard cost 
center in 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).
    As discussed further in section II.A.1.c. of this CY 2009 OPPS/ASC 
final rule with comment period and consistent with our proposal for the 
FY 2009 IPPS, we did not propose 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 stated that we 
believed 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 stated that we believed that this 
should be done in a manner that is fairly simple for hospitals to 
implement.
    For CY 2009, we proposed 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 the CY 2009 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 were available) that would be separately payable in CY 2009 
based on 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 indicated 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 proposed to pay for separately payable drugs and 
biologicals under the CY 2009 OPPS at ASP+4 percent because we believed 
that this was the best currently available proxy for average hospital 
acquisition cost and associated pharmacy overhead costs.

[[Page 68654]]

    Comment: Several commenters cited methodological concerns about the 
approach CMS used to calculate the equivalent average ASP-based payment 
amount for separately payable drugs and biologicals.
    Some commenters noted that the statute requires drug cost surveys 
for payment purposes for SCODs under the OPPS, and the most recent 
survey available is outdated as it was performed in CY 2004 by the GAO. 
The commenters stated that the statute specifically required survey 
data as the basis for hospital acquisition costs in order to provide a 
more appropriate payment methodology for drugs and biologicals, instead 
of costs from claims data. They concluded that, by not performing a 
survey and by not paying for drugs and biologicals at the physician's 
office rate, CMS was not in compliance with the statute. The commenters 
acknowledged that drug cost surveys are difficult to perform. However, 
they believed that either a survey should be performed or payment 
should be made at ASP+6 percent, in accordance with the requirement of 
the statute.
    Commenters reiterated that hospitals disproportionably mark up 
their charges for low cost drugs and biologicals to account for 
pharmacy overhead costs. They indicated that while the aggregate 
charges for inexpensive and expensive drugs may include the total 
pharmacy overhead costs of the hospital, the charges for individual 
drugs and biologicals do not represent the specific acquisition and 
pharmacy overhead costs of that particular drug or biological. The 
commenters explained that hospitals apply proportionately smaller 
markups to higher cost items and proportionately larger markups to 
lower cost items. The commenters believed that when CMS applies a 
single CCR to adjust charges to costs for these drugs and biologicals, 
charge compression leads to misallocation of the pharmacy overhead 
costs associated with high and low cost drugs and biologicals during 
ratesetting.
    Commenters noted that by using only separately payable drugs in the 
calculation of the equivalent average ASP-based amount, the pharmacy 
overhead costs associated with these separately payable drugs that are 
disproportionately included in the charges for packaged drugs are not 
factored into the calculation, resulting in an artificially low ASP 
add-on percentage. The commenters suggested using the costs of both 
packaged drugs and separately payable drugs when calculating the 
equivalent average ASP-based payment amount for separately payable 
drugs, as they argued that this would provide a more accurate ASP 
percentage payment for separately payable drugs. As an alternative, the 
commenters recommended that CMS could eliminate the drug packaging 
threshold and provide separate payment for all Part B drugs under the 
OPPS.
    Finally, the commenters noted that CMS included, in the calculation 
of the costs of separately payable drugs and biologicals, OPPS claims 
from hospitals that receive Federal discounts on drug prices under the 
340B program. The commenters pointed out that hospital participation in 
the 340B program had grown substantially over the past few years, and 
they believed that the costs from these hospitals now constituted a 
significant proportion of hospital drug costs on CY 2007 OPPS claims. 
The commenters stated that including 340B hospital claims data when 
comparing aggregate hospital costs based on claims data to ASP rates 
contributed to an artificially low equivalent average ASP-based payment 
rate because ASP data specifically exclude drugs sales under the 340B 
program.
    Response: As discussed above, the provision in section 
1833(t)(14)(A)(iii) of the Act continues to be applicable to 
determining payments for SCODs for CY 2009. This provision requires 
that 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 
or if hospital acquisition cost data are not available, then the 
average price for the drug in the year established under section 
1842(o), 1847A, or 1847B of the Act, as the case may be, as calculated 
and adjusted by the Secretary as necessary for purposes of section 
1833(t)(14)(iii)(II) of the Act. In the CY 2006 OPPS final rule, we 
compared hospital drug cost data that were available to us at the time, 
specifically: (1) Data from the GAO survey; (2) hospital claims data 
from CY 2004; and (3) ASP information. In addition, we discussed our 
methodology for comparing these data that represented different 
timeframes from 2004 to 2006. As a result of our analysis comparing 
these three sources, we concluded that, on average, the costs from 
hospital claims data representing SCODs were roughly equivalent to 
payment ASP+6 percent. Therefore, we finalized a policy that used our 
hospital claims data as a proxy for average hospital acquisition cost 
and provided payment for separately payable drugs that do not have 
pass-through status at ASP+6 percent in CY 2006 (70 FR 68639 through 
68642). The commenters are correct that the statute allows for the use 
of the methodology described in section 1842(o), section 1847A or 
section 1847B of the Act, as calculated and adjusted by the Secretary 
as necessary, but this is only when hospital acquisition cost data are 
not available. We believe that we have established our hospital claims 
data as an appropriate proxy for average hospital acquisition costs, 
taking the GAO survey information into account for the base year. While 
we have not yet performed hospital drug acquisition cost surveys 
similar to the GAO survey, we note that the statute only calls for 
``periodic'' surveys, and we are considering the possibility of such a 
survey at some point in the future.
    In addition, we understand that because hospital charges for drugs 
are adjusted to cost by a single CCR, but hospitals continue to apply 
differential markups to their charges for low and high cost drugs and 
biologicals, the result is an overestimation of costs for less 
expensive drugs and an underestimation of costs for more expensive 
drugs. In order to more accurately identify costs for drugs, we 
proposed to split the current single drug cost center into two standard 
cost centers on the Medicare cost report. By creating two standard cost 
centers (one for Drugs With High Overhead Cost Charged to Patients, the 
other for Drugs With Low Overhead Cost Charged to Patients), we 
believed that the resulting CCRs would provide a more accurate ASP-
based estimate for those drugs that are separately paid, as each 
individual drug charge would be subject to a more accurate CCR, 
depending on whether the drug was classified by the hospital as having 
high or low overhead costs. We discuss this proposal, the public 
comments we received, and our final policy in detail below.
    It has been our policy, since CY 2006, to only use separately 
payable drugs in the calculation of the equivalent average ASP-based 
payment amount under the OPPS. We do not include packaged drugs and 
biologicals in this analysis because cost data for these items are 
already accounted for within the APC ratesetting process through the 
median cost calculation methodology discussed in section II.A.2. of 
this final rule with comment period. To include the costs of packaged 
drugs in both our APC ratesetting process (for associated procedures 
present on the same claim) and in our ratesetting process to establish 
an equivalent average ASP-based payment amount for separately payable 
drugs and biologicals would give these data disproportionate

[[Page 68655]]

emphasis in the OPPS system by skewing our analyses, as the costs of 
these packaged items would be, in effect, counted twice. Accordingly, 
we are not adopting the suggestion from commenters that we include all 
packaged and separately payable drugs and biologicals when establishing 
an equivalent average ASP-based rate to provide payment for the 
hospital acquisition and pharmacy handling costs of drugs and 
biologicals. However, we remind commenters that because the costs of 
packaged drugs, including their pharmacy overhead costs, are packaged 
into the payments for the procedures in which they are administered, 
the OPPS provides payment for both the drugs and the associated 
pharmacy overhead costs through the applicable procedural APC payments.
    We also are not adopting the alternative recommendation by some 
commenters that we eliminate the drug packaging threshold and pay 
separately for all drugs and biologicals with HCPCS codes. As we have 
stated previously (71 FR 68085), we believe that it is appropriate, at 
a minimum, to continue a modest drug packaging threshold under the 
OPPS. Packaging is a fundamental component of a prospective payment 
system that contributes to important flexibility and efficiency in the 
delivery of high quality outpatient care.
    We have had several meetings with interested stakeholders over the 
past year regarding the drug costs of hospitals that participate in the 
Federal 340B program, and we are interested in gathering more 
information on their potential influence on our methodology for 
calculating payment rates for separately payable drugs. Specifically, 
we are requesting comments on this final rule with comment period that 
address: (1) Whether all HOPDs from a participating provider furnish 
drugs purchased under the 340B pricing program or only a subset of 
departments; (2) whether all drugs are available to participating 
hospitals under the 340B program; (3) whether hospital drugs provided 
to inpatients are purchased by hospitals at 340B program prices if the 
hospital is a participating provider; (4) what proportion of a 
participating hospital's total costs and charges for drugs reflect 
drugs purchased through the 340B program; (5) whether hospitals 
participating in the 340B program receive other manufacturer discounts 
that impact their final drug cost; (6) whether hospitals set different 
charges for drugs purchased through the 340B program than their charges 
for those same drugs purchased outside the program; (7) the impact 340B 
drug purchasing agreements have on OPPS hospital claims data used to 
estimate drug costs; (8) whether hospitals participating in the 340B 
program should be paid for drugs under the OPPS at adjusted rates 
because they have different average hospital acquisition costs for 
drugs and biologicals from nonparticipating hospitals, (9) whether we 
should use the equitable adjustment authority in section 1833(t)(2)(E) 
of the Act to adjust OPPS payments to hospitals for separately payable 
drugs based on hospitals' participation in the 340B program, so that 
drug payment for the two classes of hospitals (340B participating and 
340B nonparticipating) would reflect the averge drug acquisition and 
pharmacy overhead costs specific to each class of hospital; and (10) 
any additional information that would assist us in understanding and 
considering this issue for potential rulemaking in the future.
    As discussed above, in the CY 2009 OPPS/ASC proposed rule, we 
included a proposal 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. However, we noted 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, we indicated that public comment on the 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.
    We stated in the proposed rule that 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 demonstrated that some hospitals continued 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 believed 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 markup in cost center 4300 (for hospitals reporting the 
cost center) for products reported under revenue codes 0343 and 0344 
(RTI report, ``Refining Cost to Charge Ratios for Calculating APC and 
MS-DRG Relative Payment Weights,'' July 2008).
    In the CY 2009 OPPS/ASC proposed rule, we discussed several ways we 
could define the 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 Cost 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 Cost Charged to 
Patients. We believed 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 
reported HCPCS codes for drugs that are not packaged, this

[[Page 68656]]

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 believed that RTI's findings suggested 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 new cost center CCR for 
Drugs with High Overhead Cost 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 was 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 packaged status under the CY 2009 
OPPS. However, we believed that using the OPPS drug packaging threshold 
could be too low, and probably would not identify a cost point that 
would maximize cost differences between drugs with relatively high 
pharmacy overhead cost and drugs with relatively low pharmacy overhead 
cost. 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 might 
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 were 
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 expressed concern that 
identifying the unique acquisition and overhead cost for each drug 
could impose a comparable administrative burden as other prior 
proposals.
    Third, as we discussed in the proposed rule, 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. Therefore, the 
resulting CCRs would better estimate the average acquisition and 
overhead cost for these drugs. On the other hand, as with the second 
alternative, we were 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 discussed in the proposed rule 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 
of the CY 2009 OPPS/ASC proposed rule. 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 in 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 indicated that we were 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 indicated that we 
did 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 indicated in the proposed rule that we 
believed 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 believed 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 realized that there would still be some additional 
administrative burden for hospitals that had 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 proposed to pay for the combined average acquisition 
and pharmacy overhead cost of separately payable drugs and biologicals 
at ASP+4 percent based on the costs of separately payable drugs 
calculated from claims data under the CY 2009 OPPS. In addition, we 
proposed 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 indicated that we expected that CCRs from these new cost 
centers would be available in 2 to 3 years to refine OPPS drug cost 
estimates by accounting for differential hospital markup

[[Page 68657]]

practices for drugs with high and low pharmacy overhead costs. In the 
proposed rule, we specifically invited public comment on the policy and 
operational benefits, challenges, and concerns that might be associated 
with these proposals, specifically as they related 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.
    During its August 2008 meeting, the APC Panel recommended that CMS 
not implement the proposed change to the cost center for drugs on the 
Medicare cost report. In addition, the Panel recommended that CMS 
continue to provide payment for drugs at a rate of no less than ASP+5 
percent. We discuss our response to these recommendations along with 
our responses to public comments below.
    Comment: A few commenters supported CMS' proposal to split the 
single standard cost center for drugs (5600--Drugs Charged to Patients) 
into two standard cost centers (Drugs With High Overhead Cost Charged 
to Patients and Drugs With Low Overhead Cost Charged to Patients). 
Several of these commenters, including MedPAC, recommended splitting 
the single 5600 cost center into several cost centers, not just the two 
presented in the OPPS proposed rule. The commenters believed that this 
would create even more accurate CCRs for drug cost estimates that could 
be used for future ratesetting purposes.
    However, the majority of commenters did not support this proposal. 
Commenters noted that, as in past proposals made by CMS to more 
specifically incorporate differential hospital charging practices for 
pharmacy overhead costs in ratesetting, this proposal was 
administratively burdensome for hospitals and was not likely to result 
in reliable information for future ratesetting purposes. The commenters 
pointed to the differences between the costs of drugs provided in the 
HOPD, which include significant personnel and specialized equipment 
costs that would need to be allocated between drugs assigned to the two 
proposed cost centers, and the costs of medical supplies, which 
principally include the costs of the items themselves. They cited these 
differences as the main reason many commenters opposed to the proposed 
drug cost center split in turn supported the policy finalized in the FY 
2009 IPPS final rule (73 FR 48453) to split the current single cost 
center for Medical Supplies Charged to Patients into two cost centers, 
one for Medical Supplies Charged to Patients and another for 
Implantable Devices Charged to Patients, to account for charge 
compression in the payment weights for high cost medical devices under 
the IPPS and the OPPS. While this latter change was operationally 
feasible for hospitals, many commenters believed that the proposed 
changes to the cost center for drugs were either operationally 
impossible or would place a significant administrative burden on 
hospitals. In addition, the commenters noted substantial problems with 
each of options presented for classifying drugs into one of the two 
proposed cost centers. Finally, the commenters noted that the 
associated requirement to begin reporting HCPCS codes for inpatient 
drugs was not possible for many hospitals by January 1, 2009.
    Some commenters also expressed frustration that this proposal 
because it was based in the hospital cost report, would take several 
years to impact OPPS payment rates for drugs. While only a few 
commenters requested that CMS implement immediate payment changes, such 
as the regression-based approach recommended by RTI, many other 
commenters specifically rejected RTI's recommendation to apply a 
regression-based approach to cost estimation for drugs and biologicals.
    Response: Once again, we appreciate the commenters' many 
suggestions on ways to collect hospital pharmacy cost data and the 
commenters' concerns regarding our proposal. As noted by the 
overwhelming majority of commenters, we understand that our CY 2009 
proposal to change the standard cost center for drugs could lead to 
increased hospital burden. Our intent in making this proposal was to 
address the issue of differential hospital markup policies for drugs 
that stakeholders believe result in inaccurate hospital payment and not 
to create hospital burden. We have made numerous attempts over the past 
several years to adopt methods for gathering hospital information 
regarding pharmacy overhead costs for possible use in future OPPS 
ratesetting. However, all of our prior proposals have resulted in 
feedback citing increased hospital burden and recommendations that we 
not adopt any of the proposals.
    We remain interested in finding methodologies to further refine our 
payment methodology for drugs and biologicals under the OPPS. While we 
continue to believe that more refined and accurate hospital accounting 
data are the preferred long-term solution to mitigate charge 
compression in hospital cost-based weights, based on the public 
comments on this proposal and the recommendation of the APC Panel, we 
have decided not to finalize our proposal to split the 5600 cost center 
into two standard cost centers. We remain interested in continuing our 
dialogue with hospital stakeholders as we continue to explore 
reasonable ways to allocate pharmacy overhead costs to low and high 
cost drugs and as we further analyze the stakeholder proposal, 
discussed above.
    Comment: Some commenters agreed with the APC Panel's recommendation 
to continue providing payment for separately payable drugs at no less 
than ASP+5 percent. However, the majority of commenters recommended 
that CMS provide payment for separately payable drugs and biologicals 
at ASP+6 percent for CY 2009. Some commenters noted that payment at 
ASP+6 percent would eliminate a site-of-service differential that would 
otherwise exist between the HOPD and physicians' office settings if 
HOPDs were paid at ASP+4 percent, as proposed, while physicians' 
offices were paid at ASP+6 percent in CY 2009.
    In addition, some commenters expressed concern that hospitals may 
be unable to purchase many drugs at ASP+4 percent, and that this rate 
would be insufficient for certain drugs when considering both 
acquisition costs and pharmacy overhead costs. The commenters believed 
that the proposed payment rate could lead to access problems for 
Medicare beneficiaries.
    Response: In analyzing updated claims data for the CY 2009 final 
rule with comment period, we again performed the analysis described in 
the CY 2009 proposed rule by comparing the aggregate costs for 
separately payable drugs and biologicals on claims to the ASP-based 
payment rates, weighting these HCPCS codes by their OPPS volumes, and 
calculating an equivalent average ASP-based payment rate for drugs and 
biologicals provided in HOPDs for CY 2009. We used updated CY 2007 mean 
unit costs and drug volumes and updated ASP data for this final rule 
analysis to determine the final packaging status for each drug. The 
result of our final analysis using updated hospital claims data for the 
full CY 2007 year and updated CCRs is that the equivalent average ASP-
based payment amount for separately payable drugs and biologicals, 
including pharmacy handling costs, is equal to ASP+2 percent for CY 
2009. Therefore, according to our CY 2009 proposal for payment of 
separately payable drugs and biologicals which includes pharmacy 
overhead payment, based on separately payable drug costs from CY 2007 
hospital claims, the OPPS payment rate for separately payable drugs and 
biologicals would be ASP+2 percent.

[[Page 68658]]

    We acknowledge that different payment rates for drugs and 
biologicals provided in the physician's office and HOPD settings are of 
concern to some commenters. However, the OPPS, the MPFS physician's 
office payments for services, and physician's office payments for Part 
B drugs are based on very different payment methodologies. In 
particular, the OPPS relies upon costs from the most updated claims and 
Medicare cost report data to develop payment rates. On the other hand, 
the MPFS pays for services based on estimates of input costs and pays 
for drugs and biologicals at ASP+6 percent, as required by statute. 
Therefore, it is not surprising to us that the estimated costs of drug 
and biologicals and their associated pharmacy overhead, like many other 
OPPS services, could be different in the HOPD than in the physician's 
office, resulting in different payments in the two settings. We do not 
believe that different payment rates for drugs and biologicals in HOPD 
or physicians' office settings would create beneficiary access problems 
for drug administration services because we have not seen problems with 
access in the two settings for other types of services, including 
diagnostic studies, surgical procedures, and visits, which generally 
have different payment rates under the two payment systems (unless 
there is an applicable externally applied statutory cap to payment, 
such as the cap on payment for imaging services provided in the 
physician's office based on the OPPS rates).
    As we stated in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66763), after a period of continuing ASP+6 percent payment in CY 
2007 while we gathered additional information regarding pharmacy 
overhead costs, we believe that it is most appropriate at this point to 
continue to pay for drugs and biologicals and their associated pharmacy 
overhead costs using an ASP-based system, but to determine the relative 
ASP percent based on hospital costs from claims rather than provide 
payment at ASP+6 percent that would be paid in the physician's office 
or at ASP+5 percent as recommended by the APC Panel for CY 2009. We 
note that, for CY 2008, we adopted a payment rate of ASP+5 percent as a 
transition between the CY 2007 OPPS payment rate of ASP+6 and the 
claims-based CY 2008 final rule rate of ASP+3 percent.
    We continue to believe that pharmacy overhead and handling costs 
are included by hospitals in their drug charges and should be paid 
through the drug payment and that a payment rate reflecting costs from 
claims data is appropriate. However, we believe that a transition to a 
refined claims-based payment methodology continues to be appropriate as 
well, while we further explore the complex issues surrounding hospital 
allocation of pharmacy overhead costs to drug charges and differential 
hospital drug costs based on hospital participation in the 340B 
program. Therefore, we will provide a transitional payment rate of 
ASP+4 percent in CY 2009 for separately payable drugs and biologicals, 
the same payment rate that was proposed for CY 2009 based on hospital 
claims data available for the CY 2009 OPPS/ASC proposed rule. Moreover, 
we note that payment at ASP+4 percent is consistent with a 50/50 blend 
of the CY 2008 payment rate of ASP+5 percent and the final CY 2009 
equivalent average ASP-based payment amount of ASP+2 percent, as 
caclculated from CY 2007 claims data available for this final rule with 
comment period. This is similar to our CY 2008 transition methodology 
for payment of separately payable drugs and biologicals. While payment 
at ASP+4 percent is slightly higher than the equivalent average ASP-
based payment amount for all hospitals that we calculated from hospital 
costs according to the methodology we have used since CY 2006, we 
believe that another transitional payment year appropriately allows for 
a gradual change in hospital payment from the CY 2008 drug payment rate 
to a refined claims-based payment methodology. This CY 2009 
transitional payment should help to ensure continued access to 
separately payable drugs and biologicals in the HOPD, while also 
providing us with another year to explore the complex issues 
surrounding hospital allocation of pharmacy overhead costs to drug 
charges and differential hospital drug costs based on hospital 
participation in the 340B program, in order to determine if a refined 
methodology could improve payment accuracy, while also ensuring 
equitable payments. In summary, we will provide another year of 
transitional payment for CY 2009 at ASP+4 percent for separately 
payable drugs and biologicals and associated pharmacy overhead costs. 
As a result, we are not accepting the recommendation of the APC Panel 
to continue to pay for separately payable drugs and biologicals at no 
less than ASP+5 percent for CY 2009.
    As noted above, we will be further exploring the impact of 
hospitals participating in the 340B program on hospital drug costs 
calculated from OPPS claims during this CY 2009 transitional year, 
where the separately payable drug costs from OPPS claims would have 
otherwise led us to pay all hospitals at ASP+2 percent according to our 
proposed methodology. Given stakeholders' comments about increasing 
hospital participation in the 340B program and the significantly 
reduced drug acquisition costs that may result, we are considering 
various approaches to improve the accuracy of OPPS payment to all 
hospitals for the acquisition and pharmacy overhead costs of separately 
payable drugs, including whether we should use the equitable adjustment 
authority in section 1833(t)(2)(E) of the Act to adjust OPPS payments 
to hospitals for separtately payable drugs based on hospitals' 
participation in the 340B program, so that drug payment for the two 
classes of hospitals (340B participating and 340B nonparticipating) 
would reflect the average drug acquisition and pharmacy overhead costs 
specific to each class of hospital.
    Comment: One commenter requested that CMS create an HCPCS J-code 
for tositumomab, currently provided under a radioimmunotherapy regimen 
and billed as part of HCPCS code G3001 (Administration and supply of 
tositumomab, 450 mg). The commenter argued that because tositumomab is 
listed in compendia, is approved by the FDA as part of the 
BEXXAR[supreg] regimen, and has its own National Drug Code (NDC) 
number, it should be recognized as a drug and, therefore, be paid as 
other drugs are paid under the OPPS methodology, instead of having a 
payment rate determined by hospital claims data. The commenter 
suggested that a payment rate could be established using the ASP 
methodology.
    Response: We have consistently noted that unlabeled tositumomab is 
not approved as either a drug or a radiopharmaceutical, but it is a 
supply that is required as part of the radioimmunotherapy treatment 
regimen (November 27, 2007 OPPS/ASC final rule with comment period for 
CY 2008 (72 FR 66765); November 10, 2005 OPPS final rule with comment 
period for CY 2006 (70 FR 68654); November 7, 2003 OPPS final rule with 
comment period for CY 2004 (68 FR 63443)). We do not make separate 
payment for supplies used in services provided under the OPPS. Payments 
for necessary supplies are packaged into payments for the separately 
payable services provided by the hospital. Specifically, administration 
of unlabeled tositumomab is a complete service that qualifies for 
separate payment under its own clinical APC. This complete service

[[Page 68659]]

is currently described by HCPCS code G3001. Therefore, we do not agree 
with the commenter's recommendation that we should assign a separate 
HCPCS code to the supply of unlabeled tositumomab. Rather, we will 
continue to make separate payment for the administration of 
tositumomab, and payment for the supply of unlabeled tositumomab is 
packaged into the administration payment.
    After consideration of the public comments received and the 
recommendations of the APC Panel, we are finalizing our proposal to 
provide payment for nonpass-through drugs and biologicals based on 
costs calculated from hospital claims, with modification to provide a 
1-year transitional rate of ASP+4 percent for CY 2009. Moreover, we are 
not finalizing our proposal to split the single standard drug cost 
center into two cost centers. Instead, we will continue to explore 
other potential approaches to improving our drug cost estimation to 
improve payment accuracy for separately payable drugs and biologicals. 
Furthermore, we did not propose to adopt and, therefore, are not 
implementing the use of regression-based CCRs for cost estimation in 
any area of the CY 2009 OPPS, including drugs requiring detail coding 
and IV solutions.
c. 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41492), we proposed 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 were published, we were not able to include the actual 
updated furnishing fee in the proposed rule. Therefore, in accordance 
with our policy as finalized in the CY 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/.
    Comment: Many commenters supported the CY 2009 OPPS proposal to 
continue to provide a furnishing fee for blood clotting factors. 
Several commenters requested that CMS provide payment for blood 
clotting factors at a rate of ASP+6 percent, in addition to providing 
the furnishing fee.
    Response: We see no compelling reason to provide payment for blood 
clotting factors under a different methodology for OPPS purposes at 
this time. We believe that the payment rate of ASP+4 percent that we 
are finalizing for payment of all separately payable drugs and 
biologicals in CY 2009, and the additional blood clotting factor 
furnishing fee, are appropriate and will not jeopardize access to these 
treatments in the hospital outpatient setting.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to provide 
payment for blood clotting factors under the same methodology as other 
separately payable drugs and biologicals under the OPPS and to continue 
paying an updated furnishing fee.
4. Payment for Therapeutic Radiopharmaceuticals
a. Background
    Section 303(h) of Public Law 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. Radio 
pharma ceuticals also are subject to the policies affecting all 
similarly classified OPPS drugs and biologicals, such as pass-through 
payment for diagnostic and therapeutic radio pharma ceuticals and 
individual packaging determinations for therapeutic radio pharma 
ceuticals, discussed earlier in this final rule with comment period.
    For CYs 2006 and 2007, we used mean unit cost data from hospital 
claims to determine each radio pharma ceutical's packaging status and 
implemented a temporary policy to pay for separately payable radio 
pharma ceuticals based on the hospital's charge for each radio pharma 
ceutical 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 radio pharma ceutical 
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 radio pharma ceuticals in the CY 2007 claims data that we 
are using for this final rule with comment period reflect both the 
acquisition cost of the radio pharma ceutical 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 radio pharma ceutical products 
to Medicare beneficiaries. The single OPPS payment represented Medicare 
payment for both the acquisition cost of the radio pharma ceutical 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 that 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 the 
public

[[Page 68660]]

comments received, 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). In addition, we 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 Public Law 110-173 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. As we stated in the CY 2009 OPPS/ASC proposed rule, 
thereafter, the OPPS would provide payment for separately payable 
therapeutic radio pharma ceuticals 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.
    Following issuance of the CY 2009 OPPS/ASC proposed rule, section 
142 of Public Law 110-275 amended section 1833(t)(16)(C) of the Act, as 
amended by section 106(a) of Public Law 110-173, to further extend the 
payment period for therapeutic radiopharmaceuticals based on hospitals' 
charges adjusted to cost through December 31, 2009. Therefore, we have 
continued to pay hospitals for therapeutic radiopharmaceuticals at 
charges adjusted to cost through the remainder of CY 2008.
b. 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 established ASP procedures 
referenced at section 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, the 
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 the 
information was valid, reliable, and representative of a diverse group 
of hospitals and, therefore, 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. In addition, nondevice external data sources also 
would have to be identified. 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.
    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

[[Page 68661]]

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) a HCPCS code for either 
nonradiolabeled tositumomab (G3001 (Administration or supply of 
tositumomab, 450 mg)) or rituximab (J9310 (Rituximab, 100 mg)) (which 
also would 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 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. As we discussed in the CY 2009 
OPPS/ASC proposed rule (73 FR 41495), 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 
final rule with comment period. 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, as 
we proposed, we believe it would be premature to make 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, in the CY 2009 OPPS/ASC 
proposed rule, we proposed 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 proposed to 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, for that quarter 
we proposed that the OPPS would provide a prospective payment based on 
the mean cost from hospital claims data as displayed in Table 25 of the 
proposed rule, as this was the methodology finalized in the CY 2008 
OPPS/ASC final rule with comment period. Further, we proposed 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 that 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

[[Page 68662]]

ratesetting process. We believed 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 did 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 the proposed rule 
were based on mean costs from historical hospital claims data available 
for the proposed rule. Under our proposal that would initially look to 
ASP data to establish the payment rates for separately payable 
therapeutic radiopharmaceuticals, beginning in CY 2009, we proposed to 
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 proposed to allow manufacturers to submit ASP information for 
any separately payable therapeutic radiopharmaceutical for payment 
purposes under the OPPS. However, we did not propose 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 noted that all manufacturers would need to 
submit ASP information in order for payment to be made on an ASP basis. 
In the proposed rule, we specifically requested 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 believed 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). We indicated that these data would not be 
available for publication in this CY 2009 OPPS/ASC final rule with 
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 indicated our 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 proposed 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 proposed to provide payment based 
on the most recent hospital mean unit cost data that we have available. 
We believed that both methodologies represented 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 was 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 noted 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 proposed 
to use 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 were not proposing to require therapeutic 
radiopharmaceutical manufacturers to report ASP data at this time. We 
did not believe that WAC or AWP would be an appropriate proxy for OPPS 
payment for average therapeutic radiopharmaceutical acquisition cost 
and associated handling costs when manufacturers would not be required 
to submit ASP data and, therefore, payment based on WAC or AWP could 
continue for the full calendar year. We remind readers that WAC or AWP 
provide temporary payment rates for drugs under the umbrella of the 
general ASP methodology, and these are typically used while we are 
awaiting ASP information on actual sales prices to be submitted by drug 
manufacturers. We do not believe that it would be most appropriate to 
provide payment through WAC or AWP on a long-term basis for 
radiopharmaceuticals sold by those manufacturers that choose not to or 
cannot submit ASP information.
    Similar to the ASP process already in place for drugs and 
biologicals, we proposed to update ASP data for therapeutic 
radiopharmaceuticals through our quarterly process as updates become 
available. In addition, we proposed to assess the availability of ASP 
data for therapeutic radiopharmaceuticals quarterly, and if ASP data 
became available midyear, we would transition at the next available 
quarter to ASP-based payment. For example, if ASP data were 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), 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.
    Comment: Several commenters supported CMS' proposal to provide 
payment for therapeutic radiopharmaceuticals based on the ASP 
methodology. While some commenters acknowledged that ASP reporting may 
not be possible for all therapeutic radiopharmaceutical manufacturers, 
several commenters noted their intent to begin providing CMS with ASP 
data for specific therapeutic radiopharmaceuticals in CY 2009.
    Finally, while many commenters noted that Public Law 110-275 would 
not allow the proposed ASP methodology to be adopted for CY 2009, many 
commenters urged CMS to consider this methodology for CY 2010 and 
beyond.
    Response: We appreciate the support for our proposal to provide 
payment for therapeutic radiopharmaceuticals based on the ASP 
methodology for CY 2009. However, as the commenters noted, Public Law 
110-275 has directed us to provide payment for therapeutic 
radiopharmaceuticals at hospital charges adjusted to cost throughout CY 
2009. Therefore, our CY 2009 payment methodology for therapeutic

[[Page 68663]]

radiopharmaceuticals will be made in accordance with the statutory 
requirements. However, we appreciate the comments on the use of the ASP 
methodology and will consider them as we proceed with our CY 2010 
ratesetting process.
    After consideration of the public comments received, and taking 
into account the requirements of Public Law 110-275, we are finalizing 
a policy to provide payment for all therapeutic radiopharmaceuticals 
listed in Table 29 below at hospital charges adjusted to cost for CY 
2009. These therapeutic radiopharmaceuticals are assigned status 
indicator ``H'' in Addendum B to this final rule with comment period, 
as discussed in section XIII.A. of this final rule with comment period. 
As described earlier, we are continuing to define therapeutic 
radiopharmaceuticals as those radiopharmaceuticals that contain the 
word ``therapeutic'' in their long HCPCS codes descriptors.

   Table 29--CY 2009 Therapeutic Radiopharmaceuticals Paid at Charges
                            Adjusted to Cost
------------------------------------------------------------------------
                               CY 2009 short     Final CY     Final CY
     CY 2009 HCPCS code          descriptor      2009 APC      2009 SI
------------------------------------------------------------------------
A9517.......................  I131 iodide             1064            H
                               cap, rx.
A9530.......................  I131 iodide             1150            H
                               sol, rx.
A9543.......................  Y90                     1643            H
                               ibritumomab,
                               rx.
A9545.......................  I131                    1645            H
                               tositumomab,
                               rx.
A9563.......................  P32 Na                  1675            H
                               phosphate.
A9564.......................  P32 chromic             1676            H
                               phosphate.
A9600.......................  Sr89 strontium.         0701            H
A9605.......................  Sm 153                  0702            H
                               lexidronm.
------------------------------------------------------------------------

5. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, but Without OPPS Hospital Claims 
Data
    Public Law 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 did not have pass-through status 
and were without OPPS hospital claims data, at ASP+5 percent, 
consistent with the final OPPS payment methodology for other separately 
payable drugs and biologicals. In the CY 2009 OPPS/ASC proposed rule 
(73 FR 41496), we proposed to continue this methodology for CY 2009. 
Therefore, for CY 2009, we proposed 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. We believed 
that this policy would ensure that new nonpass-through drugs and 
biologicals would be treated like other drugs and biologicals under the 
OPPS, unless they are granted pass-through status. Only if 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 proposed 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 proposed, 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 were without OPPS claims data. However, we noted 
that if the WAC was also unavailable, we would make payment at 95 
percent of the product's most recent AWP. We also proposed to assign 
status indicator ``K'' to HCPCS codes for new drugs and biologicals for 
which we had not received a pass-through application. We further noted 
that, with respect to new items for which we did not have ASP data, 
once their ASP data became available in later quarter submissions, 
their payment rates under the OPPS would be adjusted so that the rates 
would be based on the ASP methodology and set to the finalized ASP-
based amount (proposed for CY 2009 at ASP+4 percent) for items that had 
not been granted pass-through status. Furthermore, we proposed to 
package payment for new HCPCS codes that describe nonpass-through 
biologicals that are only implantable, as discussed further in section 
V.A.2. of this final rule with comment period.
    For CY 2009, we also proposed to base payment for new therapeutic 
radiopharmaceuticals with HCPCS codes as of January 1, 2009, but which 
did not have pass-through status, on the WACs for these products if ASP 
data for these therapeutic radiopharmaceuticals were not available. If 
the WACs were also unavailable, we proposed to 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 
proposed to assign status indicator ``K'' to HCPCS codes for new 
therapeutic radiopharmaceuticals for which we had not received a pass-
through application.
    Consistent with other ASP-based payments, for CY 2009, we proposed 
to make any appropriate adjustments to the payment amounts for new 
drugs and biologicals in this 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) indicated 
that adjustments to the payment rates for these drugs and

[[Page 68664]]

biologicals were necessary. The payment rates for new therapeutic 
radiopharmaceuticals would also be adjusted accordingly. We noted in 
the proposed rule that the new CY 2009 HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals were not available at 
the time of development of the proposed rule. We indicated that they 
would be included in this CY 2009 OPPS/ASC final rule with comment 
period where they are assigned comment indicator ``NI'' to reflect that 
their interim final OPPS treatment is open to public comment in the CY 
2009 OPPS/ASC final rule with comment period.
    We did not receive any public comments specific to these CY 2009 
proposals. Therefore, we are finalizing these proposals, with the 
following modification regarding payment for nonpass-through 
therapeutic radiopharmaceuticals. In accordance with Public Law 110-
275, OPPS payment for nonpass-through therapeutic radiopharmaceuticals 
is made based on hospital charges adjusted to cost for CY 2009.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2007 and/or CY 2008 for which we did not have any CY 2007 
hospital claims data available for the CY 2009 proposed rule. 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 proposed to 
package items for which we estimated the per administration cost to be 
less than or equal to $60, which is the general packaging threshold 
that we proposed for drugs, biologicals, and therapeutic 
radiopharmaceuticals in CY 2009. We proposed 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 proposed to continue to package regardless of cost, as 
discussed in more detail in section V.B.2.c. of this final rule with 
comment period) in CY 2009. We proposed that the CY 2009 payment for 
separately payable items without CY 2007 claims data would be based on 
ASP+4 percent, similar to payment for 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 proposed to use the WAC for the product to establish 
the initial payment rate. However, we noted that if the WAC was also 
unavailable, we would make payment at 95 percent of the most recent AWP 
available.
    We did not receive any public comments on this CY 2009 proposal. 
Therefore, we are finalizing the proposal, without modification.
    Table 30 lists all of the nonpass-through drugs and biologicals 
without available CY 2007 claims data to which these policies apply in 
CY 2009.

                           Table 30--Drugs and Biologicals Without CY 2007 Claims Data
----------------------------------------------------------------------------------------------------------------
                                                                         Estimated
                                  CY 2009 HCPCS     CY 2009 short     average number     Final CY      Final CY
       CY 2008 HCPCS code              code           descriptor       of units per       2009 SI      2009 APC
                                                                      administration
----------------------------------------------------------------------------------------------------------------
C9237..........................  J1930..........  Lanreotide                       90            K          9237
                                                   injection.
J0400..........................  J0400..........  Aripiprazole                     39            N   ...........
                                                   injection.
J2724..........................  J2724..........  Protein c                       630            K          1139
                                                   concentrate.
J3355..........................  J3355..........  Urofollitropin,                   2            K          1741
                                                   75 iu.
Q4096..........................  J7186..........  Antihemophilic                 6825            K          1213
                                                   viii/VWF comp.
----------------------------------------------------------------------------------------------------------------

    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 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 
proposed to continue to use this methodology.
    Table 31 below shows the previously unrecognized HCPCS code, the 
previous status indicator for the unrecognized HCPCS code, the CY 2009 
short descriptor for the previously unrecognized HCPCS code, the 
associated recognized HCPCS code, and the status indicator for the 
newly recognized code. As noted in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66775), we believed that this approach would be 
the most appropriate and reasonable way to implement this change in 
HCPCS code recognition under the OPPS without impacting payment. 
However, we noted that 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.
    Comment: One commenter requested that we recognize HCPCS codes 
Q0165 (Prochlorperazine maleate, 10 mg, oral, FDA approved prescription 
anti-emetic, for use as a complete therapeutic substitute for an IV 
anti-emetic at the time of chemotherapy treatment, not to exceed a 48-
hour dosage regimen);

[[Page 68665]]

Q0168 (Dronabinol, 5 mg, oral, FDA approved prescription anti-emetic, 
for use as a complete therapeutic substitute for an IV anti-emetic at 
the time of chemotherapy treatment, not to exceed a 48-hour dosage 
regimen); Q0170 (Promethazine hydrochloride, 25 mg, oral, FDA approved 
prescription anti-emetic, for use as a complete therapeutic substitute 
for an IV anti-emetic at the time of chemotherapy treatment, not to 
exceed a 48-hour dosage regimen); Q0172 (Chlorpromazine hydrochloride, 
25 mg, oral, FDA approved prescription anti-emetic, for use as a 
complete therapeutic substitute for an IV anti-emetic at the time of 
chemotherapy treatment, not to exceed a 48-hour dosage regimen); Q0176 
(Perphenazine, 8 mg, oral, FDA approved prescription anti-emetic, for 
use as a complete therapeutic substitute for an IV anti-emetic at the 
time of chemotherapy treatment, not to exceed a 48-hour dosage 
regimen); and Q0178 (Hydroxyzine pamoate, 50 mg, oral, FDA approved 
prescription anti-emetic, for use as a complete therapeutic substitute 
for an IV anti-emetic at the time of chemotherapy treatment, not to 
exceed a 48-hour dosage regimen) that currently have OPPS status 
indicators of ``B,'' but that have related HCPCS codes for the same 
drugs with different dosages and that are recognized for payment under 
the OPPS.
    Response: We appreciate the commenter identifying these additional 
HCPCS codes, and we agree that we should recognize these HCPCS codes 
for drugs that are payable under the OPPS in order to allow hospital to 
report all HCPCS codes for drugs. As we concluded for the drug HCPCS 
codes that that we newly recognized for CY 2008, we believe that 
recognizing all of these HCPCS codes for payment under the OPPS should 
not have a significant effect on our payment methodology for drugs. 
Stakeholders have told us that this policy reduces the administrative 
burden associated with hospitals' reporting of only the HCPCS code with 
the lowest increment in its code descriptor for the OPPS. Wherever 
possible and appropriate, we continue to seek to reduce hospitals' 
administrative burden in submitting claims for payment under the OPPS. 
In determining the packaging status of these HCPCS drug codes for CY 
2009, we are following the methodology we implemented in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66725), and we have 
assigned them the same status indicators as the associated currently 
recognized HCPCS codes under the OPPS.
    We are recognizing these additional 6 HCPCS codes under the OPPS, 
effective January 1, 2009. These codes are included in Table 31 below 
and identified with an (*) to denote that they are newly recognized in 
CY 2009, while the other HCPCS drug codes displayed in the table were 
newly recognized in CY 2008.
    After consideration of the public comment received, we are 
finalizing our CY 2009 proposal to provide payment for newly recognized 
HCPCS drug codes for different doses of the same drugs on the same 
basis as the previously recognized HCPCS codes for those drugs, with 
modification to apply this policy to six additional HCPCS drug codes.

     Table 31--HCPCS Codes Unrecognized in CY 2007 or CY 2008, Associated Recognized HCPCS Codes, and Status
                                             Indicators for CY 2009
----------------------------------------------------------------------------------------------------------------
                                                                                                      Final CY
                                                                                        Associated   2009 SI for
      CY 2009 HCPCS codes previously        CY 2007 SI     CY 2009 short descriptor       HCPCS         newly
               unrecognized                                                             recognized   recognized
                                                                                        in CY 2007   HCPCS code
----------------------------------------------------------------------------------------------------------------
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 inj....        J1460            K
J1560....................................            B   Gamma globulin >10 CC inj...        J1460            K
J8521....................................            B   Capecitabine, oral, 500 mg..        J8520            K
J9062....................................            B   Cisplatin 50 MG injection...        J9060            N
J9080....................................            B   Cyclophosphamide 200 MG inj.        J9070            N
J9090....................................            B   Cyclophosphamide 500 MG inj.        J9070            N
J9091....................................            B   Cyclophosphamide 1.0 grm inj        J9070            N
J9092....................................            B   Cyclophosphamide 2.0 grm inj        J9070            N
J9094....................................            B   Cyclophosphamide lyophilized        J9093            N
J9095....................................            B   Cyclophosphamide lyophilized        J9093            N
J9096....................................            B   Cyclophosphamide lyophilized        J9093            N
J9097....................................            B   Cyclophosphamide lyophilized        J9093            N
J9110....................................            B   Cytarabine hcl 500 MG inj...        J9100            N
J9140....................................            B   Dacarbazine 200 MG inj......        J9130            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 MG inj        J9370            N
J9380....................................            B   Vincristine sulfate 5 MG inj        J9370            N
Q0165 *..................................            B   Prochlorperazine maleate 10         Q0164            N
                                                          mg.
Q0168 *..................................            B   Dronabinol 5 mg oral........        Q0167            N
Q0170 *..................................            B   Promethazine HCl 25 mg oral.        Q0169            N
Q0172 *..................................            B   Chlorpromazine HCl 25 mg            Q0171            N
                                                          oral.
Q0176 *..................................            B   Perphenazine 8 mg oral......        Q0175            N

[[Page 68666]]

 
Q0178 *..................................            B   Hydroxyzine pamoate 50 mg...        Q0177            N
----------------------------------------------------------------------------------------------------------------
* Denotes newly recognized HCPCS code for the CY 2009 OPPS.

    Finally, there were eight drugs and biologicals, shown in Table 28 
of the proposed rule, that were payable in CY 2007 but for which we 
lacked CY 2007 claims data and any other data related to the ASP 
methodology and, therefore, we were unable to determine their per day 
cost based on the ASP methodology. As we were 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 and/or 
claims data, we proposed to package payment for these drugs and 
biologicals in CY 2009.
    HCPCS code J0395 (Arbutamine HCl injection) did not have any data 
for the CY 2009 OPPS/ASC proposed rule. However, as a result of updated 
data used for this final rule with comment period, we received hospital 
claims data for this code and are, therefore, able to make a packaging 
determination for the drug for CY 2009. There was one claim for CY 2007 
for HCPCS code J0395, with a per day cost estimate of approximately 
$58. Therefore, because this amount is below our final drug packaging 
threshold for CY 2009, we are packaging HCPCS code J0395.
    We did not receive any public comments on our proposal to package 
payment for drugs that were payable in CY 2007 but for which we lack CY 
2007 claims data and for which we are unable to determine the estimated 
per day cost based on the ASP methodology. Therefore, we are finalizing 
our CY 2009 proposal, with modification to exclude HCPCS code J0395 
from packaging based on this rationale, to package payment for the 
seven drugs and biologicals listed in Table 32 below, due to missing 
data essential to calculating a per day cost. We are packaging payment 
for HCPCS code J0395 on the basis of an estimated per day cost of less 
than the final CY 2009 OPPS drug packaging threshold.

 Table 32--Drugs and Biologicals Without Information on per Day Cost and
                      That Are Packaged in CY 2009
------------------------------------------------------------------------
                                                               Final CY
     CY 2009 HCPCS code         CY 2009 short descriptor       2009 SI
------------------------------------------------------------------------
90393......................  Vaccina ig, im................           N
90581......................  Anthrax vaccine, sc...........           N
J0350......................  Injection anistreplase 30 u...           N
J1452......................  Intraocular Fomivirsen na.....           N
J2670......................  Totazoline hcl injection......           N
J3530......................  Nasal vaccine inhalation......           N
Q0174......................  Thiethylperazine maleate 10 mg           N
------------------------------------------------------------------------

VI. 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 total program payments estimated to be 
made under 1833(t) of the Act for all covered services furnished for 
that year 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 remaining quarters 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 finalized a policy 
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 because we will pay for pass-through drugs and

[[Page 68667]]

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. (We note that the Part B drug CAP program has 
been postponed for CY 2009. We refer readers to the Medicare Learning 
Network (MLN) Matters Special Edition article SE0833. Therefore, there 
will be no effective Part B drug CAP rate for pass-through drugs and 
biologicals as of January 1, 2009.) 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. Estimate of Pass-Through Spending

    As we proposed, in this final rule with comment period, we are 
finalizing a policy of setting the applicable percentage limit at 2.0 
percent of the total OPPS projected payments for CY 2009, consistent 
with our OPPS policy from CYs 2004 through 2008.
    As discussed in section IV.A. of this final rule with comment 
period, there are currently no known device categories receiving pass-
through payment in CY 2008 that will 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 we estimated the pass-through 
spending to be $0 for this group in the proposed rule. For this final 
rule with comment period, we continue to estimate $0 for this group.
    In estimating CY 2009 pass-through spending for device categories 
in the second group (that is, device categories that we knew at the 
time of the development of the proposed rule would be newly eligible 
for pass-through payment in CY 2009 (of which there were none), 
additional device categories that we estimate could be approved for 
pass-through status subsequent to the development of the proposed rule 
and before January 1, 2009, and contingent projections for new 
categories in the second through fourth quarters of CY 2009), we 
proposed 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. We estimated the CY 2009 pass-through spending for 
this second group to be $10 million in the proposed rule, and that 
continues to be our estimate for this final rule with comment period.
    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 CYs 
2008 and 2009, in the proposed rule, we estimated the total pass-
through spending for device categories to be $10 million for CY 2009. 
This estimate of $10 million remains our estimate for this CY 2009 
final rule with comment period.
    We did not receive any public comments regarding our proposed 
methodology for estimating transitional pass-through spending for 
devices for CY 2009. Therefore, we are adopting our final estimate of 
$10 million for total pass-through spending for device categories for 
CY 2009.
    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 
proposed 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 
those 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, our 
final estimate of 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 is approximately $16.3 million 
for CY 2009. This $16.3 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, and are displayed in 
Table 23 of this final rule with comment period.
    To estimate CY 2009 pass-through spending for drugs and biologicals 
in the second group (that is, drugs and biologicals that we knew at the 
time of development of the proposed rule would be newly eligible for 
pass-through payment in CY 2009 (of which there were none), additional 
drugs and biologicals that we estimate could be approved for pass-
through status subsequent to the development of the 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 used 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 estimate pass-through spending attributable to 
this second group of drugs and biologicals to be about $7.0 million for 
CY 2009.
    In the CY 2005 OPPS final rule with comment period (69 FR 65810), 
we indicated that we would be 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 were no 
radiopharmaceuticals that were eligible for pass-through payment at the 
time of publication of the CY 2009 OPPS/ASC proposed rule, and we have 
not received any pass-through applications for radiopharmaceuticals 
between the publication of the proposed rule and this final rule with 
comment period. As noted in the CY 2009 OPPS/ASC proposed rule (73 FR 
41500), 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 methodologies for 
diagnostic and therapeutic radiopharmaceuticals that we finalized, as 
discussed in section

[[Page 68668]]

V.A.3. of this final rule with comment period. 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 did not include 
radiopharmaceuticals in our proposed estimate of pass-through spending 
for CY 2009, and we have not included them in our final estimate of 
pass-through spending for CY 2009. We discuss our final policy 
regarding payment for all new diagnostic radiopharmaceuticals without 
pass-through status in CY 2009 in section V.B.2.c. of this final rule 
with comment period.
    We did not receive any public comments regarding our proposed 
methodology for estimating transitional pass-through spending for 
drugs, biologicals, and radiopharmaceuticals for CY 2009. Therefore, we 
are adopting our final estimate of $23.3 million for total pass-through 
spending for drugs, biologicals, and radiopharmaceuticals for CY 2009.
    In accordance with the comprehensive methodology described above in 
this section, 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 device categories, drugs, 
biologicals, and radiopharmaceuticals that first become eligible for 
pass-through status during CY 2009 would approximate $33.3 million, 
which represents 0.11 percent of total OPPS projected payments for CY 
2009.
    We estimate that pass-through spending in CY 2009 would not amount 
to 2.0 percent of total projected OPPS CY 2009 program spending.
    Accordingly, we are finalizing our proposed methodology for 
estimating CY 2009 OPPS pass-through spending for drugs, biologicals, 
radiopharmaceuticals, and device categories. Our final pass-through 
estimate for CY 2009 is $33.3 million.

VII. 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 (MMA), 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.
    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 (Pub. L. 109-432) 
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 based 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 OPPS/ASC 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 transmittal, effective July 1, 
2007 (Transmittal 1259, dated June 1, 2007). Based on public comments 
received on the CY 2007 OPPS/ASC 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.
    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, and 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 the 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 would provide opportunities for hospitals to 
receive additional payments under certain circumstances through the 7.1 
percent rural SCH adjustment.
    After we finalized our proposal to pay for brachytherapy sources in 
CY 2008 based on median costs, section 106(a) of

[[Page 68669]]

the MMSEA (Pub. L. 110-173) extended the charges-adjusted-to-cost 
payment methodology for brachytherapy sources for an additional 6 
months, through June 30, 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.'') was continued for 
claims processing purposes for brachytherapy source payment through 
June 30, 2008, although a beneficiary copayment was applied to payment 
for these sources. We had 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). However, we never 
applied status indicator ``K'' to brachytherapy sources for the first 6 
months of CY 2008, due to the requirements of the MMSEA.
    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 indicated 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 (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 stated in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41501) that we anticipated implementing this 
policy as of July 1, 2008.

B. OPPS Payment Policy

    In the CY 2009 OPPS/ASC proposed rule (73 FR 41500), we again 
proposed prospective payment rates for brachytherapy sources for CY 
2009. We proposed to use CY 2007 claims data for setting the CY 2009 
rates for brachytherapy sources, as we proposed for most other items 
and services that would be paid under the CY 2009 OPPS, using our 
standard OPPS ratesetting methodology. We proposed to pay for 
brachytherapy sources at prospective rates based on their source-
specific median costs as calculated from CY 2007 claims data available 
for CY 2009 ratesetting. The separately payable brachytherapy source 
codes, descriptors, APCs, approximate median costs, and status 
indicators were presented in Table 29 of the CY 2009 OPPS/ASC proposed 
rule.
    We proposed to establish new status indicator ``U'' (Brachytherapy 
Sources. Paid under OPPS; separate APC payment.) for brachytherapy 
sources as of January 1, 2009. In the CY 2009 OPPS/ASC proposed rule, 
we noted that status indicator ``H'' has been used for the periods when 
brachytherapy sources were paid based on the charges-adjusted-to-cost 
payment methodology, while status indicator ``K'' was slated to be 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 (72 FR 66785). Status indicator 
``H'' is also used for devices paid at charges adjusted to cost during 
their period of pass-through payment. While the CY 2008 definition of 
status indicator ``K'' currently encompasses nonpass-through drugs and 
biologicals, therapeutic radiopharmaceuticals, brachytherapy sources, 
and blood and blood products, brachytherapy sources have never been 
actually assigned this payment indicator because they have not had a 
period of prospective payment in CY 2008. However, assigning a status 
indicator 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 
proposed to assign new status indicator ``U'' to brachytherapy source 
HCPCS codes beginning in CY 2009.
    For CY 2009, we also proposed 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.
    Subsequent to issuance of the CY 2009 OPPS/ASC proposed rule, 
Congress enacted Public Law 110-275 (MIPPA) on July 15, 2008. Section 
142 of Public Law 110-275 amended section 1833(t)(16)(C) of the Act as 
amended by section 106(a) of the MMSEA to further extend the payment 
period for brachytherapy sources based on a hospital's charges adjusted 
to cost from July 1, 2008, through December 31, 2009. Therefore, we 
have continued to pay for brachytherapy sources at charges adjusted to 
cost in CY 2008 from July 1 through December 31, and we have maintained 
the assignment of status indicator ``H'' to brachytherapy sources for 
claims processing purposes. Furthermore, we will continue to pay for 
all separately payable brachytherapy sources based on a hospital's 
charges adjusted to cost for CY 2009. Because brachytherapy sources 
will be paid at charges adjusted to cost, we will not subject them to 
the outlier provision of section 1833(t)(5) of the Act, or subject 
brachytherapy source payment weights to scaling for purposes of budget 
neutrality. Moreover, during this CY 2009 period of payment at charges 
adjusted to cost, brachytherapy sources will not be eligible for the 
7.1 percent rural SCH adjustment (as discussed in detail in section 
II.E. of this final rule with comment period).
    Comment: Several commenters expressed support for the extension of 
brachytherapy source payment based on charges adjusted to cost through 
December 31, 2009, as required by Public Law 110-275. They cited 
concerns regarding CMS' brachytherapy source claims data used in the CY 
2009 proposal to set the prospective brachytherapy source rates based 
on median costs. Examples of the data concerns presented by the 
commenters include the following: difficulty in establishing a 
prospective payment rate for high dose rate (HDR) sources which can be 
used for multiple patients; use of only partial CY 2007 claims data for 
stranded sources for the CY 2009 OPPS payment; high variation in unit 
cost for certain brachytherapy sources; costs from few hospitals 
represented in claims data for certain sources; and a proposed rate for 
high activity palladium-131 that was lower than low activity palladium, 
inconsistent with

[[Page 68670]]

the true costs of these sources as reported by commenters. One 
commenter did not support prospective payment rates for brachytherapy 
sources for which ASP data are not available. A few commenters 
recommended continuation of payment based on charges adjusted to cost 
for CY 2010 and beyond, adopted through regulation.
    One commenter stated that the highly variable claims data for 
yttrium-90 (C2616, Brachytherapy source, non-stranded, Yttrium-90, per 
source), a source which is reported by only a small number of 
providers, in combination with possible charge compression for this 
very high cost source, result in variable and inaccurate claims data 
and, therefore, an inadequate proposed payment rate that would not pay 
appropriately for the source cost to permit access for Medicare 
beneficiaries. The commenter asserted generally that these factors 
result in unpredictable and inequitable payment rates for all such 
sources.
    Response: We appreciate the detailed public comments that describe 
data characteristics and will take the issues raised by the commenters 
into consideration in future proposed ratesetting for brachytherapy 
sources. As noted previously in this section, for CY 2009, section 142 
of Public Law 110-275 (MIPPA) requires us to pay for brachytherapy 
sources at charges adjusted to costs. Therefore, we are not considering 
any other payment methodologies for CY 2009, and we are not adopting 
our CY 2009 proposal. We will make a proposal for the CY 2010 payment 
of brachytherapy sources in the CY 2010 OPPS/ASC proposed rule, 
consistent with our annual OPPS/ASC update process.
    Furthermore, for CY 2009, we are not adopting the policy we 
established in the CY 2008 OPPS/ASC final rule with comment period of 
paying stranded and non-stranded NOS codes for brachytherapy sources, 
C2698 and C2699, based on a rate equal to the lowest stranded or non-
stranded prospective payment for such sources. Also, we are not 
adopting the policy we established in the CY 2007 OPPS/ASC final rule 
with comment period regarding payment for new brachytherapy sources for 
which we have no claims data. NOS codes C2698 and C2699 and newly 
established specific source codes will be paid at charges adjusted to 
cost through December 31, 2009, consistent with section 142 of Public 
Law 110-275.
    In addition, we did not receive any public comments regarding the 
proposed policy to create new status indicator ``U'' for brachytherapy 
source payment. Therefore, we are finalizing this proposal, without 
modification, for CY 2009. As noted earlier in this section, assigning 
a status indicator to several types of items and services with 
potentially differing payment policies has added unnecessary complexity 
to our operations. Status indicator ``U'' will be used only for 
brachytherapy sources, regardless of their specific payment methodology 
for any period of time. The use of status indicator ``U'' is expected 
to eliminate the complexity in the payment of brachytherapy sources 
caused by using status indicator ``K'' for multiple types of items and 
services.
    In summary, for CY 2009, we will continue to pay for all 
brachytherapy sources, assigned status indicator ``U,'' at charges 
adjusted to cost, consistent with section 142 of Public Law 110-275, by 
the overall hospital CCR on a claim-specific basis. All currently 
established brachytherapy source HCPCS codes that will be paid under 
the CY 2009 OPPS are listed in Table 33 below, along with their 
corresponding APCs and status indicator assignments.
    In our CY 2009 OPPS/ASC proposed rule (73 FR 41503), we again 
invited hospitals and other parties to submit recommendations to us for 
new HCPCS codes to describe new brachytherapy sources consisting of a 
radioactive isotope, including a detailed rationale to support 
recommended new sources. We indicated that we would continue to add new 
brachytherapy source codes and descriptors to our systems for payment 
on a quarterly basis.
    Comment: One commenter recommended that CMS establish a new HCPCS 
code specifically for high activity cesium-131, with a descriptor of 
``Brachytherapy source, nonstranded, high activity cesium-131, greater 
than 3.25 mCi, per source.''
    Response: Section 1833(t)(2)(H) of the Act requires that we create 
separate payment groups for brachytherapy sources which reflect the 
number, isotope, and radioactive intensity of devices of brachytherapy 
furnished. We have received a recommendation for creation of a new 
HCPCS code and APC group for a high activity cesium source, and we are 
currently evaluating whether to establish a new code for a high 
activity cesium source. Currently, there are two HCPCS codes recognized 
under the OPPS that describe cesium brachytherapy sources: C2642 
(Brachytherapy source, stranded, Cesium-131, per source) and C2643 
(Brachytherapy source, non-stranded, Cesium-131, per source). We will 
continue our established process of implementing new brachytherapy 
source codes on a quarterly basis as appropriate and providing 
necessary instruction through quarterly program transmittals.
    Consistent with our general practice, we will consider 
recommendations for new brachytherapy sources during CY 2009, as 
discussed earlier in this section.

 Table 33--Current Separately Payable Brachytherapy Sources for CY 2009
------------------------------------------------------------------------
                                CY 2009 long     Final CY     Final CY
     CY 2009 HCPCS code          descriptor      2009 APC      2009 SI
------------------------------------------------------------------------
A9527.......................  Iodine I-125,           2632            U
                               sodium iodide
                               solution,
                               therapeutic,
                               per millicurie.
C1716.......................  Brachytherapy           1716            U
                               source, non-
                               stranded, Gold-
                               198, per
                               source.
C1717.......................  Brachytherapy           1717            U
                               source, non-
                               stranded, High
                               Dose Rate
                               Iridium-192,
                               per source.
C1719.......................  Brachytherapy           1719            U
                               source, non-
                               stranded, Non-
                               High Dose Rate
                               Iridium-192,
                               per source.
C2616.......................  Brachytherapy           2616            U
                               source, non-
                               stranded,
                               Yttrium-90,
                               per source.
C2634.......................  Brachytherapy           2634            U
                               source, non-
                               stranded, High
                               Activity,
                               Iodine-125,
                               greater than
                               1.01 mCi
                               (NIST), per
                               source.
C2635.......................  Brachytherapy           2635            U
                               source, non-
                               stranded, High
                               Activity,
                               Palladium-103,
                               greater than
                               2.2 mCi
                               (NIST), per
                               source.
C2636.......................  Brachytherapy           2636            U
                               linear source,
                               non-stranded,
                               Palladium-103,
                               per 1MM.
C2638.......................  Brachytherapy           2638            U
                               source,
                               stranded,
                               Iodine-125,
                               per source.
C2639.......................  Brachytherapy           2639            U
                               source, non-
                               stranded,
                               Iodine-125,
                               per source.
C2640.......................  Brachytherapy           2640            U
                               source,
                               stranded,
                               Palladium-103,
                               per source.

[[Page 68671]]

 
C2641.......................  Brachytherapy           2641            U
                               source, non-
                               stranded,
                               Palladium-103,
                               per source.
C2642.......................  Brachytherapy           2642            U
                               source,
                               stranded,
                               Cesium-131,
                               per source.
C2643.......................  Brachytherapy           2643            U
                               source, non-
                               stranded,
                               Cesium-131,
                               per source.
C2698.......................  Brachytherapy           2698            U
                               source,
                               stranded, not
                               otherwise
                               specified, per
                               source.
C2699.......................  Brachytherapy           2699            U
                               source, non-
                               stranded, not
                               otherwise
                               specified, per
                               source.
------------------------------------------------------------------------

VIII. 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. In CY 2008, we continued to use the full 
set of CPT codes for drug administration services and continued our 
assignment of drug administration services to this six-level APC 
structure.

B. Coding and Payment for Drug Administration Services

    As we noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41503), 
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, sequential, and concurrent 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 the CY 2009 OPPS/ASC proposed rule. Under the CY 
2008 APC configurations for drug administration services, we observed 
several 2 times violations among the 6 APCs. Therefore, we proposed to 
reconfigure the drug administration APCs for CY 2009 to improve the 
clinical and resource homogeneity of the APCs. (We refer readers to 
sections III.B.2. and 3. of this final rule with comment period for 
further discussion of the 2 times rule.)
    As a result of our hospital cost analysis and detailed clinical 
review, we proposed 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. As indicated in the CY 2009 
OPPS/ASC proposed rule (73 FR 41503), 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 is the more appropriate 
structure based on hospital claims data for the full range of CPT drug 
administration codes. Our proposed five-level APC structure was 
originally included as Table 30 of the CY 2009 OPPS/ASC proposed rule 
and reprinted in replacement Table 30 included in a correction notice 
published in the Federal Register (73 FR 46575) on August 11, 2008, 
subsequent to the issuance of the CY 2009 OPPS/ASC proposed rule.
    As noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41503), 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 accepted the APC 
Panel's recommendation and, therefore, did not propose to implement a 
four-level APC structure for drug administration services in CY 2009.
    Comment: Several commenters supported the continued use of the full 
range of CPT drug administration codes for billing purposes under the 
OPPS. Conversely, one commenter requested that CMS return to a coding 
system that groups hydration services with diagnostic, prophylactic and 
therapeutic services for the first hour of infusion and additional 
hours of infusions.
    Response: We continue to believe that the use of the full set of 
drug administration CPT codes allows hospitals to use one set of codes 
for all

[[Page 68672]]

payers, minimizing the administrative burden on hospitals. Hospitals 
have described to us the challenges associated with maintaining 
different code sets for different payers, and we do not currently see 
any reason to change from the use of CPT codes for reporting drug 
administration services under the CY 2009 OPPS.
    Our proposal to move from a six-level APC structure to a five-level 
structure does not affect hospital billing for drug administration 
services. We proposed to continue to allow hospitals to use the entire 
set of drug administration CPT codes for purposes of reporting these 
services. 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.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to continue use 
of the full range of CPT drug administration codes for the CY 2009 
OPPS.
    Comment: Several commenters supported the proposal to restructure 
the drug administration APCs to a five-level APC structure. These 
commenters expressed appreciation of the proposed increase in payment 
for certain drug administration services. Furthermore, several 
commenters expressed appreciation for the timely review and proposed 
modifications in response to new claims data and indicated their belief 
that the proposed structure would result in more accurate payment for 
drug administration services under the OPPS.
    Some commenters objected to the proposed five-level APC structure 
because they believed that it would place an additional burden on 
hospitals. A few of these commenters asserted that the data used to 
establish the proposed five-level APC structure for drug administration 
services as shown in the CY 2009 OPPS/ASC proposed rule were incomplete 
or inconsistent. These commenters noted that hospitals had difficulty 
understanding and properly billing for drug administration services 
using these codes the first year they were introduced under the OPPS. 
The commenters argued that the data used for the CY 2009 OPPS/ASC final 
rule with comment period may be suspect because of widespread billing 
confusion. From their perspective, this confusion, compounded by CMS's 
failure to clarify the reporting of scenarios such as undocumented 
infusion stop times and lack of a universal list of drugs that are 
considered biological response modifiers, led to inconsistent reporting 
of these drug administration codes across hospitals. The commenters 
suggested that CMS collect at least 1 additional year of claims data 
before using this data to inform a restructuring of the drug 
administration APCs, in order to take into consideration the hospital 
learning curve that would result, ultimately, in accurate and stable 
claims data.
    In addition, some commenters noted that the CY 2008 CPT hierarchy 
for reporting drug administration codes used in the facility setting 
(as included in CPT instructions preceding the Hydration, Therapeutic, 
Prophylactic, and Diagnostic Injections and Infusions section of CPT 
codes) was not in place in CY 2007, and because CMS uses CY 2007 
hospital claims data to calculate the CY 2009 OPPS payment rates, this 
hierarchy was not appropriately reflected in the claims data. These 
commenters were concerned that the new CPT reporting hierarchy altered 
the billing practices of hospitals significantly so that CMS would 
eventually see a difference in costs from claims data and, therefore, a 
transition to a five-level APC structure before these CY 2008 data were 
available would be premature.
    Another commenter also stated that the proposed APCs are 
inconsistent with CPT coding and medical practice, and that the CPT 
codes need to be grouped in a way that represents better clinical 
coherence. Finally, some commenters were concerned that payment for 
certain drug administration services would decline under the proposed 
five-level APC structure.
    Response: 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 was appropriate to propose to reconfigure the 
drug administration APCs for CY 2009 when we first have 1 year of 
hospital claims data for the full range of CPT codes. Our prior 
assignments of newly recognized CPT codes without historical costs from 
hospital claims 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.
    As we noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41503), 
the CY 2009 ratesetting process afforded us the first opportunity to 
examine hospital claims data for the full set of CPT codes implemented 
in CY 2007 for the OPPS that reflect the concepts of initial, 
concurrent, and sequential services. These CPT codes were first 
available to hospitals in CY 2006; however, because of hospital 
concerns regarding incorporating these new concepts into their systems, 
we chose at that time not to implement these codes under the OPPS. This 
provided hospitals with the opportunity to implement these codes for 
non-OPPS payers for CY 2006 and gain experience in their reporting, 
while retaining drug administration billing codes that did not include 
the concepts of initial, concurrent, and sequential services for OPPS 
reporting and payment. Therefore, we had no reason to suspect that 
hospitals would suffer from widespread billing confusion or 
inconsistent reporting of these drug administration codes across 
hospitals. Based on comments we received to our CY 2007 OPPS/ASC 
proposed rule, we believed that hospitals were prepared to fully 
implement these CPT drug administration codes for the CY 2007 OPPS, 
complying fully with the descriptors of the CPT codes. As stated in the 
CY 2007 OPPS/ASC final rule with comment period (71 FR 68116), ``* * * 
commenters responding to our CY 2007 proposed rule * * * noted that the 
operational issues were no longer a primary concern with drug 
administration and coding, and they had gained valuable experience over 
the past year reporting these codes to non-Medicare payers.''
    As we first indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 
41503), and as we are confirming in this final rule with comment 
period, 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 final rule with comment 
period, 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 the single claims used for ratesetting represent a large 
proportion of total hospital claims for most drug administration 
services. Therefore, the CY 2007 hospital claims data essentially 
reflect the second year of hospitals' use of the CPT codes with the 
concepts of initial, concurrent, and sequential services. Although CY 
2007 is only the first year of their use for

[[Page 68673]]

OPPS purposes, hospitals had been using these codes for other payers 
for a full year before they were implemented under the Medicare OPPS. 
As a result, we have no reason to believe that our data should not be 
used for ratesetting purposes. In addition, we note that there have 
been instances in the past for drug administration services where the 
first year of data was used to establish payment rates once it was 
available, such as for the additional hour infusion codes. Furthermore, 
for the above reasons we also believe it is unnecessary to collect an 
additional year of data before restructuring the drug administration 
APCs.
    While commenters correctly observed that the drug administration 
hierarchy for services performed in the facility setting was not in 
place when hospitals implemented the revised CPT codes in CY 2007 and, 
therefore, is not reflected in our claims data for CY 2009 ratesetting 
purposes, it is our belief that the hierarchy detailed reporting 
practices were already commonly being used by the majority of 
hospitals. We do not believe that the hierarchy implemented in CY 2008 
for drug administration services substantially changed hospital billing 
practices in most cases. For these reasons, we continue to believe that 
our hospital claims data for drug administration services provided in 
CY 2007 provide an accurate representation of the costs of these 
hospital services.
    In addition, we believe that our APC groupings are consistent with 
CPT coding and medical practice because all services assigned to the 
drug administration APCs are drug administration services. While the 
specific resources used for different drug administration procedures 
may vary somewhat from CPT code to CPT code, this variation is not 
sufficient to warrant additional APCs for essentially similar services.
    We have performed our standard review of the costs of drug 
administration services based on updated data for this final rule with 
comment period, and we continue to believe that a five-level structure 
for drug administration services is appropriate for CY 2009. Therefore, 
as a result of this analysis and for the reasons discussed above, we 
believe that the proposed five-level drug administration APC structure 
is the most appropriate after examination of the robust set of drug 
administration claims available for CY 2009 ratesetting because the 
proposed structure results in payment groups with greater clinical and 
resource homogeneity. In addition, we do not believe that a crosswalk 
analysis of the cost data to the CY 2008 six-level APC structure is 
pertinent because, for a number of the CPT codes, our APC assignments 
prior to CY 2009 were based only on our estimates of the expected 
procedure costs, and not based on hospitals' actual costs for services 
reported according to the current CPT code descriptors and guidelines.
    Comment: A few commenters expressed specific concern that according 
to the CPT reporting hierarchy implemented for facilities in CY 2008, 
hospital claims data may not accurately represent the resources 
required when a hydration service is actually provided as the first 
service, especially when it is followed by a service, such as an 
injection of a drug, that would be reported as the initial service 
according to the CPT hierarchy.
    Response: During the development of new drug administration codes 
implemented by CPT in CY 2006, the AMA, the creators and maintainers of 
the Level I HCPCS codes (CPT codes), determined that the required 
resources and clinical characteristics of hydration services and 
therapeutic, prophylactic, and diagnostic drug administration services 
were sufficiently distinct to warrant different codes for the first 
hour of infusion and additional hours of infusion for these two types 
of services. Further, the AMA implemented a hierarchy for reporting 
drug administration services in the facility setting where chemotherapy 
services are primary to therapeutic, prophylactic, and diagnostic 
services, which are primary to hydration services. In addition, the 
hierarchy specifies that infusions are considered primary to pushes, 
which are considered primary to injections. Just as the CPT codes are 
under the authority of the AMA, so are these instructions that preface 
the affected CPT codes and, in general, we adopt CPT instructions for 
reporting services under the OPPS. As discussed earlier, although 
reporting according to the hierarchy will first be specifically 
reflected in the CY 2008 OPPS claims data available for the CY 2010 
OPPS update, we believe that the hierarchy detailed reporting practices 
that were already commonly being used by the majority of hospitals. We 
do not believe that the hierarchy implemented in CY 2008 for drug 
administration services substantially changed hospital billing 
practices in most cases, and we believe that our final CY 2009 payment 
rates for these services is appropriate for drug administration CPT 
codes reported in accordance with the specified hierarchy for CY 2009.
    Comment: One commenter requested that CMS reconsider the proposed 
APC assignment of CPT code 90765 (Intravenous infusion, for therapy, 
prophylaxis, or diagnosis, initial, up to one hour), and stated that 
the CPT code median cost is substantially higher than the median cost 
of the APC.
    Response: For the CY 2009 OPPS/ASC proposed rule, we proposed to 
assign CPT code 90765 to APC 0439 (Level IV Drug Administration). The 
proposed code-specific median cost for this service was approximately 
$127, and the proposed median cost for APC 0439 was also approximately 
$127. According to our standard practice, we reevaluate proposed HCPCS 
code assignments between the proposed and final rules after updating 
our data, as discussed in section II.A. of this final rule with comment 
period. For this final rule with comment period, the updated final 
median cost of CPT code 90765 of approximately $126 is the same as the 
APC median cost of approximately $126, and we believe that this is the 
most appropriate APC assignment for this drug administration code.
    Comment: One commenter stated that, under the proposed five-level 
APC structure, a 2 times rule violation appears in APC 0436 (Level I 
Drug Administration). The commenter noted that the proposed median cost 
for CPT code 90779 (Unlisted therapeutic, prophylactic or diagnostic 
intravenous or intra-arterial injection or infusion) was approximately 
$77, while the proposed median cost for APC 0436 was approximately $25. 
The commenter suggested reassigning CPT code 90779 to APC 0438 (Level 
III Drug Administration), with a proposed median cost of approximately 
$74.
    Response: As a matter of established OPPS policy described in the 
CY 2005 OPPS final rule with comment period (69 FR 65724 through 
65725), we assign all unlisted HCPCS codes, such as CPT code 90779, to 
the lowest level APC within the appropriate clinical series. By 
definition, ``unlisted'' or ``not otherwise classified'' codes do not 
describe the services being performed, and the services coded using 
``unlisted'' codes vary over time as new CPT and HCPCS codes are 
developed. Therefore, it is impossible for any level of analysis of 
past hospital data to result in appropriate placement of the service 
for the upcoming year in an APC in which there is clinical integrity of 
the groups and weights. Therefore, we continue to believe that the 
appropriate default, in the absence of a code that describes the 
service being furnished, is placement in the lowest level APC within 
the clinical category in which the unlisted code falls. The assignment 
of the unlisted codes to the lowest level APC in the

[[Page 68674]]

clinical category specified in the code provides a reasonable means for 
interim payment until such time as there is a code that specifically 
describes what is being paid. It encourages the creation of codes where 
appropriate and mitigates against overpayment of services that are not 
clearly identified on the bill. Our assignment of CPT code 90779 to APC 
0436 is consistent with this policy. The hospital cost data for 
unlisted HCPCS codes, including CPT code 90779, are not used for 
ratesetting and, furthermore, the costs of unlisted HCPCS codes are not 
subject to the 2 times rule. For additional information on the 2 times 
rule, we refer readers to sections III.B.2 and 3 of this final rule 
with comment period.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to implement a 
five-level APC structure for drug administration services, with final 
assignment of all HCPCS codes as proposed. Table 34 below displays the 
five finalized APC groups for drug administration services for CY 2009. 
We note that several of the CY 2008 CPT codes for drug administration 
services have been renumbered for CY 2009. We provide both the CY 2008 
CPT codes and the CY 2009 CPT codes, along with the CY 2009 long code 
descriptors, in Table 34 below.
    Comment: Several commenters requested that CMS reconsider the 
proposed packaged status of CPT code 90768 (Intravenous infusion, for 
therapy, prophylaxis, or diagnosis; concurrent infusion). The 
commenters noted that the service described by this code, for which 
hospital claims data are first available in CY 2007, requires 
additional facility resources. They believed that because CMS now has 
claims data upon which to set a specific payment rate for the service, 
the OPPS should pay separately for CPT code 90768 in CY 2009.
    Response: We agree with commenters that this code was first 
introduced in CY 2007 under the OPPS and that we have cost data for 
this CPT code based on historical hospital claims data. However, we 
believe that this code remains appropriate for packaging. As we 
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66787 through 66788), in deciding whether to package a service or pay 
for it separately, we consider 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. CPT code 90768, by definition, is always provided in 
association with other intravenous infusions, and we continue to 
believe that it is most appropriately packaged under the OPPS. 
Furthermore, to reduce the size of the APC payment groups and establish 
separate payment for this currently packaged ancillary and supportive 
service would be inconsistent with our overall strategy to encourage 
hospitals to use resources more efficiently by increasing the size of 
the OPPS payment bundles.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal, without modification, to package 
payment for CPT code 90768 for CY 2009.

                                   Table 34--CY 2009 Drug Administration APCS
----------------------------------------------------------------------------------------------------------------
                                Final CY 2009
                                 approximate    CY 2008 HCPCS   CY 2009 HCPCS
      Final CY 2009 APC          APC median         code            code            CY 2009 long descriptor
                                    cost
----------------------------------------------------------------------------------------------------------------
0436.........................             $24           90471           90471  Immunization administration
                                                                                (includes percutaneous,
                                                                                intradermal, subcutaneous, or
                                                                                intramuscular injections); one
                                                                                vaccine (single or combination
                                                                                vaccine/toxoid).
                                                        90472           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           90473  Immunization administration by
                                                                                intranasal or oral route; one
                                                                                vaccine (single or combination
                                                                                vaccine/toxoid).
                                                        90474           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           96361  Intravenous infusion, hydration;
                                                                                each additional hour (List
                                                                                separately in addition to code
                                                                                for primary procedure).
                                                        90766           96366  Intravenous infusion, for
                                                                                therapy, prophylaxis, or
                                                                                diagnosis (specify substance or
                                                                                drug); each additional hour
                                                                                (List separately in addition to
                                                                                code for primary procedure).
                                                        90771           96371  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           96372  Therapeutic, prophylactic or
                                                                                diagnostic injection (specify
                                                                                substance or drug); subcutaneous
                                                                                or intramuscular.
                                                        90779           96379  Unlisted therapeutic,
                                                                                prophylactic, or diagnostic
                                                                                intravenous or intra-arterial
                                                                                injection or infusion.
                                                        95115           95115  Professional services for
                                                                                allergen immunotherapy not
                                                                                including provision of
                                                                                allergenic extracts; single
                                                                                injection.
                                                        95117           95117  Professional services for
                                                                                allergen immunotherapy not
                                                                                including provision of
                                                                                allergenic extracts; two or more
                                                                                injections.
                                                        95145           95145  Professional services for the
                                                                                supervision of preparation and
                                                                                provision of antigens for
                                                                                allergen immunotherapy (specify
                                                                                number of doses); single
                                                                                stinging insect venom.
                                                        95165           95165  Professional services for the
                                                                                supervision of preparation and
                                                                                provision of antigens for
                                                                                allergen immunotherapy; single
                                                                                or multiple antigens (specify
                                                                                number of doses).

[[Page 68675]]

 
                                                        95170           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           96549  Unlisted chemotherapy procedure.
0437.........................             $35           90767           96367  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           96370  Subcutaneous infusion for therapy
                                                                                or prophylaxis (specify
                                                                                substance or drug); each
                                                                                additional hour (List separately
                                                                                in addition to code for primary
                                                                                procedure).
                                                        90773           96373  Therapeutic, prophylactic, or
                                                                                diagnostic injection (specify
                                                                                substance or drug); intra-
                                                                                arterial.
                                                        90774           96374  Therapeutic, prophylactic, or
                                                                                diagnostic injection (specify
                                                                                substance or drug); intravenous
                                                                                push, single or initial
                                                                                substance/drug.
                                                        90775           96375  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           95144  Professional services for the
                                                                                supervision of preparation and
                                                                                provision of antigens for
                                                                                allergen immunotherapy, single
                                                                                dose vial(s) (specify number of
                                                                                vials).
                                                        95148           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           96401  Chemotherapy administration,
                                                                                subcutaneous or intramuscular;
                                                                                non-hormonal anti-neoplastic.
                                                        96402           96402  Chemotherapy administration,
                                                                                subcutaneous or intramuscular;
                                                                                hormonal anti-neoplastic.
                                                        96405           96405  Chemotherapy administration;
                                                                                intralesional, up to and
                                                                                including 7 lesions.
                                                        96415           96415  Chemotherapy administration,
                                                                                intravenous infusion technique;
                                                                                each additional hour (List
                                                                                separately in addition to code
                                                                                for primary procedure).
0438.........................             $72           90760           96360  Intravenous infusion, hydration;
                                                                                initial, 31 minutes to 1 hour.
                                                        90769           96369  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           95146  Professional services for the
                                                                                supervision of preparation and
                                                                                provision of antigens for
                                                                                allergen immunotherapy (specify
                                                                                number of doses); 2 single
                                                                                stinging insect venoms.
                                                        95147           95147  Professional services for the
                                                                                supervision of preparation and
                                                                                provision of antigens for
                                                                                allergen immunotherapy (specify
                                                                                number of doses); 3 single
                                                                                stinging insect venoms.
                                                        96406           96406  Chemotherapy administration;
                                                                                intralesional, more than 7
                                                                                lesions.
                                                        96411           96411  Chemotherapy administration;
                                                                                intravenous, push technique,
                                                                                each additional substance/drug
                                                                                (List separately in addition to
                                                                                code for primary procedure).
                                                        96417           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           96423  Chemotherapy administration,
                                                                                intra-arterial; infusion
                                                                                technique, each additional hour
                                                                                (List separately in addition to
                                                                                code for primary procedure).
0439.........................            $126           90765           96365  Intravenous infusion, for
                                                                                therapy, prophylaxis, or
                                                                                diagnosis (specify substance or
                                                                                drug); initial, up to 1 hour.
                                                        95149           95149  Professional services for the
                                                                                supervision of preparation and
                                                                                provision of antigens for
                                                                                allergen immunotherapy (specify
                                                                                number of doses); 5 single
                                                                                stinging insect venoms.
                                                        96409           96409  Chemotherapy administration;
                                                                                intravenous, push technique,
                                                                                single or initial substance/
                                                                                drug.
                                                        96420           96420  Chemotherapy administration,
                                                                                intra-arterial; push technique.
                                                        96522           96522  Refilling and maintenance of
                                                                                implantable pump or reservoir
                                                                                for drug delivery, systemic
                                                                                (e.g., intravenous, intra-
                                                                                arterial).
                                                        96542           96542  Chemotherapy injection,
                                                                                subarachnoid or intraventricular
                                                                                via subcutaneous reservoir,
                                                                                single or multiple agents.
0440.........................            $184           95990           95990  Refilling and maintenance of
                                                                                implantable pump or reservoir
                                                                                for drug delivery, spinal
                                                                                (intrathecal, epidural) or brain
                                                                                (intraventricular).
                                                        95991           95991  Refilling and maintenance of
                                                                                implantable pump or reservoir
                                                                                for drug delivery, spinal
                                                                                (intrathecal, epidural) or brain
                                                                                (intraventricular); administered
                                                                                by physician.
                                                        96413           96413  Chemotherapy administration,
                                                                                intravenous infusion technique;
                                                                                up to 1 hour, single or initial
                                                                                substance/drug.

[[Page 68676]]

 
                                                        96416           96416  Chemotherapy administration,
                                                                                intravenous infusion technique;
                                                                                initiation of prolonged
                                                                                chemotherapy infusion (more than
                                                                                8 hours), requiring use of a
                                                                                portable or implantable pump.
                                                        96422           96422  Chemotherapy administration,
                                                                                intra-arterial; infusion
                                                                                technique, up to 1 hour.
                                                        96425           96425  Chemotherapy administration,
                                                                                intra-arterial; infusion
                                                                                technique, initiation of
                                                                                prolonged infusion (more than 8
                                                                                hours), requiring the use of a
                                                                                portable or implantable pump.
                                                        96440           96440  Chemotherapy administration into
                                                                                pleural cavity, requiring and
                                                                                including thoracentesis.
                                                        96445           96445  Chemotherapy administration into
                                                                                peritoneal cavity, requiring and
                                                                                including peritoneocentesis.
                                                        96450           96450  Chemotherapy administration, into
                                                                                CNS (e.g., intrathecal),
                                                                                requiring and including spinal
                                                                                puncture.
                                                        96521           96521  Refilling and maintenance of
                                                                                portable pump.
                                                        C8957           C8957  Intravenous infusion for therapy/
                                                                                diagnosis; initiation of
                                                                                prolonged infusion (more than
                                                                                eight hours), requiring use of
                                                                                portable or implantable pump.
----------------------------------------------------------------------------------------------------------------

IX. 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 
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.7.f. of this final rule with comment period 
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 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 35. As we stated in the proposed rule 
(73 FR 41506), we are not changing the visit HCPCS codes that hospitals 
report for CY 2009.

Table 35--CY 2009 CPT E/M and Level II HCPCS Codes Used To Report Clinic
       and Emergency Department Visits and Critical Care Services
------------------------------------------------------------------------
      CY 2009 HCPCS code                   CY 2009 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).
------------------------------------------------------------------------

[[Page 68677]]

 
                 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 adopted all 
three of these recommendations and provided frequency and cost data 
related to these services at the August 2008 APC Panel meeting. During 
its August 2008 meeting, the APC Panel requested, for review by the APC 
Panel at the next CY 2009 APC Panel meeting, an analysis of CY 2008 
claims data for clinic visits, Type A and Type B emergency department 
visits, and extended assessment and management composite APCs. The APC 
Panel also recommended that the work of the Visits and Observation 
Subcommittee continue. We are adopting these recommendations.
    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 final rule 
with comment period.

B. 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 
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

[[Page 68678]]

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 that 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, as we stated in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41507), we did not propose this approach for 
reporting CPT codes for clinic visits 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 was 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, as we stated in the proposed rule (73 FR 41507), 
we did not propose 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 the options described above but did not propose to 
adopt these three alternatives for CY 2009. Instead, we proposed to 
modify the definitions of ``new'' and ``established'' patients as they 
apply to hospital outpatient visits. Specifically, the meanings of 
``new'' and ``established'' patients would pertain to whether or not 
the patient has been registered as an inpatient or outpatient of the 
hospital within the past 3 years. Under this proposed modification, 
hospitals would not need to determine the specific clinic where the 
patient was previously treated because the modified definition would 
not rely upon when the medical record was initially created but rather 
would depend upon whether the individual has been registered as a 
hospital inpatient or outpatient within the previous 3 years.
    In addition, hospitals would also not need to determine when the 
medical record was initially created. If the patient has been 
registered as an inpatient or outpatient of the hospital within the 
past 3 years, that patient is considered an ``established'' patient to 
the hospital. If a patient has been 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 considered 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 may be ``new'' to the physician but an ``established'' 
patient to the hospital. The opposite would 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 modified definition of new and established 
patients 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 modified definition, thereby 
providing appropriate payment for new and established clinic visits for 
all five levels until CY 2009 claims data reflecting the refined 
definitions would be available for CY 2011 ratesetting. We expect only 
minimal cost differences for clinic visits based on these proposed new 
definitions established for CY 2009. We invited the public to 
specifically comment on the proposed modified definitions of new and 
established patients under the OPPS.
    Comment: Most commenters supported the first alternative described 
above and requested that CMS eliminate the need for hospitals to 
distinguish between new and established patient visits because of the 
administrative difficulty in determining the correct visit type. 
Specifically, these commenters suggested that hospitals bill an 
appropriate visit code, based on the resources expended in the visit at 
a level determined by the hospitals' internal reporting guidelines, 
without distinguishing whether the patient is new or established. 
Several commenters requested that we adopt the APC Panel's March 2007 
recommendation, as related to visits. Specifically, the APC Panel 
recommended at that time that CMS eliminate the ``new'' and 
``established'' patient distinctions in the reporting of hospital 
clinic visits. During its discussion, the APC Panel suggested that 
hospitals bill the appropriate level clinic visit code according to the 
resources expended while treating the beneficiary, based on each 
hospital's internal guidelines. The APC Panel also suggested that each 
hospital's internal guidelines reflect resource cost differences (if a 
difference exists) between new and established patients.
    Several commenters suggested that CMS change the status of the new 
patient visit CPT codes to nonpayable and require hospitals to bill the 
established patient visit codes exclusively. One commenter acknowledged 
the payment difference between new and established patient visits but 
noted that its hospital system chose to bill all visits as established 
patients because of the administrative burden associated with 
determining whether a patient is new or established. Other commenters 
suggested that CMS require hospitals to bill the new patient visit 
codes exclusively, particularly in urgent care clinics, claiming that 
the patients' previous encounters are rarely relevant to future visits. 
Another commenter noted that resource efficiencies that exist when 
treating an established patient do not pertain in the HOPD in the same 
way as they apply to the physician's office.
    If CMS were to finalize a policy that required hospitals to bill 
only one type of visit code for a given visit level, several commenters 
suggested setting

[[Page 68679]]

the payment rate for the reportable visit code at a blend of the new 
and established patient visit rates for that level. Several commenters 
believed that, under both the current and proposed definitions for new 
and established patients, it is difficult for mid-sized hospitals and 
impossible for small hospitals to determine whether a patient visit 
should be reported with the new or established patient visit code. Many 
commenters suggested that the AMA create hospital-specific Category I 
CPT visit codes that do not distinguish between new and established 
patient visits, as appropriate for reporting hospital resource use. 
These commenters indicated that it would be most appropriate for the 
AMA to create these hospital-specific visit codes following 
implementation of national visit guidelines. Other commenters requested 
the creation of Level II HCPCS G-codes for reporting clinic visits, 
noting that implementation of national guidelines does not appear to be 
imminent, and that HCPCS G-codes would solve the immediate problem.
    While most commenters recommended that CMS eliminate the 
distinction between new and established patient visits, other 
commenters supported the proposed definitions for new and established 
patients. Some commenters supported the general proposal to refine the 
definition of a new patient under the OPPS, but suggested that the 3 
year window was too long because significant changes can occur in a 
patient's medical history that would not be reflected in a medical 
record that had not been updated for 3 years. Other commenters noted a 
preference for reporting visits without distinguishing between new and 
established patient visits, but stated that if it was necessary to 
distinguish between new and established patient visits, the proposed 
refinement to the definition of a new patient was an improvement from 
the previous definition.
    One commenter suggested that CMS finalize another one of the 
alternatives discussed above and 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.
    Response: Because hospitals will be reporting CPT codes for CY 2009 
and we continue to observe significant cost differences between new and 
established patient visits of the same level, we will continue to 
recognize new and established patient visit codes under the CY 2009 
OPPS, consistent with their CPT code descriptors. We agree with the 
commenters that it could be less burdensome from a coding perspective 
if hospitals only needed to report one set of codes, rather than 
continuing to distinguish between new and established patient visits. 
However, we do not believe that this would pay most appropriately and 
accurately for new and established visits at all five levels based on 
the costs that have been reported to us by hospitals for these 
services. For CY 2009, hospitals should continue to distinguish between 
new and established patient visits, consistent with their CPT code 
descriptors, in order to receive appropriate payment for these services 
and so that accurate claims data are available for future OPPS 
ratesetting. While we acknowledge that some hospitals may prefer HCPCS 
G-codes rather than continuing to distinguish between new and 
established patient visits in reporting CPT codes, we are reluctant to 
again consider establishing HCPCS G-codes, particularly in the absence 
of national guidelines, based on past comments we have received to 
prior proposed rules. Furthermore, public comments we have received to 
the CY 2009 OPPS/ASC proposed rule and prior proposed rules on the 
establishment of Level II HCPCS codes for services other than visits 
generally have reflected a strong general preference on the part of 
commenters for OPPS' use of CPT codes rather than Level II HCPCS codes.
    The majority of commenters who expressed an opinion about the 
definitions of new and established patients, if we were to continue to 
recognize a distinction, believed that the proposed new and established 
patient definitions would be easier to apply than the current 
definitions. While we are continuing to recognize the CPT codes for new 
and established patient visits, we are interested in minimizing the 
administrative reporting burden of hospitals, while continuing to 
capture resource differences between new and established patient visits 
of the same level. Therefore, we believe that adopting our proposed 
modifications to these definitions is the most desirable approach for 
CY 2009.
    Comment: One commenter asked whether the new and established 
patient definitions apply to CPT codes other than CPT codes 99201 
through 99205 and CPT codes 99211 through 99215. Specifically, the 
commenter questioned whether the definitions would apply to CPT codes 
99605 (Medication therapy management service(s) provided by a 
pharmacist, individual, face-to-face with patient, with assessment and 
intervention if provided; initial 15 minutes, new patient) and 99606 
(Medication therapy management service(s) provided by a pharmacist, 
individual, face-to-face with patient, with assessment and intervention 
if provided; initial 15 minutes, established patient).
    Response: CPT codes 99605 and 99606 are assigned status indicator 
``E'' under the OPPS, indicating that they are not payable under the 
OPPS and should not be reported on OPPS claims. If a hospital provided 
medication therapy management services described by the CPT codes as 
part of a clinic visit, emergency department visit, or a procedure, 
that visit or procedure would be reportable, and the medication therapy 
management services provided as part of that service would be covered 
by Medicare, but would not be separately payable. For a complete 
discussion of these codes, we refer readers to the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68061). The discussion relates to 
CPT codes 0115T through 0117T, which were the predecessor codes to CPT 
codes 99605 through 99607.
    In general, however, the new and established patient definitions 
for CY 2009 would also apply under the OPPS to payable CPT codes other 
than CPT codes 99201 through 99205 and 99211 through 99215 that 
distinguish between new and established patients unless we have 
specifically provided different instructions regarding the reporting of 
those codes.
    After consideration of the public comments received, and for the 
reasons explained in this section, we are finalizing our CY 2009 
proposal, without modification, to change the definitions of new and 
established patients as they relate to reporting hospital outpatient 
visits under the OPPS. Specifically, beginning in CY 2009, the meanings 
of ``new'' and ``established'' patients pertain to whether or not the 
patient has been registered as an inpatient or outpatient of the 
hospital within the past 3 years. A patient who has been registered as 
an inpatient or outpatient of the hospital within the 3 years prior to 
the visit would be considered to be an established patient for that 
visit, while a patient who has not been registered as an inpatient or 
outpatient of the hospital within the 3 years prior to the visit would 
be considered to be a new patient for that visit.
    As discussed further in section II.A.2.e.(1) of this final rule 
with comment period and consistent with our CY 2008 policy, when 
calculating the median costs for the clinic visit APCs (0604 through 
0608), we will

[[Page 68680]]

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 will 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 final rule with comment 
period, 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 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 HCPCS

[[Page 68681]]

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 HCPCS 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 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 HCPCS 
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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41509), we summarized 
the CY 2007 proposed rule cost data available for the CY 2009 
ratesetting for the Type B emergency department HCPCS codes G0380 
through G0384. Based on those 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.
    As stated in the CY 2009 OPPS/ASC proposed rule (73 FR 41509), we 
performed additional data analyses to gather more information to 
support 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 resembled 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 were less than the median costs of Type A emergency department 
visits for all but the level 5 visit, and that the observed differences 
were 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 in this section, 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 indicated in 
the CY 2009 OPPS/ASC proposed rule (73 FR 41509) that we would continue 
to perform additional analyses to monitor patterns of billing and costs 
of these services 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 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 the Type B emergency 
department visits, based on the resource costs of the Type B emergency 
department visits that are reflected in claims data.
    In accordance with the APC Panel's assessment, we proposed to 
establish the payment for Type B emergency department visits in CY 2009 
consistent with their median costs, although our proposal did not fully 
adopt the APC Panel's recommended payment configuration. Specifically, 
we proposed to establish payment for 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). In addition, for CY 2009, we proposed 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. 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,

[[Page 68682]]

2, 3, and 4 Type A emergency department visits, we proposed to modify 
the titles of the current APCs for these visits to incorporate Type A 
in their names. We proposed the following titles: 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 proposed 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.
    During its August 2008 meeting, the APC Panel recommended that CMS 
adopt the proposed APC assignments and payment rates for Type A and 
Type B emergency department visits for CY 2009.
    The median costs using final rule data 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 36 below.

 Table 36--Comparison of Median Costs for Clinic Visit APCs, Type B Emergency Department Visit HCPCS Codes, and
                                           Type A Emergency Visit APCs
----------------------------------------------------------------------------------------------------------------
                                                                                   Final CY 2009
                                                                                      type B       Final CY 2009
                                                                   Final CY 2009     emergency        type A
                           Visit level                             clinic visit     department       emergency
                                                                    APC median      visit HCPCS      visit APC
                                                                       cost        code-specific    median cost
                                                                                    median cost
----------------------------------------------------------------------------------------------------------------
Level 1.........................................................             $53             $44             $51
Level 2.........................................................              67              60              84
Level 3.........................................................              88              87             134
Level 4.........................................................             111             156             213
Level 5.........................................................             158             313             317
----------------------------------------------------------------------------------------------------------------

    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.
    Table 37 below displays the APC median costs for each level of Type 
B emergency department visits using CY 2007 final rule data, under our 
proposed CY 2009 configuration.

 Table 37--CY 2009 Type B Emergency Department Visit APC Assignments and
                              Median Costs
------------------------------------------------------------------------
                                                           Final CY 2009
 Type B emergency department visit level   Final CY 2009    APC median
                                          APC assignment       cost
------------------------------------------------------------------------
Level 1.................................            0626             $44
Level 2.................................            0627              60
Level 3.................................            0628              87
Level 4.................................            0629             156
Level 5.................................            0616             317
------------------------------------------------------------------------

    For the CY 2009 OPPS, we also proposed to include HCPCS code G0384 
in the criteria that determine eligibility for payment of composite APC 
8003 (Level II Extended Assessment and Management Composite).
    Comment: The commenters overwhelmingly supported the payment 
proposal related to Type B emergency department visits. One commenter 
specifically commended CMS for systematically creating HCPCS codes for 
Type B emergency department visits with the specific goal of measuring 
resource cost data to determine appropriate payment rates. While most 
commenters believed it was appropriate to assign HCPCS code G0384 
(Level 5 Type B emergency visit) to APC 0616 (Level 5 Emergency Visit), 
thereby paying the level 5 Type B emergency department visit at the 
same rate as the level 5 Type A emergency department visit, several 
commenters requested that CMS assign HCPCS code G0384 to its own Type B 
emergency department APC. Other commenters requested that CMS instruct 
hospitals to set charges that specifically reflect resource use for 
Type B emergency department visits, whether provided in a separate area 
of the hospital, at an off-site location, or in a ``carved-out'' 
section of the main emergency department. Some commenters noted their 
surprise that hours of operation would lead to cost differences between 
Type A and Type B emergency department visits at most levels, 
particularly because level 5 emergency department visits in both Type A 
and Type B emergency departments have similar costs. One

[[Page 68683]]

commenter suggested that CMS should determine the true cause of cost 
differences between Type A and Type B emergency department visits. Many 
commenters recommended that CMS continue to monitor data and propose 
future payment changes as necessary. One commenter hypothesized that 
Type B emergency department visit costs would grow more similar to Type 
A emergency department visit costs than clinic visit costs over time. 
Another commenter noted that hospitals are still becoming familiar with 
the relatively new Type B emergency department visit HCPCS codes so CMS 
should perform similar analyses next year, using an additional year of 
data.
    Response: We agree with the commenters that it would be appropriate 
and informative to update our analyses of the cost data related to Type 
A and Type B emergency department visits in preparation for the CY 2010 
rulemaking, and periodically thereafter, to determine whether a 
modified APC configuration would be appropriate. This is, in fact, our 
regular practice in the course of the annual rulemaking cycle for all 
OPPS services. In addition, we will specifically analyze the Type B 
emergency department visit level distributions when an additional year 
of data are available, and regularly thereafter. We do not expect to 
see significant increases in the proportion of high level Type B 
emergency department visits as a result of the final CY 2009 payment 
policy for these visits, which pays more for these visits in CY 2009 
than in CY 2008.
    For CY 2009, we do not believe it is necessary to assign HCPCS code 
G0384 (Level 5 Type B emergency visit) to its own APC rather than 
assigning it to APC 0616 with the level 5 Type A emergency visit CPT 
code as proposed. 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. We also believe that level 5 emergency 
department visits to Type A and Type B emergency departments are 
clinically similar as well, so that the two HCPCS codes are most 
appropriately assigned to the same clinical APC. As always, we 
encourage hospitals to set charges that specifically reflect resource 
use for all services provided, including Type A and Type B emergency 
department visits.
    We continue to believe that an emergency department's hours of 
operation and associated available capacity contribute significantly to 
the cost differences between levels 1 through 4 Type A and Type B 
emergency department visits. We acknowledge that the costs of the level 
5 emergency department visits in both the Type A and Type B emergency 
department settings are comparable, and we attribute this to the very 
significant hospital resources that are often used to care for the 
sickest patients in the emergency department. We also note that level 5 
Type B emergency department visits account for less than 2 percent of 
total Type B emergency department visits, while level 5 Type A 
emergency department visits account for over 12 percent of total Type A 
emergency department visits, suggesting that for these intensive visits 
Type B emergency departments may be less able to benefit from 
efficiencies that may result from the proportionately higher volumes of 
lower level services in Type B emergency departments.
    Comment: Some commenters are still concerned about the definition 
of a Type B emergency department and offered various suggestions for 
refining the definition. Most of these commenters requested that CMS 
adjust the policy to broaden the definition of Type A emergency 
departments, specifically to revise the rule that hospitals must carve 
out portions of the emergency department that are not available 24 
hours a day. The commenters specifically requested that the definition 
be adjusted so that a ``fast track'' area of an emergency department, 
located within the same building as a Type A emergency department, 
would be considered Type A, regardless of its hours of operation, if it 
provides unscheduled emergency services and shares a common patient 
registration system with the Type A emergency department. These 
commenters also recommended that CMS analyze whether cost differences 
between Type A and Type B emergency departments result from varying 
contractor criteria as to what defines a Type A and Type B emergency 
department. One commenter suggested that we restrict the billing of 
Type B emergency department visit codes to emergency departments whose 
``host provider'' is classified as a Type A emergency department.
    Response: We consider the main distinguishing feature between Type 
A and Type B emergency departments to be the full-time versus part-time 
availability of staffed areas for emergency medical care, not the 
process of care or the site of care (on the hospital's main campus or 
offsite). We continue to believe, and as our CY 2007 claims data 
reflect, emergency departments or areas of the emergency department 
that are available less than 24 hours a day for visits of lower 
intensity have lower resource costs than emergency departments or areas 
of the emergency department that are available 24 hours a day. We have 
gathered 2 years of cost data based on the current definition and do 
not believe a policy change in the reporting of these Type A and Type B 
emergency department codes would be appropriate for CY 2009. In 
addition, if our Type A emergency department payments provide support 
for 24 hours a day, 7 days per week availability of services, then 
visits provided in areas of the hospital that are not staffed 24 hours 
a day could be overpaid if we were to redefine these services as Type A 
emergency department visits. This could also have the effect of 
diluting, and ultimately decreasing, the median resource costs 
associated with visits to Type A emergency departments.
    As recommended by several commenters, we studied the cost 
differences between Type A and Type B emergency department visits by 
Medicare contractor. There were 43 contractors who handled claims from 
hospitals that reported both Type A and Type B emergency department 
visits. Our analyses revealed a distribution of visits costs as 
expected, including generally lower Type B emergency department visit 
costs in comparison with Type A emergency department visits, and 
increasing costs for Type B emergency department visits from levels 1 
through 5, similar to the cost increases we observed for levels 1 
through 5 Type A emergency department visits. There were several 
contractors with more unusual cost distributions for Type B emergency 
department visits, such as relatively similar costs across levels 1 
through 5 visits for Type B emergency department visits, and we will 
continue to monitor these distributions in future years. While there 
are some limitations to our claims data, including that this is the 
first year of claims for the Type B emergency department visit HCPCS G-
codes, that there are relatively small numbers of claims for Type B 
emergency department visits from CY 2007, and that certain hospitals 
began transitioning from fiscal intermediaries to MACs during CY 2007 
and, therefore, may have received different contractor instructions 
during the claims year, overall, we have no reason to believe that the 
cost differences between Type A and Type B emergency departments 
evident in our aggregate OPPS claims data result from varying 
contractor criteria as to what defines Type A and Type B emergency 
departments. At this

[[Page 68684]]

time, we see no reason to modify our reporting instructions for Type A 
and Type B emergency department visits for CY 2009, and we see no 
evidence from the claims data available to date of markedly different 
interpretations of our national reporting instructions by Medicare 
contractors.
    Comment: Several commenters expressed disappointment that CMS 
created Level II HCPCS G-codes for reporting Type B emergency 
department visits, an act which they believe is inconsistent with 
previous statements made by CMS that new codes would not replace 
existing CPT codes until national guidelines were implemented.
    Response: We acknowledge that there may be some administrative 
burden for providers to bill HCPCS G-codes to report visits provided in 
Type B emergency departments rather than CPT codes. We first 
established these Level II HCPCS codes in CY 2007 and we will continue 
their use for the third year, in CY 2009. In this case, because current 
CPT emergency visit codes do not describe services provided in Type B 
emergency departments, we saw no alternative other than to create HCPCS 
G-codes in order to collect cost information specific to these Type B 
emergency department visits that would allow us to consider payment 
other than at the clinic visit rates which would have resulted from the 
continued reporting of these visits as clinic visits. In response to 
commenters past concerns about HCPCS G-codes, we have previously stated 
(71 FR 68127) that we would postpone implementing HCPCS G-codes for 
clinic and Type A emergency department visits until national guidelines 
have been established. At such time, we will again consider their 
possible utility.
    Comment: Many commenters supported CMS' proposal to include HCPCS 
code G0384 in the criteria that determine eligibility for payment of 
the Level II Extended Assessment and Management Composite APC 8003.
    Response: We are pleased that the commenters support the proposal 
to include HCPCS code G0384 as part of the criteria for payment of APC 
8003. We believe that it is appropriate to provide payment of composite 
APC 8003 in those cases of an intensive level 5 Type B emergency 
department visit in association with 8 or more hours of observation 
care, when the other criteria for payment of composite APC 8003 are 
met. This parallels our treatment of CPT code 99285 for hospital 
reporting of level 5 Type B emergency department visits and payment of 
composite APC 8003.
    We refer readers to section II.A.2.e.(1) of this final rule with 
comment period for further discussion related to the extended 
assessment and management composite APCs. As discussed in detail in 
section II.A.2.e.(1) of this final rule with comment period 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 are utilizing 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 results in the most accurate cost estimates for APCs 0609 
through 0616 and 0626 through 0629 for CY 2009.
    In summary, for CY 2009, we are finalizing our CY 2009 proposal, 
without modification, and adopting the August 2008 APC Panel 
recommendation to assign levels 1 through 4 Type B emergency department 
visits to their own APCs and to assign the level 5 Type B emergency 
department visit to the same APC as the level 5 Type A emergency 
department visit. Furthermore, we are also finalizing our CY 2009 
proposal to include HCPCS code G0384 for reporting level 5 Type B 
emergency department visits as part of the criteria for payment of the 
Level II Extended Assessment and Management Composite APC 8003.
3. Visit Reporting Guidelines
    As described in section IX.A. of this final rule with comment 
period, 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 section 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, 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 stated our belief 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 the CY 2009 OPPS/ASC 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

[[Page 68685]]

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 
encouraging hospitals to continue to report visits during CY 2009 
according to their own internal hospital guidelines.
    In the absence of national guidelines, we will 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 finalized 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 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.
    In addition, we note our continued expectation that hospitals' 
internal guidelines will 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).
    Comment: Several commenters noted that they are eagerly awaiting 
implementation of national guidelines, particularly because of the 
various problems that they believe exist due to the lack of national 
guidelines. Some of these commenters noted that some Medicare 
contractors use their own auditing methods rather than reviewing each 
hospital's internal guidelines while conducting medical review. These 
commenters requested that CMS require contractors to apply a hospital's 
internal guidelines while performing medical review. Another commenter 
performed extensive review on a large sample of hospital emergency 
department visits to determine whether the distributions seen in this 
sample resembled the distribution described by CMS and printed in the 
CY 2008 OPPS/ASC final rule with comment period (72 FR 66804). The 
commenter explained that the results are similar to those of CMS at the 
national level, but that emergency departments have increased the 
proportion of level 4 and 5 emergency department visits in recent 
years, and that several outlier providers are billing significantly 
higher level visits than expected based on their geographic location 
and hospital type. Therefore, the commenter concluded that national 
guidelines would yield more accurate payment and would benefit all 
parties involved. The commenter also did not believe that all 
hospitals' internal guidelines fully comply with all the principles 
articulated by CMS. Other commenters supported moving cautiously toward 
implementation of national guidelines, acknowledging that 
implementation of national guidelines would create a major burden for 
hospitals. One commenter submitted a set of wound care guidelines for 
review by CMS. Many commenters requested that the AMA create CPT codes 
to report hospital-specific visits, after national guidelines are 
developed.
    A few commenters recommended that, in the absence of national 
guidelines, CMS provide additional guidance relating to the specific 
services that should be included or bundled into the visit codes. One 
commenter specifically asked CMS to clarify what services are included 
in the reporting of critical care.
    Response: We acknowledge that it would be desirable to many 
hospitals to have national guidelines. However, we also understand that 
it would be disruptive and administratively burdensome to other 
hospitals that have successfully adopted internal guidelines to 
implement any new set of national guidelines while we address the 
problems that would be inevitable in the case of any new set of 
guidelines that would be applied by thousands of hospitals. As noted in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66806), we 
encourage fiscal intermediaries and MACs to review a hospital's 
internal guidelines when an audit occurs. We appreciate the visit level 
distribution analysis provided to us by one commenter and note that in 
the absence of national guidelines, we will 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 plan to specifically analyze the Type B emergency 
department distributions when additional years of data are available. 
We do not expect to see significant increases in volume for high level 
Type B emergency department visits as a result of the CY 2009 payment 
policy for these visits, which pays more for these visits in CY 2009 
than in CY 2008. In addition, we reiterate our expectation that 
hospitals' internal guidelines fully comply with the principles listed 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 68805). 
We appreciate receiving the set of wound care guidelines and will take 
these into consideration as we pursue implementation of national 
guidelines. We agree with the commenter that it is unlikely that one 
set of guidelines could be applied to visits to all HOPDs of the 
hospital, including specialty clinics.
    Regarding the public comments requesting clarification of services 
that should be included or bundled into visit codes, hospitals should 
separately report all HCPCS codes in accordance with correct coding 
principles, CPT code descriptions, and any additional CMS guidance, 
when available. Specifically with respect to CPT code 99291 (Critical 
care, evaluation and management of the critically ill or critically 
injured patient; first 30-74 minutes), hospitals must follow the CPT 
instructions related to reporting that CPT code. Any services that CPT 
indicates are included in the reporting of CPT code 99291 should not be 
billed separately by the hospital. In establishing payment rates for 
visits, CMS packages the costs of certain items and services separately 
reported by HCPCS codes into payment for visits according to the 
standard OPPS methodology for packaging costs as outlined in sections 
II.A.2. and II.A.4. of this final rule with comment period.
    Correct reporting by hospitals ensures the integrity of our CMS 
cost data. CMS developed the National Correct Coding Initiative (NCCI) 
to promote national correct coding methodologies and to prevent 
improper coding that could lead to inappropriate Part B payments. 
Medicare contractors implement NCCI edits in their systems for purposes 
of physician payment, and a subset of NCCI edits, commonly referred to 
as CCI edits, is incorporated into the I/OCE for claims processed 
through that system. While CMS currently applies CCI edits for many 
services under the OPPS but has temporarily suspended the application 
of certain edits for a period of time to allow hospitals to incorporate 
coding for these types of services in

[[Page 68686]]

their systems, CMS plans to soon apply all appropriate CCI edits for 
purposes of hospital reporting.
    We refer readers to the July 2008 OPPS quarterly update, 
Transmittal 1536, Change Request 6094, issued on June 19, 2008, for 
further clarification about the reporting of CPT codes for hospital 
outpatient services paid under the OPPS. In that transmittal, we note 
that while CPT codes generally are created to describe and report 
physician services, they are also used by other providers/suppliers to 
describe and report services that they provide. Therefore, the CPT code 
descriptors do not necessarily reflect the facility component of a 
service furnished by the hospital. Some CPT code descriptors include 
reference to a physician performing a service. For OPPS purposes, 
unless indicated otherwise, the usage of the term ``physician'' does 
not restrict the reporting of the code or application of related 
policies to physicians only, but applies to all practitioners, 
hospitals, providers, or suppliers eligible to bill the relevant CPT 
codes pursuant to applicable portions of the Act, the CFR, and the 
Medicare rules. In cases where there are separate codes for the 
technical component, professional component, and/or complete procedure, 
hospitals should report the code that represents the technical 
component for their facility services. If there is no separate 
technical component code for the service, hospitals should report the 
code that represents the complete procedure. Consistent with past input 
we have received from many hospitals, hospital associations, the APC 
Panel, and others, we will continue to utilize CPT codes for reporting 
services under the OPPS whenever possible to minimize hospitals' 
reporting burden. If the AMA were to create facility-specific CPT codes 
for reporting visits provided in HOPDs, we would certainly consider 
such codes for OPPS use.
    Comment: One commenter asked whether it was appropriate for a 
hospital to bill a visit code under the OPPS for care provided to a 
registered outpatient if the patient was not seen by a physician.
    Response: Under the OPPS, unless indicated otherwise, we do not 
specify the type of hospital staff (for example, nurses or pharmacists) 
who may provide services in hospitals because the OPPS only makes 
payments for services provided incident to physicians' services. 
Hospitals providing services incident to physicians' services may 
choose a variety of staffing configurations to provide those services, 
taking into account other relevant factors such as State and local laws 
and hospital policies.
    Billing a visit code in addition to another service merely because 
the patient interacted with hospital staff or spent time in a room for 
that service is inappropriate. A hospital may bill a visit code based 
on the hospital's own coding guidelines which must reasonably relate 
the intensity of hospital resources to different levels of HCPCS codes. 
Services furnished must be medically necessary and documented.
    Comment: Several commenters requested that CMS allow hospitals to 
bill critical care with a minimum time requirement of 15 minutes rather 
than the current 30 minute time requirement. The commenters noted that 
the hospital may have its greatest resource use in the first 10 minutes 
of critical care which is much earlier than the 30 minute minimum 
required in the CPT code descriptor.
    Response: The CPT instructions for reporting of critical care 
services with CPT code 99291 (Critical care, evaluation and management 
of the critically ill or critically injured patient; first 30-74 
minutes) and the CPT code descriptor specify that the code can only be 
billed if 30 minutes or more of critical care services are provided. 
Because hospitals will be reporting CPT codes for critical care 
services for CY 2009, they must continue to provide a minimum of 30 
minutes of critical care services in order to bill CPT code 99291, 
according to the CPT code descriptor and CPT instructions. We note that 
hospitals can report the appropriate clinic or emergency department 
visit code consistent with their internal guidelines if fewer than 30 
minutes of critical care is provided.
    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 will 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. 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 HOPD 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 final rule with comment period and in the CY 2004 
OPPS final rule with comment period (68 FR 63470), we also believe that 
some CMHCs manipulated their charges in order to inappropriately 
receive outlier payments.
    In the CY 2005 OPPS update, which was based on CY 2003 data, the 
CMHC median per diem cost was $310, the hospital-based PHP median per 
diem

[[Page 68687]]

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, which was 
based on CY 2004 data, 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 have covered 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 15-percent 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 of the 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 was computed from both hospital-based and CMHC PHP data, 
was $172.
    For the prior 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 believed the data reflect the level of cost for the type 
of services that were 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.)
    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 believed the data reflected the level of 
cost for the type of services that were 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 were multiple days of care entered on a claim, a 
unique cost was computed for each day of care. We only assigned costs 
for line items on days when a payment was made. All of these costs were 
then arrayed from lowest to highest and the middle value of the array 
was considered 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 might not have reflected 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 
final rule with comment period (72 FR 66673), we believed this payment 
amount would give the providers an opportunity to increase the 
intensity of their programs and maintain

[[Page 68688]]

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.

B. 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).
    As discussed in the CY 2009 OPPS/ASC proposed rule (73 FR 41513), 
we have updated this analysis using updated CY 2007 claims and found 
that the results and trends have continued for CMHCs. In fact, there 
are even more days with less than 4 units of service provided in CMHCs; 
however, there are 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 29 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 of 
service. 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               $174               $148
Days with 3 units......................................                139                157                139
Days with 4 units or more..............................                172                200                174
----------------------------------------------------------------------------------------------------------------

    Using updated 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 $148. Using the updated CY 2007 data, the trends 
noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41513) have 
continued. The updated CY 2007 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 ($174). Medians for claims containing 4 or more 
units of service are $200 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, $157 for hospital-based PHPs, and 
$139 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 only 3 units 
of service should represent the number of services provided in a 
typical day. Our intention was to cover days that consisted of 3 units 
of service only in certain limited circumstances. For example, as we 
noted in the CY 2009 OPPS/ASC proposed rule, we believe 3-service days 
may be appropriate 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 3 units of service in a day is when a patient 
is required to leave the PHP early for the day due to an unexpected 
medical appointment (73 FR 41513). Therefore, we recognize there may be 
limited circumstances when it is appropriate for PHPs to receive 
payment for days when only 3 units of service are provided. However, as 
we indicated in the CY 2009 OPPS/ASC proposed rule (73 FR 41513), we 
believe that programs that provide 4 or more units of service 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, although there are circumstances when 3 units of 
service provided may be appropriate, in order to reflect our general 
belief that 4 or more units of service more appropriately reflect the 
comprehensive nature of PHP services, for CY 2009, we proposed to 
create two separate APC payment rates for PHP: One for days with three 
services (APC 0172) and one for days with four or more services (APC 
0173). For APC 0172, we proposed to use the median per diem cost for 
CMHC and hospital-based PHP days with 3 units of services ($140). For 
APC 00173, we proposed 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.
    Comment: A number of commenters expressed concern about the 
magnitude of the PHP per diem rate reduction, particularly in light of 
reductions over the past few years (50 percent over 5 years). Many 
commenters believed that a reduction of 14.2 percent for CY 2009 would 
reduce the financial viability of PHP and possibly lead to the closure 
of many PHPs, thus affecting access to this crucial service that serves 
vulnerable populations. In addition, because hospital outpatient mental 
health services paid under the OPPS are capped at the PHP per diem 
rate, many commenters were concerned about overall access to outpatient 
mental health treatment. The majority of the commenters requested that 
CMS adjust the rate upward or freeze the PHP per diem rate at the CY 
2008 level. Some commenters suggested leaving Level II services at the 
current rate, but reduce the rate for the Level I PHP services as 
proposed.
    Several commenters requested that CMS withdraw the provisions 
pertaining to the proposal to create two separate APCs. The commenters 
stated that the split mechanism could encourage providers to provide 
patients with fewer services. Other commenters supported creation of a 
Level I PHP day,

[[Page 68689]]

stating that the two-tier payment proposal is good but does not go far 
enough to promote service intensity and continued access to their 
important services.
    Many of the commenters supported the creation of two separate APC 
payment rates for PHPs based on the number of units of service provided 
to a patient per day but recommended that CMS use only hospital-based 
PHP data to determine the rates at which PHP services will be paid in 
hospital-based settings. These commenters believed that hospital-based 
data are reliable, predictable, and national in scope.
    The commenters pointed out that while the aggregate number of PHP 
service providers has remained relatively stable over time, the number 
of hospital-based PHPs has dropped by 16 percent, while the number of 
CMHC PHPs has increased by 53 percent (with the majority of new CMHCs 
located in Florida, Louisiana, and Texas). The commenters reported that 
80 percent of the States have two or more hospital programs, and only 
30 percent of the States have more than one CMHC. The commenters 
believed that it is also important to note that the number of rural 
hospital-based PHPs has declined during the 2003-2006 period by 47 
percent.
    Response: After consideration of the public comments received on 
the two-tiered payment approach, we have decided to retain the two-
tiered payment approach in order to provide PHPs scheduling flexibility 
to ensure that patients receive at least 20 hours of therapeutic 
services per week and to reflect the lower costs of a less intensive 
day. Although we do not expect Level I days to be frequent, we do 
recognize that there are times when a patient may need a less intensive 
day. Therefore, we recognize the need for a two-tiered payment system: 
One payment for those less intensive days with three services and 
another payment for those more intensive days with four or more 
services. We believe that were a PHP to provide only Level I days to a 
patient, it would be difficult for the patient to meet the eligibility 
criteria in 42 CFR 410.43 requiring a minimum of 20 hours of service 
per week (discussed later in this section).
    We understand the commenters' concerns over the magnitude of the 
PHP per diem rate reduction and the impact the reduction has on the 
payment cap for other hospital outpatient mental health services. We 
also understand the commenters' concerns regarding continued access to 
the PHP benefit, particularly in hospital-based PHPs, which we believe 
are generally providing the mix and quantity of services that should be 
provided under such an intensive program.
    Hospital-only data have been used in the past to set the PHP 
payment rates when the CMHC data were unavailable or too volatile to 
use. This year, using the CMHC data would significantly reduce the 
current rate and negatively impact hospital-based PHPs, resulting 
possibly in reduced access to care. Because hospital-based PHPs are 
geographically diverse, whereas CMHCs are located in only a few States, 
we are concerned that a significant drop in the rate could result in 
hospital-based PHPs closing and leading to possible access problems. In 
addition, using hospital-based PHP data alone results in a Level II 
Partial Hospitalization rate (APC 0173) that is close to the current 
payment level ($203).
    In light of the reasons noted above, we are finalizing the two-
tiered payment rates as proposed, but are instead using hospital-based 
PHP data only to calculate the two per diem payment rates. As we stated 
earlier in this section and in the CY 2009 OPPS/ASC proposed rule, 
although there are circumstances when 3 units of service provided may 
be appropriate, in order to reflect our general belief that 4 or more 
units of service more appropriately indicated the comprehensive nature 
of PHP services, for CY 2009, we are creating two separate APC payment 
rates for PHP: One for days with three services and one for days with 
four or more services. We are finalizing two new APCs for PHP as 
follows:

 
------------------------------------------------------------------------
              APC                      Group title         Per diem rate
------------------------------------------------------------------------
0172...........................  Level I Partial                    $157
                                  Hospitalization (3
                                  services).
0173...........................  Level II Partial                    200
                                  Hospitalization (4 or
                                  more services).
------------------------------------------------------------------------

    For APC 0172, we are using the median per diem cost for hospital-
based PHP days with 3 units of services ($157). For APC 00173, we are 
using the median per diem cost for hospital-based PHP days with 4 or 
more units of service ($200). These payment rates are derived from 
hospital-based PHP claims, and represent the median cost of providing 
PHP services for the unit of services described. We believe that 
creating a rate specific to days with three services is consistent with 
our policy 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 final rule with comment 
period. Creating two separate PHP rates provides a lower payment for 
days with only 3 units of services, while not penalizing programs that 
provide four or more units of service by excluding days with 3 units of 
service in the computation of APC 0173. As we stated in the CY 2009 
OPPS/ASC proposed rule, we believe this two-tiered approach 
appropriately balances our concern that a PHP is an intensive program 
and should generally consist of 5 to 6 units of service, with the 
realization that there may be certain appropriate circumstances where 3 
units of service may be provided in a day.
    As the PHP rates are applied to both CMHC and hospital-based PHPs, 
we would prefer to use both hospital-based PHP and CMHC data in 
computing the PHP rates. The changes we are making with respect to the 
PHP benefit, providing a two-tiered payment approach, clarifying 
eligibility criteria and denying payment for low intensity days, are 
expected to create more comparable programs in terms of the number of 
units furnished in a typical day for both CMHCs and hospitals. We 
believe that these efforts also will reduce the difference in the 
median cost per day in these two settings over time and CMHC data will 
be available for future ratesetting.
    Comment: A few commenters requested that CMS further consider 
separate payment rates for PHP provided in CMHCs versus hospital-based 
programs, given the significant difference in costs for providing those 
services in the two settings. The commenters suggested that CMS 
establish a total of four distinct rates based upon claim data. The 
commenters gave the following example: CMHC--Level I 3 services, $139; 
CMHC--Level II 4 or more services, $171; HB--Level

[[Page 68690]]

I 3 services, $151 and; HB--Level II 4 or more services, $205.
    Response: We appreciate this comment, and we continue to evaluate 
ways to better reflect the costs in providing PHP services.
    Comment: A few commenters disagreed with the CMS approach to 
establishing the median per diem cost by summarizing the line-item 
costs on each bill and dividing by the number of days on the bills. The 
commenters indicated that this calculation can severely dilute the rate 
and penalize providers. The commenters stated that all programs are 
strongly encouraged by the fiscal intermediaries to submit all PHP 
service days on claims, even when the patient receives less than 3 
units of service. The commenters were concerned that programs are only 
paid their per diem when 3 or more qualified units of service are 
presented for a day of service. The commenters stated that if only 1 or 
2 units of service are assigned a cost and the day is divided into the 
aggregate data, the cost per day is significantly compromised and 
diluted. They claimed that even days that are paid but only have 3 
units of service dilute the cost factors on the calculations.
    One commenter suggested that the CMS' methodology is flawed because 
it does not reflect actual costs. One commenter expressed the view that 
the CMS methodology for rate calculations using CCRs does not fairly 
reflect the actual costs of the providers. The commenter stated that, 
with the change to per diem payment in 2000, the CCRs do not have the 
same influence on services that they did under cost-based 
reimbursement. The commenter noted that, other than the reporting in 
the cost reports, the charge factor has no bearing on the services. The 
commenter believed that, regardless of the charge, payment is still 
made at the established rate influenced only by the wage index. The 
commenter stated that the higher the ``charge'' established by the 
provider and reported in the cost report, the lower the proportionate 
rate of cost is assigned by CMS when calculating the costs to determine 
the median cost rates. The commenter stated that hospitals and CMHCs 
can drastically influence the rates innocently, by the identification 
of the charge per service assigned to the particular intervention. The 
commenter mentioned that providers have unknowingly hurt their own 
programs by raising their identified charges for a service, as this 
lowers the percentage of the applicable ratio when applied to the claim 
services. The commenter stated that the charges themselves have no 
bearing whatsoever on the delivery or provision of the services.
    Response: We expect that a provider's charges will reflect the 
level of services provided, which has a relationship to the cost of 
providing those services. In Medicare cost reporting, the total charges 
are to be reported along with the provider's cost. To the extent that a 
provider is submitting bills that have charges that do not directly 
relate to the delivery or provision of services, their CCRs will be 
unpredictable and would distort the costs of the services provided.
    Moreover, in developing the CY 2009 PHP rates, we excluded days 
that have only 1 or 2 units of service. In addition, we did not include 
days where no payment was made. This resulted in our using data only 
from those days where we believe PHP services were actually provided. 
To calculate the Level I PHP rate, we used days with 3 units of 
service, and to calculate the Level II PHP rate, we used days with 4 or 
more units of service. We believe our methodology accurately reflects 
the median cost of providing these two levels of PHP.
    As discussed in the CY 2008 OPPS final rule with comment period (72 
FR 66671-66672), we have refined our methodology for computing per diem 
costs. We have developed an alternate way to determine median cost by 
computing a separate per diem cost for each day rather than for each 
bill and, in so doing, we believe it more accurately reflects the per 
diem cost of providing PHP services. Under this method, a cost is 
computed separately for each day of PHP care. When there are multiple 
days of care entered on a claim, a unique cost is computed for each day 
of care. We only assign costs for line items on days when a payment is 
made. All of these costs are then arrayed from lowest to highest and 
the middle value of the array would be the median per diem cost.
    We adopted this alternative method of computing PHP per diem median 
cost because we believe it produces a more accurate estimate because 
each day gets an equal weight towards computing the median. This method 
for computing a PHP per diem median cost more accurately reflects the 
costs of a PHP day and uses all available PHP data. In addition, if a 
provider has charges on a bill for which the provider does not receive 
payment, this will be reflected in that provider's CCRs. This lower CCR 
will be applied to the larger charges and will result in the 
appropriate cost per diem.
    Comment: Several commenters asked CMS to analyze the mapping of 
revenue-codes-to-cost centers for CMHCs similar to the analysis CMS 
completed for hospital-based programs and discussed in the CY 2007 
OPPS/ASC final rule with comment period (71 FR 68000). The commenters 
indicated that CMHC PHP services have higher CCRs than the overall CMHC 
CCRs.
    Response: We cannot conduct a revenue code mapping analysis for 
CMHCs because PHP is the CMHCs' only Medicare cost, and CMHCs do not 
have the same cost centers as hospitals. Therefore, for CMHCs, we use 
the overall facility CCR from the Outpatient Provider-Specific File.
    Comment: One commenter stated that two of the PHP codes, activity 
therapy and education and training, are allowed to be performed 
multiple times per day, but only count as one therapy unit, regardless 
of how many sessions are actually provided.
    Response: As we have stated in the past, there is a misconception 
that CMS only counts activity therapy and education and training 
services as one therapy unit, regardless of how many sessions are 
actually performed. We again note that when the PHP per diem is 
calculated, all therapy sessions are counted in the analysis. When we 
established HCPCS code G0176 for activity therapy, we defined the code 
as ``Activity therapy, such as music, dance, art or play therapies not 
for recreation, related to the care and treatment of patient's 
disabling mental problems, per session (45 minutes or more).'' In 
addition, when we established HCPCS code G0177 for education and 
training, we defined the code as ``Training and educational services 
related to the care and treatment of patient's disabling mental health 
problems, per session (45 minutes or more).'' Therefore, when PHPs 
provide and bill for multiple sessions of HCPCS codes G0176 and G0177, 
they are counted as multiple therapy units.
    Comment: Many commenters stated that, as CMS is aware, cost report 
information for CMHCs is not currently included in the Healthcare Cost 
Report Information System (HCRIS) and recommended that CMS base its 
calculations only in the cost report information that the agency can 
verify directly and not on data provided by the fiscal intermediary.
    Response: We understand the commenters' need to have CMHC data 
available through the HCRIS system and are working to include them in 
the system. However, we have no reason to believe the Medicare 
contractors enter incorrect CCRs in the Outpatient Provider Specific 
File.

[[Page 68691]]

    Comment: With respect to the methodology used to establish the PHP 
APC amount, commenters were concerned that data from settled cost 
reports do not include costs reversed on appeal. The commenters stated 
that there are inherent problems in using claims data from a time 
period that is different from that for the CCRs from settled cost 
reports. They indicated that this methodology would artificially lower 
the computed median costs, and that the data used to calculate the PHP 
rate should be revised to include costs that were subsequently allowed. 
The commenters also stated that CMS uses costs that are at least 1 to 3 
years old to project rates 2 years forward and that this approach does 
not accurately reflect the true costs of the providers.
    Response: Since 2000, Medicare has paid for PHP through the OPPS, 
which is not a cost-based reimbursement system. We use the best 
available data in computing the APCs. On January 17, 2003, we issued 
Program Memorandum No. A-03-004 that directed fiscal intermediaries to 
update the CCRs on an ongoing basis whenever a more recent full year 
settled or tentatively settled cost report is available. In this way, 
we minimize the time lag between the CCRs and claims data and continue 
to use the best available data for ratesetting purposes.
    Comment: A few commenters expressed their concern as to why CMS 
continues to state that a day of partial hospitalization should not 
equal the cost of the separate services provided in a non-PHP setting 
or that even a full partial day should not equal the cost of the 
separate services in an outpatient hospital setting. These commenters 
presented two different typical days using proposed CY 2008 rates: 
Typical Day 1 included three group therapy sessions (CPT code 90853, 
APC 0325, 3 x $64.45) and one individual psychotherapy session (CPT 
code 90818, APC 0323, $106.49). The commenter priced Typical Day 1 at 
$299.84. Typical Day 2 included one group therapy session (CPT code 
90853, APC 0325, $64.45), one individual psychotherapy session (CPT 
code 90818, APC 0323, $106.49), and one family therapy session (CPT 
code 90847, APC 0324, $141.61). The commenter priced Typical Day 2 at 
$312.55. Based on the commenter's presented material, the commenter 
stated that the typical days yield an average componentized rate of 
$306. The commenter questioned how CMS can set rates for APCs 0322 
through 0325, but is unable to determine a payment rate for a day that 
is comprised of a minimum of 3 to 4 units of those services. Other 
commenters stated that while CMS requires a minimum of four treatments 
per day to qualify for a day of PHP, the proposed per diem rate of 
$179.88 for PHP is less than what CMS would pay for four group therapy 
sessions.
    Some commenters mentioned variations of using the median cost of 
$62.66 for APC 325 to illustrate the inadequacy of the proposed PHP per 
diem payment of $174.07. One commenter stated that by multiplying 4 
group therapy services by $62.66 yields $250.64, which is more that 
$174.07. Another commenter claimed that CMS pays hospital facilities 
for outpatient services on a per unit basis up to the per diem PHP 
payment. The commenter mentioned that CMS has identified Group Therapy 
APC 0325 with a true median cost of $62.66. The commenter stated that 
the patients involved in outpatient services are participating 1 to 3 
days and generally receive 4 or more units of service on those days. 
The commenter added that while programs are providing 4 or more units 
of service, the per diem limit will only allow them to be ``paid their 
cost'' for about 2.75 units of service (3 x $62.66 = $187.98). The 
commenter stated that the program is $13.91 short for the third service 
and the fourth service and any others are provided with no 
reimbursement.
    Response: We do not believe that it is appropriate to compare the 
partial hospitalization services to separate mental health services. 
The commenter does not use the payment rates for the PHP APCs, that is, 
APCs 0172 and 0173, in its calculations. The payment rates for APC 
services cited by the commenter (APC 0323, APC 0324, and APC 0325) are 
not computed from PHP bills. As stated earlier, we used data from PHPs 
to determine the median cost of a day of PHP. PHP is a program of 
services where savings can be realized by hospitals and CMHCs over 
delivering individual psychotherapy services.
    We structured the PHP APCs (APCs 0172 and 0173) as a per diem 
methodology in which the day of care is the unit that reflects the 
structure and scheduling of PHPs and the composition of the PHP APCs 
consist of the cost of all services provided each day. Although we 
require that each PHP day include a psychotherapy service, we do not 
specify the specific mix of other services provided, and our payment 
methodology reflects the cost per day rather than the cost of each 
service furnished within the day.
    We examined both CMHC and hospital-based PHP data to determine what 
services these programs are providing to their patients. An important 
finding was that the ``typical'' days cited by the commenter are not 
typical days for most CMHCs. For CMHCs, 60 percent of services are 
group psychotherapy (CPT codes 90853 and 90857), 26 percent of services 
are training and education (HCPCS code G0177), 12 percent are activity 
therapy (HCPCS code G0176), and only 1 percent of PHP days included 
individual therapy (brief or extended (CPT code 90816 or 90818)).
    The ``typical'' days cited by the commenter also are not typical 
days for hospital-based PHPs. For hospital-based PHPs, 47 percent of 
services are group psychotherapy (CPT codes 90853 and 90857), 27 
percent of services are training and education (HCPCS code G0177), 16 
percent are activity therapy (HCPCS code G0176), 3 percent are 
occupational therapy (HCPCS code G0129), 2 percent of PHP days include 
brief individual psychotherapy (CPT code 90816), and only 1 percent of 
PHP days include extended individual therapy (CPT code 90818).
    We note that the APCs for training and education (HCPCS code 
G0177), activity therapy (HCPCS code G0176), and occupational therapy 
(HCPCS code G0129) are not separately payable under the OPPS. They are 
packaged services and only payable as part of a PHP day of care. In 
CMHCs, training and education (HCPCS code G0177) and activity therapy 
(HCPCS code G0176) account for 38 percent of PHP services. In hospital-
based PHPs, training and education and activity therapy account for 43 
percent of PHP services. In addition to not being separately payable, 
these services may be provided to patients by less costly staff than 
staff who provide psychotherapy and occupational therapy. Based on the 
mix of services provided on the majority of PHP days, we believe the 
data used for setting the PHP payment appropriately reflect the typical 
PHP day and its costs should not be compared to the costs of providing 
separate services.
    Comment: Several commenters claimed that the costs of CMHCs are 
higher because ``hospitals can share and spread their costs to other 
departments.'' The commenters believed that the CMHC patient acuity 
level is more intense than that for hospital patients because HOPDs 
need only provide one or two therapies, yet still receive the full PHP 
per diem.
    Response: We do not agree that CMHC costs are necessarily higher 
than that of a hospital. CMHCs are required to furnish an array of 
outpatient services, including specialized outpatient services for 
children, elderly persons, individuals with a serious mental illness, 
and residents of its service area

[[Page 68692]]

who have been discharged from inpatient treatment. Accordingly, CMHCs 
have the same ability as hospitals to share costs among its programs as 
needed. Further, we believe hospital costs in some areas, for example, 
capital and 24-hour maintenance costs, greatly exceed comparable CMHC 
costs. Regardless, we believe patient acuity across hospital-based and 
CMHC PHPs should be the same, that is, the patients would otherwise 
require inpatient psychiatric care regardless of setting (section 
1835(a)(2)(F) of the Act).
    Comment: Many commenters expressed concern that the proposed rates 
exclude substantial costs from the providers that should be considered 
for calculating the per diem PHP rates. In summary, the commenters 
stated ``that approximately 2.25 hours of direct services per day are 
provided to Medicare patients that are not billable or do not have 
codes available to bill Medicare.'' The commenters cited as examples: 
100 percent of physician supervision and related overhead expenses; 85 
to 93 percent of all nursing related direct services for physical 
health needs or family education services; 92 percent of case 
management services provided by licensed therapists and other support 
staff; 85 percent of unscheduled crisis intervention services; and 80 
percent of family therapy without the client. Other commenters also 
provided specific examples of indirect services they provide that are 
not reimbursable, such as: assisting in finding housing; accessing 
other health care services; obtaining medications; working through 
issues with family members; providing transportation to medical and 
other appointments; assisting with the information and appointments 
regarding Social Security and Medicare questions; accessing food banks 
and food stamps; obtaining eye and dental services; providing 
occupational therapy, dual diagnosis (conducted by a licensed 
therapist), relaxation, humor, mindfulness, nutrition education (run by 
a registered dietician), pastoral care; and trying to integrate 
volatile/anxious patients into the milieu when they cannot tolerate a 
group process and need one-on-one attention.
    Response: PHP services are specifically defined in section 1861(ff) 
of the Act. Meals and transportation are specifically excluded under 
section 1861(ff)(2)(I) of the Act. While some of the services the 
commenters list are provided in a PHP setting, we only pay for direct 
patient care costs. Other services, such as case management and team 
meetings, would be considered overhead costs and not direct patient 
care costs. All Medicare allowable costs will be included in the cost 
portion of the CCR. By applying this ratio to the billed charges, the 
cost estimate will reflect all allowable costs.
    Comment: Many commenters expressed concern that CMS fails to 
protect rural mental health providers. The commenters claim that there 
is documented evidence, published by CMS, of the special hardships and 
needs of rural providers. They noted that most other rural provider 
types have been recognized for this hardship and have had allowance and 
special provisions to ensure their viability. The commenters requested 
that CMS consider treating CMHCs in an equitable manner to other rural 
provider types. The commenters also mentioned that they reviewed all of 
the documentation available and the impact statement, but found no 
evidence that any small rural providers had been included. The 
commenters wanted to remind CMS that the agency is required by law to 
calculate and disclose the impact of any action on small and rural 
providers. A few commenters specifically mentioned that there were no 
Louisiana CMHCs included in the impact.
    Response: We believe we do take the concerns of rural mental health 
providers into account. Over the last several years, our mitigation of 
rate reductions for PHPs benefits all CMHCs, including rural providers. 
As to the particular treatment of rural providers, we believe the 
commenter may be referring to the statutory hold harmless provisions. 
Section 1833(t)(7)(D) of the Act authorizes such payments, on a 
permanent basis, for children's hospitals and cancer hospitals and, 
through CY 2009, for rural hospitals having 100 or fewer beds and is 
not a SCH, and for SCHs in rural areas. Section 1866(t)(7)(D) of the 
Act does not authorize hold harmless payments to CMHCs. In addition, 
another provision directed at rural providers, section 411 of Public 
Law 108-173 that requires CMS to determine the appropriateness of 
additional payments for certain rural hospitals, does not extend to 
CMHCs.
    In this year's impact table, we included CMHCs in the total count 
of providers, but they are not shown separately. We typically do not 
report a separate impact for CMHCs because they are only paid for one 
service, PHP, under the OPPS, and each CMHC can typically easily 
estimate the impact of payment rate changes by referencing payment for 
PHP in Addendum A to both the proposed rule and this final rule with 
comment period. Because we proposed a CY 2009 policy change to PHP 
payment, we presented separate impacts for CMHCs in Table 45 and 
discussed the impact in section XXI.B.4 in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41558). We have updated this analysis for this 
final rule with comment period. (For additional information, we refer 
readers to section XXIII of this final rule with comment period.)
    Comment: Several commenters requested that CMS support a 
legislative amendment to remove PHP from the APC codes and create an 
independent status similar to home health and then establish a 
reasonable base rate for PHP such as the current 2008 per diem. The 
commenters also recommended that CMS annually adjust the base rate by a 
conservative inflation factor such as the CPI. Other commenters 
suggested establishing a PHP rate calculation task force to develop a 
new rate methodology that captures all relevant data and reflects the 
actual costs to providers to deliver PHP services. The commenter 
recommended that the ratesetting task force be composed of CMS staff 
and a diverse group of stakeholders that includes front-line providers 
of PHP services and representatives from national industry 
organizations.
    Response: As the commenters stated, currently, the statutory 
authority does not provide for a separate payment system for partial 
hospitalization services. Therefore, it would require a statutory 
change to establish an independent payment system for PHPs. In response 
to commenters' request for a PHP rate calculation task force, we do not 
believe an official task force is required, but we continue to support 
an informal process. We have met with industry groups and providers 
numerous times over the years and continue to be open to discussion 
about the partial hospitalization benefit.
    Comment: A few commenters recommended that CMS establish quality 
criteria to judge performance and that would influence future payment 
rates.
    Response: We agree with the commenters that information about the 
status of quality benchmarks and indicators would be useful and we 
encourage providers to submit that information to us. While the 
commenters did not provide any specifics, we would be interested in how 
such a quality program would be structured.
    Comment: A few commenters stated that the wage index adjustment 
does not accurately reflect the cost of labor in areas affected by 
Hurricanes Katrina and Rita. The commenters also pointed out that the 
proposed wage index in

[[Page 68693]]

Louisiana has decreased post-hurricane instead of increasing, which has 
resulted in a much lower payment rate in Louisiana. The commenters 
further stated that the time lag for wage indexing is a huge factor for 
Hurricane Zone providers and that the wage index decrease makes the 
assumption that the cost of labor has actually decreased since the 
hurricanes. Some commenters noted that the lack of facilities and 
trained professionals and inadequate reimbursement will make Louisiana 
worse off now than prior to Hurricanes Katrina and Rita.
    Response: The hospital wage data used to compute the FY 2009 IPPS 
hospital wage index is from the FY 2005 hospital cost reports for all 
hospitals. This is the standard lag timeframe in determining the 
hospital wage index. The FY 2005 data are reflected in the FY 2009 IPPS 
hospital wage index. However, we note that the wage index is a relative 
measure of differences in area hourly wage levels. It compares a labor 
market's average hourly wage to the national average hourly wage. To 
the extent that post-hurricane hospital labor costs are higher relative 
to the national average, the wage index reflects the higher relative 
labor cost beginning with the FY 2005 data that are in the FY 2009 IPPS 
hospital wage index (which will be applied to the CY 2009 OPPS rate 
year). In addition, the statutory authority for the OPPS wage index 
policy in section 1833(t)(2)(D) of the Act requires that the wage 
adjustments be made in a budget neutral manner. Therefore, any increase 
in one wage area factor would need to be budget neutral. Finally, it 
should be noted that CMHCs and hospitals located in Federal Emergency 
Management Agency (FEMA) designated disaster areas received relief 
funds by the Department of Health and Human Services in 2007.
    Comment: One commenter stated that CMS data and per diem payment 
rates are strongly biased by just a few providers. The commenter stated 
that CMS' data identifies 631 providers of partial hospitalization 
services and identifies the overall industry costs at $288 million with 
approximately 1,400,000 days of partial hospitalization services. The 
commenter stated that this suggests an average daily census per program 
of less than 9 patients per day, based on 250 days of services in a 
year. The commenter was aware of only 2 or 3 programs that maintain a 
daily census in PHPs in excess of 50 to 60 per day, some as high as 200 
to 250 per day. The commenter stated that these individual providers 
skew the data and disproportionately influence the calculated rates 
with severe cost advantages that other providers cannot duplicate 
because of economies of scale. The commenter stated that these few high 
volume providers should not set the rates for all providers and should 
be excluded from the rate calculations.
    Response: In response to this comment, we analyzed the cost per day 
for various high volume providers and determined that the high volume 
providers have a cost per day similar to that of smaller, lower volume 
providers. For this reason, although high volume providers may have a 
greater proportion of days used for median rate setting, we do not 
believe that including the data for these providers skews the resulting 
median. Our analysis shows that economies of scale do not appear to 
influence the cost per day for these providers.
    Comment: One commenter expressed concern that the proposed PHP APC 
rate decrease is inconsistent with a response CMS gave to a MedPAC 
recommendation. The commenter claimed that MedPAC recommended that 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. The commenter 
also claimed that CMS' response was that it was 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.
    Response: All APCs under the OPPS receive a market basket increase 
as part of the calculation of the conversion factor. The proposed PHP 
APC rates were based upon standard OPPS ratesetting methodology. 
Barring a decrease due to the quality reporting requirements, we 
anticipate a full market basket increase and not an update of less than 
a full market basket to the OPPS payment rates. The PHP APCs are 
converted to a weight relative to the median cost of a Mid-Level Office 
Visit. The relative weight is multiplied by the conversion factor to 
convert it to a dollar amount. However, there are other factors in the 
conversion factor that may offset the market basket increase. For 
example, the conversion factor includes the wage index and rural budget 
neutrality adjustments, an adjustment for pass-through set asides, 
among others. (We refer readers to section X.D of this final rule with 
comment period for a more detailed discussion of the conversion factor 
update.)
    Comment: One commenter suggested that CMS take a proactive step to 
prevent the duplication of services by CMHCs by implementing a ``Needs 
Assessment'' protocol before allowing centers to be established. The 
commenters stated that these assessments could be used as a way for CMS 
to determine if the establishment of a CMHC is necessary in a certain 
area.
    Response: We believe the commenter is referring to certificate of 
need programs implemented by many States, which is beyond the scope of 
the proposed rule and this final rule with comment period.
    Comment: Several commenters expressed concern that cost report data 
frequently do not reflect bad debt expense for the entire year. The 
commenters were concerned that these costs are not being considered in 
the CMS data and severely shortchange the rate calculations.
    Response: The bad debt policy is outside the scope of the proposed 
rule and this final rule with comment period. We refer the commenter to 
42 CFR 413.89 and the Provider Reimbursement Manual Part I (PRM), 
Chapter 3, concerning our bad debt requirements.
    Comment: One commenter noted that CMS did not respond to previous 
statements from commenters that the industry would welcome 
accreditation rules and/or stricter policies for PHPs.
    Response: We agree with the commenters that this is an area that 
should be addressed, and we are exploring proposing conditions of 
participation for CMHCs to establish minimum standards for patient 
rights, physical environment, staffing, and documentation requirements. 
We believe that adding conditions of participation would contribute to 
more consistency between CMHCs and hospital-based PHPs.
    Comment: One commenter suggested that CMS should consider that 
licensed professionals with a master's degree in psychology to be 
equivalent to those with a master's degree in social work with an LCSW. 
Specifically, the commenter questioned how someone trained in the field 
to conduct therapy is considered less able than a social worker who may 
have had minimal or any clinical training.
    Response: Specific policy related to the qualification or licensure 
requirements of mental health professionals is beyond the scope of the 
proposed rule and this final rule with comment period.

[[Page 68694]]

C. Policy Changes

1. Policy 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 did not receive any 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 
units of PHP services required in a PHP day to be three, it was never 
our intention that three units of service 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 units of service with a break for lunch. As 
indicated in section X.B. of this final rule with comment period, we 
proposed 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 proposed changes to the existing PHP logic portion of the I/OCE 
to require that CMHCs and hospital-based PHPs provide a minimum of 3 
units of service 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 proposed to deny payment for any PHP claims 
for days when fewer than three units of therapeutic services are 
provided. We believe that three units of services should be the minimum 
number of services allowed in a PHP day because a day with one or two 
units of services does not meet the statutory intent of a PHP program. 
Three units of 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 units of services should only occur under certain circumstances. 
As we explained in section X.B. of this final rule with comment period, 
an example of when it may be appropriate to bill only three units of 
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 units of 
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 units of services. As we noted in the 
CY 2009 OPPS/ASC proposed rule (73 FR 41514), we will be observing 
trends and assessing the two payment rate approach in our continued 
review to protect the integrity of the PHP program.
    Comment: Commenters supported CMS' proposal to deny payment for 
``low unit'' days. However, they stated that CMS should contemplate 
that there are rare instances when a patient becomes ill or has a 
family or personal emergency and needs to leave the program early on 
that day; therefore, they receive fewer services. The commenters 
suggested that CMS create a modifier to be used to trigger a 
``suspension of claim for medical review'' and potential payment at a 
reduced rate. Other commenters suggested that CMS continue to pay and 
maintain the current policy of suspending claims for medical review. 
The commenters believed that this is an appropriate way to make payment 
determinations. A few other commenters opposed the idea of denying 
payment; they proposed that CMS pay the fee schedule amount for the one 
or two services.
    Response: While we recognize that special circumstances exist where 
a patient might have to leave a PHP early, we continue to believe that 
days with one or two units of services are inconsistent with a benefit 
designed as a full-day program and substitute for inpatient care. 
Therefore, we do not believe it is appropriate to establish a modifier 
at this time or continue to pay and are maintaining the current policy 
of suspending claims for medical review. In addition, we have codified 
patient eligibility criteria in this final rule with comment period 
that will require a minimum of 20 hours of service per week, which 
strengthens our view that these low intensity days are rare and do not 
represent a normal day, such that payment should be denied. If there 
are legitimate instances when one or two units of service days are 
justified, denial still leaves the provider the option to appeal as 
specified in the Medicare Claims Processing Manual, Pub. 100-04, 
Chapter 30, Section 30.2.2. We will continue to monitor data in the 
future to assess the potential later need for a modifier for such 
claims.
2. Policy 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. In the CY 2009 OPPS/ASC proposed rule (73 FR 41514), we 
proposed 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 proposed 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 proposed 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 proposed to revise 42 CFR 410.43 to add the following 
patient eligibility criteria. We proposed 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

[[Page 68695]]

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.
    As we noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41514), 
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. As reiterated in the CY 2009 OPPS/ASC proposed rule (73 FR 
41514), 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 to help to ensure success. Moreover, 
the safety of all PHP 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 we believed 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 
reflects our longstanding policy and 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.
    Comment: Generally, commenters supported the eligibility 
requirements and their incorporation in the regulations at Sec.  
410.43, with the exception of the requirement that PHPs are intended 
for patients who require 20 hours per week of therapeutic services. A 
few commenters requested that CMS clarify that the list of patient 
eligibility requirements will be used as general requirements or 
guidelines and not as patient-specific requirements with the potential 
to deny coverage of services or payments for individual patients. The 
commenters also indicated that the 20 hours per week requirement, while 
fundamentally sound, is insufficiently refined for inclusion in 
regulation and feared the impact of such a strict requirement on 
patient care. The commenters were concerned that a regulatory provision 
could result in the denial of coverage for services or payments for 
individual patients.
    Some commenters indicated that a guideline of 16 to 20 hours per 
week could accommodate the beneficiary, particularly during the 
transition period following hospital discharge. They stated that 
partial hospitalization is an intensive form of outpatient care 
intended for patients with acute psychiatric illness who could benefit 
from ongoing intensive and structured psychotherapy. The commenters 
also stated that PHP is frequently used as a substitute or a step-down 
from hospital care with the patient being transitioned into a less 
intensive level of care. Other commenters expressed the concern that a 
patient may not be able to participate at the 20 hour per week minimum 
for intense therapy, particularly during the transition period. They 
stated that during the transition, the patient, in addition to 
psychiatric treatment, frequently needs to make and keep appointments 
to resolve physical or social issues. A few commenters also indicated 
that a patient may need an occasional day to acclimate to the rigorous 
demands of the very intensive level of PHP services. They added that 
the transition period either before or after hospitalization may 
frequently warrant clinical discretion and flexibility in patient care 
management.
    Response: We note that the eligibility requirements that we 
proposed to codify in the regulations at Sec.  410.43 are not new, and 
are currently a part of the operational policy that is contained in the 
Medicare Benefits Policy Manual, Pub. 100-02, Chapter 6, Section 70.3.
    We understand commenters' concerns about the 20 hours per week 
requirement with regard to scheduling flexibility, but we are concerned 
that if we reduce the minimum number of hours lower than the current 
guideline, the low end of the range will become the new minimum. 
Therefore, instead of reducing the number of hours a patient needs in 
order to be eligible to receive the benefit, in this final rule with 
comment period, we are clarifying that the patient eligibility 
requirement that patients require 20 hours of therapeutic services is 
evidenced in a patient's plan of care rather than in the actual hours 
of therapeutic services a patient receives. The intent of this 
eligibility requirement is that for most weeks we expect attendance 
conforming to the patient's plan of care. We recognize that there may 
be times at the beginning (or end) of a patient's transition into (or 
out of) a PHP where the patient may not receive 20 hours of therapeutic 
services. For example, if a patient begins treatment on a Wednesday and 
receives services for the remainder of that week (Thursday and Friday), 
that patient's first week may not include 20 hours of therapeutic 
services. However, we expect that for generally all weeks the PHP 
patients are receiving the amount and type of services identified in 
the plan of care.
    Therefore, we are finalizing our proposal, with the clarification 
noted above, the patient eligibility criteria at 42 CFR 410.43 as 
follows:
    Partial hospitalization programs are intended for patients who--
    (1) Require a minimum of 20 hours per week of therapeutic services 
as evidenced in their plan of care;
    (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 did not receive any public comments on our proposal 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 in accordance with a 
physician certification and plan of care. Therefore, we are finalizing 
the cross-reference change as proposed.
3. Partial Hospitalization Coding Update
    As part of our ongoing evaluation of partial hospitalization codes, 
in the CY 2009 OPPS/ASC proposed rule (73 FR

[[Page 68696]]

41515), we proposed several coding changes. We identified several CPT 
codes that we believed were inappropriate for billing PHP claims. Upon 
further study and after consultation with CMS medical advisors, we 
proposed 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, as 
explained in the CY 2009 OPPS/ASC proposed rule, we believe there are 
similar and more appropriate HCPCS codes to use to bill for these 
services.
    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. In the CY 2009 OPPS/ASC 
proposed rule (73 FR 41515) we noted our belief that CPT code 90846 is 
not an appropriate code for the PHP benefit, because it excludes the 
beneficiary. We further noted that another available PHP code, CPT code 
90847 (Family psychotherapy (conjoint psychotherapy with patient 
present)), which is currently a billable PHP code, is a 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 proposed 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 proposed to eliminate PHP payment for 
CPT code 90899 in CY 2009. In the CY 2009 OPPS/ASC proposed rule (73 FR 
41515), we further noted 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 proposed 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) (now identified as G0410); and GXXX2 (Interactive group 
psychotherapy, in a partial hospitalization setting, approximately 45 
to 50 minutes) (now identified as G0411) (73 FR 41515). As most of the 
current PHP codes already include time estimates, we indicated in the 
CY 2009 OPPS/ASC proposed rule that 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 proposed the two new timed HCPCS G-
codes for PHP group therapies. As we noted in the CY 2009 OPPS/ASC 
proposed rule, both CPT codes 90853 and 90857 may still be used in a 
non-PHP setting.
    Comment: Commenters generally supported the proposed PHP coding 
changes. Other commenters requested CMS to modify the original proposal 
and retain a couple of the codes. For example, the commenters agreed 
with eliminating CPT code 90899 (Unlisted psychiatric service or 
procedure); they believed removal is reasonable as the code is a 
generic code and is often misinterpreted by the payer. However, a few 
commenters opposed the elimination of CPT code 90846 (Family 
psychotherapy (without the patient present)), and suggested that there 
are times when family therapy without the patient is highly therapeutic 
and necessary. The commenters stated discussions with the family on how 
to handle potential volatile topics with the patient present could have 
an adverse effect on the patient's behavior.
    Some commenters agreed with the removal of CPT code 90849 (Multi-
family group psychotherapy). A few other commenters opposed the 
removal, stating that multigroup psychotherapy is especially beneficial 
in cases of addiction, as it impacts the entire family. A few 
commenters requested that CMS not replace the two existing group 
therapy CPT code 90853 and CPT 90857 with the two new timed G-codes 
because they believed that using G-codes may create programming and 
business operational issues and may be administratively burdensome for 
hospitals. The commenters further believed that the use of G-codes is 
not consistent with government and industry goals of data uniformity 
and consistency and, instead, recommended that CMS submit a code 
proposal to the AMA modifying the two existing group psychotherapy CPT 
codes 90853 and 90857 by adding the timed elements in their definitions 
and maintain only one set of codes for these services. Several 
commenters also believed that the new G-codes' time estimates are 
inadequate and requested the codes be extended to 60 to 90 minutes.
    Response: We appreciate the support of the commenters for removal 
of CPT code 90899 and, therefore, are finalizing removal of this code 
from the PHP code set for CY 2009. Although CPT code 90899 will 
continue to be a billable mental health code, it will no longer be 
accepted as a PHP billable code. We also appreciate the commenters' 
support for the use of CPT code 90846 and believe the need for this 
code in specific clinical situations is valuable. While we remain 
concerned about therapy that excludes the patient, we agree that this 
code does have a narrow, although useful, scope. Therefore, CPT code 
90846 will remain a billable PHP code. However, we will be monitoring 
the use of this code to ensure that the frequency of this code does not 
unduly increase.
    We are finalizing the elimination of CPT code 90849 as proposed 
because we continue to believe that this code is not consistent with 
the intent of the statute that PHP treatment be focused on the 
patient's condition. We continue to believe CPT code 90849 focuses the 
service on the needs of the family and does not specifically focus 
therapeutic treatment on an individual patient. Therefore, although it 
will continue to be a billable mental health code, we are

[[Page 68697]]

finalizing our policy that CPT code 90849 will no longer be a PHP 
billable code.
    After consideration of the public comments received concerning the 
creation of the two timed group psychotherapy G-codes, we continue to 
believe that we have a need to create and maintain G-codes when CPT 
codes are not available to meet our needs. Moreover, although we 
generally follow CPT guidelines, there are cases where the CPT system 
does not meet our payer needs for code specificity, payment and 
timeliness of assignment, and thus we assign HCPCS codes for those 
services. We acknowledge that there may be some administrative burden 
for providers to bill G-codes rather than CPT codes. However, we 
proposed to establish these two group therapy G-codes because existing 
CPT group therapy codes do not capture the time component that the 
proposed G-codes do and, therefore, we continue to believe that 
creation of G-codes in order to capture timed group psychotherapy 
visits is necessary. We continue to believe we defined the G-codes 
according to industry standard for group psychotherapy, allowing for 45 
to 50 minutes of therapy with 10 to 15 minutes for documentation. 
Therefore, we are finalizing the proposed G-codes, with final assigned 
numbers as follows: G0410 (Group psychotherapy other than of a 
multiple-family group, in a partial hospitalization setting, 
approximately 45 to 50 minutes) and G0411 (Interactive group 
psychotherapy, in a partial hospitalization setting, approximately 45 
to 50 minutes).
    Lastly, as noted above, while we removed CPT code 90899 from the 
PHP billable code set, we did not intend to replace it with HCPCS code 
G0177 (Training and education services related to the care and 
treatment of patient's disabling mental health problems, per session 
(45 minutes or more)). HCPCS code G0177 is currently a valid HCPCS code 
for PHP and will remain a valid HCPCS code for billing patient 
education and training services in a PHP program. Although HCPCS code 
G0177 is a packaged code, it is the only valid HCPCS under PHP to bill 
patient education and training services. It was during data analysis 
for the CY 2009 OPPS/ASC proposed rule (73 FR 41515) that we observed 
some providers incorrectly billing patient and education services using 
CPT code 90899. To clarify, HCPCS code G0177 is the only valid PHP code 
to bill patient training and education services. We note that HCPCS 
code G0177 may also be used in a non-PHP setting.
    In summary, after consideration of the public comments received, in 
this final rule with comment period, we are modifying the PHP billable 
code set to remove CPT codes 90899, 90853, and 90857 for CY 2009. We 
are retaining CPT code 90846 and adding two new timed G-codes: G0410 
(Group psychotherapy other than of a multiple-family group, in a 
partial hospitalization setting, approximately 45 to 50 minutes) and 
G0411 (Interactive group psychotherapy in a partial hospitalization 
setting, approximately 45 to 50 minutes).
    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 38 below displays the revised list of 
billable PHP revenue codes and HCPCS codes shown in Transmittal 1487. 
This table also includes the four CPT codes that we are removing from 
the PHP code set for CY 2009 and the two new HCPCS G-codes we are 
adding to the PHP code set for CY 2009. The four CPT codes that we are 
removing are shown in the HCPCS code column with a line struck through 
each code. The two new HCPCS G-codes that we are adding are shown in 
the HCPCS code column, in the row with revenue code 0915 (Group 
Therapy). HCPCS code 90846 is shown as retained in the row with revenue 
code 0916 (Family Psychotherapy).
[GRAPHIC] [TIFF OMITTED] TR18NO08.564

D. 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

[[Page 68698]]

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 final rule with comment period, 
for CY 2009, we proposed to continue our policy of setting aside 1.0 
percent of the aggregate total payments under the OPPS for outlier 
payments. We proposed that a portion of that 1.0 percent, an amount 
equal to 0.07 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 final rule with comment period, we 
again proposed to set a dollar threshold in addition to an APC 
multiplier threshold for OPPS outlier payments. However, because the 
PHP 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 did not propose to set a dollar 
threshold for CMHC outliers. As noted in section II.F. of this final 
rule with comment period, we proposed 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.
    Comment: A few commenters indicated that they are in favor of 
eliminating the outlier payments for CMHCs and returning the money in 
order to possibly increase the base for the PHP payments.
    Response: We note that section 1833(t)(5) of the Act requires an 
outlier policy for covered HOPD services. Partial hospitalization 
program services are covered HOPD services. Because CMHCs are a 
provider of PHP services, outlier payments must be provided for them in 
accordance with the statute. Therefore, until the statute is changed to 
eliminate the statutory requirement for outlier payments that will 
affect payment to CMHCs, we are maintaining the current outlier 
threshold for CMHCs. We would anticipate that if the outlier authority 
were removed, all OPPS providers, not just CMHCs, would be affected.
    As discussed in section II.F of this final rule with comment 
period, using more recent data for this final rule with comment period, 
we set the target for hospital outpatient outlier payments at 1.0 
percent of total estimated OPPS payments. We allocated a portion of 
that 1.0 percent, and amount equal to 0.12 percent of outlier payments 
and 0.0012 percent of total estimated OPPS payments to CMHCs for PHP 
outliers. For CY 2009, as proposed, we are setting the outlier 
threshold at 3.40 times the APC amount and CY 2009 outlier percentage 
applicable to costs in excess of the threshold at 50 percent.
    After considering the public comment received, and as noted above, 
we are finalizing our CY 2009 proposal to set a separate outlier 
threshold for CMHCs.

XI. 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 HOPD. 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 underlying physical condition of the 
patient, or the need for at least 24 hours of postoperative recovery 
time or monitoring before the patient can be safely discharged. 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 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 proposed to be paid by Medicare in CY 
2009 only as inpatient procedures were included as Addendum E to the CY 
2009 OPPS/ASC proposed rule.

[[Page 68699]]

B. 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. As discussed in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41517), 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 (eg, 
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 the winter 2009 meeting.
    Following discussion at the March 2008 APC Panel meeting, 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 had been 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 proposed 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, specifically solicited 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 proposed to remove three procedures 
from the inpatient list that commenters on the CY 2008 OPPS/ASC 
proposed rule had requested to be removed. As indicated in the CY 2009 
OPPS/ASC proposed rule (73 FR 41517), we believe that these procedures 
are appropriate for removal from the inpatient list and specifically 
solicited public comment on our proposal to remove the following 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 APC Panel's March 2008 meeting, a meeting 
attendee requested removal of several CPT codes from the inpatient 
list. The attendee's verbal request was followed by written 
correspondence in which the stakeholder requested that we remove five 
additional procedures from the inpatient list for CY 2009. These 
procedures were: 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 proposed to remove one of these procedures 
from the inpatient list, specifically CPT code 54332, and noted that 
effective January 1, 2008, CPT code 50580 was removed from the 
inpatient list and assigned to APC 0161.
    At its August 2008 meeting, the APC Panel recommended that we 
remove three of the procedures that were proposed for removal from the 
inpatient list, CPT codes 50727, 54332, and 54535, and three additional 
procedures that were discussed at the meeting in a public presentation. 
The three additional procedures were CPT codes 51845, 51860, and 54336, 
codes that were first brought to our attention after the March 2008 APC 
Panel meeting in the stakeholder letter discussed earlier in this 
section.
    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, as noted in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41517), we accepted both recommendations of the 
APC Panel from its March 2008 meeting regarding the inpatient list and 
(1) proposed to remove the five specific procedures the APC Panel 
recommended for removal (CPT codes 21172, 21386, 21387, 27479, and 
20660) and (2) sought input from relevant professional societies 
regarding our CY 2009 proposal to remove from the inpatient list CPT 
codes 54535 and 61850.
    Comment: One commenter expressed concerns about the proposed 
removal of CPT codes 27886 and 54535 from the inpatient list. The 
commenter stated that there is uncertainty about whether these 
procedures can be safely performed in an outpatient setting and asked 
that CMS reconsider the proposed removal of these two procedures. 
Another commenter supported the proposed removal of CPT code 54535 from 
the inpatient list.
    A few commenters recommended that CMS not remove CPT code 61850 
from the inpatient list. One of the

[[Page 68700]]

commenters reported that the procedure requires careful observation for 
hemorrhaging, and expressed the opinion that the procedure should be 
performed only on an inpatient basis.
    Response: Because of the concerns raised by the commenters, we 
reevaluated CPT codes 27886, 54535, and 61850 in light of the 
commenters' recommendations combined with our review of updated 
utilization data and the clinical judgment of our medical advisors. For 
CPT codes 27886 and 61850, the updated physician billing data for all 
sites of service indicate that the inpatient utilization for these two 
CPT codes is higher than their outpatient utilization. In addition, as 
noted earlier, a commenter has indicated that there is some degree of 
uncertainty as to whether CPT code 27886 can be performed safely in an 
outpatient setting. With regard to CPT code 61850, the commenters 
contended that this procedure cannot be performed safely on an 
outpatient basis. As stated earlier, one of the commenters indicated 
that there is a risk of hemorrhaging associated with this procedure. 
Therefore, based on our reevaluation of CPT codes 27886 and 61850, we 
agree with the commenters and are not finalizing our proposal to remove 
these two procedures from the inpatient list for CY 2009.
    In reevaluating CPT code 54535 for removal from the inpatient list, 
we took several additional factors into consideration. First, according 
to our updated physician billing utilization data, the outpatient 
utilization for this procedure is somewhat higher than the inpatient 
utilization. Second, when we presented this procedure to the APC Panel 
as a possible candidate for removal from the inpatient list at its 
March 2008 meeting and again at its August 2008 meeting, the APC Panel 
first requested that we seek stakeholder input on removing CPT code 
54535 from the inpatient list at its March meeting and then provided a 
specific recommendation at its August meeting to remove CPT code 54535 
from the inpatient list for CY 2009. Finally, we note that commenters 
were split in their opinion to remove CPT code 54535 from the inpatient 
list, with one commenter concerned about the safety of performing this 
procedure in the outpatient setting while the other commenter supported 
its removal from the inpatient list. Based on our reevaluation of CPT 
code 54535, we continue to believe that this procedure can be safely 
performed in the outpatient setting and we are removing it from the 
inpatient list for CY 2009.
    Comment: One commenter supported CMS' proposal to remove CPT codes 
21386 and 21387 from the inpatient list and requested that CMS also 
remove CPT code 21385 (Open treatment of orbital floor blowout 
fracture; transantral approach (Caldwell-Luc operation)) from the 
inpatient list. The commenter pointed out that it was questionable why 
CMS would propose to remove CPT codes 21386 and 21387 from the 
inpatient list, but not also remove CPT code 21385 from the inpatient 
list for CY 2009.
    Response: We appreciate the commenter's support for our proposal to 
remove CPT codes 21386 and 21387 from the CY 2009 inpatient list. We 
are removing these two procedures from the CY 2009 inpatient list as 
proposed.
    With regard to CPT code 21385, that procedure is not currently on 
the inpatient list. For CY 2008, CPT code 21385 is assigned to APC 0256 
(Level V ENT Procedures). For CY 2009, CPT code 21385 is retained in 
APC 0256, which we have retitled (Level VI ENT Procedures), and to 
which CPT codes 21386 and 21387 are assigned.
    Comment: One commenter requested that CMS remove CPT code 0184T 
(Excision of rectal tumor, transanal endoscopic microsurgical approach 
(i.e., TEMS)) from the inpatient list. The commenter stated that the 
procedure is minimally invasive and is comparable to CPT code 45170 
(Excision of rectal tumor, transanal approach), which is not on the 
inpatient list.
    Response: We consulted with our medical advisors in reevaluating 
CPT code 0184T for removal from the inpatient list. We note that this 
CPT code was implemented on January 1, 2008, and was approved by the 
CPT Editorial Panel in the prior year. When the service was reviewed by 
the CPT Editorial Panel based on a request for a new CPT code, the 
procedure was described as requiring a full thickness excision of the 
rectal wall, with a typical site of service in the inpatient setting 
and not the HOPD. We have no utilization data for this procedure but, 
based on the clinical judgment of our medical advisors and the recent 
deliberations in establishing this new CPT code, we believe that this 
procedure should remain on the inpatient list.
    Comment: One commenter supported CMS' proposal to remove CPT codes 
54332 and 50727 from the inpatient list and further recommended that 
CMS also remove CPT codes 51845, 51860, and 54336 from the inpatient 
list for CY 2009.
    Response: We appreciate the commenter's support. After reevaluating 
these five CPT codes for payment under the OPPS in CY 2009, we continue 
to agree that CPT codes 54332 and 50727 can be appropriately performed 
in the HOPD, consistent with our proposal and the APC Panel's August 
2008 recommendation in support of their removal from the inpatient 
list, and that CPT codes 51845, 51860, and 54336, as recommended by the 
APC Panel in August 2008, can be safely performed on Medicare 
beneficiaries in the outpatient setting. Therefore, for CY 2009, we are 
removing all five of these CPT codes from the inpatient list.
    Comment: Many commenters suggested that CMS eliminate the inpatient 
list and gave several reasons why it should be eliminated. They stated 
that there was inconsistency between the Medicare payment policies for 
hospitals and physicians related to performance of inpatient procedures 
in the HOPD that allows physicians to receive full payment for 
inpatient procedures that are performed on beneficiaries who are not 
inpatients but denies hospitals payment for those same procedures. They 
noted that under, current payment policy, physicians have little 
incentive to avoid providing inpatient procedures to beneficiaries who 
are outpatients. The commenters argued that there are a variety of 
circumstances that result in procedures on the inpatient list being 
performed without an inpatient admission. For example, they explained 
that sometimes during the intraoperative period, due to clinical 
circumstances, the surgeon performs a procedure that is on the 
inpatient list rather than the procedure that was planned. Further, 
they asserted that because the inpatient list changes every year, 
physicians may not always be aware that a particular procedure is on 
the inpatient list. Finally, some commenters contended that the 
decision about whether the beneficiary should be an inpatient for 
surgery should be left to the surgeon and should not be regulated by 
CMS. They pointed out the many safety provisions that are met by 
hospitals participating in the Medicare program as evidence that 
hospitals would provide care safely and appropriately.
    Response: We appreciate the comments and understand the commenters' 
reasons for advocating the elimination of the inpatient list. However, 
we continue to believe that the inpatient list serves an important 
purpose in identifying procedures that cannot be safely and effectively 
provided to Medicare beneficiaries in the HOPD. We are concerned that 
elimination of the inpatient list could result in unsafe or 
uncomfortable care

[[Page 68701]]

for Medicare beneficiaries. Therefore, we are not discontinuing our use 
of the inpatient list at this time.
    In addition to the above concerns about differences in physician 
and hospital outpatient payment policy, hospitals have expressed 
ongoing concerns related to inpatient procedures being performed 
inappropriately for beneficiaries who are not inpatients and that, as a 
result, beneficiaries may be liable for the charges for the services. 
We believe that it is the responsibility of physicians and hospitals to 
know which procedures are on the inpatient list.
    We also are concerned about the potential results of eliminating 
the inpatient list on beneficiary liability. For instance, we are 
concerned that, without the inpatient list, beneficiaries could 
experience longer stays in observation units after some procedures. The 
APC Panel has discussed its concern with extended time in observation 
units, frequently exceeding 24 hours. We know that it is not unusual in 
such cases for the beneficiary to be unaware of his or her outpatient 
status, which typically means he or she incurs higher out-of-pocket 
costs. Moreover, the financial liability for OPPS copayments for 
complex surgical procedures and long periods in the HOPD differs 
significantly from a beneficiary's inpatient cost-sharing 
responsibilities.
    Comment: In addition to requesting elimination of the inpatient 
list, a few commenters suggested that if CMS chooses to maintain the 
list that CMS should establish an appeal process to address those 
circumstances in which OPPS payment for a service provided on an 
outpatient basis is denied because it is on the inpatient list. The 
commenters believed that if CMS maintains the inpatient list that there 
should be a mechanism by which payment could still be made in some 
cases. For instance, commenters suggested an appeal process that would 
allow hospitals to submit information to explain the unusual 
circumstances that necessitated performance of an inpatient procedure 
for a beneficiary who is an outpatient.
    Response: We appreciate the commenters' suggestions. We intend to 
continue to encourage physicians' awareness of the implications for 
beneficiaries and hospitals of performing the inpatient list procedures 
on beneficiaries who are not inpatients. We do not plan to adopt a 
specific appeals process for claims related to inpatient list 
procedures performed in the HOPD at this time. The existing established 
processes for a beneficiary or provider to appeal a specific claim 
remain in effect.
    Comment: One commenter suggested that CMS implement a method by 
which the ancillary services related to unscheduled inpatient 
procedures performed on an outpatient basis could be recognized for 
payment. The commenter asserted that due to hospital billing practices, 
hospital coding staff do not know until well after the surgery is 
complete that an unscheduled inpatient procedure was performed on an 
outpatient who was not admitted as an inpatient. The commenter 
requested that CMS create a modifier that hospitals could append to the 
HCPCS codes for unscheduled inpatient procedures that would enable CMS 
to recognize and pay for the ancillary services associated with them, 
comparable to the -CA modifier that addresses 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.
    Response: We thank the commenter for the suggestion but do not 
believe there is a need for a specific modifier to identify unscheduled 
outpatient performance of inpatient procedures on Medicare 
beneficiaries. We continue to believe that the inpatient list 
procedures are not appropriate for performance in the HOPD, and 
therefore, we expect that when such a procedure is performed on a 
Medicare beneficiary, the patient would be admitted as an inpatient. We 
established payment for ancillary services reported in association with 
an inpatient procedure to which the -CA modifier is appended in order 
to provide payment to hospitals for services provided in those rare 
cases when the patient dies before being admitted as an inpatient. In 
these situations, hospitals are absolutely unable to admit these 
patients. In the circumstances described by the commenter concerning 
unscheduled inpatient procedures in the HOPD, we do not believe it 
would be appropriate to make payment under the OPPS for ancillary 
services that are provided in association with a procedure that we have 
designated as only safe for performance on inpatients, and we see no 
insurmountable hospital barriers to admitting those patients as 
inpatients of the hospital. We understand hospitals' dilemma when the 
decision is made intraoperatively to perform an unscheduled procedure. 
However, we continue to believe that it is very important for hospitals 
to educate physicians on Medicare services paid under the OPPS to avoid 
inadvertently providing services in a hospital outpatient setting that 
would be paid only during an inpatient stay because we believe that the 
HOPD is not an appropriate site of service for the procedures.
    After consideration of the public comments received, we are 
modifying our CY 2009 proposal to remove 12 CPT codes from the 
inpatient list. The final list of 12 procedures that we are removing 
from the inpatient list for CY 2009 is displayed in Table 39 below. The 
table shows each CPT code and the APC to which the procedure is 
assigned for OPPS payment in CY 2009. Also, as stated earlier in this 
section, we will present data regarding CPT codes 20660 and 64818 to 
the APC Panel at its first CY 2009 meeting. Therefore, in this final 
rule with comment period, we are accepting the APC Panel's August 2008 
recommendation to remove CPT codes 51845, 51860, and 54336 from the 
inpatient list for CY 2009. We also are accepting the APC Panel's 
August 2008 recommendation which supported our proposal to remove CPT 
codes 50727, 54332, and 54535 from the inpatient list for CY 2009.

           Table 39--HCPCS Codes Removed From the Inpatient List and Their APC Assignments for CY 2009
----------------------------------------------------------------------------------------------------------------
                                                                                       Final CY 2009   Final CY
               CY 2009 HCPCS Code                       CY 2009 Long descriptor             APC         2009 SI
----------------------------------------------------------------------------------------------------------------
20660...........................................  Application of cranial tongs                  0138          T
                                                   caliper, or stereotactic frame,
                                                   including removal (separate
                                                   procedure).
21172...........................................  Reconstruction superior-lateral               0256          T
                                                   orbital rim and lower forehead,
                                                   advancement or alteration, with
                                                   or without grafts (includes
                                                   obtaining autografts).

[[Page 68702]]

 
21386...........................................  Open treatment of orbital floor               0256          T
                                                   blowout fracture; periorbital
                                                   approach.
21387...........................................  Open treatment of orbital floor               0256          T
                                                   blowout fracture; combined
                                                   approach.
27479...........................................  Arrest, epiphyseal, any method                0050          T
                                                   (eg, epiphysiodesis); combined
                                                   distal femur proximal tibia and
                                                   fibula.
43420...........................................  Closure of esophagostomy or                   0254          T
                                                   fistula; cervical approach.
50727...........................................  Revision of urinary-cutaneous                 0165          T
                                                   anastomosis (any type urostomy).
51845...........................................  Abdomino-vaginal vesical neck                 0202          T
                                                   suspension, with or without
                                                   endoscopic control (eg, Stamey,
                                                   Raz, modified Pereyra).
51860...........................................  Cystorrhaphy, suture of bladder               0162          T
                                                   wound, injury or rupture; simple.
54332...........................................  One stage proximal penile or                  0181          T
                                                   penoscrotal hypospadias repair
                                                   requiring extensive dissection to
                                                   correct chordee and urethroplasty
                                                   by use of skin graft tube and/or
                                                   island flap.
54336...........................................  One stage perineal hypospadias                0181          T
                                                   repair requiring extensive
                                                   dissection to correct chordee and
                                                   urethroplasty by use of skin
                                                   graft tube and/or island flap.
54535...........................................  Orchiectomy, radical, for tumor;              0181          T
                                                   with abdominal exploration.
----------------------------------------------------------------------------------------------------------------

XII. OPPS Nonrecurring Technical and Policy Changes and Clarifications

A. Physician Supervision of HOPD Services

    In the CY 2009 OPPS/ASC proposed rule (73 FR 41518), we provided a 
restatement and clarification of the requirements for physician 
supervision of diagnostic and therapeutic hospital outpatient services 
that were set forth in the April 7, 2000 OPPS final rule with comment 
period (65 FR 18524 through 18526).
    As we stated before, section 1861(s)(2)(C) of the Act authorizes 
payment for diagnostic services that 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 of our 
regulations. 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 in the Physician Fee Schedule Relative Value 
File. The file is updated quarterly and is available on the CMS Web 
site at http://www.cms.hhs.gov/PhysicianFeeSched/.
    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 of our regulations. 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 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 further stated that ``we 
assume the physician supervision requirement is met on hospital 
premises because staff physicians would always be nearby within the 
hospital.''
    As we explained in the CY 2009 OPPS/ASC proposed rule (73 FR 
41519), we restated the existing policy because we were 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

[[Page 68703]]

has been 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) of our regulations 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 to 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 health care 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 quality 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.
    Comment: Several commenters supported the clarification that was 
provided as a clear and warranted safeguard to individuals being served 
in on-campus and off-campus departments of hospitals. One commenter was 
concerned that the restatement and clarification of policy included in 
the proposed rule would interfere with its ability to provide services 
in PHP programs and rural CMHCs and stated that ``the current policy is 
appropriate.'' Another commenter stated that the clarification of 
policy would cause hospitals to incur significant costs and would 
result in physician contractual problems and suggested that CMS conduct 
a study to better understand outpatient settings and the physician 
supervision currently available to them.
    Response: We agree with many of the commenters that appropriate 
supervision is a key aspect of the delivery of safe and high quality 
hospital outpatient services to Medicare beneficiaries. As for the 
concerns of commenters related to hospital staffing and costs, we note 
that the discussion in the CY 2009 OPPS proposed rule was not a 
proposed change in policy but was an intended clarification to assist 
providers who may have misunderstood the policy in the past.
    Comment: One commenter requested clarification about whether a 
nonphysician practitioner can provide supervision of ``incident to'' 
services in the hospital outpatient setting when the ``incident to 
service'' is within the practitioner's scope of practice.
     Response: According to section 1861(r) of the Act, ``[t]he term 
`physician' '', when used in connection with the performance of any 
function or action, means (1) a doctor of medicine or osteopathy 
legally authorized to practice medicine and surgery by the State in 
which he performs such function or action * * *; (2) a doctor of dental 
surgery or of dental medicine * * *; (3) a doctor of podiatric medicine 
* * *; (4) a doctor of optometry * * *; or (5) a chiropractor. In 
addition, the conditions of participation for hospitals under Sec.  
482.12(c)(1)(i) through (c)(1)(vi) of our regulations require that 
every Medicare patient is under the care of a doctor of medicine or 
osteopathy, a doctor of dental surgery or dental medicine, a doctor of 
podiatric medicine, a doctor of optometry, a chiropractor, or a 
clinical psychologist; each practicing within the extent of the Act, 
the Code of Federal Regulations, and State law. Further, Sec.  
482.12(c)(4) of our regulations requires that a doctor of medicine or 
osteopathy must be responsible for the care of each Medicare patient 
with respect to any medical or psychiatric condition that is present on 
admission or develops during hospitalization and is not specifically 
within the scope of practice of one of the other practitioners listed 
in Sec.  482.12(c)(1)(ii) through (c)(1)(vi). Also, 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 of our regulations. Section 410.27(a)(1)(ii) describes 
payment for hospital outpatient services when they are ``an integral 
though incidental part of a physician's services.'' Also, Sec.  
410.27(f) requires that hospital outpatient services provided in

[[Page 68704]]

provider-based departments must be under the direct supervision of a 
physician. Direct supervision is defined in this paragraph: ``Direct 
supervision means 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. 
It does not mean that the physician must be present in the room when 
the procedure is performed.'' The language of the statute and 
regulations does not include other nonphysician practitioners. 
Therefore, it would not be in accordance with the law and regulations 
for a nonphysician practitioner to be providing the physician 
supervision in a provider-based department, even if a nurse 
practitioner's or a physician assistant's professional service was 
being billed as a nurse practitioner or a physician assistant service 
and not a physician service.
     Comment: One commenter requested clarification of the supervision 
required for diagnostic services provided in a department of a hospital 
that is located on the hospital campus.
     Response: As explained above, Sec.  410.28(e) of our regulations 
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).'' We also explained that we have continued to follow the 
supervision requirements for individual diagnostic tests as listed in 
the Physician Fee Schedule Relative Value File, updated quarterly and 
maintained on the CMS Web site as shown above. For diagnostic services 
not listed in the MPFS, Medicare contractors, in consultation with 
their medical directors, would define appropriate supervision levels in 
order to determine whether claims for these services are reasonable and 
necessary. Section 410.28(e) does not distinguish between on-campus and 
off-campus provider-based departments. Therefore, all provider-based 
departments providing diagnostic services, whether on or off the 
hospital's main campus, should follow the requirements of the MPFS or 
their Medicare contractor, as appropriate, for individual diagnostic 
services.
     Comment: Several commenters provided specific hypothetical 
scenarios related to the location of the physician and asked whether 
these situations would meet the definition of direct supervision. One 
commenter asked for further clarification regarding the supervision 
level required for specific services.
     Response: As stated above and in the CY 2009 OPPS/ASC proposed 
rule, we require direct supervision for therapeutic services provided 
in the hospital or in provider-based departments of the hospital. For 
diagnostic services furnished in provider-based departments, the MPFS 
level of supervision is applied or the Medicare contractor determines 
the level of supervision required for services not listed in the MPFS. 
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 further clarified that ``on the 
premises of the location'' means that the physician must be present on 
the premises of the entity accorded status as a department of the 
hospital. This means that the physician must be present in the 
provider-based department. As we explained in the April 7, 2000 final 
rule with comment period (65 FR 18526), the direct supervision 
requirement for provider-based departments of hospitals was taken from 
and parallels the definition of direct supervision in Sec.  
410.32(b)(3)(ii), which requires that the physician must be present in 
the office suite.
     Comment: A number of commenters requested that CMS change the 
level of physician supervision listed in the MPFS for CPT code 77421 
(Stereoscopic X-Ray guidance for localization of target volume for the 
delivery of radiation therapy) from personal supervision to direct 
supervision.
     Response: Changes to supervision requirements for specific CPT 
codes under the MPFS are outside of the scope of this CY 2009 OPPS/ASC 
final rule with comment period. We have referred these comments to the 
appropriate CMS component and would encourage individuals to work with 
the appropriate specialty society to bring future requests to CMS' 
attention.
    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 do expect 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. 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 microscopic examination by a pathologist, in the CY 2009 
OPPS/ASC proposed rule (73 FR 41519 through 41520), we proposed to 
recognize four new more specific Level II HCPCS G-codes under the CY 
2009 OPPS for these pathology services, consistent with the CY 2009 
proposal for the MPFS. The proposed HCPCS codes were: 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 stated in the CY 2009 OPPS/ASC proposed rule (73 
FR 41520), that we believe that the descriptors of these proposed HCPCS 
G-codes more specifically reflect the

[[Page 68705]]

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 proposed to assign these four new HCPCS G-codes to APC 
0343 with a proposed APC median cost of approximately $35. We 
specifically solicited public comment on the appropriateness of 
recognizing these proposed new HCPCS G-codes under the OPPS and their 
proposed APC assignments especially 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.
     Comment: One commenter opposed the proposal to utilize HCPCS G-
codes to report pathology services for prostate saturation biopsy and 
requested that CMS seek CPT codes for these services in order to avoid 
coding confusion and the administrative burden of having two code sets 
for the same service. Another commenter supported the creation of HCPCS 
G-codes for services involving the examination of more than 21 core 
samples, but stated that a HCPCS G-code for 20 or fewer samples would 
be unnecessary and confusing because it would be highly unlikely that a 
saturation biopsy would be performed to obtain less than 20 specimens. 
This latter commenter stated that a pathologist would not know whether 
core samples came from a sextant biopsy versus a saturation biopsy and, 
therefore, would not know whether to report the proposed HCPCS code 
GXXX1 or CPT code 88305. The commenter recommended that CPT code 88305 
be used for saturation biopsy to report the examination of up to 20 
core samples and the following HCPCS G-codes be used to report the 
examination of more than 20 core samples: GXXX1 (21-40 specimens); 
GXXX2 (41-60 specimens); and GXXX3 (greater than 60 specimens). The 
commenter also opposed the proposed assignment of all of the HCPCS G-
codes to APC 0343 because the commenter was unclear as to how the 
proposed payment rate of $35 was calculated. The commenter also 
believed that CMS did not provide information about whether there would 
be increased payment for each successive level of specimen samples.
     Response: We continue to believe that it is important to pay more 
appropriately for the pathology services associated with examination of 
core samples obtained during prostate saturation biopsy. No new CPT 
codes are being implemented to describe these services for CY 2009. 
Therefore, we believe that the creation of Level II HPCPCS codes, as we 
proposed, is essential to providing more appropriate payment for the 
services in the short term and to collecting claims data that reflect 
hospitals' costs for the services for future OPPS ratesetting. In 
contrast to the perspective of one commenter, we believe that, in 
uncommon cases, prostate saturation biopsy may result in 20 or fewer 
core samples for examination and that, in such cases, we would expect 
the hospital resources to differ from the hospital resources required 
to provide CPT code 88305. Therefore, we are finalizing the creation of 
the proposed four new more specific Level II HCPCS G-codes under the 
OPPS for these pathology services, consistent with the CY 2009 final 
payment policy for the MPFS. As stated in the CY 2009 OPPS/ASC proposed 
rule (73 FR 41519 through 41520), we believe the proposed descriptors 
of these HCPCS G-codes more specifically reflect the characteristics of 
prostate saturation biopsy pathology services so that reporting will 
result in more accurate cost data for OPPS ratesetting and, ultimately, 
more appropriate payment.
    In considering the commenter's concerns related to the proposed APC 
assignments for the HCPCS G-codes, we took into account the 
characteristics of the prostate saturation biopsy pathology services, 
including typical cases and typical complexity of the pathology review, 
and we examined the OPPS claims data available for CPT code 88305 and 
related surgical pathology services. Furthermore, we explicitly 
assessed the expected incremental hospital resource costs associated 
with examination of an increasing number of core samples. Based on 
these analyses and review of the public comments, we concluded that all 
four HCPCS G-codes are more appropriately assigned to New Technology 
APCs under the OPPS because there are no established clinical APCs that 
we believe are appropriate based on consideration of the clinical 
characteristics and expected hospital resources costs of the services 
described by the HCPCS G-codes. As discussed further in section III.C. 
of this final rule with comment period, we maintain new services in New 
Technology APCs until we have sufficient data to reassign them to 
appropriate clinical APCs.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal to recognize four new HCPCS G-codes for 
pathology services associated with prostate saturation biopsy, 
specifically HCPCS codes G0416 (Surgical pathology, gross and 
microscopic examination for prostate needle saturation biopsy sampling, 
1-20 specimens); G0417 (Surgical pathology, gross and microscopic 
examination for prostate needle saturation biopsy sampling 21-40 
specimens); G0418 (Surgical pathology, gross and microscopic 
examination for prostate needle saturation biopsy sampling, 41-60 
specimens); and G0419 (Surgical pathology, gross and microscopic 
examination for prostate needle saturation biopsy sampling, greater 
than 60 specimens). CPT code 88305 will continue to be recognized under 
the OPPS for those surgical pathology services unrelated to prostate 
saturation biopsy. CPT code 88305 will also continue to be assigned to 
APC 0343, with a final CY 2009 median cost of approximately $34.
    We are not adopting our proposal to assign these four HCPCS G-codes 
to APC 0343. Instead, in this final rule with comment period, we are 
assigning these HCPCS G-codes to four different New Technology APCs for 
CY 2009. For the CY 2009 OPPS, HCPCS code G0416 is assigned to APC 1505 
(New Technology--Level V ($300-400)), with a CY 2009 final payment rate 
of approximately $350; HCPCS code G0417 is assigned to APC 1507 (New 
Technology--Level VII ($500-600)), with a CY 2009 final payment rate of 
approximately $550; HCPCS code G0418 is assigned to APC 1511 (New 
Technology--Level XI ($900-1000)), with a CY 2009 final payment rate of 
approximately $950; and HCPCS code G0419 is assigned to APC 1513 (New 
Technology--Level XIII ($1,100-1,200)), with a CY 2009 final payment 
rate of approximately $1,150. Payment for these services is made at the 
midpoint of each New Technology APC cost band. Furthermore, each of 
these New Technology APCs has a status indicator of ``S,'' indicating 
that there is no discount when multiple significant procedures are 
provided on the same day to a single Medicare beneficiary. Because the 
four HCPCS G-codes are new for CY 2009, we are assigning comment 
indicator ``NI'' in Addendum B to this final rule with comment

[[Page 68706]]

period, indicating that their CY 2009 interim OPPS treatment is open to 
public comment in this final rule with comment period.

C. Changes to the Initial Preventive Physical Examination (IPPE)

    In order to implement section 101(b) of the MIPPA, beginning 
January 1, 2009, we will pay for an IPPE performed not later than 12 
months after the date of the beneficiary's initial enrollment in 
Medicare Part B. Any beneficiary who has not yet had an IPPE and whose 
initial enrollment in Medicare began in CY 2008 will be able to have an 
IPPE in CY 2009, as long as it is done within 12 months of the 
beneficiary's initial enrollment. We will pay for one IPPE for each 
beneficiary in a lifetime. The Medicare deductible does not apply to 
the IPPE if it is performed on or after January 1, 2009. Providers paid 
under the OPPS will report IPPE visits occurring on or after January 1, 
2009, using new HCPCS code G0402 (Initial preventive physical 
examination; face-to-face visit, services limited to new beneficiary 
during the first 12 months of Medicare enrollment). HCPCS code G0344 
(Initial preventive physical examination; face-to-face visit, services 
limited to new beneficiary during the first 6 months of Medicare 
enrollment) will be active until December 31, 2008 for beneficiaries 
who have the IPPE prior to January 1, 2009.
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue the 
assignment of HCPCS code G0344 to APC 0605 (Level 2 Hospital Clinic 
Visits) for CY 2009, with a proposed payment rate of approximately $68. 
We did not receive any public comments on our proposed CY 2009 OPPS 
treatment of HCPCS code G0344, and therefore, are adopting it as final. 
We are crosswalking new HCPCS code G0402 to HCPCS code G0344 because of 
their clinical and expected resource similarity and assigning the new 
code to APC 0605 on an interim basis for CY 2009. As a new HCPCS code 
for CY 2009, the OPPS treatment of HCPCS code G0402 is open to public 
comment in this final rule with comment period. The final CY 2009 
median cost of APC 0605 is approximately $67.
    We note that the policy for reporting a medically necessary 
hospital visit during the same visit as the IPPE still applies. CPT 
codes 99201 through 99215 for hospital clinic visits of new and 
established patients at all five levels of resource intensity may also 
be appropriately reported, depending on the circumstances, but they 
must be appended with the CPT-25 modifier, identifying the hospital 
visit as a separately identifiable service from the IPPE described by 
HCPCS code G0402.
    Section 101(b) of the MIPPA also removes the screening 
electrocardiogram (EKG) as a mandatory requirement, as identified in 
section 1861(ww)(1) of the Act, to be performed as part of the IPPE. 
The MIPPA requires that there be education, counseling, and referral 
for an EKG, as appropriate, for a once-in-a lifetime screening EKG 
performed as a result of a referral from an IPPE. The facility service 
for the screening EKG (tracing only) is payable under the OPPS when it 
is the result of a referral from an IPPE. Providers paid under the OPPS 
should report new HCPCS code G0404 (Electrocardiogram, routine ECG with 
12 leads, tracing only, without interpretation and report, performed as 
a screening for the initial preventive physical examination) for 
services furnished on or after January 1, 2009. HCPCS code G0367 
(Tracing only, without interpretation and report, performed as a 
component of the initial preventive physical exam) will be active until 
December 31, 2008 for reporting the facility service for a screening 
EKG performed prior to January 1, 2009.
    In the CY 2009 OPPS/ASC proposed rule, we proposed to continue the 
assignment of HCPCS code G0367 to APC 0099 (Electrocardiograms) for CY 
2009, with a proposed payment rate of approximately $26. We did not 
receive any public comments on our proposed CY 2009 OPPS treatment of 
HCPCS code G0367 and, therefore, are adopting it as final. We are 
crosswalking new HCPCS code G0404 to HCPCS code G0367 because of their 
clinical and expected resource similarity and assigning the new code to 
APC 0099 on an interim basis for CY 2009. As a new HCPCS code for CY 
2009, the OPPS treatment of HCPCS code G0404 is open to public comment 
in this final rule with comment period. We note that the two other new 
related screening EKG codes, specifically HCPCS code G0403 
(Electrocardiogram, routine ECG with 12 leads; performed as a screening 
for the initial preventive physical examination with interpretation and 
report) and HCPCS code G0405 (Electrocardiogram, routine ECG with 12 
leads; interpretation and report only, performed as a screening for the 
initial preventive physical examination), include an interpretation and 
report and, therefore, are assigned status indicators ``M'' and ``B,'' 
respectively, on an interim basis for the CY 2009 OPPS. HCPCS code 
G0403 and HCPCS code G0405 replace predecessor HCPCS code G0366 
(Electrocardiogram, routine ECG with 12 leads; performed as a component 
of the initial preventive examination with interpretation and report) 
and HCPCS code G0368 (Interpretation and report only, performed as a 
component of the initial preventive examination), respectively. Our 
instructions in the July 2008 OPPS quarterly update, Transmittal 1536, 
Change Request 6094, issued on June 19, 2008, specify that, in cases 
where there are separate codes for the technical component, 
professional component, and/or complete procedure, hospitals paid under 
the OPPS should report the code that represents the technical component 
for their facility services. Therefore, hospitals that are billing for 
HOPD services paid under the OPPS should not report new HCPCS code 
G0403 or HCPCS code G0405 for payment of the screening EKG under the CY 
2009 OPPS, but should instead report new HCPCS code G0404. The final CY 
2009 median cost of APC 0099 is approximately $26.

D. Reporting of Wound Care Services

    Section 1834(k) of the Act, as added by section 4541 of the BBA, 
allows payment at 80 percent of the lesser of the actual charge for the 
services or the applicable fee schedule amount for all outpatient 
therapy services; that is, physical therapy services, speech-language 
pathology services, and occupational therapy services. As provided 
under section 1834(k)(5) of the Act, we created a therapy code list 
based on a uniform coding system (that is, the HCPCS) to identify and 
track these outpatient therapy services paid under the MPFS. We provide 
this list of therapy codes along with their respective designation in 
the Medicare Claims Processing Manual, Pub 100-04, Chapter 5, Section 
20. Two of the designations that we use in that manual denote whether 
the listed therapy code is an ``always therapy'' service or a 
``sometimes therapy'' service. We define an ``always therapy'' service 
as a service that must be performed by a qualified therapist under a 
certified therapy plan of care, and a ``sometimes therapy'' service as 
a service that may be performed by an individual outside of a certified 
therapy plan of care. We provide payment for several ``sometimes 
therapy'' wound care services under OPPS if they are provided by the 
hospital outside of a certified therapy plan of care.
    As added to the OPPS via the MPFS process, for CY 2009, CPT code 
0183T (Low frequency, non-contact, non-thermal ultrasound, including 
topical application(s), when performed, wound assessment, and 
instruction(s) for ongoing care, per day) is newly designated as a 
``sometimes therapy''

[[Page 68707]]

service. In CY 2009, hospitals will receive separate payment under the 
OPPS when they bill for wound care services described by CPT code 0183T 
that are furnished to hospital outpatients by individuals independent 
of a therapy plan of care. In contrast, when such services are 
performed by a qualified therapist under a certified therapy plan of 
care, providers should attach an appropriate therapy modifier (that is, 
``GP'' for physical therapy, ``GO'' for occupational therapy, and 
``GN'' for speech language pathology) or report their charges under a 
therapy revenue code (that is, revenue codes in the 042x, 043x, or 044x 
series), or both, to receive payment under the MPFS. For CY 2009, the 
I/OCE logic assigns this service to APC 0015 (Level III Debridement & 
Destruction) for payment under the OPPS if the service is not provided 
under a certified therapy plan of care or directs contractors to pay 
under the MPFS if the service is identified on a hospital claim with a 
therapy modifier or therapy revenue code as a therapy service.

E. Standardized Cognitive Performance Testing

    Section 1834(k) of the Act, as added by section 4541 of the BBA, 
essentially establishes that payment for all outpatient therapy 
services, that is, physical therapy services, speech-language pathology 
services, and occupational therapy services be provided under a fee 
schedule. As provided under section 1834(k)(5) of the Act, we created a 
therapy code list based on a uniform coding system (that is, the HCPCS) 
to identify and track these outpatient therapy services paid under the 
MPFS. This list of therapy codes, along with their respective 
designation, is set forth in the Medicare Claims Processing Manual, 
Pub. 100-04, Chapter 5, Section 20. Two of the designations that we use 
in that manual denote whether the listed therapy code is an ``always 
therapy'' service or a ``sometimes therapy'' service. We define an 
``always therapy'' service as a service that must be performed by a 
qualified therapist under a certified therapy plan of care, and a 
``sometimes therapy'' service as a service that may be performed by an 
individual outside of a certified therapy plan of care.
    CPT code 96125 (Standardized cognitive performance testing (eg, 
Ross Information Processing Assessment) per hour of a qualified health 
care professional's time, both face-to-face time administering tests to 
the patient and time interpreting these test results and preparing the 
report) was a new CPT code effective January 1, 2008, and was assigned 
status indicator ``A'' in the CY 2008 OPPS/ASC final rule with comment 
period because it is designated as an ``always'' therapy service under 
the MPFS. When CPT code 96125 is reported by a hospital, the hospital 
should attach an appropriate therapy modifier (that is, ``GP'' for 
physical therapy, ``GO'' for occupational therapy, and ``GN'' for 
speech language pathology), as noted in the Medicare Claims Processing 
Manual, Pub. 100-04, Chapter 5, Section 20, and the hospital will 
receive payment for the service under the MPFS.
    Comment: One commenter who addressed our CY 2008 interim assignment 
of CPT code 96125 asked why this CPT code was assigned status indicator 
``A,'' while many other central nervous system assessments and tests 
were assigned status indicator ``Q'' for the CY 2008 OPPS.
    Response: CPT code 96125 is correctly assigned status indicator 
``A'' because it is designated as an ``always therapy'' service, as 
described earlier. The other similar central nervous system assessments 
and tests are not designated as ``always therapy'' services codes and, 
therefore, are assigned other appropriate status indicators.
    After consideration of the public comment received, we are 
finalizing the CY 2008 interim assignment of status indicator ``A'' to 
CPT code 96125 which is designated as an ``always therapy'' service. 
When reported appropriately by hospitals as a therapy service, CPT code 
96125 will be paid under the MPFS.

XIII. OPPS Payment Status and Comment Indicators

A. 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 CY 2009 
status indicator assignments for APCs and HCPCS codes are shown in 
Addendum A and Addendum B, respectively, to this final rule with 
comment period. As we proposed in the CY 2009 OPPS/ASC proposed rule 
(73 FR 41520), in this final rule with comment period, we are using the 
status indicators that were listed in Addendum D1 to the proposed rule, 
which we discuss below in greater detail. We have made several 
modifications to the information included in the two columns labeled 
Item/Code/Service and OPPS Payment Status as displayed in the tables 
below for this final rule with comment period in response to public 
comments and to reflect implementation of certain provisions of Public 
Law 110-275 applicable to services paid under the OPPS in CY 2009.
1. Payment Status Indicators To Designate Services That Are Paid under 
the OPPS
    We proposed several changes to these status indicators for the CY 
2009 OPPS, and the Item/Code/Service and OPPS Payment Status columns 
listed in the table below reflect further modifications based on the 
provisions of Public Law 110-275 for CY 2009.

------------------------------------------------------------------------
           Indicator            Item/code/service   OPPS Payment status
------------------------------------------------------------------------
G.............................  Pass-Through       (1) Paid under OPPS;
                                 Drugs and          separate APC
                                 Biologicals.       payment.
H.............................  (1) Pass-Through   (1) Separate cost-
                                 Device             based pass-through
                                 Categories.        payment; not subject
                                                    to copayment.
                                (2) Therapeutic    (2) Separate cost-
                                 Radiopharmaceuti   based nonpass-
                                 cals.              through payment;
                                                    subject to
                                                    copayment.
K.............................  Nonpass-Through    Paid under OPPS;
                                 Drugs and          separate APC
                                 Biologicals.       payment.
N.............................  Items and          Paid under OPPS;
                                 Services           payment is packaged
                                 Packaged into      into payment for
                                 APC Rates.         other services.
                                                   Therefore, there is
                                                    no separate APC
                                                    payment.
P.............................  Partial            Paid under OPPS; per
                                 Hospitalization.   diem APC payment.
Q1............................  STVX-Packaged      Paid under OPPS;
                                 Codes.             Addendum B displays
                                                    APC assignments when
                                                    services are
                                                    separately payable.

[[Page 68708]]

 
                                                   (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 under OPPS;
                                 paid through a     Addendum B displays
                                 composite APC.     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    Paid under OPPS;
                                 Products.          separate APC
                                                    payment.
S.............................  Significant        Paid under OPPS;
                                 Procedure, Not     separate APC
                                 Discounted when    payment.
                                 Multiple.
T.............................  Significant        Paid under OPPS;
                                 Procedure,         separate APC
                                 Multiple           payment.
                                 Reduction
                                 Applies.
U.............................  Brachytherapy      Paid under OPPS;
                                 Sources.           separate APC
                                                    payment.
V.............................  Clinic or          Paid under OPPS;
                                 Emergency          separate APC
                                 Department Visit.  payment.
X.............................  Ancillary          Paid under OPPS;
                                 Services.          separate APC
                                                    payment.
------------------------------------------------------------------------

    In the CY 2009 OPPS/ASC proposed rule (73 FR 41521), we proposed to 
replace current status indicator ``Q'' with three new separate status 
indicators: ``Q1,'' ``Q2,'' and ``Q3'' for CY 2009. We proposed 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 believe 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 also proposed to use new payment status indicator 
``R'' for all blood and blood product APCs and to use new payment 
status indicator ``U'' for 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 proposed to create these new status indicators for 
blood and blood products and for brachytherapy sources to facilitate 
implementation of the reduced conversion factor that would apply to 
payments to hospitals that are required to report quality data but that 
fail to meet the established quality data reporting standards.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41521), we noted our 
belief that this proposal was necessary to continue the 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. Under our CY 2009 proposal, 
payment for blood and blood products and brachytherapy sources would 
have been subject to the reduced market basket conversion factor for 
hospitals that failed to meet the requirements of the HOP QDRP, while 
separately payable nonpass-through drugs and biologicals would not have 
been paid based on the conversion factor. We would have been unable to 
use status indicator ``K'' alone to indicate application of the reduced 
conversion factor to payment for the appropriate products if we 
continued to assign status indicator ``K'' to all of these items. 
Section XVI. of this final rule with comment period provides a full 
discussion of the requirements of the HOP QRDP and the reduced market 
basket conversion factor that will apply to payment for specific 
services when hospitals for which the reporting is required fail to 
meet the reporting standards.
    Subsequent to issuance of the CY 2009 OPPS/ASC proposed rule, 
Public Law 110-275 was enacted on July 15, 2008. Section 142 of Public 
Law 110-275 requires CMS to continue to pay for brachytherapy sources 
and therapeutic radiopharmaceuticals for the period of July 1, 2008 
through December 31, 2009, at hospitals' charges adjusted to the costs, 
a methodology that is different from the approaches we proposed for 
these items in CY 2009. We have continued to assign status indicator 
``H'' to brachytherapy sources for July 1, 2008 through December 1, 
2008, to ensure appropriate payment for these items. Moreover, we are 
not adopting the proposed prospective payment for brachytherapy sources 
and therapeutic radiopharmaceuticals, and we are not assigning status 
indicator ``K'' to therapeutic radiopharmaceuticals for CY 2009, as 
proposed. For this final rule with comment period, we have modified our 
proposed definition of status indicator ``K'' to include only nonpass-
through drugs and biologicals and, in parallel fashion, we have 
modified our proposed definition of status indicator ``H'' to include 
therapeutic radiopharmaceuticals for CY 2009. We note that beneficiary 
copayment does apply to payment for therapeutic radiopharmaceuticals 
assigned status indicator ``H,'' although pass-through device category, 
also assigned status indicator ``H,'' will continue to have no 
beneficiary copayment applied. The national unadjusted copayment or 
minimum

[[Page 68709]]

unadjusted copayment, as applicable, applies to all APC payments for 
OPPS services unless there is a statutory exception. There is no 
statutory exception for payment of therapeutic radiopharmaceuticals 
and, therefore, copayment applies to these products in CY 2009. 
However, where additional pass-through payment is made for a device 
category or drug that has pass-through status, section 1833(t)(8)(E) of 
the Act requires that the copayment for the device category or drug 
furnished be calculated as though the additional pass-through payment 
had not been made. Therefore, there is no copayment for the additional 
pass-through payment for a device category with OPPS pass-through 
status. The OPPS PRICER would continue to ensure that no copayment 
would be assigned for pass-through device categories that may be 
approved for CY 2009.
    CY 2009 payment for therapeutic radiopharmaceuticals, to which the 
reduced market basket conversion factor does not apply, is discussed in 
detail in section V.B.4. of this final rule with comment period. The 
payment methodology for brachytherapy sources specified by section 142 
of Public Law 110-275 requires no changes to our proposed definition of 
status indicator ``U'' for brachytherapy sources because the definition 
only indicated that separate payment would be made, without specifying 
the payment methodology. CY 2009 payment for brachytherapy sources, to 
which the reduced market basket conversion factor does not apply, is 
discussed in detail in section VII. of this final rule with comment 
period.
    Comment: Several commenters supported the proposed assignment of a 
separate status indicator to blood and blood products and encouraged 
CMS to make status indicator ``R'' final.
    Response: We appreciate the commenters' support of status indicator 
``R.'' New status indicator ``R'' for blood and blood products was 
created in order to facilitate implementation of the reduced market 
basket conversion factor that applies to payments to hospitals that are 
required to report quality data but fail to meet the established 
quality reporting standards. This reduced conversion factor applies to 
CY 2009 payment for blood and blood products, as further discussed in 
section XVI.D.2. of this final rule with comment period.
    Comment: Several commenters supported the proposal to refine status 
indicator ``Q'' by creating three related status indicators: ``Q1,'' 
``Q2,'' and ``Q3.'' These commenters stated that these changes would 
allow providers to quickly and easily isolate HCPCS codes that are 
packaged for different reasons. Commenters believed that the creation 
of status indicators ``Q1,'' ``Q2,'' and ``Q3'' make the conditionally 
packaged payment policy for each HCPCS code more transparent and urged 
CMS to finalize this proposal.
    Response: We appreciate the commenters' support regarding the 
development and use of status indicators ``Q1,'' ``Q2,'' and ``Q3'' to 
identify different types of conditionally packaged services. We 
continue to believe that these refinements are helpful in identifying 
the packaging rationale for different HCPCS codes under the OPPS.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal for status indicators to designate 
services payable under the OPPS, with modification to take into 
consideration provisions of Public Law 110-275 for CY 2009. The final 
status indicators and their descriptions are displayed in the table 
above, as well as in Addendum D1 to this final rule with comment 
period.
2. Payment Status Indicators To Designate Services That Are Paid Under 
a Payment System Other Than the OPPS
    We did not propose any changes to the status indicators as listed 
below for the CY 2009 OPPS.

------------------------------------------------------------------------
                                                         OPPS Payment
            Indicator              Item/code/service        status
------------------------------------------------------------------------
A...............................  Services furnished  Not paid under
                                   to a hospital       OPPS. Paid by
                                   outpatient that     fiscal
                                   are paid under a    intermediaries/
                                   fee schedule or     MACs under a fee
                                   payment system      schedule or
                                   other than OPPS,    payment system
                                   for example:        other than OPPS.
                                   Ambulance  ..................
                                   Services.
                                   Clinical   Not subject to
                                   Diagnostic          deductible or
                                   Laboratory          coinsurance.
                                   Services.
                                   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           Not paid under
                                   Procedures.         OPPS. Admit
                                                       patient. Bill as
                                                       inpatient.
F...............................  Corneal Tissue      Not paid under
                                   Acquisition;        OPPS. Paid at
                                   Certain CRNA        reasonable cost.
                                   Services; and
                                   Hepatitis B
                                   Vaccines.
L...............................  Influenza Vaccine;  Not paid under
                                   Pneumococcal        OPPS. Paid at
                                   Pneumonia Vaccine.  reasonable cost;
                                                       not subject to
                                                       deductible or
                                                       coinsurance.
M...............................  Items and Services  Not paid under
                                   Not Billable to     OPPS.
                                   the Fiscal
                                   Intermediary/MAC.
Y...............................  Non-Implantable     Not paid under
                                   Durable Medical     OPPS. All
                                   Equipment.          institutional
                                                       providers other
                                                       than home health
                                                       agencies bill to
                                                       DMERC.
------------------------------------------------------------------------

    We did not receive any public comments regarding the status 
indicators that designate services paid under a payment system other 
than the OPPS. Therefore, we are finalizing our CY 2009 proposal, 
without modification. The final status indicators are displayed in the 
table above, as well as in Addendum D1 to this final rule with comment 
period.
3. Payment Status Indicators To Designate Services That Are Not 
Recognized Under the OPPS But That May Be Recognized by Other 
Institutional Providers
    We did not propose any changes to the status indicators listed 
below for the CY 2009 OPPS.

[[Page 68710]]



------------------------------------------------------------------------
                                                         OPPS Payment
            Indicator              Item/code/service        status
------------------------------------------------------------------------
B...............................  Codes that are not  Not paid under
                                   recognized by       OPPS.
                                   OPPS when
                                   submitted on an
                                   outpatient
                                   hospital Part B
                                   bill type (12x
                                   and13x).
                                                       May be
                                                       paid by fiscal
                                                       intermediaries/
                                                       MACs when
                                                       submitted on a
                                                       different bill
                                                       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.
------------------------------------------------------------------------

    We did not receive any public comments regarding the status 
indicators that designate services that are not recognized under the 
OPPS but that may be recognized for payment to other institutional 
providers. Therefore, we are finalizing our CY 2009 proposal, without 
modification. The final status indicators are displayed in the table 
above, as well as in Addendum D1 to this final rule with comment 
period.
4. Payment Status Indicators To Designate Services That Are Not Payable 
by Medicare on Outpatient Claims
    We did not propose any changes to these status indicators for the 
CY 2009 OPPS, but the Item/code/service and OPPS Payment status columns 
for status indicator ``E'' listed in this table below reflect 
modifications in response to public comments.

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

    Comment: Several commenters observed that as the Medicare program 
has evolved to incorporate other benefits, such as payment for 
prescription drugs under Medicare Part D, the historical definition of 
status indicator ``E,'' specifically that these items and services are 
not paid under the OPPS or any other Medicare payment system, is no 
longer accurate.
    Response: We appreciate the commenters' concern and have clarified 
the definition of status indicator ``E'' in the table above to indicate 
more precisely that status indicator ``E'' designates items and 
services that are not payable when submitted on outpatient claims of 
any bill type. We have also clarified that these items and services are 
not covered by the Medicare outpatient benefit, in recognition that 
they may be covered under some circumstances under other benefits of 
the Medicare program.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal for payment status indicators to 
designate services that are not payable by Medicare for outpatient 
claims, with modification to clarify that status indicator ``E'' 
indicates no payment for outpatient claims, rather than no payment 
under any Medicare benefit. The final status indicators are displayed 
in the table above, as well as in Addendum D1 to this final rule with 
comment period.
    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 final rule with comment period all active HCPCS 
codes for CY 2009 and currently active HCPCS codes that will be 
discontinued at the end of CY 2008 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 
finalizing for these items and services are listed in the tables above 
and in Addendum D1 to this final rule with comment period.
    Addendum B, with a complete listing of HCPCS codes that includes 
their payment status indicators and APC assignments for CY 2009, is 
available electronically on the CMS Web site under supporting 
documentation for this final rule with comment period at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage

B. Comment Indicator Definitions

    In the CY 2009 OPPS/ASC proposed rule (73 FR 41522), we proposed to 
use for the CY 2009 OPPS 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.
    Except as discussed below with regard to services to which we have 
assigned status indicators ``R,'' ``Q1,'' ``Q2,'' ``Q3,'' and ``U,'' we 
proposed to use the ``CH'' comment indicator in this

[[Page 68711]]

final rule with comment period to indicate HCPCS codes for which the 
status indicator or APC assignment, or both, will change in CY 2009 
compared to their assignment as of December 31, 2008.
    As was proposed, we are using the ``CH'' indicator in this CY 2009 
OPPS/ASC final rule with comment period to call attention to changes in 
the payment status indicator and/or APC assignment for HCPCS codes for 
CY 2009 compared to their assignment as of December 31, 2008. We 
believe that use of the ``CH'' indicator in the CY 2009 OPPS/ASC final 
rule with comment period will facilitate the public's review of the 
changes that we are finalizing for CY 2009. The use of the comment 
indicator ``CH'' in association with a composite APC indicates that the 
configuration of the composite APC is changed in this CY 2009 OPPS/ASC 
final rule with comment period.
    ``STVX-packaged codes,'' ``T-packaged codes,'' and other HCPCS 
codes that could be paid through a composite APC with final 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 final CY 
2009 changes in status indicator assignments from ``K'' to ``R'' and 
from ``H'' to ``U,'' respectively, are not flagged with comment 
indicator ``CH'' in Addendum B to this final rule with comment period. 
As noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41522), these 
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.
    As was proposed, we are continuing our policy of using comment 
indicator ``NI'' in this CY 2009 OPPS/ASC final rule with comment 
period. Only HCPCS codes with comment indicator ``NI'' in this CY 2009 
OPPS/ASC final rule with comment period are subject to comment. HCPCS 
codes that do not appear with comment indicator ``NI'' in this CY 2009 
OPPS/ASC final rule with comment period are not open to public comment, 
unless we specifically have requested additional comments elsewhere in 
this final rule with comment period. The CY 2009 treatment of HCPCS 
codes that appear in this CY 2009 OPPS/ASC final rule with comment 
period to which comment indicator ``NI'' is not appended was open to 
public comment during the comment period for the CY 2009 OPPS/ASC 
proposed rule, and we are responding to those comments in this final 
rule with comment period.
    We did not receive any public comments regarding comment 
indicators. Therefore, we are continuing to use the two comment 
indicators, ``CH'' and ``NI,'' for CY 2009 and their definitions are 
listed in Addendum D2 to this final rule with comment period.

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.
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: As proposed in the CY 2009 OPPS/ASC proposed rule (73 
FR 41457), in this final rule with comment period we are increasing the 
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. We also are implementing, 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 (Pub. L. 109-432). Specifically, we have calculated 
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 
update of the conversion factor and our adoption and implementation of 
the reduced conversion factor that will 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 final rule with comment period.
    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 
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, and we briefly highlighted the CMS contractor's comparative and 
impact analyses of the MedPAC and CMS wage indices and the public 
comments received regarding the recommendations in the FY 2009 IPPS 
final rule (73 FR 48564 through 48567). In section II.C. of this final 
rule with comment period, we discuss changes to the wage index related 
to the MedPAC recommendations that were adopted in the FY 2009 IPPS 
final rule and our application of these changes to the wage index for 
the CY 2009 OPPS.
    This full MedPAC report can be downloaded from MedPAC's Web site 
at: http://www.medpac.gov/documents/Jun07_EntireReport.pdf.

B. APC Panel Recommendations

    Recommendations made by the APC Panel at its March 2008 and August 
2008 meetings are discussed in sections of this final rule with comment 
period that correspond to topics addressed by the APC Panel. The report 
and recommendations from the APC Panel's March 5-6, 2008 and August 27-
28, 2008 meetings 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

[[Page 68712]]

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 
related 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 proposed 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 final policy to reconcile 
outlier payments, beginning in CY 2009, in more detail in section 
II.F.3. of this final rule with comment period.
    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 for 
calculating CCRs, increasing the frequency of CCR calculation, and 
conducting an annual review of CMHC CCRs. However, in light of this OIG 
recommendation, for the CY 2009 OPPS, we also proposed to provide for 
reconciliation of outlier payments under the OPPS. We discuss our final 
policy to reconcile outlier payments in more detail in section II.F.3. 
of this final rule with comment period.

XV. Ambulatory Surgical Centers: Updates and Revisions to the 
Ambulatory Surgical Center Conditions for Coverage and Updates to the 
Revised Ambulatory Surgical Center Payment System

A. Legislative and Regulatory Authority for the ASC Conditions for 
Coverage

    As the single largest payer for health care services in the United 
States, the Federal Government assumes a critical responsibility for 
the quality of care furnished under its programs. Historically, the 
Medicare program's quality assurance approach was focused on 
identifying health care entities that furnished poor quality care or 
that failed to meet minimum Federal standards. Overall, we found that 
this problem-focused approach had inherent limitations and did not 
necessarily translate into better care for patients. Ensuring quality 
through the enforcement of prescriptive health and safety standards 
alone has resulted in us expending many of our resources on working 
with marginal providers, rather than stimulating broad-based 
improvements in quality of care.
    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 health, safety, and other requirements under the 
statutory authority of section 1832(a)(2)(F)(i) of the Act. The 
substantive requirements 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 42 CFR Part 416, Subpart C specify the 
conditions for coverage (CfCs) for ASCs. The Secretary is responsible 
for ensuring that the CfCs and their enforcement are adequate to 
protect the health and safety of individuals treated by ASCs.
    To implement the CfCs, we determine compliance through State survey 
agencies or accreditation organizations that conduct onsite inspections 
utilizing these requirements. In order to participate in the Medicare 
program, ASCs must meet Medicare standards as determined by a State 
agency or by a national accrediting organization approved by the 
Secretary and whose standards meet or exceed the CfCs. Currently, there 
are four national accreditation organizations that are approved by the 
Secretary:
     The Joint Commission;
     The American Association for Accreditation of Ambulatory 
Surgical Facilities (AAAASF);
     The Accreditation Association for Ambulatory Health Care 
(AAAHC); and
     The American Osteopathic Association (AOA).
    With respect to payment for surgical procedures performed in a 
Medicare-certified ASC, there are two primary elements to the total 
cost of performing a surgical procedure: (a) The cost of the 
physician's professional services to perform the procedure; and (b) the 
cost of items and services furnished by the facility where the 
procedure is performed (for example, surgical supplies, equipment, and 
nursing services). Payment for the first element is made under the 
Medicare Physician Fee Schedule (MPFS). We address the second element, 
payment for the cost of items and services furnished by the facility, 
in sections XV.C. through XV.F. of this document.

B. Updates and Revisions to the ASC Conditions for Coverage

1. Background
    On August 31, 2007, we published a proposed rule in the Federal 
Register entitled ``Medicare and Medicaid Programs; Ambulatory Surgical 
Centers, Conditions for Coverage'' (72 FR 50470). In that proposed 
rule, we proposed to revise the definitions of certain terms used in 
the ASC CfCs set forth in Sec.  416.2 and some of the existing specific 
CfCs pertaining to the ASC governing body and management, evaluation of 
quality, and laboratory and radiologic services, which are set forth in 
Sec. Sec.  416.41, 416.43, and 416.49, respectively, to reflect current 
ASC practices. In addition, we proposed to add several new CfCs on 
patient rights, infection control, and patient admission, assessment, 
and discharge to promote and protect patient health and safety.
    The current ASC CfCs were originally published on August 5, 1982 
(47 FR

[[Page 68713]]

34082), and, for the most part, these regulations have remained 
unchanged since that time. From 1990 to 2000, the number of ASCs 
participating in the Medicare program has increased at a rate of about 
175 facilities a year. The total number of ASCs more than doubled from 
1,197 to 2,966 during this 10-year period, making ASCs one of the 
fastest growing facility types in the Medicare program. The annual 
volume of procedures performed on both Medicare and non-Medicare 
patients has tripled.
    Currently, over 5,100 ASCs participate in the Medicare program.\1\ 
This growth is due in part to advances in medical technology that allow 
additional surgical procedures to be safely performed outside of a 
hospital setting. This shift has paved the way for increasing numbers 
of procedures to be performed in an ASC. The changes we proposed are 
more aligned with today's ASC health care industry standards.
---------------------------------------------------------------------------

    \1\ Only comprehensive rehabilitation facilities and rural 
health clinics have experienced a higher rate of growth. Office of 
Evaluations and Inspections (OEI) analysis of Part B Medicare data. 
See Office of Inspector General Quality Oversight of Ambulatory 
Surgical Centers Supplemental Report 1: The Role of Certification 
and Accreditation.
---------------------------------------------------------------------------

    In addition, HHS' health care information transparency initiative 
(discussed more fully in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 67960)) gives consumers what we believe to be accessible 
and useful information on the price and quality of health care items 
and services so that they can more meaningfully exercise choices in 
selecting health care. In support of this initiative, in August 2006, 
we announced the release of Medicare payment information for 61 
procedures performed in ASCs. This information is available on the CMS 
Web site at: http://www.cms.hhs.gov/HealthCareConInit/ and will assist 
patients undergoing surgical procedures to select the most appropriate 
setting for the delivery of high quality, efficient care. The 
information shows ``Commonly Performed Procedures in ASCs'' and 
contains ASC charges and Medicare payment data for ASC facility costs 
for a limited number of services administered in States and counties. 
The data are broken down at the county, State, and national level. 
Moreover, the CMS Web site at http://www.cms.hhs.gov/center/ombudsman.asp is available to the public and ASC patients to get 
information about the Medicare and Medicaid programs, prescription drug 
coverage, and how to coordinate Medicare benefits with other health 
insurance programs. The Web site also includes information about filing 
a grievance or complaint.
    Section 109(b) of the MEIA-TRHCA (Pub. L. 109-432) amended section 
1833(i) of the Act to authorize the Secretary to develop measures that 
are appropriate to determine the measurement of quality care (including 
medication errors) furnished by ASCs that reflect the consensus among 
affected parties and to reduce the annual payment update by 2 
percentage points for any ASC that does not submit data on quality 
measures in the form and manner required by the Secretary. These 
measures, to the extent feasible and practicable, must include measures 
set forth by one or more national consensus building entities (section 
1833(t)(17)(C) of the Act). We refer readers to section XVI.H. of this 
rule for a more detailed discussion of these measures. We expect 
Medicare beneficiaries to receive high quality surgical services and, 
for that reason, we proposed a Quality Assessment Performance 
Improvement (QAPI) requirement as a new condition for coverage (Sec.  
416.43). (We refer readers to section XV.B.2.b.(2) of this final rule 
for a more detailed discussion of the QAPI provision.)
2. Provisions of the Proposed and Final Regulations
    As stated earlier, the ASC CfCs were originally issued in 1982. 
Most of the revisions made since then have been payment-related. Since 
1982, significant innovations in ASC patient care delivery and quality 
assessment practices have emerged. In an effort to ensure continued 
quality in the ASC setting, in the 2007 ASC CfCs proposed rule, we 
proposed to revise three of the existing conditions and create three 
new conditions. The proposed revised conditions are: Governing body and 
management; Evaluation of quality (renamed Quality Assessment and 
Performance Improvement (QAPI)); and Laboratory and radiologic 
services. The proposed new conditions are: Patient rights; Infection 
control, and Patient admission, assessment, and discharge. As stated in 
the 2007 ASC CfCs proposed rule (72 FR 50470), our objective is to 
achieve a balanced regulatory approach by ensuring that an ASC 
furnishes health care to meet essential health and quality standards, 
while ensuring that it monitors and improves its own performance.
    In this section, we discuss the revised and new ASC requirements 
that we proposed, summarize the public comments received, present our 
responses, and set forth our final policies.
a. Definitions (Sec.  416.2)
    Existing Sec.  416.2 sets forth definitions for terms used in the 
ASC CfCs. We proposed to revise the definition of ``Ambulatory surgical 
center'' or ``ASC.'' In addition, we proposed to add a definition for 
``overnight stay'' to Sec.  416.2.
    We proposed to revise the ASC definition to read as follows:
    Ambulatory surgical center or ASC means any distinct entity that 
operates exclusively for the purpose of providing surgical services to 
patients not requiring an overnight stay following the surgical 
services, has an agreement with CMS to participate in Medicare as an 
ASC, and meets the conditions set forth in subparts B and C of this 
part [416].
    We proposed to revise the overnight stay definition to read as 
follows:
    Overnight stay means the patient's recovery requires active 
monitoring by qualified medical personnel, regardless of whether it is 
provided in the ASC, beyond 11:59 p.m. of the day on which the surgical 
procedure was performed.
    In the Medicare cost reporting manual (Provider Reimbursement 
Manual, Part 1, Section 2205 (Medicare Patient Days, page 22-16)), we 
have defined a hospital inpatient day as beginning at midnight and 
ending 24 hours later. Consistent with this longstanding policy, we 
proposed to codify in regulations that any patient whose recovery 
requires active monitoring by qualified personnel beyond 11:59 p.m. of 
the day on which the surgical procedure was performed, is a patient who 
may require hospitalization or more intensive care. Accordingly, we 
proposed that ASCs that are Medicare-certified may not keep patients 
beyond 11:59 p.m. of the day on which the surgical procedure was 
performed.
    In the August 2, 2007 final rule that established the revised ASC 
payment system (72 FR 42546), we added in new Sec.  416.166(b) that 
covered surgical procedures ``would not typically be expected to 
require active medical monitoring and care at midnight following the 
procedure.'' In the CY 2007 OPPS/ASC proposed rule and CY 2007 OPPS/ASC 
final rule with comment period (71 FR 49639 and 71 FR 68168, 
respectively), we addressed the denial of payment of an ASC facility 
fee for any procedure for which prevailing medical practice dictated 
that the beneficiary would typically be expected to require active 
medical monitoring and care at midnight following the procedure. We 
also note that the patient's location at midnight was a generally 
accepted standard for

[[Page 68714]]

determining his or her status as a hospital inpatient or SNF patient 
and, as such, it is reasonable to apply the same standard in the ASC 
setting.
    Comment: Many commenters suggested that CMS keep the current ASC 
definition as it is currently written. The commenters believed the 
proposed definition was too restrictive. Other commenters noted that 
some ASCs operate on a 24-hour basis and that the 11:59 p.m. cutoff 
time was not in keeping with current practice.
    Response: After consideration of the public comments received, we 
are not finalizing the proposed definition of ``overnight stay'' and 
have revised the proposed definition of ``ASC'' to recognize that the 
hours of operation of an ASC have an impact on patient discharge 
schedules. In this final rule, we have defined ``ASC'' to mean a 
``distinct entity that operates exclusively for the purpose of 
providing surgical services to patients not requiring hospitalization 
and in which the expected duration of services would not exceed twenty-
four hours following admission. The entity must have an agreement with 
CMS to participate in Medicare as an ASC and must meet the conditions 
set forth in subparts B and C of this part [416].''
    Patients admitted to an ASC will be allowed to stay in the facility 
for 23 hours and 59 minutes starting at the time of admission. This 
policy will create a 24-hour rolling clock that will allow ASCs the 
flexibility to perform procedures later in the day or to perform those 
procedures that require more lengthy patient recovery times.
    In summary, we are finalizing our proposal, with modification, to 
revise the definition of ``ASC'' at Sec.  416.2 to state that an ASC 
means any distinct entity that operates exclusively for the purpose of 
providing surgical services to ``patients not requiring hospitalization 
and in which the expected duration of services would not exceed 24 
hours following an admission,'' instead of ``patients not requiring an 
overnight stay following the surgical services,'' as proposed. There 
may be rare instances when a Medicare patient is required to stay 
beyond 24 hours due to an unexpected result from a surgery that would 
require further monitoring and care. Such a stay would be unplanned and 
the ASC would continue to be responsible for the patient and provide 
care until the patient is stable and able to be discharged in 
accordance with the ASC regulations and facility policy.
b. Specific Conditions for Coverage
(1) Condition for Coverage: Governing Body and Management (Sec.  
416.41)
    The proposed Governing body and management CfC was separated into 
three standards to more clearly articulate CMS expectations. We also 
proposed two new items: First, the governing body would have oversight 
and be accountable for the quality assessment and performance 
improvement program; and second, the ASC would be expected to maintain 
a written disaster preparedness plan for the emergency care of patients 
to address fire, natural disaster, functional failure of equipment, or 
other unexpected events or circumstances that are likely to threaten 
the health and safety of its patients. The ASC would coordinate the 
plan with State and local agencies and would be responsible for 
conducting annual drills, written evaluations and implementation of any 
corrections needed to improve the plan.
    Comment: One commenter suggested the disaster preparedness plan 
should only require ASCs to have a plan to provide for the emergency 
care of the ASC's patients on the premises during events that threaten 
their health and safety.
    Response: We disagree with the commenter. Our intent is for the ASC 
to have a disaster preparedness plan in place to care not only for the 
facility's patients on the premises, but also staff, and others who may 
be in the facility during an emergency if intervention is needed. We 
believe that the safety of others in the facility is not subject to 
individual facility decisionmaking. Therefore, we have revised Sec.  
416.41(c)(1) accordingly.
    Comment: Several commenters were concerned that the proposed 
language to ``coordinate'' the disaster preparedness plan with State 
and local agencies could be interpreted by survey officials as a 
requirement to integrate the ASC facility into State and local disaster 
relief efforts. The commenters recommended that CMS modify the proposed 
language and utilize the word ``communicate'' as an alternative.
    Response: After consideration of the public comments received, we 
are retaining the proposed language at Sec.  416.41(c)(2) as final, and 
are requiring that ASCs coordinate their disaster preparedness plan 
with State and local authorities. Coordinating the plan with State and 
local authorities would assist in overall planning efforts and would 
make known the availability of assets and capabilities that exist 
during an emergency.
    Comment: One commenter expressed support for the requirement that 
the ASC conduct disaster preparedness drills. However, the commenter 
believed that to require an ASC to ``immediately implement any 
corrections'' would be unrealistic.
    Response: We agree that an overly literal interpretation of the 
phrase ``immediately implement any corrections'' located at proposed 
Sec.  416.41(c)(3) could be problematic. However, we continue to 
believe an inordinate delay in addressing concerns with the disaster 
preparedness plan would not be beneficial. In response to the public 
comment, in this final rule, we have changed Sec.  416.41(c)(3) to 
read, ``The ASC conducts drills, at least annually, to test the plan's 
effectiveness. The ASC must complete a written evaluation of each drill 
and promptly implement any corrections to the plan.'' We believe this 
change will provide an appropriate balance between urgency of 
correction and thoughtful planning.
    Comment: One commenter stated that the reference to a ``local'' 
Medicare-participating or nonparticipating hospital in proposed Sec.  
416.41(b)(2) is too vague and suggested an alternate definition.
    Response: We understand there have been problems in the past 
related to the definition of ``local'' when referring to the 
requirement that ASCs must have an effective procedure for the 
immediate transfer to a local Medicare-participating hospital or a 
local nonparticipating hospital. We specifically addressed this issue 
in the ASC CfCs proposed rule and are reiterating our position here. 
The definition of local hospital would require the ASC to consider the 
most appropriate facility to which the ASC would transport its patients 
in the event of an emergency. If the closest hospital could not 
accommodate the patient population or the predominant medical 
emergencies associated with the types of surgeries performed by the 
ASC, a more distant hospital might also meet the ``local'' definition. 
In this case, transfer to the more distant hospital would be 
appropriate. However, under normal circumstances, the ASC would be 
required to transfer patients to the nearest, most appropriate local 
hospital, as transfer to a more distant hospital could affect patient 
health.
    After consideration of the public comments received, we are 
finalizing the proposed revisions to Sec.  416.41 with the following 
modifications.
    In Sec.  416.41(c)(1) of this final rule, we have revised the 
proposed language to state that the ASC must maintain a written 
disaster preparedness plan that

[[Page 68715]]

provides for the emergency care of patients, staff, and others in the 
facility in the event of fire, natural disaster, functional failure of 
equipment, or other unexpected events or circumstances that are likely 
to threaten ``the health and safety of those in the ASC'' instead of 
the ``health and safety of its patients'' as proposed.
    In Sec.  416.41(c)(3) of this final rule, we have revised the 
proposed language to state that when the ASC conducts drills, at least 
annually, to test the disaster preparedness plan's effectiveness, the 
ASC must complete a written evaluation of each drill and ``promptly'' 
implement any corrections to the plan, instead of ``immediately'' as 
proposed. (2) Condition for Coverage: Quality Assessment and 
Performance Improvement (QAPI) (Sec.  416.43)
    The existing Sec.  416.43, ``Condition for coverage: Evaluation of 
quality,'' relies on a reactive problem-oriented approach to identify 
and resolve patient care issues. Failure to meet this requirement has 
consistently been one of the top 10 deficiencies cited by Medicare 
surveyors nationwide.
    During the last decade, the health care industry has moved beyond 
the problem-oriented, after-the-fact, corrective approach of quality 
assurance to an approach that focuses on a proactive, preemptive plan 
that continuously addresses quality improvement. We proposed that each 
ASC would develop, implement, and maintain an effective, continuous 
quality assessment and performance improvement program that stimulates 
it to constantly monitor and improve its own performance, and to be 
responsive to the needs, desires, and satisfaction levels of the 
patients and families it serves. The desired outcome of this proposed 
requirement would be that an ASC improve its provision of services by 
proactively implementing its own quality improvement activities. With 
an effective quality assessment and performance improvement program in 
place and operating properly, an ASC would be able to prevent the 
adverse affects of care by identifying the activities that lead to poor 
patient outcomes. Therefore, an ASC would be free to develop its own 
individualized program. As proposed, an ASC's QAPI program would not be 
judged against a specific model.
    The proposed QAPI requirement was divided into five standards. 
Under standard Sec.  416.43(a), ``Program scope,'' an ASC's quality 
assessment and performance improvement program would include, but not 
be limited to, an ongoing program that would be able to show measurable 
improvement in indicators that were associated with improved health 
outcomes and with the identification and reduction of medical errors. 
We expect that an ASC would use standards of care and the findings made 
available in current literature to select indicators to monitor its 
program. The ASC would measure, analyze, and track these quality 
indicators, including areas such as adverse patient events, infection 
control and other aspects of performance that include processes of care 
and services furnished in the ASC. (``Adverse patient events,'' as used 
in the field, generally refer to occurrences that are harmful or 
contrary to the targeted patient outcomes.)
    The second proposed standard at Sec.  416.43(b), ``Program data,'' 
would require the ASC program to incorporate quality indicator data 
into its QAPI program, including patient care and other relevant data 
regarding services furnished in the ASC. We did not propose to require 
that ASCs use any particular process or outcome measures. Proposed 
standard (b) also would require that data collected by the ASC, 
regardless of the source of the data elements, would be collected in 
accordance with the detail and frequency specifications established by 
the ASC's governing body. Once collected, ASCs would analyze the data 
to determine the effectiveness and safety of its services, and to 
identify opportunities for improvement.
    The third standard as proposed at Sec.  416.43(c), ``Program 
activities,'' would require the ASC to set priorities for its 
performance improvement activities that focused on high risk, high 
volume and problem-prone areas, that considered the incidence, 
prevalence and severity of identified problems, and that gave priority 
to improvement activities that affected health outcomes, patient 
safety, and quality of care. In Sec.  416.43(c), we also proposed to 
require the ASC to track adverse patient events, analyze their causes, 
implement improvements and ensure that the improvements are sustained 
over time.
    The fourth standard as proposed at Sec.  416.43(d), ``Performance 
improvement projects,'' would require the number and scope of 
improvement projects that the ASC conducted annually reflect the scope 
and complexity of the ASC's services and operations. The ASC would 
document what improvement projects were being conducted, the reasons 
for conducting them, and the measurable progress achieved on them.
    Finally, at Sec.  416.43(e), ``Governing body responsibilities,'' 
we proposed that the ASC's governing body would be responsible and 
accountable for ensuring that the ongoing quality improvement program 
was defined, implemented, and maintained, and that ASC resources were 
adequately allocated for implementing the facility's program. The 
governing body would ensure that the program addressed priorities for 
improved quality of care and patient safety. The governing body would 
also specify the frequency and detail of the data collection and ensure 
that all quality improvement actions were evaluated for effectiveness. 
It would be incumbent on the governing body to lend its full support to 
all ASC quality assessment and performance improvement efforts.
    Comment: Some commenters indicated that the QAPI approach in the 
2007 ASC CfCs proposed rule is impractical compared to the existing 
requirement, ``Evaluation of quality.''
    Response: We disagree that the QAPI approach is impractical. The 
QAPI focus for ASCs, and other Medicare-certified providers and 
suppliers, is aimed at proactively accessing the quality of care 
provided and improving health outcomes. A more effective QAPI program 
will allow ASCs to improve patient care. Many ASCs have already 
implemented a more effective quality improvement program in place of 
the current ASC requirement.
    Comment: One commenter stated the details of the proposed QAPI 
program duplicated the requirements imposed by the accrediting bodies.
    Response: As stated in the preamble of the 2007 ASC CfCs proposed 
rule, one of the intents of the revisions to the ASC regulations is to 
update some of the CfCs. As such, the QAPI CfC is being updated to 
reflect the current standards of practice in the ASC facility setting. 
We support the ASC accrediting organizations that have adopted 
proactive quality improvement programs as current standards of 
practice. The consistency in philosophy between the Medicare ASC 
program and those of the accrediting organizations should be comforting 
to patients and families. Moreover, the specifics of the proposed ASC 
program are similar to the quality improvement programs that have been 
included in the Medicare rules governing hospices, and that are being 
developed for other Medicare facilities. However, we did not 
intentionally duplicate material from any specific accrediting 
organization. Because each ASC will determine the specifics of its 
program, any similarity between it and other QAPI programs, intentional 
or not, is irrelevant.
    Comment: Many commenters expressed enthusiastic support for the 
updated and expanded QAPI CfC.

[[Page 68716]]

    Response: We appreciate the overall support for data collection and 
QAPI. We note that the new regulation does not require ASCs to use 
electronic health records or any specific software for data collection. 
ASCs are free to choose the data collection methods and tools that best 
suit their needs. We do not believe that this new regulation imposes an 
undue burden on ASCs because it does not require them to obtain 
sophisticated data collection and analysis computer programs.
    Comment: A few commenters expressed concerns as to whether State 
surveyors would receive adequate training on the new QAPI program, and 
wondered whether it would be enforced in a consistent manner.
    Response: A newly designed surveyor training program is expected to 
be available online in 2010, thus making uniform training accessible to 
State surveyors. Once every surveyor is exposed to the same training 
program, we expect the decisions surveyors make, based on the findings, 
will be more consistent.
    Comment: Several commenters submitted topic areas they would like 
to include in a QAPI program, such as evaluation and documentation of 
surgical and anesthesia risk, surgical infection prevention via 
prophylactic antibiotic administration, utilization of proper 
medications at admission, and reporting of the number of cases 
requiring transfer to hospitals due to complications.
    Response: ASCs may choose from these and other topic areas when 
developing their QAPI programs, but not to the exclusion of those 
topics set out at Sec.  416.43(c).
    Comment: One commenter expressed concern that the QAPI CfCs could 
limit the effectiveness of efforts to ensure safety because, if 
adopted, the new regulations would allow ASCs to develop and implement 
their own standards. In addition, the commenter argued, State agencies 
would have the option to enforce such standards differently among 
States. Another commenter questioned how CMS would monitor the quality 
of care being provided across ASCs.
    Response: The proposed QAPI standards would serve as an outline to 
the ASC industry and will aid each ASC in developing, implementing and 
maintaining its own QAPI program. State survey agencies will be 
receiving standardized surveyor training to assist in decreasing or 
eliminating surveyor inconsistency. In addition to training surveyors, 
we will address any surveyor inconsistency through interpretive 
guidelines. We note that the QAPI standards do not in any way replace 
the other substantive standards that ASCs must meet.
    We will monitor the quality of care through the results from State 
survey agencies and deemed national accreditation organizations. The 
QAPI CfC reflects current industry standards for evaluating quality of 
care and will help ASCs adopt the universal approach of a proactive 
program that encourages facilities to make improvements that will 
prevent patients from being adversely affected. In the near future, we 
will require ASCs to report quality measures. These quality measures 
will be utilized to calculate whether ASCs receive full payment updates 
and as comparative tools for the industry.
    Comment: One commenter suggested that CMS include language that 
would require the ASC governing body to appoint in writing an 
appropriately trained individual to be responsible for the 
implementation and oversight of the facility's QAPI program.
    Response: While some ASCs may desire to assign a single individual 
the responsibility of managing the QAPI program, others may find 
alternate ways that are appropriate to meet this responsibility. ASCs, 
like other health entities, operate in ways that are advantageous to 
their own needs. In keeping with this philosophy, we are not requiring 
that an ASC follow a specific template related to the development and 
management of its QAPI program. We believe each ASC should have the 
flexibility to determine how that program should be implemented.
    Comment: One commenter suggested that the QAPI program require a 
leadership component and that the program include activities dealing 
with high-risk patients, adverse events, and staff resources.
    Response: We agree. The QAPI oversight and accountability 
requirements are part of the Governing body and management CfC; 
therefore, leadership would be held responsible for direct involvement 
in the QAPI program. Within the revised QAPI CfC, the ASC QAPI program 
would be required to set priorities for program activities, focus on 
high-risk, high-volume, and problem-prone areas, maintain an effective 
program that includes leadership involvement, and ensure that 
appropriate resources are allocated for an effective program.
    Comment: One commenter expressed concern with the use of the word 
``annually'' in proposed Sec.  416.43(d)(1) when referencing 
``distinct'' improvement projects and questioned whether this would 
require a set of separate and distinct projects every year. In 
addition, the commenter requested that the word ``number'' be removed, 
to keep the focus on the scope.
    Response: We stated in the preamble of the 2007 ASC CfCs proposed 
rule that we recognize that ASCs serve different populations and 
provide different services. The words ``distinct,'' ``annually,'' and 
``number'' are not new terms for the QAPI Medicare regulations and 
simply mean that when the ASC conducts its projects, those projects 
need to take into consideration the types of services it furnishes and 
any other aspect of its operation so that the effort is meaningful. 
While we would expect that ASCs will engage in specific projects on an 
annual basis, there may be a detailed project that will require a long 
range approach and could be the project that consumes available ASC 
resources for a period of time, thus making it difficult to undertake 
more than one project in a particular year.
    Comment: One commenter stated that the word ``resources'' in the 
QAPI CfC should be enhanced by including specific references to staff, 
time, information systems and training.
    Response: We agree that the term ``resources'' should be clarified, 
and therefore, in this final rule we have revised proposed Sec.  
416.43(e)(5) to refer instead to staff, time, information systems and 
training.
    After consideration of the public comments received, and with the 
exception of Sec.  416.43(e)(5) and some minor nonsubstantive 
revisions, we are adopting the proposed revisions to Sec.  416.43 as 
final, without modification. In Sec.  416.43(e)(5), we have modified 
the proposed requirement to specify that the governing body must 
allocate adequate ``staff, time, information systems, and training'' to 
the QAPI program, instead of ``resources,'' as proposed.
(3) Condition for Coverage: Laboratory and Radiologic Services (Sec.  
416.49)
    The existing laboratory and radiologic requirement is located at 
Sec.  416.49. We proposed to divide the condition into a laboratory 
standard and a radiologic standard. We also proposed to modify the 
radiology services standard requiring that an ASC meet the Conditions 
for Coverage for Portable X-Ray Services.
    Comment: A few commenters expressed concern that the proposed 
changes to the radiologic services standard could severely restrict the 
ability of ASCs to perform procedures requiring imaging guidance. One 
commenter stated the proposed changes would also impose impractical 
physician ordering criteria and other

[[Page 68717]]

requirements that are not applicable in the ASC setting. In general, 
while understanding CMS' rationale for presenting the proposed change, 
commenters believed that this change would disrupt ASC operations on a 
continuing scale.
    Response: The proposed change to the radiologic services 
requirement was intended to parallel the requirement in the current 
laboratory standard. That is, an ASC would be required to obtain both 
laboratory and radiology services from entities that were already 
certified in accordance with Medicare requirements. We believed this 
change would establish a higher level of patient safety. We proposed to 
replace the current requirement that requires ASCs to meet the hospital 
radiology department requirement (Condition of Participation for 
Hospitals at Sec.  482.26--Radiologic Services) with the requirement 
for ASCs to meet the Conditions for Coverage for Portable X-Ray 
Suppliers (Conditions for Coverage of Portable X-Ray Services at 
Sec. Sec.  486.100 through 486.110). These requirements are detailed, 
thorough, and provide a good foundation for the protection of Medicare 
beneficiaries. However, it has been pointed out by many of the 
commenters that the proposed requirements are better suited and more 
practical for ASCs that perform diagnostic as opposed to imaging 
services, and that the training requirement for technicians was 
problematic. The portable x-ray conditions are geared toward the 
technicians that perform the technical component of diagnostic 
radiology services without the physician being present, in contrast to 
ASCs, where the imaging guidance is provided under the direct, personal 
supervision of the surgeon performing the procedure.
    After consideration of the public comments and the impact of the 
proposed change on an ASC's daily operation, we believe that the change 
we proposed may be overly restrictive. Therefore, we are not adopting 
the requirement in proposed Sec.  416.49(b)(2). Instead, we are 
retaining the existing radiology services requirement applicable to 
ASCs, at Sec.  482.26 (Hospital Conditions of Participation--Radiologic 
services). These conditions include the requirements for the safety of 
patients and personnel, maintenance of equipment, and qualifications 
for personnel as they relate to radiologic services. However, we have 
maintained in this final rule the proposed formatting change that 
separates the laboratory and radiology portion of the existing Sec.  
416.49 into two standards.
(4) Condition for Coverage: Patient Rights (Sec.  416.50)
    The proposed patient rights CfC was divided into four standards. 
Under the first standard, Sec.  416.50(a), ``Notice of rights,'' the 
ASC would be required to provide the patient or the patient's 
representative with notice of the patient's rights in advance of the 
date of the procedure, in a language and manner that the patient or 
patient representative understands. We proposed the following: An ASC 
would have to post the written notice of patient rights in a place or 
places within the ASC where patients or their representatives are 
likely to notice it; and the notice of rights would have to include (1) 
the name, address, and telephone number for a representative in the 
State agency to whom patients could report complaints about an ASC; and 
(2) the Web site for the Medicare Beneficiary Ombudsman. We also 
proposed that the ASC would be responsible for the following: Providing 
the patient (or his or her representative) with verbal and written 
information concerning its policies on advance directives; establishing 
procedures for documenting the existence, submission, investigation and 
disposition of a patient's written or verbal grievance to the ASC; 
fully documenting all alleged violations/grievances; and specifying 
timeframes for the grievance process regarding review of the grievance 
and provision of a response.
    The second proposed standard at Sec.  416.50(b), ``Exercise of 
rights and respect for property and person,'' specifies the patient's 
right to exercise his or her rights without being subject to 
discrimination or reprisal. It also specifies the patient's right to 
voice grievances regarding treatment or care that is (or fails to be) 
furnished by the ASC; the patient's right to be fully informed about a 
treatment or procedure and about the expected outcome; the patient's 
right, if adjudged incompetent under State law by a court of proper 
jurisdiction, to have his or her rights exercised by the person 
appointed under State law to act on the patient's behalf; and the 
patient's right, if a State court has not adjudged a patient 
incompetent, to any legal representative designated by the patient in 
accordance with State law to exercise the patient's rights to the 
extent allowed by State law.
    The third proposed standard at Sec.  416.50(c), ``Privacy and 
safety,'' would require the ASC to acknowledge the patient has the 
right to personal privacy, the right to receive care in a safe setting, 
and the right to be free from all forms of abuse or harassment.
    The fourth proposed standard at Sec.  416.50(d), ``Confidentiality 
of clinical records,'' would require the ASC to acknowledge the 
patient's right expect that his or her clinical records maintained by 
the ASC will be held in strict confidentiality. We also proposed that 
access to or release of patient information and clinical records is 
permitted only with written consent of the patient or the patient's 
representative or as authorized by law.
    Comment: Some commenters believed CMS should allow more flexibility 
for ASCs to develop their own process for apprising patients of their 
rights. Several of the commenters referred CMS to the Title VI, 
Prohibition Against National Origin Discrimination--Persons with 
Limited-English Proficiency (42 U.S.C. 2000d et seq.). One commenter 
referred CMS to the Hospital conditions of participation. Both laws 
permit facility flexibility in informing the patient, or when 
appropriate, the patient's representative, about the patient's rights. 
These commenters pointed out that Title VI specifies that the extent of 
the facility's obligation to provide written translation of documents 
should be determined by the recipient on a case-by-case basis. They 
also believed that ASCs' flexible options could include such methods as 
posting signs and providing information in patient brochures.
    Response: We agree that facilities should have flexibility in 
informing patients of their rights. We also believe that when a patient 
undergoes a surgical procedure at an ASC that has some physical risk, 
even a slight risk, the patient needs to be able to have information at 
hand that explains the procedure(s) at least in a general way. 
Therefore, we are retaining the proposed requirement that the ASC must 
post the written notice of patient rights in a place or places within 
the ASC likely to be noticed by patients (or their representatives, if 
applicable) waiting for treatment. We also are retaining the proposed 
requirement that the patient be informed verbally and in writing. The 
written portion may be a printed information sheet or other more 
sophisticated documents. The document needs to include basic 
information as required by Sec.  416.50. It may not be practical for an 
ASC to have available a printed patient rights information document in 
the language that every patient can understand. However, it is expected 
that where, a written document is not practical the ASC would make 
certain that its verbal explanation is clear and thorough. HHS

[[Page 68718]]

has published guidance on serving individuals with limited English 
proficiency in the Federal Register at 67 FR 4968 (February 1, 2002).
    Comment: Several commenters believed that the Patient rights 
condition for coverage is too prescriptive and could create 
administrative burdens which would negatively affect the delivery of 
care. These commenters suggested CMS delete the phrase ``post the 
written notice.'' They also recommended that CMS adopt a broader 
interpretation of the phrase ``informing the patient or patient 
representative.''
    Response: Patient rights and the explanation of patient rights are 
important elements in this and other Medicare health and safety rules. 
We agree that procedures that ASCs must follow should be the least 
prescriptive possible. That is why we have not been explicit in 
detailing the specifics of the verbal and written information that 
needs to be included when informing patients of their rights. Regarding 
the commenters' suggestion to broaden the interpretation of ``informing 
the patient or patient representative,'' we believe the proposed 
language is appropriate and we are retaining the language in this final 
rule.
    Comment: Several commenters agreed that disclosure of a physician's 
ownership interest in a facility is critical, but believe patients 
should be notified of this financial interest at the point of physician 
referral and not burden the ASC. The commenters expressed concern that 
if a beneficiary is not told of a physician's financial interest until 
a procedure is scheduled, the beneficiary may feel uncomfortable 
requesting an alternative physician or alternative facility for fear of 
offending the surgeon. They also asserted that seeking an alternative 
physician or facility could delay the procedure.
    Response: While it may be advantageous to patients to know as early 
as possible if their physician has an ownership interest in the ASC, we 
are unable to require physicians to impart that information because we 
do not regulate physician offices.
    Comment: Several commenters suggested that the requirement to 
propose written ownership disclosure information to patients prior to 
the first visit embodies the potential to needlessly disrupt patient 
care, and inconvenience patients. Commenters recommended that CMS adopt 
the requirement that ownership information be made available to 
patients upon request or that it be posted in the facility.
    Response: Our proposal to require ASCs to be responsible for 
physician disclosure of financial interests in or ownership of an ASC 
is based on our existing rules set out at 42 CFR Part 420--Program 
Integrity. Our goal is to assist Medicare beneficiaries in their 
efforts to make informed health care decisions through disclosure of 
all pertinent treatment information, and to achieve a basic level of 
knowledge across provider settings.
    We did not propose to specify in the 2007 ASC CfCs proposed rule 
how the ownership disclosure information would be provided to the 
patient, only that it would be provided in writing prior to the first 
visit to the ASC. To respond to commenters' concerns, we have revised 
the proposed regulation text to require that the ASC must notify the 
patient in advance of the date of the procedure regarding physician 
ownership (for example, it could be at the same time that the ASC 
provides the package of information regarding pre-surgical testing for 
the planned ASC surgical procedure). Patients scheduled for a surgical 
procedure at an ASC almost always receive a package of information 
containing pre-surgical testing and physical examination requirements 
to which patients need to adhere. We believe that a simple ``check 
box'' form could be included in this information packet, for example, 
specifying whether the referring physician has a financial interest in 
the facility.
    Comment: Several commenters suggested that ASCs should not be 
required to comply with an advance directive requirement because ASCs 
perform elective surgeries and because ASC staff are dedicated to doing 
everything within their power and training to ensure a patient survives 
the procedure. These commenters further stated that because Medicare 
does not pay for surgical procedures in the ASC that pose a significant 
risk to beneficiaries, it is not necessary to require an advance 
directives policy for ASCs.
    The commenters also expressed concern that a patient arriving only 
90 minutes in advance of an ASC procedure would not have sufficient 
time within which to complete an advance directive in addition to the 
other forms that he or she may be required to complete. Instead, the 
commenters suggested that advance directives could be made available by 
the ASC for the patients to obtain and read at their leisure prior to 
the procedure. The commenters further stated that the proposed 
requirements would be financially burdensome.
    Response: Virtually all Medicare providers and suppliers have an 
advance directive requirement, with the exception of ASCs and rural 
health clinics. We agree that explaining an advance directive to 
patients prior to surgery could be cumbersome depending upon the 
patient's level of understanding and other circumstances. However, we 
also believe that patient health and safety must be the primary 
consideration in determining whether to have ASCs assume some 
responsibility for an advance directive requirement. We considered the 
policies behind the Consumer Bill of Rights and Responsibilities 
(CBRR), which recommended measures to promote and assure health care 
quality and value and to protect consumers and workers in the health 
care system. We were interested in whether ASC patients should be 
treated differently than other patients by virtue of the fact that the 
surgical procedures they undergo are voluntary and are provided 
exclusively on an ambulatory basis. CBRR is very specific in stating 
that consumers must be able to discuss advance directives with their 
health care provider. We concur. Although surgical procedures performed 
at ASCs are elective, in the event that any unforeseen complications 
arise that require transferring the patient to a hospital, an advance 
directive could be important upon the patient's arrival at the 
hospital. To ensure consumers' rights and ability to participate in 
treatment decisions, we believe that ASC health care personnel should 
discuss the use of advance directives with patients and their 
designated family members. Discussing advance directives with patients, 
regardless of the health care setting, is becoming the standard of 
practice. To actively participate in decisionmaking about their care, 
consumers must have complete information about their treatment options, 
including the alternative of no intervention, as well as the risks, 
benefits, and consequences of any options. Conversely, a health care 
provider may indicate that it is against its policy to comply with 
certain advance directives. When such conscience objections are 
expected to occur, patients should be made aware of it in advance of 
the date of the procedure. As is the case with patient rights 
information, advance directive forms can be mailed in the same packet 
to patients.
    Comment: Several commenters were critical of the proposed 
requirement that ASCs report substantiated and unsubstantiated 
complaints to State and local authorities. The commenters

[[Page 68719]]

argued that unsubstantiated complaints should not be reported, as this 
might cause inappropriate disclosure of confidential information. 
Commenters recommended revising this provision to require that all 
allegations of neglect be promptly reported to a person in authority at 
the ASC. The commenters indicated that if the ASC determined that the 
grievance constituted a violation of applicable laws, regulations, or 
health care program requirements, the ASC would then report the 
allegation(s) to appropriate State and/or local authorities.
    Response: We agree with the commenters. In this final rule, we have 
revised the proposed ``Submission and investigation of grievances'' 
requirement at Sec.  416.50(a)(3)(iv) to specify that only 
substantiated allegations must be reported to State and/or local 
authorities.
    Comment: Commenters believed that confidentiality of clinical 
records creates unnecessary confusion with the more comprehensive HIPAA 
privacy standards applicable to ASCs. They believed that permitting 
access to or release of patient records only with the patient's written 
consent is more stringent than the HIPAA standards, which permit 
routine disclosures without patient consent for purposes of payment, 
treatment, and health care operations. These commenters recommended 
instead that CMS develop a new standard which cross-references the 
HIPAA standard for confidentiality of clinical records.
    Response: We agree with these commenters and in this final rule 
have revised the proposed regulation at Sec.  416.50(d) to reflect a 
cross-reference to the HIPAA standards at 45 CFR Parts 160 and 164.
    After consideration of the public comments received, we are 
finalizing the proposed revisions to Sec.  416.50 with modifications to 
the following provisions.
    In Sec.  416.50(a)(1), we have made editorial revisions, using the 
phrase ``in advance of the date of the procedure'' instead of the 
proposed phrase ``prior to furnishing care to the patient and''.
    We have made two editorial revisions to Sec.  416.50(a)(1)(i): 
First, to refer to the ``The ASC's'' notice of rights; and second, to 
refer to the correct name of the Office of the Medicare Beneficiary 
Ombudsman.
    In Sec.  416.50(a)(1)(ii), we have made a minor editorial revision 
to the proposed first sentence, using the phrase ``where applicable,'' 
instead of the proposed phrase ``if applicable''.
    In Sec. Sec.  416.50(a)(2)(i) and (b)(2), we have changed 
references to ``applicable State law'' to specify ``applicable State 
health and safety laws''.
    In Sec.  416.50(a)(3)(iv), we added the words ``Only 
substantiated'' to specify the types of allegations that must be 
reported to ``State or local authorities, or both''.
    In Sec.  416.50(d), we have revised the paragraph to reflect a 
cross-reference to the HIPAA standards at 45 CFR Parts 160 and 164.
(5) Condition for Coverage: Infection Control. (Sec.  416.51)
    The proposed infection control CfC was divided into two standards. 
Under standard Sec.  416.51(a), ``Sanitary environment,'' we would 
require the ASC to provide a functional and sanitary environment for 
the provision of surgical services by adhering to professionally 
acceptable standards of practice. We proposed to allow the ASCs to have 
flexibility in designing their own infection control program that would 
meet CMS regulations and also meet the needs of their particular 
facility. The second proposed standard at Sec.  416.51(b), ``Infection 
control,'' would require the ASC to maintain an ongoing program 
designed to prevent, control, and investigate infections and 
communicable diseases. The program would be required to designate a 
qualified professional who has training in infection control, integrate 
the infection control program into the ASC's QAPI program and be 
responsible for providing a plan of action for preventing, identifying 
and managing infections and communicable diseases and for immediately 
implementing corrective and preventive measures that result in 
improvement. Because the prevention and control of infection is so 
critically important to overall patient and staff health and safety, we 
have proposed to elevate the current standard-level requirement to a 
condition-level requirement and expand the requirements to include the 
designation of a qualified professional to direct the infection control 
program.
    Comment: One commenter recommended that CMS include language that 
requires the ASC to base its policies for its infection control program 
on nationally recognized guidelines and standards. Another commenter 
also suggested the use of nationally recognized guidelines as the basis 
for ASC selection of approved and scientifically based methods and 
equipment for cleaning, disinfection and sterilization as outlined in 
nationally recognized guidelines.
    Response: In this final rule, we have revised proposed Sec.  
416.51(b) to add a provision to read, ``In addition, the infection 
control and prevention program must include documentation that the ASC 
has considered, selected, and implemented nationally recognized 
infection control guidelines.'' As stated in the preamble to the 2007 
ASC CFCs proposed rule (72 FR 50477), we expect ASCs to utilize 
nationally recognized and approved standards and guidelines for their 
infection control procedures. We stated that we did not want to 
restrict an ASC's flexibility in utilizing the guidelines that best 
suited its method of operation and, therefore, have chosen not to 
accept the comment that we select specific infection control methods as 
requirements.
    Comment: A few commenters asked for clarification regarding the 
requirement that the designated professional have training in infection 
control. One commenter suggested the inclusion of examples of 
nationally recognized organizations that ASCs may seek out for guidance 
and continuing education. Other commenters suggested the designated 
infection control individual be identified as an infection control 
professional rather than infection control officer.
    Response: We are not mandating one specific set of guidelines or 
infection and control standards that an ASC must employ but rather, it 
must consider, select and implement from nationally recognized 
guidelines. The preeminent organization that addresses infection issues 
is the Centers for Disease Control and Prevention. Hospitals and 
hospital organizations as well as national health care organizations 
also would have information regarding infection control. Training in 
infection control is available through a variety of services such as 
health care organizations, professional associations, and government 
entities. For example, an ASC could obtain information from the 
Healthcare Infection Control Practice Advisory Committee (HICPAC), 
Occupational Safety and Health Administration (OSHA), Association for 
Professionals in Infection Control and Epidemiology (APIC), Society for 
Healthcare Epidemiology of America (SHEA), Association of PeriOperative 
Registered Nurses (AORN) and/or the Association for the Advancement of 
Medical Instrumentation (AAMI). At this time, we will continue to allow 
the ASCs the flexibility in setting up the infection control program in 
a manner which best meets the organization's needs. Moreover, we expect 
that the ASC will be able to provide verification of staff training and 
current competency related to infection control standards of practice.

[[Page 68720]]

    We do not find that it is necessary to associate a title with the 
qualified professional who directs the program.
    Comment: Several commenters requested flexibility in designating an 
infection control professional to serve multiple facilities that are 
under common ownership.
    Response: There may be rationale for those ASC facilities that are 
under common ownership to utilize a single infection control 
professional to direct more than one facility program concurrently. 
However, we believe that this type of arrangement would potentially 
hinge on the proximity of the ASCs to each other, the frequency of 
onsite visits by the designated individual, and the ability of each 
facility to respond to an infection control issue in a timely manner. 
We will address these and other issues in more detail in subregulatory 
guidance.
    Comment: One commenter questioned the rationale for elevating 
infection control to the condition level. A commenter noted that 
requiring the program to be under the direction of a designated 
professional who has training in infection control, should not be 
necessary in the smaller ASC setting.
    Response: The infection control requirement located at Sec.  
416.44(a)(3) currently requires both large and small ASC organizations 
to establish a program for identifying and preventing infections, 
maintaining a sanitary environment, and reporting the results to 
appropriate authorities. Considering the huge growth in the ASC 
industry since we issued the current ASC regulations in 1982, we 
believe that infection control in a surgical facility should be a high 
priority. All ASCs, regardless of size, must therefore have an 
infection control program where the person in charge is knowledgeable 
and is aware of current advances in the field.
    After consideration of the public comments received, we are 
finalizing the proposed revisions to Sec.  416.51, with some 
modification.
    In the introductory test of Sec.  416.51, we have revised an 
editorial change to the proposed language, using the phrase ``The 
ASC,'' instead of the proposed phrase ``The Ambulatory Surgical Center 
(ASC).'' We are not adopting the proposed ending phrase ``for patients 
and ASC staff''. Thus, the final language of the introductory text 
reads: ``The ASC must maintain an infection control program that seeks 
to minimize infections and communicable diseases.''
    In Sec.  416.51(b), we have added a sentence to the proposed 
requirements for infection control which states, ``In addition, the 
infection control and prevention program must include documentation 
that the ASC has considered, selected, and implemented nationally 
recognized infection control guidelines.''
(6) Condition for Coverage--Patient Admission, Assessment, and 
Discharge (Sec.  416.52)
    The proposed admission, assessment and discharge requirement 
identified the three general areas that would be applicable to a 
surgical procedure and the timeframes for completing the assessments to 
help ASCs ensure they are identifying patient issues and needs in a 
timely and safe manner.
    The proposed patient admission, assessment and discharge condition 
was divided into three standards. The first standard, Sec.  416.52(a), 
``Admission and pre-surgical assessment,'' would require the patient to 
have a comprehensive medical history and physical assessment completed 
by a physician or other qualified practitioner in accordance with State 
law and ASC policy not more than 30 days before the date of the 
scheduled surgery. The purpose of this medical history and physical 
assessment not more than 30 days before the date of the scheduled 
surgery is to ensure the medical professionals at the ASC have up-to-
date and pertinent patient information available to perform safe and 
effective surgical procedures. In the second standard, Sec.  416.52(b), 
``Post-surgical assessment,'' we proposed that a thorough assessment of 
the patient's post-surgical condition must be completed and documented, 
and that any post-surgical needs are addressed and included in the 
discharge notes. In the third standard, Sec.  416.52(c), ``Discharge,'' 
we proposed that the ASC must provide each patient with written 
discharge instructions; ensure the patient has a safe transition to 
home; ensure post-surgical needs are met; ensure each patient has a 
discharge order; and ensure the discharge order indicates the patient 
has been evaluated for proper anesthesia and medical recovery.
    Comment: The majority of commenters supported the overall goals of 
the proposed patient admission, assessment, and discharge requirement. 
Several commenters suggested the removal of the specific language, 
``who performed the surgery or procedures unless otherwise specified by 
State law'' found in proposed Sec.  416.52(c)(3). Several other 
commenters questioned the rationale for the addition of the condition 
itself and believed the requirement is more stringent than that 
developed by accrediting bodies.
    Response: After consideration of the public comments received and 
further review of the existing standards for assessment, anesthesia 
evaluation, and discharge, we have modified some of our proposed 
requirements in this final rule. We are not adopting that portion of 
proposed Sec.  416.52(a)(2) that would require the pre-surgical 
assessment to include a determination of the patient's mental ability 
to undergo surgery. This may be beyond the scope of a surgical team.
    Comment: Several commenters argued that CMS should not require ASCs 
to assess a patient's subjective ``mental ability'' to undergo surgery, 
especially where such an assessment conflicts with the legal right of a 
patient to make his or her own health care decisions or to have those 
decisions made by his or her designated representatives rather than by 
health care providers. One commenter had two suggestions. The first was 
that CMS change the language at proposed Sec.  416.52(a)(1) to include 
the requirement that the physician who will be performing the procedure 
complete the comprehensive history and physical assessment, and that if 
the physician delegates this responsibility to another physician, such 
as the primary care physician, the operating physician review and 
authenticate the assessment prior to the date of surgery. Secondly, the 
commenter requested that CMS change the language at proposed Sec.  
416.52(a)(3) to state that ``the patient's medical history and physical 
assessment must be placed in the patient's medical record prior to the 
patient being taken to the operating room,'' rather than ``before the 
surgical procedure is started.''
    Response: It is customary for the patient's primary care physician 
to perform the patient's comprehensive history and physical assessment, 
and it is also customary for the operating physician to determine from 
the pre-surgical assessment that is based on the required history and 
physical assessment requirement at Sec.  416.52(a)(2) of the final rule 
that the patient will be able to tolerate surgery. We believe the 
second suggestion of the commenter for changes to Sec.  416.52(a)(3) is 
a reiteration of what was proposed. However, in the final rule we have 
changed the language from ``before the surgical procedure is started'' 
to ``prior to the surgical procedure.''
    Comment: Some commenters suggested alternative language to the 
post-surgical assessment located at Sec.  416.52(b)(1). Commenters 
stated that a thorough assessment would require a review of all body 
systems and that it is not standard practice to do full body

[[Page 68721]]

assessments post-operatively and there is no evidence-based clinical 
rationale for such a broad requirement. One commenter suggested that 
well-trained professional nurses are capable of performing patient 
monitoring and assessment for anesthesia recovery.
    Response: We agree and in this final rule have revised the 
requirement to allow for sufficient flexibility based on ASC policy to 
determine the assessment appropriate to the nature and scope of the 
procedure performed as well as the specific medical condition of the 
individual patient. The final regulation text at Sec.  416.52(b)(1) 
reads, ``The patient's post-surgical condition must be assessed and 
documented in the medical record by a physician, other qualified 
practitioner, or a registered nurse with, at a minimum, post-operative 
care experience, in accordance with applicable State health and safety 
laws, standards of practice, and ASC policy.''
    Comment: Some commenters indicated the requirement in the proposed 
Discharge standard at Sec.  416.52(c)(2) that the ASC ensure that the 
patient have a safe transition to home was overly broad and opposed the 
language. Commenters were concerned that the language could be 
interpreted to mean the ASCs would be obligated to assume full 
responsibility for transporting patients to their homes using 
ambulances or other extraordinary precautions. They stated that there 
was no way for ASCs to ``ensure'' against car accidents or other events 
outside of their control that could interfere with a patient's safe 
transition to home.
    Response: We agree that the proposed language could be construed 
too broadly and that there would be room for interpretation about the 
ASC's responsibility for patients after they had left the facility 
enroute to their home. Therefore, in this final rule we have removed 
that proposed requirement to limit ASC responsibility.
    Comment: Many commenters suggested CMS move the discharge language 
located in the existing Surgical services requirement at Sec.  
416.42(c) to the new Patient admission, assessment, and discharge 
requirement at proposed Sec.  416.52. Commenters also recommended that 
CMS expand the requirement currently set out at Sec.  416.42(a) to 
specify that other qualified anesthesia providers, in addition to a 
physician, may evaluate each patient's proper anesthesia recovery 
before discharge from the ASC. In addition, commenters suggested that 
CMS group all the discharge requirements together in one section.
    Response: As noted previously, we have clarified and amended the 
language at proposed Sec.  416.52(b)(1) in this final rule to state 
that the patient's post-surgical condition must be assessed and 
documented in the medical record by a physician, other qualified 
practitioner, or a registered nurse with, at a minimum, post-operative 
care experience, in accordance with applicable State health and safety 
laws, standards of practice, and ASC policy.
    In addition, it is customary for the operating physician to write a 
discharge order indicating ``the patient may be discharged when 
stable.'' Thus, in this final rule we are retaining, with some 
modification, the proposed language at Sec.  416.52(c)(2) which now 
states: ``Ensure each patient has a discharge order signed by the 
physician who performed the surgery or procedure in accordance with 
applicable State health and safety laws, standards of practice, and ASC 
policy.'' These modifications to our proposal do not detract from the 
intent or value of the requirement.
    Based on the public comments we received regarding proposed Sec.  
416.52(b)(1) and our corresponding changes, we believe a companion 
change can be made to Sec.  416.42. We believe that discharged patients 
should be free of the effects of anesthesia to the greatest extent 
possible. Because we are permitting a physician, other qualified 
practitioner, or a registered nurse with experience in post-operative 
care at a minimum in Sec.  416.52(b)(1) to assess and document the 
patient's post-surgical condition, we believe that we should permit a 
qualified practitioner, as defined at Sec.  410.69(b), to determine if 
the lingering effects of anesthesia adversely affect discharge as noted 
in proposed Sec.  416.42(a)(2). Therefore, in this final rule, we are 
conforming the existing regulation at Sec.  416.42(a) (we refer readers 
to Subpart C--Specific Conditions for coverage--Surgical services) to 
the policy proposed at Sec.  416.52(c) of the proposed rule by 
separating the existing two sentences into Sec.  416.42(a)(1) and Sec.  
416.42(a)(2), and we are expanding the language under paragraph (a)(2) 
to state that ``before discharge from the ASC, each patient must be 
evaluated by a physician or by a practitioner qualified to administer 
anesthesia as defined at Sec.  410.69(b) of this chapter, in accordance 
with applicable State health and safety laws, standards of practice, 
and ASC policy, for proper anesthesia recovery.'' These changes will 
provide flexibility for an ASC and are reflective of current practice.
    We agree with the suggestion that we group the discharge 
requirements together in one section and have moved the requirement 
located at existing Sec.  416.42(c), ``Standard: Discharge,'' to the 
new patient admission, assessment and discharge requirement at Sec.  
416.52 (c)(3). As adopted, this paragraph requires the ASC to ``Ensure 
all patients are discharged in the company of a responsible adult, 
except those patients exempted by the attending physician.''
    After consideration of the public comments received, we are 
adopting the provisions of proposed Sec.  416.52 as final with 
modifications as discussed below. As discussed earlier, we also are 
adopting revisions to Sec. Sec.  416.42(a) and 416.42(c) based on 
public comments received regarding proposed changes to Sec.  416.52(c) 
to conform them to the final policy.
    In Sec.  416.52, we revised the proposed introductory language to 
state that, ``The ASC must ensure each patient has the appropriate pre-
surgical and post-surgical assessments completed and that all elements 
of the discharge requirements are completed.''
    In Sec.  416.52(a)(1), we have changed the proposed language 
``State law and ASC policy'' to specify ``applicable State health and 
safety laws, standards of practice, and ASC policy''.
    In Sec.  416.52(a)(2), we added language to state that the pre-
surgical assessment must be completed by a physician ``or other 
qualified practitioner in accordance with applicable State health and 
safety laws, standards of practice, and ASC policy'' and that the 
documented medical history and physical assessment includes 
``documentation of any allergies to drugs and biologicals''. We are not 
adopting the proposed language that would have required that ``The 
assessment must include documentation to determine the patient's mental 
ability to undergo the surgical procedure.''
    In Sec.  416.52(a)(3), we have changed the language ``before the 
surgical procedure is started'' to ``prior to the surgical procedure''.
    In Sec.  416.52(b)(1), we have revised the proposed language to 
state ``The patient's post-surgical condition must be assessed and 
documented in the medical record by a physician, other qualified 
practitioner, or a registered nurse with post-operative care experience 
at a minimum, in accordance with applicable State health and safety 
laws, standards of practice, and ASC policy.''
    In Sec.  416.52(c)(1), we have added language to state that the ASC 
must, ``Provide each patient with written discharge instructions and 
overnight supplies. When appropriate, make a followup appointment with 
the

[[Page 68722]]

physician, and ensure that all patients are informed, either in advance 
of their surgical procedure or prior to leaving the ASC, of their 
prescriptions, post-operative instructions and physician contact 
information for followup care.''
    In Sec.  416.52(c)(2), we did not adopt the proposed requirement 
that the ASC must ensure ``the patient has a safe transition to home 
and that the post-surgical needs are met.''
    In Sec.  416.52(c)(3), we have renumbered the proposed section as 
Sec.  416.52(c)(2) and revised the proposed first sentence to state 
that the ASC must, ``Ensure each patient has a discharge order, signed 
by the physician who performed the surgery or procedure in accordance 
with applicable State health and safety laws, standards of practice, 
and ASC policy.''
    We are not adopting as final the proposed language of Sec.  
416.52(c)(3), which would have required that ``The discharge order must 
indicate that the patient has been evaluated for proper anesthesia and 
medical recovery.'' We have moved the provision of existing Sec.  
416.42(c) to new final Sec.  416.52(c)(3), and made editorial revisions 
so that the provision now reads, ``Ensure all patients are discharged 
in the company of a responsible adult, except those patients exempted 
by the attending physician.''
    In Sec.  416.42(a), we have separated the two existing sentences 
into two subsections and added language in the newly designated Sec.  
416.42(a)(2) to permit ``a practitioner qualified to administer 
anesthesia as defined at Sec.  410.69(b) of this chapter, in accordance 
with applicable State health and safety laws, standards of practice, 
and ASC policy'' or a physician to evaluate a patient for proper 
anesthesia recovery before the patient is discharged from the ASC.
    In Sec.  416.42(c), we have made minor editorial revisions to the 
existing requirement and moved the requirement to new Sec.  
416.52(c)(3).
c. Comments Outside the Scope of the Proposed Rule
    Comment: One commenter requested that CMS change emergency 
equipment language to say ``available in the ASC'' instead of the 
current language ``available to the operating rooms.'' Other commenters 
suggested that CMS allow surgeons to have consulting privileges instead 
of admitting privileges at local hospitals. Some commenters suggested 
that CMS remove the requirement that mandates all ASCs have a 
mechanical ventilator, or exclude ASCs not administering general 
anesthesia from the requirement to have a ventilator in the ASC. Some 
commenters expressed concern over the variance in State licensing 
requirements. One commenter recommended that CMS establish an ``ASC 
compare'' site for comparison of safety and quality of services. Other 
commenters suggested that CMS add language to allow other individuals 
permitted by State law or regulation to order drugs or biologicals. 
Finally, one commenter requested that CMS amend the waiting area 
requirement.
    Response: These issues are outside the scope of the 2007 ASC CfCs 
proposed rule and are not addressed in this final rule.

C. Updates to the Revised ASC Payment System

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.
    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 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 redesignating clause 
(iv) as clause (v) and by adding a new clause (iv) to paragraph (2)(D) 
and 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, under 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

[[Page 68723]]

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 active 
medical monitoring and care at midnight following the procedure 
(``overnight stay''). We adopted this standard for defining which 
surgical procedures are covered surgical procedures under the ASC 
payment system as an indicator of the complexity of the procedure and 
its appropriateness for Medicare payment in ASCs. We use this standard 
only for purposes of evaluating procedures to determine whether or not 
they are appropriate for Medicare beneficiaries in ASCs. Prior to the 
revised ASC payment system, procedures were excluded from the ASC list 
of covered surgical procedures based on whether they were expected to 
require more than four hours of recovery time. Both the previous 4-hour 
limit on the expected length of recovery time and the current criterion 
related to the expected need for active medical monitoring at midnight 
following the procedure were based on our longstanding requirement that 
procedures on the Medicare ASC list of covered surgical procedures do 
not require an extended recovery time and do not 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). We 
note that we added over 800 surgical provedures to the list of covered 
surgical procedures for ASC payment in CY 2008, the first year of the 
revised ASC payment system, based on the criteria for payment that we 
adopted in the August 2, 2007 revised ASC payment system final rule as 
described above in this section. Patient safety and health outcomes 
continue to be important to us as more health care moves to the 
ambulatory care setting. Therefore, as we gain additional experience 
with the revised ASC payment system, we are interested in any 
information the public may have regarding the comparative patient 
outcomes of surgical care provided in ambulatory settings, including 
HOPDs, ASCs, and physicians' offices, particularly with regard to the 
Medicare population.
    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 Addenda 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 systems (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), 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.
     Comment: Commenters provided a number of general suggestions 
related to the ASC list of covered surgical procedures. They contended 
that CMS should not restrict which procedures are payable in ASCs any 
more than CMS restricts which procedures are payable in HOPDs. The 
commenters also enumerated more specific modifications that they said 
would make the ASC payment system more equitable. They suggested that 
CMS allow payment for procedures reported by unlisted codes when the 
only possible procedures reported by the unlisted code are from 
anatomic sites that could not possibly pose a potential risk to 
beneficiary safety. They gave as an example of such

[[Page 68724]]

an unlisted code, CPT code 67999 (Unlisted procedure, eyelids). In 
addition, the commenters recommended that CMS automatically evaluate, 
for addition to the ASC list of covered surgical procedures, all 
procedures that are removed from the OPPS inpatient list and that, in 
all cases, CMS should provide specific reasons that procedures are 
excluded from the ASC list of covered surgical procedures. The 
commenters questioned why there are instances in which all but one or 
two of the procedures in a given APC are included on the ASC list. They 
stated that the APCs are clinically homogeneous and that as such, all 
of the procedures in an APC should be determined either to be excluded 
from or included on the ASC list. Finally, some commenters requested 
that ASCs be paid for certain services outside the CPT surgical code 
range, including certain Category III CPT codes and radiology services 
when packaged surgical procedures would also be performed.
     Response: We appreciate the commenters' suggestions regarding the 
consistency of the decisions about which procedures are excluded from 
the ASC list. However, as we explained in the August 2, 2007 revised 
ASC payment system final rule (72 FR 42479), we do not believe that all 
procedures that are appropriate for performance in HOPDs are 
appropriate in ASCs. HOPDs are able to provide much higher acuity care 
than ASCs. ASCs have neither patient safety standards consistent with 
those in place for hospitals, nor are they required to have the trained 
staff and equipment needed to provide the breadth and intensity of care 
that hospitals are required to maintain. Therefore, we will not modify 
our policy to exclude from the ASC list of covered surgical procedures 
only those procedures for which no payment is made in HOPDs.
    We do not agree with the commenters' recommendation that we include 
certain unlisted codes on the list of covered procedures. Even though 
it may be highly unlikely that any procedures that would be expected to 
pose a risk to beneficiary safety or to require an overnight stay would 
be reported by an unlisted code from certain anatomic sites, we cannot 
know what surgical procedure is being reported by an unlisted code, and 
because we cannot evaluate any such procedure, we believe that we must 
exclude unlisted codes from the list of covered surgical procedures.
    Each year in the annual OPPS/ASC proposed rule, we present the 
procedures we are proposing to remove from the OPPS inpatient list for 
the upcoming calendar year. In the past, we have not consistently 
reviewed procedures removed from the OPPS inpatient list to evaluate 
their appropriateness for payment under the ASC payment system. Because 
our policy under the revised ASC payment system is to annually evaluate 
all surgical procedures that are excluded from the ASC list for 
potential inclusion in the following year, we believe it is appropriate 
to include a review of surgical procedures that are proposed for 
removal from the OPPS inpatient list as part of our annual review of 
procedures excluded from the ASC list of covered surgical procedures. 
Therefore, we are adopting the commenters' suggestion to evaluate for 
appropriateness of ASC payment surgical procedures removed from the 
OPPS inpatient list. We will include in the annual OPPS/ASC proposed 
rule, our proposals to include or not include on the ASC list of 
covered surgical procedures those procedures proposed for removal from 
the OPPS inpatient list. We will include our final decisions in the 
OPPS/ASC final rule with comment period.
    We do not agree with the commenters' request that we provide 
specific reasons for our decisions to exclude procedures from the ASC 
list other than that we believe a procedure is expected to pose a 
significant risk to beneficiary safety or to require an overnight stay. 
We believe that these reasons are sufficiently specific. Our decisions 
to exclude procedures from the ASC list are based on a number of the 
criteria listed at Sec.  416.166, and we believe that it would be 
unnecessary and overly burdensome to list each and every reason for 
those decisions.
    For each of the specific examples that the commenters provided of 
inconsistent ASC treatment of procedures assigned to a single APC under 
the OPPS, we have evaluated the individual procedures for inclusion on 
the ASC list and each is discussed in section XV.E.1.a. of this final 
rule with comment period. During our development of the proposed CY 
2010 update to the ASC payment system, we will perform a comprehensive 
review of the APCs to address other potential inconsistencies.
    Finally, currently the revised ASC payment system provides payment 
only for surgical procedures within the surgical code range of CPT and 
for those Category III CPT codes and Level II HCPCS codes that directly 
crosswalk or are clinically similar to surgical procedures that are on 
the ASC list of covered surgical procedures (72 FR 42478). Furthermore, 
radiology services are only separately paid when they are provided 
integral to the performance of covered surgical procedures (72 FR 
42498). Therefore, we will not provide ASC payment in CY 2009 for 
services that do not meet these criteria. However, we note that while 
section 1832(a)(2)(F) of the Act defines the ASC benefit as ``facility 
services furnished in connection with surgical procedures specified by 
the Secretary,'' some stakeholders have raised the possibility of ASCs 
providing a broader range of services in the future, including services 
such as cardiac catheterization and hyperbaric oxygen therapy (which 
are included in the medicine range of CPT codes). While we are not 
making any changes to the existing criteria for ASC services for CY 
2009, we may consider proposing changes in the future.
    After consideration of the public comments received, we are 
accepting the commenters' recommendation to include in our annual 
evaluation of excluded surgical procedures all procedures proposed for 
removal from the OPPS inpatient list, and agree to evaluate the OPPS 
APCs for potential inconsistencies related to exclusion from the ASC 
list of covered surgical procedures. We are not accepting the 
commenters' recommendations to not exclude all procedures reported by 
unlisted codes and procedures that we determine would be expected to 
pose a significant risk to beneficiary safety or require an overnight 
stay. Further, we also are not accepting the commenters' recommendation 
that CMS provide more specific reasons for its decisions regarding 
exclusion of specific procedures from the ASC list of covered surgical 
procedures or their recommendation that we pay ASCs for services in CY 
2009 that do not meet the current criteria for ASC services.

D. Treatment of New Codes

1. 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

[[Page 68725]]

the summer through the fall of each year, to be effective January 1, 
are included in the final rule with comment period 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. The interim payment indicators assigned to the 
new codes under the revised ASC payment system are subject to public 
comment in that final rule with comment period. 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. We will respond to those 
comments in the OPPS/ASC final rule with comment period for the 
following calendar year. We proposed to continue this recognition 
process for CY 2009 (73 FR 41525).
    We did not receive any public comments regarding this proposal. For 
CY 2009, we are continuing our established policy for recognizing new 
Category I and Category III CPT codes and Level II HCPCS codes.
    In addition, we proposed 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 (73 FR 41525). Therefore, we 
proposed 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 proposed to include in Addenda AA and BB to 
this final rule with comment period 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 are designated by 
comment indicator ``NI'' in the Addenda to this 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 appeared 
in Table 36 of the CY 2009 OPPS/ASC proposed rule (73 FR 41525), were 
subject to comment on the CY 2009 OPPS/ASC proposed rule, and we 
proposed to finalize their payment indicators in this CY 2009 OPPS/ASC 
final rule with comment period. We proposed 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 the three new 
codes. Because new Category III CPT codes that become effective for 
July are not available to CMS in time for incorporation into the 
Addenda to the OPPS/ASC proposed rule, our policy is to include the 
codes, their proposed payment indicators, and proposed payment rates in 
the preamble to the proposed rule but not in the Addenda to the 
proposed rule. These codes and their final payment indicators and rates 
are included in the appropriate Addenda to the OPPS/ASC final rule with 
comment period.
    We did not receive any public comments regarding this proposal. We 
are continuing our established policy for recognizing new mid-year CPT 
codes, and the new mid-year codes implemented in July 2008 are 
displayed in Table 40 below, as well as in Addendum AA to this final 
rule with comment period.

  Table 40--New Category III CPT Codes Implemented in July 2008 for ASC
                                 Payment
------------------------------------------------------------------------
                                                              Final CY
                                          CY 2009 Long        2009 ASC
         CY 2009 HCPCS code                descriptor          payment
                                                              indicator
------------------------------------------------------------------------
 0190T.............................   Placement of                   G2
                                      intraocular
                                      radiation source
                                      applicator.
 0191T.............................   Insertion of                   G2
                                      anterior segment
                                      aqueous drainage
                                      device, without
                                      extraocular
                                      reservoir; internal
                                      approach.
 0192T.............................   Insertion of                   G2
                                      anterior segment
                                      aqueous drainage
                                      device, without
                                      extraocular
                                      reservoir; external
                                      approach.
------------------------------------------------------------------------

2. 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 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 (Transmittal 1540, Change Request 
6095, dated June 20, 2008) of the CY 2008 ASC payment system. In the CY 
2009 OPPS/ASC proposed rule (73 FR 41526), we solicited public comment 
on the proposed ASC payment indicators and payment rates for these 
codes, as listed in Tables 37 and 38 of the proposed rule. The codes 
listed in

[[Page 68726]]

Table 37 also were included in Addendum BB to the CY 2009 OPPS/ASC 
proposed rule. Those HCPCS codes are paid in ASCs, beginning in either 
April or July 2008, 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 HCPCS codes that become effective for July are not 
available to CMS in time for incorporation into the Addenda to the 
OPPS/ASC proposed rule, our policy is to include the HCPCS codes, their 
proposed payment indicators, and proposed payments rates in the 
preamble to the proposed rule but not in the Addenda to the proposed 
rule. The HCPCS codes and their final payment indicators and rates are 
included in the appropriate Addenda to the OPPS/ASC final rule with 
comment period. Thus, the codes implemented by the July 2008 ASC update 
and their proposed CY 2009 payment rates (based on July 2008 ASP data) 
that were displayed in Table 38 of the CY 2009 OPPS/ASC proposed rule 
were not included in Addendum BB to the CY 2009 OPPS/ASC proposed rule. 
We proposed 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 this CY 2009 OPPS/ASC final rule with comment period, consistent 
with our annual update policy.
    For CY 2009, the CMS HCPCS Workgroup created permanent HCPCS J-
codes for the four codes that were implemented in April 2008 and one of 
the codes that was implemented in July 2008, and we will be recognizing 
these HCPCS J-codes for payment of these drugs and biologicals under 
the CY 2009 ASC payment system, consistent with our general policy to 
use permanent HCPCS codes, if appropriate, for the reporting of drugs. 
Tables 41 and 42 show the new permanent HCPCS J-codes that replace 
several HCPCS C-codes and Q-codes that will be deleted, effective 
December 31, 2008. The HCPCS J-codes, effective January 1, 2009, 
describe the same drugs and the same dosages as the HCPCS codes they 
are replacing. Because the new HCPCS codes describe the same drugs and 
the same dosages as do the current codes, there is no effect on the 
payment indicators.
    In addition, a new HCPCS Q-code, Q4114, that is effective January 
1, 2009, was created to replace HCPCS code C9357. Although the long 
descriptor is changed, the new code describes the same biological and 
dosage as did HCPCS code C9357. Therefore, we will recognize HCPCS code 
Q4114 for payment under the CY 2009 ASC payment system, and no change 
to the payment indicator of the HCPCS code is warranted.
    We did not receive any public comments regarding our proposal. We 
are adopting the ASC payment indicators for the new Level II HCPCS 
codes implemented in April and July 2008 as shown in Tables 41 and 42, 
respectively. Moreover, we are adopting as final the replacement HCPCS 
codes, specifically J1267, J7186, J1459, J1750, and J1453, as well as 
HCPCS codes C9356, Q4114, and C9358, as show in Tables 41 and 42 below, 
and in Addendum BB to this final rule with comment period.

                            Table 41--Level II HCPCS Codes Implemented in April 2008
----------------------------------------------------------------------------------------------------------------
                                                                                                  Final CY 2009
             CY 2008 HCPCS code               CY 2009 HCPCS        CY 2009 Long descriptor         ASC payment
                                                  code                                              indicator
----------------------------------------------------------------------------------------------------------------
 C9241.....................................           J1267   Injection, doripenem, 10 mg......              K2
 Q4096.....................................           J7186   Injection, antihemophilic factor               K2
                                                              viii/von willebrand factor
                                                              complex (human), per factor viii
                                                              i.u.
 Q4097.....................................           J1459   Injection, immune globulin                     K2
                                                              (Privigen), intravenous, non-
                                                              lyophilized (e.g. liquid), 500 mg.
 Q4098.....................................           J1750   Injection, iron dextran, 50 mg...              K2
----------------------------------------------------------------------------------------------------------------


                             Table 42--Level II HCPCS Codes Implemented in July 2008
----------------------------------------------------------------------------------------------------------------
                                                                                                  Final CY 2009
             CY 2008 HCPCS code               CY 2009 HCPCS        CY 2009 Long descriptor         ASC payment
                                                  code                                              indicator
----------------------------------------------------------------------------------------------------------------
 C9242.....................................           J1453   Injection, fosaprepitant, 1 mg...              K2
 C9356.....................................           C9356   Tendon, porous matrix of cross-                K2
                                                              linked collagen and
                                                              glycosaminoglycan matrix
                                                              (TenoGlide Tendon Protector
                                                              Sheet), per square centimeter.
 C9357.....................................           Q4114   Allograft, Integra Flowable Wound              K2
                                                              Matrix, injectible, 1 cc.
 C9358.....................................           C9358   Dermal substitute, native, non-                K2
                                                              denatured collagen (SurgiMend
                                                              Collagen Matrix), per 0.5 square
                                                              centimeters.
----------------------------------------------------------------------------------------------------------------

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

1. Covered Surgical Procedures
a. Additions to the List of ASC Covered Surgical Procedures
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41526), we proposed 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 among those 
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 the most 
recent

[[Page 68727]]

available utilization data, we identified the following six procedures 
that we believed 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 proposed 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) were 
displayed in Table 39 of the CY 2009 OPPS/ASC proposed rule (73 FR 
41527).
     Comment: Commenters requested that CMS add a number of additional 
procedures to the ASC list of covered surgical procedures. Some 
commenters requested that CMS add CPT codes 15170 (Acellular dermal 
replacement, trunk, arms, legs; first 100 sq cm or less, or 1% of body 
area of infants and children); 15171 (Acellular dermal replacement, 
trunk, arms, legs; each additional 100 sq cm, or each additional 1% of 
body area of infants and children, or part thereof); 15175 (Acellular 
dermal replacement, face scalp, eyelids, mouth, neck, ears, orbits, 
genitalia, hands, feet, and/or multiple digits; first 100 sq cm or 
less, or 1% of body area of infants and children); and 15176 (Acellular 
dermal replacement, face scalp, eyelids, mouth, neck, ears, orbits, 
genitalia, hands, feet, and/or multiple digits; each additional 100 sq 
cm or each additional 1% of body area of infants and children, or part 
thereof) because they believed that those procedures met the criteria 
CMS has established for ASC payment and are comparable to surgical 
procedures already included on the list of covered surgical procedures.
     Response: We reviewed these codes and agree with the commenters 
that the procedures would not be expected to pose a significant risk to 
beneficiary safety and to require an overnight stay. Therefore, we are 
adding these procedures to the ASC list of covered surgical procedures, 
and we have assigned payment indicator ``G2'' to CPT codes 15170, 
15171, 15175 and 15176 in Addendum AA to this final rule with comment 
period.
     Comment: Several commenters requested that CMS add to the ASC list 
the procedures reported by CPT codes 21385 (Open treatment of orbital 
floor blowout fracture; transantral approach (Caldwell-Luc type 
operation); 21386 (Open treatment of orbital floor blowout fracture; 
periorbital approach); and 21387 (Open treatment of orbital floor 
blowout fracture; combined approach). The commenters stated that 
although the majority of these cases result from trauma and, therefore, 
present in the hospital emergency department, delayed presentation 
occasionally occurs. In those cases, they argued that the ASC setting 
would be an appropriate site for the procedures because blood loss is 
minimal and patients do not require an overnight stay. They also noted 
that CMS had proposed to remove CPT codes 21386 and 21387 from the OPPS 
inpatient list for CY 2009 and that because these procedures would be 
payable in the hospital outpatient setting, they requested that CMS 
provide a reason for its decision to continue to exclude the procedures 
from the ASC list.
     Response: Although we agree with the commenters that these 
procedures rarely would be performed in ASCs because of the typically 
urgent nature of their presentation, our medical advisors found that 
the typical post-operative course for the procedures includes a need 
for active medical monitoring for at least 24 hours following surgery. 
Based on our review of the three procedures, we will continue to 
exclude them from the list of covered surgical procedures for CY 2009 
because we expect that they would pose a significant risk to 
beneficiary safety or require an overnight stay following surgery, even 
on those rare occasions that the beneficiary presents in the ASC after 
a delay in seeking treatment.
     Comment: Commenters requested the addition of CPT codes 29867 
(Arthroscopy, knee, surgical; osteochondral allograft (eg, 
mosaicplasty)) and 29868 (Arthroscopy, knee, surgical; meniscal 
transplantation (includes arthrotomy for meniscal insertion), medial or 
lateral) to the ASC list of covered surgical procedures because they 
would not be expected to require overnight care and are comparable to 
procedures such as CPT code 29880 (Arthroscopy, knee, surgical; with 
meniscectomy (medial AND lateral, including any meniscal shaving)) that 
are included on the ASC list.
    Response: We reviewed the utilization and clinical information for 
the two procedures discussed. We continue to believe that the post-
operative care that is likely to be required for the procedures 
includes inpatient hospital care in many cases, and we expect would at 
least require active medical monitoring and care at midnight following 
the procedure. Therefore, we will continue to exclude CPT codes 29867 
and 29868 from the ASC list of covered surgical procedures for CY 2009.
    Comment: Commenters requested that CMS add CPT codes 31292 (Nasal/
sinus endoscopy, surgical; with medial or inferior orbital wall 
decompression) and 31294 (Nasal/sinus endoscopy, surgical; with optic 
nerve decompression) to the ASC list. Commenters contended that because 
CMS proposed to add CPT code 31293 (Nasal/sinus endoscopy, surgical; 
with medial orbital wall and inferior wall decompression) to the list 
for CY 2009, CMS should also add these two closely related procedures. 
The three procedures were proposed for assignment to APC 0075 (Level V 
Endoscopy Upper Airway) under the OPPS, and the commenters indicated 
that CPT codes 31292 and 31294 were the only procedures assigned to 
that APC that are not on the ASC list. They stated their belief that 
the clinical homogeneity of the APC provides supporting evidence that 
these two procedures should also be included for payment in ASCs.
    Response: In response to the public comments, we reexamined CPT 
codes 31292 and 31294 and continue to expect that these procedures 
would pose a significant safety risk to beneficiaries in ASCs or 
require monitoring at midnight following the surgery. In addition, in 
reviewing those procedures, we reevaluated our proposed addition of CPT 
code 31293 to the ASC list and determined that it should remain 
excluded from the ASC list. Our medical advisors agreed with the 
commenters that the procedure reported by CPT code 31293 is closely 
related to those procedures reported using CPT codes 31292 and 31294 
and determined that it, too, would be expected to pose a significant 
risk to beneficiary safety and require an overnight stay. Therefore, we 
will not add CPT codes 31292 and 31294 to the ASC list, and we also are 
not finalizing our proposal to add CPT code 31293 to the ASC list of 
covered surgical procedures for CY 2009.
    Comment: One commenter requested that CMS add CPT code 37205 
(Transcatheter placement of an intravascular stent(s) (except coronary,

[[Page 68728]]

carotid, and vertebral vessel), percutaneous; initial vessel) to the 
ASC list of covered surgical procedures for CY 2009. The commenter said 
that one of the procedures described by CPT code 37205 is increasingly 
employed by surgeons in attempts to extend the patency of a fistula or 
graft for hemodialysis longer than may be accomplished by angioplasty 
alone. The commenter believed that continued exclusion of CPT code 
37205 from the ASC list would interfere with the physician-patient 
decision-making process related to the most appropriate site for the 
service to be provided. Further, the commenter noted that CPT code 
37205 is used to report other surgeries, some of which may not be 
appropriately provided in ASCs, and strongly encouraged CMS to consider 
creating a separate code(s) for the placement of dialysis vascular 
access stents, similar to the hemodialysis access angioplasty HCPCS G-
codes (G0392 (Transluminal balloon angioplasty, percutaneous; for 
maintenance of hemodialysis access, arteriovenous fistula or graft; 
arterial) and G0393 (Transluminal balloon angioplasty, percutaneous; 
for maintenance of hemodialysis access, arteriovenous fistula or graft; 
venous)) created for CY 2007.
    Response: We continue to find that many of the procedures that 
could be reported by CPT code 37205 would be expected to present 
significant risks to beneficiary safety if they were to be performed in 
ASCs. Therefore, we will continue to exclude this procedure from the 
ASC list for CY 2009. However, we understand the commenter's points 
that the procedure, when performed peripherally, may be valuable for 
maintaining vascular access for dialysis patients and that the clinical 
characteristics of stenting to maintain hemodialysis access may differ 
from the features of other surgical procedures that could also be 
described by CPT code 37205. As we develop the proposals to update the 
OPPS and ASC payment system for CY 2010, we will consider the 
commenter's recommendation regarding the creation of a HCPCS G-code to 
describe the insertion of vascular stents for the purpose of extending 
the patency of fistulae or grafts for dialysis patients.
    Comment: One commenter requested that CMS add CPT code 50593 
(Ablation, renal tumor(s), unilateral, percutaneous, cryotherapy) to 
the ASC list of covered surgical procedures. The commenter noted that 
the procedure is assigned to APC 0423 (Level II Percutaneous Abdominal 
and Biliary Procedures) under the OPPS and is the only procedure in 
that APC that is excluded from the ASC list. The commenter believed 
that, because APCs are clinically homogeneous, CPT code 50593 should 
also be included for ASC payment.
    Response: Our medical advisors reviewed the procedure described by 
CPT code 50593. We have no physician claims data to indicate in which 
sites-of-service the procedure was performed because the Category I CPT 
code was new for CY 2008, and physician data are not available for the 
predecessor Category III CPT code. Based on the judgment of our medical 
advisors, we continue to expect that the procedure would pose a 
significant safety risk to beneficiaries if performed in an ASC. When 
we prepare the CY 2010 OPPS/ASC proposed rule, we will review 
utilization data that have become available for the procedure.
    Comment: Commenters on the CY 2008 OPPS/ASC final rule with comment 
period and commenters on the CY 2009 OPPS/ASC proposed rule requested 
that CMS add CPT code 52649 (Laser enucleation of the prostate with 
morcellation, including control of postoperative bleeding, complete 
(vasectomy, meatotomy, cystourethroscopy, urethral calibration and/or 
dilation, internal urethrotomy and transurethral resection of prostate 
are included if performed)), a new code for CY 2008, to the ASC list of 
covered surgical procedures. The commenters asserted that the procedure 
is comparable to those reported by CPT codes 52647 (Laser coagulation 
of prostate, including control of postoperative bleeding, complete 
(vasectomy, meatotomy, cystourethroscopy, urethral calibration and/or 
dilation, and internal urethrotomy are included if performed)) and 
52648 (Laser vaporization of prostate, including control of 
postoperative bleeding, complete (vasectomy, meatotomy, 
cystourethroscopy, urethral calibration and/or dilation, internal 
urethrotomy and transurethral resection of prostate are included if 
performed)). They believed that, like CPT codes 52647 and 52648, CPT 
code 52649 could be safely performed in an ASC and does not require an 
overnight stay. One commenter explained that the primary difference 
between CPT codes 52648 and 52649 is the additional amount of physician 
time involved for the enucleation technique.
    Response: CPT code 52649 was new for CY 2008, so it was assigned 
interim treatment under the ASC payment system and its status was, 
therefore, open to comment on the CY 2008 OPPS/ASC final rule with 
comment period. Because CPT code 52649 was new for CY 2008, we have no 
physician utilization data regarding the procedure's sites-of-service. 
Our medical advisors continue to expect that CPT code 52649 would pose 
a significant risk to beneficiary safety or require an overnight stay 
and should be excluded from the ASC list for CY 2009. Therefore, we are 
excluding it from the ASC list of covered surgical procedures. However, 
we will reevaluate this procedure as part of our annual review of 
procedures that are excluded from the ASC list during development of 
the CY 2010 OPPS/ASC proposed rule.
    Comment: One commenter requested that CMS add CPT code 57310 
(Closure of urethrovaginal fistula) to the ASC list of covered surgical 
procedures. The commenter contended that the procedure is less complex 
than the procedure reported by CPT code 57320 (Closure of vesicovaginal 
fistula; vaginal approach), which is on the ASC list, and that the 
procedure would be safe for performance in ASCs and would not require 
an overnight stay.
    Response: The utilization data for CPT code 57310 show that the 
procedure is performed roughly half of the time on an inpatient basis 
and that there is no utilization in physicians' offices or ASCs. Based 
on those data, in addition to the clinical judgment of our medical 
advisors that the procedure would be expected to pose a significant 
risk to beneficiary safety and require an overnight stay when performed 
in an ASC, we believe that CPT code 57310 should continue to be 
excluded from the ASC list of covered procedures for CY 2009.
    Comment: One commenter, on behalf of many ASCs, requested the 
addition of CPT codes 64448 (Injection, anesthetic agent; femoral 
nerve, continuous infusion by catheter (including catheter placement) 
including daily management for anesthetic agent administration) and 
64449 (Injection, anesthetic agent; lumbar plexus, posterior approach, 
continuous infusion by catheter (including catheter placement) 
including daily management for anesthetic agent administration) to the 
ASC list of covered surgical procedures for CY 2009. The commenter 
stated that these procedures are provided to non-Medicare patients in 
ASCs on a regular basis and that patients would not require care 
overnight.
    Response: Our medical advisors examined the utilization data and 
available clinical information for these procedures and determined that 
they are appropriate for Medicare payment as covered surgical 
procedures in ASCs.

[[Page 68729]]

Although the utilization data show that the procedures are usually 
provided to inpatients as a component of anesthesia for an inpatient 
surgical procedure, such as total knee replacement, we realize that 
both CPT code 64448 and 64449 also may be provided as independent, 
primary procedures. When the procedures are the primary procedures 
provided to the beneficiary, we agree with the commenter that the ASC 
is an appropriate site-of-service. Therefore, we will assign payment 
indicator ``G2'' to CPT codes 64448 and 64449 for CY 2009.
    Comment: As discussed further in section XI. of this final rule 
with comment period, commenters requested that CPT code 0184T (Excision 
of rectal tumor, transanal endoscopic microsurgical approach (i.e., 
TEMS)) be removed from the OPPS inpatient list. They also recommended 
that once the procedure was removed from the inpatient list, it should 
be added to the ASC list of covered surgical procedures because the 
procedure is minimally invasive and is clinically comparable to CPT 
code 45170 (Excision of rectal tumor, transanal approach), which is not 
excluded from the ASC list.
    Response: As discussed in section XI. of this final rule with 
comment period, we consulted with our medical advisors in reevaluating 
CPT code 0184T for removal from the inpatient list and determined that 
the procedure should remain on the inpatient list. Therefore, the 
procedure will continue to be excluded from the ASC list.
    Comment: Several commenters asked that CMS remove a number of 
procedures from the list of covered surgical procedures. They expressed 
their concern that CMS has not excluded these procedures and strongly 
urged CMS to remove the procedures from the list because they are not 
safely performed in ASCs. Specifically, one commenter asserted that CPT 
codes 21215 (Graft, bone; mandible (includes obtaining graft)); 40700 
(Plastic repair of cleft lip/nasal deformity; primary, partial or 
complete, unilateral); 40701 (Plastic repair of cleft lip/nasal 
deformity, primary bilateral, one stage procedure); 42200 (Palatoplasty 
for cleft palate, soft and/or hard palate only); 42205 (Palatoplasty 
for cleft palate, with closure of alveolar ridge; soft tissue only); 
42210 (Palatoplasty for cleft palate, with closure of alveolar ridge; 
with bone graft to alveolar ridge includes obtaining graft)), 42215 
(Palatoplasty for cleft palate; major revision); and 42220 
(Palatoplasty for cleft palate; secondary lengthening procedure) 
require general anesthesia and close postoperative monitoring and are 
often performed in the inpatient setting.
    The commenters would like the procedures removed from the ASC list 
for a number of reasons. First, they asserted that the eight procedures 
are unsafe for performance in ASCs due to the need for general 
anesthesia and postoperative airway monitoring and reminded CMS that 
most of the patients who undergo these procedures are children and that 
very few are Medicare beneficiaries. They believed that the close 
monitoring of the airway postoperatively is beyond the typical ASC 
scope of observation. They also requested that the procedures be 
excluded from ASC payment because they are concerned that private 
insurers may misinterpret the procedures' inclusion on the ASC list as 
a Medicare policy that means the procedures should never be provided in 
the inpatient setting.
    Response: We do not see a basis for removing these procedures from 
the ASC list. All eight of these procedures were on the list of covered 
surgical procedures even before CY 2007 and, to our knowledge, have 
been safely performed in ASCs all of that time. Our policy to not 
exclude a procedure from the ASC list is not an indication that a 
procedure should no longer be provided in other settings, including the 
hospital inpatient setting. We take this opportunity to reiterate two 
points relative to the ASC list: we make decisions regarding procedures 
excluded from the ASC list based on our assessments of the needs of 
Medicare beneficiaries; and we include on the ASC list all procedures 
we believe are appropriate in order to provide physicians and patients 
with the most choices possible for sites-of-service. We expect that 
physicians will consider for each individual patient which site-of-
service is most appropriate. We understand that the procedures on the 
ASC list are sometimes more appropriately performed on an inpatient 
basis due to the individual's age or other clinical considerations.
    After consideration of the public comments received, as discussed 
above, we are adopting for CY 2009 the 14 ASC covered surgical 
procedures and payment indicators as set out in Table 43 below.

       Table 43--ASC Covered Surgical Procedures Added FOR CY 2009
------------------------------------------------------------------------
                                                           Final CY 2009
       CY 2009 HCPCS code             CY 2009 Short         ASC payment
                                        descriptor           indicator
------------------------------------------------------------------------
15170..........................  Acell graft trunk/arms/              G2
                                  legs.
15171..........................  Acell graft t/arm/leg                G2
                                  add-on.
15175..........................  Acellular graft, f/n/hf/             G2
                                  g.
15176..........................  Acell graft, f/n/hf/g                G2
                                  add-on.
34490..........................  Removal of vein clot...              G2
36455..........................  Bl exchange/transfuse                G2
                                  non-nb.
49324..........................  Lap insertion perm ip                G2
                                  cath.
49325..........................  Lap insertion perm ip                G2
                                  cath.
49326..........................  Lap w/omentopexy add-on              G2
64448..........................  N block inj fem, cont                G2
                                  inf.
64449..........................  N block inj, lumbar                  G2
                                  plexus.
0190T..........................  Place intraoc radiation              G2
                                  src.
0191T..........................  Insert ant segment                   G2
                                  drain int.
0192T..........................  Insert ant segment                   G2
                                  drain ext.
------------------------------------------------------------------------


[[Page 68730]]

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 performed more than 50 percent of the time 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. 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 reported by CPT 
codes 21073 (Manipulation of temporomandibular joint(s) (TMJ), 
therapeutic, requiring an anesthesia service (ie, general or monitored 
anesthesia care); 67229 (Treatment of extensive or progressive 
retinopathy, one or more sessions; preterm infant (less than 37 weeks 
gestation at birth), performed from birth up to 1 year of age (eg, 
retinopathy of prematurity), photocoagulation or cryotherapy); and 
68816 (Probing of nasolacrimal duct, with or without irrigation; with 
transluminal balloon catheter dilation) that were new for CY 2008 as 
temporarily office-based on an interim 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 CY 2009 OPPS/ASC final rule with comment 
period, which we do in the discussion in section XV.E.1.b.(2) of this 
final rule with comment period.
(2) Changes to Covered Surgical Procedures Designated as Office-Based 
for CY 2009
    In developing the CY 2009 OPPS/ASC 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 proposed 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) (73 FR 41527). We 
proposed to make the office-based designation of CPT code 0084T 
temporary because we did not have adequate data upon which to base a 
permanent designation. We proposed to make permanent office-based 
designations for the remaining four procedures. The codes that we newly 
proposed as office-based were displayed in Table 40 of the CY 2009 
OPPS/ASC proposed rule (73 FR 41527-8).
    Comment: Commenters stated that CMS should not finalize any of its 
proposed new designations of procedures as office-based, in order to 
limit the exposure of the ASC payment system to the vulnerabilities of 
the MPFS. Further, they asserted that CMS did not provide publicly 
accessible data to validate the agency's assertions that the procedures 
proposed for temporary or permanent assignment as office-based 
procedures were commonly performed in physicians' offices in CY 2007. 
They also shared their belief that, as more procedures are designated 
office-based, the linkage between the ASC and OPPS ratesetting 
methodology would be eroded and relative weight scaling based on 
changes in OPPS median costs would be confounded.
    Response: We continue to believe that our policy to identify low 
complexity procedures that are usually provided in physicians' offices 
is necessary and valid. We believe this is the most appropriate 
approach to preventing the creation of payment incentives for services 
to move from physicians' offices to ASCs for the many newly-covered low 
complexity procedures on the ASC list. Moreover, we are confident that 
the CY 2007 claims data, the most recent full year of volume and 
utilization data, is an appropriate source to inform our decisions 
regarding the site-of-service for procedures. Our office-based 
designations are based on our medical advisors' clinical judgments, 
utilization data for procedures that are closely related to the 
procedures being evaluated, and any other information that is available 
to us, in addition to the claims data. We post a number of supporting 
data files on the CMS Web site for each proposed and final rule for the 
annual OPPS/ASC update. Although we do not post all relevant Medicare 
data on the CMS Web site, Medicare claims data are available to any 
member of the public who chooses to purchase and use these data. 
Therefore, we believe that commenters have access to relevant Medicare 
claims and utilization data in order to conduct analyses that would 
assist them in evaluating all of our ASC proposals.
    Regarding the commenters' assertions that increasing the number of 
procedures designated as office-based further erodes the linkage 
between the OPPS and ASC ratesetting methodologies and increases the 
exposure of the ASC payment system to the ``vulnerabilities of the 
MFPS,'' it is unclear to what vulnerabilities of MPFS the commenters 
are referring. However, we continue to believe that it is appropriate 
that ASCs be paid no more for performing office-based procedures than 
those procedures would be paid when performed in physicians' offices, 
in order to deter inappropriate

[[Page 68731]]

migration of these surgical procedures to ASCs based on financial 
considerations rather than clinical needs. Therefore, we believe it is 
necessary to update the office-based list of ASC covered surgical 
procedures annually, to account for changes in medical practice and new 
surgical procedures that may result in additional surgical procedures 
that are predominantly performed in physicians' offices.
    Comment: One commenter supported the designation of CPT codes 0084T 
(Insertion of a temporary prostatic urethral stent) and 55876 
(Placement of interstitial device(s) for radiation therapy guidance 
(e.g., fiducial markers, dosimeter), prostate (via needle, any 
approach), single or multiple) as office-based procedures. The 
commenter stated that the procedure reported by CPT code 0084T is 
minimally invasive and can be safely performed in the physician's 
office setting. The commenter also requested that CMS make permanent 
the office-based designation of CPT code 55876. The commenter stated 
that the procedure is being performed safely in the physician office 
setting and believed that office-based utilization is increasing.
    Response: We thank the commenter for the support. However, we will 
maintain the temporary office-based designations for CPT codes 0084T 
and 55876 until we are able to evaluate more complete utilization and 
clinical information for those procedures. CPT Code 55876 is discussed 
below in more detail.
    The utilization data for the procedures listed in Table 44 did not 
change between the proposed rule and this final rule with comment 
period. Therefore, after consideration of the public comments received, 
we are finalizing our CY 2009 proposal, without modification, to 
designate the procedures displayed in Table 44 as office-based for CY 
2009. The office-based designation of CPT code 0084T remains temporary.

    Table 44--CY 2009 Final Designations of ASC Covered Surgical Procedures Newly Designated as Office-Based
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed CY    Final CY
                                                                           CY 2008 ASC    2009 ASC     2009 ASC
           CY 2009 HCPCS code                 CY 2009 short descriptor       payment      payment      payment
                                                                            indicator    indicator    indicator
----------------------------------------------------------------------------------------------------------------
0084T...................................  Temp prostate urethral stent...           G2          R2*          R2*
36515...................................  Apheresis, adsorp/reinfuse.....           G2           P2           P2
36516...................................  Apheresis, selective...........           G2           P2           P2
65436...................................  Curette/treat cornea...........           G2           P3           P3
67505...................................  Inject/treat eye socket........           G2           P3          P3
----------------------------------------------------------------------------------------------------------------
* If designation is temporary.

    Furthermore, during the development of the CY 2009 OPPS/ASC 
proposed rule, we reviewed CY 2007 utilization and other information 
for the seven procedures with temporary office-based designations for 
CY 2008. Of those procedures, in the CY 2009 OPPS/ASC proposed rule, we 
proposed 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) (73 FR 41528). 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 believed it was appropriate to propose to make that 
designation permanent for CY 2009.
    In the CY 2009 OPPS/ASC proposed rule, we proposed to not make 
permanent the office-based designations for the 6 other procedures for 
which the CY 2008 designations are temporary (73 FR 41528). For those 
procedures, we did not believe that the currently available utilization 
data provided an adequate basis for proposing permanent office-based 
designations. In our review of these six codes, we 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) also 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 
proposed to maintain the temporary office-based payment indicator for 
CY 2009. Therefore, we also proposed to assign a temporary office-based 
payment indicator to HCPCS code C9728 for CY 2009. The procedures with 
temporary office-based status for the CY 2008 ASC payment system that 
we proposed to continue to temporarily designate as office-based 
procedures for CY 2009 were displayed in Table 40A of the CY 2009 OPPS/
ASC proposed rule (73 FR 41528).
     Those procedures and their CY 2009 proposed and final payment 
indicators are displayed in Table 45 below. All procedures for which 
the proposed office-based designation for CY 2009 was temporary also 
were indicated by an asterisk in Addendum AA to the CY 2009 OPPS/ASC 
proposed rule.
    Comment: Commenters on the CY 2008 OPPS/ASC final rule with comment 
period and commenters on the CY 2009 OPPS/ASC proposed rule objected to 
the temporarily office-based designation for CPT code 21073 
(Manipulation of temporomandibular joint(s) (TMJ), therapeutic, 
requiring an anesthesia service (i.e., general or monitored anesthesia 
care). They asserted that, because CPT code 21073 is new for CY 2008 
and is not analogous, or essentially equivalent, to any previously 
existing code, CMS has no data upon which to base its

[[Page 68732]]

designation of CPT code 21073 as office-based. One commenter said that 
CMS bears the burden of proof in categorizing a service as office-
based, especially because that categorization is permanent. Further, 
the commenters noted that, by definition, the procedure requires 
anesthesia services and they believe it is unlikely that physicians' 
offices would be the primary site for this service.
    Response: We reexamined the utilization and clinical information 
available to us for this procedure. As noted by the commenters, CPT 
code 21073 is new for CY 2008 and, therefore, we do not have physician 
utilization data upon which to base designation of the procedure as 
office-based. However, our medical advisors continue to believe that 
CPT code 21073 describes a surgical procedure that they expect will be 
performed in physician's offices. In support of their clinical 
perspective are the clinical example and description of the procedure 
included in CPT 2008 Changes: An Insider's View. In that description, 
the patient undergoes the procedure under general anesthesia in the 
physician's office. However, because we have no Medicare utilization 
data for this service, we believe that a temporary office-based 
designation is most appropriate.
    Comment: A commenter requested that CMS reconsider the designation 
of CPT code 67229 (Treatment of extensive or progressive retinopathy, 
one or more sessions; preterm infant (less than 37 weeks gestation at 
birth), performed from birth up to 1 year of age (e.g., retinopathy of 
prematurity), photocoagulation or cryotherapy) as temporarily office-
based. The commenter said that, by its very nature, it is clear that 
the procedure is performed on premature newborns and that it would 
never be done in the office setting. Further, the commenter stated 
that, because the procedure is not as likely to be done in ASCs as in 
the HOPD or hospital neonatal intensive care unit, CMS should not 
preclude its performance in ASCs by setting a payment that is too low 
to cover the costs of the treatment.
    Response: We reviewed our temporary designation for this code as 
office-based. Although we do not have data indicating physicians' 
office utilization, according to the clinical example published in CPT 
2008 Changes: An Insider's View, the procedure requires only topical 
anesthesia and we continue to believe that, in the circumstances that 
the procedure is being performed on a child outside of the hospital 
setting, it would most likely be performed in the physicians' office. 
We would also point out that, at this time, the procedure has not been 
priced in the office and, as a result, the temporary assignment of 
payment indicator R2 results in payment at the fully implemented ASC 
rate. Therefore, we are maintaining for CY 2009 our designation of CPT 
code 67229 as temporarily office-based.
    Comment: Commenters on the CY 2008 OPPS/ASC final rule with comment 
period and commenters on the CY 2009 OPPS/ASC proposed rule strongly 
opposed the interim designation of new CPT code 68816 (Probing of 
nasolacrimal duct, with or without irrigation; with transluminal 
balloon catheter dilation) as office-based. They stated that the 
procedure is not furnished in physicians' offices more than 50 percent 
of the time. They explained that because the typical patient is a 14-
month old infant the surgical procedure reported by CPT code 68816 
usually requires general anesthesia and absolutely requires the use of 
either the hospital outpatient or ASC setting.
    Response: CPT code 68816 is a new code for CY 2008 and, as such, we 
do not have utilization data for review. We are persuaded by the 
commenters, however, that there is a need for a facility setting to 
perform most of these procedures and believe that it would be 
appropriate not to finalize our proposal to designate the procedure as 
office-based, even temporarily. Therefore, we are assigning payment 
indicator ``G2'' to CPT code 68816 for CY 2009.
    After consideration of the public comments received, as displayed 
in Table 45, we are adopting for CY 2009 the following payment 
indicators for those procedures that were designated temporarily 
office-based for CY 2008 and for which we proposed to maintain their CY 
2009 designation as temporarily office-based.

Table 45--Final CY 2009 Payment Indicators for CY 2008 Offfice-Based Procedures for Which Their Proposed CY 2009
                                    Designation Was Temporarily Office-Based*
----------------------------------------------------------------------------------------------------------------
                                                                                        Proposed CY    Final CY
                                                                           CY 2008 ASC    2009 ASC     2009 ASC
           CY 2009 HCPCS code                 CY 2009 short descriptor       payment      payment      payment
                                                                            indicator    indicator    indicator
----------------------------------------------------------------------------------------------------------------
0099T...................................  Implant corneal ring...........          R2*          R2*          R2*
0124T...................................  Conjunctival drug placement....          R2*          R2*          R2*
21073...................................  Mnpj of tmj w/anesthesia.......          P3*          P3*          P3*
55876...................................  Place rt device/marker, pros...          P3*          P3*          P3*
67229...................................  Tr retinal les preterm inf.....          R2*          R2*          R2*
68816...................................  Probe nl duct w/balloon........          P3*          P3*           G2
C9728...................................  Place device/marker, non pro...          R2*          R2*         R2*
----------------------------------------------------------------------------------------------------------------
* If designation is temporary.

    Displayed in Table 46 are new CY 2009 HCPCS codes (excluding 
renumbered codes) to which we have assigned temporary office-based 
payment indicators. As explained in section XV.D.1. of this final rule 
with comment period, we reviewed all of the newly created HCPCS codes 
that became available after the issuance of the CY 2009 OPPS/ASC 
proposed rule that will be used to report surgical procedures in CY 
2009 to evaluate their appropriateness for the ASC list of covered 
surgical procedures. Of the 16 new CY 2009 HCPCS codes that we 
determined should not be excluded from the ASC list based on our 
clinical review, including assessment of available utilization and 
volume data for any closely related procedures and consideration of 
other available information, we determined that three of the procedures 
would usually be performed in physicians' offices. However, because we 
had no utilization data for the procedures described by these new HCPCS 
codes, we made the office-based designations temporary rather than 
permanent and will reevaluate the procedures when data

[[Page 68733]]

become available. The temporary payment indicators for the three 
office-based procedures displayed in Table 46 are interim designations 
and are open to public comment during the 60-day comment period for 
this final rule with comment period. HCPCS codes that are new for CY 
2009 are designated with an ``NI'' comment indicator in Addenda AA. We 
will respond to public comments on the interim designations in the CY 
2010 OPPS/ASC final rule with comment period.

Table 46--CY 2009 Payment Indicators for New CY 2009 HCPCS Codes for ASC
   Covered Surgical Procedures Assigned Temporary Office-Based Payment
                     Indicators on an Interim Basis
------------------------------------------------------------------------
                                                              CY 2009
                                                            Interim ASC
       CY 2009 HCPCS code        CY 2009 long descriptor      payment
                                                             indicator
------------------------------------------------------------------------
46930..........................  Destruction of internal             P3*
                                  hemorrhoid(s) by
                                  thermal energy (eg,
                                  infrared coagulation,
                                  cautery,
                                  radiofrequency).
64455..........................  Injection(s),                       P3*
                                  anesthetic agent and/
                                  or steroid, plantar
                                  common digital
                                  nerve(s) (eg, Morton's
                                  neuroma).
64632..........................  Destruction by                     P3*
                                  neurolytic agent;
                                  plantar common digital
                                  nerve.
------------------------------------------------------------------------
* If designation is temporary.

c. Covered Surgical Procedures Designated as Device-Intensive
(1) Background
    As discussed in the August 2, 2007 ASC 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 the CY 2009 OPPS/ASC proposed rule (73 FR 
41530). The 45 ``device-intensive'' procedures for which the modified 
rate calculation methodology applies in CY 2008 were 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).
(2) Changes to List of Covered Surgical Procedures Designated as 
Device-Intensive for CY 2009
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41528 through 41529), 
we proposed to update the ASC list of covered surgical procedures that 
are eligible for payment according to the device-intensive procedure 
payment methodology for CY 2009, consistent with the proposed OPPS 
device-dependent APC update, reflecting 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 final rule 
with comment period. The ASC covered surgical procedures that we 
proposed to designate as device-intensive and that would be subject to 
the device-intensive procedure payment methodology were listed in Table 
41 of the CY 2009 OPPS/ASC proposed rule (73 FR 41529 through 41530). 
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 were also listed in Table 41 
of the proposed rule. Each proposed device-intensive procedure was 
assigned payment indicator ``H8'' or ``J8,'' depending on whether it is 
subject to transitional payment, and all of these codes were included 
in Addendum AA to the CY 2009 OPPS/ASC proposed rule.
    Comment: The commenters generally supported the continuation of a 
modified payment methodology for ASC covered surgical procedures 
designated as device-intensive. However, several commenters stated that 
many of the procedures CMS identifies as device-dependent under the 
OPPS are not treated as device-intensive under the revised ASC payment 
system, and that the resulting ASC payment rates proposed for these 
procedures are too low to ensure patient access to these procedures in 
the ASC setting. According to these commenters, the placement of an APC 
on the OPPS device-dependent list means that a significant portion of 
the procedure cost is not influenced by factors such as labor costs. 
They argued that ASC procedures that are device-dependent under the 
OPPS should likewise be protected from the full application of the ASC 
conversion factor, in order to properly account for the fixed cost of 
the device or implant, and recommended that CMS treat as device-
intensive all ASC procedures that are assigned to an OPPS device-
dependent APC.
    The commenters expressed general concerns about the payment 
adequacy of procedures mapping to OPPS device-dependent APC 0083 
(Coronary or Non-Coronary Angioplasty and Percutaneous Valvuloplasty); 
APC 0115 (Cannula/Access Device Procedures); APC 0202 (Level VII Female 
Reproductive Procedures); and APC 0623 (Level III Vascular Access 
Procedures). Some commenters asked that CMS reconsider the criteria for 
recognizing procedures as device-intensive for ASC payment purposes to 
include procedures where the OPPS device offset percentage is lower 
than 50 percent, while others requested that CMS add to the ASC list of 
device-intensive procedures those procedures that require items that 
would have been separately payable under the Durable Medical Equipment, 
Prosthetics, Orthotics, and Supplies (DMEPOS) fee schedule prior to the 
implementation of the revised ASC payment system on January 1, 2008.
    Several commenters did not request that CMS modify the methodology 
for designating ASC covered surgical procedures as device-intensive, 
but requested that specific procedures that were not included in Table 
41 of the CY 2009 OPPS/ASC proposed rule (73 FR 41529 through 41530) be 
recognized as

[[Page 68734]]

device-intensive in CY 2009. Some commenters argued that the procedures 
described by the following codes always require the use of an auditory 
osseointegrated device and should be considered device-intensive for 
ASC payment purposes: CPT code 69714 (Implantation, osseointegrated 
implant, temporal bone, with percutaneous attachment to external speech 
processor/cochlear stimulator; without mastoidectomy); CPT code 69715 
(Implantation, osseointegrated implant, temporal bone, with 
percutaneous attachment to external speech processor/cochlear 
stimulator; with mastoidectomy); CPT code 69717 (Replacement (including 
removal of existing device), osseointegrated implant, temporal bone, 
with percutaneous attachment to external speech processor/cochlear 
stimulator; without mastoidectomy); and CPT code 69718 (Replacement 
(including removal of existing device), osseointegrated implant, 
temporal bone, with percutaneous attachment to external speech 
processor/cochlear stimulator; with mastoidectomy). According to these 
commenters, the proposed ASC payment rate of approximately $3,086 would 
be inadequate to cover the device costs associated with these 
procedures and, therefore, would prevent ASCs from providing these 
services. The commenters added that these CPT codes map to device-
dependent APC 0425 (Level II Arthroplasty or Implantation with 
Prosthesis), and that it is inconsistent for a procedure to be 
considered device-driven in one setting of care and not another setting 
of care.
    Several commenters also pointed out that CPT code 19296 (Placement 
of radiotherapy afterloading balloon catheter into the breast for 
interstitial radioelement application following partial mastectomy, 
includes imaging guidance; on date separate from partial mastectomy) 
and CPT code 19297 (Placement of radiotherapy afterloading balloon 
catheter into the breast for interstitial radioelement application 
following partial mastectomy, includes imaging guidance; concurrent 
with partial mastectomy), which map to OPPS device-dependent APC 0648 
(Level IV Breast Surgery), require the use of a device that has a list 
price that clearly exceeds 50 percent of the median costs calculated 
for those CPT codes and, therefore, concluded that these procedures 
should be added to the ASC list of device-intensive procedures.
    Response: We appreciate commenters' recommendations on how we 
should designate procedures as device-intensive under the revised ASC 
payment system. In the August 2, 2007 revised ASC payment system final 
rule (72 FR 42508), we established that the modified payment 
methodology for calculating ASC payment rates for device-intensive 
procedures shall apply to ASC covered surgical procedures that are 
assigned to device-dependent APCs under the OPPS for the same calendar 
year, where those APCs have a device cost of greater than 50 percent of 
the APC cost (that is, the device offset percentage is greater than 
50). We believe these criteria ensure that ASC payment rates are 
adequate to provide packaged payment for high cost implantable devices 
and ensure beneficiaries have access to these procedures in all 
appropriate care settings. We do not agree that we should change our 
criteria and treat as device-intensive all ASC services that map to 
OPPS device-dependent APCs, or the subset of procedures that are 
assigned to OPPS device-dependent APCs with device offset percentages 
less than 50 percent, regardless of whether those procedures require 
items that would have been separately payable under the DMEPOS fee 
schedule prior to the implementation of the revised ASC payment system 
on January 1, 2008. Under the modified payment methodology for ASC 
covered surgical procedures designated as device-intensive, we 
separately determine both the device payment and service payment 
portions of the ASC payment rate, and apply the ASC conversion factor 
only to the specially calculated OPPS relative payment weight for the 
service portion, while providing the same packaged payment for the 
device portion as would be made under the OPPS. The 50-percent device 
offset threshold is established to ensure that the ASC conversion 
factor is not applied to the costs of high cost implantable devices, 
which likely do not vary between ASCs and OPPS hospitals in the same 
manner service costs have been shown to vary. We believe that when 
device costs comprise less than 50 percent of total procedure costs, 
those costs are less likely to be as predictable across sites-of-
service. Accordingly, we believe that it is possible for ASCs to 
achieve efficiencies relative to OPPS hospitals when providing those 
procedures, and that the application of the ASC conversion factor to 
the entire ASC payment weight is appropriate.
    We note that, due to additional claims and revised cost report data 
that have become available since we issued the CY 2009 OPPS/ASC 
proposed rule, the OPPS device offset percentage for device-dependent 
APC 0425 is now greater than 50 percent. Therefore, the procedures that 
are on the list of ASC covered surgical procedures and assigned to this 
APC, including auditory osseointegrated device implantation procedures, 
are designated as device-intensive for ASC payment purposes for CY 
2009, as shown in Table 47 below. However, the device offset 
percentages for APC 0083, APC 0115, APC 0202, APC 0623, and APC 0648 
remain below 50 percent based on the CY 2007 claims data available for 
this final rule with comment period. Therefore, the surgical procedures 
that are assigned to these APCs under the OPPS and that are on the ASC 
list of covered surgical procedures are not considered to be device-
intensive procedures for CY 2009 and they are not subject to the 
modified ASC payment methodology.
    Comment: Some commenters urged CMS to move to the fully implemented 
transitional payment rate in CY 2009 for procedures that require 
implantable devices but are not designated as device-intensive. 
According to commenters, ASCs cannot afford to perform procedures with 
significant device costs for which no payment for the device is made 
during the transition. Commenters offered as an example the procedure 
described by CPT code 26535 (Arthroplasty, interphalangeal joint; each 
joint), which requires implantation of a prosthetic joint. Commenters 
noted that because the procedure does not map to a device-dependent APC 
and is not considered device-intensive for ASC payment purposes, the 
procedure would not be economically feasible to perform in the ASC 
setting until full implementation of the revised ASC payment rates in 
CY 2011. Some commenters stated that the payment rates calculated for 
ASC device-intensive procedures that are subject to transitional 
payment also are too low.
    One commenter recommended that CMS exempt CPT code 51715 
(Endoscopic injection of implant material into the submucosal tissues 
of the urethra and/or bladder neck) from the 4-year transition and 
immediately adopt the ``fully implemented'' ASC payment rate in order 
to recognize more appropriately the procedure's device costs. The 
commenter calculated the OPPS device offset percentage of CPT code 
51715 and found that it equals 29 percent of the CY 2009 OPPS proposed 
payment rate for CPT code 51715, but 68 percent of the CY 2009 ASC 
proposed payment rate. According to the commenter, prior to 
implementation of the revised ASC payment system on January 1, 2008, 
ASCs would have received payment for these high device costs under the 
DMEPOS fee schedule rather than through the ASC facility

[[Page 68735]]

payment for CPT code 51715. The commenter reasoned that since the 
devices are no longer paid separately, the procedure described by CPT 
code 51715 is in the same situation as a procedure code that is newly 
assigned to payment in the ASC setting (that is, there is no longer a 
relevant payment within the prior ASC system upon which to base the 
transition). The commenter concluded that this was an analogous case 
warranting the same remedy of full implementation of the ASC rate 
without phase-in.
    Several commenters argued that CMS should not subject procedures 
that were on the ASC list of covered surgical procedures in CY 2007 but 
were rarely performed in ASCs prior to 2008 to the transitional 
adjustment. One commenter provided its data analysis demonstrating that 
CPT code 55873 (Cryosurgical ablation of the prostate (includes 
ultrasonic guidance for interstitial cryosurgical probe placement)) was 
present on three ASC claims in CY 2007, on one claim in CY 2006, and 
was not billed at all by ASCs in CY 2005. According to the commenters, 
the transitional payment for CPT code 55873 is inadequate to cover 
ASCs' costs of providing the procedure and will prevent beneficiaries 
from accessing this procedure in the ASC setting.
    Response: We do not agree that we should move to the full revised 
ASC payment rates in CY 2009 for all ASC covered surgical procedures 
that may require implantable devices but are not designated as device-
intensive for ASC payment purposes. As we stated in the August 2, 2007 
revised ASC payment system final rule (72 FR 42520), the transition to 
the fully implemented revised ASC payment system should not be 
asymmetrical, meaning that procedures with decreasing payments under 
the revised payment system should not be transitioned differently from 
those with increasing payments. We also do not agree that procedures 
not designated as device-intensive that require items that would have 
been separately payable under the DMEPOS fee schedule prior to the 
implementation of the revised ASC payment system on January 1, 2008, 
are in the same situation as a procedure code that is newly covered in 
the ASC setting, and thus not subject to the transition.
    As stated above, only those ASC covered surgical procedures that 
are assigned to OPPS device-dependent APCs and have OPPS device offset 
percentages greater than 50 percent are designated as device-intensive 
for ASC payment purposes. CPT code 26535 and CPT code 51715 are not 
assigned to OPPS device-dependent APCs, and thus do not meet the 
criteria established for designating ASC covered surgical procedures as 
device-intensive. Accordingly, we do not distinguish between the device 
and service portions of ASC payment for these procedures, and the 
transitional adjustment is applied to the total ASC payment rates. As 
established in regulation at Sec.  416.171(c), the transitional 
adjustment applies to all services on the CY 2007 ASC list of covered 
services. We cannot make an exception for procedures, such as the one 
described by CPT code 55873, that were on the CY 2007 ASC list of 
covered services but were rarely performed in ASCs according to 
commenters.
    We disagree with commenters that payment rates for ASC device-
intensive procedures that are subject to transitional payment also are 
too low. Consistent with the approach under the modified payment 
methodology for ASC covered surgical procedures designated as device-
intensive whereby we only apply the ASC conversion factor to the 
service payment portion of the ASC payment rate and not the device 
payment portion, we also apply the transition policy differentially to 
the device and service payment portions of the total ASC payment. While 
we do not subject the device payment portion of the total ASC payment 
for the procedure to the transition policy, we do transition the 
service payment portion of the total ASC payment for the procedure over 
the 4-year phase-in period. As described in the August 2, 2007 revised 
ASC payment system final rule (72 FR 42521), during each of the 
transition years, when the CY 2007 ASC payment rate for a device-
intensive procedure that did not previously include packaged ASC 
payment for the implantable device itself is blended with the payment 
developed under the methodology of the revised ASC payment system that 
would otherwise package the device payment, the full device payment 
amount is paid to ASCs in the transition year, with blended payment 
determined only for the service portion of the ASC payment, for which a 
corresponding CY 2007 ASC payment rate exists. This specific transition 
approach helps ensure that ASCs receive appropriate packaged payment 
for implantable devices during the transition years, even though 
payment for such devices is generally not included in their base CY 
2007 ASC payment rate.
    Comment: Some commenters urged CMS not to adjust the device-or 
implant-related portion of ASC payment by the Medicare wage index. 
According to commenters, the acquisition of devices and implants occurs 
on a national market, and ASCs in rural areas pay approximately the 
same for medical devices and equipment as are facilities in more 
expensive labor markets. The commenters stated that CMS is underpaying 
device costs in markets where the wage index is low, and overpaying in 
markets where the wage index is high. The commenters recommended CMS 
use the OPPS device offset percentage where calculated for OPPS device-
dependent procedures to determine what portion of the ASC payment 
should be excluded from wage index adjustment. For other services that 
are not device-dependent under the OPPS, commenters recommended CMS 
calculate the amount of the payment attributable to the median device 
cost and apply the wage index to the remainder of the payment.
    Response: We do not believe it is appropriate to vary the 
percentage of the national payment that is wage adjusted for different 
services. Under the revised ASC payment system, we utilize 50 percent 
as the labor-related share to adjust national ASC payment rates for 
geographic wage differences. We apply to ASC payments the IPPS pre-
floor, pre-reclassification wage index values associated with the June 
2003 OMB geographic localities, as recognized under the IPPS and OPPS, 
in order to adjust the labor-related portion of the national ASC 
payment rates for geographic wage differences. Consistent with the 
OPPS, we apply the ASC geographic wage adjustment to the entire ASC 
payment rate for device-intensive procedures. MedPAC has indicated its 
intent to evaluate CMS' method for adjusting payments for variations in 
labor costs in light of differences in labor-related costs for device-
implantation services. We look forward to reviewing the results of its 
evaluation, as well as any recommendations it may provide, regarding 
the OPPS or ASC wage adjustment policy.
    Comment: Commenters expressed concern that the payment increase 
proposed for cochlear implant procedures would be insufficient to cover 
the true costs associated with the cochlear implant device, described 
by HCPCS code L8614 (Cochlear device, includes all internal and 
external components), and related surgical procedure, described by CPT 
code 69930 (Cochlear device implantation, with or without 
mastoidectomy), which is assigned to OPPS device-dependent APC 0259 
(Level VII ENT Procedures).

[[Page 68736]]

In order to preserve access to this service in the ASC setting, 
commenters urged CMS to reconsider the CY 2009 proposed ASC payment 
rate of approximately $22,744 based on estimates of the selling price 
of the cochlear implant device as calculated using hospital invoice 
data supplied separately by the two leading cochlear implant 
manufacturers. Other commenters encouraged CMS to continue to monitor 
and adjust payments for cochlear implant claims including CPT code 
69930 paired with HCPCS code L8614.
    Response: We calculate the ASC relative payment weights using the 
OPPS relative weights, which are based on hospitals' costs as reported 
on claims and in cost reports. As discussed in section II.A.2.d.(1). of 
this final rule with comment period, we disagree with the commenters 
that it would be appropriate to use external pricing information in 
place of the costs derived from the claims and Medicare cost report 
data for APC 0259 because we believe that to do so would distort the 
relativity that is fundamental to the integrity of the OPPS. We do not 
believe it would be appropriate to deviate from our standard 
ratesetting methodologies, either for OPPS device-dependent APCs or ASC 
device-intensive procedures, based on manufacturer estimates of a 
particular device's selling price relative to the OPPS or ASC payment 
rate.
    Comment: One commenter requested CMS adjust the OPPS device offset 
percentages for ASC device-intensive payment purposes to account for 
the effects of charge compression. According to the commenter, CMS 
should ``decompress'' the supply median costs to minimize any 
artificial reductions that charge compression causes in the estimate of 
the OPPS device offset percentages.
    Response: As discussed in section II.A.1.c.(2) of this final rule 
with comment period, for CY 2009, we are not adopting any short-term 
statistical regression-based adjustments under the OPPS that would 
serve to ``decompress'' the median costs for procedures involving 
devices, or for any other procedures. Rather, we are focusing on long-
term changes to Medicare cost reporting to address the effects of 
charge compression, including the creation of 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 
Patient as discussed in section II.A.1.c.(2) of this final rule with 
comment period. We believe that this change to how hospitals report 
costs for devices and supplies will improve our future estimates of 
costs related to high cost implantable devices, including the device 
offset percentages upon which we base the device portion of ASC payment 
rates for device-intensive procedures.
    Comment: One commenter recommended that CMS adopt the OPPS concepts 
of pass-through payments and New Technology APCs into the ASC payment 
system. According to the commenter, adequate payment for newer advanced 
technologies in the most appropriate setting will ensure optimum care 
for Medicare beneficiaries.
    Response: Under the revised ASC payment system, we provide separate 
payment at contractor-priced rates for devices that are included in 
device categories with pass-through status under the OPPS when the 
devices are an integral part of a covered surgical procedure. As 
discussed in section IV.A. of this final rule with comment period, 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. New technology surgical procedures 
described by Category III CPT codes or Level II HCPCS codes that 
crosswalk directly or are clinically similar to established procedures 
already on the ASC list of covered surgical procedures, including those 
assigned to New Technology APCs under the OPPS, are eligible for ASC 
payment if we believe they would not be expected to pose a significant 
risk to the safety of Medicare beneficiaries and to require an 
overnight stay when provided in an ASC.
    Under the OPPS, new technology procedures that are not eligible for 
pass-through payment may be assigned temporarily to a New Technology 
APC. Those APCs are designated by cost bands, with payment under the 
OPPS at the midpoint of the cost band, and were created to allow CMS to 
make appropriate and consistent payment for new procedures, based on 
their estimated costs, that are not yet reflected in OPPS claims data. 
This OPPS methodology provides a mechanism for timely Medicare payment 
for some new technologies. ASC payment for procedures assigned to New 
Technology APCs under the OPPS and included on the ASC list of covered 
surgical procedures is made at the ASC rate calculated according to the 
standard methodology for the ASC payment system. Thus, ASCs have the 
same timely access to payment for any new technology procedure that is 
a covered ASC surgical procedure assigned to a New Technology APC under 
the OPPS.
    We do not believe it is necessary to implement any additional ASC-
specific policies to ensure adequate payment for newer advanced 
technologies in the ASC setting. As discussed in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66843), we believe these policies 
serve to appropriately incorporate payment for new technologies under 
the revised ASC payment system. After consideration of the public 
comments received, we are designating the ASC covered surgical 
procedures displayed in Table 47 below as device-intensive for CY 2009.

              Table 47--ASC Covered Surgical Procedures Designated as Device-Intensive for CY 2009
----------------------------------------------------------------------------------------------------------------
                                                                                                   Final CY 2009
                                                                                                      device-
  CY 2009 HCPCS     CY 2009 short    Final CY 2009 ASC payment   Final CY 2009  CY 2009 OPPS APC  dependent  APC
      code            descriptor             indicator             OPPS APC           title           offset
                                                                                                    percentage
----------------------------------------------------------------------------------------------------------------
24361...........  Reconstruct elbow  H8.......................            0425  Level II                      59
                   joint.                                                        Arthroplasty or
                                                                                 Implantation
                                                                                 with Prosthesis.
24363...........  Replace elbow      H8.......................            0425   Level II                     59
                   joint.                                                        Arthroplasty or
                                                                                 Implantation
                                                                                 with Prosthesis.
24366...........  Reconstruct head   H8.......................            0425  Level II                      59
                   of radius.                                                    Arthroplasty or
                                                                                 Implantation
                                                                                 with Prosthesis.
25441...........  Reconstruct wrist  H8.......................            0425  Level II                      59
                   joint.                                                        Arthroplasty or
                                                                                 Implantation
                                                                                 with Prosthesis.

[[Page 68737]]

 
25442...........  Reconstruct wrist  H8.......................            0425  Level II                      59
                   joint.                                                        Arthroplasty or
                                                                                 Implantation
                                                                                 with Prosthesis.
25446...........  Wrist replacement  H8.......................            0425  Level II                      59
                                                                                 Arthroplasty or
                                                                                 Implantation
                                                                                 with Prosthesis.
27446...........  Revision of knee   J8.......................            0681  Knee                          71
                   joint.                                                        Arthroplasty.
33206...........  Insertion of       J8.......................            0089  Insertion/                    72
                   heart pacemaker.                                              Replacement of
                                                                                 Permanent
                                                                                 Pacemaker and
                                                                                 Electrodes.
33207...........  Insertion of       J8.......................            0089  Insertion/                    72
                   heart pacemaker.                                              Replacement of
                                                                                 Permanent
                                                                                 Pacemaker and
                                                                                 Electrodes.
33208...........  Insertion of       J8.......................            0655  Insertion/                    76
                   heart pacemaker.                                              Replacement/
                                                                                 Conversion of a
                                                                                 permanent dual
                                                                                 chamber
                                                                                 pacemaker.
33212...........  Insertion of       H8.......................            0090  Insertion/                    74
                   pulse generator.                                              Replacement of
                                                                                 Pacemaker Pulse
                                                                                 Generator.
33213...........  Insertion of       H8.......................            0654  Insertion/                    77
                   pulse generator.                                              Replacement of
                                                                                 a permanent
                                                                                 dual chamber
                                                                                 pacemaker.
33214...........  Upgrade of         J8.......................            0655  Insertion/                    76
                   pacemaker system.                                             Replacement/
                                                                                 Conversion of a
                                                                                 permanent dual
                                                                                 chamber
                                                                                 pacemaker.
33224...........  Insert pacing      J8.......................            0418  Insertion of                  71
                   lead & connect.                                               Left
                                                                                 Ventricular
                                                                                 Pacing Elect..
33225...........  Lventric pacing    J8.......................            0418  Insertion of                  71
                   lead add-on.                                                  Left
                                                                                 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-       J8.......................            0680  Insertion of                  71
                   active ht record.                                             Patient
                                                                                 Activated Event
                                                                                 Recorders.
53440...........  Male sling         H8.......................            0385  Level I                       59
                   procedure.                                                    Prosthetic
                                                                                 Urological
                                                                                 Procedures.
53444...........  Insert tandem      H8.......................            0385  Level I                       59
                   cuff.                                                         Prosthetic
                                                                                 Urological
                                                                                 Procedures.
53445...........  Insert uro/ves     H8.......................            0386  Level II                      69
                   nck sphincter.                                                Prosthetic
                                                                                 Urological
                                                                                 Procedures.
53447...........  Remove/replace ur  H8.......................            0386  Level II                      69
                   sphincter.                                                    Prosthetic
                                                                                 Urological
                                                                                 Procedures.
54400...........  Insert semi-rigid  H8.......................            0385  Level I                       59
                   prosthesis.                                                   Prosthetic
                                                                                 Urological
                                                                                 Procedures.
54401...........  Insert self-contd  H8.......................            0386  Level II                      69
                   prosthesis.                                                   Prosthetic
                                                                                 Urological
                                                                                 Procedures.
54405...........  Insert multi-comp  H8.......................            0386  Level II                      69
                   penis pros.                                                   Prosthetic
                                                                                 Urological
                                                                                 Procedures.
54410...........  Remove/replace     H8.......................            0386  Level II                      69
                   penis prosth.                                                 Prosthetic
                                                                                 Urological
                                                                                 Procedures.
54416...........  Remv/repl penis    H8.......................            0386  Level II                      69
                   contain pros.                                                 Prosthetic
                                                                                 Urological
                                                                                 Procedures.
55873...........  Cryoablate         H8.......................            0674  Prostate                      59
                   prostate.                                                     Cryoablation.
61885...........  Insrt/redo         H8.......................            0039  Level I                       84
                   neurostim 1                                                   Implantation of
                   array.                                                        Neurostimulator.
61886...........  Implant neurostim  H8.......................            0315  Level III                     88
                   arrays.                                                       Implantation of
                                                                                 Neurostimulator.
62361...........  Implant spine      H8.......................            0227  Implantation of               82
                   infusion pump.                                                Drug Infusion
                                                                                 Device.
62362...........  Implant spine      H8.......................            0227  Implantation of               82
                   infusion pump.                                                Drug Infusion
                                                                                 Device.
63650...........  Implant            H8.......................            0040  Percutaneous                  57
                   neuroelectrodes.                                              Implantation of
                                                                                 Neurostimulator
                                                                                 Electrodes.
63655...........  Implant            J8.......................            0061  Laminectomy,                  62
                   neuroelectrodes.                                              Laparoscopy, or
                                                                                 Incision for
                                                                                 Implantation of
                                                                                 Neurostimulator
                                                                                 Electr.
63685...........  Insrt/redo spine   H8.......................            0222  Level II                      85
                   n generator.                                                  Implantation of
                                                                                 Neurostimulator.
64553...........  Implant            H8.......................            0040  Percutaneous                  57
                   neuroelectrodes.                                              Implantation of
                                                                                 Neurostimulator
                                                                                 Electrodes.
64555...........  Implant            J8.......................            0040  Percutaneous                  57
                   neuroelectrodes.                                              Implantation of
                                                                                 Neurostimulator
                                                                                 Electrodes.

[[Page 68738]]

 
64560...........  Implant            J8.......................            0040  Percutaneous                  57
                   neuroelectrodes.                                              Implantation of
                                                                                 Neurostimulator
                                                                                 Electrodes.
64561...........  Implant            H8.......................            0040  Percutaneous                  57
                   neuroelectrodes.                                              Implantation of
                                                                                 Neurostimulator
                                                                                 Electrodes.
64565...........  Implant            J8.......................            0040  Percutaneous                  57
                   neuroelectrodes.                                              Implantation of
                                                                                 Neurostimulator
                                                                                 Electrodes.
64573...........  Implant            H8.......................            0225  Implantation of               62
                   neuroelectrodes.                                              Neurostimulator
                                                                                 Electrodes,
                                                                                 Cranial Nerve.
64575...........  Implant            H8.......................            0061  Laminectomy,                  62
                   neuroelectrodes.                                              Laparoscopy, or
                                                                                 Incision for
                                                                                 Implantation of
                                                                                 Neurostimulator
                                                                                 Electr.
64577...........  Implant            H8.......................            0061  Laminectomy,                  62
                   neuroelectrodes.                                              Laparoscopy, or
                                                                                 Incision for
                                                                                 Implantation of
                                                                                 Neurostimulator
                                                                                 Electr.
64580...........  Implant            H8.......................            0061  Laminectomy,                  62
                   neuroelectrodes.                                              Laparoscopy, or
                                                                                 Incision for
                                                                                 Implantation of
                                                                                 Neurostimulator
                                                                                 Electr.
64581...........  Implant            H8.......................            0061  Laminectomy,                  62
                   neuroelectrodes.                                              Laparoscopy, or
                                                                                 Incision for
                                                                                 Implantation of
                                                                                 Neurostimulator
                                                                                 Electr.
64590...........  Insrt/redo pn/     H8.......................            0039  Level I                       84
                   gastr stimul.                                                 Implantation of
                                                                                 Neurostimulator.
65770...........  Revise cornea      H8.......................            0293  Level V Anterior              65
                   with implant.                                                 Segment Eye
                                                                                 Procedures.
69714...........  Implant temple     H8.......................            0425  Level II                      59
                   bone w/stimul.                                                Arthroplasty or
                                                                                 Implantation
                                                                                 with Prosthesis.
69715...........  Temple bne implnt  H8.......................            0425  Level II                      59
                   w/stimulat.                                                   Arthroplasty or
                                                                                 Implantation
                                                                                 with Prosthesis.
69717...........  Temple bone        H8.......................            0425  Level II                      59
                   implant revision.                                             Arthroplasty or
                                                                                 Implantation
                                                                                 with Prosthesis.
69718...........  Revise temple      H8.......................            0425  Level II                      59
                   bone implant.                                                 Arthroplasty or
                                                                                 Implantation
                                                                                 with Prosthesis.
69930...........  Implant cochlear   H8.......................            0259  Level VII ENT                 84
                   device.                                                       Procedures.
----------------------------------------------------------------------------------------------------------------

d. Surgical Procedures Removed From the OPPS Inpatient List for CY 2009
    As discussed in section XV.C.3. of this final rule with comment 
period, we will evaluate all procedures at the time they are removed 
from the OPPS inpatient list for inclusion on the ASC list of covered 
surgical procedures. The final list of procedures removed from the 
inpatient list for CY 2009 may be found in section XI.B. of this final 
rule with comment period.
    We evaluated each of the 12 procedures removed from the OPPS 
inpatient list for CY 2009. We determined that all of these procedures 
will be excluded from the ASC list of covered surgical procedures for 
CY 2009 because they may be expected to pose a significant risk to 
beneficiary safety in ASCs or require an overnight stay. The procedures 
will be evaluated again as part of our annual review of excluded 
surgical procedures in preparation for the CY 2010 update to the ASC 
payment system.
2. Covered Ancillary Services
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41530), we proposed 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 resulted 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 were 
proposed for packaged status under the OPPS for CY 2009. Comment 
indicator ``CH,'' as discussed in section XV.F. of the CY 2009 OPPS/ASC 
proposed rule (73 FR 41537), was used in Addendum BB to that proposed 
rule to indicate covered ancillary services for which we proposed a 
change in the ASC payment indicator to reflect, 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.
    Comment: Several commenters requested that CMS remove CPT codes 
77520 (Proton treatment delivery; simple, without compensation); 77522 
(Proton treatment delivery; simple, with compensation); 77523 (Proton 
treatment delivery; intermediate); and 77525 (Proton treatment 
delivery; complex) from the list of covered ancillary services. The 
reasons the commenters provided for this request are that proton beam 
therapy is never provided integral to a surgical procedure and, as 
such, would never be eligible for payment in ASCs and providing proton 
beam therapy requires a much larger capital investment than would be 
feasible for ASCs. The commenters believed that because the services 
would not be provided in ASCs, including them on the list of covered 
ancillary services was unnecessary, and that having ASC rates published 
for the services could result in confusion on the part of other payers 
who mistakenly believe that the published Medicare ASC rates for proton 
beam therapy are actually used by Medicare to pay for those services 
when they are performed alone.
    Response: While we understand the commenters' concerns, our policy 
is to include as covered ancillary services all

[[Page 68739]]

procedures with CPT codes in the radiology range of CPT, specifically 
CPT codes 70000 through 79999 (72 FR 42497). We do not evaluate those 
services to determine whether or not they would ever be provided in 
ASCs integral to covered surgical procedures. By definition, CPT codes 
77520, 77522, 77523 and 77525 are included as covered ancillary 
services and, therefore, we are not removing proton beam therapy codes 
from that list for CY 2009.
    Comment: Several commenters requested that HCPCS codes G0339 (Image 
guided robotic linear accelerator-based stereotactic radiosurgery, 
complete course of therapy in one session, or first session of 
fractionated treatment) and G0340 (Image guided robotic linear 
accelerator-based stereotactic radiosurgery, delivery including 
collimator changes and custom plugging, fractionated treatment, all 
lesions, per session, second through fifth sessions, maximum five 
sessions per course of treatment); and CPT codes 0071T (Focused 
ultrasound ablation of uterine leiomyomata, including MR guidance; 
total leiomyomata volume less than 200 cc of tissue) and 0072T (Focused 
ultrasound ablation of uterine leiomyomata, including MR guidance; 
total leiomyomata volume greater or equal to 200 cc of tissue) be 
removed from the ASC list of covered ancillary services and instead be 
included on the ASC list of covered surgical procedures. The commenters 
stated that these services are surgical procedures.
    One commenter asserted that the procedures described by HCPCS codes 
G0339 and G0340 require joint participation of a surgeon and a 
radiation oncologist and treat tumors that have not responded to 
traditional radiation therapy. As procedures that can be provided 
without a covered surgical procedure, the commenter requested that CMS 
allow the procedures to be eligible for separate payment in ASCs as 
covered surgical procedures. Similarly, the commenter contended that 
the procedures reported by CPT codes 0071T and 0072T also are 
noninvasive surgical procedures that should be payable as covered 
surgical procedures in ASCs. The commenter noted that CMS defined those 
two procedures as noninvasive surgical procedures in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66710).
    Response: While we originally included the services described by 
CPT codes 0071T and 0072T on the list of covered ancillary services 
because of the similarities between these services and stereotactic 
radiosurgery services and, although they are assigned to the same APCs 
under the OPPS as stereotactic radiosurgery services, we agree with the 
commenter that they are not sufficiently similar to services in the 
radiology range of CPT codes to be placed on the list of covered 
ancillary services. Therefore, we are not including them in Addendum BB 
to this final rule with comment period.
    We define 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 directly crosswalk 
or are clinically similar to ASC covered surgical procedures (72 FR 
42478). Because Category III CPT codes 0071T and 0072T do not directly 
crosswalk and are not clinically similar to any ASC covered surgical 
procedures, we are not placing them on the list of ASC covered surgical 
procedures. Therefore, we are not including them in Addendum AA to this 
final rule with comment period.
    We do not agree with the commenters that G0339 and G0340 represent 
surgical procedures. These HCPCS codes were developed for reporting 
stereotactic radiosurgery services under the OPPS and crosswalk 
directly to CPT codes in the radiology range of CPT. As such, we are 
not removing HCPCS codes G0339 and G0340 from the ASC list of covered 
ancillary services and we are not adding them to the list of covered 
surgical procedures. These HCPCS codes are included in Addendum BB to 
this final rule with comment period.
    All CY 2009 ASC covered ancillary services and their payment 
indicators for CY 2009 are included in Addendum BB to this final rule 
with comment period.

F. ASC Payment for Covered Surgical Procedures and Covered Ancillary 
Services

1. 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 payment for 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, Public Law 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/.
    Subsequent to publication of the CY 2009 OPPS/ASC proposed rule, 
section 131 of the MIPPA, Public Law 110-275, restored MPFS payments to 
the levels in effect prior to July 1, 2008 for the remainder of CY 2008 
and increased the update to the conversion factor for the MPFS to 1.1 
percent for CY 2009. Therefore, the ASC rates for some office-based 
procedures and covered ancillary radiology services for the second half 
of CY 2008 were affected, and the CY 2009 conversion factor increase 
for the MPFS also affects CY 2009 ASC payments for certain of these 
services.
b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2009
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41530), we proposed CY 
2009 payment rates for procedures with payment indicator ``G2'' that 
were 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 proposed 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 42520 through 42521).
    We proposed payment rates for office-based procedures (payment 
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures 
not subject to transitional payment (payment indicator ``J8'') 
calculated according to our established policies (72 FR 42504 and 
42511). Thus, we proposed to update

[[Page 68740]]

the payment amounts for device-intensive procedures based on the CY 
2009 OPPS proposal that reflected 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.
    Comment: Several commenters requested that CMS provide a higher ASC 
payment for the procedure reported by CPT code 0192T (Insertion of 
anterior segment aqueous drainage device, without extraocular 
reservoir; external approach). Commenters stated that the proposed ASC 
payment rate was inadequate to cover the cost of the device and, 
therefore, ASCs would not be able to provide the procedures.
    Response: As discussed fully in section III.A.2. of this final rule 
with comment period, we are reassigning CPT code 0192T to APC 0673 
(Level IV Anterior Segment Eye Procedures) from APC 0234 (Level III 
Anterior Segment Eye Procedures), where it was proposed for assignment 
under the CY 2009 OPPS. This code was first implemented in July 2008, 
so is not subject to the transition under the ASC payment system. APC 
0673 has a higher OPPS payment rate for CY 2009 than the proposed OPPS 
payment and, therefore, the final CY 2009 ASC payment is also higher 
than the proposed ASC rate. We believe that the CY 2009 ASC payment is 
appropriate and ensures access to this procedure for Medicare 
beneficiaries in ASCs.
    Comment: One commenter was concerned about the proposed payment for 
HCPCS code G0393 (Transluminal balloon angioplasty, percutaneous; for 
maintenance of hemodialysis access, arteriovenous fistula or graft; 
venous). The commenter requested that CMS correct the payment rate for 
G0393 because the commenter believed it should be equal to the ASC 
payment for CPT code 35476 (Transluminal balloon angioplasty, 
percutaneous; venous). The commenter noted that in past regulations CMS 
crosswalked HCPCS code G0393 to that CPT code.
    Response: As discussed in the CY 2007 OPPS/ASC final rule with 
comment period (71 FR 68168), we created HCPCS codes G0392 
(Transluminal balloon angioplasty, percutaneous; for maintenance of 
hemodialysis access, Arteriovenous fistula or graft; arterial) and 
G0393 in order to make those angioplasty procedures for arteriovenous 
fistulae maintenance available for Medicare payment in ASCs. At that 
time, the only codes available to report the procedures were CPT codes 
35475 (Transluminal balloon angioplasty, percutaneous; brachiocephalic 
trunk or branches, each vessel) and 35476, which were excluded from the 
ASC list at that time. The two new HCPCS G-codes specifically described 
arterial and venous angioplasty procedures to maintain hemodialysis 
access through arteriovenous fistulae or grafts for dialysis patients.
    Subsequently, in response to comments, we added CPT code 35476 to 
the ASC list of covered surgical procedures in our CY 2008 final rule 
with comment period (72 FR 66838). HCPCS code G0393 and CPT code 35476 
have the same CY 2009 OPPS payment because they are both assigned to 
the same APC, APC 0083 (Coronary or Non-Coronary Angioplasty and 
Percutaneous Valvuloplasty).
    Although HCPCS code G0393 was created as an alternative to CPT code 
35476 for some clinical situations, it was added to the ASC list in CY 
2007 and is, therefore, subject to the ASC transitional payment 
methodology. In contrast, CPT code 35476 was added to the ASC list CY 
2008 and is paid according to the standard ASC revised rate calculation 
methodology. Consequently, the ASC payment rates for the two procedures 
cannot be the same in CY 2009.
    Comment: Commenters suggested that CMS abandon the office-based 
procedure payment policy. Their reasons for making this suggestion 
include a belief that CMS does not need the policy to avoid creating a 
payment incentive for procedures often furnished in physicians' offices 
to migrate to ASCs. They also believed that implementation of the 
payment caps is, in fact, creating payment incentives for the affected 
procedures to migrate to more expensive and less efficient HOPDs. They 
contended that CMS has overestimated the likelihood that procedures 
usually furnished in physicians' offices would migrate to ASCs if there 
are no payment limits in place. They asserted that physicians should be 
able to make the decision about the site-of-service based on the 
individual beneficiary's circumstances and that the payment limits 
instituted by CMS for office-based procedures interfere with that 
patient-physician decision-making because the rates for procedures that 
are capped at the nonfacility PE RVU amount are often too low to 
support performance of the procedure in an ASC. Thus, they argued that 
the policy to cap payment for some procedures effectively removes the 
ASC as an option for the beneficiary's care. The commenters were 
concerned that Medicare has not fully considered the consequences of 
this payment policy. They believed that in addition to limiting 
beneficiary access to ASCs as a site for service, this policy will 
result in higher Medicare costs due to the ``reverse migration'' of 
cases that could have been performed in efficient and lower cost ASCs 
migrating to more costly HOPDs.
    Response: As noted by the commenters, we implemented the payment 
policy for office-based procedures to mitigate potentially 
inappropriate migration of services from the physicians' office setting 
to the ASC. Contrary to the commenters' beliefs that the CMS actuarial 
estimates for expected migration of procedures from physicians' offices 
to ASCs are exaggerated, our experience indicates that payment 
differentials do have a significant effect on practice patterns. We 
continue to believe the policy is appropriate in light of the many low 
complexity procedures we have added to the ASC list under the revised 
payment system. Further, we note that, prior to the revised payment 
system, procedures that were commonly performed in physicians' offices 
were excluded from the ASC list. Our policy under the revised payment 
system results in Medicare payment for many of those previously-
excluded procedures at the full revised ASC payment rate, without a 
transition. We view our policy to make payment to ASCs for many of 
these procedures that were previously excluded as an important step in 
expanding the choices of sites for care available to physicians and 
beneficiaries. In addition, we do not view our policy to limit payment 
for the least complex procedures that are commonly provided in 
physicians' offices as a loss for ASCs. In contrast to the prior ASC 
payment system, our current policy provides an ASC payment for the 
procedures and we believe that amount is appropriate.
    As discussed fully in the August 2, 2007 final rule for the revised 
ASC payment system (72 FR 42521 through 42535), we believe we gave full 
consideration to all aspects of our final payment policies for the 
revised ASC payment system. Our policies related to office-based 
procedures were adopted to avoid creating incentives for migration of 
surgical procedures from physicians' offices to ASCs. The low 
complexity procedures that were on the CY 2007 ASC list of covered 
surgical procedures are performed, on average, 17 percent of the time 
in ASCs. We expected that with the payment limits on office-based 
procedures, the newly added low complexity procedures would have

[[Page 68741]]

similar utilization patterns. Each year as we develop our proposed and 
final updates to the payment system, we will continue to evaluate the 
effects of our payment policies on ASCs, including the utilization 
patterns of low complexity procedures paid under the revised ASC 
poayment system.
    Comment: Several commenters recommended that if CMS chooses not to 
abandon the policy to designate certain procedures as office-based and 
subject to payment limits, that it should modify its policy. Included 
in the recommended modifications to the policy related to office-based 
procedures, commenters suggested the following:
     Increase the utilization threshold to some level greater 
than 50 percent to identify office-based procedures. Although no 
commenters recommended an alternate threshold as a criterion for 
determining that a procedure is office-based, they did suggest that the 
threshold should be higher than 50 percent and that it should be 
reevaluated periodically.
     Consider utilization variation over multiple years and 
across geographic areas. The commenters recommended that CMS consider 
utilization data from multiple years and from different geographic 
regions to account for variability in physicians' office utilization 
across states for procedures. One commenter asserted that CMS' reliance 
on national averages to gauge practice patterns was a weakness of the 
policy and that the variations the commenter found across States are an 
indication that the payment caps might not be an effective tool for 
influencing site selection for surgery because many factors, such as 
the number of ASCs in the area, influence the site-of-service decision. 
With regard to fluctuations in site-of-service utilization over time, 
the commenter believed that the year-to-year variation reflects 
significant volatility and CMS' policy to make the office-based 
designation permanent ignores that finding. Further, the commenter 
asserted that the Medicare Part B claims data that CMS uses to evaluate 
site-of-service utilization is not a sound approach because the data 
are flawed.
     Discontinue use of temporary office-based designations. 
Commenters suggested that CMS discontinue use of temporary office-based 
designations because they believed that CMS usually assigns temporary 
designations to procedures for which there is no utilization data and 
that CMS should not make a determination for those procedures until 
some data become available. In addition, some commenters expressed 
frustration that the temporary designations may remain in place for 
years and, as such, are not really temporary. Further, payment for the 
procedures with temporary status is subject to the payment limits.
     Reevaluate the office-based procedures periodically so 
that the designation as office-based is not permanent. Several 
commenters did not believe it was fair to make office-based 
designations permanent because the policy may compromise physicians' 
ability to make appropriate changes in their practices as new 
technology and other advances become available. They urged CMS to 
reevaluate the procedures periodically to ensure that the designations 
as office-based reflect practice patterns over time.
     Limit the reduction in payment for office-based procedures 
and do not base payment limit on the MPFS. A few commenters asserted 
that CMS' policy to cap payment for office-based ASC procedures at the 
MPFS amount is flawed because the policy results in fluctuations in the 
ASC relative weights for those procedures based both on the PE RVU 
values and the MPFS conversion factor, both of which may vary from year 
to year. Rather, they believed that all ASC relative payment weights 
should be based on OPPS relative payment weights.
    Response: We selected 50 percent as the physicians' office 
utilization threshold because we intended to make new ASC procedures 
that are usually (greater than 50 percent of the time) provided in 
physicians' offices subject to the payment limits. However, our 
decisions regarding office-based status are not entirely based on the 
utilization data. Physicians' office utilization is an important aspect 
of our evaluation but so are the volume of procedures, the clinical 
characteristics of procedures, and the characteristics and utilization 
of related and similar procedures. We continue to believe that a 
threshold of 50 percent is the most appropriate threshold to identify 
those surgical procedures that are commonly performed in physicians' 
offices, specifically more than half of the time. We believe that 
adoption of a threshold higher than 50 percent would result in ASC 
payment for low complexity procedures at ASC rates that could encourage 
migration of these procedures from physicians' offices to ASCs, even in 
cases where the less costly office setting was clinically appropriate.
    We do not agree with the commenters' recommendations that we should 
consider multiple years of utilization data and variation in 
utilization across geographic areas to determine office-based status 
for each procedure. There are cases in which we do look at multiple 
years of utilization data in determining whether or not a procedure is 
office-based, such as for very low volume procedures, but that is not 
necessary for most procedures. Although the commenters asserted that 
there is significant volatility in the year-to-year utilization data 
for surgical procedures, we do not agree that is the case. Generally, 
Medicare Part B claims data reflect relatively stable site-of-service 
utilization across years, and we continue to see increasing physician's 
office utilization of new low complexity procedures rather than 
decreasing levels.
    We believe that our national policy should be guided by national 
data and not subject to the uncertainties of local practice patterns 
that may depend more on the availability of certain types of providers 
or suppliers in communities than the care needs of Medicare 
beneficiaries. Medicare is a national program and our policies are 
designed to ensure that all Medicare beneficiaries receive the same 
benefits and the same high quality care regardless of where they reside 
or travel in the United States. It would be inappropriate to institute 
different policies related to covered services by geographic area.
    As stated above, we use physicians' claims data, the clinical 
judgments of our medical advisors, and any other relevant information 
that is available to make our determination that a procedure is office-
based. We believe that our data are reliable, and we will continue to 
rely on the claims data as one source of information to evaluate the 
sites-of-service for surgical procedures.
    We apply the temporary designation when our clinical evaluation 
suggests that the procedure is of a complexity level such that 
performance in the physician's office is the most appropriate and 
likely site for care, but there are little or no data or experience so 
we are not certain that the procedure will be provided most of the time 
in physicians' offices. We also handle the designation of office-based 
status, including temporary status, through the annual notice and 
comment rulemaking process to allow for public input into those 
determinations.
    Once we have completed the process and designated ASC covered 
surgical procedures as office-based, we are confident that our 
permanent office-based designations are appropriate and that the 
resulting payment amounts are appropriate for providing the service in 
ASCs if a facility site is required for a particular beneficiary. We 
expect that it

[[Page 68742]]

would be extremely rare for procedures that were usually provided in 
physicians' offices to become more complex procedures that require 
facility settings due to new technology or other advances, while the 
CPT coding for such procedures is unchanged. In general, advances in 
technology and medical practice have historically led to less-invasive 
surgical methods and allowed for less-intensive sites-of-service. We do 
not see a need for the periodic reevaluation of all office-based 
designations.
    Finally, there are several instances in which Medicare payment 
systems use values and relative weights that are external, or from 
other systems, to make payment. We believe that making payment to ASCs 
at the nonfacility PE RVU amount for procedures that have been priced 
specifically for the physicians' office setting is entirely appropriate 
given our intention to not create an incentive for those procedures to 
migrate to another setting. Further, we believe that limiting the ASC 
payment for office-based procedures to the physician's office rate 
provides appropriate payment to the ASC for those procedures when an 
ASC setting is necessary for the beneficiary's care.
    Comment: One commenter requested that the CY 2009 ASC payment rate 
for CPT code 55876 (Placement of interstitial device(s) for radiation 
therapy guidance (eg, fiducial markers, dosimeter), prostate (via 
needle, any approach), single or multiple) be revised to be consistent 
with the payment for HCPCS code C9728 (Placement of interstitial 
devices(s) for radiation therapy/surgery guidance (eg, fiducial 
markers, dosimeter), other than prostate (any approach), single or 
multiple) because the procedures are analogous to one another.
    Response: We proposed to continue the temporary office-based 
designation for CPT code 55876 and to designate HCPCS code C9728 as 
temporarily office-based because the codes are clinically similar, but 
correspond to different anatomic regions of the body. However, HCPCS 
code C9728 has not been priced for performance in physicians' offices 
and, therefore, is assigned temporary office-based payment indicator 
``R2,'' resulting in ASC payment at the rate calculated according to 
the standard ASC ratesetting methodology. Conversely, CPT code 55876 
does have a nonfacility PE RVU amount and, because that amount is less 
than the ASC rate, payment for CPT code 55876 is made at the 
nonfacility PE RVU amount for the procedure.
    We understand the commenter's desire for consistency, but we 
believe that our designation of the procedures as temporarily office-
based is appropriate and we do not assign nonfacility PE RVUs to HCPCS 
C-codes which are not recognized for payment under the MPFS. We do not 
believe the payment differential between the two procedures provides 
sufficient justification for changing the payment indicator for CPT 
code 55876 so that its CY 2009 payment amount would be equal to that 
for HCPCS code C9728.
c. Adjustment to ASC Payments for No Cost/Full Credit and Partial 
Credit Devices
    Under Sec.  416.179, our ASC policy with regard to payment for 
costly devices implanted in ASCs at no cost or with full or partial 
credit is consistent with the OPPS policy. The CY 2009 OPPS APCs and 
devices subject to the adjustment policy are discussed in section 
IV.B.2. of this final rule with comment period. The ASC policy includes 
adoption of the OPPS policy for reduced payment to providers when a 
specified 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. 
Specifically, as we described in the CY 2008 OPPS/ASC final rule with 
comment period, when a procedure provided in CY 2008 that was listed in 
Table 58 of the CY 2008 OPPS/ASC final rule with comment period was 
performed in an ASC and the case involved implantation of a no cost or 
full credit device listed in Table 59 of the final rule with comment 
period, 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 59 was furnished without cost. The contractor reduces 
payment to the ASC 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 (72 FR 66845). 
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. The reduction of ASC payment in this circumstance was 
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, as we explained in the CY 2008 OPPS/ASC final 
rule with comment period, we reduce the payment for implantation 
procedures listed in Table 58 of the CY 2008 OPPS/ASC final rule with 
comment period 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 cost of the new 
device (72 FR 66846). In CY 2008, ASCs must append the modifier ``FC'' 
to the HCPCS code for a surgical procedure listed in Table 58 of the CY 
2008 OPPS/ASC final rule with comment period when the facility received 
a partial credit of 50 percent or more of the cost of a device listed 
in Table 59. In order to report that they received a partial credit of 
50 percent or more of the cost of a new device, ASCs had the option of 
either: (1) Submitting the claim for the device replacement 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 claim 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 was 50 percent or more of the cost of the 
replacement device. Beneficiary coinsurance was based on the reduced 
payment amount.
    Consistent with the OPPS, we proposed to update the list of ASC 
device-intensive procedures that would be subject to the no cost/full 
credit and partial credit device adjustment policy for CY 2009. Table 
42 of the CY 2009 OPPS/ASC proposed rule displayed the ASC covered 
implantation procedures and their payment indicators that we proposed 
would be subject to the no cost/full credit and partial credit device 
adjustment policy for CY 2009. Specifically, when a procedure that was 
listed in Table 42 of the proposed rule is performed in an ASC and the 
case involves implantation of a no cost/full credit device, or a 
partial credit device for which the ASC received at least a 50 percent 
partial credit, and the device was listed in Table 43 of the proposed 
rule, the ASC would report the HCPCS ``FB'' or ``FC'' modifier, as 
appropriate, on the line with the covered surgical procedure code. The 
procedures listed in Table 42 were those ASC covered device-intensive 
procedures assigned to APCs under the OPPS to which the policy would 
apply. We did not propose to apply this policy to the procedures

[[Page 68743]]

and devices associated with APCs 0425 (Level II Arthroplasty or 
Implantation with Prosthesis) and 0648 (Level IV Breast Surgery), which 
were proposed for inclusion in the OPPS no cost/full credit and partial 
credit device adjustment policy for CY 2009, because ASC covered 
procedures assigned to these two APCs under the OPPS did not qualify 
for payment as ASC covered device-intensive surgical procedures (that 
is, their estimated device offset percentages were less than 50 percent 
based on partial year data available for the proposed rule).
    Comment: One commenter expressed support for the continuation of 
the no cost/full credit and partial credit device adjustment policy for 
ASCs in CY 2009.
    Response: We appreciate the commenter's support of the no cost/full 
credit and partial credit device adjustment policy.
    For CY 2009, we will reduce the payment for device implantation 
procedures listed in Table 48 below by the full device offset amount 
for no cost/full credit cases. ASCs must append the modifier ``FB'' to 
the HCPCS procedure code when the device furnished without cost or with 
full credit is listed in Table 49, below, and the associated 
implantation procedure code is listed in Table 48. In addition, for CY 
2009, we will reduce the payment for implantation procedures listed in 
Table 48 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. If the ASC 
receives a partial credit of 50 percent or more of the cost of a device 
listed in Table 49, the ASC must append the modifier ``FC'' to the 
associated implantation procedure code if the procedure is listed in 
Table 48. We are adding procedures assigned to APC 0425 and their 
associated devices to Tables 48 and 49, respectively, because these 
procedures now qualify for ASC payment as device-intensive procedures 
based on updated claims and cost report data, as described in section 
XV.E.1.c. of this final rule with comment period.

                    Table 48--CY 2009 Procedures to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Applies
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           Final CY 2009   Final CY 2009
                                         CY 2009 Short        Final CY 2009 ASC     Final CY 2009     CY 2009 OPPS APC       OPPS full     OPPS partial
         CY 2009 HCPCS code                descriptor         payment indicator       OPPS APC             Title              offset          offset
                                                                                                                            percentage      percentage
--------------------------------------------------------------------------------------------------------------------------------------------------------
24361..............................  Reconstruct elbow      H8...................            0425  Level II Arthroplasty              59              29
                                      joint.                                                        or Implantation with
                                                                                                    Prosthesis.
24363..............................  Replace elbow joint..  H8...................            0425  Level II Arthroplasty              59              29
                                                                                                    or Implantation with
                                                                                                    Prosthesis.
24366..............................  Reconstruct head of    H8...................            0425  Level II Arthroplasty              59              29
                                      radius.                                                       or Implantation with
                                                                                                    Prosthesis.
25441..............................  Reconstruct wrist      H8...................            0425  Level II Arthroplasty              59              29
                                      joint.                                                        or Implantation with
                                                                                                    Prosthesis.
25442..............................  Reconstruct wrist      H8...................            0425  Level II Arthroplasty              59              29
                                      joint.                                                        or Implantation with
                                                                                                    Prosthesis.
25446..............................  Wrist replacement....  H8...................            0425  Level II Arthroplasty              59              29
                                                                                                    or Implantation with
                                                                                                    Prosthesis.
27446..............................  Revision of knee       J8...................            0681  Knee Arthroplasty....              71              35
                                      joint.
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/             76              38
                                      pacemaker.                                                    Conversion of a
                                                                                                    permanent dual
                                                                                                    chamber pacemaker.
33212..............................  Insertion of pulse     H8...................            0090  Insertion/Replacement              74              37
                                      generator.                                                    of Pacemaker Pulse
                                                                                                    Generator.
33213..............................  Insertion of pulse     H8...................            0654  Insertion/Replacement              77              38
                                      generator.                                                    of a permanent dual
                                                                                                    chamber pacemaker.
33214..............................  Upgrade of pacemaker   J8...................            0655  Insertion/Replacement/             76              38
                                      system.                                                       Conversion of a
                                                                                                    permanent dual
                                                                                                    chamber pacemaker.
33224..............................  Insert pacing lead &   J8...................            0418  Insertion of Left                  71              36
                                      connect.                                                      Ventricular Pacing
                                                                                                    Elect.
33225..............................  Lventric pacing lead   J8...................            0418  Insertion of Left                  71              36
                                      add-on.                                                       Ventricular Pacing
                                                                                                    Elect.
33240..............................  Insert pulse           J8...................            0107  Insertion of                       89              45
                                      generator.                                                    Cardioverter-
                                                                                                    Defibrillator.
33249..............................  Eltrd/insert pace-     J8...................            0108  Insertion/Replacement/             88              44
                                      defib.                                                        Repair of
                                                                                                    Cardioverter-
                                                                                                    Defibrillator Leads.
33282..............................  Implant pat-active ht  J8...................            0680  Insertion of Patient               71              36
                                      record.                                                       Activated Event
                                                                                                    Recorders.
53440..............................  Male sling procedure.  H8...................            0385  Level I Prosthetic                 59              29
                                                                                                    Urological
                                                                                                    Procedures.
53444..............................  Insert tandem cuff...  H8...................            0385  Level I Prosthetic                 59              29
                                                                                                    Urological
                                                                                                    Procedures.

[[Page 68744]]

 
53445..............................  Insert uro/ves nck     H8...................            0386  Level II Prosthetic                69              34
                                      sphincter.                                                    Urological
                                                                                                    Procedures.
53447..............................  Remove/replace ur      H8...................            0386  Level II Prosthetic                69              34
                                      sphincter.                                                    Urological
                                                                                                    Procedures.
54400..............................  Insert semi-rigid      H8...................            0385  Level I Prosthetic                 59              29
                                      prosthesis.                                                   Urological
                                                                                                    Procedures.
54401..............................  Insert self-contd      H8...................            0386  Level II Prosthetic                69              34
                                      prosthesis.                                                   Urological
                                                                                                    Procedures.
54405..............................  Insert multi-comp      H8...................            0386  Level II Prosthetic                69              34
                                      penis pros.                                                   Urological
                                                                                                    Procedures.
54410..............................  Remove/replace penis   H8...................            0386  Level II Prosthetic                69              34
                                      prosth.                                                       Urological
                                                                                                    Procedures.
54416..............................  Remv/repl penis        H8...................            0386  Level II Prosthetic                69              34
                                      contain pros.                                                 Urological
                                                                                                    Procedures.
61885..............................  Insrt/redo neurostim   H8...................            0039  Level I Implantation               84              42
                                      1 array.                                                      of Neurostimulator.
61886..............................  Implant neurostim      H8...................            0315  Level III                          88              44
                                      arrays.                                                       Implantation of
                                                                                                    Neurostimulator.
62361..............................  Implant spine          H8...................            0227  Implantation of Drug               82              41
                                      infusion pump.                                                Infusion Device.
62362..............................  Implant spine          H8...................            0227  Implantation of Drug               82              41
                                      infusion pump.                                                Infusion Device.
63650..............................  Implant                H8...................            0040  Percutaneous                       57              29
                                      neuroelectrodes.                                              Implantation of
                                                                                                    Neurostimulator
                                                                                                    Electrodes,
                                                                                                    Excluding Cranial
                                                                                                    Nerve.
63655..............................  Implant                J8...................            0061  Laminectomy,                       62              31
                                      neuroelectrodes.                                              Laparoscopy, or
                                                                                                    Incision for
                                                                                                    Implantation of
                                                                                                    Neurostimulator
                                                                                                    Electr.
63685..............................  Insrt/redo spine n     H8...................            0222  Level II Implantation              85              42
                                      generator.                                                    of Neurostimulator.
64553..............................  Implant                H8...................            0040  Implantation of                    57              29
                                      neuroelectrodes.                                              Neurostimulator
                                                                                                    Electrodes, Cranial
                                                                                                    Nerve.
64555..............................  Implant                J8...................            0040  Percutaneous                       57              29
                                      neuroelectrodes.                                              Implantation of
                                                                                                    Neurostimulator
                                                                                                    Electrodes,
                                                                                                    Excluding Cranial
                                                                                                    Nerve.
64560..............................  Implant                J8...................            0040  Percutaneous                       57              29
                                      neuroelectrodes.                                              Implantation of
                                                                                                    Neurostimulator
                                                                                                    Electrodes,
                                                                                                    Excluding Cranial
                                                                                                    Nerve.
64561..............................  Implant                H8...................            0040  Percutaneous                       57              29
                                      neuroelectrodes.                                              Implantation of
                                                                                                    Neurostimulator
                                                                                                    Electrodes,
                                                                                                    Excluding Cranial
                                                                                                    Nerve.
64565..............................  Implant                J8...................            0040  Percutaneous                       57              29
                                      neuroelectrodes.                                              Implantation of
                                                                                                    Neurostimulator
                                                                                                    Electrodes,
                                                                                                    Excluding Cranial
                                                                                                    Nerve.
64573..............................  Implant                H8...................            0225  Implantation of                    62              31
                                      neuroelectrodes.                                              Neurostimulator
                                                                                                    Electrodes, Cranial
                                                                                                    Nerve.
64575..............................  Implant                H8...................            0061  Laminectomy,                       62              31
                                      neuroelectrodes.                                              Laparoscopy, or
                                                                                                    Incision for
                                                                                                    Implantation of
                                                                                                    Neurostimulator
                                                                                                    Electr.
64577..............................  Implant                H8...................            0061  Laminectomy,                       62              31
                                      neuroelectrodes.                                              Laparoscopy, or
                                                                                                    Incision for
                                                                                                    Implantation of
                                                                                                    Neurostimulator
                                                                                                    Electr.
64580..............................  Implant                H8...................            0061  Laminectomy,                       62              31
                                      neuroelectrodes.                                              Laparoscopy, or
                                                                                                    Incision for
                                                                                                    Implantation of
                                                                                                    Neurostimulator
                                                                                                    Electr.
64581..............................  Implant                H8...................            0061  Laminectomy,                       62              31
                                      neuroelectrodes.                                              Laparoscopy, or
                                                                                                    Incision for
                                                                                                    Implantation of
                                                                                                    Neurostimulator
                                                                                                    Electr.
64590..............................  Insrt/redo pn/gastr    H8...................            0039  Level I Implantation               84              42
                                      stimul.                                                       of Neurostimulator.
69714..............................  Implant temple bone w/ H8...................            0425  Level II Arthroplasty              59              29
                                      stimul.                                                       or Implantation with
                                                                                                    Prosthesis.
69715..............................  Temple bne implnt w/   H8...................            0425  Level II Arthroplasty              59              29
                                      stimulat.                                                     or Implantation with
                                                                                                    Prosthesis.
69717..............................  Temple bone implant    H8...................            0425  Level II Arthroplasty              59              29
                                      revision.                                                     or Implantation with
                                                                                                    Prosthesis.

[[Page 68745]]

 
69718..............................  Revise temple bone     H8...................            0425  Level II Arthroplasty              59              29
                                      implant.                                                      or Implantation with
                                                                                                    Prosthesis.
69930..............................  Implant cochlear       H8...................            0259  Level VII ENT                      84              42
                                      device.                                                       Procedures.
--------------------------------------------------------------------------------------------------------------------------------------------------------


    Table 49--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
------------------------------------------------------------------------
      CY 2009 Device HCPCS code            CY 2009 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.
L8690...............................  Aud osseo dev, int/ext comp.
------------------------------------------------------------------------

2. 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, ancillary 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 the CY 2009 OPPS/ASC 
proposed rule (73 FR 41530), 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 OPPS rates were unavailable, at 
contractor-priced rates in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 42499). 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, consistent with our final overall ASC payment policy, 
we paid ASCs at contractor-priced rates for brachytherapy sources 
provided in ASCs during that period of time.
    Beginning July 1, 2008, brachytherapy sources applied in ASCs were 
to be paid at the same prospectively set rates that were finalized in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 67165 
through 67188). Immediately prior to the publication of the CY 2009 
OPPS/ASC proposed rule, section 142 of the MIPPA amended section 
1833(t)(16)(C) of the Act (as amended by section 106 of the Medicare, 
Medicaid, and SCHIP Extension Act of 2007) to extend the requirement 
that brachytherapy sources be paid under the OPPS at charges adjusted 
to cost through December 31, 2009. Therefore, consistent with final ASC 
payment policy, ASCs will continue to be paid at contractor-priced 
rates for brachytherapy sources provided in ASCs during that period of 
time.
    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 CY 2009 OPPS/ASC final rule with comment period, 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. Payment for Covered Ancillary Services for CY 2009
    In the CY 2009 OPPS/ASC proposed rule, for CY 2009, we proposed to 
update the ASC payment rates and make changes to payment indicators as 
necessary in order to maintain consistency 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 (73 FR

[[Page 68746]]

41530). The proposed CY 2009 OPPS payment methodologies for separately 
payable drugs and biologicals and brachytherapy sources were discussed 
in sections V. and VII. of the CY 2009 OPPS/ASC proposed rule, 
respectively (73 FR 41480 and 41500), and the CY 2009 ASC payment rates 
for those services were proposed to equal the proposed CY 2009 OPPS 
rates. In Addendum BB to the CY 2009 OPPS/ASC proposed rule, we 
indicated whether the proposed CY 2009 payment rate for radiology 
services was 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 could 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 proposed to pay based on the standard ASC rate 
methodology were 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 were 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 
were listed in Addendum BB to the CY 2009 OPPS/ASC proposed rule.
    Comment: One commenter expressed concern that payments for certain 
radiological services commonly provided to patients with end-stage 
renal disease (ESRD) are packaged into payment for surgical procedures 
under the ASC payment system. They requested that 11 of those services 
be paid separately in ASCs and asked CMS to reexamine the packaging for 
the radiological services displayed below.

----------------------------------------------------------------------------------------------------------------
                                                                Proposed CY 2009 OPPS     Proposed CY 2009 ASC
            HCPCS code                    Long descriptor         status  indicator        payment indicator
----------------------------------------------------------------------------------------------------------------
75710.............................  Angiography, extremity,     Q2...................  N1.
                                     unilateral, radiological
                                     supervision and
                                     interpretation.
75790.............................  Angiography, arteriovenous  Q2...................  N1.
                                     shunt (e.g., dialysis
                                     patient), radiological
                                     supervision and
                                     interpretation.
75798.............................  Not a valid CPT code......  N/A..................  N/A.
75820.............................  Venography, extremity,      Q2...................  N1.
                                     unilateral, radiological
                                     supervision and
                                     interpretation.
75898.............................  Angiography through         Q1...................  N1.
                                     existing catheter for
                                     follow-up study for
                                     transcatheter therapy,
                                     embolization or infusion.
75902.............................  Mechanical removal of       N....................  N1.
                                     intraluminal
                                     (intracatheter)
                                     obstructive material from
                                     central venous device
                                     through device lumen,
                                     radiologic supervision
                                     and interpretation.
75962.............................  Transluminal balloon        Q2...................  N1.
                                     angioplasty, peripheral
                                     artery, radiological
                                     supervision and
                                     interpretation.
75984.............................  Change of percutaneous      N....................  N1.
                                     tube or drainage catheter
                                     with contrast monitoring
                                     (e.g., genitourinary
                                     system, abscess),
                                     radiological supervision
                                     and interpretation.
76937.............................  Ultrasound guidance for     N....................  N1.
                                     vascular access requiring
                                     ultrasound evaluation of
                                     potential access sites,
                                     documentation of selected
                                     vessel patency,
                                     concurrent realtime
                                     ultrasound visualization
                                     of vascular needle entry,
                                     with permanent recording
                                     and reporting.
77011.............................  Computed tomography         N....................  N1.
                                     guidance for stereotactic
                                     localization.
78827.............................  Not a valid CPT code......  N/A..................  N/A.
----------------------------------------------------------------------------------------------------------------

    The commenter expressed concern that packaging payment for these 
services limits full access to services for ESRD patients for the 
repair and maintenance of vascular access. The commenter recommended 
that CMS give particular attention to the packaged status of CPT codes 
75710, 75790, 75962 and 75798 because they are commonly used for 
vascular access procedures and are critical to beneficiaries living 
with ESRD.
    The commenter also expressed support for an APC Panel 
recommendation to delay packaging under the OPPS until analyses can be 
performed to determine the impact on beneficiaries and the viability of 
ASCs providing these services.
    Response: We continue to believe that packaging payment for those 
ancillary radiology services integral to surgical procedures that would 
be packaged under the OPPS in an HOPD is appropriate under the revised 
ASC payment system. This policy is aligned with the recommendation of 
the Practicing Physicians Advisory Council (PPAC) to apply payment 
policies uniformly in the ASC and HOPD settings. It also maintains 
comparable payment bundles under the OPPS and the revised ASC payment 
system, consistent with the recommendation of MedPAC to maintain 
consistent payment bundles under both payment systems. Our ASC payment 
policy would not permit separate payment for the radiology procedures 
discussed by the commenter when they are provided integral to covered 
surgical procedures (the only case in which they would be covered and 
paid to the ASC), just as these same radiology services would not be 
paid separately under the OPPS if they accompanied a surgical 
procedure.
    The APC Panel did make a recommendation during its August 2008 
meeting for the OPPS regarding packaging for radiation therapy guidance 
services. The APC Panel recommended that CMS pay separately for 
radiation therapy guidance for 2 years and then reevaluate packaging on 
the basis of claims data. The Panel further recommended that CMS 
evaluate possible models for threshold levels for packaging radiation 
therapy guidance and other new technologies.
    ASCs are not within the purview of the APC Panel. The APC Panel's 
advisory role includes specific areas of focus related to the OPPS. We 
would not expect the APC Panel to make any recommendations related to 
ASCs and, in fact, there was no APC Panel recommendation related to the 
impact of packaging for radiation therapy guidance services on the 
viability of ASCs providing the services as was reported by the 
commenter. A full discussion of the final OPPS policy related to 
packaging of radiation therapy guidance services for CY 2009 may be

[[Page 68747]]

found in section II.A.4. of this final rule with comment period.
    Comment: Many commenters requested that CMS modify the packaging 
policy to provide separate payment for some services that are not 
reported by any of the codes within the CPT surgical code range. The 
commenters stated their belief that as a result of CMS' packaging 
policy, procedural services that they believe would meet the criteria 
for performance in ASCs and thereby, would be eligible for payment as 
covered surgical procedures in ASCs, are being inappropriately excluded 
from eligibility for payment. More specifically, the commenters 
disagreed with the ASC packaging policy under which a minor surgical 
procedure (reported by a code within the CPT surgical code range) is 
packaged into payment for a radiology service. The commenters argued 
that the result of the packaging policy is that the surgical procedure 
is not eligible for separate payment. Because the radiology service is 
only eligible for separate payment when it is provided integral to a 
covered surgical procedure, the radiology service is not separately 
payable when it is the only service being provided.
    The commenters expressed particular concern regarding discography 
services. Packaged into the CPT codes 72285 (Discography, cervical or 
thoracic, radiological supervision and interpretation) and 72295 
(Discography, lumbar, radiological supervision and interpretation) are 
CPT codes 62290 (Injection procedure for discography, each level; 
lumbar) and 62291 (Injection procedure for discography, each level; 
cervical or thoracic). The injection procedures are, by definition, 
surgical procedures because they are reported by CPT codes in the 
surgical range. Commenters noted that packaging the surgical code into 
the radiology service means that the radiology service is included on 
the ASC list of covered ancillary services and that, therefore, 
separate payment is only made to an ASC when the radiology service is 
provided integral to a covered surgical procedure. They believe the 
radiology service should be separately payable when it is performed 
alone. The commenters argued that discography services would migrate to 
HOPDs as a result of this packaging policy. They contended that CMS 
should provide ASC payment for both the traditional forms of surgery 
and other invasive procedures appropriate to the outpatient surgical 
setting.
    Response: Packaged surgical services are minor procedures and are 
usually reported with a more comprehensive procedure that may be 
nonsurgical and, therefore, excluded from payment under the revised ASC 
payment system. In the circumstances referred to by the commenters, the 
minor surgical procedures are performed in support of comprehensive 
nonsurgical services and payment for the minor surgical procedures is 
packaged into payment for the nonsurgical services under the OPPS. We 
do not agree that we should define surgical procedures under the 
revised ASC payment system to include other types of services, such as 
radiology services, even though some minor component(s) of the service 
may be defined as surgical. Instead, we continue to believe that the 
other types of services, including radiology services, are not 
appropriate for performance and separate payment in ASCs unless they 
are integral to covered surgical procedures.
    After consideration of the public comments received, we are 
providing CY 2009 payment for covered ancillary services in accordance 
with the final policies of the revised ASC payment system as described 
in the CY 2008 OPPS/ASC final rule with comment period. Covered 
ancillary services and their final CY 2009 payment indicators are 
listed in Addendum BB to this final rule with comment period.

G. New Technology Intraocular Lenses

1. Background
    In the CY 2007 OPPS/ASC final rule with comment period, we 
finalized our current 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 NTIOL class that 
is qualified for a payment adjustment (71 FR 67960 and 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. Pursuant to Section 141(b)(3) of P.L. 103-432 and our 
regulations at 42 CFR 416.185(b), 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
    + Announce the deadline for submitting requests for review of an 
application for a new NTIOL class for 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 2007 OPPS/ASC final rule with comment period, we finalized our 
proposal to base our determinations on consideration of the following 
factors set out at 42 CFR 416.195 (71 FR 67960 and 68227):
     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);

[[Page 68748]]

    ++ 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/08_NTIOLs.asp#TopOfPage.
    As we 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 
with comment period 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 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/08_NTIOLs.asp#TopOfPage.
    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
                                                 services            NTIOL
          NTIOL class           HCPCS code   furnished on or    characteristic     IOLs eligible for adjustment
                                                  after
----------------------------------------------------------------------------------------------------------------
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
                                             through May 18,    Preexisting       Ultraviolet-Absorbing Silicone
                                             2005.              Astigmatism.      Posterior Chamber IOL with
                                                                                  Toric Optic, models AA4203T,
                                                                                  AA4203TF, and AA4203TL.
3.............................  Q1003       February 27,       Reduced           Advanced Medical Optics (AMO)
                                             2006, through      Spherical         Tecnis[reg] IOL models Z9000,
                                             February 26,       Aberration.       Z9001, Z9002, ZA9003, AR40xEM
                                             2011.                                and Tecnis[reg] 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, CC4204A, and
                                                                                  Elastimide AQ2015A.
----------------------------------------------------------------------------------------------------------------

 b. Request To Establish New NTIOL Class for CY 2009
    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

[[Page 68749]]

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 types of lenses in the December 
20, 1999 and May 3, 2000 NTIOL proposed and final rules published in 
the Federal Register (64 FR 71148 through 71149 and 65 FR 25738 through 
25740, respectively).
    In its CY 2009 request, Rayner asserted 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 stated 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 stated 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 determination on consideration of the three major 
criteria that are outlined in the discussion above. In the CY 2009 
OPPS/ASC proposed rule, we noted that we had begun our review of 
Rayner's request to recognize its C-Flex IOL as an NTIOL and 
concurrently establish a new class of NTIOLs. In the CY 2009 OPPS/ASC 
proposed rule, we solicited comments on this candidate IOL with respect 
to the established NTIOL criteria as discussed above (73 FR 41536).
    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 noted in 
the CY 2009 OPPS/ASC proposed rule 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 stated, ``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 
did 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 did not indicate the specific clinical benefits 
associated with the lens. In the CY 2009 OPPS/ASC proposed rule (73 FR 
41536), we noted that we were 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. In the CY 2009 OPPS/ASC 
proposed rule (73 FR 41536), we noted that we welcomed 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

[[Page 68750]]

request to establish a new NTIOL class for CY 2009, we stated our 
belief that foldable, spherical, monofocal IOLs made of acrylic, 
silicone, or polymethylmethacrylate materials represented the currently 
available lenses against which the candidate NTIOL to establish a new 
class should be compared. The Rayner request asserted that the 
hydrophilic material of the candidate lens with respect to silicone oil 
adhesion made the lens a novel IOL in the U.S. market. In the CY 2009 
OPPS/ASC proposed rule (73 FR 41536), we sought 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 was 
unclear, and it was also unclear how often and what other alternative 
tamponade materials may be employed in the U.S relative to silicone 
oil. In the CY 2009 OPPS/ASC proposed rule (73 FR 41536), we welcomed 
public comments and relevant data specifically addressing whether use 
of the Rayner C-Flex IOL resulted in measurable, clinically meaningful, 
improved outcomes in comparison with use of currently available IOLs.
    In accordance with our established NTIOL review process, we sought 
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 have been received by August 
18, 2008. We stated that the announcement of CMS' determination 
regarding this request would appear in this 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 would be effective 30 days following the date that this 
final rule with comment period is published in the Federal Register.
    We thank the public for their comments concerning our review of the 
request from Rayner Surgical, Inc. to establish a new class of NTIOLs 
based on the characteristics of its C-Flex IOL Model 570C. Some of the 
comments we received raised additional questions about the proven 
effectiveness of the Rayner C-Flex lens, especially when compared to 
other currently available lenses. These public comments and our 
responses to them are summarized below.
    Comment: One commenter expressed general support for CMS' 
integration of the new NTIOL notice and comment process into the annual 
OPPS/ASC rulemaking cycle. The commenter cautioned that the process 
should be monitored to ensure that the consideration of these new 
technologies is not impeded or slowed by the rulemaking process. 
Additionally, the commenter requested that for consistency the NTIOL 
comment period should coincide with the comment period for the 
remainder of the issues included in the annual OPPS/ASC proposed rule.
    Response: We thank the commenter for the support of our integration 
of the new NTIOL notice and comment process into the annual OPPS/ASC 
rulemaking cycle. However, in response to the request that the comment 
period regarding requests to establish new classes of NTIOLs should 
coincide with the comment period for all other issues included in the 
annual OPPS/ASC proposed rule, we note that section 141(b)(3) of the 
Social Security Act Amendments of 1994, Public Law 103-432, clearly 
requires us to provide a 30-day comment period on lenses that are the 
subject of requests for recognition as belonging to a new class of 
NTIOLs. Therefore, we will continue to provide a 30-day comment period 
on lenses that are the subject of requests for recognition as members 
of a new class of NTIOLs.
    Comment: One commenter responded to CMS' view of the present 
definition of currently available lenses. The commenter believed that 
the definition of ``currently available IOLs'' should take into account 
the most recent preceding level of technological advancement and 
corresponding patient benefit that has been or is rapidly becoming 
accepted by the ophthalmologic medical community. The commenter 
suggested that in order to identify the latest technological 
advancement, CMS should consider market shares and/or growth rates of 
various classes of currently available IOLs. The commenter further 
stated that IOLs that reduce spherical aberration have become the 
technology of choice for most cataract surgeons because of the greater 
quality of vision they provide. The commenter concluded that CMS should 
be reluctant to establish a new NTIOL class for a future candidate IOL 
that does not reduce spherical aberration.
    Response: We will consider and evaluate this particular concept of 
``currently available lenses'' for its applicability to our future 
reviews of NTIOL applications. While we would expect that use of IOLs 
seeking NTIOL recognition would result in improved clinical outcomes 
when compared to currently available lenses, which includes lenses with 
the characteristic of reducing spherical aberration, we do not require 
that lenses seeking NTIOL recognition also share the same 
characteristics as other lenses that are in currently active NTIOL 
classes. As discussed in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68178), we continue to believe that flexibility is 
critical when identifying what the public considers ``currently 
available lenses,'' in order to allow for consideration of 
technological advances in lenses over time.
    Comment: One commenter questioned how CMS could expect a comparison 
reference to be included in an FDA-approved label, as the FDA's legal 
authority is only to determine if a product is safe and effective. 
Furthermore, the commenter stated that to expect a device label to 
contain language remarking about the device's performance in relation 
to other similar devices makes meeting the NTIOL criteria impossible. 
The commenter did not believe that the labels of the IOLs that have 
received NTIOL status contained such language.
    Response: In response to the comment regarding the FDA's legal 
authority to make comparative decisions, we note that it was not our 
intent to suggest that the FDA makes comparative decisions, but rather 
that the FDA-approved label, submitted by an applicant, may include 
benchmark studies that have compared the performance of the applicant's 
lens against the performance of other lenses. We have reviewed requests 
for NTIOL class recognition where the FDA-approved label has included 
such comparative bench studies, and we do use this information in our 
review process.
    Comment: One commenter claimed that the C-Flex lens application to 
establish a new NTIOL category meets the specific NTIOL review criteria 
and that the applicant lens is not described

[[Page 68751]]

by current or prior classes of NTIOLs. This commenter asserted that the 
C-Flex IOL offers patients who go on to require vitreoretinal surgery 
clinically meaningful improvements, such as a decreased rate of 
subsequent therapeutic interventions and a decreased incidence of 
subsequent IOL exchange. The commenter also argued that the C-Flex IOL 
provides beneficiaries who go on to require vitreoretinal surgery with 
more stable postoperative vision because patients who suffer from 
silicone oil adhesion to their implanted IOL lose visual acuity and 
either must live with impaired vision or undergo another surgical 
procedure to remove the damaged lens and have a new IOL inserted. The 
commenter pointed out that silicone oil used as a tamponade agent 
during vitreoretinal surgery may need to be left in the vitreal space 
for many months following surgery, resulting in silicone adherence to a 
vast majority of the currently available IOLs identified by CMS. The 
commenter concluded that silicone oil adherence to the IOL creates both 
immediate and long-term problems for patients, as well as the retinal 
surgeon. Such problems include decreased visualization of the operative 
area by the surgeon and reoperation on the eye, which exposes the 
patient to significant surgical risks.
    The commenter claimed that 15,000 to 30,000 of the approximately 
1.5 million cataract surgery patients per year in the United States go 
on to require vitreoretinal surgery, and not an insignificant number of 
these individuals face surgical risks associated with silicone oil 
adherence. The commenter stated that the benefit from the C-Flex IOL is 
not dependent on the number of patients who might be impacted but 
rather the clinical outcomes at issue.
    Another commenter explained that problems of silicone oil adhesion 
and silicone oil opacification have been primarily attributed to 
silicone IOLs, and some experts advise that silicone IOLs not be 
implanted in patients at risk for vitreoretinal surgery. This commenter 
asserted that published peer-reviewed articles in the medical 
literature conclude that either a hydrophobic or a hydrophilic acrylic 
IOL is preferable (for greater visibility) to a silicone IOL in 
patients at risk for future vitreoretinal surgery. The commenter 
further stated that silicone IOLs have been replaced in the United 
States to a large extent by hydrophobic acrylic IOLs based on surgeon 
preferences and common clinical scenarios. In addition, the commenter 
explained that many studies have documented postoperative optic 
opacification due to calcification in hydrophilic acrylic IOLs and that 
postoperative opacification of these lenses is of concern, given that 
the supposed additional benefit of the hydrophilic C-Flex IOL is 
superior clarity in eyes exposed to silicone oil. The commenter further 
claimed that recent publications identify ``secondary calcification'' 
with hydrophilic acrylic IOLs as a phenomenon seen in eyes with 
complicated pathology (such as vitreoretinal surgery). The commenter 
questioned the bench studies cited in the C-Flex IOL FDA label, stating 
that there is no evidence that relatively small differences in silicone 
oil coverage (as measured in the bench tests) translates into any 
clinically meaningful benefit.
    Two commenters responded to the question as to whether surgeons 
have alternatives to silicone oil. One commenter stated that retinal 
surgeons could opt to use gas or air for their tamponade effect, but 
that use of these substitutes during vitreoretinal surgery did not 
avoid visual problems. This commenter believed that while there are 
some options to address certain aspects of the silicone oil adherence 
problem, none of these options completely resolves the problem and 
therefore the C-Flex lens provides a clinical benefit as compared to 
each of these alternatives. The other commenter asserted that choices 
of retinal tamponades include silicone oil, gases, and perfluorocarbon 
liquids, all of which are indicated for use in treating retinal 
detachments. This commenter further stated that the choice of tamponade 
is based on each patient's presentation and specific pathology, and 
that the alternatives are generally not interchangeable. The commenter 
also explained that silicone oil is not used in every retinal 
detachment procedure and that in some cases of retinal detachment, 
surgeons use a scleral buckle procedure that does not utilize a retinal 
tamponade. Another commenter did not offer alternative materials that 
could be used as a tamponade but stated that published peer-reviewed 
articles in the medical literature conclude that either a hydrophobic 
or a hydrophilic acrylic IOL is preferable (for greater visibility) to 
a silicone IOL in patients at risk for retinal surgery.
    Response: As we have stated in prior rulemaking, we fully expect 
that to be recognized as an NTIOL and to subsequently establish a new 
NTIOL class, the insertion of the candidate IOL would result in 
significantly improved clinical outcomes compared to currently 
available IOLs, and 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 were identified for each class. We agree that 
the applicant lens is not described by current or prior classes of 
NTIOLs. We also agree that clinical outcomes rather than number of 
patients that may be impacted should be the focus of our decision. 
However, we note that with respect to the applicant lens, there are no 
published comparable clinical data available or presented by the 
applicant which demonstrate that use of the C-Flex IOL results in 
measurable, clinically meaningful, improved outcomes in comparison with 
use of currently available IOLs. The applicant submitted studies that 
evaluated the adhesion of silicone oil to various IOL materials and 
these studies conclude, to varying degrees, that lenses made of 
hydrophilic material exhibit lower silicone oil adhesion than lenses 
made of hydrophobic materials. However, the clinical relevance of these 
bench studies submitted by the applicant has not been established. We 
agree with the comment that several studies have documented 
postoperative opacification of hydrophilic lenses. In our review of the 
studies submitted by the applicant and other available data and 
studies, we encountered information, similar to the peer-reviewed 
journal articles submitted by one commenter that suggested that 
hydrophilic lenses may be susceptible to other forms of opacification. 
If this were the case, any potential visual benefit from reduced 
silicone oil opacification might not be realized.
    After consideration of the public comments received, we conclude 
that the Rayner C-Flex IOL does not demonstrate substantial clinical 
benefit in comparison with currently available IOLs. Therefore, we are 
disapproving Rayner's request to recognize its C-Flex (model 570) IOL 
as an NTIOL and, therefore, we are not establishing a new class of 
NTIOL for payment as a result of this CY 2009 review cycle.
4. 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 after expiration of the payment adjustment, and made 
minor editorial changes to Sec.  416.200(d). For CY 2008, we did not 
revise the current payment adjustment amount, and we did not propose to 
revise the payment adjustment amount for CY 2009 in light of our very 
short experience with the

[[Page 68752]]

revised ASC payment system, implemented initially on January 1, 2008. 
Therefore, the final ASC payment adjustment amount for NTIOLs in CY 
2009 is $50.
5. 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 is 
established according to the standard payment methodology of the 
revised payment system, which multiplies 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 is 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 were included in Table 44 of the CY 2009 OPPS/ASC 
proposed rule (73 FR 41537).
    We did not receive any public comments concerning the proposed CY 
2009 payment rates for the insertion of IOL procedures. Therefore, we 
are finalizing the payment rates for the insertion of IOL procedures, 
calculated according to the standard methodology of the revised ASC 
payment system, as shown in Table 50 below for CY 2009.

   Table 50--Insertion of IOL Procedures and Their CY 2009 ASC Payment
                                  Rates
------------------------------------------------------------------------
                                                           Final CY 2009
    CY 2009 HCPCS code        CY 2009 Long descriptor       ASC payment
------------------------------------------------------------------------
66983....................  Intracapsular cataract                $964.70
                            extraction with insertion of
                            intraocular lens prosthesis
                            (one stage procedure).
66984....................  Extracapsular cataract                 964.70
                            removal with insertion of
                            intraocular lens prosthesis
                            (one stage procedure),
                            manual or mechanical
                            technique (e.g., irrigation
                            and aspiration or
                            phacoemulsification).
66985....................  Insertion of intraocular lens          893.03
                            prosthesis (secondary
                            implant), not associated
                            with concurrent cataract
                            removal.
66986....................  Exchange of intraocular lens.          893.03
------------------------------------------------------------------------

6. Announcement of CY 2009 Deadline for Submitting Requests for CMS 
Review of Appropriateness of ASC Payment for Insertion of an NTIOL 
Following Cataract Surgery
    In accordance with Sec.  416.185(a) of our regulations as revised 
by the CY 2007 OPPS/ASC final rule with comment period, CMS announces 
that in order to be considered for payment effective January 1, 2010, 
requests for review of applications for a new class of new technology 
IOLs must be received at CMS by 5 p.m. EST, on March 2, 2009. Send 
requests to ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17, 
Centers for Medicare and Medicaid, 7500 Security Boulevard, Baltimore, 
MD 21244-1850.
    To be considered, requests for NTIOL reviews must include the 
information on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/08_NTIOLs.asp#TopOfPage.

H. ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule for the revised ASC payment system, 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 this final rule 
with comment period 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'' is used in the final rule to indicate new 
HCPCS codes for which the interim payment indicator assigned is subject 
to comment on this final rule with comment period.
    The ``CH'' comment indicator was used in Addenda AA and BB to the 
CY 2009 OPPS/ASC proposed rule to indicate that: A new payment 
indicator (in comparison with the indicator for the CY 2008 ASC April 
quarterly update) was proposed for assignment to an active HCPCS code 
for the next calendar year; an active HCPCS code was proposed for 
addition to the list of procedures or services payable in ASCs; or an 
active HCPCS code was proposed for deletion at the end of the current 
calendar year. The ``CH'' comment indicators that are published in this 
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 payment indicators and comment 
indicators are provided in Addenda DD1 and DD2, respectively, to this 
final rule with comment period.
2. ASC Payment and Comment Indicators
    In the CY 2009 OPPS/ASC proposed rule, we proposed to revise the 
definition of one ASC payment indicator for CY 2009 (73 FR 41537). We 
proposed 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. The revised definition was displayed in Addendum 
DD1 to the CY 2009 OPPS/ASC proposed rule.
    We did not receive any public comments that addressed our proposal 
related to implementation of a revised definition for payment indicator 
``F4''. We are finalizing our proposal, without modification, to adopt 
the payment indicators as defined in Addendum DD1 to this final rule 
with comment period.

I. 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

[[Page 68753]]

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 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. of the CY 2009 OPPS/ASC 
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) (73 FR 41523 
through 41539).
    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, using updated Core Based Statistical 
Areas (CBSAs) issued by the Office of Management and Budget in June 
2003. The reclassification provision provided at section 1886(d)(10) of 
the Act is specific to hospitals. We believe the use of the most recent 
available raw pre-floor and pre-reclassified hospital wage index 
results in the most appropriate adjustment to the labor portion of ASC 
costs. In addition, use of the unadjusted hospital wage data avoids 
further reductions in certain rural statewide wage index values that 
result from reclassification. We continue to believe that the 
unadjusted hospital wage index, which is updated yearly and is used by 
many other Medicare payment systems, appropriately accounts for 
geographic variances in labor costs for ASCs.
    As discussed in the August 2, 2007 revised ASC payment system 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.
    In the CY 2009 OPPS/ASC proposed rule, we noted that as part of our 
review of the hospital wage index, in accordance with section 106(b)(2) 
of the MIEA-TRHCA, CMS has initiated a research contract that will 
include analysis and recommendations on alternatives to the current 
method for computing the IPPS wage index for FY 2009. We received an 
interim report on this analysis in August 2008 that is available on the 
Web site at http://www.acumenllc.com/reports/cms/RevisedImpactAnalysisfor2009FinalRule.pdf. We anticipate a final report 
in the winter of 2009. While the majority of that final report will 
address the impact of changes on the IPPS wage index, report 
recommendations should provide some information about how proposals to 
refine the IPPS wage index, including modification or elimination of 
the reclassification process and adoption of Bureau of Labor Statistics 
data, may result in a more appropriate wage index for non-IPPS 
providers (73 FR 48564).
2. 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, in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41538), we proposed 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 CY 2009 ASC scaler was 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 
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,

[[Page 68754]]

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 was 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.C. of the 
CY 2009 OPPS/ASC proposed rule (73 FR 41562).
    For any given year's ratesetting, we typically use the most recent 
full calendar year of claims data to model budget neutrality 
adjustments. When we developed the CY 2009 OPPS/ASC proposed rule, we 
had available 95 percent of CY 2007 ASC claims data. These claims did 
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 contained data for ASC services billed in 
CY 2007 that were eligible to receive payment under the previous ASC 
payment system. We did 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 assumed 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 created 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 state, 
county, and CBSA with each ASC. This file, available to the public as a 
supporting data file for the CY 2009 OPPS/ASC proposed rule, is posted 
on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/01_Overview.asp#TopOfPage.
    Comment: Many commenters opposed scaling the ASC relative payment 
weights, expressing similar opinions to those public comments that were 
summarized when CMS finalized the CY 2009 scaling policy in the August 
2, 2007 revised ASC payment system final rule. These commenters 
expressed many concerns, including that scaling is inappropriate and 
will continue to erode the relationship between the ASC payment system 
and the OPPS.
    Numerous commenters asserted that CMS is not required to scale the 
ASC relative weights and that it should use its administrative 
authority and not apply the ``secondary'' scaler to ASC relative 
weights in CY 2009. They noted that CMS established at Sec.  
416.171(e)(2) a process by which it may (emphasis added) make annual 
adjustment to the relative payment weights, as needed (emphasis added).
    Most commenters believed that the scaling would result in decreased 
ASC expenditures in CY 2009. On the other hand, some commenters 
contended that suspending application of the scaler would result in an 
aggregate increase in spending in the ASC setting in CY 2009, although 
the commenters believed this increase in spending would be appropriate. 
In addition, many of the commenters indicated that the fact that the 
weights are already scaled to ensure budget neutrality under the OPPS 
means that they should not be scaled (``secondary rescaling'') to 
ensure budget neutrality under the ASC system.
    Many commenters expressed concern that other payment adjustments 
are already depressing the ASC payments for many procedures, including 
the freeze on the ASC payment update and the transition policy and that 
scaling further reduces rates to inappropriately low levels. Further, 
the commenters stated that scaling has a disproportionate impact on 
some types of covered surgical procedures and that the differences in 
the mix of services between the OPPS (where lower cost primary care and 
diagnostic services are included in relative weight scaling) and ASCs, 
as well as the ``secondary rescaling'' of the relative weights for ASC 
procedures effectively resulted in penalizing ASCs for performing only 
surgical procedures.
    The commenters also expressed their belief that the lack of ASC 
volume data for 40 percent of the covered surgical procedures raises 
substantial methodological issues. They stated that perhaps CMS should 
put off scaling the ASC weights until there are ASC data that reflect 
actual experience under the revised payment system.
    Finally, the commenters asserted that the scaling would lead to 
access to care problems for Medicare beneficiaries.
    Response: Many of these comments are similar to public comments on 
the proposal for the revised ASC payment system that we responded to in 
the August 2, 2007 revised ASC payment system final rule. For example, 
we noted in that August 2, 2007 final rule that commenters ``were 
concerned that annual rescaling would cause divergence of the relative 
weights between the OPPS and the revised ASC payment system for 
individual procedures.'' (72 FR 42532) While we continue to appreciate 
the commenters' concerns, we refer the commenters to the discussion in 
the August 2, 2007 revised ASC payment system final rule for our 
detailed response in promulgating the final CY 2009 scaling policy (72 
FR 42531 through 42533). Below, we address new issues raised by the 
commenters and provide a general summary of some of the relevant 
responses from the August 2, 2007 final rule.
    With respect to the use of ``as needed'' in the text of Sec.  
416.171(e)(2), we note that this section says ``* * * CMS adjusts the 
ASC relative payment weights under 416.167(b)(2) as needed so that any 
updates and adjustments made under 419.50(a) of this subchapter are 
budget neutral as estimated by CMS.'' This does not mean that CMS will 
determine whether or not to adjust for budget neutrality. Rather, it 
means that CMS adjusts the relative payment weights as needed to ensure 
budget neutrality. If we were not to scale the ASC relative payment 
weights, we estimate that the CY 2009 updates and adjustments would not 
be budget neutral. This result would be counter to the rationale for 
the scaling policy described in the August 2, 2007 revised ASC payment 
system final rule (72 FR 42532).
    We agree with the commenters who indicated that suspending 
application of the scaler would result in an aggregate increase in 
spending in the ASC setting in CY 2009. However, we disagree with the 
commenters that this increase in spending would be appropriate because, 
as we discussed in the August 2, 2007 revised ASC payment system final 
rule, we continue to believe that it is inappropriate for ASC 
expenditures to increase or decrease as a result of changes in the 
relative payment weights or the wage index. Changes in aggregate ASC 
expenditures related to payment rates should be determined by the 
update to the ASC conversion factor. Specifically, we stated that, 
``Rescaling of relative weights or the application of a budget 
neutrality adjustment is a common feature of Medicare payment systems, 
designed to ensure that estimated aggregate payments under a payment 
system for an upcoming year would be neither greater nor less than the 
aggregate payments that would be made in the prior year, taking into

[[Page 68755]]

consideration any changes or recalibrations for the upcoming year. * * 
* We continue to believe that this principle should apply as well in 
the revised ASC payment system.'' (72 FR 42532)
    The ASC weight scaling methodology is entirely consistent with the 
OPPS methodology for scaling the relative payment weights. Establishing 
budget neutrality under the OPPS does not result in budget neutrality 
under the revised ASC payment system. Scaling the ASC relative payment 
weights is not a ``secondary rescaling'' of the OPPS relative payment 
weights; there are two separate processes for the two separate payment 
systems.
    In order to maintain budget neutrality of the ASC payment system, 
CMS needs to adjust for the effects of wage index changes and relative 
weight changes even though there are other factors affecting ASC 
payment rates. However, the use of a uniform scaling factor does not 
alter the relativity of the OPPS payment weights as used in the ASC 
payment system. Differences in the relativity between the ASC relative 
payment weights and the OPPS relative payment weights are not driven by 
the application of the uniform scaling factor. To the extent that 
commenters objected to the effects of other payment policies of the 
revised ASC payment system, the uniform scaling factor is not the 
driver of the effects of those payment policies. Our ASC weight scaling 
methodology is entirely consistent with the OPPS weight scaling 
methodology.
    Regarding commenters' concern that scaling has a disproportionate 
effect on some types of covered surgical procedures, we note that, as 
explained in the August 2, 2007 revised ASC payment system final rule 
(72 FR 42542), a major effect of the revised ASC payment system is 
redistribution of payments across all ASC procedures. Historically, the 
highest volume ASC procedures had payment rates that were close to the 
payments in HOPDs and, as such, accounted for most of the total 
Medicare payments to ASCs. As a result, payments for many of those high 
volume services are the most adversely affected under the revised 
payment system as the relative weights across all ASC procedures become 
more closely aligned with those under the OPPS.
    With respect to the use of CY 2007 ASC claims data, we typically 
use the most recent full calendar year of claims data to model budget 
neutrality adjustments. For CY 2009, the most recent full year of data 
available is CY 2007 ASC claims data. On the other hand, we recognize 
that partial 2008 ASC claims data do contain at least some utilization 
for the new covered surgical procedures and covered ancillary services 
under the revised ASC payment system. We considered trying to use CY 
2008 ASC data in developing the CY 2009 OPPS/ASC proposed rule and, on 
balance, concluded that given the newness of the revised ASC payment 
system, we continue to believe that it is more appropriate to use full 
CY 2007 data in the development of the CY 2009 ASC payment rates, 
rather than incomplete CY 2008 claims data. We expect to use the full, 
complete CY 2008 claims data in the development of the CY 2010 ASC 
payment rates.
    We do not believe that the application of the scaler will lead to 
beneficiary access problems. We believe that the fully implemented 
relative weights will be representative of relative costs across all 
ASC services and that payments will support the continued provision of 
high quality surgical procedures to Medicare beneficiaries. We also 
expect that over time ASCs will provide an increased breadth of 
services. However, appropriate beneficiary access to services in 
appropriate care settings is always an important concern and we will 
continue to monitor access under the revised ASC payment system.
    Comment: Commenters also criticized the relative weight scaler and 
transitional payment methodologies for resulting in relatively larger 
ASC payment decreases for the highest volume ASC procedures than for 
other ASC procedures. They estimated that payment decreases for the 
seven highest volume ASC procedures are responsible for financing 50 
percent of the payment increases for other procedures that have payment 
rates that have historically lagged far below the OPPS rates. They 
asserted that this represented a disproportionate and inappropriate 
effect on the highest volume ASC services. They argued that it was not 
fair for CMS to attempt to balance budget neutrality for the revised 
ASC payment system on reduced payment for only a few ASC services.
    Response: The GAO found that OPPS relative payment weights were 
reflective of the relative costs among the same procedures in ASCs. As 
we explained in the August 2, 2007 revised ASC payment system final 
rule (72 FR 42542), a major effect of the use of the OPPS relativity in 
the revised ASC payment system is a redistribution of payments across 
all ASC procedures. We noted that many procedures for which the 
relativity under the OPPS was higher than the relativity under the old 
ASC payment system would experience significant payment increases as 
payments under the revised ASC payment system would be made based on 
the relativity found under the OPPS. Many of those procedures were 
historically lower volume ASC services. Conversely, however, procedures 
for which the relativity under the old ASC payment system was higher 
than the relativity under the OPPS, like many of the high volume ASC 
procedures mentioned by the commenters, would see payment decreases 
under the revised ASC payment system. As described in the August 2, 
2007 revised ASC payment system final rule, we are transitioning these 
payment changes over 4 years to allow time for ASCs to adjust to the 
new payment structure (72 FR 42521).
    As stated earlier, the use of a uniform scaling factor does not 
alter the relativity of the OPPS payment weights as used in the ASC 
payment system. Differences in the relativity between the ASC relative 
payment weights and the OPPS relative payment weights are not driven by 
application of the uniform scaling factor. For a further discussion of 
the transition policy and the effect of scaling on the relativity of 
the ASC payment weights, we refer readers to the August 2, 2007 revised 
ASC payment system final rule (72 FR 42519 through 42521 and 42531 
through 42533).
    Comment: A number of commenters requested that CMS recalculate the 
payment rate for 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 highest volume ASC procedure. Some commenters 
stated that they could not calculate the payment amount that CMS 
published as the national unadjusted rate in the CY 2009 OPPS/ASC 
proposed rule. Other commenters noted that the ASC payment rate for CPT 
code 66984 should have increased slightly for CY 2009 because the OPPS 
rate increased. They argued that if the payment system was functioning 
as it was described in the August 2, 2007 revised ASC payment system 
final rule, the CY 2009 payment for CPT code 66984 should have 
increased by $1.13, but instead, due to rescaling, the proposed CY 2009 
ASC payment for the procedure decreased.
    Other commenters understood the method for calculation and 
indicated their belief that CMS should not apply the scaler to the CY 
2007-based portion of the CY 2009 payment rate for this or other HCPCS 
codes subject to the transition. They noted that, in the August 2, 2007 
revised ASC payment system final rule, the final policy called

[[Page 68756]]

for a CY 2009 transitional blend of 50 percent of the CY 2007 payment 
rate for a covered surgical procedure on the CY 2007 ASC list of 
covered surgical procedures and 50 percent of the CY 2009 payment rate 
for the procedure calculated under the ASC standard methodology. Thus, 
these commenters believed that CMS' scaling of the entire blended CY 
2009 ASC payment weight was not appropriate because this methodology 
decreased the CY 2007 payment amount contributing to the procedure's 
lower CY 2009 proposed transitional ASC payment rate.
    Response: To calculate the transitional rate for CY 2009 for CPT 
code 66984, the CY 2007 payment rate portion of the blended rate must 
be adjusted by the relative weight scaling factor. The commmenters who 
could not calculate a CY 2009 payment rate for CPT code 66984 that 
matched the rate included in the CY 2009 OPPS/ASC proposed rule likely 
did not scale the ASC transitional payment weight associated with the 
blended CY 2009 payment rate for CPT code 66984.
    The issue of the inclusion of the transition in the calculation of 
the CY 2009 scaling factor was clearly addressed in the August 2, 2007 
revised ASC payment system final rule where we specifically indicated 
that ``holding ASC utilization and the mix of services constant, for CY 
2009, we will compare the total weight using the CY 2008 ASC relative 
payment weights under the 75/25 blend (of the CY 2007 payment rate and 
the revised payment rate) with the total weight using CY 2009 relative 
payment weights under the 50/50 blend (of the CY 2007 payment rate and 
the revised payment rate), taking into account the changes in the OPPS 
relative payment weights between CY 2008 and CY 2009. We will use the 
ratio of CY 2008 to CY 2009 total weight to scale the ASC relative 
payment weights for CY 2009.'' (72 FR 42533)
    In addition to explicitly stating in the August 2, 2007 revised ASC 
payment system final rule how we would incorporate the transition into 
the CY 2009 scaling calculation, we indicated in the methodology 
describing our calculation of the final estimated CY 2008 budget 
neutrality adjustment that ``the budget neutrality calculation is 
calibrated to take into account the CY 2008 transitional payment rates 
for procedures on the CY 2007 list of covered surgical procedures.'' 
(72 FR 42531) In other words, the CY 2008 budget neutrality adjustment 
took into account the transition and was not based on the fully 
implemented system.
    It would be inconsistent with the final policies established in the 
August 2, 2007 revised ASC payment system final rule and the 
calculation of the CY 2008 ASC conversion factor for us to calculate 
the CY 2009 budget neutrality adjustment without taking the transition 
into account and base it only on the fully implemented system, as was 
suggested by some commenters.
    After consideration of the public comments received, we are 
finalizing, without modification, our CY 2009 ASC relative payment 
weight scaling methodology. The final CY 2009 ASC payment weight scaler 
is 0.9751.
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 proposed 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 (73 
FR 41539). 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-related 
share 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 proposed rule resulting ratio of 
0.9996 (the ASC wage index budget neutrality adjustment) to the CY 2008 
ASC conversion factor to calculate the proposed 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 
revised ASC payment system 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 only proposed 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 was the 
product of $41.401 multiplied by 0.9996.
    Comment: One commenter questioned CMS' determination of the CY 2008 
wage index as finalized in the CY 2008 OPPS/ASC final rule with comment 
period. The commenter inquired as to how local wage index assignments 
were determined and, more specifically, how a facility was determined 
to be rural.
    Response: In June 2003, the Office of Management and Budget (OMB) 
announced revised standards for designating the geographic statistical 
areas that CMS uses to define labor market areas for purposes of 
assigning the wage index. Specifically, the OMB announced that labor 
market areas would no longer be defined as Metropolitan Statistical 
areas (MSAs), but instead as Core Based Statistical Areas (CBSA). OMB 
further divided these CBSAs into metropolitan statistical areas and 
micropolitan statistical areas, which, in accordance with established 
policy, CMS treats as urban and rural, respectively (69 FR 49026 
through 49034). Areas not located in any CBSA also are considered 
rural.
    Since June 2003, CMS has transitioned from MSA designations to the 
CBSA designations. As a result of this change, some facilities that 
were previously located in urban areas might now be located in areas 
deemed as rural under the revised standards. The same would also apply 
to facilities that were previously located in rural areas and are now 
located in urban areas. In the August 2, 2007 revised ASC payment 
system final rule (72 FR 42517 through 42518), we finalized the policy 
of assigning the wage index to ASCs based on their CBSA designation, 
instead of MSAs, under the revised ASC payment

[[Page 68757]]

system. Therefore, the wage index that is assigned to an ASC is based 
on the CBSA in which the facility is physically located. The OMB 
periodically updates the CBSA designations using census data, and we 
reflect those updates in assignment of the wage index each year. A 
crosswalk that maps the prior MSA labor market area designations to the 
revised CBSA designations is available on the CMS Web site and can be 
accessed at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN.
    Comment: Many commenters requested that CMS adopt the same wage 
index for ASCs as CMS uses to adjust payment under the OPPS. Commenters 
contended that because ASCs offer services that are very similar to 
those provided in HOPDs and, therefore, the facilities are competing 
for the same type of staff, the same wage adjustments should apply.
    Response: We believe that the pre-floor, pre-reclassification 
hospital wage index that we use for our other nonacute care hospital 
payment systems is appropriate for the ASC payment system. However, as 
noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41538), in 
accordance with section 106(b)(1) of the MIEA-TRCHA, CMS has initiated 
a research contract that will evaluate the application of the hospital 
wage index in noninpatient settings. We may reconsider our wage 
policies in light of the findings from that study when they become 
available.
    Comment: Many commenters contended that payment for services 
provided in ASCs should be made based on a fixed percentage of the OPPS 
rates. Several commenters indicated that two bills have been introduced 
in Congress to set and keep ASC payment rates at 75 percent of HOPD 
payments. These commenters expressed support for the legislation and 
their belief that 75 percent would balance Medicare's need for savings 
with an ASC payment rate that could promote growth and development of 
ASCs and ultimately lead to greater long-term savings for Medicare as 
procedures shift from more costly HOPDs. These commenters reiterated 
their belief that CMS' method for establishing budget neutrality for 
the revised ASC payment system was flawed and has resulted in payments 
that are too low to sustain ASC services for Medicare beneficiaries.
    Commenters were also concerned that updating the conversion factor 
for the revised ASC payment system using the CPI-U instead of the 
hospital market basket used to update the OPPS would cause divergence 
in the relationship between payment to HOPDs and ASCs over time that 
would not be based on growing differences between the costs of 
providing procedures in those two different settings. The commenters 
asserted that hospitals and ASCs experience similar inflationary 
pressures. Therefore, they recommended that CMS use the hospital market 
basket as the update for inflation under the revised ASC payment system 
because that update would more appropriately reflect inflation in the 
costs of providing surgical services. In addition, the commenters 
believed that the same update under the two payment systems would allow 
for a consistent relationship between their payments for the same 
surgical procedures.
    Response: Many of these comments are similar to comments we 
responded to in the August 2, 2007 revised ASC payment system final 
rule. For example, we noted in that final rule that ``[s]everal 
commenters specifically recommended that CMS adopt 75 percent as the 
multiplier to the OPPS conversion factor, so that payment rates under 
the revised ASC payment system would be 75 percent of the OPPS rates. 
They cited legislation that was introduced in the U.S. Senate in 2003 
in which payments to ASCs were to have been provided at 75 percent of 
the OPPS rates.'' (72 FR 42526) We also stated in the final rule (72 FR 
42518) that commenters ``expressed concern that the use of two 
different factors to update payments for ASCs and HOPDs would further 
increase the discrepancies between payments in the two settings.''
    While we continue to appreciate the commenters' concerns, to the 
extent that the commenters are addressing the methodology for 
calculating the CY 2008 conversion factor, we refer them to the 
discussion of the methodology in the August 2, 2007 revised ASC payment 
system final rule (72 FR 42521 through 42531). To the extent commenters 
are concerned about the CY 2009 update to the conversion factor, ASCs 
are not eligible for an update in CY 2009, as required by statute. 
Finally, to the extent commenters are concerned about updates to the 
ASC conversion factor for years after CY 2009, we note that we did not 
propose to change the conversion factor update methodology and we refer 
readers to the discussion in the August 2, 2007 revised ASC payment 
system final rule on this issue (72 FR 42518 through 42519).
    After consideration of the public comments received, we are 
finalizing our proposed methodology for determining the final CY 2009 
ASC conversion factor. Using more complete CY 2007 data for this final 
rule with comment period, we calculated a wage index budget neutrality 
adjustment of 0.9998 for this final rule with comment period. The final 
ASC conversion factor of $41.393 is the product of the CY 2008 
conversion factor of $41.401 multiplied by 0.9998.
3. Display of ASC Payment Rates
    Addenda AA and BB to this CY 2009 OPPS/ASC final rule with comment 
period display the 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 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 change in payment 
policy for the item or service from CY 2008 to CY 2009, including 
identifying new or discontinued HCPCS codes, designating items or 
services new for payment under the ASC payment system, and identifying 
items or services with changes 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. 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 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 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

[[Page 68758]]

covered ancillary services that have a predetermined national payment 
amount, such as drugs and biologicals that are separately paid under 
the OPPS or services that are contractor-priced or paid at reasonable 
cost in ASCs.
    To derive the 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 was multiplied 
by the CY 2009 ASC conversion factor of $41.393. The conversion factor 
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 which are displayed in 
Addendum BB, may not show a relative payment weight. The ``CY 2009 
Second Year Transition Payment'' column displays the CY 2009 national 
unadjusted ASC payment rates for all items and services. The CY 2009 
ASC payment rates for separately payable drugs and biologicals are 
based on ASP data used for payment in physicians' offices in October 
2008.
    Comment: Several commenters requested that CMS display in Addendum 
AA the fully implemented ASC payment rates. They stated that it would 
be helpful to them to see what ASC payment rates would be expected to 
look like once the transitional period is over.
    Response: The fully transitioned ASC payment rates do not represent 
what the payment rates would be once the transitional period is over. 
They represent what the payment rates would be in CY 2009 in the 
absence of a transition. However, in response to these requests by 
these commenters, we will make the fully transitioned CY 2009 ASC 
payment weights available on the CMS Web site at http://www.cms.hhs.gov/ASCPayment/ shortly after the publication of this final 
rule with comment period.
    After consideration of the public comments received, we are 
finalizing our CY 2009 proposal to display the updated CY 2009 ASC 
payment rates for covered surgical procedures and covered ancillary 
services in Addenda AA and BB, respectively, to this final rule with 
comment period. We also will make available on the CMS Web site what 
the ASC payment weights would be in CY 2009 without the transition.

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 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 to the public.
    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 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. 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. In the 
CY 2009 OPPS/ASC proposed rule (73 FR 41546), we proposed to implement 
validation requirements that will apply beginning with the CY 2010 
payment determinations. As discussed in section XVI.E.3.a. of this 
preamble, we are not adopting our validation proposal, but instead are 
adopting a voluntary test validation process for CY 2010.
    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

[[Page 68759]]

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. In the CY 2009 OPPS/ASC 
proposed rule (73 FR 41540), we invited public 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.
    Comment: One commenter recommended that CMS move beyond pay-for-
reporting toward pay-for-performance so that payment updates depend on 
empirical results from quality data, not on whether the data are 
submitted, and encouraged CMS to request this authority from Congress.
    Response: We thank the commenter for sharing this suggestion for 
future program directions.
    Comment: One commenter requested that CMS not penalize hospitals by 
cutting their payment update if hospitals can demonstrate that they are 
currently working to comply with the reporting requirements, but do not 
yet have the infrastructure to fully comply.
    Response: We understand that setting up a new reporting program has 
challenges. We recognize that, unlike the RHQDAPU program, the 
reporting of hospital outpatient data did not have the benefit of 
existing reporting systems. However, section 109(a) of MIEA-TRHCA 
requires that the reporting system apply to payment for services 
furnished on or after January 1, 2009. In order to assist hospitals in 
meeting this requirement, we have provided support to hospitals with 
the provision of a data reporting tool, known as the CMS Abstraction 
and Reporting Tool for Outpatient Department measures (CART-OPD), which 
is available at the QualityNet Web site (http://www.qualitynet.org). We 
also have delayed the submission of data as much as possible. As 
required by statute, hospitals failing to report the required data will 
be subject to a reduction in their annual payment update.
    Comment: One commenter questioned the intent of the quality data 
reporting program, how fairness for all providers is achievable, and 
how payment and quality are linked with respect to hospitals and 
physicians. The commenter stated that hospitals have been singled out 
and unfairly penalized for services and care they have limited ability 
to control.
    Response: We are required to implement the amendments made to the 
Act by section 109(a) of the MIEA-TRHCA regarding data for measures 
appropriate for the measurement of the quality of care (including 
medication errors) furnished by hospitals in outpatient settings. The 
HOP QDRP program provides an incentive to hospitals to report quality 
data. Under the statute, there is no penalty applied to hospitals based 
on the quality of the services provided.
    Comment: Several commenters suggested that critical access 
hospitals (CAHs) be allowed to voluntarily report outpatient hospital 
data. Some of these commenters expressed the desire that CMS address 
this issue formally in some manner, including suggesting addressing 
this issue in OPPS rulemaking.
    Response: We thank the commenters for their support of having CAHs 
voluntarily report outpatient data. However, because CAHs are not 
subject to the OPPS or the revised ASC payment system, we do not, at 
this time, plan to address this issue in the OPPS/ASC rulemaking 
process.
    Comment: Several commenters suggested that CMS evaluate RHQDAPU 
program measures for their suitability for outpatient setting. The 
commenters recommended re-specification and refinement for the 
outpatient setting of inpatient measures determined suitable upon 
testing. The commenters suggested that the following specific RHQDAPU 
program measures were potentially appropriate for use in the outpatient 
setting: [Acute Myocardial Infarction] AMI-2 (Aspirin prescribed at 
discharge); AMI-6 (Beta blocker at arrival); AMI-5 (Beta blocker 
prescribed at discharge); HF-1 (Discharge instructions); and PN-3b 
(Blood culture performed before first antibiotic received in hospital).
    Response: We welcome these suggestions. We support the use of 
similar measures in different settings to promote broader and more 
consistent attention to specific processes of care. We also agree that 
such efforts of aligning inpatient and outpatient measures can allow 
for greater efficiencies in data collection and submission by hospitals 
across health care settings. We note that some of the existing OPPS 
measures focus on the same processes of care included in similar IPPS 
measures. We will investigate the suitability of the IPPS measures 
suggested and other measures currently in use in CMS reporting programs 
for future use in the outpatient setting.
    After consideration of the public comments received, we are 
finalizing measures that specifically apply to services furnished in 
the hospital outpatient setting. In the future, we will consider 
adapting more measures from the current IPPS RHQDAPU program measure 
set for use in the OPPS measures set.
2. Reporting ASC Quality Data for Annual Payment Update
    Section 109(b) of the MIEA-TRHCA amended section 1833(i) of the Act 
by redesignating clause (iv) to clause (v) and 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 update 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, ``[e]xcept as the 
Secretary may otherwise provide,'' the hospital outpatient quality data 
provisions of sections 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 final rule with comment 
period for a discussion of our decision to implement ASC quality data 
reporting in a later rulemaking.
3. Reporting Hospital Inpatient Quality Data for Annual Payment Update
    Section 5001(a) of Public Law 109-171 (DRA) set out the current 
requirements for the IPPS RHQDAPU program. We established the RHQDAPU 
program in order to implement section 501(b) of Public Law 108-173 
(MMA). The program builds on our ongoing voluntary Hospital Quality 
Initiative.

[[Page 68760]]

The Initiative is intended to empower consumers with quality of care 
information so that they can make more informed decisions about their 
health care while also encouraging hospitals and clinicians to improve 
the quality of their care. Under the current statutory provisions found 
in section 1886(b)(3)(B)(viii) of the Act, the IPPS annual payment 
update for ``subsection (d)'' hospitals that do not submit inpatient 
quality data in a form and manner, and at a time specified by the 
Secretary is reduced by 2.0 percentage points.
    We used an initial ``starter set'' of 10 quality measures for the 
IPPS RHQDAPU program under section 501(b) of Public Law 108-173 and 
have expanded the measures as required under section 
1886(b)(3)(B)(viii)(III), (IV) and (V) of the Act, as added by section 
5001(a) of Public Law 109-171. We initially added measures as a part of 
the annual IPPS rulemaking process. In response to public comments 
asking that we issue IPPS RHQDAPU program quality measures and other 
requirements as far in advance as possible, we also have used the OPPS 
annual payment update rulemaking process to adopt IPPS RHQDAPU program 
measures and requirements. In the CY 2007 OPPS final rule (71 FR 
68201), we included six additional IPPS RHQDAPU program quality 
measures for the FY 2008 update. In the CY 2008 OPPS/ASC final rule 
with comment period, we added two additional National Quality Forum 
(NQF)-endorsed quality measures to the IPPS RHQDAPU program (72 FR 
66875-66876).
    In the FY 2009 IPPS proposed rule (73 FR 23642), we proposed to 
retire one of the existing 30 quality measures and to add 43 additional 
quality measures for the FY 2010 payment update (73 FR 23647, 23651). 
In the FY 2009 IPPS final rule (73 FR 48604), we retired one existing 
measure, but only adopted 13 of the proposed additional 43 measures (73 
FR 48609). We indicated that we intended to adopt two additional 
measures in this CY 2009 OPPS/ASC final rule with comment period, but 
only if the measures were endorsed by a national consensus-based entity 
such as the NQF (73 FR 48611). The NQF is a voluntary consensus-based 
standard-setting organization established to standardize health care 
quality measurement and reporting through its consensus development 
process. Under section 1886(b)(3)(B)(viii)(V) of the Act, we are 
required to add measures that reflect consensus among affected parties 
and, to the extent feasible and practicable, include measures set forth 
by one or more national consensus building entities. As discussed in 
section XVI.I. of this CY 2009 OPPS/ASC final rule with comment period, 
we are adding two additional quality measures to the IPPS RHQDAPU 
program for FY 2010 because the NQF has endorsed these measures.

B. Hospital Outpatient Quality Measures for CY 2009

    For the CY 2009 annual payment update, we required HOP QDRP 
reporting using seven quality measures--five Emergency Department (ED) 
AMI measures plus two 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 HOPDs.
    The five ED-AMI measures capture the quality of care for acute 
myocardial infarction in the outpatient setting in hospital EDs, 
specifically for those adult patients with AMI who are treated and then 
transferred to another facility for further care. Outpatients treated 
for AMI receive many of the same interventions as patients who are 
evaluated and admitted at the same facility. Three (ED-AMI-1 [OP-4], 
ED-AMI-3 [OP-2] and ED-AMI-5 [OP-3]) of these five measures, except for 
their limitation to outpatients (transferred patients), are equivalent 
to those currently reported under the IPPS RHQDAPU program for admitted 
patients, and are published on the Hospital Compare Web site at: http://www.HospitalCompare.hhs.gov. The other two ED-AMI measures encompass 
timely delivery of care and transfer for patients presenting to a 
hospital with an AMI who are not admitted but transferred to another 
facility. Transferred AMI patients are currently not included in the 
calculation of the inpatient AMI measures because of the limitation of 
the RHQDAPU program measures to inpatients.
    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 and address selection and timely administration of 
prophylactic antibiotics for surgical infection prevention, similar to 
measures in the IPPS RHQDAPU program.
    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 seven measures as designated below, effective for hospital 
outpatient services furnished on or after April 1, 2008:

                    CY 2009 HOP QDRP Quality Measures
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
 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. Quality Measures for CY 2010 and Subsequent Calendar Years and the 
Process To Update Measures

1. Quality Measures for CY 2010 Payment Determinations
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41541), for CY 2010, 
we proposed to require continued submission of data on the existing 
seven measures discussed above and to adopt four imaging measures. We 
proposed to designate the existing seven 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.

[[Page 68761]]

 
 PQRI 20.................   OP-6: Timing of Antibiotic
                                     Prophylaxis.
 PQRI 21.................   OP-7: Prophylactic Antibiotic
                                     Selection for Surgical Patients.
------------------------------------------------------------------------

    Comment: Commenters supported the current HOP QDRP measures, which 
were seen as having a positive impact on quality of care. One commenter 
recommended limiting the measures for 2009 to those seven that are 
currently implemented.
    Response: We agree that the current HOP measures are important to 
the quality of care patients receive in the HOPD and will continue 
their collection. We also are committed to broadening the scope of 
measurement for the HOP QDRP and, therefore, have proposed additional 
measures for the CY 2010 annual payment update and have solicited 
comments on measures being considered for implementation in future 
years.
    Comment: One commenter did not support the proposed quality measure 
OP-3: Median Time to Transfer to Another Facility for Acute Coronary 
Intervention (formerly, ED-AMI-5). The commenter stated that this 
measure would result in additional burden to hospitals without an 
increase in meaningful quality data.
    Response: We believe that, when percutaneous intervention (PCI) is 
indicated, timely transfer of patients is an important aspect of 
quality of care in the hospital outpatient setting; hence our inclusion 
of this measure in the HOP QDRP measure set. National guidelines 
recommend the prompt initiation of PCI in patients presenting with ST-
segment elevation myocardial infarction. The early use of primary PCI 
in patients with acute myocardial infarction who present to the ED with 
ST-segment elevation or LBBB results in a significant reduction in 
mortality and morbidity. Despite these recommendations, few eligible 
older patients hospitalized with AMI receive primary angioplasty in a 
timely manner. Patients transferred for primary PCI rarely meet 
recommended guidelines for door-to-balloon time, which under current 
American College of Cardiology/American Hospital Association 
recommendations is 90 minutes or less. Therefore, we believe that 
reporting on this measure will increase meaningful quality of care 
data.
    Comment: One commenter did not support the current HOP QDRP measure 
set and perceived the set as not adequately measuring the breadth of 
coverage in the ED or the HOPD. The commenter suggested that CMS adopt 
cross-cutting measures, outcomes measures, and process measures that 
are correlated to outcomes.
    Response: Because CY 2008 was the first year of the OPPS reporting 
program, we decided to limit the number of HOP QDRP reporting 
requirements. In future years, we anticipate that the scope of 
outpatient services covered by measures will increase. For HOP QDRP 
reporting for CY 2009, we are adding four imaging efficiency measures, 
which add another topic to the HOP QDRP measure set. We support the 
development and implementation of cross-cutting, outcome, and process 
measures that are correlated to outcomes and intend to consider such 
measures for future rulemaking.
    Comment: Several commenters expressed concern that the current HOP 
QDRP measure set (OP-1 to OP-7) was not fully field-tested for its use 
in HOP QDRP. They urged CMS to fully test in order to identify and 
correct operational issues before data validation on the CY 2009 
measures begin. One commenter expressed concern over frequent changes 
in the consensus base, citing the reversal of consensus on whether 
prophylaxis is necessary for bunion surgery, and recommended that new 
quality measures be based in valid clinical studies.
    Response: The HOP QDRP measures were selected and implemented as 
required under section 1833(t)(17) of the Act. While the short 
timeframe available to implement the program as required by statute did 
not permit extensive field testing prior to implementation in CY 2008, 
we did conduct limited pilot testing on a small convenience sample. 
Specifically, the measure specifications were used to collect data from 
189 medical records in Oklahoma and Illinois. Additionally, these seven 
HOP QDRP measures are NQF-endorsed and are supported by clinical 
evidence. The measures have been in effect for services furnished on or 
after April 1, 2008 and hospitals have been submitting data 
successfully to the OPPS Clinical Warehouse. We plan to analyze the 
data collected under the HOP QDRP to evaluate the seven initial HOP 
QDRP measures and to address operational issues in data collection for 
these already implemented measures before CY 2009 validation. We also 
believe that our plan to conduct a voluntary test validation on these 
measures as outlined in section XVI.E.3.a. of this preamble will 
provide sufficient time to assess the relevant issues for these 
measures, and will provide both CMS and the sampled hospitals with 
valuable feedback for measure maintenance purposes during this 
voluntary validation test period. We have a measures development 
contractor working to maintain and refine the measures specifications 
as needed. In terms of the comment on consensus base of the measures, 
we intend to utilize our measure maintenance processes and, as 
appropriate, consensus building entities such as the NQF to address 
changes in the clinical evidence base that may require changes to 
measure specifications that will be described in the CMS Hospital 
Outpatient Quality Measures Specifications Manual (Specifications 
Manual). CMS believes that, while this may result in changes that occur 
more frequently than the usual 3 year re-evaluation intervals, such 
flexibility is necessary to accommodate changes in the clinical 
evidence base informing these measures.
    After consideration of the public comments received, we are 
finalizing for continued data collection in CY 2009 for the CY 2010 
annual payment update the following seven current HOP QDRP measures, 
redesignated as discussed above: (1) OP-1: Median Time to Fibrinolysis; 
(2) OP-2: Fibrinolytic Therapy Received Within 30 Minutes; (3) OP-3: 
Median Time to Transfer to Another Facility for Acute Coronary 
Intervention; (4) OP-4: Aspirin at Arrival; (5) OP-5: Median Time to 
ECG; (6) OP-6: Timing of Antibiotic Prophylaxis; and (7) OP-7: 
Prophylactic Antibiotic Selection for Surgical Patients.
    The four imaging measures that we proposed to adopt beginning with 
the CY 2010 payment determination are claims-based measures that CMS 
would 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 would calculate these measures 
using CY 2008 Medicare administrative claims data.

[[Page 68762]]

    The proposed imaging measures are based on clinical evidence that 
they promote efficient and high quality patient care. Efficient 
healthcare is that which neither underutilizes nor over utilizes 
healthcare resources. This approach to defining efficiency is supported 
by the observation of widespread process variation in healthcare that 
is not associated with variation in outcome. The Institute of Medicine 
has identified efficiency as an important quality aim. However, despite 
the identification of efficiency as an important factor in the 
provision health care, there currently are few healthcare efficiency 
quality measures available. MedPAC's description of the rapid growth in 
the volume of imaging services in 2000 as compared to 2006, coupled 
with the significant level of these services rendered under the OPPS 
suggests that imaging is an area to investigate with regard to 
efficiency. In the CY 2009 OPPS/ASC proposed rule (73 FR 41541), we 
proposed four imaging measures that measure high quality, efficient use 
of services for the hospital outpatient setting.

            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 invited public comment on these four proposed imaging measures, 
which had been submitted to the NQF for consideration.
    Comment: Several commenters supported the proposed imaging 
efficiency measures. The commenters agreed that these claims-based 
imaging efficiency measures avoid increased data collection burden. One 
commenter was pleased that the proposed rule includes cancer related 
quality measures, in particular the mammography follow-up rates. One 
commenter agreed that ``combined studies with and without contrast'' in 
thorax CT should be ordered infrequently and that this is an area where 
cost could possibly be reduced. One commenter was supportive of the use 
of claims data to gather information on OP-8: MRI Lumbar Spine for Low 
Back Pain, as the information is not available using chart abstraction. 
This commenter was also pleased that measure OP-8 is harmonized with 
the NCQA low back pain measure. One commenter, in support of measure 
OP-9: Mammography Follow-up Rates, stated that the measure has the 
potential to positively affect the quality of life and health of 
Medicare patients, and also believed that the measure supports the work 
of organizations such as the American Cancer Society Cancer Action 
Network.
    Response: We thank these commenters for their supportive 
statements, and are adopting the four imaging efficiency measures in 
this final rule with comment period.
    Comment: Several other commenters believed that the four new 
imaging efficiency measures are still in the developmental phase and 
have not yet received NQF endorsement nor have they been considered for 
adoption by the Hospital Quality Alliance (HQA). They urged CMS to not 
adopt the four imaging efficiency measures at this time and to 
reevaluate the measures at such time as essential measure 
specifications, NQF endorsement and AQA-HQA collaboration can be 
accomplished. One commenter stated that data specifications should be 
available when public comment is requested.
    Response: We believe that the four new imaging efficiency measures 
meet the requirements of section 1833(t)(17)(C)(i) of the Act, as added 
by section 109(a) of MIEA-TRHCA, and we are adopting them in this final 
rule with comment period. Section 1833(t)(17)(C)(i) of the Act requires 
the Secretary to ``develop measures that the Secretary determines to be 
appropriate for the measurement of the quality of care (including 
medication errors) furnished by hospitals in outpatient settings and 
that reflect consensus among affected parties and, to the extent 
feasible and practicable, shall include measures set forth by one or 
more national consensus building entities.'' We believe that these 
imaging efficiency measures are appropriate for the measurement of the 
quality of care furnished by hospitals in outpatient settings. The 
proposed imaging efficiency measures have gone through an extensive 
development process with broad stakeholder input incorporated 
throughout the development process. Specifically, the measures 
development process for the imaging efficiency measures included the 
convening of a Technical Expert Panel (TEP) by a contractor comprised 
of affected parties affiliated with hospitals, payers, practitioners 
from various medical specialties, consumers, as well as clinical, 
scientific, and performance measurement experts. The TEP was convened 
multiple times to identify, develop, and refine measures associated 
with an area requiring quality measurement. The TEP did not move 
forward measures for development upon which the TEP did not agree.
    The measure development process also included a public comment 
period. The measures development contractor publicly posted the measure 
specifications during this time. In the future, we also will make 
relevant measure specifications available during public comment periods 
following proposed rulemakings. Comments during the measure development 
public comment period included supportive comments from many affected 
parties, including comments indicating that these measures are a timely 
and much needed addition to imaging efficiency measurement given the 
scarcity of such measures that have been set forth by a national 
consensus building entity, that they address areas of great 
epidemiologic relevance, and that they address the needs of affected 
parties for accountability and transparency for an area of increasing 
waste and inefficiency. These measures were modified based upon public 
comments received during the public comment period. Given this process, 
we believe that these measures are no longer in the development phase 
and are appropriate

[[Page 68763]]

for the measurement of quality of care furnished by hospitals in 
outpatient settings.
    These measures also reflect consensus among affected parties, as 
required by section 1833(t)(17)(C)(i) of the Act. The proposed measures 
have been developed by the Secretary through a consensus-building 
process that included a broadly representative TEP and a public comment 
period, as discussed above. We believe that this statutory requirement 
is met when the development process for the completed measures reflects 
consensus of a broad representation of affected parties.
    Finally, we believe the requirement that the measures developed by 
the Secretary, to the extent feasible and practicable, include measures 
set forth by one or more national consensus building entities is met, 
as required by section 1833(t)(17)(C)(i) of the Act. Two of the four 
imaging efficiency measures (OP-8 and OP-11) have been endorsed by NQF, 
a national consensus building entity. We note, however, that the 
statute does not require that each measure be endorsed by NQF or other 
national consensus building entities. Further, the statute does not 
require that the Secretary limit measures to those adopted by 
stakeholder organizations not meeting the requirements of voluntary 
consensus organizations under the National Technology Transfer and 
Advancement Act (NTTAA), such as the HQA or AQA. Moreover, we believe 
it is not feasible and practicable to adopt only imaging efficiency 
measures that have been endorsed by a national consensus building 
entity.
    The measurement area of efficiency is currently in its infancy, and 
there are few measures available for adoption that have been set forth 
by a national consensus building entity, such as NQF. We have given 
consideration to measures that have been endorsed by NQF. However, 
except for the two efficiency measures included in this final rule with 
comment period, we did not find that these other measures meet program 
needs because other NQF-endorsed measures are not measures at the 
facility level or do not sufficiently address the quality aim of 
efficiency. For example, other NQF-endorsed measures may focus on 
documentation requirements and not efficiency. As the area of 
efficiency measurement matures, it will become more feasible and 
practicable to adopt additional measures that have been set forth by a 
national consensus building entity.
    With respect to the proposed imaging efficiency measures, we 
believe that there are important factors involving patient safety 
weighing in favor of including these measures in the HOP QDRP, even if 
they have not been set forth by a national consensus building entity. 
Specifically, these measures address the unnecessary administration of 
contrast materials and the unnecessary radiation exposure resulting 
from unnecessary imaging studies. These measures fill a significant gap 
given the few existing imaging efficiency measures available at the 
outpatient facility level. Therefore, we are adopting these measures in 
this final rule with comment period.
    Comment: Several commenters opposed the use of CY 2008 claims to 
calculate compliance with the imaging efficiency measures for the CY 
2010 payment determination. The commenters also stated that the use of 
claims data assesses a facility's utilization of imaging services as 
opposed to assessing the practice of the ordering physician. Numerous 
commenters stated that all of the imaging efficiency measures seemed to 
be more appropriately used in assessing physician quality rather than 
that for the HOPD, because, the commenters argued, the four measures 
are all physician-driven. One commenter stated that it was unclear 
whether compliance is based on ``reporting'' through claims submission 
or whether compliance is based on an unknown performance rate.
    Response: We use CY 2008 claims to calculate the imaging efficiency 
measures for the CY 2010 payment determination because the CY 2008 
claims are the most current existing claims data available to us. We do 
not require any additional data submission from hospitals for these 
measures to satisfy the requirements of the HOP QDRP.
    The four imaging efficiency measures that we proposed are for the 
HOP QDRP and measurement is at the facility level, not at the physician 
level. We believe that, because HOPDs are receiving payment for these 
imaging services under the OPPS, these data are appropriate for use in 
measuring HOPD quality of care. There is no requirement that hospitals 
must meet a particular performance score in order to satisfy the 
requirements of the HOP QDRP in regard to the imaging efficiency 
measures, just that the hospitals report the required information.
    Comment: Several commenters stated that the collection of imaging 
efficiency measures was inappropriately named and that the measures 
were unadjusted utilization rates. One commenter stated that the 
selection of the MRI and CT measures has raised suspicion with imaging 
services staff that CMS' motive is cost reduction only.
    Response: We disagree with the characterization of the measures as 
utilization rates. These measures were constructed using the definition 
of efficiency adopted by the IOM, and are intended to address waste and 
promote the efficient beneficial use of services. We received input 
from affected parties, such as hospitals and consumers, and received 
agreement from such parties that these are efficiency measures as 
defined by the IOM criteria, and that they measure imaging efficiency. 
We select HOP QDRP measures in order to provide hospitals with a 
greater awareness of the quality of care they provide and to provide 
actionable information for consumers to make more informed decisions 
about their health care providers and treatments. For the imaging 
measures, the focus is on hospitals and consumers reducing unnecessary 
exposure to radiation and contrast materials as a result of duplicative 
imaging services.
    Comment: Several commenters were concerned that the billing data 
proposed for the imaging efficiency measures would include Medicare 
patients only, which they believed could distort the true picture of 
the delivery of imaging services.
    Response: While the distribution of the rates may be different when 
calculated using Medicare claims only, Medicare claims comprise a 
substantial portion of total hospital outpatient claims for these 
services therefore we believe that the use of these claims data would 
not provide a distorted view of the delivery of imaging services in the 
outpatient setting. We would be interested in calculating measures 
based on all-payer claims data and may propose to collect such data in 
the future. However, collection of all-payer data presents additional 
infrastructure issues.
    Comment: One commenter asked what administrative processes will be 
implemented for claims-based measures and whether the administrative 
claims data will undergo reliability testing or validation by CMS. The 
commenter was concerned that if a hospital does not submit a claim for 
payment, this could result in the loss of 2 percentage points of the 
OPPS annual payment update for the hospital. The commenter asked if 
there would be a review period for hospitals of the administrative data 
before it was released to the public.
    Response: CMS employs a variety of measures to ensure the accuracy 
of coding for outpatient claims from the provider to postpayment 
levels. All Medicare providers are required to have compliance programs 
in place. At the claims processing level, edits are in

[[Page 68764]]

place to ensure that claims are completed in a manner consistent with 
payment policy, and prepayment edits may flag claims for review. At the 
postpayment level, a variety of entities are utilized to detect 
improper payments. Prior to public reporting, we will provide each 
hospital an opportunity to review its data. Hospitals should submit 
claims for services they have furnished in order to receive payment on 
the claims and to receive the full annual payment update.
    Comment: Several commenters did not believe that the OP-8: MRI 
Lumbar Spine for Low Back Pain measure is ready for implementation, and 
even with further testing and improvement, this measure is more 
suitable for physicians who order imaging tests than to the HOPD that 
implement or furnish physician orders. Some commenters stated that the 
measure does not allow for consideration of over-the-counter (OTC) 
medications as an indicator of antecedent therapy. Several commenters 
stated that they were unclear as to what steps they should take to 
improve their performance on this measure. These commenters were 
uncertain if CMS believes that hospitals should refuse access to MRIs 
for low back pain for those patients and whether they should provide 
proof of antecedent conservative therapy. One commenter stated that 
this measure is potentially a dangerous incentive where it aims for 
reductions without qualifiers because there are cases of epidural 
abscesses as well as abdominal aortic aneurisms that present with low 
back pain. This commenter believed that using a less costly diagnostic 
approach will delay diagnosis and potentially cause harm to the 
patient. One commenter believed that there are factors such as the lack 
of provider documentation that may lead to the appearance of 
inappropriate MRI orders for low back pain, and believed that this 
measure would be burdensome for the hospital and should be directed at 
the clinician. One commenter also stated that it will be important to 
communicate what OP-8 portrays, and whether better quality is indicated 
by a higher or lower efficiency score, and whether there is an 
appropriate benchmark or rate.
    Response: This measure has undergone a rigorous development process 
and has been endorsed by NQF for accountability at the facility level. 
Although we believe that the basis for the measure may be appropriately 
applied at the ordering physician level, it is also a facility measure 
as considered by the NQF and we believe that this measure is ready for 
implementation at the facility level.
    There is evidence that a substantial portion of MRIs for low back 
pain are potentially not beneficial and do not lead to any modification 
of therapy based on the MRI results, especially when performed on the 
first visit prior to any attempt to diagnose or treat the patient 
through more conservative means. OP-8 measures the rate of usage of MRI 
for low back pain and it accounts for a 6-week window between the time 
of presentation with low back pain and the imaging service, during 
which time it is expected that any OTC or other antecedent therapy 
would have occurred. This measure does not establish absolute 
parameters for the use of imaging services, but rather identifies 
variations from norms for the efficient use of imaging services. The 
focus of the measure is not on increasing rates to 100 percent or 
reducing rates to 0 percent or any other values; rather, the focus is 
on promoting efficient use of imaging services.
    As for the role of the hospital, the hospital has control over the 
use of the MRI machine. HOPDs can improve their efficiency because they 
are in a position to promote consultation between ordering physicians 
and the radiologists engaged by the HOPD, to communicate directly with 
the ordering physician as needed, and otherwise to educate and 
communicate with and engage the hospital medical staff and community 
physicians on the appropriate use of MRI for low back pain. CMS does 
not believe that hospital outpatient departments should refuse access 
to MRIs for low back pain. Further, we disagree that this measure 
provides an inappropriate incentive for reductions in MRI for low back 
pain or it encourages the inappropriate use of less costly diagnostic 
approaches. The intent of the measure is to assess the appropriateness 
of the imaging study and, if a less costly approach is equally or more 
effective than the MRI, the HOPD should employ the less costly 
approach.
    Finally, while provider documentation is important, these measures 
will be calculated by CMS based solely on claims that have been 
submitted to Medicare by HOPDs. Thus, there would be no collection 
burden associated with the calculation of these measures at the 
hospital outpatient level.
    Comment: Several commenters stated that they did not believe that 
the OP-11: Thorax CT--Use of Contrast Material measure should be 
implemented at this time because preliminary calculations of the 
measure rate found a relatively low use of combined studies. They 
believed it was unclear to what extent there is room for improvement on 
this measure. One commenter was concerned that undefined and 
nonstratified use of administrative data may push physicians to treat 
patients on guidelines, not on how the patient presents.
    Response: Our claims-based evidence indicates that there is 
significant practice variation in the use of combined studies, 
indicating room for improvement, and in many instances, a high level of 
use of combined studies in outpatient settings. This measure seeks to 
identify practice variation in the use of combined Thorax CT, which may 
be considered inefficient. The focus of this measure is to help 
identify inefficient use of imaging studies and it is important because 
it addresses important patient safety concerns including the 
unnecessary administration of contrast materials and the unnecessary 
radiation exposure resulting from unnecessary imaging studies. The 
measure specifications and administrative data are defined and 
incorporate inclusion and exclusion criteria to stratify the 
populations being observed. Additionally, they have been endorsed by a 
national consensus building entity, the NQF, which reviews the possible 
unintended consequences of the measures on physician practice patterns. 
Also, the imaging efficiency measures are at a facility level and not a 
physician level.
    Comment: Numerous commenters stated that OP-10: Abdomen CT--Use of 
Contrast Material measure should not be implemented as it is currently 
defined because there is a lack of evidence in the published literature 
to determine the appropriate use of contrast material for these 
patients. One commenter stated that the order for use of contrast 
material may be difficult to attribute to a specific physician as one 
may order contrast, but many rely on the radiologist to determine 
whether contrast is needed. One commenter stated this would be 
difficult to implement due to the vast exclusions and, therefore, this 
was not a good choice to introduce quality measures to the imaging 
area.
    Response: We disagree that evidence does not exist in the published 
literature concerning the appropriate use of contrast material for 
these patients. Regarding difficulty in implementing this measure, we 
conducted an extensive claims analysis during the development and 
evaluation of this measure. The results of this analysis indicate that 
a significant pattern of variation among providers exists in the use of 
combination examinations in conjunction with an abdomen CT. We

[[Page 68765]]

are not attributing the measure to individual physicians, as the 
furnishing of the service and its measurement occur at the facility 
level and the measure will be calculated using outpatient hospital 
claims. Any ``vast exclusions'' would not impede implementation of this 
measure because it will be calculated by Medicare billing data which is 
already submitted by hospitals' outpatient departments, thus, not 
providing additional implementation burden to HOPDs.
    Comment: Numerous commenters recommended that the imaging 
efficiency measures be reviewed by the AMA Physician Consortium for 
Performance Improvement (PCPI) because they believed this group was 
best qualified to consider the appropriateness of the measures for 
numerous health conditions. They also stated that OPPS measures that 
relate to physician performance should be aligned with physician 
measures utilized in the PQRI.
    Response: Although the AMA-PCPI is an important and active 
developer of physician level quality measures, the AMA-PCPI is not a 
primary developer of facility level measures. However, in some 
instances, measures developed by the AMA-PCPI can be adapted for 
facility use as were the two surgical infection measures included in 
the current HOP QDRP set of measures. Members of the AMA-PCPI 
frequently contribute comments to other measures developers, including 
comments on the development of these facility level measures. 
Harmonizing measures across settings is desirable and we agree that it 
may be useful to examine opportunities to align measures in the future.
    Comment: Several commenters expressed concern that the Mammography 
Follow-Up Rates imaging efficiency measure (OP-9) was not ready for 
implementation. These commenters believed there was a lack of consensus 
as to what the appropriate recall rate should be, and thus, it was 
unclear to them what rate the hospitals should be striving to achieve. 
One commenter stated that appropriate follow-up for a normal screening 
mammogram might be a phone call or letter from the provider. The 
commenter was concerned that existing claims data are not adequate for 
this purpose, and the state of the art of electronic health records is 
not sufficiently developed to allow a meaningful calculation of follow-
up without extensive manual collection and reporting. One commenter 
stated that this information creates redundancy as the information is 
already collected for the American College of Radiologists and the 
commenter's State. Another commenter stated that this measure 
inappropriately makes the hospital responsible for both the provider 
and the patient. The commenter stated that an educational campaign 
through a public service announcement would be just as effective and 
would not require the hospital to invest more money in developing an 
automated method to inform patients that their mammogram is due.
    Response: We believe that the Mammography Follow-Up Rates imaging 
efficiency measure is ready for implementation because it underwent a 
consensus-based development process that meets the statutory 
requirement for adoption of a measure, and includes testing and public 
comment. The imaging efficiency measure OP-9: Mammography Follow-up 
Rates does not seek to establish or identify a specific range within 
which follow-up rates must fall. There has been considerable research 
done on appropriate ranges and, during the development process, we also 
found a range of rates among hospitals. The measure will identify 
differing relative performance rates. We are not attempting to 
determine whether follow-up occurred in terms of notification, but 
rather seek to measure the degree to which a facility must repeat 
mammography imaging for its patients. We appreciate the fact that 
hospitals may be responding to a number of reporting requests or 
requirements. However, the HOP QDRP is a separate reporting program for 
hospitals receiving payment under the OPPS, and, at this time, HOP QDRP 
requirements cannot be met by reporting under other programs. Because 
the imaging efficiency measures are claims based, hospitals will not 
need to collect and submit additional data; they need only to submit 
claims for services for which they are to be paid under Medicare. We 
performed extensive claims analysis for this measure using Medicare 
claims and also other claims databases available, and our results 
indicate that it is appropriate, valid and reliable to calculate this 
measure using claims data. The measure carries significant 
epidemiologic relevance in that it is aimed at optimizing the use of an 
examination that carries a proven benefit in terms of quality and 
longevity of life. We agree that educational campaigns and public 
service announcements may be beneficial to Medicare beneficiaries. We 
do not believe that these programs would replace or should supplant 
quality of care measurement and public reporting of the HOP QDRP 
measures because the data collected for HOP QDRP includes all OPPS 
hospitals and are not limited to only certain States or voluntary 
participation as other programs are, thus making HOP QDRP a more 
comprehensive quality reporting program.
    Comment: One commenter wanted to know whether measure OP-11: Thorax 
CT--Use of Contrast Material will answer the question of what medical 
benefit the administration of contrast material provides.
    Response: The measure is intended to measure the efficient use of 
imaging services and not answer specific clinical questions.
    Comment: One commenter wanted CMS to specify a benchmark for 
measure OP-8: MRI Lumbar Spine for Low Back Pain to assess the 
percentage of cases where MRI intervention altered the course of 
patient management.
    Response: We do not have a predetermined benchmark for this 
measure. However, the range of performance, including national and 
State averages, will become available as we publicly report the 
information.
    Comment: One commenter requested that CMS risk-adjust the data for 
what it believed to be a more accurate representation of the patient 
population of tertiary hospitals and academic medical centers.
    Response: In general, process of care measures do not require the 
use of risk adjustment. Process of care measures reflect best practices 
and clinical guidelines that apply independent of the condition of the 
patient. When certain conditions or circumstances for which the 
particular intervention being measured would not be appropriate, these 
cases are removed from the denominator of the process of care measure.
    Comment: One commenter stated that in the field, hospitals find the 
issue of overuse of imaging services is often provider specific for the 
services included in the four proposed imaging efficiency measures and 
that these measures, in the commenter's opinion, involve the hospital 
being the policing entity for accepting an order for MRI and CT scans. 
The commenter requested that CMS consider making the overuse of imaging 
services an issue for the PQRI rather than one for the hospital that 
receives the physician orders. Another commenter argued that imaging 
services are targeted for measures because of the expense to CMS rather 
than patient safety issues. The commenter stated that its imaging 
services providers voiced immediate objections to these measures 
because

[[Page 68766]]

these are revenue generating examinations, ordered by physicians that 
they have little control over, and the proposed imaging efficiency 
measures have little to do with quality and all to do with cost.
    Response: In our response to an earlier commenter, we discussed the 
role of the hospital with respect to the use of imaging services it 
controls. We believe that the commenters understate considerably the 
effective roles hospitals can play in promoting the efficient use of 
imaging services. Further, we disagree with the commenters' statements 
that these measures are focused on cost or expenses rather than on 
patient safety. As discussed previously, the focus of the four proposed 
imaging efficiency measures is on reducing unnecessary exposure to 
radiation and contrast materials as a result of duplicative imaging 
services.
    Comment: One commenter stated that CMS has inappropriately assumed 
that hospitals fail to provide quality care due to the number of 
imaging services they perform, when, in fact, according to the 
commenter, the hospitals are merely working with their physicians and 
following orders to provide high-quality health care to Medicare 
beneficiaries.
    Response: America's Health Insurance Plans (AHIP) estimates that a 
range of 20 percent to 50 percent of high-technology diagnostic imaging 
for a variety of conditions fails to provide information that improves 
patient diagnosis and treatment and may be considered redundant or 
unnecessary (July 2008 monograph http://www.ahip.org/content/default.aspx?docid=24057). There is a growing interest in pursuing 
strategies that promote the appropriate use of imaging services, avoid 
redundancy and unnecessary exposure to radiation, reduce painful and 
wasteful follow-up procedures, and ensure that the patient is getting 
the right service the first time. As discussed above, hospitals can 
play a role in promoting the efficient use of imaging services.
    Comment: One commenter stated that none of these measures relates 
to radiation oncology.
    Response: We did not intend for these measures to focus on 
radiation oncology. These measures are intended to measure imaging 
efficiency.
    After consideration of the public comments received and as 
discussed in the above responses to those comments, we are finalizing 
the following four imaging efficiency measures for the CY 2010 payment 
determination: (1) OP-8: MRI Lumbar Spine for Low Back Pain; (2) OP-9: 
Mammography Follow-up Rate; (3) OP-10: Abdomen CT--Use of Contrast 
Material; and (4) OP-11: Thorax CT--Use of Contrast Material. Adoption 
of these four measures into the HOP QDRP meets the requirements of 
section 1833(t)(17)(C)(i) of the Act that the measures are appropriate 
for measurement of quality of care furnished by hospitals in outpatient 
settings, reflect consensus among affected parties and, to the extent 
feasible and practicable, include measures set forth by a national 
consensus building entity. All four of the proposed imaging efficiency 
measures reflect consensus among affected parties as meeting IOM 
criteria of measuring efficiency in general, and imaging efficiency in 
particular. In addition, two of the imaging efficiency measures we are 
finalizing (OP-8 and OP-11) are NQF-endorsed. For program purposes, the 
technical specifications for these four new HOP QDRP measures will be 
published in the January 2009 Specification Manual located at http://www.qualitynet.org.
    The measures for the 2009 HOP QDRP measurement set to be used for 
the CY 2010 payment determination are as follows:

 2009 HOP QDRP Measurement Set To Be Used for 2010 Payment Determination
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis.
OP-2: Fibrinolytic Therapy Received Within 30 Minutes.
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention.
OP-4: Aspirin at Arrival.
OP-5: Median Time to ECG.
OP-6: Timing of Antibiotic Prophylaxis.
OP-7: Prophylactic Antibiotic Selection for Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain.
OP-9: Mammography Follow-up Rates.
OP-10: Abdomen CT--Use of Contrast Material.
OP-11: Thorax CT--Use of Contrast Material.
------------------------------------------------------------------------

2. Process for Updating Measures
    Although we adopt measures through the rulemaking process, in the 
CY 2009 OPPS/ASC proposed rule (73 FR 41541), we proposed to establish 
a subregulatory process that would 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 national consensus building entity. We believe that the 
establishment of a subregulatory 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 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 OP-6 and OP-
7) based on updated clinical guidelines or best practices.
    Therefore, we proposed that when a national consensus building 
entity updates the measure specifications for a measure that we have 
adopted for the HOP QDRP program, we would update our measure 
specifications for that measure accordingly. We would provide 
notification of the measure specification updates on the QualityNet Web 
site, http://www.qualitynet.org, and in the Specifications Manual no 
less than 3 months before any changes become effective for purposes of 
reporting under the HOP QDRP. We invited public comments on this 
proposal.
    Comment: Several commenters supported issuing measure specification 
updates to reflect the current standard of care based on scientific 
evidence and in accordance with the latest specifications endorsed by a 
national consensus organization through a subregulatory process. They 
stated that use of measures based on the most up to date scientific 
evidence will best ensure that patients receive high quality and 
appropriate care.
    Response: We appreciate these supportive statements to our proposal 
that when a national consensus building entity updates the measure 
specifications for a measure that we have adopted for the HOP QDRP 
program, we would update our measure specifications for that measure 
accordingly through a subregulatory process. National consensus 
building entities issue changes of a substantive nature to measures 
they have endorsed which may occur off-schedule from the rulemaking 
cycle, but which nonetheless carry clinical significance, warranting 
updates to measures using a subregulatory process. This subregulatory 
process is in addition to the existing technical updates that are 
routinely made and posted to QualityNet and which constitute technical 
business requirements for data submission such as updates to ICD-9 or 
HCPCS codes.
    For measures that are not endorsed by a national consensus building 
entity, the measures would be updated through the subregulatory process 
based on scientific advances as determined necessary by CMS. Once 
measures have been adopted by the HOP QDRP

[[Page 68767]]

program there is a measure maintenance process that occurs where 
Technical Expert Panels that represent consensus among affected parties 
review the measure specifications and take into account changes in 
scientific evidence as they evaluate the measure specifications and 
make recommendations to refine them. Changes such as this have occurred 
using this subregulatory mechanism to date, and we believe that it 
should continue to occur using this mechanism. Changes made in this 
manner would reflect current consensus resulting from changes in 
science and clinical evidence, and changes in consensus for which 
public input is sought through a national consensus process.
    Comment: Many commenters also agreed that 90 days notice prior to 
implementation is sufficient. One commenter recommended that CMS 
consider issuing notification through additional systems (such as CMS 
listserv groups) as well as through QualityNet notices and regularly 
scheduled changes to the Specifications Manual, and to consider 
providing notification about such changes 6 months prior to 
implementation rather than 3 months.
    Response: We will update our measure specifications for a measure 
through a subregulatory process providing at least 3 months advance 
notice for changes. QualityNet and the regularly scheduled 
Specifications Manual updates are our primary mechanisms for 
communicating changes relating to technical aspects of the measures as 
well as changes consistent with those made as part of endorsement 
status that reflect current science and consensus. We will investigate 
supplementing this communication through other means as well. We agree 
that if changes to measures result in changes in the data elements to 
be submitted and, therefore, require significant system changes, 
hospitals would require sufficient time to accommodate such changes, 
which we believe will be satisfied with 6-months notice. However, if 
changes do not affect data elements to be submitted, we intend to 
provide no less than 3 months notification for the change, which we 
believe would be sufficient.
    Comment: Numerous commenters urged CMS to utilize the rulemaking 
process to announce quality measure changes and make accompanying 
measure specification changes. While many commenters agreed that a 
subregulatory process would be appropriate for minor changes, the 
commenters expressed concern that use of a subregulatory process would 
not afford hospitals sufficient time to consider substantive changes or 
new measures, and that the formal regulatory process should be utilized 
in order to provide an opportunity for public input to such changes.
    Response: We did not propose to adopt new measures using a 
subregulatory process. Rather, a subregulatory process will be used in 
order to maintain specifications for existing quality measures to be 
consistent with current science and consensus among affected parties. 
This measure maintenance process has occurred using this subregulatory 
mechanism to date, and we believe that it should continue to occur 
using this mechanism. Changes made in this manner would reflect current 
consensus resulting from changes in science and clinical evidence, and 
changes in consensus for which public input is sought through a 
national consensus process. The adoption of new outpatient measures 
will continue to be through an annual notice-and-comment rulemaking 
process. However, we will provide a 6-month notice for substantive 
changes to data elements that will require significant systems changes, 
such as the addition of required new data elements.
    Comment: One commenter stated that, prior to linking measures to 
outpatient payment, there should be evidence that the measures have an 
impact on quality and outcome for patients treated in the outpatient 
setting, and that the services measures should be reevaluated each year 
so that areas that are no longer a problem can be removed from the 
list.
    Response: As part of the measure development process, the HOP QDRP 
measures have undergone rigorous scrutiny for validity as indicators of 
outpatient quality of care. Measures that are implemented in this 
reporting program will undergo regular reevaluation every 3 years as 
part of the measure maintenance and reevaluation process. However, we 
also may decide upon reviewing measures to suspend measures from the 
reporting program, and these decisions would be announced during the 
annual rulemaking process. While improvability is an important 
criterion for measure selection, we do not limit measure selection 
solely to areas perceived as problem areas.
    After consideration of the public comments received, we are 
finalizing the use of the subregulatory process described to ensure 
that the HOP QDRP measures are calculated based on the most up-to-date 
scientific and consensus standards. We will continue to release a HOPD 
Specification Manual every 6 months and addenda as necessary providing 
at least 3 months of advance notice for non-substantive changes such 
changes to ICD-9 and HCPCS codes and at least 6 months notice for 
substantive changes to data elements that will require significant 
systems changes.
3. Possible New Quality Measures for CY 2011 and Subsequent Calendar 
Years
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41542), we sought 
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 also sought comment on some of these measures 
in the CY 2008 OPPS/ASC proposed rule. We sought 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 requested 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 solicited public comment on the following measure sets and 
measures for consideration in CY 2011 and subsequent calendar years.

[[Page 68768]]



 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.*
Osteoporosis...................     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 welcomed suggestions regarding other additional measures and 
topics relevant to the hospital outpatient setting that we could use to 
further develop the measure set, and indicated that we were 
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.
    Comment: One commenter strongly supported inclusion of measure 5, 
Median Time from ED Arrival to ED Departure for Discharged ED Patients. 
The commenter believed that this measure is reasonable for assessing 
patient delays in receiving ED care. The commenter also recommended 
inclusion of a companion measure, Median Time from ED Arrival to ED 
Departure for Admitted Patients, because this measure assesses 
``boarding'' time in the ED. This measure was not included in the CY 
2009 OPPS/ASC proposed rule. Further, the commenter suggested that 
these measures be stratified by psychiatric population, ED observation, 
transferred patients, and all others.
    Response: We thank the commenter for its support of the inclusion 
of measure 5. The Median Time from ED Arrival to ED Departure for 
Admitted Patients was specified to collect data on patients in the 
inpatient population and, therefore, is not appropriate for the 
outpatient setting. In the FY 2009 IPPS proposed rule (73 FR 23652), we 
solicited comments on this measure as a possible measure to be used in 
the RHQDAPU program for FY 2011 and subsequent years. We appreciate the 
suggestion regarding the stratification of the measure. We intend to 
stratify both measures by psychiatric, observation, and transferred 
patients, and those other patients who do not meet the other 
stratification criteria.
    Comment: Several commenters described the challenges for data 
collection and reporting resulting from the proposed measures, and 
stated CMS should assess the amount of chart review required for 
different populations.
    Response: We are interested in minimizing the burden on hospitals 
associated with data collection and reporting. We have sought to 
address this by using claims-based measures, where appropriate, and we 
are evaluating the use of data from clinical data registries. In the 
case of the ED timing measures, these data are routinely collected by 
hospitals currently. In addition, we are evaluating the potential for 
such data to be submitted electronically from hospital information 
systems. We have assessed collection burden for each measure as a whole 
for the global population. There is no additional burden of chart 
review for the stratified populations, since there is no requirement 
for an additional or separate chart review for the stratified 
populations.
    Comment: One commenter stated that some of the measures do not add 
value for consumers, citing its belief that measure 4, the percentage 
of time a needle biopsy was used in diagnosis, has nothing to do with 
an accurate diagnosis or appropriate treatment; and that measure 16, 
the medication reconciliation, does not measure medication errors or 
avoidable harm.
    Response: We believe that these measures would be of use to 
consumers. Literature indicates that needle biopsy results in a lower 
incidence of re-excision, reduced number of total operations, and a 
shorter time to complete surgery compared with surgical biopsy. 
Medication reconciliation review promotes the examination of inpatient 
and outpatient differences in patient medication, which helps reduce 
medical errors and supports the provision of quality care to patients.
    Comment: One commenter stated that future measures should be more 
specific in terms of size, volume of services, type and level of care, 
geographical regions, and electronic health record (EHR)-implementation 
status. The commenter also stated that related measures should be 
assessed for alignment across settings or under different conditions.
    Response: We appreciate these suggestions for possible future 
consideration. We agree that alignment across settings is an important 
goal.
    Comment: One commenter stated the measures are too similar to 
measures used in physician office setting and should be setting 
specific. Other commenters stated that several of the measures are 
better suited for the physician office rather than the HOPD, and the 
measures should be thoroughly field tested before implementation.
    Response: We believe that these measures are specific to the HOPD

[[Page 68769]]

because HOP QDRP measures pertain to services payable under the OPPS 
system. These include a variety of hospital services, including ED, 
outpatient surgery, and imaging services. While we understand that 
hospital outpatient services, such as in a hospital outpatient clinic, 
may appear similar to the physician office setting, these procedures 
and care are furnished and paid for at the HOPD level; therefore, 
accountability at this level is appropriate. We agree that measures 
should be field tested before implementation, and strives to do so 
during the measures development process.
    Comment: Several commenters were concerned that the measures 
proposed for use in CY 2011 or beyond did not have full NQF 
endorsement.
    Response: We previously discussed the consensus requirements for 
the HOP QDRP program under section 1833(t)(17)(C) of the Act. Although 
we prefer measures that represent voluntary consensus standards, such 
as provided by NQF-endorsed measures, we also take into account other 
considerations, including the availability of adequate NQF-endorsed 
measures, to meet program requirements.
    Comment: Several commenters suggested additional measurement topics 
and measures for future implementation in the HOP QDRP. These included:
     Healthcare-associated infections
     MRSA process of care measures
     Cross-cutting risk-adjusted measures
     Surgical site infection
     Appropriate hair removal for surgery patients
     Central line associated blood-stream infections and 
central line bundle compliance
     Claims based measures of infections after outpatient 
hospital procedures
     Data and measures from national data registries
     High-risk disease
     Post-fracture care
     Acute and chronic pain management
     Anticoagulant therapy safety and education
     PQRI CAD and osteoporosis measures
     Coordination of care
     ED AMI mortality
     Severe sepsis and septic shock management bundle
     Confirmation of endotracheal tube placement
     Overall cardiac care
     Use and overuse of cardiac CT
     Inappropriate use of percutaneous cardiac interventions
     Measures that can be collected via electronic health 
records (EHRs)
     ASC measures
    Response: We appreciate these suggestions and will consider these 
topic areas for future implementation. We agree with the importance of 
actively working to move to a system of data collection based on 
submission of data from EHRs. To this end, we are engaged with HIT 
standards setting organizations to promote the adoption of the 
necessary standards for the HOP QDRP and for quality measures for other 
settings.
    Comment: Numerous commenters stated that CMS should only select 
NQF-endorsed measures for the HOP QDRP, and should work with large 
stakeholder organizations such as HQA, PCPI, AHQA, AMA, QASC, and IHI 
to prioritize measurement areas and measure selection. Commenters 
suggested other selection criteria, such as national priority areas 
identified by HHS, and called for CMS to develop a framework for the 
selection of measures that includes public input, priority setting, 
consultation with other Federal agencies, NQF endorsement, field 
testing, and staggered implementation. Commenters also suggested that 
hospital inpatient measures adopted for the RHQDAPU program should be 
reviewed for applicability when selecting measures for the hospital 
outpatient setting, and that CMS should make specifications for new 
hospital outpatient measures available for review through QualityNet at 
the time they are proposed.
    Response: We discussed above the requirements of section 
1833(t)(17)(C) of the Act. We prefer to use measures that have been 
adopted by national consensus building entities when such measures are 
available and adequately meet program needs. Our measure selection is 
generally guided by Departmental and CMS priorities supplemented by 
stakeholder input. For example, we are examining measures currently 
used in our reporting programs in other settings for potential 
applicability to the outpatient setting and ways we can harmonize 
measures across settings. We value stakeholder input which we receive 
from a broad range of stakeholders. However, ultimately, measures are 
selected through notice-and-comment rulemaking reflecting input from 
the public at large. The input we consider is not limited to particular 
stakeholders or groups of stakeholders. We will make outpatient measure 
specifications available to the public during the public comment period 
for the proposed rule on the CMS Web site. In future proposed rules, we 
will provide the Web site address at which the technical specifications 
for future proposed measures will be available during the public 
comment period.
    Comment: One commenter stated that hospital-acquired condition 
(HAC) measures are not ready for implementation in the outpatient 
setting because care in the outpatient setting is much more varied and 
much less life-threatening than in the inpatient setting and because 
coding is more difficult. The commenter believed that HAC measures are 
difficult to establish and prone to subjectivity.
    Response: We have not proposed any HAC measures for the HOP QDRP; 
however, we will consider the commenter's concerns as we develop 
proposed measures for CY 2011 and subsequent years.
    Based on the public comments received, we will consider the 
recommended topic areas as we develop new quality measures for CY 2011 
and subsequent calendar years.

D. 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41542), we discussed 
how the proposed payment reduction for failure to meet the 
administrative, data collection, and data 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 by hospitals that are required 
to report

[[Page 68770]]

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. 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 final rule with comment period): ``P,'' ``Q1,'' 
``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``V,'' or ``X.'' We proposed that 
payment for all services assigned these status indicators 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 midpoint of a cost-band increment, rather than based on the 
product of the OPPS conversion factor and the relative payment weight. 
Therefore, in the CY 2009 OPPS/ASC proposed rule (73 FR 41543), we 
proposed 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. We note that we also 
proposed that the reduction would apply to brachytherapy sources for 
which we proposed to assign status indicator ``U'' (Brachytherapy 
Sources. Paid under OPPS; separate APC payment). Subsequent to issuance 
of the proposed rule, Congress enacted Public Law 110-275 (MIPPA). 
Section 142 of Public Law 110-275 specifically requires that 
brachytherapy sources be paid during CY 2009 on the basis of charges 
adjusted to cost, rather than under the standard OPPS methodology. 
Therefore, the reduced conversion factor would not be applicable to CY 
2009 payment for brachytherapy sources because payment would not be 
based on the OPPS conversion factor and, consequently, the payment 
rates for these services are not updated by the OPD fee schedule 
increase factor. We refer readers to section VII. of this CY 2009 OPPS/
ASC final rule with comment period for further discussion of payment 
for brachytherapy sources.
    Comment: One commenter supported the CMS proposal to not apply 
payment and copayment reductions to New Technology APCs for hospitals 
that did not meet the requirements of the HOP QDRP.
    Response: We appreciate the commenter's support. We believe that, 
because New Technology APC payments are set using the cost-band 
methodology described above, the statutory requirement would not apply 
the reduction to 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,'' ``V,'' or ``X.'' These services include separately 
payable drugs and biologicals, separately payable therapeutic 
radiopharmaceuticals, pass-through drugs and devices and brachytherapy 
sources that are paid at charges adjusted to cost, and a few other 
specific services that receive cost-based payment. As a result, in the 
CY 2009 OPPS/ASC proposed rule (73 FR 41543), with the exception of 
brachytherapy sources, we also proposed 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. In the CY 2009 OPPS/ASC proposed rule (73 FR 
41502), we proposed prospective payment based on median costs for 
brachytherapy sources and proposed to assign brachytherapy sources 
status indicator ``U'' but, subsequent to the issuance of the CY 2009 
OPPS/ASC proposed rule, Congress enacted Public Law 110-275, which 
further extended the payment period for brachytherapy sources based on 
a hospital's charges adjusted to cost.
    Comment: One commenter suggested that reducing payment and 
copayment for pharmacy services for hospitals that fail to meet the 
requirements of the HOP QDRP is excessively punitive.
    Response: As described above, the market basket reduction would not 
apply to separately paid drugs and biologicals that are assigned status 
indicator ``K'' or to therapeutic radiopharmaceuticals, assigned status 
indicator ``H'' in this final rule with comment period, which are paid 
at charges adjusted to cost for CY 2009 based on the provisions of 
section 142 of Public Law 110-275. The market basket reduction for 
hospitals that fail to meet the reporting requirements would only apply 
to those services whose payment rates are calculated using the 
conversion 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, 
in the CY 2009 OPPS/ASC proposed rule, we proposed 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 because 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 CY 2009 OPPS/ASC final rule 
with comment period. Therefore, we proposed 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 proposed 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

[[Page 68771]]

weights. The final CY 2009 reporting ratio is 0.981, calculated by 
dividing the reduced conversion factor of $64.784 by the full 
conversion factor of $66.059.
    To determine the reduced national unadjusted payment rates that 
would apply to hospitals that fail to meet their quality reporting 
requirements for the CY 2009 OPPS, we will multiply the final full 
national unadjusted payment rate in Addendum B to this CY 2009 OPPS/ASC 
final rule with comment period by the final 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 final national 
unadjusted payment rate of $295.69. Where a hospital fails to meet the 
reporting requirements of the HOP QDRP for the CY 2009 payment update, 
the reduced national unadjusted payment rate for that hospital would be 
$290.07 (the reporting ratio of 0.981 multiplied by the full national 
unadjusted payment rate for CPT code 11401).
    We did not receive any public comments on our proposal for 
determining the reduced national unadjusted payment rates that would 
apply to hospitals that fail to meet their quality reporting 
requirements for the CY 2009 OPPS.
    After consideration of the public comments received, we are 
finalizing our proposal, without modification, to apply the market 
basket update reduction to payments for all services calculated using a 
conversion factor through application of the reporting ratio. The final 
CY 2009 reporting ratio is 0.981, calculated by dividing the reduced 
market basket conversion factor of $64.784 by the full market basket 
conversion factor of $66.059.
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 CY 2009 OPPS/ASC 
final rule with comment period, 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 Medicare 
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 
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, in the CY 2009 OPPS/ASC proposed rule (73 FR 41544), we 
proposed 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, in the CY 2009 OPPS/ASC proposed 
rule (73 FR 41544), we proposed 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 of the regulations, 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 would allow us to appropriately set the 
national unadjusted copayments for the reduced OPPS national unadjusted 
payment rates and would be most consistent with the eventual 
establishment of 20 percent of the payment rate as the uniform 
coinsurance percentage for all services

[[Page 68772]]

under the OPPS. In the CY 2009 OPPS/ASC proposed rule, we proposed to 
revise Sec. Sec.  419.41, 419.42, and 419.43 to reflect this policy.
    Comment: Some commenters supported the CMS proposal for 
beneficiaries and secondary payers to share in the payment reduction 
for hospitals that fail to meet the HOP QDRP requirements.
    Response: We appreciate the support for our proposed policy. In 
order to ensure that beneficiaries and secondary payers do not pay a 
higher share of the reduced payment that results from a hospital's 
failure to meet the reporting requirements, we believe that a copayment 
calculation methodology that applies the reporting ratio to the 
national unadjusted copayment and the minimum unadjusted copayment is 
most appropriate.
    After consideration of the public comments received, we are 
finalizing our proposal, without modification, for beneficiaries and 
secondary payers to share in the payment reduction for hospitals that 
fail to meet the HOP QDRP requirements. We also are finalizing our 
revisions to Sec. Sec.  419.41, 419.42, and 419.43 of the regulations, 
without modification, to reflect this policy.
c. Treatment of Other Payment Adjustments
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41544), we proposed 
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 proposed 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 proposed 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 existing 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 CY 2009 
OPPS/ASC final rule with comment period.
    We did not receive any public comments on this proposal and, 
therefore, are finalizing our proposal without modification.

E. Requirements for HOPD 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41544), for payment 
determinations affecting the CY 2010 payment update, we proposed 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.
     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 proposed for CY 
2011 to implement an on-line registration form and eliminate the paper 
form. We invited public comment on this proposed change.
    Comment: Commenters supported the use of an on-line registration 
form.
    Response: We thank these commenters for their support for our 
proposal to use an on-line registration form. We are finalizing the use 
of an on-line registration form with the concomitant elimination of the 
paper form for the Notice of Participation requirement for CY 2011.
    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

[[Page 68773]]

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. We did not receive comments on these proposed 
requirements.
    After consideration of the public comments received and as 
discussed above, we are finalizing these administrative requirements as 
proposed.
2. Data Collection and Submission Requirements
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41545), we proposed 
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 are 
finalized in this CY 2009 OPPS/ASC final rule with comment period and 
that will be published and maintained in the Specifications Manual that 
can be found at: http://www.qualitynet.org.We proposed that 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, we 
proposed that the hospital will be allowed to sample cases and submit 
data for these sampled cases rather than submitting data from all 
eligible cases. We proposed that this sampling scheme will be set out 
in the Specifications Manual at least four 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 proposed 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, 
hospitals would still be required to submit aggregate measure 
population and sample size counts for the applicable measure topic as 
part of their quarterly data submissions.
     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 4 months after the last day 
of each calendar quarter for measures finalized in the CY 2009 OPPS/ASC 
final rule with comment period. 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. 
We proposed that 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.
    We proposed that 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 
submissions 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 of all possible cases 
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.
    Comment: One commenter asked what authority or rationale CMS had to 
require the submission of non-Medicare population counts. Some 
commenters questioned the requirement to submit aggregate Medicare 
population figures as CMS has this information from submitted Medicare 
claims. Some commenters stated that there was no demonstrable reason 
that aggregate population data are meaningful for quality improvement. 
Several commenters stated that the submitting of aggregate numbers of 
outpatient episodes of care is resource intensive. One commenter stated 
that because outpatient billing is not as standardized and structured 
as inpatient billing, without further field-testing to address the 
problem with population identification counts, unintended consequences 
with the reporting of incomplete and inaccurate data will result. One 
commenter suggested that, due to time required to recount cases with 
information systems limitations, a 10-percent variance be considered.
    Response: Our authority for proposing that hospitals submit 
aggregate population data is found in section 1833(t)(17)(A) of the 
Act, which applies to hospitals as defined under section 1886(d)(1)(B) 
of the Act. That provision states that subsection (d) hospitals that do 
not report data required for the quality measures selected by the 
Secretary in the form and manner required by the Secretary will not 
receive the full payment rate update. We have stated that we intended 
to model the HOP QDRP after the RHQDAPU program for hospital inpatient 
services. The RHQDAPU program requires hospitals to comply with CMS/
Joint Commission sampling requirements for submitting data. These 
requirements require hospitals to submit a random sample or a 
population count of their

[[Page 68774]]

caseloads for RHQDAPU program measures for both Medicare and non-
Medicare patients. We do not currently have any patient population 
counts for non-Medicare patients. Because we do not have patient 
population counts for non-Medicare patients, we believe that this 
information would help us to better assess the completeness of hospital 
submitted HOP QDRP data for all treated patients. It is important to 
know how complete measurements are while considering them for quality 
improvement efforts or as results of quality improvement interventions. 
Further, the HOP QDRP measures are intended to provide the public with 
information on all patients treated in the outpatient hospital setting, 
including both Medicare and non-Medicare patients. We proposed to have 
hospitals report aggregate Medicare populations and sampling figures in 
order to assess whether hospitals are conducting appropriate sampling 
to what they believe their respective populations by measure to be.
    However, we understand that outpatient data systems are more 
disparate and varied than inpatient data systems. We also realize that, 
in some cases, considerable effort has been required in order for a 
hospital to be able to determine how many patients it has who have 
received care meeting specifications. We are aware that there have been 
issues with translating HOP QDRP measure specifications to some 
hospital outpatient data systems. We acknowledge that there are issues 
with determining population counts based upon some existing measure 
specifications and share concerns regarding unintended consequences due 
to the reporting of incomplete and inaccurate information. Therefore, 
we are making the reporting of aggregate population figures voluntary 
(Medicare and non-Medicare) and not a requirement for payment decisions 
affecting the CY 2010 payment update. We emphasize that we are making 
this requirement voluntary only for data reported for CY 2009 to be 
used for the CY 2010 payment update. We intend to check reporting of 
Medicare claims in order to supply information to hospitals on their 
efforts to fully collect quality measure data on all eligible Medicare 
cases, but will not make any payment decisions affecting the CY 2010 
payment update contingent on any comparisons made of CMS and population 
figures supplied voluntarily by hospitals.
    Comment: Several commenters supported CMS' proposal to allow 
hospitals that have five or fewer claims (both Medicare and non-
Medicare) for any measure included in a measure topic in a quarter to 
not be required to submit patient level data for the entire measure 
topic for that quarter. The commenters believed that this approach is a 
sensible way to reduce the reporting burden on hospitals with a very 
small number of cases. However, commenters believed that hospitals 
should always be able to voluntarily report on quality measures if they 
want to do so.
    Response: We appreciate the commenters' support. This proposal 
strives to minimize the reporting burden for hospitals with small 
patient caseloads. We welcome voluntary data submission by hospitals 
with smaller than the minimum number of cases. As we discussed above, 
the reporting of population figures by all hospitals will be voluntary.
    Comment: One commenter suggested that the minimum number of claims 
to exempt a hospital from reporting be raised to 10 claims per quarter 
because 10 is still a small sample and should not be used to determine 
the annual payment update, nor be publicly reported when a statistical 
sample size is greater than 25.
    Response: We selected more than 5 cases per quarter (more than 20 
cases per year) as the minimum threshold to ensure that the vast 
majority of hospitals with sufficient caseload would be required to 
submit data, while easing the burden on hospitals whose patient counts 
were too small to reliably predict hospital performance. We have 
selected a quarterly basis for the minimum threshold as data reporting 
requirements are on a quarterly basis. We acknowledge that there may be 
some hospitals that may have smaller, fluctuating case number such that 
there are less than five cases one quarter and more than 5 another, but 
believe that these hospitals will be few. We believe that hospital 
level performance can be reliably estimated with 20 to 30 cases 
reported annually, consistent with commonly used statistical sampling 
practice (for reference, see Wilson Van Voorhis, Carmen R. and Morgan, 
Betsey L. (2007) Understanding Power and Rules of Thumb for Determining 
Sample Sizes, Tutorials in Quantitative Methods for Psychology, volume 
3(2), pages 43 to 50). We believe that the more than five cases 
quarterly threshold is a fair, consistent, and easily understandable 
requirement that would not reduce the amount of reliable data publicly 
reported. It is likely that the vast majority of hospitals affected by 
this requirement would not have sufficient annual caseload for us to 
publicly report their data. We also chose the more than five cases 
quarterly threshold to be consistent with the RHQDAPU program for 
reporting hospital inpatient quality measure data.
    Comment: One commenter argued that, if the proposed imaging 
measures were adopted, these data should be submitted at the patient 
level, regardless of whether or not the hospital has five or fewer 
claims for a measure within a certain set.
    Response: The proposed imaging measures are Medicare claim-based 
measures. Therefore, we anticipate that hospitals (regardless of the 
number of claims for a measure within a certain measure set) will 
submit claims for these services because they will want to receive 
Medicare payment. Because we proposed to calculate these measures using 
CY 2008 Medicare claims data, we would expect that most of such claims 
have been submitted for payment.
    Comment: Some commenters that supported CMS' proposal to allow 
hospitals that have five or fewer claims (both Medicare and non-
Medicare) for any measure included in a measure topic in a quarter to 
not be required to submit patient level data for the entire measure 
topic for that quarter believed that these hospitals should also be 
exempt from reporting their aggregate population numbers. The 
commenters believed the administrative burden of determining these 
numbers for outpatient encounters was so difficult that exempting 
hospitals due to low volume did little to reduce burden if efforts to 
prove small numbers were still required and suggested methods for CMS 
to deem hospitals as small volume, for example, based upon Medicare 
claims. Some of these commenters suggested the criteria should be 
number of cases per year rather than number of cases per quarter. 
Several commenters argued that these hospitals should be exempt from 
reporting aggregate population figures because hospitals that may never 
report quality data would still have to establish a mechanism to 
identify their patient populations every quarter.
    Response: We thank these commenters for expressing their concerns 
regarding burden to small hospitals. As discussed above, for the CY 
2010 payment update, we are not requiring the submission of aggregate 
population figures, either Medicare or non-Medicare, in this final rule 
with comment period, although hospitals may voluntarily submit such 
data. We may address this issue in a future rulemaking as hospital 
outpatient data systems and measure specifications mature and improve.
    Comment: One commenter expressed the view that technical 
limitations of

[[Page 68775]]

QualityNet require further evaluation and review. The commenter also 
recommended that the same processes be used for both the inpatient and 
outpatient programs rather than creating a separate system and 
warehouse because the commenter believed that adding a second Web site 
and different timelines will have negative repercussions for the 
hospitals.
    Response: We have made recent improvements to the infrastructure to 
process data submitted by hospitals, such as procuring additional 
bandwidth to accommodate increased data flow. We believe that the 
processes for the inpatient and outpatient programs are consistent, and 
the official information source for the two programs is a single Web 
site: http://www.qualitynet.org. There are circumstances that require 
operational separation of the two programs. It is necessary to have 
separate data collection tools for the two programs because the two 
programs are on separate payment cycles with corresponding data cycles. 
The inpatient hospital payment system operates on a fiscal year basis 
beginning in October and the outpatient payment system operates on a 
calendar year basis beginning with January. In addition, due to funding 
issues under initial implementation, the inpatient and outpatient data 
systems had to be kept separate. We will consider these comments in the 
future and thank the commenter for its suggestion for improving 
processes under the HOP-QDRP.
    Comment: Some commenters expressed concerns regarding the differing 
submission deadlines for HOP-QDRP and RHQDAPU program data. Some 
commenters objected to what, in their view, was a submission timeline 
that is 15 days earlier than the current inpatient time line.
    Response: It is necessary to separate the data submission schedules 
to ease the burden on the data warehouse infrastructure, preventing 
data delays as much as possible. The data collection timeline under 
initial implementation of the HOP-QDRP was set to allow as much time as 
possible for hospitals to comply with data reporting requirements for 
any decisions regarding whether or not a hospital would receive the 
full CY 2009 payment update. The HOP-QDRP quarterly data reporting 
deadline of 4 months following the last quarterly discharge date is 
necessary to provide CMS with more time to process the data and provide 
hospitals with earlier feedback about their quality measures for 
improvement work. Based on previous experience with the RHQDAPU 
program, CMS believes that this timeframe provides hospitals with 
sufficient time to identify and abstract the data. November 1 is the 
latest date that we can accept HOP-QDRP data and still compile a list 
of reporting hospitals to make payment decisions toward the upcoming 
calendar year payment update; the rest of the reporting schedule 
follows from this date. For the RHQDAPU program, the quarterly data 
reporting deadline is 4.5 months after the end of the preceding quarter 
(the exact dates are posted on the QualityNet Web site). The 4.5 month 
RHQDAPU program time lag was chosen in order to allow hospitals 
sufficient time to submit data to The Joint Commission before 
submitting data to CMS. The majority of hospitals also submit data for 
many RHQDAPU measures to The Joint Commission, and their data 
submission deadline is approximately 4 months after the end of the 
preceding quarter.
    After consideration of the public comments received and as 
discussed in the above responses to those comments, we are adopting as 
final the proposed data collection and submission requirements with 
modifications. We are finalizing that hospitals that have five or fewer 
cases (both Medicare and non-Medicare) for any measure included in a 
measure topic will not be required to submit patient level data for 
that entire measure topic for that quarter; however, these hospitals 
may voluntarily submit these data. We are not requiring the submission 
of aggregate population figures, Medicare or non-Medicare, for data 
reported for CY 2009 in order to receive the full CY 2010 payment 
update, although hospitals may voluntarily submit these data.
3. HOP QDRP Validation Requirements
a. 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. 
In the CY 2009 OPPS/ASC proposed rule (73 FR 41546), we proposed to 
implement validation requirements that would apply beginning with the 
CY 2010 payment determinations.
    Specifically, we proposed 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 would 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 proposed to validate data reported beginning with January 2009 
episodes of care to be used for 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 proposed to not validate data submitted by every hospital 
participating in the HOP QDRP every year. Instead, we proposed 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 noted 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 proposed 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, we proposed that 
hospitals must pass our validation requirement of a minimum of 80 
percent reliability, based upon our validation process, for the 
designated time periods. In addition, we proposed that an upper bound 
of 95

[[Page 68776]]

percent confidence interval to measure accuracy would be used.
    The methodology we proposed to use for calculating the confidence 
intervals under the HOP QDRP is 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 proposed to consider the hospital's data ``validated'' 
for payment update purposes for CY 2010. We proposed 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 solicited comment on this validation methodology, and stated our 
belief that this approach is a reliable process that is suitable for 
the HOP QDRP. We also noted that we are considering whether to propose 
a similar approach for the RHQDAPU program in future years. We also 
stated that 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.
    After careful consideration of the following comments received, and 
as discussed more fully below, we are adopting a voluntary test 
validation program, the results of which will not affect the CY 2010 
payment update for any hospital. Under this program, we intend to 
conduct a test validation using a random sample of approximately 800 
hospitals, sampling 50 or less patient episodes of care per hospital 
from data submitted to the OPPS Clinical Warehouse for the relevant 
time period. Participation in the test validation for CY 2010 is 
voluntary for hospitals, and CMS encourages hospital participation to 
learn about their data abstraction accuracy.
    Comment: Some commenters supported the proposed validation 
methodology contingent on the incorporation of additional conditions. 
Some commenters proposed that a test validation be done for each 
hospital, either for the first year of validation or prior to the first 
year using a smaller sample, such as 5 patient episodes of care per 
hospital, and done with sufficient time so that hospitals could learn 
from any mistakes. One commenter suggested that this ``test'' 
validation be done using second quarter 2008 data. Other commenters 
recommended that the first validation done be considered a ``test 
run,'' tying validation to payment determinations in CY 2011.
    Response: We thank the commenters for these suggestions. We 
acknowledge the need for hospitals to gain experience with any 
validation process for HOP QDRP data collection. After consideration of 
the public comments received, we are adopting a voluntary test 
validation program, the results of which will not affect the CY 2010 
payment update for any hospital. Under this program, we intend to 
conduct a test validation using a random sample of approximately 800 
hospitals, sampling 50 or less patient episodes of care per hospital 
from data submitted to the OPPS Clinical Warehouse for the relevant 
time period. We intend to utilize data beginning with January 1, 2009 
patient episodes of care. We will validate those data by requesting 
that the hospital voluntarily send the supporting medical record 
documentation that corresponds to each selected episode-of-care to a 
CMS contractor within 30 calendar days of the date of the request. The 
CMS contractor will 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 
sampled hospital on the results of the reabstraction. We will utilize a 
measure match approach. We intend to calculate confidence intervals for 
data validated for feedback purposed, but will not require the passing 
of any validation threshold for purposes of the CY 2010 update. We 
intend to provide additional feedback to all hospitals participating in 
the HOP QDRP in a manner that does not identify individual hospitals or 
hospital information in any way. Hospitals are encouraged to 
participate in any validation efforts undertaken so that the 
information gleaned can be used toward improving their and other 
hospitals' data abstraction and collection processes. We plan to 
propose a validation program for the CY 2011 payment update in our CY 
2010 OPPS/ASC proposed rule.
    Comment: Many commenters supported the proposed validation process 
and agreed with the approach of validating the measure rates rather 
than the data element rate. The commenters cited various reasons for 
supporting the proposed validation process, stating that it was a 
reasonable approach to ensure accuracy, would provide a more accurate 
picture of performance, and was an improvement of the inpatient 
validation process. One commenter agreed with the proposed validation 
approach using a sample of hospitals as long as lessons learned are 
shared with hospitals in a timely manner. Some commenters expressed 
appreciation for providing time for hospitals to implement quality 
measures and work on their performance data before validation and 
public reporting occur.
    Some commenters requested more detail with regard to the selection 
process for the sampled hospitals, the notification process, or the 
actual validation process. Some commenters urged that the selection 
process be totally random and unbiased. Another commenter stated that 
hospitals should also continue to validate their own data for overall 
accuracy and for abstractor accuracy because the integrity of the data 
is critical. Several commenters recommended that the timeframe to 
provide the information for validation be established as 60 days rather 
than 30 days to allow additional time to retrieve, duplicate, and 
submit records. A few commenters believed that hospitals selected for 
validation in one year be excluded from the validation pool for some 
specified time, for example, 1 to 2 years, or should be selected no 
more than twice in 5 years based upon a criteria, such as there being 
no identified errors or passing at the 80-percent level with those not 
meeting the criteria being subject to potential selection again the 
following year. One commenter believed that, for there to be no bias in 
the selection methodology, statistically speaking, a hospital should 
not be selected 2 years in a row. Some commenters asked that CMS 
indicate how the proposed validation approach would be applied for 
measures calculated from claims data. Many commenters recommended using 
a similar validation approach for the RHDQAPU program. Some commenters 
recommended that the proposed HOP QDRP approach be used for all 
Medicare quality measure data reporting programs, including the PQRI.
    One commenter did not agree with validation of a larger number of 
cases, though all hospitals are eligible. The commenter was concerned 
that if not all hospitals are validated on a regular basis, this could 
lead to lower standards, that 50 charts would unduly burden smaller 
hospitals, and supported the first alternative approach for

[[Page 68777]]

validation requiring 20 charts per year for each hospital. Commenters 
expressed concerns about current factors that could adversely affect 
validation. One concern was that CPT and E&M codes were being required 
to be part of documentation required for submission for validation. 
Another concern was that the criteria for inclusion do not take into 
account cancelled procedures, which the commenters indicated was an 
issue because HOP QDRP abstraction does not allow for the collection of 
CPT coding modifiers, resulting in these records failing the measure 
criteria. Some commenters expressed concern that hospitals risk the 
potential to appear worse at the quality measure related to 
prophylactic antibiotic prior to incision than actually exists and 
would lose their full payment update. Commenters expressed concerns 
regarding the 80-percent reliability threshold from chart validation. 
Some commenters stated that the 80 percent threshold was too stringent, 
urging a lower level set. Some of these commenters stated that 
statistical analysis of collected data should be done to assess if 80 
percent is an objective number for passing the validation process. 
Other commenters asked that CMS include more information about the 
methodology and how it would be applied in this final rule with comment 
period.
    Response: We thank those commenters that supported our proposed 
validation method. As discussed above, we are implementing a voluntary 
test validation program in CY 2009, the results of which will not 
affect the CY 2010 payment update for any hospital. We will consider 
all of the commenters' suggestions and concerns when we propose a HOP 
QDRP validation program for the CY 2011 payment update in our CY 2010 
OPPS/ASC proposed rule and when we propose RHQDAPU program validation 
requirements in the FY 2010 IPPS proposed rule.
    After consideration of the public comments received and as 
discussed above, we are not finalizing the proposed validation method 
to be used toward CY 2010 payment decisions. We acknowledge the need 
for hospitals to gain experience with any validation process for HOP 
QDRP data collection. In light of the public comments received, we are 
voluntary test validation program in CY 2009, the results of which will 
not affect the CY 2010 payment update for any hospital. Under this 
program, we intend to conduct a test validation using a sample of 
approximately 800 hospitals, sampling 50 or less patient episodes of 
care per hospital from data submitted to the OPPS Clinical Warehouse 
for the relevant time period. We intend to utilize data beginning with 
January 1, 2009 patient episodes of care. We will validate those data 
by requesting that the hospital voluntarily send the supporting medical 
record documentation that corresponds to each selected episode-of-care 
to a CMS contractor within 30 calendar days of the date of the request. 
The CMS contractor will 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 
sampled hospital on the results of the reabstraction. We will utilize a 
measure match approach. We will not require the passing of any 
validation threshold for purposes of the CY 2010 update, but will 
calculate these values as part of feedback supplied to hospitals which 
participate in validation efforts. We intend to provide feedback to all 
hospitals participating in the HOP QDRP in a manner that does not 
identify individual hospitals or hospital information in any way. 
Hospitals are encouraged to participate in any validation efforts 
undertaken so that the information gleaned can be used toward improving 
their and other hospitals' data abstraction and collection processes. 
We plan to propose a validation program for the CY 2011 payment update 
in our CY 2010 OPPS/ASC proposed rule.
b. Alternative Data Validation Approaches for CY 2011
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41546), we also 
solicited 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 welcomed 
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.
    Comment: Many commenters disagreed with validating data from all 
participating HOP QDRP hospitals following the process currently used 
under the RHQDAPU program. The commenters stated that a measure match 
rate approach as proposed was preferable.
    Response: We thank the commenters for expressing their views.
    Comment: Some commenters supported the second and third alternative 
methods proposed as also effective approaches for data validation and 
suggested criteria for targeting. In support of the third alternative 
method, commenters stated that this would be an efficient use of both 
hospital and CMS resources and would assure that all participating HOP 
QDRP hospital data are valid. Other commenters expressed opposition to 
use of criteria to target hospitals for validation or the inability to 
comment due to lack of detail.
    Response: We thank these commenters for their views on the use of 
criteria for targeting hospitals for validation purposes. As we stated, 
these additional validation approaches were for consideration in future 
years and that we did not yet have criteria for targeting. We will 
consider the suggested criteria in future validation planning in future 
rulemaking. As discussed in section 3(a) of the HOP-QDRP portion of 
this final rule, we will be conducting a test validation program this 
year and the results of the validation will not affect the CY 2010 
annual payment update.
    Comment: One commenter stated that some vendors provide data 
validation services to hospitals and suggested that CMS entertain a 
formal relationship with such entities rather than being solely 
responsible for national data validation.
    Response: We thank the commenter for this information.
    We appreciate all the public comments received regarding the 
alternate validation approaches proposed and will take them into 
account as we develop validation proposals for CY 2011.

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

[[Page 68778]]

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. 
In the CY 2009 OPPS/ASC proposed rule, we proposed 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 (73 FR 41546). We also proposed to publish 
quality data by CCN under the HOP QDRP; however, we will note on our 
Web site where the publicly reported measures combine results from two 
or more hospitals. This approach is consistent with the approach taken 
under the IPPS RHQDAPU program.
    Comment: Several commenters agreed with the proposal that hospitals 
with the same CCN have their data publicly reported as one facility 
(with a notation when data from more than one hospital is combined). 
Some of these commenters supported the proposal that they believed that 
the proposal would add important alignment of clinical reporting with 
financial reporting.
    Response: We thank the commenters for their support of our proposal 
to report data by CCN. We proposed to report data by CCN for several 
reasons. First, the unit affected by the OPPS annual payment update 
subject to meeting the requirements under the HOP QDRP is handled by 
CCN; it is not separated by NPI or other individual facility 
identifier. Second, hospitals meet survey and certification 
requirements by CCN, again not by any other individual facility 
identifier. Third, the additional Medicare identifier for facilities, 
the NPI, is not a uniform identifier; the NPI can refer to, for 
example, an individual clinic, a provider group, or a hospital. Fourth, 
as stated by several commenters, reporting by CCN would align the 
reporting of quality of care data with financial data. For these 
reasons, at this time, we consider the CCN as the payment and hospital 
certification identifier representative of entire hospital entity to be 
the appropriate identifier for public reporting.
    Comment: A few commenters urged CMS to identify a means to report 
each facility's performance in order to provide accurate information to 
consumers trying to assess the quality of a given hospital.
    Response: For reasons discussed above, we believe that the CCN is 
currently the most appropriate identifier for public reporting. 
However, we are aware that this aspect of shared CCNs is a serious and 
complex problem and we are continuing to work toward a resolution of 
the problem that accommodates both consumer and hospital payment needs. 
We understand that there is not always a one-to-one relationship 
between the NPI and the CCN upon which the HOP QDRP is based. At this 
time, we are trying to assess the extent of this problem. In terms of 
determining eligibility of an HOPD's full annual payment update, we 
have addressed this by maintaining an NPI to CCN crosswalk. For CY 2010 
public reporting, data would be publicly reported on the CMS Web site 
by CCN, but we intend to indicate instances where data from two or more 
hospitals are combined.
    Comment: Numerous commenters expressed support for public reporting 
of the hospital outpatient measures, and recommended that the hospital 
outpatient measures be added to the existing Hospital Compare tool. The 
commenters also recommended evaluation of the HOP QDRP data and 
consumer testing before any information is released publicly to ensure 
that information provided to consumers and physicians is not 
misleading. One commenter expressed concern over the possibility of 
less than 12 months of data being used for public reporting, and 
recommended that all measures have a minimum of 12 months 
implementation before they are eligible for inclusion in public 
reporting and the validation process affecting hospitals' annual 
payment updates.
    Response: We will consider using Hospital Compare for the public 
reporting of HOPD data. However, no decision has been made at this 
time. As part of our measure maintenance contract, we continue to 
evaluate the measure specifications and measures data. We conduct 
consumer testing on a regular basis to inform decisions about Web site 
display, language and navigation. We will implement public reporting 
for outpatient measures in CY 2010, but have not made any decisions 
about what quarters will be reported when they are reported. In the 
case of our other public reporting timeframes, data reported in March 
2010 are to be based upon 3Q08 through 2Q09, and data reported in 
December 2010 are to be based upon 2Q09 through 1Q10. However, we may 
also choose to report less than a full 12 months when we begin public 
reporting under HOP QDRP.
    Comment: One commenter believed that, for providers and consumers, 
the information presented on Hospital Compare is confusing, and it is 
difficult to decipher which information is representative of the total 
population or only the Medicare population. The commenter stated that 
Medicare claims-based information under the HOP QDRP will continue to 
add to the confusion of what is representative of the total population 
served by the hospital versus which is only representative of the 
Medicare population.
    Response: We understand that this is a problem and would prefer to 
have data that represent the entire population, that is, all-payer, for 
all measures. Unfortunately, this is not possible at this time. We have 
access only to Medicare administrative (claims and enrollment) data 
that are used for the outcome measures (30-day risk-standardized 
mortality and newly adopted readmission rates) reported on Hospital 
Compare. We are interested in obtaining all-payer administrative data, 
but there are infrastructure and other challenges. Until we have access 
to all-payer administrative data, we make every effort to label the 
data sources on Hospital Compare so that users understand that the 
underlying populations differ for some measures.
    After consideration of the public comments received and as noted in 
the above responses, in this rule with comment period, we are 
finalizing our proposal that hospitals sharing the same CCN must 
combine data collection and submission across their multiple campuses 
for all HOP QDRP measures. We also are finalizing our proposal to 
publicly report HOP QDRP measures by CCN with notation on the Web site 
where the publicly reported measures combine results from two or more 
hospitals. Participating hospitals will be granted the opportunity to 
review this information as we have recorded it before the information 
is published. We intend to publicly report on our Web site hospital 
outpatient measures data in CY 2010 but have not made a decision 
regarding what quarters will be reported or when these data will be 
reported. In addition, we will continue to explore

[[Page 68779]]

the use of Hospital Compare and other locations for the public 
reporting of HOPD data. We anticipate communicating our decision about 
these reporting issues in the CY 2010 OPPS/ASC proposed rule.

G. 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 
anticipated similar concerns with the HOP QDRP and, therefore, 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. In the CY 2009 OPPS/ASC proposed rule (73 FR 41547), 
we proposed a mandatory reconsideration and appeals process that would 
apply to the CY 2010 payment decisions. Under our proposal, in order to 
receive reconsideration of a CY 2010 payment decision, the hospitals 
must--
    (1) 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:
     Hospital Medicare ID number known as the CCN.
     Hospital Name.
     CMS-identified reason for failure (as provided in any CMS 
notification of failure to the hospital).
     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.
     CEO contact information, including name, e-mail address, 
telephone number, and mailing address (must include physical address, 
not just a post office box).
     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.
     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).
     The request must be signed by the hospital's CEO.
    (2) Following receipt of a request for reconsideration, CMS will--
     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.
     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).
    Comment: Several commenters supported hospital appeals and 
reconsideration processes and urged CMS to have these processes in 
place at the same time as the validation process and that strict 
timelines be defined so that the public has access to information as 
quickly as possible.
    Response: We thank these commenters for their support of hospital 
appeals and reconsideration processes. We plan to complete any CY 2009 
reconsideration reviews and communicate the results of these 
determinations within 60 to 90 days following the date of the request 
for reconsideration. If a hospital is dissatisfied with the result of 
this reconsideration, the hospital may file a claim under the PRRB 
process with its associated timelines. As discussed previously, we will 
be conducting a voluntary test validation program using data from 
services beginning January 1, 2009; there is no validation requirement 
to be met to be considered toward payment decisions affecting CY 2010 
payment. The results of this test validation program will not affect 
the CY 2010 payment update for any hospital.
    Comment: One commenter stated that the PRRB process under the 
RHQDAPU program upon which the proposed reconsideration and appeals 
process for the HOP QDRP is modeled has been unduly long and hospitals 
do not learn of CMS' decision on reconsideration requests in a timely 
manner. The commenter urged CMS to revise the process to produce more 
timely decisions. Another commenter recommended that an appeal process 
be at least 90 days due to the time involved to investigate and 
respond.
    Response: We interpret the comment to refer to the proposed HOP-
QDRP reconsideration process. We believe that there are competing 
interests of timeliness and completeness in any reconsideration and 
appeals process. We agree that hospitals need to know the results of 
any reconsideration and appeals process as quickly as possible. As 
stated above, we plan to complete the reconsideration process within 60 
to 90 days following the date of the request for reconsideration. Based 
on previous experience with the RHQDAPU reconsideration process, we 
believe that this timeframe is necessary to adequately review the 
estimated volume of HOP-QDRP reconsideration cases. If a hospital is 
dissatisfied with the result of this reconsideration, the hospital may 
file a claim under the PRRB process, with its associated timelines (see 
42 CFR Part 405, Subpart R (PRRB appeal)).
    After consideration of the public comments received, we are 
adopting as final the HOP QDRP reconsideration and appeals process as 
proposed. We believe that any CY 2009 reconsideration review will 
require 60 to 90 days for completion based upon experience with the 
RHQDAPU program and we plan to communicate all determinations within 60 
to 90 days following the request for reconsideration.

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) 
and adding sections 1833(i)(2)(D)(iv) and1833(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 noncompliant ASCs.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66875), we indicated that we intended to implement the provisions of 
section 109(b) of the MIEA-TRHCA in a future rulemaking. 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

[[Page 68780]]

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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41547), we noted that 
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 invited public comment on this deferral of 
quality data reporting for ASCs and invited suggestions for quality 
measures geared toward the services provided by ASCs. We also sought 
comment on potential reporting mechanisms for ASC quality data, 
including electronic submission of these data.
    Comment: Many commenters agreed with the CMS proposal to defer 
quality data reporting from ASCs until a later rulemaking. Some of the 
commenters agreed with CMS' assessment regarding the need to complete 
implementation of the revised ASC payment system before implementing 
quality measure data reporting.
    Response: We thank these commenters for their support of our 
decision to defer quality data reporting from ASCs until a later 
rulemaking.
    Comment: One commenter disagreed with CMS' assessment regarding the 
revised ASC payment system posing ongoing challenges to such a 
magnitude as to prevent the reporting of quality of care data in 2009.
    Response: We thank the commenter for this view, but we still 
believe that we should not increase burdens on ASCs at this time with a 
new data reporting system while implementing a revised payment system.
    Comment: Several commenters supported measuring the quality of 
services provided in the ASC setting. Some commenters urged the 
implementation of a quality reporting system for ASCs as soon as 
possible. Some commenters stated that such reporting with similar 
measures would allow the same level of transparency for both hospitals 
and ASCs. Some commenters suggested that reporting begin in CY 2009 on 
the five NQF-endorsed quality measures that were developed by the ASC 
Quality Collaboration. Some commenters stated that selected measures 
should include an electronic data submission mechanism. Several 
commenters expressed concerns of the potential data collection burden 
for ASCs; some of these commenters suggested the administrative claims 
approach to be the most feasible for ASCs to submit quality of care 
data. One commenter recommended that ASCs not be required to report the 
same quality data as that as HOPDs due to the nature of their services.
    Response: We will consider these comments and suggestions for 
future implementation of ASC quality measure data.
    Comment: One commenter suggested that a mandatory reconsideration 
and appeals process provided that data under reconsideration or appeal 
not be publicly displayed until resolution of such reconsideration or 
appeal for ASC reporting and that an appropriate method of applying the 
required reduction to payments for ASCs that do not meet requirements 
be devised.
    Response: We have not proposed any reconsideration and appeals 
process for ASC quality measure reporting. However, we appreciate these 
comments and suggestions for future implementation of a reconsideration 
and appeals process for ASC quality measure data reporting and will 
consider them for future implementation.
    After consideration of the public comments received, we continue to 
believe that promoting high quality care in the ASC setting through 
quality reporting is highly desirable and is fully in line with our 
efforts under other payment systems. We intend to implement quality 
measures in the ASC setting in a future rulemaking.

I. FY 2010 IPPS Quality Measures Under the RHQDAPU Program

    In the FY 2009 IPPS proposed rule (73 FR 23651), we noted that, to 
the extent that the proposed quality measures for FY 2010 under the 
RHQDAPU program had not already been endorsed by a consensus building 
entity such as the NQF, we anticipated that they would be endorsed 
prior to the time that we issued the FY 2009 IPPS final rule. We stated 
that we intended to finalize the FY 2010 RHQDAPU program measure set 
for the FY 2010 payment determination in the FY 2009 IPPS final rule, 
contingent upon the endorsement status of the proposed measures. 
However, we stated that, if a measure had not received NQF endorsement 
by the time we issued the FY 2009 IPPS final rule, we intended to 
finalize that measure for the RHQDAPU program measure set in this CY 
2009 OPPS/ASC final rule with comment period if the measure received 
endorsement prior to the time we issued this CY 2009 OPPS/ASC final 
rule with comment period (73 FR 23651). We previously have finalized 
some measures in this manner when endorsement of a measure is expected 
by the publication date of an upcoming rule (72 FR 66876). We requested 
public comment on these measures in the FY 2009 IPPS proposed rule and 
received comments on these measures during the FY 2009 IPPS proposed 
rule public comment period. We responded to these comments in the FY 
2009 IPPS final rule (73 FR 48606).
    In the FY 2009 IPPS final rule (73 FR 48611), we set out, as listed 
below, two measures which had not yet received NQF endorsement, and 
stated that we intended to adopt for the FY 2010 RHQDAPU program 
measure set in this CY 2009 OPPS/ASC final rule with comment period if 
the measures receive endorsement from a national consensus-based entity 
such as NQF:

[[Page 68781]]



 Proposed Quality Measures To Be Finalized in the CY 2009 OPPS/ASC Final
                        Rule With Comment Period
    [Contingent on endorsement by national consensus-building entity]
------------------------------------------------------------------------
                                  Topic
-------------------------------------------------------------------------
Readmission Measures (Medicare Patients)
     AMI 30-Day Risk Standardized Readmission Measure (Medicare
     patients).
     Pneumonia (PN) 30-Day Risk Standardized Readmission Measure
     (Medicare patients).
------------------------------------------------------------------------

NQF has endorsed the two measures listed above and we are finalizing 
the Risk-Standardized Readmission measures (Medicare patients) for AMI 
and Pneumonia to be included in the CY 2010 RHQDAPU program measure 
set.

XVII. Healthcare-Associated Conditions

A. Background

    As noted in its landmark 1999 report ``To Err is Human: Building a 
Safer Health System,'' the Institute of Medicine found that medical 
errors are a leading cause of morbidity and mortality in the United 
States. Total national costs of these errors due to lost productivity, 
disability, and health care costs were estimated at $17 billion to $29 
billion.\2\ As one approach to combating healthcare-associated 
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, Public Law 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. CMS has titled this initiative Hospital-Acquired 
Conditions (HAC) and Present on Admission (POA) Indicator Reporting. 
Beginning October 1, 2008, Medicare cannot assign an inpatient 
discharge that includes only 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 inpatient hospital claims specifying whether diagnoses were 
present on admission. Through FY 2008 and FY 2009 IPPS rulemaking, CMS 
selected 10 categories of hospital-acquired conditions (72 FR 47202 
through 47218 and 73 FR 23547 through 23562).
---------------------------------------------------------------------------

    \2\ 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.
---------------------------------------------------------------------------

    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. These 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. Expanding the Principles of the IPPS Hospital-Acquired Conditions 
Payment Provision to the OPPS

    As discussed in the CY 2009 OPPS/ASC proposed rule (73 FR 741548), 
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 health care delivered in other settings. 
Other potential settings of care include HOPDs, ASCs, SNFs, home health 
care, end-stage renal disease (ESRD) facilities, and physician 
practices; therefore, we will refer to conditions that occur in 
settings other than the inpatient hospital setting as ``healthcare-
associated conditions'' and continue to refer to those that occur in 
the inpatient setting as ``hospital-acquired conditions.'' 
Implementation of this concept would be different for each setting, as 
each Medicare payment system is different. In addition, selected 
conditions must be reasonably preventable through the application of 
evidence-based guidelines and this might vary for candidate conditions 
across the various care settings. However, CMS is committed to aligning 
incentives across settings of care 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 are likely to be high in the 
outpatient setting, given the large number of encounters and exposures 
that occur in these settings. Approximately 530,000 preventable drug-
related injuries are estimated to occur each year among Medicare 
beneficiaries in outpatient clinics.\3\ These statistics clearly point 
to the significant magnitude of the problem of healthcare-associated 
conditions in outpatient settings. Recent trends have shown a shift in 
services from the inpatient setting to the HOPD, and we expect the 
occurrence of healthcare-associated conditions stemming from outpatient 
care to grow directly as a result of this shift in sites of service.
---------------------------------------------------------------------------

    \3\ 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.
---------------------------------------------------------------------------

    For these reasons, we believe 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 inpatient hospital admission. In 
addition, like the IPPS, the OPPS is also subject to the ``pay-for-
reporting'' provision that affects the hospital annual payment update, 
by the authority of section 1833(t)(17) of the Act (as amended by 
section 109(a) of the MIEA-TRHCA). 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

[[Page 68782]]

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 final rule with comment period.
    As noted in the CY 2009 OPPS/ASC proposed rule (73 FR 41548), we 
did not propose new Medicare policy in this discussion of healthcare-
associated conditions as they relate to the OPPS. Instead, we solicited 
public comments on options and considerations, including statutory 
authority, related to extending the IPPS hospital-acquired conditions 
payment provision for hospitals to the OPPS. As indicated in the 
proposed rule, we understand that there would be challenges in 
expanding the IPPS provision to other settings paid under different 
Medicare payment systems, and we specifically invited public comments 
that present ideas and models for extending the principle behind the 
IPPS provision to the OPPS. To stimulate reflection and creativity, we 
presented 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
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 preventable 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.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41549), we 
specifically sought public comment on the applicability of these 
criteria to the selection of candidate healthcare-associated conditions 
for the OPPS. We indicated in the proposed rule that we were 
specifically interested in public comment on the reasonably preventable 
criterion in the HOPD setting. As we explained in that rule, there are 
significant infrastructure differences between the IPPS and the OPPS, 
as discussed further in section XVII.B.4. of this final rule with 
comment period. Thus, in the proposed rule, we expressed interest in 
receiving 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 healthcare-associated 
condition?
     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 its 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. In the CY 2009 OPPS/ASC proposed 
rule, we specifically solicited 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 (72 FR 47202 through 47218) and the FY 
2009 IPPS final rule with comment period (73 FR 48471 through 48491) 
provided a detailed analysis supporting the selection of the hospital-
acquired conditions. In the CY 2009 OPPS/ASC proposed rule (73 FR 
41550), we solicited public comments on the following conditions that 
have been selected as inpatient hospital-acquired conditions:
     Object left in during surgery;
     Air embolism;
     Blood incompatibility; and
     Falls and trauma fractures, dislocations, intracranial 
injuries, crushing injuries, and burns.
    We observed that 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 specifically requested public 
comment on the potential for considering these conditions as 
healthcare-associated conditions for the HOPD.
    We acknowledged that reporting even this short list of healthcare-
associated 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 falls or 
trauma. Thus, we specifically requested public comment on whether or 
not we could assume that these conditions reported as secondary 
diagnoses on OPPS claims would have

[[Page 68783]]

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 explained that 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 healthcare services that led to the healthcare-
associated condition. Therefore, we indicated in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41550) that we welcomed broad public comment on 
the approaches and challenges related to the appropriate attribution of 
different types of healthcare-associated conditions encountered in the 
HOPD. Moreover, we also understand that patients differ in their 
severity and complexity of disease, as well as their likelihood of 
following medical recommendations. Therefore, we specifically requested 
public comment on how to account for patient-specific risk factors that 
would increase the likelihood of the occurrence of healthcare-
associated conditions (73 FR 41550).
    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 solicited 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 indicated that 
we were 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.
    External Cause-of-Injury coding (E-coding) may represent a 
mechanism for coding clarity for preventable healthcare-associated 
conditions such as adverse drug events related to medication errors. 
The CDC has been interested in further developing and expanding 
strategies to improve E-coding. A recent CDC Workgroup report discussed 
the importance and value of using high-quality E-coding.\4\ 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.
---------------------------------------------------------------------------

    \4\ 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 can 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 if no other CC or MCC 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'' that 
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 specifically requested public 
comment on how necessary a POA indicator would be for the candidate 
conditions we had 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 (73 FR 41550 through 41551).
    Further, we also solicited recommendations on how hospital payment 
for a clinical encounter in the hospital outpatient setting (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

[[Page 68784]]

conditions, or could possibly be 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. Furthermore, the hospital should not 
be able to bill the beneficiary for OPPS services that either would not 
be paid or would be paid at an adjusted amount under an OPPS 
healthcare-associated conditions payment provision.
    In contrast to the payment limitation approach used for the IPPS, 
we explained in the CY 2009 OPPS/ASC proposed rule that we recognized 
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 noted 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 stated 
that 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 specifically 
requested 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.
    As discussed in the CY 2009 OPPS/ASC proposed rule (73 FR 41551), 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 
indicated that we were interested in receiving 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.
    Comment: Several commenters fully supported expanding the IPPS 
hospital-acquired conditions policy to HOPDs and ASCs. They encouraged 
CMS to expand the policy as supported by the clinical evidence base in 
order to improve patient outcomes and work toward aligning payment 
toward higher value across settings. They also expressed full support 
for the criteria used and the four specific healthcare-associated 
conditions discussed.
    However, the majority of commenters had specific concerns with the 
suggested conditions or concerns about CMS' authority and ability to 
fairly implement such a policy for outpatient settings. Some commenters 
supported the general idea of a healthcare-associated conditions 
payment policy for HOPDs, while others opposed any expansion of the 
IPPS hospital-acquired conditions payment provision to other settings. 
Some commenters stated that CMS should not/cannot implement an OPPS 
healthcare-associated condition payment policy without explicit 
statutory authority. Many commenters also stated that CMS should not 
implement a related policy in HOPDs, ASCs, or physicians' offices 
without gathering several years of data and gaining implementation 
experience for IPPS hospital-acquired conditions. Several commenters 
recommended that CMS develop an advisory panel of clinicians and 
scientists, including both academic researchers and clinicians active 
in patient care in HOPDs, to provide the agency with assistance in 
developing the policy.
    Response: Given that so much medical care is now provided to 
Medicare beneficiaries outside of the hospital inpatient setting, we 
believe that extending a healthcare-associated conditions payment 
policy to the OPPS is an important and essential next step in 
Medicare's focus on quality and value. We believe it is fully 
appropriate to adopt a policy of not paying more for medical care that 
harms patients or leads to complications that could have been 
prevented. Because the high volume services delivered in the HOPD are 
so varied, we believe a healthcare-associated conditions payment policy 
in the HOPD would allow CMS to extend its quality activities and drive 
quality and value by stimulating behaviors that are patient-centered 
and focus on the continuum of care and patient safety goals. The 
hospital community has already begun to focus on quality in the HOPD by 
submitting relevant quality data through the HOP QDRP, and hospital 
participation in the program determines the hospital's annual payment 
update. We believe that a healthcare-associated conditions payment 
policy would take this initial effort to the next level of quality 
improvement.
    Moreover, we believe that we have statutory authority to implement 
a healthcare-associated conditions payment policy for the OPPS. 
Specifically, section 1833(t)(2)(E) of the Act provides that the `` * * 
* Secretary shall establish, in a budget neutral manner, * * * 
adjustments as determined to be necessary to ensure equitable payments 
* * *.'' Consistent with our usual practice, we would pursue the 
development and adoption of such a policy through our annual notice and 
comment rulemaking to update the OPPS. We believe an urgent and 
compelling rationale exists for considering a healthcare-associated 
conditions payment policy necessary to ensuring equitable payments 
under the OPPS. While we plan to attend to and learn from our 
experience with the implementation and ongoing development of the IPPS 
hospital-acquired conditions policy, we do not believe that it is 
necessary for us to gain years of experience with that program before 
pursuing a healthcare-associated conditions payment policy for the 
OPPS. As the commenters pointed out, the IPPS and OPPS are very 
different payment systems, and we believe that the most appropriate 
course at this point is to consider a healthcare-associated conditions 
payment policy for the OPPS that takes into account the most current 
and emerging knowledge and experience in this rapidly evolving area of 
health care policy.
    We appreciate the challenges raised by commenters, and we will 
continue to evaluate and seek input from stakeholders and other 
potential collaborators to identify healthcare-associated conditions 
that are

[[Page 68785]]

meaningful in the HOPD setting and may propose payment adjustments for 
them, as appropriate, in a future OPPS annual rulemaking cycle, to 
ensure equitable payments. We understand the importance and value of 
identifying appropriate collaborators to work with us as we develop the 
policy, identify conditions, and address implementation issues. 
Therefore, we intend to continue an open dialogue with stakeholders 
regarding all issues relevant to the development of a healthcare-
associated conditions policy over the upcoming months, which we 
anticipate will begin this winter with an IPPS/OPPS hospital-acquired/
healthcare-associated conditions listening session, jointly sponsored 
with the CDC.
    Comment: Some commenters suggested that CMS should reconsider the 
criteria for possible candidate OPPS conditions and specifically define 
``reasonably preventable'' for the HOPD setting. Several commenters 
stated that clinically-proven guidelines for prevention should be 
available and that there should be solid evidence that, by following 
the guidelines, the likelihood of the occurrence of an event can be 
reduced to zero or near zero. Other commenters suggested that CMS 
define rates or frequencies of ``reasonably preventable'' events and 
design a strategy to both reward and penalize hospitals based on data-
driven findings that would ultimately also serve to drive quality 
improvement.
    Several commenters addressed some of the potential specific 
healthcare-associated conditions discussed in the CY 2009 OPPS/ASC 
proposed rule (73 FR 41549), as well as suggested other conditions that 
might be considered or should not be considered. Two commenters were 
concerned with the potential inclusion of falls and trauma as a 
condition. Another commenter requested that hospitals providing 
rehabilitation therapy services be exempt from a healthcare-associated 
conditions payment policy because of the inherent risk of falls 
associated with the provision of rehabilitation services. In addition, 
one commenter requested that if CMS were to implement a policy for 
healthcare-associated conditions in the HOPD setting, CMS should 
continue the established IPPS policy of excluding Staphylococcus aureus 
septicemia and methicillin-resistant Staphylococcus aureus infection 
because these infections are not ``reasonably preventable.'' One 
commenter stated that blood is rarely transfused in the outpatient 
setting and, therefore, blood incompatibility should be removed from 
consideration. A few commenters stated that CMS should not simply 
incorporate all of the IPPS hospital-acquired conditions into the OPPS. 
Several commenters suggested that CMS consider adding serious 
disability or death caused by adverse events and serious disability or 
death caused by medication errors as future healthcare-associated 
conditions. Finally, several commenters recommended that CMS should use 
a process similar to that used for identifying IPPS hospital-acquired 
conditions, that is, working with the CDC, before implementation of a 
healthcare-associated conditions program in the HOPD setting.
    Many commenters requested that CMS delay any implementation of a 
healthcare-associated conditions payment policy under the OPPS until 
adoption of ICD-10, to facilitate the collection of more accurate data 
and the use of E-codes. In addition, many commenters stated that the 
attribution of healthcare-associated conditions in the HOPD setting is 
difficult because patients often see multiple physicians or 
practitioners in multiple distinct hospital outpatient departments and 
settings. Finally, several commenters believed that there was a serious 
need to develop risk adjustment techniques to account for differences 
in patient severity and other patient characteristics, especially for 
teaching hospitals and other hospitals, such as cancer hospitals, that 
see many high-risk patients.
    Response: We understand the commenters' concerns about the choice 
of conditions for a healthcare-associated conditions payment policy in 
the outpatient environment, and we plan to work with knowledgeable 
experts in hospital outpatient care to choose reasonably preventable 
conditions based on solid evidence for future proposed policies. Our 
goal is to eliminate preventable events to the extent possible, while 
stimulating hospitals to design system changes to minimize the 
occurrence of errors broadly.
    We appreciate the public comments about the specific healthcare-
associated conditions discussed in the CY 2009 OPPS/ASC proposed rule, 
as well as other suggestions made by commenters regarding other 
potential HOPD-specific conditions. We note that each of the four 
conditions discussed in the CY 2009 OPPS/ASC proposed rule is among the 
Serious Reportable Events (commonly referred to as ``never events'') 
identified by the NQF and included in the current IPPS hospital-
acquired conditions payment provision. We will continue to consider 
each of these conditions, as well as others suggested by commenters, as 
we move forward to develop a healthcare-associated conditions payment 
policy for the OPPS. We agree that the future implementation of ICD-10 
will be helpful to identify adverse events and medical errors, but we 
do not see the necessity of waiting for ICD-10 to initiate a 
healthcare-associated conditions program under the OPPS.
    We agree that the OPPS APC payment methodology currently does not 
distinguish the severity of illness of patients being treated within 
each APC group. Hospital claims for both low and high severity patients 
contribute to the calculation of the overall median cost for the 
services and procedures assigned to each APC. We also understand that a 
process to document and capture patient comorbidities and existing 
complications in outpatient settings is not yet fully developed. As a 
result, a healthcare-associated conditions payment policy for the OPPS 
would need to be initiated and then incrementally refined, potentially 
using Serious Reportable Events as a starting point until a fair risk 
adjustment program could be implemented.
    Likewise, we acknowledge that Medicare patients may see physicians 
or other practitioners in multiple HOPDs and clinics, physicians' 
offices, ASCs, or other settings during a given episode-of-care; 
therefore, accountability could be difficult to assign. While we 
understand that there are complexities associated with attribution in 
any setting, particularly ambulatory settings, complications are most 
likely the result of a breakdown in communication of accurate, timely, 
and relevant information among practitioners and providers. 
Consequently, we believe that expansion of healthcare-associated 
conditions to settings beyond the IPPS is an urgent and essential next 
stage in encouraging the coordination of the highest quality health 
care for Medicare beneficiaries.
    Comment: Several commenters stated that the IPPS hospital-acquired 
conditions payment reduction methods would not be appropriate for the 
OPPS because the OPPS APC payments are HCPCS code-based and not based 
on diagnosis and disease severity, as is the IPPS. Several commenters 
suggested that without changes to the OPPS payment structure, there 
would be no fair or straightforward methodology for adjusting hospital 
payment. Several commenters recommended that CMS use a flat case rate 
reduction, but cautioned that this would require a comparison of costs 
for services between claims with healthcare-associated conditions and 
those without healthcare-associated conditions. The commenters also 
recommended several

[[Page 68786]]

other alternative payment mechanisms. For example, some commenters 
suggested episode-based payments encompassing the continuum of care 
that recognize and reward effective post-discharge care. Other 
commenters offered a data-driven approach to establish benchmark and 
best practice complication rates for healthcare-associated conditions 
where CMS could set payment rates based on average complication rates 
and provide evidence-based tools to help hospitals work toward lower 
complication rates. Several commenters argued that holding one provider 
responsible for payment of costs downstream would not be viable because 
of multiple payment systems, contractors, and providers.
    Response: We appreciate the concerns of the commenters about 
developing a payment reduction policy associated with healthcare-
associated conditions under the OPPS, given the differences between the 
HCPCS code-based OPPS and MS-DRG-based IPPS payment infrastructures, 
and we welcome consideration of the payment reduction methodologies 
suggested by others. We note that we received no public comments on the 
possibility of providing the same reduced payment rate for services in 
the HOPD encounter that led to the healthcare-associated condition that 
would be paid to a hospital that failed to meet the quality reporting 
requirements. We will fully consider each of the payment reduction 
methodologies suggested by commenters and discussed in the CY 2009 
OPPS/ASC proposed rule (73 FR 41550). We also plan to continue an open 
dialogue with stakeholders as we move forward over the coming months 
toward the goal of establishing a strong connection between an OPPS 
healthcare-associated conditions payment policy and the delivery of the 
highest quality health care. We also expect that the future development 
and refinement of a healthcare-associated conditions payment policy, as 
well as POA indicators for the outpatient setting, will lead to 
increased communication among providers, contractors, and policymakers, 
as well as potentially more integrated payment for Part B services 
across payment systems. This, in turn, could allow for holding one 
provider responsible to another for payment of costs downstream for 
healthcare-associated conditions.
    Comment: Many commenters asserted that the POA indicators in use 
for the IPPS hospital-acquired conditions policy beginning October 1, 
2008 may need to be modified as a requirement for healthcare-associated 
conditions in the HOPD or ASC setting. Several commenters observed that 
the conditions CMS proposed for consideration (air embolism, object 
left in during surgery, blood incompatibility, and falls and trauma) 
would likely result in an inpatient admission with the healthcare-
associated condition reported as present on admission. Many commenters 
also argued that the HOPD episode-of-care is often too short to 
identify whether a condition was present at the beginning of the 
hospital outpatient stay. They also believed that there would likely be 
unintended consequences to using a POA indicator for the OPPS, such as 
hospitals providing increased and unnecessary diagnostic testing. 
Several commenters claimed that having to report POA indicators for all 
ICD-9-CM diagnosis codes would be an administrative burden on 
hospitals. They requested that CMS consider narrowing hospital 
outpatient POA data collection to specific conditions or specific 
populations of beneficiaries. In addition, one commenter suggested that 
the entire current ICD-9-CM Official Coding Guidelines for POA would 
have to be evaluated and possibly revised or rewritten for outpatient 
settings, due to potential complications of collecting POA information 
in the outpatient setting using the current guidelines. A number of 
commenters believed the term ``present on admission'' was not 
applicable to the HOPD setting and suggested the term would need to be 
changed to ``present on arrival.'' Finally, some commenters suggested 
that a ``present on encounter'' indicator or another form of 
incorporation of pre-existing conditions into an episode-of-care might 
be more useful than a POA indicator because care may extend into other 
settings or to other caregivers or practitioners.
    Response: We acknowledge that the POA indicator was designed for 
hospital inpatient use and would need to be refined for the HOPD 
setting, both to accommodate events occurring in the hospital 
outpatient setting that directly result in hospital admission (for 
example, air embolism), as well as to allow identification of HOPD 
initiated healthcare-associated conditions that may become apparent 
distinct from the date of the initiating event (for example, object 
left in during surgery). We believe that accountability of a single 
hospital provider for the quality of medical care provided across its 
outpatient and inpatient settings should be a central component of 
patient-centered care coordination and effective implementation of 
hospital-acquired and healthcare-associated conditions payment 
policies. For instance, we do not believe that a preventable condition 
acquired in the HOPD that results in an inpatient admission should be 
considered POA because it occurred before there was a physician's 
written order to admit the patient. In such a case, it was the 
hospital's care that caused the condition and the inpatient admission 
and, in our view, the condition should not be considered as a 
complication or major complication in determining the Medicare 
inpatient hospital payment. It would be clinically non-intuitive and 
counter to the goals of patient safety and value-based purchasing if 
healthcare-associated conditions that developed during an HOPD 
encounter and resulted in an inpatient admission could not be 
identified through our coding systems and, therefore, an appropriate 
payment adjustment could not be provided. We will raise this issue with 
the NUBC, which is responsible for maintaining the POA reporting 
definitions. In addition, we believe that it would be both 
inappropriate and a disservice to beneficiaries for hospitals to engage 
in activities such as delayed admission or transfer between a 
provider's facilities or satellites in order to avoid an IPPS hospital-
acquired condition payment reduction.
    It is imperative that as we consider expansion of the IPPS 
hospital-acquired conditions payment policy to other settings, we 
synchronize policies across Medicare payment systems. Therefore, we 
look forward to working with the NUBC to develop POA indicators 
appropriate to outpatient settings. We also plan to work with the NUBC 
to refine and update the POA reporting definitions so that we can 
accomplish the goals of the IPPS hospital-acquired and OPPS healthcare-
associated conditions policies of holding a provider responsible for 
preventable conditions attributable to care provided in its own 
outpatient or inpatient settings, while also ensuring that the 
reporting definitions continue to be appropriate and effective for 
nonhospital-acquired conditions payment and research purposes. As we 
move toward an OPPS healthcare-associated conditions payment policy, we 
will work with hospitals and other stakeholders to ensure that 
reporting of conditions in outpatient settings could be accomplished in 
a way that would be administratively manageable for hospitals, while 
discouraging potential undesirable effects on beneficiaries and the 
Medicare program, such as overutilization of diagnostic testing.

[[Page 68787]]

    In summary, we thank commenters for their thoughtful responses and 
suggestions to our CY 2009 OPPS/ASC proposed rule discussion and 
questions regarding the potential for extension of the IPPS hospital-
acquired conditions payment provision to outpatient settings through a 
healthcare-associated conditions payment policy. We view addressing the 
ongoing problem of preventable healthcare-associated conditions in 
outpatient settings, including the HOPD, as a key value-based 
purchasing 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. We 
look forward to continuing to work with stakeholders to improve the 
quality, safety, and value of healthcare provided to Medicare 
beneficiaries, beginning with the joint IPPS/OPPS listening session 
that we anticipate holding this winter.

XVIII. Hospital Conditions of Participation: Requirements for Approval 
and Re-Approval of Transplant Centers To Perform Organ Transplants; 
Policy Clarification

    On March 30, 2007, we published in the Federal Register (72 FR 
15198) a final rule that set forth the requirements that heart, heart-
lung, intestine, kidney, lung, and pancreas transplant centers must 
meet to participate as Medicare-approved transplant centers. These 
requirements included procedures for approval and re-approval, as well 
as disapproval, of transplant centers. In that final rule, we 
summarized and responded to the public comments that we had received on 
a preceding proposed rule published in the Federal Register on February 
4, 2005 (70 FR 6140).
    This final rule clarifies and revises several statements of policy 
that were provided in the March 30, 2007 final rule as responses to 
public comments received on the proposed rule. Specifically, among the 
public comments received, a few commenters recommended that ``a center 
should be allowed to continue Medicare participation pending exhaustion 
of any appeals, provided that its treatment of Medicare beneficiaries 
does not jeopardize their health and safety.'' In the March 30, 2007 
final rule (72 FR 15242), we responded, in part, to this public comment 
by stating that ``[i]f a transplant center appeals a termination of 
Medicare approval under 42 CFR part 498, the termination will not occur 
until the appeals process, if any, is completed.'' This statement is 
contrary to longstanding Medicare policy.
    In addition, in the February 4, 2005 proposed rule, we had proposed 
at Sec.  482.104(c)(2) to require a transplant center being terminated 
to inform patients on the center's waiting list of that fact 30 days 
prior to the termination. One commenter who responded to the proposed 
rule recommended that CMS modify the proposed 30-day notification 
requirement by adding language to indicate that patients on the 
center's waiting list must be informed 30 days prior to the termination 
``and following the exhaustion of all appeals provided pursuant to 
[part] 498.'' In the preamble to the March 30, 2007 final rule at page 
15248, we responded to this comment in part by stating that ``[i]n most 
cases Medicare providers and suppliers are permitted to continue to 
participate in Medicare while an appeal is pending. * * *'' This 
response statement is also contrary to longstanding Medicare policy.
    In this final rule, we are clarifying the two responses in the 
preamble of the March 30, 2007 final rule to make clear that 
longstanding Medicare policy does not permit a provider to continue to 
participate in the Medicare program until the provider has exhausted 
all appeals. In fact, it has been the consistent policy of this 
Department for more than 30 years to make provider agreement 
terminations, and most alternative sanctions, effective prior to the 
running of the administrative appeals process. Where the matter has 
arisen in litigation over the years, the courts have upheld this 
position. We cite the following court cases as examples: Cathedral Rock 
of North College Hill, Inc. v. Shalala, 223 F.3d 354 (6th Cir. 2000); 
Caton Ridge Nursing Home, Inc. v. Califano, 596 F.2d 608 (4th Cir. 
1979); and Geriatrics, Inc. v. Harris, 640 F.2d 262 (10th Cir. 1981). 
While there are many legal arguments that have been made in support of 
this view, the Department has taken this position largely based on its 
underlying belief that patients or residents of health care facilities 
should not be subjected to continued poor quality of care for the 
pendency of an appeal which can be lengthy in duration. In this 
context, the interests of providers wanting to stay in the program must 
be of secondary importance to the well-being of the Medicare patient 
population.
    Thus, if a provider, such as a transplant center, appeals a 
termination of Medicare approval under 42 CFR part 498, termination 
occurs on the date established by CMS, and termination will be prior to 
the onset of any appeals process, whether or not the deficiency poses 
immediate jeopardy to the health and safety of patients.
    Therefore, in this final rule, we are clarifying the response to 
comment language of the preamble of the March 30, 2007 final rule at 
page 15242 by revising it to read ``Thus, if a transplant center 
appeals a termination of Medicare approval under 42 CFR part 498, the 
termination will occur before the appeals process, if any, begins.'' 
(Emphasis added) We are clarifying the response to comment language of 
the preamble of the March 30, 2007 final rule at page 15248 by revising 
it to read ``Medicare providers and suppliers are not entitled to have 
their program participation continue during the pendency of the 
administrative appeals process.'' We note that no change is being made 
to the regulation text because the regulation itself does not call for 
a prior hearing. Our intent is only to clarify and correct earlier 
preamble statements that ran contrary to a longstanding policy of this 
Department.
    This clarification does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 35).
    The revised preamble statements merely clarify existing policy and, 
therefore, the impact is negligible.

XIX. Files Available to the Public via the Internet

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

    Addenda A and B to this final rule with comment period provide 
various data pertaining to the CY 2009 payment for items and services 
under the OPPS. Addendum A, which includes a list of all APCs to be 
payable under the OPPS, and Addendum B, which includes a list of all 
active HCPCS codes and all currently active HCPCS codes that will be 
discontinued at the end of CY 2008 with their assigned OPPS payment 
status and comment indicators, 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 also are including on the CMS 
Web site a table that displays the HCPCS code data in Addendum B sorted 
by APC assignment, identified as Addendum C.
    Addendum D1 defines the payment status indicators that are used in 
Addenda A and B. Addendum D2

[[Page 68788]]

defines the comment indicators that are used in Addendum B. Addendum E 
lists the HCPCS codes that only are payable to hospitals as inpatient 
procedures and are not payable under the OPPS. Addendum L contains the 
out-migration wage adjustment for CY 2009. Addendum M lists the HCPCS 
codes that are members of a composite APC and identifies the composite 
APC to which each is assigned. This addendum also identifies the status 
indicator for the code and a comment indicator if there is a change in 
the code's status with regard to its membership in the composite APC. 
Each of the HCPCS codes included in Addendum M has a single procedure 
payment APC, listed in Addendum B, to which it is 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 final rule with comment period 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 CY 2009 ASC Payment System

    Addenda AA and BB to this final rule with comment period provide 
various data pertaining to the CY 2009 payment for ASC covered surgical 
procedures and covered ancillary services for which ASCs may receive 
separate payment. Addendum AA lists the ASC covered surgical procedures 
and the CY 2009 ASC payment indicators and payment rates for each 
procedure. Addendum BB displays the ASC covered ancillary services and 
their CY 2009 payment indicators and payment rates. All 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 final CY 
2009 OPPS and MPFS ratesetting information.
    Addendum DD1 defines the payment indicators that are used in 
Addenda AA and BB. Addendum DD2 defines the comment indicators that are 
used in Addenda AA and BB.
    Addendum EE (available only on the Internet) lists the surgical 
procedures that are excluded from Medicare payment if furnished in 
ASCs. The excluded procedures listed in Addendum EE are surgical 
procedures that are either assigned to the OPPS inpatient list, are not 
covered by Medicare, are 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 to be used for the CY 2009 OPPS) that were published as 
tentative and final in the FY 2009 IPPS final rule (73 FR 48779 through 
49021) and that were issued as final in a subsequent document published 
in the Federal Register on October 3, 2008 (73 FR 57888) are accessible 
on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN.

XX. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995 (PRA), 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 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. ASC Conditions for Coverage Collections

    In the August 31, 2007 ASC CfCs proposed rule (72 FR 50478), we 
solicited public comments on each of the issues outlined under section 
XX.A. of this preamble for the sections under items XX.B.1. through 4. 
below included in the proposed rule that contain information collection 
requirements.
1. Condition for Coverage--Governing Body and Management (Sec.  416.41)
    Section 416.41 sets out the conditions for coverage related to the 
governing body and management of ASCs. Each ASC must have a governing 
body that assumes full legal responsibility for determining, 
implementing, and monitoring policies governing the ASC's total 
operation. Section 416.41(b)(3) states that, as a condition for 
coverage, an ASC must have a written transfer agreement with the 
hospital as referenced in Sec. Sec.  416.41(b)(1) and (b)(2).
    The burden associated with this requirement is the time and effort 
involved in the ASC having a written transfer agreement with the 
hospital receiving the transfer. This requirement is subject to the 
PRA, and is currently approved under OMB No. 0938-0266, with an 
expiration date of June 30, 2011.
    Section 416.41(c)(1) requires that an ASC maintain a written 
disaster preparedness plan that provides for the emergency care of 
patients in the event of fire, natural disaster, functional failure of 
equipment, or other unexplained circumstances that are likely to 
threaten personal health and safety. Section 416.41(c)(3) requires that 
an ASC complete a written evaluation of each drill conducted to test 
the effectiveness of the disaster preparedness plan.
    The burden associated with the requirements in Sec. Sec.  
416.41(c)(1) and (c)(3) is the time and effort necessary to draft and 
maintain the written disaster preparedness plan. In addition, there is 
burden associated with drafting and maintaining the reports on the 
effectiveness of the plan. We estimate that an administrator, earning 
$49.00 per hour, would be largely responsible for developing the plan 
and for managing the yearly drills and evaluations. We are estimating 
that the yearly cost for one ASC to develop and implement a disaster 
preparedness plan will be approximately 4 hours at $49.00 per hour, 
with a net cost of $196.00 per ASC. The total cost for all ASCs is 
estimated to be $999,600.
    We did not receive any public comments on these information 
collection requirements.
2. Condition for Coverage--Quality Assessment and Performance 
Improvement (Sec.  416.43)
    Section 416.43 sets out the conditions for coverage for quality 
assessment and performance improvement. ASCs,

[[Page 68789]]

through the governing body and with the active participation of the 
medical staff, must develop, implement, and maintain an ongoing, data-
driven QAPI program. This section outlines the standards for the scope 
of the QAPI program, the use of quality indicator data, the 
prioritization of performance improvement program activities, the 
complexity of performance improvement projects, and the 
responsibilities of ASC governing bodies. Specifically, Sec.  
416.43(d)(2) states that an ASC must fully document the performance 
improvement projects that are being conducted. The documentation, at a 
minimum, must include the reason(s) for implementing the project, and a 
description of the results of the project.
    The burden associated with this requirement is the time and effort 
involved in collecting, analyzing, and documenting the performance 
improvement projects. We estimate that each ASC would spend 18 hours a 
year collecting, analyzing, and documenting the findings. These 
activities would most likely be managed by the ASC's administrator. 
Based on an hourly rate of $49.00, the total cost of these activities 
is estimated to be $882 per ASC.
    We did not receive any public comments on this information 
collection requirement.
3. Condition for Coverage--Patient Rights (Sec.  416.50)
    Section 416.50 sets out the requirements an ASC must meet when 
informing a patient of his or her rights, in addition to requirements 
for the protection and promotion of these rights. Section 416.50(a)(1) 
requires that an ASC provide the patient or, as appropriate, the 
patient's representative with verbal and written notice of the 
patient's rights in advance of the procedure to be performed at the ASC 
and in a language and manner that the patient or patient's 
representative understands.
    The burden associated with these requirements is the time and 
effort required to inform the patient or, as appropriate, the patient's 
representative of the patient's rights. Because ASCs must notify 
patients either verbally or in writing in advance of the patient coming 
under the ASC's care, ASCs may choose to mail the patient rights 
notification to the patient along with the pre-surgical information, 
the physician's financial interests or ownership, and the advance 
directives. Generally, the most effective and efficient manner to 
furnish a notice of rights is to initially develop a general notice 
which can be subsequently discussed and/or distributed as needed. We 
expect that an ASC will use this simple and inexpensive approach in 
order to meet this requirement. In response to the needs of their 
specific patient populations, some ASCs might choose to have their 
patient rights notification written in the predominant language(s) of 
their patients. More than likely, this message would be written by a 
registered nurse or similar professional. A typical message might be in 
three parts: An introduction; the information section; and a section 
for follow-up questions and issues. We expect the effort to develop 
this one-time message would not exceed 1 hour at a cost of $39.00 for 
each ASC. We believe that this would be a one-time cost for ASCs and 
estimate that the total costs would be $198,900 for all ASCs.
    Section 416.50(a)(2)(i) requires ASCs to provide the patient or 
representative with information concerning its policies on advance 
directives, including a description of applicable State law. Section 
416.50(a)(2)(iii) requires documentation in a prominent part of the 
patient's medical record that indicates whether or not the patient has 
executed an advance directive. The burden associated with these 
requirements is the time and effort necessary for disseminating the 
information to the patient and maintaining the necessary documentation 
in the medical record. ASCs mail information to their patients 
concerning documentation that must be completed prior to the surgical 
procedure. Dissemination of the advance directives information will 
result in the inclusion of one additional sheet of paper in the ASC's 
mailing packet. In addition, as a matter of both law and ethics, health 
care providers are generally expected to provide care that conforms to 
the wishes and priorities of the patient. Thus, information on advance 
directives should be communicated in a way that effectively notifies 
patients of their right to complete an advance directive before they 
agree to use the facility's services because the facility's policy 
could be important to a patient's choice of whether to use that 
facility. Providing advance directives information to patients prior to 
the patient's first visit to the ASC is typically done by ASCs even 
though it is not specifically federally mandated.
    However, arguably, informing patients concerning advance directives 
is in keeping with the current requirement concerning documentation of 
properly executed informed patient consent found at Sec.  416.47 and 
would be considered part of the ASC's standard operating costs. Thus, 
while these requirements are subject to the PRA, we believe they would 
constitute usual and customary business practices. Pursuant to 5 CFR 
1320.3(b)(2), we will not include these activities in the PRA analysis.
    Section 416.50(a)(3) imposes both recordkeeping and reporting 
requirements. Specifically, Sec.  416.50((a)(3)(ii) states that an ASC 
must fully document all alleged violations relating, but not limited 
to, mistreatment, neglect, verbal, mental, sexual or physical abuse. In 
addition, at Sec.  416.50(a)(3)(iii), an ASC must immediately report 
the allegations to a person in authority in the ASC. Under Sec.  
416.50(a)(3)(iv), the ASC must immediately report substantiated 
allegations to the State and local bodies having jurisdiction, and the 
State survey agency if warranted. In addition, Sec.  416.50(a)(3)(v) 
requires an ASC to document how the grievance was addressed. The ASC 
must also provide the patient with a written notice of its decision.
    The burden associated with this requirement is the time and effort 
necessary to fully document the alleged violation or complaint, 
disclose the written notice to each patient who filed a grievance, and 
report the alleged violations to the aforementioned entities. We 
estimate that, on average, it will take each ASC 15 minutes at a cost 
of $39.00 an hour to develop and disseminate 12 notices on an annual 
basis (3 hours per ASC), for a total ASC burden of 15,300 hours at a 
cost of $596,700.
    Since ASCs began operating under Medicare in 1982, they have been 
required to provide information to patients about the procedures to be 
performed. This information is provided to patients by way of the 
informed patient consent in the current regulation. ASCs are also 
responsible for providing patients with information concerning expected 
outcomes. The final rule requires that ASCs continue this practice. 
Therefore, we do not anticipate that ASCs will incur significant costs 
associated with this requirement.
    While these requirements are subject to the PRA, we believe they 
would constitute a usual and customary business practice. Pursuant to 5 
CFR 1320.3(b)(2), we will not include these activities in the PRA 
analysis.
    We did not receive any public comments on these information 
collection requirements.

[[Page 68790]]

4. Condition for Coverage--Patient Admission, Assessment, and Discharge 
(Sec.  416.52)
    Section 416.52(a) requires each patient to have a comprehensive 
medical history and physical assessment no more than 30 days before the 
scheduled surgery date. The patient also must have a pre-surgical 
assessment which must occur upon admission. Section 416.52(b) requires 
that the patient's post-surgical condition must be assessed and 
documented in the medical record and that the patient's post-surgical 
needs must be addressed and included in the discharge notes. Section 
416.52(c) requires that ASCs provide each patient written discharge 
instructions and ensure that each patient receives a discharge order 
signed by a physician or other qualified practitioner. ASCs also must 
ensure all patients are discharged in the company of a responsible 
adult.
    The burden associated with these requirements is the time and 
effort necessary to perform the assessments and to document the 
information in the medical record. However, performing patient 
assessments and documenting medical records is normal and customary 
business practice for health care providers. Therefore, while these 
requirements are subject to the PRA, the associated burden is exempt as 
it meets the requirements set forth in 5 CFR 1320.3(b)(2).
    We did not receive any public comments on these information 
collection requirements.
5. Revisions to the CfC on Infection Control in This Final Rule (Sec.  
416.51)
    In Sec.  416.51 of the August 31, 2007 ASC CfCs proposed rule, we 
included a CfC on infection control, which specified that an ASC must 
(1) provide a functional and sanitary environment for the provision of 
surgical services by adhering to professionally acceptable standards of 
practice and (2) maintain an ongoing program designed to prevent, 
control, and investigate infections and communicable diseases. The 
program would be required to designate a qualified professional who has 
training in infection control, integrate the infection control program 
into the ASC's QAPI program, and be responsible for providing a plan of 
action for preventing, identifying, and managing infections and 
communicable diseases and for immediately implementing corrective and 
preventive measures that result in improvement.
    As discussed in section XV.B.2.b.(5) of this preamble of this final 
rule, in response to public comments received, we are revising Sec.  
416.51(b) to specify that the infection control and prevention program 
must include documentation that the ASC has considered, selected, and 
implemented nationally recognized infection control guidelines.
    The burden associated with this requirement is the time and effort 
necessary to document the consideration, selection, and implementation 
of the nationally recognized infection control guidelines information 
in the program. We believe that the time needed for the required 
documentation would be negligible. Therefore, while this requirement is 
subject to the PRA, the associated burden is exempt as it meets the 
requirements set forth in 5 CFR 1320.3(b)(2).
f. Effects of the Patient Admission, Assessment, and Discharge 
Provision (Sec.  416.52)
    We are finalizing this new condition because it represents the 
current standard of practice and does not pose additional burden.
    (1) Effects of the Admission and Pre-Surgical Assessment Provision
    We are requiring the completion of a comprehensive medical history 
and physical assessment no more than 30 days before the day of the 
scheduled surgery. It is very unlikely that the comprehensive medical 
history will be completed at the ASC. Therefore, there is unlikely to 
be any ASC burden associated with this requirement.
    We are requiring that a pre-surgical assessment be completed upon 
admission to the ASC. Existing regulations at Sec.  416.42(a) require a 
physician to examine the patient immediately before surgery to evaluate 
the risks involved in administering anesthesia and performing the 
procedure. Physicians must determine that patients, including those at 
high risk, are able to undergo the surgery itself and be able to manage 
recovery. Pre-surgical assessments represent a current standard of 
community practice, are currently required under existing regulations, 
and, therefore, do not pose additional burden.
    To ensure the ASC health care team has all patient information 
available when needed, the medical history and physical assessment must 
be placed in the patient's medical record before the surgical procedure 
is started. There is no burden associated with this requirement.
(2) Effects of the Post-Surgical Assessment Provision
    The post-surgical assessment requires the ASC to ensure the 
patient's post-surgical condition is documented in the medical record 
by a physician or other qualified practitioner in accordance with State 
law and ASC policy, and the patient's post-surgical needs addressed and 
included in the discharge notes. Post-surgical assessments, located in 
the current regulation under surgical services, reflect ASC standard of 
practice, and therefore, do not pose additional burden.
(3) Effects of the Discharge Provision
    The ASC is required to provide each patient with discharge 
instructions and ensure each patient has a signed discharge order, any 
needed overnight supplies and physician contact information for 
followup care or an appointment. Requiring the patient to have a signed 
discharge order, discharge instructions, any immediate overnight 
supplies that may be needed, and physician contact information when the 
patient leaves the ASC is standard practice. Therefore, we do not 
believe this is a new burden for ASCs.
    Therefore, while these requirements are subject to the PRA, the 
associated burden is exempt as it meets the requirements set forth in 5 
CFR 1320.3(b)(2).

C. Associated Information Collections Not Specified in Regulatory Text

    This final rule with comment period does not impose any information 
collection requirements through regulatory text. However, this final 
rule with comment period makes reference to one associated information 
collection concerning the HOP QDRP that is not discussed in the 
regulatory text. The following is a discussion of this collection, for 
which we solicited public comment in the CY 2009 OPPS/ASC proposed rule 
(73 FR 41552).
    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 section XVI.C.1. of the CY 2009 OPPS/ASC proposed rule (73 FR 
41541), we proposed 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. In the CY 2009 OPPS/ASC proposed 
rule (73 FR 41552), we estimated that there will be approximately 3,500 
respondents per year.

[[Page 68791]]

    For hospitals to collect and submit the information on the required 
measures, we estimated it will take 30 minutes per sampled case. In 
this final rule with comment period, we have reduced the burden 
associated with our proposed data submission requirements by making 
hospital submission of the aggregate numbers of outpatient episodes of 
care which are eligible for submission under the HOP QDRP voluntary, 
instead of requiring this submission as we proposed. Thus, although in 
the proposed rule based on an estimated 10 percent sample size and 
estimated populations of 2.5 to 5 million outpatient visits per 
measure, we estimated a total of 1,800,000 cases per year, the changes 
in this final rule with comment period will reduce this burden.
    In addition, in the proposed rule we estimated that completing 
participation forms will require approximately 4 hours per hospital per 
year. (Hospitals that continue to participate in the HOP QDRP only have 
to complete the participation form in the first year that they 
participate.) We expected the burden for all of these hospitals to 
total 914,000 hours per year.
    For CY 2010, we proposed that the proposed validation process would 
require 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 would take approximately 20 hours per 
hospital to submit the 50 charts. There would 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.
    In this final rule with comment period we have revised the 
validation process. The validation process will be used a test to 
provide feedback to all participating hospitals, but will not affect CY 
2010 payment determinations. We will still use a sample of 800 
participating hospitals, but we will sample 50 or less cases per 
hospital. Thus, we believe that the burden for the validation process 
will be somewhat less than our original estimate, although we cannot 
determine how much less until we determine the final number of cases 
sampled.
    We did not receive any public comments specifically regarding these 
burden estimates. We believe that our proposed estimates are still 
valid for this final rule with comment period, although we expect that 
the actual burden will be somewhat reduced by the changes from the 
proposed rule adopted in this final rule with comment period discussed 
above.
    We are requesting OMB's emergency review and approval of the 
information collection requirements in Sec. Sec.  416.41(c)(1) and 
(c)(3), 416.43, and 416.50. Emergency review and approval is necessary 
to ensure that these requirements are approved before the effective 
date of these provisions.
    If you comment on these information collection and record keeping 
requirements, please mail copies directly to the following by the date 
listed in the ``DATES'' section of this final rule with comment period:

Centers for Medicare & Medicaid Services, Office of Strategic 
Operations and Regulatory Affairs, Division of Regulations Development, 
Attn.: William Parham, CMS-1404-FC, Room C5-14-03, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: CMS Desk Officer, CMS-1404-FC Fax (202) 395-6974.

XXI. Waiver of Proposed Rulemaking

A. Requirements for Waivers

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register to provide for public comment before the provisions of 
a rule take effect in accordance with section 553(b) of the 
Administrative Procedure Act (APA). The notice of proposed rulemaking 
includes a reference to the legal authority under which the rule is 
proposed, and the terms and substances of the proposed rule or a 
description of the subjects and issues involved. However, this 
procedure can be waived if the Secretary finds, for good cause, that 
the notice-and-comment procedure is impracticable, unnecessary, or 
contrary to the public interest, and incorporates a statement of the 
finding and the reasons therefore in the rule.

B. OPPS Regulations Update to 42 CFR 419.43(d)(1)(i)(B)

    We are making a technical correction to Sec.  419.43(d)(1)(i)(B) to 
appropriately reference Sec.  419.66. The correcting amendment to Sec.  
419.43(d)(1)(i)(B) merely removes the phrase ``paragraph (e) of this 
section'' and adds in its place the correct cross-reference ``Sec.  
419.66.'' As this correction does not make substantive changes to any 
underlying policy and is purely technical in nature, we find good cause 
to waive notice-and-comment procedures as unnecessary.

C. OPPS Regulations Update to 42 CFR 419.43(f)

    We are making a technical conforming amendment to Sec.  419.43(f) 
which sets forth our longstanding, consistent policy to exclude certain 
items and services from eligibility for outlier payments. Under our 
longstanding policy, drugs and biologicals, as well as items paid at 
charges adjusted to cost by application of a hospital-specific CCR are 
excluded from the payment adjustment in Sec.  419.43(d). In the past, 
we updated the regulations at Sec.  419.43(f) to specifically identify 
those items paid at charges adjusted to cost by a hospital-specific CCR 
that we exclude from this adjustment (for example, brachytherapy 
sources). We are now specifying in a general manner that items paid at 
charges adjusted to cost are not eligible for the adjustment in Sec.  
419.43(d) (rather than specifically listing all items that are paid at 
charges adjusted to cost and that are excluded from the payment 
adjustment in Sec.  419.43(d)). This technical conforming amendment 
reflects our existing policy which has previously been subject to 
notice-and-comment procedures. Therefore, we find good cause to waive 
notice-and-comment procedures as unnecessary.

D. OPPS Regulations Update to 42 CFR 419.43(g)(4)

    We are making a correcting amendment to Sec.  419.43(g)(4) which 
sets forth our longstanding, consistent policy to exclude items paid at 
charges adjusted to cost by application of a hospital-specific CCR from 
the payment adjustment in Sec.  419.43(g)(4). Instead of annually 
updating the regulations at Sec.  419.43 to specifically identify those 
items paid at charges adjusted to cost, for administrative ease and 
convenience, Sec.  419.43(g)(4) now specifies in a general manner that 
items and services paid at charges adjusted to cost by a hospital-
specific CCR are not eligible for the adjustment in Sec.  419.43(g)(2). 
This correcting amendment does not alter our longstanding, consistent 
policy regarding items paid at charges adjusted to cost by application 
of a hospital-specific CCR. As these changes reflect existing policy 
and the substantive policies have already undergone notice-and-comment 
procedures, we find good cause to waive notice-and-comment procedures 
as unnecessary.

[[Page 68792]]

E. OPPS Regulations Update to 42 CFR 419.70

    We are revising Sec.  419.70(d)(2), (d)(4), and (d)(5) of the 
regulations to make technical corrections and to incorporate 
nondiscretionary provisions of section 147 of Public Law 110-275 (as 
described in sections I.F.5. and II.E.1. of this final rule with 
comment period) with respect to the extension and expansion of the 
Medicare hold harmless provision under the OPPS for certain hospitals. 
We note that Public Law 110-275 was enacted on July 15, 2008, 
subsequent to issuance of the CY 2009 OPPS/ASC proposed rule. Because 
the rule makes conforming changes to the regulation in order to 
implement section 147 of Public Law 110-275, we find good cause to 
waive notice-and-comment procedures as unnecessary.
    In the case of the correcting amendments to Sec. Sec.  419.70(e), 
419.70(g), and 419.70(i), we merely substitute the word ``paragraph'' 
with the word ``section'' in order to correct inaccurate cross-
references. These corrections do not make substantive changes to any 
underlying policy and are purely technical in nature. Therefore, we 
find good cause to waive notice-and-comment procedures as 
unnecessary.''
    In addition, as explained previously in this final rule with 
comment period, we are substituting the word ``paragraph'' with the 
word ``part'' in Sec.  419.70(d)(2) in order to more precisely capture 
existing policy and to correct an inaccurate cross-reference. This 
change is technical in nature and does not change the substantive 
underlying policy. Therefore, we find good cause to waive notice-and-
comment procedures as unnecessary.

XXII. 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 final 
rule with comment period, and, when we proceed with a subsequent 
document(s), we will respond to those comments in the preamble to that 
document(s).

XXIII. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this final rule with comment period 
(CMS-1404-FC) and the two final rules (CMS-3887-F and CMS 3835-F-1) as 
required by Executive Order 12866 (September 1993, Regulatory Planning 
and Review), as amended by Executive Order 13258, the Regulatory 
Flexibility Act (RFA) (September 19, 1980, Public Law 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 will be 
implemented by this final rule with comment period will result in 
expenditures exceeding $100 million in any 1 year. We estimate the 
total increase (from changes in this final rule with comment period as 
well as enrollment, utilization, and case-mix changes) in expenditures 
under the OPPS for CY 2009 compared to CY 2008 to be approximately $1.6 
billion.
    We estimate that the effects of the changes to the ASC payment 
system provisions for CY 2009 (such as adding 14 procedures that were 
previously excluded to the CY 2009 ASC list of covered surgical 
procedures and designating 8 additional procedures as office-based) 
will 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 changes to the ASC payment system for CY 2009 is 
provided in section XXIII.C. of this final rule with comment period.
    This final rule with comment period 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 a 
regulatory impact analysis that, to the best of our ability, presents 
the costs and benefits of the rulemaking. Table 53 and Table 54 of this 
final rule with comment period display the redistributional impact of 
the CY 2009 changes on ASC payment, grouped by specialty area and then 
by procedures with the greatest ASC expenditures, respectively.
    We have determined that the final rule for the ASC CfCs is not a 
major rule because the overall economic impact for all the new CfCs is 
estimated to be $26.2 million annually.
    We have determined that the final rule that contains clarification 
regarding the Secretary's ability to terminate Medicare providers and 
suppliers (that is, relating specifically to transplant centers) during 
an appeal of a determination that affects participation in the Medicare 
program will have no net effect on Medicare expenditures.
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. Many 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 (hospitals having revenues of 
$34.5 million or less in any 1 year; ambulatory surgical centers having 
revenues of $10 million or less in any 1 year). (For details on the 
latest standards for health care providers, we refer readers to 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 many 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 final 
rule with comment period will have a significant impact on a 
substantial number of small entities.
    In relation to the final rule on the ASC CfCs, we estimate there 
are approximately 5,100 Medicare-participating ASCs (that includes both 
deemed and non-deemed facilities) with average admissions of 
approximately 1,240 patients per ASC (based on the number of patients 
seen in ASCs in 2008 divided by the number of ASCs in 2008). As stated 
earlier, most ASCs are considered to be small entities, either by 
nonprofit status or by having revenues of $7 million to $34.5 million 
in any 1 year. The cost of this final rule is less than 1 percent of 
the total ASC Medicare revenue per facility. According to the CMS 
national expenditure data, Medicare paid approximately $3 billion to 
ASCs in 2007.

[[Page 68793]]

3. Small Rural Hospitals
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. With 
the exception of hospitals located in certain New England counties, for 
purposes of section 1102(b) of the Act, we 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, we continue to classify these hospitals as urban hospitals. 
We believe that the changes to the OPPS in this final rule with comment 
period will affect both a substantial number of rural hospitals as well 
as other classes of hospitals and that the effects on some may be 
significant. Therefore, the Secretary has determined that this final 
rule with comment period will have a significant impact on the 
operations of a substantial number of small rural hospitals.
    In addition, the Secretary has determined that the final rule on 
the ASC CfCs will not have a significant impact on the operations of a 
substantial number of rural hospitals because ASCs are designed to only 
provide procedures on an outpatient basis, and, thus, are not competing 
with rural hospitals for inpatient procedures.
    Also, the clarification of Medicare termination policy for 
providers and suppliers, specifically transplant centers, in this final 
rule will have no significant effect on 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 final rule with 
comment period will not mandate any requirements for State, local, or 
tribal governments, nor will it affect private sector costs. The final 
rule relating to revisions of the ASC CfCs and the final rule 
containing policy clarification of the policy on termination of 
Medicare providers and suppliers will not have an effect on the 
expenditures of State, local, or tribal government, and the impact on 
the private sector is estimated to be less than $120 million.
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 provisions included in this final 
rule with comment period in accordance with Executive Order 13132, 
Federalism, and have determined that they will 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 51 
below, we estimate that OPPS payments to governmental hospitals 
(including State and local governmental hospitals) will increase by 4.4 
percent under this final rule with comment period. The provisions 
related to payments to ASCs in CY 2009 will not affect payments to 
governmental hospitals.
    In addition, this final rule on ASC CfCs has no Federalism 
implications and will not affect State and local governments. However, 
for purposes of burden estimates, we are unable to accurately determine 
the number of ASCs that are already compliant with these requirements. 
Therefore, we have decided to err on the high cost side and apply the 
derived cost estimates to the total number of ASCs participating in 
Medicare. In addition, we believe the increased quality initiatives 
outlined in the regulation should have little or no effect on the 
benefit cost of ASC services.
    We also have examined the policy clarification relating to 
termination of Medicare providers and suppliers in this final rule in 
accordance with Executive Order 13132, Federalism, and have determined 
that it will not have a substantial direct effect on State, local or 
tribal governments, preempt State law, or otherwise have a Federalism 
implication.

B. Effects of OPPS Changes in This Final Rule With Comment Period

    We are making 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 also are required under section 1833(t)(9)(A) of the Act to 
revise, not less often than annually, the wage index and other 
adjustments. In addition, we must review the clinical integrity of 
payment groups and weights at least annually. Accordingly, in this 
final rule with comment period, we are updating the conversion factor 
and the wage index adjustment for hospital outpatient services 
furnished beginning January 1, 2009, as we discuss in sections II.B. 
and II.C., respectively, of this final rule with comment period. We 
also are revising the relative APC payment weights using claims data 
from January 1, 2007, through December 31, 2007, and updated cost 
report information. We are continuing the payment adjustment for rural 
SCHs, including EACHs. We are removing 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 23 of 
this final rule with comment period that we are removing from pass-
through payment status for CY 2009.
    Under this final rule with comment period, the update change to the 
conversion factor as provided by statute will increase total OPPS 
payments by 3.9 percent in CY 2009. The changes to the APC weights, the 
changes to the wage indices, and the continuation of a payment 
adjustment for rural SCHs, including EACHs, will not increase OPPS 
payments because these changes to the OPPS are budget neutral. However, 
these updates do change the distribution of payments within the budget 
neutral system as shown in Table 51 below and described in more detail 
in this section.
1. Alternatives Considered
    Alternatives to the changes we are making and the reasons that we 
have chosen the options are discussed throughout this final rule with 
comment period. Some of the major issues discussed in this final rule 
with comment period and the options considered are discussed below.
a. Alternatives Considered for Payment of Multiple Imaging Procedures
    We are revising 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 
will 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

[[Page 68794]]

service. As discussed in detail in section II.A.2.e.(5) of this final 
rule with comment period, we are utilizing 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 composite APC 
methodology for multiple imaging services will 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 existing 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 existing 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 final 
rule with comment period.
    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 that 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 final rule with comment 
period, 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 adopting 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 final rule with comment period, we do 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 will 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 multiple imaging composite APCs from 3 
collapsed imaging families, rather than the 11 MPFS imaging families, 
will enable us to maximize the use of multiple imaging claims for 
ratesetting.
b. Alternatives Considered for the HOP QDRP Requirements for the CY 
2009 Payment Update
    As discussed in section XVI.D.2. of this final rule with comment 
period, we are implementing the payment provisions of section 109(a) 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 final rule with 
comment period, effective for services paid under the CY 2009 OPPS, we 
will 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). We will calculate a ``reporting 
ratio'' that will 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 rates, 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 adopting 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 will therefore not pay a higher 
coinsurance rate and will share in the reduction of payments to these 
hospitals. We believe that this alternative will 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

[[Page 68795]]

coinsurance percentage for all services under the OPPS.

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 
final rule with comment period for discussion of the issues and the Web 
site at 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 issuance of the CY 2009 OPPS/ASC 
proposed rule. 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-term 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 final rule with comment period.
    With respect to adopting the RTI recommendations, we considered 
three alternatives. The first alternative we considered and the one we 
adopted was to make no changes in response to the RTI findings and to 
accept none of the recommendations regarding cost estimation. While 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, we are 
adopting this alternative for CY 2009 OPPS for the reasons discussed in 
detail in the discussion of charge compression in sections II.A.1.c.(2) 
and V.B.3. of this final rule with comment period. However, as we 
discussed in the FY 2009 IPPS final rule with comment period (73 FR 
48458 through 48467), we believe that creation of a new cost center to 
facilitate more accurate estimation of device costs is preferable to 
the regression-based adjustment of CCRs. Moreover, as we explain in 
section II.A.1.c.(2) of this final rule with comment period, prior to 
adopting any changes in the revenue code-to-cost center crosswalk used 
to adjust hospital charges to costs for OPPS ratesetting as recommended 
by RTI, we will provide a streamlined comparison of median costs that 
isolates changes attributable to the revenue code-to-cost center 
crosswalk to allow for informed analysis and additional public input 
regarding the RTI-recommended changes to the crosswalk.
    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 among hospital departments and among 
hospitals and should be thoroughly assessed before we decide whether to 
propose changes in OPPS cost estimation.
    The third alternative we considered was to break the single 
standard cost center 5600 on the Medicare cost report into two 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. As discussed in section V.B.3. 
of this final rule with comment period, we did not choose this 
alternative because hospitals indicated that it would be an 
extraordinary administrative burden to report the HCPCS codes for drugs 
administered to inpatients that are paid separately under the OPPS (but 
not paid separately under the IPPS) and to allocate the pharmacy 
overhead costs (for example, salaries, supplies, and equipment costs) 
between two new drug cost centers.
2. Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the CY 2009 policy changes on various hospital groups. We post on 
our Web site our hospital-specific estimated payments for CY 2009 with 
the other supporting documentation for this final rule with comment 
period. 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-FC'' 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 final rule with 
comment period. We show hospital-specific data only for hospitals whose 
claims were used for modeling the impacts shown in Table 51 below. We 
do not show hospital-specific impacts for hospitals whose claims we 
were unable to use. We refer readers to section II.A.2. of this final 
rule with comment period for a discussion of the hospitals whose claims 
we do not use for ratesetting and impact purposes.
    We estimate the effects of the individual policy changes by 
estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our policy changes. In addition, we 
do not make adjustments for future changes in variables such as service 
volume, service-mix, or number of encounters. As we have done in 
previous rules, we solicited public comment and information about the 
anticipated effect of our proposed

[[Page 68796]]

changes on hospitals and our methodology for estimating them.
    We received several public comments on the form and content of the 
impact analysis.
    Comment: Many commenters stated their concern that no Louisiana 
CMHCs (including small or rural CMHCs) were included in the impact 
table. The commenters believed that CMS is required by regulation to 
calculate the estimated impact of the OPPS/ASC proposed rule on all 
small and rural providers. Another commenter was concerned with CY 2009 
proposed policy changes that the commenter believed would reduce OPPS 
payments to Michigan hospitals. The commenter estimated that Michigan 
hospitals would lose approximately $115 million annually when providing 
OPPS services to Medicare beneficiaries.
    Response: We are including estimated impacts for all providers 
(including small, rural CMHCs located in Louisiana) in the first line 
of Table 51 in this final rule with comment period. We also are 
including estimated impacts for all CMHCs on the last line of the 
impact table. Furthermore, we post on the CMS Web site estimated impact 
for every hospital and CMHC whose claims were used in modeling the 
impacts of this final rule with comment period. As noted above, 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-FC'' from the list of regulations and notices. Hospitals and CMHCs 
whose claims were used in ratesetting and modeling the impact of this 
CY 2009 OPPS/ASC final rule with comment period can review the 
estimated impact that the policies adopted in this CY 2009 OPPS/ASC 
final rule with comment period may have on them by looking at our 
estimates on this table. There are estimated payments for more than 50 
CMHCs from Louisiana in the file. With respect to Michigan hospitals, 
we estimate that 94 percent of the hospitals in Michigan would receive 
increased OPPS payments as a result of the CY 2009 OPPS.
    In summary, we have made available on the CMS Web site the 
estimated amounts that we expect would be paid to each hospital and 
CMHC for which claims were used in ratesetting and modeling of impacts 
for the CY 2009 OPPS. These estimated amounts were used to generate the 
impacts identified in Table 51 below.
3. Estimated Effects of This Final Rule with Comment Period on 
Hospitals
    Table 51 below shows the estimated impact of this final rule with 
comment period on hospitals. Historically, the first line of the impact 
table, which estimates the 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 also are 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 changes by referencing payment for PHP services in 
Addendum A to this final rule with comment period. Because we are 
adopting 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 51 and discuss the impact 
on CMHCs in section XXIII.B.4. of this final rule with comment period.
    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 Public Law 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. Section 124 of Public Law 110-275 further extended section 508 
reclassifications through September 30, 2009. The amounts attributable 
to this reclassification are incorporated into the CY 2008 estimates.
    Table 51 shows the estimated redistribution of hospital and CMHC 
payments among providers as a result of 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 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 payment estimate. We did not model a budget neutrality 
adjustment for the rural adjustment for SCHs, including EACHs, because 
we are not making any changes to the policy for CY 2009. Because 
updates to the conversion factor, including the update of the market 
basket and the subtraction of additional money 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 will 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 final rule with comment period will redistribute money 
during implementation also will 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 final OPPS rates for CY 2009 will have a positive 
effect for providers paid under the OPPS, resulting in a 3.9 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 these changes will result in 
a 4.1 percent increase in Medicare payments to all other hospitals, 
exclusive of transitional pass-through payments. The majority of the 
difference is attributable to the redistribution of 0.24 percent of 
total spending from CMHCs due to the changes in payment for partial 
hospitalization services. The remainder of the difference is 
attributable to changes in OPPS payment to cancer and children's 
hospitals, which are not adversely affected by this estimated reduction 
in OPPS payment because the law provides additional payment for them 
that is outside of OPPS budget neutrality.
    To illustrate the impact of the final 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 51 shows the 
independent effect of changes resulting from the reclassification of 
services among APC groups and the 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 APC recalibration changes for CY 
2009 by varying only the weights (the final CY 2008 weights versus the 
CY 2009 weights calculated using the CY 2007 claims used for this final 
rule with

[[Page 68797]]

comment period) and calculating the percent difference in payments. 
Column 2 also reflects the effect of 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 payment weights.
    Column 3 reflects the independent effects of updated wage indices, 
including 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 making 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 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 policies 
on each hospital group by including the effect of all the 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 Public Law 
108-173 as extended by the MMSEA and further extended by Public Law 
110-275. Column 5 shows the combined budget neutral effects of Columns 
2 through 4, plus the impact of the change to the fixed outlier 
threshold from $1,575 to $1,800; the impact of the section 508 
reclassification wage index extension; and the impact of increasing the 
estimate of the percentage of total OPPS payments dedicated to 
transitional pass-through payments. We estimate that these cumulative 
changes will increase payments to all providers by 3.9 percent for CY 
2009. We modeled the independent effect of all changes in Column 5 
using the final weights for CY 2008 and the final weights for CY 2009. 
We used the final conversion factor for CY 2008 of $63.694 and the CY 
2009 conversion factor of $66.059. Column 5 also contains simulated 
outlier payments for each year. We used the charge inflation factor 
used in the FY 2009 IPPS final rule of 5.85 percent (1.0585) to 
increase individual costs on the CY 2007 claims to reflect CY 2008 
dollars, and we used the most recent overall CCR in the July 2008 
Outpatient Provider-Specific File. Using the CY 2007 claims and a 5.85 
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, will be approximately 0.73 percent of total 
payments. Outlier payments of 0.73 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 July 
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 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 51 shows the total number of 
providers (4,252), 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 final rule with comment period. 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 (3,970) 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 222 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 reconfiguration, 
recalibration, and other policies (such as composite payment for 
multiple imaging procedures performed on the same day, payment for 
separately payable drugs at ASP+4 percent, and changes in payment for 
PHP services). In many cases, the redistribution of 0.24 percent of 
total OPPS spending 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 0.3 percent increase 
for the 3,970 hospitals that remain after excluding hospitals held 
harmless and CMHCs. Overall, these changes will increase payments to 
urban hospitals by 0.3 percent. We estimate that large urban hospitals 
will see an increase of 0.3 percent and other urban hospitals will see 
a 0.4 percent increase in payments, all attributable to recalibration.
    Overall, rural hospitals will show a 0.1 percent increase as a 
result of changes to the APC structure. With the money redistributed 
from PHP services, and other recalibration changes, rural hospitals of 
all bed sizes will experience no change or will experience changes 
ranging from -0.5 to 0.6 percent.
    Among teaching hospitals, the largest observed impacts resulting 
from APC recalibration include an increase of 0.5 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 will see an increase of 0.2 percent, governmental 
hospitals will see an increase of 0.2 percent, and voluntary hospitals 
will see an increase of 0.3 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 will experience decreases of 0.3 to 2.5 percent as a result 
of the decline in payment for PHP services and the change in payment 
policy for PHP services from one per diem rate in CY 2008 to two per 
diem rates in CY 2009, as well as other recalibration changes.

[[Page 68798]]

Column 3: New Wage Indices and the Effect of the Rural Adjustment
    This column estimates the impact of applying the final FY 2009 IPPS 
wage indices for the CY 2009 OPPS. Overall, these changes will not 
change the payments to urban or rural hospitals.
    Among teaching hospitals, the largest observed impact resulting 
from 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 
governmental hospitals will see an increase of 0.2 percent, and 
voluntary and proprietary hospitals will 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 of up to 0.8 
percent. The Central regions (excluding the East North Central regions) 
and the Pacific regions of the country experience increases up to 1.2 
percent. Change in Puerto Rico's wage data contributes to the decrease 
of 0.9 percent.
Column 4: All Budget Neutrality Changes and Market Basket Update
    The addition of the market basket update of 3.6 percent mitigates 
any negative impacts on payments for CY 2009 created by the budget 
neutrality adjustments made in Columns 2 and 3. In general, all 
hospitals will see an increase of 3.9 percent, attributable to the 3.6 
percent market basket increase, the 0.24 percent increase in payment 
weight created by the reduction in payment for PHP services that is 
then redistributed to other services and the 0.04 percent 
redistribution from dedicated cancer and children's hospitals (which 
are not affected by the redistribution because the law holds them 
harmless). The 0.28 percent increase is rounded to 0.3 for purposes of 
Table 51.
    Overall, these changes will increase payments to urban hospitals by 
3.9 percent. We estimate that large urban hospitals will see an 
increase of 3.8 percent and other urban hospitals will see a 4.1 
percent increase.
    Overall, rural hospitals will experience a 3.7 percent increase as 
a result of the market basket update and other budget neutrality 
adjustments. Rural hospitals that bill less than 5,000 lines will 
experience a 3.8 percent increase. Increases in payment due to the wage 
index modestly offset the reduction in payment for PHP services in low 
volume rural hospitals. Rural hospitals that bill more than 5,000 lines 
will experience increases of 2.9 to 3.9 percent.
    Among teaching hospitals, the observed impacts resulting from the 
market basket update and other budget neutrality adjustments include an 
increase of 4.0 percent for both major and minor teaching hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals will increase 3.8 percent, governmental hospitals 
will increase 4.0 percent, and voluntary hospitals will experience an 
increase of 3.9 percent.
Column 5: All Changes for CY 2009
    Column 5 compares all changes for CY 2009 to final payment for CY 
2008 and includes the extended 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 will 
experience an increase of 3.9 percent under this final rule with 
comment period in CY 2009 relative to total spending in CY 2008. The 
projected 3.9 percent increase for all providers in Column 5 reflects 
the 3.6 percent market basket increase, less 0.02 percent for the 
change in the pass-through estimate between CY 2008 and CY 2009, plus 
0.27 percent for the difference in estimated outlier payments between 
CY 2008 (0.73 percent) and CY 2009 (1.0 percent), less 0.02 percent for 
the extended section 508 wage payments, and results in 3.87 percent 
that rounds to the 3.9 percent increase shown in Table 51. When we 
exclude cancer and children's hospitals (which are held harmless to 
their pre-OPPS costs) and CMHCs, the gain will be 4.1 percent.
    The combined effect of all changes for CY 2009 will increase 
payments to urban hospitals by 4.2 percent. We estimate that large 
urban hospitals will see a 4.1 percent increase, while ``other'' urban 
hospitals will experience an increase of 4.3 percent. Urban hospitals 
that bill less than 5,000 lines will experience an increase of 1.4 
percent.
    Overall, rural hospitals will experience a 3.9 percent increase as 
a result of the combined effects of all changes for CY 2009. Rural 
hospitals that bill less than 5,000 lines will experience an increase 
of 4.6 percent, which is greater than the 3.8 percent increase in 
Column 4. All rural hospitals that bill greater than 5,000 lines will 
experience increases ranging from 3.1 percent to 4.1 percent.
    Among teaching hospitals, the largest observed impacts resulting 
from the combined effects of all changes include an increase of 4.5 
percent for major teaching hospitals and an increase of 4.2 percent for 
minor teaching hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals will gain 3.9 percent, governmental hospitals 
will experience an increase of 4.4 percent, and voluntary hospitals 
will experience an increase of 4.1 percent.
4. Estimated Effects of This Final Rule With Comment Period on CMHCs
    The last row of the impact analysis in Table 51 demonstrates the 
impact on CMHCs. We modeled this impact assuming that CMHCs will 
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 will be a 22.8 
percent decrease in payments to CMHCs due to these APC policy changes 
(shown in Column 2). Column 3 shows that the CY 2009 wage index updates 
account for a small decrease in payments to CMHCs (0.3 percent). We 
note that all providers paid under the OPPS, including CMHCs, receive a 
3.6 percent market basket increase (shown in Column 4). Combining this 
market basket increase, along with changes in APC policy for CY 2009 
and the CY 2009 wage index updates, the combined impact on CMHCs for CY 
2009 is a 19.5 percent decrease.
    We anticipate that CMHCs will change their behavior in response to 
the CY 2009 payment rates for PHP services, consistent with patient 
need. By providing one additional qualifying partial hospitalization 
service, CMHCs will qualify for payment of APC 0173 (Level II Partial 
Hospitalization payment (4 or more services)), whose payment rate is 
approximately $205, rather than APC 0172 (Level I Partial 
Hospitalization payment rate (3 services)), whose payment rate is 
approximately $161. This change in behavior will 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 
(approximately 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 will be a 15.8 percent decrease rather than a 
22.8 percent decrease (which is the decrease due to APC

[[Page 68799]]

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 with three services would qualify for the 
Level II PHP payment rate, we estimate that the combined impact 
including all changes (market basket increase, changes in APC policy 
for CY 2009, and CY 2009 wage index updates), on CMHCs for CY 2009 will 
be approximately a 12.1 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 51 is 
modeled assuming that those days will not receive any payment, in 
accordance with our policy to deny payment for days with less than 
three services. However, we anticipate that CMHCs will also change 
their behavior in response to our 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 with three or more services 
would qualify for new APC 0172 or new APC 0173.

                                 Table 51--Impact of Changes for CY 2009 Hospital Outpatient Prospective Payment System
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        New wage index   Comb (cols 2,
                                                                        Number of           APC           and rural      3) with market    All changes
                                                                        hospitals      recalibration      adjustment     basket update
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 (1)              (2)              (3)              (4)              (5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL PROVIDERS *....................................................            4,252              0.0              0.0              3.6              3.9
ALL HOSPITALS (excludes hospitals held harmless and CMHCs).........            3,970              0.3              0.0              3.9              4.1
URBAN HOSPITALS....................................................            2,970              0.3              0.0              3.9              4.2
    LARGE URBAN (GT 1 MILL.).......................................            1,620              0.3              0.0              3.8              4.1
    OTHER URBAN (LE 1 MILL.).......................................            1,350              0.4              0.1              4.1              4.3
RURAL HOSPITALS....................................................            1,000              0.1              0.0              3.7              3.9
    SOLE COMMUNITY * * *...........................................              405              0.1             -0.1              3.6              4.0
    OTHER RURAL....................................................              595              0.0              0.0              3.7              3.8
BEDS (URBAN):
    0-99 BEDS * * *................................................            1,003              0.4              0.0              4.0              4.2
    100-199 BEDS...................................................              907              0.2              0.0              3.8              3.9
    200-299 BEDS...................................................              469              0.4              0.2              4.2              4.3
    300-499 BEDS...................................................              401              0.4              0.0              4.0              4.3
    500 + BEDS.....................................................              190              0.3             -0.2              3.7              4.2
BEDS (RURAL):
    0-49 BEDS * * *................................................              356              -05              0.1              3.2              3.4
    50-100 BEDS * * *..............................................              379             -0.1             -0.1              3.4              3.6
    101-149 BEDS...................................................              159              0.0              0.2              3.8              3.9
    150-199 BEDS...................................................               62              0.4              0.1              4.2              4.4
    200 + BEDS.....................................................               44              0.6             -0.2              4.0              4.4
VOLUME (URBAN):
    LT 5,000 Lines.................................................              608             -2.5              0.1              1.2              1.4
    5,000-10,999 Lines.............................................              176              0.4             -0.1              3.9              4.0
    11,000-20,999 Lines............................................              280              0.5              0.2              4.3              4.5
    21,000-42,999 Lines............................................              514              0.1              0.1              3.8              3.9
    GT 42,999 Lines................................................            1,392              0.4              0.0              4.0              4.2
VOLUME (RURAL):
    LT 5,000 Lines.................................................               77             -0.3              0.5              3.8              4.6
    5,000-10,999 Lines.............................................              100             -0.7              0.2              3.1              3.7
    11,000-20,999 Lines............................................              187             -0.7              0.0              2.9              3.1
    21,000-42,999 Lines............................................              318             -0.3              0.0              3.3              3.5
    GT 42,999 Lines................................................              318              0.3              0.0              3.9              4.1
REGION (URBAN):
    NEW ENGLAND....................................................              153              0.4             -0.1              3.9              4.1
    MIDDLE ATLANTIC................................................              380              0.4             -0.6              3.4              3.5
    SOUTH ATLANTIC.................................................              457              0.3             -0.1              3.9              4.0
    EAST NORTH CENT................................................              471              0.4             -0.4              3.6              4.1
    EAST SOUTH CENT................................................              195              0.2              0.0              3.8              4.0
    WEST NORTH CENT................................................              189              0.6              0.5              4.7              4.8
    WEST SOUTH CENT................................................              486              0.1              0.1              3.8              4.2
    MOUNTAIN.......................................................              192              0.4              0.1              4.2              4.4
    PACIFIC........................................................              399              0.1              1.2              4.9              5.0
    PUERTO RICO....................................................               48              0.1             -0.9              2.8              3.2
REGION (RURAL):
    NEW ENGLAND....................................................               24              0.9             -0.8              3.7              3.9
    MIDDLE ATLANTIC................................................               68              0.3             -0.3              3.6              3.8
    SOUTH ATLANTIC.................................................              168             -0.2              0.0              3.4              3.5
    EAST NORTH CENT................................................              127              0.2             -0.5              3.3              3.6
    EAST SOUTH CENT................................................              179             -0.1              0.3              3.7              3.8
    WEST NORTH CENT................................................              114              0.3              0.2              4.2              4.8
    WEST SOUTH CENT................................................              210             -0.2              0.4              3.9              4.0

[[Page 68800]]

 
    MOUNTAIN.......................................................               76             -0.2             -0.2              3.2              3.4
    PACIFIC........................................................               34             -0.1              1.1              4.6              4.8
TEACHING STATUS:
    NON-TEACHING...................................................            2,965              0.2              0.0              3.8              4.0
    MINOR..........................................................              725              0.4              0.0              4.0              4.2
    MAJOR..........................................................              280              0.5             -0.1              4.0              4.5
DSH PATIENT PERCENT:
    0..............................................................                9              1.9              0.0              5.5              5.5
    GT 0-0.10......................................................              400              0.5             -0.4              3.8              3.9
    0.10-0.16......................................................              398              0.4              0.0              4.0              4.3
    0.16-0.23......................................................              815              0.3             -0.1              3.8              4.0
    0.23-0.35......................................................              985              0.3              0.2              4.1              4.3
    GE 0.35........................................................              749              0.1              0.1              3.8              4.2
    DSH NOT AVAILABLE * *..........................................              614             -2.2              0.2              1.5              1.6
URBAN TEACHING/DSH:
    TEACHING & DSH898..............................................              0.4              0.0              4.0              4.3
    TEACHING/NO DSH................................................                0              0.0              0.0              0.0              0.0
    NO TEACHING/DSH................................................            1,482              0.3              0.0              3.9              4.0
    NO TEACHING/NO DSH.............................................                7              1.7             -0.1              5.2              5.2
    DSH NOT AVAILABLE * *..........................................              583             -2.2              0.2              1.5              1.6
TYPE OF OWNERSHIP:
    VOLUNTARY......................................................            2,113              0.3              0.0              3.9              4.1
    PROPRIETARY....................................................            1,275              0.2              0.0              3.8              3.9
    GOVERNMENT.....................................................              582              0.2              0.2              4.0              4.4
CMHCs..............................................................              222            -22.8             -0.3            -19.5           -19.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column (1) shows total hospitals.
Column (2) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups and the recalibration of APC weights based on
  CY 2007 hospital claims data.
Column (3) shows the budget neutral impact of updating the wage index by applying the FY 2009 hospital inpatient wage index. We did not make any changes
  to the rural adjustment.
Column (4) shows the impact of all budget neutrality adjustments and the addition of the market basket update.
Column (5) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate and adds outlier payments.
  This column also shows the impact of the extended 508 wage reclassification, which ends September 30, 2009.
* These 4,252 providers include children and cancer hospitals, which are held harmless to pre-BBA payments, and CMHCs.
** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care
  hospitals.
* * * Section 1833(t)(7)(D) of the Act specifies that rural hospitals with 100 or fewer beds and SCHs with 100 or fewer beds (urban and rural) receive
  additional payment for covered hospital outpatient services furnished during CY 2009 for which the prospective payment amount is less than the pre-BBA
  amount. The amount of payment is increased by 85 percent of that difference for CY 2009.

5. Estimated Effect of This Final Rule With Comment Period on 
Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary share of payment will 
increase for services for which the OPPS payments will rise and will 
decrease for services for which the OPPS payments will 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 national unadjusted copayment for APC 
0037 is $228.76, the same national unadjusted copayment in effect for 
CY 2008. The minimum unadjusted copayment for APC 0037 is $178.60 or 20 
percent of the national unadjusted payment rate for APC 0037 of $892.96 
for CY 2009. The minimum unadjusted copayment will rise because the 
payment rate for APC 0037 will rise for CY 2009. In all cases, the 
statute limits beneficiary liability for copayment for a service to the 
hospital inpatient deductible for the applicable year. The CY 2009 
hospital inpatient deductible is $1,068.
    In order to better understand the impact of 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 
4,252 hospitals and CMHCs on which our modeling is based, that total 
beneficiary liability for copayments will decline by approximately $62 
million or, as an overall percentage of total payments, from 24.8 
percent in CY 2008 to 23.3 percent in CY 2009. This estimated decline 
in beneficiary liability is a consequence of the APC recalibration and 
reconfiguration we are adopting for CY 2009.
6. Conclusion
    The changes in this final rule with comment period will affect all 
classes of hospitals and CMHCs. Some classes of hospitals will 
experience significant gains and others less significant gains, but all 
classes of hospitals will experience positive updates in OPPS payments 
in CY 2009. In general, CMHCs will experience an overall decline of 
19.5 percent in payment due to the creation of two APCs for PHP and the 
recalibration of the payment rates. Table 51 demonstrates the estimated 
distributional impact of the OPPS budget neutrality requirements that 
results in a 3.9 percent increase in payments for CY 2009, after 
considering all changes to APC reconfiguration and recalibration, as 
well as the market basket increase, wage index changes, estimated 
payment for outliers, and changes to the pass-through payment estimate. 
The accompanying discussion,

[[Page 68801]]

in combination with the rest of this final rule with comment period, 
constitutes a regulatory impact analysis.
7. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 52, we have 
prepared an accounting statement showing the CY 2009 estimated hospital 
OPPS incurred benefit impact associated with the CY 2009 hospital 
outpatient market basket update shown in this final rule with comment 
period, based on the 2008 Trustees' Report baseline. All estimated 
impacts are classified as transfers.

Table 52--Accounting Statement: CY 2009 Estimated Hospital OPPS Incurred
  Benefit Impact Associated With the CY 2009 Hospital Outpatient Market
                       Basket Update (in Billions)
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  $0.8 billion.
From Whom to Whom.................  Federal Government to outpatient
                                     hospitals and other providers who
                                     received payment under the hospital
                                     OPPS.
ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½ï¿½
    Total.........................  $0.8 billion.
------------------------------------------------------------------------

C. Effects of ASC Payment System Changes in This Final Rule With 
Comment Period

    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 4 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 
paying 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 is 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 final rule with comment period, we set the CY 2009 
ASC relative payment weights by scaling unadjusted CY 2009 ASC relative 
payment weights by the ASC scaler of 0.9751. 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 
53 and 54 below.
    The 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 final CY 2009 ASC 
conversion factor is $41.393.
1. Alternatives Considered
    Alternatives to the changes we are making and the reasons that we 
have chosen the options are discussed throughout this final rule with 
comment period.
a. Alternatives Considered for 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 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 final rule with comment period, 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.E. 
of this final rule with comment period, we are newly designating eight 
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 eight procedures we are designating 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 eight procedures we are designating 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

[[Page 68802]]

decisions regarding the most appropriate setting for surgical care.
    The second alternative we considered, and the alternative we 
selected, is to designate eight additional procedures as office-based 
for CY 2009. Three of the eight procedures are newly-created CPT codes 
that will become effective beginning January 1, 2009. We selected this 
alternative because our review of the most recent available volume and 
utilization data and/or, if appropriate, the clinical characteristics, 
utilization and volume of related codes indicated that these procedures 
could be considered to be usually performed in physicians' offices. We 
believe that designating these procedures as either temporarily or 
permanently 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. Alternatives Considered for 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 
and are not expected to require an overnight stay.
    In developing this final rule with comment period, 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, newly created Category I CPT and Level II 
HCPCS codes for CY 2009, and surgical procedures that were excluded 
from ASC payment for CY 2008. Based on that review, we identified 16 
surgical procedures for which there are newly created Category I CPT 
codes for CY 2009 CPT and 14 procedures that had been excluded from the 
list in CY 2008 that meet the criteria for inclusion on the ASC list of 
covered surgical procedures and we are adding 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 additional 30 procedures we are 
designating 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 designate 30 additional procedures as ASC covered 
surgical procedures for CY 2009. We selected this alternative because 
our review of the clinical characteristics and newly available CY 2007 
utilization data, if applicable, for all of these procedures indicated 
that they 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 projected effects of the 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 53 and 
54 below are based upon a methodology that assumes no changes in 
service-mix with respect to the CY 2007 ASC data used for this final 
rule with comment period. 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 Final Rule With Comment Period 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 provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the 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 53 depicts the aggregate 
percent change in payment by surgical specialty group and Table 54 
shows a comparison of payment for procedures that we estimate will 
receive the most Medicare payment in CY 2009.
    Table 53 shows the 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 53.
     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 updates to the ASC 
payment rates for CY 2009 under the scaled, 50/50 blend of the CY 2007 
ASC

[[Page 68803]]

payment rate and the CY 2009 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 would be attributable to updates to ASC payment 
rates for CY 2009 compared to CY 2008 if there were no transition 
period to the fully implemented payment rates. 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 
eliminating or modifying the policy for a 4-year transition that was 
finalized in the August 2, 2007 revised ASC payment system final rule 
(72 FR 42519).
    As seen in Table 53, the 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 will increase in CY 2009 with the 50/50 transitional 
payment rates and, in the absence of the transition, would increase 
even more. For instance, in the aggregate, payment for integumentary 
system procedures is expected to increase by 7 percent under the 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 will 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 53--Estimated CY 2009 Impact of the Update to the 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...........................................          $1,397              -1              -2
Digestive system................................................             753              -6             -16
Nervous system..................................................             327              -3             -10
Musculoskeletal system..........................................             222              19              54
Integumentary system............................................              89               7              19
Genitourinary system............................................              88              11              28
Respiratory system..............................................              23              14              38
Cardiovascular system...........................................              15              16              46
Auditory system.................................................               6              25              52
----------------------------------------------------------------------------------------------------------------

    Table 54 below shows the estimated impact of the 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 receiving the greatest 
estimated CY 2008 aggregate Medicare payments to ASCs. The HCPCS codes 
are sorted in descending order by estimated CY 2008 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 
update, incorporating a 50/50 blend of the CY 2007 ASC payment rate and 
the 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 
update if there were no transition period to the fully implemented 
payment rates. 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 eliminating or modifying the policy for the 4-year 
transition that was finalized in the August 2, 2007, revised ASC 
payment system final rule (72 FR 42519).
    As displayed in Table 54, 25 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 53, the estimated effects of the CY 2009 update on ASC payment 
for individual procedures in year 2 of the transition shown in Table 54 
are varied. Aggregate ASC payments for many of the most frequently 
furnished ASC procedures will decrease as the transition causes 
individual procedure payments to reflect relative ASC payment weights 
that are more closely

[[Page 68804]]

aligned with the relative payment weights under the OPPS.
    The ASC procedure for which the most Medicare payment is estimated 
to 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 update to the ASC rates will 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 
Table 54 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 transitional payment rates for 8 of the 9 digestive system 
procedures included in Table 54 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 53 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 54. The CY 2009 update will result in 5 percent payment decreases 
for 4 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 will realize payment 
increases, especially CPT codes 64622 (Destruction by neurolytic agent, 
paravertebral facet joint nerve; lumbar or sacral, single level) and 
64721 (Neuroplasty and/or transposition; medial nerve at carpal tunnel) 
for which payment will increase by 13 percent in CY 2009.
    The estimated payment effects for most of the remaining procedures 
listed in Table 54 are positive. For example, the CY 2009 transitional 
payment rate for CPT codes 29880 (Arthroscopy, knee, surgical; with 
meniscectomy (medial AND lateral, including any meniscal shaving)) and 
29881 (Arthroscopy, knee, surgical; with meniscectomy (medial OR 
lateral, including any meniscal shaving)) are estimated to increase 17 
percent over the CY 2008 transitional payment amount.

Table 54--Estimated Impact of Update to CY 2009 ASC Payment System on Aggregate Payments for Selected Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                                   Estimated CY
                                                                                   Estimated CY    2009 percent
                                                                      Allowed      2009 percent   change without
           HCPCS code                    Short descriptor          charges  (in    change (50/50    transition
                                                                       mil)           Blend)          (fully
                                                                                                   implemented)
(1)                               (2)...........................             (3)             (4)             (5)
----------------------------------------------------------------------------------------------------------------
66984...........................  Cataract surg w/iol, 1 stage..           1,087              -1              -3
43239...........................  Upper gi endoscopy, biopsy....             166              -7             -20
45378...........................  Diagnostic colonoscopy........             141              -6             -18
45380...........................  Colonoscopy and biopsy........             132              -6             -18
45385...........................  Lesion removal colonoscopy....             101              -6             -18
66821...........................  After cataract laser surgery..              84             -10             -29
62311...........................  Inject spine l/s (cd).........              76              -5             -13
64483...........................  Inj foramen epidural l/s......              53              -5             -13
66982...........................  Cataract surgery, complex.....              51              -1              -3
45384...........................  Lesion remove colonoscopy.....              38              -6             -18
G0121...........................  Colon ca scrn not hi rsk ind..              37              -9             -25
G0105...........................  Colorectal scrn; hi risk ind..              32              -9             -25
15823...........................  Revision of upper eyelid......              30               4              10
64475...........................  Inj paravertebral l/s.........              27              -5             -13
43235...........................  Uppr gi endoscopy, diagnosis..              24               0               0
52000...........................  Cystoscopy....................              23              -1             -10
64476...........................  Inj paravertebral l/s add-on..              22             -22             -65
29881...........................  Knee arthroscopy/surgery......              21              17              49
64721...........................  Carpal tunnel surgery.........              19              13              38
63650...........................  Implant neuroelectrodes.......              17              10              20
29880...........................  Knee arthroscopy/surgery......              16              17              49
62310...........................  Inject spine c/t..............              15              -5             -13
67041...........................  Vit for macular pucker........              14               0              -3
67904...........................  Repair eyelid defect..........              14               5              13
64484...........................  Inj foramen epidural add-on...              14             -19             -51
43248...........................  Uppr gi endoscopy/guide wire..              13              -7             -20
28285...........................  Repair of hammertoe...........              13              15              41
63685...........................  Insrt/redo spine n generator..              12               3               7
64622...........................  Destr paravertebrl nerve l/s..              11              13              40
29848...........................  Wrist endoscopy/surgery.......              11              -4             -12
----------------------------------------------------------------------------------------------------------------

    Predictably, the previous ASC payment system served as an incentive 
to ASCs to focus on providing procedures for which they determined 
Medicare payments would support their continued operation. We note 
that,

[[Page 68805]]

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 toward 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 requirement characteristics of those procedures.
4. Estimated Effects of This Final Rule With Comment Period on 
Beneficiaries
    We estimate that the CY 2009 update to the ASC payment system will 
be generally positive for beneficiaries with respect to the procedures 
newly added to the ASC list of covered surgical procedures and for 
those designated 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 will be less than the OPPS copayment amount for the same 
services. (The only exceptions would be if the ASC coinsurance amount 
exceeds the inpatient deductible. The statute requires that copayment 
amounts under the OPPS not exceed the inpatient deductible.) For 
procedures newly added to the ASC list of covered surgical procedures 
in CY 2009 that migrate from the HOPD to the ASC, the beneficiary 
coinsurance amount will be less than the OPPS copayment amount. 
Furthermore, the additions to the list will 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 designated as office-based in CY 2009, the beneficiary 
coinsurance amount will 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 will 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 will also reduce beneficiary liability for these services, 
for the two reasons described above with respect to the 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 extent to which the ASC provides a different set of 
procedures in the coming year.
    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 adopting 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.whitehousegov/omb/circulars/a004/a-4.pdf), in Table 55 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the statutorily required zero percent 
update to the CY 2009 revised ASC payment system, based on the 
provisions of this final rule with comment period. This table provides 
our best estimate of Medicare payments to providers and suppliers as a 
result of the update to the CY 2009 ASC payment system, as presented in 
this final rule with comment period. All expenditures are classified as 
transfers.

Table 55--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.
------------------------------------------------------------------------


[[Page 68806]]

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

1. Hospital Reporting of Outpatient Quality Data Under the HOP QDRP
    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 final rule with comment period, 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.
2. Hospital Reporting of Inpatient Quality Data Under the RHQDAPU 
Program
    In the FY 2009 IPPS proposed rule (73 FR 23651), we noted that, to 
the extent that the proposed quality measures for FY 2010 under the 
RHQDAPU program had not already been endorsed by a consensus building 
entity such as the NQF, we anticipated that they would be endorsed 
prior to the time that we issued the FY 2009 IPPS final rule. We stated 
that we intended to finalize the FY 2010 RHQDAPU program measure set 
for the FY 2010 payment determination in the FY 2009 IPPS final rule, 
contingent upon the endorsement status of the proposed measures. 
However, we stated that, if a measure had not received NQF endorsement 
by the time we issued the FY 2009 IPPS final rule, we intended to 
finalize that measure for the RHQDAPU program measure set in this CY 
2009 OPPS/ASC final rule with comment period if the measure received 
endorsement prior to the time we issued this CY 2009 OPPS/ASC final 
rule with comment period (73 FR 23651). We requested public comment on 
these measures.
    In the FY 2009 IPPS final rule (73 FR 48611), we set out, as listed 
below, two measures which had not yet received NQF endorsement, and 
that we intended to adopt for the FY 2010 RHQDAPU program measure set 
in this CY 2009 OPPS/ASC final rule with comment period if the measures 
receive endorsement from a national consensus-based entity such as NQF:

                Readmission Measures (Medicare Patients)
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
 AMI 30-Day Risk Standardized Readmission Measure (Medicare
 patients).
 Pneumonia (PN) 30-Day Risk Standardized Readmission Measure
 (Medicare patients).
------------------------------------------------------------------------

    In section XVI.I. of this final rule with comment period, we 
finalized these measures because we expect them to receive NQF 
endorsement. We estimate that the two new RHQDAPU program readmission 
measures for Medicare patients adopted in this final rule with comment 
period will have no incremental impact on the percentage of hospitals 
that will qualify for the full IPPS payment update factor for FY 2010. 
These two measures are calculated using Medicare Part A inpatient 
claims already submitted by hospitals. Past experience from adding 
other RHQDAPU program claims-based measures indicates that no hospitals 
are expected to be impacted in their FY 2010 IPPS Medicare payment 
update.

E. Effects of ASC Conditions for Coverage Changes in This Final Rule

1. Effects on ASCs
    As described in section XV.B. of the preamble of this document, the 
ASC CfCs final rule presents new provisions, as well as provisions that 
are carried over from the existing ASC CfC regulations. For purposes of 
this section, we have assessed only the impact of the new provisions. 
Other provisions have not been revised and, therefore, do not present a 
new burden to ASCs.
    Table 56 contains data that are frequently used in this impact 
statement. The salary-related cost data are referenced from the 
Salarywizard.com Web site at http://hrsalarycenter.salary.com. Some of 
the requirements contained in the new CfC provisions are already 
standard medical or business practices. Therefore, these requirements 
do not present an additional burden to ASCs.
    We recognize that, in describing what the effect of this rule will 
be on ASCs, burden estimates may not accurately reflect the experience 
of all ASCs. Facilities vary in the complexity of operations and 
processes, and. therefore, associated costs may differ.

       Table 56--Year 2008 Data Used Through This Impact Analysis
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Number of Medicare-certified ASCs nationwide.................      5,100
Average number of patients per ASC...........................      1,240
Hourly rate of administrator*................................     $49.00
Hourly rate of registered nurse*.............................     $39.00
------------------------------------------------------------------------
* Hourly salary rates include base salary, bonuses, Social Security,
  401(k)/403(b), disability, health care, pension, and time off.

    We are revising the following existing conditions: Governing body 
and management; Evaluation of quality; and Laboratory and radiologic 
services. We are finalizing the following new conditions: Patient 
rights, Infection control, and Patient admission, assessment and 
discharge.
a. Effects of the Governing Body and Management Provision (Sec.  
416.41)
    This ASC CfCs final rule expands the responsibility of the 
governing body to include the QAPI program and the creation and 
maintenance of a disaster preparedness plan. The governing body's 
specific responsibilities for QAPI are detailed in the new QAPI 
condition located at Sec.  416.43(e). The assignment of burden for this 
requirement can be found under the description of the QAPI requirement.
    The existing regulations require that ASCs meet certain safety 
requirements under Sec.  416.44, ``Condition for coverage--
Environment.'' In an effort to ensure ASCs are equipped to handle 
emergencies and disasters, we are requiring that ASCs develop a plan 
specific to disaster preparedness that would provide for the emergency 
care of patients, ASC staff, and patient family members who are in the 
ASC when/if unexpected events or circumstances occur at the ASC or in 
the immediate community that threaten the health of these individuals. 
The plan requires an ASC to coordinate with appropriate State and local 
agencies and, as available, to seek their advice on plan development. 
The plan also requires an annual review to test the plan's 
effectiveness.

[[Page 68807]]

    In addition to an annual review, the rule also requires that the 
ASC staff be able to demonstrate, through annual drills and written 
evaluations, the ASCs ability to manage emergencies that are likely to 
occur within their geographic area.
    We estimate that an administrator, earning $49.00 per hour, would 
be largely responsible for developing the plan and for managing the 
yearly drills and evaluations. We are estimating that the yearly cost 
for one ASC to develop and implement a disaster preparedness plan will 
be approximately 4 hours at $49.00 per hour, with a net cost of $196.00 
per ASC. The total cost for all ASCs is estimated to be $99,600.
b. Effects of the QAPI Provision (Sec.  416.43)
    In Sec.  416.43, we are replacing the existing requirement, 
``Evaluation of quality,'' with a revised requirement entitled, 
``Quality assessment and performance improvement''. As part of our 
efforts to establish regulatory consistency where possible among 
providers and suppliers, we are adding a QAPI program that requires 
ASCs to continuously monitor quality improvement through focused 
projects, identify barriers to improvements, take efforts to measure 
improvements in patient health outcomes, and work to reduce medical 
errors. ASCs are also expected to measure, analyze and track quality 
indicators, including adverse patient events, infection control, and 
other aspects of performance, including processes of care and services 
furnished in the ASC.
    Once an area of concern is identified, the ASC will develop a plan 
for improvement. The ASC determines the specifics of the plan, assesses 
its effectiveness, and monitors the results learned.
    This condition includes five standards: program scope; program 
data; program activities; performance improvement projects; and 
governing body responsibilities. Because ASCs are already required in 
the current CfCs to evaluate the quality of care they provide on an 
ongoing basis, many providers are already using some version of a 
comprehensive quality assessment and performance improvement program. 
We estimate that it would take 12 hours for each ASC to develop its own 
quality assessment performance improvement program. We also estimate 
that each ASC would spend 18 hours a year collecting and analyzing the 
findings. In addition, we estimate that each ASC would spend 4 hours a 
year training its staff and 18 hours a year implementing performance 
improvement activities. Both the program development and implementation 
functions would most likely be managed by the ASC's administrator. 
Based on an hourly rate of $49.00, the total cost of the quality 
assessment and performance improvement condition for coverage is 
estimated to be $2,548 per ASC.
    The hourly burden is based on estimates that are found in the 
``Hospital Conditions of Participation: Quality Assessment and 
Performance Improvement'' final rule (68 FR 3435, January 24, 2003). We 
estimated that a hospital would spend 80 hours collecting and analyzing 
information on 12 identified measures. According to our 2002 
statistics, 5,985 hospitals discharged 11.8 million patients in 2000. 
This means that the statistically average hospital discharged 
approximately 2,000 patients that year. Collecting and analyzing data 
for 2,000 patients, we estimate that the implementation burden would 
take 80 hours. Based on the estimate that the average ASC treats and 
discharges 1,240 patients per year, we reduced the burden for ASCs to 
52 hours each. A new standard, Program scope, requires that the 
existing evaluation activities demonstrate measurable improvement in 
patient health outcomes. This rule also requires the use of quality 
indicator data in the QAPI program, but does not require any specific 
data collection or utilization, nor would it require ASCs to report the 
collected data. This would give the ASCs flexibility and minimize 
burden.
    A new standard, Program activities, identifies priority areas that 
an ASC must consider in its program. ASCs would be expected to carry 
out assessment activities according to the scope and complexity of 
their programs.
    This rule requires the governing body to become involved in all 
aspects of the QAPI program. We have estimated the burden based on 
management by an administrator. There should be direct and open 
communication between the program manager and the governing body. The 
analysis of a variety of reports, program prioritization, and 
allocation of resources are all standard business practices and, 
therefore, we have not assigned additional burden to these functions.

                   Table 57--Summary of Quality Assessment and Performance Improvement Burden
----------------------------------------------------------------------------------------------------------------
                                                   Time per ASC     Total time
                    Standard                          (hours)         (hours)      Cost per ASC     Total cost
----------------------------------------------------------------------------------------------------------------
Developing QAPI.................................              12          61,200            $588      $2,998,800
Collecting/analyzing findings...................              18          91,800             882       4,498,200
Training staff..................................               4          20,400             196          99,600
Implementing improvement activities.............              18          91,800             882       4,498,200
                                                 ---------------------------------------------------------------
    Annual total................................              52         265,200           2,548      12,994,800
----------------------------------------------------------------------------------------------------------------

    The various ASC accreditation and professional health organizations 
(that is, The Joint Commission, the AAAASF, the AAAHC, and the AOA) 
support advances in patient care in a number of ways and actively 
encourage health care entities to expand and improve their existing 
programs. These organizations are familiar with quality improvement 
programs and are likely to have actual or referral information 
available to assist ASCs in setting up their QAPI programs.
    In developing a QAPI program, ASCs are urged to take advantage of 
the variety of information that exists from the industry. ASCs may also 
find that QAPI programs for other entities, such as hospitals, can be 
adapted to fit certain needs.
    Comment: One commenter disagreed with our estimated costs in the 
proposed rule of developing and implementing a QAPI program.
    Response: In this final rule, we have not increased the burden 
estimate from the proposed rule because the commenter did not establish 
cause for a modification.
c. Effects of the Laboratory and Radiologic Services Provision (Sec.  
416.49)
    Final changes to this CfC are editorial. There is no additional 
burden assigned to this CfC.

[[Page 68808]]

d. Effects of the Patient Rights Provision (Sec.  416.50)
    The existing regulations do not contain a condition-level patient 
rights requirement. The final rule recognizes that ASC patients are 
entitled to certain rights that must be protected and preserved, and 
that all patients must be free to exercise these rights. The final rule 
details basic information that ASCs are required to provide to 
patients: Notice of rights; exercise of patient rights and respect for 
property and person; privacy and safety; and confidentiality of 
clinical records. This condition also includes a requirement for 
advance directives, as specified at 42 CFR Part 489, Subpart I, and a 
requirement for the submission and investigation of grievances.
    We have identified potential burden in the following areas.
(1) Effects of the Notice of Rights--Verbal and Written Notice 
Provision
    An ASC is required to provide patients or, as appropriate, their 
representatives with verbal or written notice of the rights and 
responsibilities of the patient in advance of the patient coming under 
the care of the ASC. Because ASCs must notify patients either verbally 
or in writing in advance of the patient coming under the ASC's care, 
ASCs may choose to mail the patient rights notification to the patient 
along with the pre-surgical information, the physician's financial 
interests or ownership, and the advance directives. Generally, the most 
effective and efficient manner to furnish a notice of rights is to 
initially develop a general notice which can be subsequently discussed 
and/or distributed as needed. We expect that an ASC will use this 
simple and inexpensive approach in order to meet this requirement. In 
response to the needs of their specific patient populations, some ASCs 
might choose to have their patient rights notification written in the 
predominant language(s) of their patients. More than likely, this 
message would be written by a registered nurse or similar professional. 
A typical message might be in three parts: An introduction; the 
information section; and a section for followup questions and issues. 
We expect the effort to develop this one-time message would not exceed 
1 hour at a cost of $39.00 for each ASC. We believe that this would be 
a one-time cost for ASCs and estimate that the total costs would be 
$198,900 for all ASCs. If an ASC chooses to mail the patient rights to 
the ASC patient, this form would accompany the other pre-surgical 
treatment forms that an ASC typically mails to the patient. It is 
likely that the patient's rights form would consist of a one page, 
brochure-type informational. We believe the cost associated with adding 
this informational brochure to the pre-surgical treatment package would 
be nominal. Therefore, we have not calculated a cost for this mailing.
    In many cases, notifying patients verbally of their rights is 
already being done and some ASCs may already be employing interpreters 
to make certain that patients who do not understand English fully 
understand their rights and responsibilities. However, for purposes of 
this analysis, we will assume that all ASCs need to budget for this 
activity. The cost for language services can range from moderate hourly 
amounts to daily, full-time interpreters at $800 per day. Telephonic 
services are more reasonable and more accessible and can be purchased 
for $2.00 per minute. We are not able to determine the percentage of 
non-English speaking patients an ASC would care for in a year as that 
depends on a number of variables, including the ASC's geographic 
location. In addition, the availability of in-person language services 
would also vary from location to location and, while it may not be 
preferred, in some cases the use of family members may be necessary.
    Given this discussion, we estimate that 3 percent of an average 
annual ASC caseload of 1,240 cases might require interpreter services 
and 15 minutes of time would be needed for an interpreter to provide a 
general description of the rights to which the patient is entitled. 
Because a percentage of an ASC's patients will speak Spanish or French, 
as these languages are commonly spoken in some parts of the country, we 
expect that friends and relatives of patients speaking these languages 
would be available to assist in understanding issues related to the 
patient's scheduled procedure. Therefore, the need for an ASC to hire 
an interpreter in these cases would be infrequent. (Other than English, 
Spanish is the language most commonly spoken in 42 States.) The ASC may 
have to take steps to arrange for an interpreter for some patients when 
other options are not available.
     Telephone interpretive services at $2.00/minute x 15 
minutes = $30.00 per patient. The cost for telephone interpreter 
services is, for example, dependent upon the language, the consumed 
time, or frequency. Costs range from $75.00 an hour to $160.00 or more 
an hour. The figure of $2.00 per minute is an estimated average cost.
     3 percent x 1,240 patient caseload = 37 patients per year 
per ASC requiring the services of an interpreter.
     $30.00 x 37 = $1,110.00 per ASC.
     $1,110 x 5,100 ASCs = $5,661,000 estimated cost total for 
all ASCs.
(2) Effects of the Advance Directives Provision
    Each ASC is required to establish an advance directive policy, and 
provide the patient or representative with information concerning its 
policies on advance directives, including a description of applicable 
State laws and, if requested, official State advance directive forms. 
Each ASC is also required to explain these policies to their patients. 
This includes providing information on any conscience objections the 
physician(s) and/or the ASC might have to advance directives; 
documenting whether an individual has executed an advance directive; 
and educating staff on the importance of advance directives. We expect 
that many ASCs already communicate information about advance directives 
to their patients because advance directives are common in hospitals 
and a significant portion of Medicare patients have had some experience 
with hospitals. Many ASCs have already formulated some type of advance 
directives policy.
    We estimate that the development of an advance directives document 
utilizing generic advance directives forms obtained from existing Web 
sites or from State agency Web sites, by a registered nurse or 
equivalent will take 1 hour at $39.00 per ASC. The estimated cost for 
all ASCs is $198,900. We randomly queried a small sample of State Web 
sites and found generic advance directives forms in English and Spanish 
that were posted and available for downloading.
    We believe that these functions reflect standard industry practice 
and, therefore, would add no burden. While this requirement is subject 
to the PRA, we believe the burden associated with this requirement 
would constitute a usual and customary business practice. Pursuant to 5 
CFR 1320.3(b)(2), we will not include the cost of this activity in the 
economic impact analysis.
    Some ASCs will choose to mail advance directives to their patients 
along with the other pre-surgical treatment information. In instances 
when ASCs mail the advance directives, it would also be appropriate to 
mail the ASC's disclosures concerning any policies the ASC or the ASC's 
physicians might have regarding specific patient rights, for example, 
do not resuscitate orders, etc. We believe such information should be 
mailed with the package of information in an effort to afford patient 
the opportunity to seek

[[Page 68809]]

out another ASC in the event they are uncomfortable or in disagreement 
with the ASC's policies on advance directives.
    Most advance directives consist of a one-page brochure. Because 
ASCs already mail a package of information to the patient, we again 
believe the cost of including a second additional page would be nominal 
and, therefore, assign no burden to this activity.
(3) Effects of the Submission and Investigation of Patient Complaints 
Provision
    We estimate that an ASC may have to investigate complaints from 
approximately 1 percent (12 patients) of its caseload due to 
allegations of mistreatment, and neglect, for example. We are not aware 
of an existing repository of records that accurately identifies the 
number and exact nature of ASC complaints. Therefore, 1 percent is an 
estimate.
    An investigation could average 1 hour and would be managed by an 
administrator. Twelve hours could be spent by each ASC in this 
activity.
     12 hours x $49.00 (administrator's hourly salary) = $588 
estimated cost for each ASC.
     $588 x 5,100 ASCs = $2,998,800 estimated cost for all 
ASCs.
    In its resolution of the grievance, an ASC must investigate all 
allegations, document how the violation or grievance was addressed, and 
provide the patient with written notice of its decision containing the 
name of an ASC contact person, the steps taken to investigate the 
grievance, the results of the grievance process, and the date the 
grievance process was completed.
    The burden associated with this requirement is the time and effort 
necessary to fully document the alleged violation or complaint and to 
disclose the written notice to each patient who filed a grievance. We 
estimate that, on average, it will take each ASC 15 minutes at a cost 
of $39.00 an hour to develop and disseminate 12 notices on an annual 
basis (3 hours per ASC), for a total ASC burden of 15,300 hours at a 
cost $596,700.
    While this requirement is subject to the PRA, we believe it would 
constitute a usual and customary business practice. Pursuant to 5 CFR 
1320.3(b)(2), we will not include this activity in the economic impact 
analysis.
(4) Effects of the Exercise of Rights and Respect for Property and 
Person Provision
    Since ASCs began operating under Medicare in 1982, they have been 
required to provide information to patients about the procedures to be 
performed. This information is provided to patients by way of the 
informed patient consent in the current regulation. ASCs are also 
responsible for providing patients with information concerning expected 
outcomes. The final rule requires that ASCs continue this practice. 
Therefore, we do not anticipate that ASCs will incur significant costs 
associated with this requirement.
(5) Effects of the Privacy and Safety Provision
    The current regulatory language requires that an ASC provide a safe 
and sanitary environment to protect the health and safety of patients. 
The final rule adds the requirement that the patient has the right to 
personal privacy. We are defining personal privacy in this case as 
providing the patient access to an area of the ASC which is shielded 
from view from others to prepare for the procedure to be performed. 
This would mean a place to disrobe, speak with ASC personnel about 
issues and concerns, and then get dressed following the procedure. 
While this requirement is subject to the PRA, we believe that it would 
constitute a usual and customary business practice. Pursuant to 5 CFR 
1320.3(b)(2), we will not include this activity in the economic impact 
analysis.
(6) Effects of the Confidentiality of Clinical Records Provision
    The existing regulation at Sec.  416.47(a) requires that an ASC 
develop a system for the proper collection, storage, and use of patient 
records. This use includes such purposes as to provide appropriate 
health care, for payment information, for disease management, and for 
quality assessment. The changes in the final rule merely provide a 
formal clarification of the current requirement's approach the proper 
use of records. ASCs recognize the need for privacy regarding patient 
medical records and have already instituted policies based on the 
Federal HIPAA Privacy Rule, which requires appropriate safeguards to 
protect the privacy of individually identifiable health information and 
regulates the use and disclosure of such information. In addition, 48 
States have medical privacy laws that are applicable to patients' 
health information. Some State laws are specific in prohibiting 
unlawful disclosure of patient information while, in other States, 
prohibitions are linked to laws governing specific medical entities. 
Most health care facilities have already instituted procedures to 
address this issue to conform to State laws. Therefore, we do not 
believe this final rule will impose any significant additional 
financial or resource burdens on ASCs.
e. Effects of the Infection Control Provision (Sec.  416.51)
    As we proposed, we are elevating the level of importance of the 
infection control requirements, located at Sec.  416.44(a)(3), to the 
condition level. The ASC is required to ensure that the infection 
control program minimizes infections and communicable diseases that 
could affect both patients and ASC staff. We are also requiring that a 
designated professional in the ASC be responsible for the program. We 
estimate the burden increase to be minimal, except for the ongoing 
training expense to make certain that the designated professional 
continues to be familiar with current infection control information.
    ASCs are currently required to have a program that identifies and 
prevents infections, maintains a sanitary environment, and reports 
results to the appropriate authorities. The new condition requires the 
ASC to designate an individual (in most cases this would be a nurse or 
an environmental engineer) to be responsible for the ASC infection 
control program. The ASC can continue to designate the individual that 
currently oversees the infection control program. However, the ASC must 
also assure that the person who is designated is, through a combination 
of training, knowledge and experience, capable of performing this task. 
To ensure the individual continues his/her current knowledge of 
infection control methodologies and techniques, he/she would need to 
engage in continuing education in infection control on a frequent or at 
least an annual basis.
    We estimate that an ASC would spend approximately $500 per calendar 
year on infection control training for the designated individual. This 
cost was based on the quantity of technical information that we believe 
is appropriate to be included in an infection control program. The cost 
also includes the time spent by the ASC infection control officer (the 
trainee), the cost for a qualified trainer and the training materials. 
We estimate that the course would run 4 hours. The total estimated cost 
for all ASCs would be $2,550,000. We do not expect that individuals 
would have to travel any significant distance to meet this training 
requirement.
    Comment: One commenter suggested that CMS underestimated the burden 
of costs in the proposed rule with respect to the infection control 
program. The

[[Page 68810]]

commenter suggested that the cost estimate for training did not 
consider the cost associated with initial training.
    Response: The existing ASC regulations at Sec.  416.44(a)(3) 
already requires an ASC to have an infection control program that is 
capable of identifying and preventing infections. ASC clinicians such 
as nurses and pharmacists, in addition to physicians, are already 
involved in implementing infection control practices as part of the 
current requirement. These professionals already have a fundamental 
knowledge base from which to draw, and, therefore, we do not believe 
initial training cost is an issue here. Therefore, we are retaining the 
burden estimate as proposed.
    The infection control condition also includes the requirement that 
the infection control program be part of the ASC's QAPI program. We 
have not prescribed specific areas to be monitored or a process that 
must be followed to meet the requirement. We have not assigned any 
burden to this requirement because, under the current rules, the ASC 
should already be evaluating quality activities and executing an 
infection control program. This requirement has been included as a 
formal way of ensuring it is an integral part of the ASC's QAPI 
process.
    This CfC requires an ASC to continue to take specific and 
appropriate actions to address the prevention and control of 
infections. We do not believe this will add any regulatory burden 
because this condition reflects contemporary standard practice in ASC 
facilities and, again, should be part of the ASC obligation under the 
current rules.
f. Effects of the Patient Admission, Assessment, and Discharge 
Provision (Sec.  416.52)
    The condition reflects a more patient-centered approach that we 
believe will result in an improved quality of care, and more emphasis 
on patient outcomes. Specifically, we are finalizing this new condition 
because it represents the current standard of practice and does not 
pose additional burden.
(1) Effects of the Admission and Pre-Surgical Assessment Provision
    We are requiring the completion of a comprehensive medical history 
and physical assessment no more than 30 days before the day of the 
scheduled surgery. It is very unlikely that the comprehensive medical 
history will be completed at the ASC. Therefore, there is unlikely to 
be any ASC burden associated with this requirement.
    We are requiring that a pre-surgical assessment be completed upon 
admission to the ASC. Existing regulations at Sec.  416.42(a) require a 
physician to examine the patient immediately before surgery to evaluate 
the risks involved in administering anesthesia and performing the 
procedure. Physicians must determine that patients, including those at 
high risk, are able to undergo the surgery itself and be able to manage 
recovery. Pre-surgical assessments represent a current standard of 
community practice, are currently required under a different 
description, and, therefore, do not pose additional burden.
    To ensure the ASC health care team has all patient information 
available when needed, the medical history and physical assessment must 
be placed in the patient's medical record before the surgical procedure 
is started. There is no burden associated with this requirement.
(2) Effects of the Post-Surgical Assessment Provision
    The post-surgical assessment requires the ASC to ensure the 
patient's post-surgical condition is documented in the medical record 
by a physician or other qualified practitioner in accordance with State 
law and ASC policy, and the patient's post-surgical needs addressed and 
included in the discharge notes. Post-surgical assessments, located in 
the current regulation under surgical services, reflect ASC standard of 
practice, and therefore, do not pose additional burden.
(3) Effects of the Discharge Provision
    The ASC is required to provide each patient with discharge 
instructions and ensure each patient has a signed discharge order, any 
needed overnight supplies and physician contact information for 
followup care or an appointment. Requiring the patient to have a signed 
discharge order, discharge instructions, any immediate overnight 
supplies that may be needed, and physician contact information when the 
patient leaves the ASC is standard practice. Therefore, we do not 
believe this is a new burden for ASCs.
    The total compliance cost for ASCs is listed below by condition.

               Total Cost to ASCs To Implement Regulation
------------------------------------------------------------------------
       Condition                   Activity            Cost for all ASCs
------------------------------------------------------------------------
Sec.   416.41..........  Governing Body (Disaster               $999,600
                          Preparedness).
Sec.   416.43..........  QAPI.......................          12,994,800
                            Develop Program.........        ($2,998,800)
                            Collecting & Analyzing          ($4,498,200)
                             Findings.
                            Training Staff..........         ($ 999,600)
                            Implementing Improvement        ($4,498,200)
                             Activities.
Sec.   416.50..........  Patient Rights.............           9,654,400
                            Develop Patient Notice            ($198,900)
                             of Rights.
                            Telephone Interpreter...        ($5,661,000)
                            Develop Advance                   ($198,900)
                             Directive.
                            Investigating Patients'         ($2,998,800)
                             Complaints.
                            Develop/Disseminate              ($ 596,700)
                             Complaint Investigation
                             Notice.
Sec.   416.51..........  Annual Infection Control              2,550,000
                          Training.
                                                     -------------------
    Total Implementation Cost for All ASCs..........          26,198,800
------------------------------------------------------------------------

2. Alternatives Considered
    One alternative was to maintain the existing CfCs without 
revisions. However, we concluded this was not a reasonable option 
because our existing CfCs, in some cases, are not compatible with the 
current standards of practice. Revising the existing CfCs takes 
advantage of continuing advances in the health care delivery field. In 
addition, listed below are other alternatives.

[[Page 68811]]

a. Alternatives to the Governing Body and Management Provision (Sec.  
416.41)
    We considered not including the requirement for the disaster 
preparedness plan. However, as witnessed by the problems affecting 
health care facilities across the Gulf region in September 2005 as a 
result of Hurricane Katrina, we have finalized this requirement to 
ensure the safety of patients and staff members alike.
b. Alternatives to the QAPI Provision (Sec.  416.43)
    We discussed eliminating any reference to the use of quality 
indicator data, including patient care data. However, in light of the 
existing and proposed hospital, home health and rural health clinic 
quality assessment and performance improvement requirements, we believe 
ASCs also must continue current efforts in quality improvement by 
building a foundation where quality indicator data can be used to 
identify activities that lead to poor patient outcomes.
c. Alternatives to the Patient Rights Provision (Sec.  416.50)
    We considered not requiring a patient rights standard in ASCs 
because we are aware that ASCs currently participate in some patient 
rights' activities, for example, documenting patient's executed 
informed consent; safeguarding patient's privacy; and encouraging 
patients to participate in treatment decisions by discussing treatment 
options with them. However, to facilitate greater communication between 
patients and health care facilities and to ensure that patients receive 
considerate, respectful care in all health care settings, we have 
determined that ASC facilities should be required to provide patients 
or their representatives with a notice of the patient's rights in a 
language that the patient understands. We believe this requirement will 
protect and promote considerate and respectful treatment of ASC 
patients.
d. Alternatives to the Discharge Provision (Sec.  416.52)
    We considered requiring that the ASC have a physician on its 
premises whenever a patient is in the facility. However, we determined 
this might be impractical considering there are circumstances when 
patients are present in the ASC facility before and after procedures 
that do not warrant the need for physician coverage. Therefore, we 
believe the requirement of a signed discharge order will provide more 
flexibility and continue to ensure proper physician or qualified 
provider coverage until the patient has completely recovered and 
physically leaves the ASC facility.
3. Conclusion
    This is not a major rule, because the overall impact for all new 
conditions is estimated to be $26.2 million annually. Moreover, a 
detailed assessment of the associated costs and benefits, as outlined 
by section 202 of the Unfunded Mandates Reform Act, will not be 
performed because the impact of this regulation does not reach the $130 
million threshold.

F. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, this 
OPPS/ASC final rule with comment period, the ASC CfCs final rule, and 
the final rule that clarifies Medicare policy regarding terminations of 
providers and suppliers were reviewed by the OMB.

List of Subjects

42 CFR Part 410

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

42 CFR Part 416

    Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

0
For reasons stated in the preamble of this document, the Centers for 
Medicare & Medicaid Services is amending 42 CFR Chapter IV as set forth 
below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

0
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).


0
2. Section 410.43 is amended by--
0
a. Removing the word ``and'' at the end of paragraph (a)(2).
0
b. Redesignating paragraph (a)(3) as paragraph (a)(4).
0
c. Adding a new paragraph (a)(3).
0
d. 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 a minimum of 20 hours per week of therapeutic services 
as evidenced in their plan of care;
    (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 416--AMBULATORY SURGICAL SERVICES

0
3. The authority citation for Part 416 continues to read as follows:

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


0
4. Section 416.2 is amended by revising the definition of ``Ambulatory 
surgical center or ASC'' to read as follows:


Sec.  416.2  Definitions.

* * * * *
    Ambulatory surgical center or ASC means any distinct entity that 
operates exclusively for the purpose of providing surgical services to 
patients not requiring hospitalization and in which the expected 
duration of services would not exceed 24 hours following an admission. 
The entity must have an agreement with CMS to participate in Medicare 
as an ASC, and must meet the conditions set forth in subparts B and C 
of this part.
* * * * *


0
5. Section 416.41 is revised to read as follows:


Sec.  416.41  Condition for coverage--Governing body and management.

    The ASC must have a governing body that assumes full legal 
responsibility for determining, implementing, and monitoring policies 
governing the ASC's total operation. The governing body has oversight 
and accountability for the quality assessment and performance 
improvement program, ensures that facility policies and programs are 
administered so as to provide quality

[[Page 68812]]

health care in a safe environment, and develops and maintains a 
disaster preparedness plan.
    (a) Standard: Contract services. When services are provided through 
a contract with an outside resource, the ASC must assure that these 
services are provided in a safe and effective manner.
    (b) Standard: Hospitalization. (1) The ASC must have an effective 
procedure for the immediate transfer, to a hospital, of patients 
requiring emergency medical care beyond the capabilities of the ASC.
    (2) This hospital must be a local, Medicare-participating hospital 
or a local, nonparticipating hospital that meets the requirements for 
payment for emergency services under Sec.  482.2 of this chapter.
    (3) The ASC must--
    (i) Have a written transfer agreement with a hospital that meets 
the requirements of paragraph (b)(2) of this section; or
    (ii) Ensure that all physicians performing surgery in the ASC have 
admitting privileges at a hospital that meets the requirements of 
paragraph (b)(2) of this section.
    (c) Standard: Disaster preparedness plan. (1) The ASC must maintain 
a written disaster preparedness plan that provides for the emergency 
care of patients, staff and others in the facility in the event of 
fire, natural disaster, functional failure of equipment, or other 
unexpected events or circumstances that are likely to threaten the 
health and safety of those in the ASC.
    (2) The ASC coordinates the plan with State and local authorities, 
as appropriate.
    (3) The ASC conducts drills, at least annually, to test the plan's 
effectiveness. The ASC must complete a written evaluation of each drill 
and promptly implement any corrections to the plan.

0
6. Section 416.42 is amended by--
0
a. Revising paragraph (a).
0
b. Removing paragraph (c).
0
c. Redesignating paragraph (d) as paragraph (c).
    Revised paragraph (a) reads as follows:


Sec.  416.42  Condition for coverage--Surgical services.

    (a) Standard: Anesthetic risk and evaluation. (1) A physician must 
examine the patient immediately before surgery to evaluate the risk of 
anesthesia and of the procedure to be performed.
    (2) Before discharge from the ASC, each patient must be evaluated 
by a physician or by an anesthetist as defined at Sec.  410.69(b) of 
this chapter, in accordance with applicable State health and safety 
laws, standards of practice, and ASC policy, for proper anesthesia 
recovery.
* * * * *

0
7. Section 416.43 is revised to read as follows:


Sec.  416.43  Conditions for coverage--Quality assessment and 
performance improvement.

    The ASC must develop, implement and maintain an ongoing, data-
driven quality assessment and performance improvement (QAPI) program.
    (a) Standard: Program scope. (1) The program must include, but not 
be limited to, an ongoing program that demonstrates measurable 
improvement in patient health outcomes, and improves patient safety by 
using quality indicators or performance measures associated with 
improved health outcomes and by the identification and reduction of 
medical errors.
    (2) The ASC must measure, analyze, and track quality indicators, 
adverse patient events, infection control and other aspects of 
performance that includes care and services furnished in the ASC.
    (b) Standard: Program data. (1) The program must incorporate 
quality indicator data, including patient care and other relevant data 
regarding services furnished in the ASC.
    (2) The ASC must use the data collected to--
    (i) Monitor the effectiveness and safety of its services, and 
quality of its care.
    (ii) Identify opportunities that could lead to improvements and 
changes in its patient care.
    (c) Standard: Program activities. (1) The ASC must set priorities 
for its performance improvement activities that--
    (i) Focus on high risk, high volume, and problem-prone areas.
    (ii) Consider incidence, prevalence, and severity of problems in 
those areas.
    (iii) Affect health outcomes, patient safety, and quality of care.
    (2) Performance improvement activities must track adverse patient 
events, examine their causes, implement improvements, and ensure that 
improvements are sustained over time.
    (3) The ASC must implement preventive strategies throughout the 
facility targeting adverse patient events and ensure that all staff are 
familiar with these strategies.
    (d) Standard: Performance improvement projects. (1) The number and 
scope of distinct improvement projects conducted annually must reflect 
the scope and complexity of the ASC's services and operations.
    (2) The ASC must document the projects that are being conducted. 
The documentation, at a minimum, must include the reason(s) for 
implementing the project, and a description of the project's results.
    (e) Standard: Governing body responsibilities. The governing body 
must ensure that the QAPI program--
    (1) Is defined, implemented, and maintained by the ASC.
    (2) Addresses the ASC's priorities and that all improvements are 
evaluated for effectiveness.
    (3) Specifies data collection methods, frequency, and details.
    (4) Clearly establishes its expectations for safety.
    (5) Adequately allocates sufficient staff, time, information 
systems and training to implement the QAPI program.

0
8. Section 416.49 is revised to read as follows:


Sec.  416.49  Condition for coverage--Laboratory and radiologic 
services.

    (a) Standard: Laboratory services. If the ASC performs laboratory 
services, it must meet the requirements of Part 493 of this chapter. If 
the ASC does not provide its own laboratory services, it must have 
procedures for obtaining routine and emergency laboratory services from 
a certified laboratory in accordance with Part 493 of this chapter. The 
referral laboratory must be certified in the appropriate specialties 
and subspecialties of service to perform the referred tests in 
accordance with the requirements of Part 493 of this chapter.
    (b) Standard: Radiologic services. (1) The ASC must have procedures 
for obtaining radiological services from a Medicare approved facility 
to meet the needs of patients.
    (2) Radiologic services must meet the hospital conditions of 
participation for radiologic services specified in Sec.  482.26 of this 
chapter.

0
9. A new Sec.  416.50 is added to read as follows:


Sec.  416.50  Condition for coverage--Patient rights.

    The ASC must inform the patient or the patient's representative of 
the patient's rights, and must protect and promote the exercise of such 
rights.
    (a) Standard: Notice of rights. (1) The ASC must provide the 
patient or the patient's representative with verbal and written notice 
of the patient's rights in advance of the date of the procedure, in a 
language and manner that the patient or the patient's representative 
understands. In addition, the ASC must--
    (i) Post the written notice of patient rights in a place or places 
within the ASC likely to be noticed by patients (or

[[Page 68813]]

their representative, if applicable) waiting for treatment. The ASC's 
notice of rights must include the name, address, and telephone number 
of a representative in the State agency to whom patients can report 
complaints, as well as the Web site for the Office of the Medicare 
Beneficiary Ombudsman.
    (ii) The ASC must also disclose, where applicable, physician 
financial interests or ownership in the ASC facility in accordance with 
the intent of Part 420 of this subchapter. Disclosure of information 
must be in writing and furnished to the patient in advance of the date 
of the procedure.
    (2) Standard: Advance directives. The ASC must comply with the 
following requirements:
    (i) Provide the patient or, as appropriate, the patient's 
representative in advance of the date of the procedure, with 
information concerning its policies on advance directives, including a 
description of applicable State health and safety laws and, if 
requested, official State advance directive forms.
    (ii) Inform the patient or, as appropriate, the patient's 
representative of the patient's right to make informed decisions 
regarding the patient's care.
    (iii) Document in a prominent part of the patient's current medical 
record, whether or not the individual has executed an advance 
directive.
    (3) Standard: Submission and investigation of grievances. (i) The 
ASC must establish a grievance procedure for documenting the existence, 
submission, investigation, and disposition of a patient's written or 
verbal grievance to the ASC.
    (ii) All alleged violations/grievances relating, but not limited 
to, mistreatment, neglect, verbal, mental, sexual, or physical abuse, 
must be fully documented.
    (iii) All allegations must be immediately reported to a person in 
authority in the ASC.
    (iv) Only substantiated allegations must be reported to the State 
authority or the local authority, or both.
    (v) The grievance process must specify timeframes for review of the 
grievance and the provisions of a response.
    (vi) The ASC, in responding to the grievance, must investigate all 
grievances made by a patient or the patient's representative regarding 
treatment or care that is (or fails to be) furnished.
    (vii) The ASC must document how the grievance was addressed, as 
well as provide the patient with written notice of its decision. The 
decision must contain the name of an ASC contact person, the steps 
taken to investigate the grievance, the results of the grievance 
process, and the date the grievance process was completed.
    (b) Standard: Exercise of rights and respect for property and 
person.
    (1) The patient has the right to--
    (i) Exercise his or her rights without being subjected to 
discrimination or reprisal.
    (ii) Voice grievances regarding treatment or care that is (or fails 
to be) furnished.
    (iii) Be fully informed about a treatment or procedure and the 
expected outcome before it is performed.
    (2) If a patient is adjudged incompetent under applicable State 
health and safety laws by a court of proper jurisdiction, the rights of 
the patient are exercised by the person appointed under State law to 
act on the patient's behalf.
    (3) If a State court has not adjudged a patient incompetent, any 
legal representative designated by the patient in accordance with State 
law may exercise the patient's rights to the extent allowed by State 
law.
    (c) Standard: Privacy and safety. The patient has the right to--
    (1) Personal privacy.
    (2) Receive care in a safe setting.
    (3) Be free from all forms of abuse or harassment.
    (d) Standard: Confidentiality of clinical records. The ASC must 
comply with the Department's rules for the privacy and security of 
individually identifiable health information, as specified at 45 CFR 
parts 160 and 164.

0
10. A new Sec.  416.51 is added to read as follows:


Sec.  416.51  Conditions for coverage--Infection control.

    The ASC must maintain an infection control program that seeks to 
minimize infections and communicable diseases.
    (a) Standard: Sanitary environment. The ASC must provide a 
functional and sanitary environment for the provision of surgical 
services by adhering to professionally acceptable standards of 
practice.
    (b) Standard: Infection control program. The ASC must maintain an 
ongoing program designed to prevent, control, and investigate 
infections and communicable diseases. In addition, the infection 
control and prevention program must include documentation that the ASC 
has considered, selected, and implemented nationally recognized 
infection control guidelines. The program is--
    (1) Under the direction of a designated and qualified professional 
who has training in infection control;
    (2) An integral part of the ASC's quality assessment and 
performance improvement program; and
    (3) Responsible for providing a plan of action for preventing, 
identifying, and managing infections and communicable diseases and for 
immediately implementing corrective and preventive measures that result 
in improvement.

0
11. A new Sec.  416.52 is added to read as follows:


Sec.  416.52  Conditions for coverage--Patient admission, assessment 
and discharge.

    The ASC must ensure each patient has the appropriate pre-surgical 
and post-surgical assessments completed and that all elements of the 
discharge requirements are completed.
    (a) Standard: Admission and pre-surgical assessment. (1) Not more 
than 30 days before the date of the scheduled surgery, each patient 
must have a comprehensive medical history and physical assessment 
completed by a physician (as defined in section 1861(r) of the Act) or 
other qualified practitioner in accordance with applicable State health 
and safety laws, standards of practice, and ASC policy.
    (2) Upon admission, each patient must have a pre-surgical 
assessment completed by a physician or other qualified practitioner in 
accordance with applicable State health and safety laws, standards of 
practice, and ASC policy that includes, at a minimum, an updated 
medical record entry documenting an examination for any changes in the 
patient's condition since completion of the most recently documented 
medical history and physical assessment, including documentation of any 
allergies to drugs and biologicals.
    (3) The patient's medical history and physical assessment must be 
placed in the patient's medical record prior to the surgical procedure.
    (b) Standard: Post-surgical assessment. (1) The patient's post-
surgical condition must be assessed and documented in the medical 
record by a physician, other qualified practitioner, or a registered 
nurse with, at a minimum, post-operative care experience in accordance 
with applicable State health and safety laws, standards of practice, 
and ASC policy.
    (2) Post-surgical needs must be addressed and included in the 
discharge notes.
    (c) Standard: Discharge. The ASC must--
    (1) Provide each patient with written discharge instructions and 
overnight supplies. When appropriate, make a followup appointment with 
the physician, and ensure that all patients

[[Page 68814]]

are informed, either in advance of their surgical procedure or prior to 
leaving the ASC, of their prescriptions, post-operative instructions 
and physician contact information for followup care.
    (2) Ensure each patient has a discharge order, signed by the 
physician who performed the surgery or procedure in accordance with 
applicable State health and safety laws, standards of practice, and ASC 
policy.
    (3) Ensure all patients are discharged in the company of a 
responsible adult, except those patients exempted by the attending 
physician.

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

0
12. The authority citation for Part 419 continues to read as follows:

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

0
13. 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.
* * * * *

0
14. Section 419.42 is amended by revising paragraph (e) to read as 
follows:


Sec.  419.42  Hospital election to reduce coinsurance.

* * * * *
    (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).
* * * * *
0
15. Section 419.43 is amended by--
0
a. In paragraph (d)(1)(i)(B), removing the phrase ``paragraph (e) of 
this section'' and adding in its place the cross-reference ``Sec.  
419.66''.
0
b. Adding new paragraphs (d)(5) and (d)(6).
0
c. Revising paragraph (f).
0
d. Revising paragraph (g)(4).
0
e. Adding a new paragraph (h)(4).
    The additions and revisions read as follows:


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

* * * * *
    (d) * * *
    (5) Cost-to-charge ratios for calculating charges adjusted to cost. 
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.
    (6) Reconciliation. For hospital outpatient services furnished 
during cost reporting periods beginning on or after January 1, 2009--
    (i) 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.
    (ii) At the time of any reconciliation under paragraph (d)(6)(i) 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.
* * * * *
    (f) Excluded services and groups. The following services or groups 
are excluded from qualification for the payment adjustment under 
paragraph (d)(1) of this section:
    (1) Drugs and biologicals that are paid under a separate APC; and
    (2) Items and services paid at charges adjusted to costs by 
application of a hospital-specific cost-to-charge ratio.
    (g) * * *
    (4) Excluded services and groups. The following services or groups 
are excluded from qualification for the payment adjustment in paragraph 
(g)(2) of this section:
    (i) Drugs and biologicals that are paid under a separate APC;
    (ii) Devices paid under 419.66; and
    (iii) Items and services paid at charges adjusted to costs by 
application of a hospital-specific cost-to-charge ratio.
* * * * *
    (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).

0
16. Section 419.70 is amended by--
0
a. Revising the introductory text of paragraph (d)(2).
0
b. Revising the heading of paragraph (d)(4).
0
c. Adding a new paragraph (d)(5).
0
d. In paragraphs (e), (g), and (i), removing the term ``paragraph'' and 
adding it its place the term ``section.''
    The revisions and additions read as follows:


Sec.  419.70  Transitional adjustments to limit decline in payments.

* * * * *
    (d) * * *
    (2) Temporary treatment for small rural hospitals on or after 
January 1, 2006. For covered hospital outpatient services furnished in 
a calendar year from January 1, 2006, through December

[[Page 68815]]

31, 2009, for which the prospective payment system amount is less than 
the pre-BBA amount, the amount of payment under this part is increased 
by 95 percent of that difference for services furnished during 2006, 90 
percent of that difference for services furnished during 2007, and 85 
percent of that difference for services furnished during 2008 and 2009 
if the hospital--
* * * * *
    (4) Temporary treatment for sole community hospitals located in 
rural areas for covered hospital outpatient services furnished during 
cost reporting periods beginning on or after January 1, 2004 and before 
January 1, 2006. * * *
    (5) Temporary treatment for sole community hospitals located in 
rural areas on or after January 1, 2009, and through December 31, 2009. 
For covered hospital outpatient services furnished on or after January 
1, 2009, and continuing through December 31, 2009, for which the 
prospective payment system amount is less than the pre-BBA amount, the 
amount of payment under this part is increased by 85 percent of that 
difference if the hospital--
    (i) Is a sole community hospital as defined in Sec.  412.92 of this 
chapter or is an essential access community hospital as described under 
Sec.  412.109 of this chapter; and
    (ii) Has 100 or fewer beds as defined in Sec.  412.105(b) of this 
chapter.
* * * * *

(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: October 23, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: October 29, 2008.
Michael O. Leavitt,
Secretary.
BILLING CODE 4120-01-P

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

Part II--Continued

Book 2 of 2

Pages 68921-69518





Department of Health and Human Services





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



Centers for Medicare & Medicaid Services



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



42 CFR Parts 410, 416, and 419



Medicare Program: Changes to the Hospital Outpatient Prospective 
Payment System and CY 2009 Payment Rates; Changes to the Ambulatory 
Surgical Center Payment System and CY 2009 Payment Rates; Hospital 
Conditions of Participation: Requirements for Approval and Re-Approval 
of Transplant Centers To Perform Organ Transplants--Clarification of 
Provider and Supplier Termination Policy Medicare and Medicaid 
Programs: Changes to the Ambulatory Surgical Center Conditions for 
Coverage; Final Rule

  Federal Register / Vol. 73, No. 223 / Tuesday, November 18, 2008 / 
Rules and Regulations  

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[FR Doc. E8-26212 Filed 10-30-08; 4:15 pm]
BILLING CODE 4120-10-C