[Federal Register Volume 73, Number 223 (Tuesday, November 18, 2008)]
[Rules and Regulations]
[Pages 68502-68920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: X08-11118]



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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
����������������������������������������������������������������������������������������������������������������
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 
APCPanel@cms.hhs.gov 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

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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

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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 
co