Federal Register, Volume 74 Issue 137 (Monday, July 20, 2009)

[Federal Register Volume 74, Number 137 (Monday, July 20, 2009)]
[Proposed Rules]
[Pages 35231-35724]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-15882]

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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: Proposed Changes to the Hospital Outpatient
Prospective Payment System and CY 2010 Payment Rates; Proposed Changes
to the Ambulatory Surgical Center Payment System and CY 2010 Payment
Rates; Proposed Rule

Federal Register / Vol. 74, No. 137 / Monday, July 20, 2009 /
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 416, and 419

[CMS-1414-P]
RIN 0938-AP41

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital
outpatient prospective payment system (OPPS) to implement applicable
statutory requirements and changes arising from our continuing
experience with this system. In this proposed rule, we describe the
proposed changes to the amounts and factors used to determine the
payment rates for Medicare hospital outpatient services paid under the
prospective payment system. These changes would be applicable to
services furnished on or after January 1, 2010.
In addition, this proposed rule would update the revised Medicare
ambulatory surgical center (ASC) payment system to implement applicable
statutory requirements and changes arising from our continuing
experience with this system. In this proposed rule, we set forth the
applicable relative payment weights and amounts for services furnished
in ASCs, specific HCPCS codes to which these proposed changes would
apply, and other pertinent ratesetting information for the CY 2010 ASC
payment system. These proposed changes would be applicable to services
furnished on or after January 1, 2010.

DATES: To be assured consideration, comments on all sections of this
proposed rule must be received at one of the addresses provided in the
ADDRESSES section no later than 5 p.m. EST on August 31, 2009.

ADDRESSES: In commenting, please refer to file code CMS-1414-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions for
``Comment or Submission'' and enter the 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-1414-P, P.O. Box 8013, Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments (one
original and two copies) to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1414-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments (one original and two copies) before the
close of the comment period to one of the following addresses:
a. Room 445-G, Hubert H. Humphrey Building, 200 Independence
Avenue, SW., Washington, DC 20201.
(Because access to the interior of the HHH Building is not readily
available to persons without Federal Government identification,
commenters are encouraged to leave their comments in the CMS drop slots
located in the main lobby of the building. A stamp-in clock is
available for persons wishing to retain a proof of filing by stamping
in and retaining an extra copy of the comments being filed.)
b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call the telephone number (410) 786-9994 in advance to schedule
your arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Alberta Dwivedi, (410) 786-0378,
Hospital outpatient prospective payment issues.
Dana Burley, (410) 786-0378, Ambulatory surgical center issues.
Michele Franklin, (410) 786-4533, and Jana Lindquist, (410) 786-
4533, Partial hospitalization and community mental health center
issues.
James Poyer, (410) 786-2261, Reporting of quality data issues.

SUPPLEMENTARY INFORMATION:
Submitting Comments: We welcome comments from the public on all
issues set forth in this proposed rule to assist us in fully
considering issues and developing policies. You can assist us by
referencing file code CMS-1414-P for all issues on which you wish to
comment.
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, MD 21244, on Monday through Friday of each week from 8:30
a.m. to 4 p.m. EST. To schedule an appointment to view public comments,
phone 1-800-743-3951.

Electronic Access

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

Alphabetical List of Acronyms Appearing in This Proposed Rule

ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AMA American Medical Association
AMP Average manufacturer price
AOA American Osteopathic Association
APC Ambulatory payment classification
ASC Ambulatory Surgical Center
ASP Average sales price

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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
CKD Chronic kidney disease
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CORF Comprehensive outpatient rehabilitation facility
CPT [Physicians] Current Procedural Terminology, Fourth Edition,
2009, copyrighted by the American Medical Association
CR Cardiac rehabilitation
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
ICR Intensive cardiac rehabilitation
IDE Investigational device exemption
IME Indirect medical education
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IPPS [Hospital] Inpatient prospective payment system
IVIG Intravenous immune globulin
KDE Kidney disease education
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
PR Pulmonary rehabilitation
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., and XVI. through XXI. of this proposed rule and in Addenda A, B,
C (Addendum C is available on the Internet only; we refer readers to
section XVIII.A. of this proposed rule), D1, D2, E, L, and M to this
proposed rule. The provisions related to the revised ASC payment system
are included in sections XV., XVI., and XVIII. through XXI. of this
proposed rule and in Addenda AA, BB, DD1, DD2, and EE to this proposed
rule. (Addendum EE is available on the Internet only; we refer readers
to section XVIII.B. of this proposed rule.)

Table of Contents

I. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule
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. Summary of the Major Contents of This Proposed Rule
1. Proposed Updates Affecting OPPS Payments
2. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies
3. Proposed OPPS Payment for Devices
4. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals
5. Proposed Estimate of OPPS Transitional Pass-Through Spending
for Drugs, Biologicals, Radiopharmaceuticals, and Devices
6. Proposed OPPS Payment for Brachytherapy Sources
7. Proposed OPPS Payment for Drug Administration Services
8. Proposed OPPS Payment for Hospital Outpatient Visits
9. Proposed Payment for Partial Hospitalization Services
10. Proposed Procedures That Will Be Paid Only as Inpatient
Services
11. Proposed OPPS Nonrecurring Technical and Policy
Clarifications
12. Proposed OPPS Payment Status and Comment Indicators
13. OPPS Policy and Payment Recommendations
14. Proposed Update of the Revised Ambulatory Surgical Center
(ASC) Payment System
15. Reporting Quality Data for Annual Payment Rate Updates
16. Healthcare-Associated Conditions
17. Regulatory Impact Analysis
II. Proposed Updates Affecting OPPS Payments
A. Proposed Recalibration of APC Relative Weights
1. Database Construction
a. Database Source and Methodology
b. Proposed Use of Single and Multiple Procedure Claims
c. Proposed Calculation of CCRs
(1) Development of the CCRs
(2) Charge Compression
2. Proposed Data Development Process and 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. Proposed Calculation of Single Procedure APC Criteria-Based
Median Costs
(1) Device-Dependent APCs
(2) Blood and Blood Products
(3) Single Allergy Tests
(4) Echocardiography Services

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(5) Nuclear Medicine Services
(6) Hyperbaric Oxygen Therapy
(7) Payment for Ancillary Outpatient Services When Patient
Expires (-CA Modifier)
e. Proposed Calculation of Composite APC Criteria-Based Median
Costs
(1) Extended Assessment and Management Composite APCs (APCs 8002
and 8003)
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
(APC 8001)
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite
APC (APC 8000)
(4) Mental Health Services Composite APC (APC 0034)
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006,
8007, and 8008)
3. Proposed Calculation of OPPS Scaled Payment Weights
4. Proposed Changes to Packaged Services
a. Background
b. Service-Specific Packaging Issues
(1) Package Services Addressed by APC Panel Recommendations
(2) Other Service-Specific Packaging Issues
B. Proposed Conversion Factor Update
C. Proposed Wage Index Changes
D. Proposed Statewide Average Default CCRs
E. Proposed OPPS Payment to Certain Rural and Other Hospitals
1. Hold Harmless Transitional Payment Changes Made by Public Law
110-275 (MIPPA)
2. Proposed Adjustment for Rural SCHs Implemented in CY 2006
Related to Public Law 108-173(MMA)
F. Proposed Hospital Outpatient Outlier Payments
1. Background
2. Proposed Outlier Calculation
3. Outlier Reconciliation
G. Proposed Calculation of an Adjusted Medicare Payment from the
National Unadjusted Medicare Payment
H. Proposed Beneficiary Copayments
1. Background
2. Proposed Copayment Policy
3. Proposed Calculation of an Adjusted Copayment Amount for an
APC Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies
A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes
1. Proposed Treatment of New Level II HCPCS Codes and Category I
CPT Vaccine Codes and Category III CPT Codes for Which We Are
Soliciting Public Comments in This Proposed Rule
2. Proposed Process for New Level II HCPCS Codes and Category I
and III CPT Codes for Which We Will Be Soliciting Public Comments in
the CY 2010 OPPS/ASC Final Rule With Comment Period
B. Proposed OPPS Changes--Variations Within APCs
1. Background
2. Application of the 2 Times Rule
3. Proposed Exceptions to the 2 Times Rule
C. New Technology APCs
1. Background
2. Proposed Movement of Procedures From New Technology APCs to
Clinical APCs
D. Proposed OPPS/ASC Specific Policies: Insertion of Posterior
Spinous Process Distraction Device (APC 0052)
IV. Proposed OPPS Payment for Devices
A. Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
2. Proposed Provisions for Reducing Transitional Pass-Through
Payments To Offset Costs Packaged Into APC Groups
a. Background
b. Proposed Policy
B. Proposed Adjustment to OPPS Payment for No Cost/Full Credit
and Partial Credit Devices
1. Background
2. Proposed APCs and Devices Subject to the Adjustment Policy
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
A. Proposed OPPS Transitional Pass-Through Payment for
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals
1. Background
2. Proposed Drugs and Biologicals With Expiring Pass-Through
Status in CY 2009
3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With
New or Continuing Pass-Through Status in CY 2010
4. Pass-Through Payments for Implantable Biologicals
a. Background
b. Proposed Policy for CY 2010
5. Definition of Pass-Through Payment Eligibility Period for New
Drugs and Biologicals
6. Proposed Provision for Reducing Transitional Pass-Through
Payments for Diagnostic Radiopharmaceuticals and Contrast Agents To
Offset Costs Packaged Into APC Groups
a. Background
b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
c. Proposed Payment Offset Policy for Contrast Agents
B. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals Without Pass-Through Status
1. Background
2. Proposed Criteria for Packaging Payment for Drugs,
Biologicals, and Radiopharmaceuticals
a. Background
b. Proposed Cost Threshold for Packaging Payment for HCPCS Codes
That Describe Certain Drugs, Nonimplantable Biologicals, and
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
c. Proposed Packaging Determination for HCPCS Codes That
Describe the Same Drug or Biological But Different Dosages
d. Proposed Packaging of Payment for Diagnostic
Radiopharmaceuticals, Contrast Agents, and Implantable Biologicals
(``Policy-Packaged'' Drugs and Devices)
3. Proposed Payment for Drugs and Biologicals Without Pass-
Through Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs
(SCODs) and Other Separately Payable and Packaged Drugs and
Biologicals
b. Proposed Payment Policy
4. Proposed Payment for Blood Clotting Factors
5. Proposed Payment for Therapeutic Radiopharmaceuticals
a. Background
b. Proposed Payment Policy
6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital
Claims Data
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for
Drugs, Biologicals, Radiopharmaceuticals, and Devices
A. Background
B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Brachytherapy Sources
A. Background
B. Proposed OPPS Payment Policy
VIII. Proposed OPPS Payment for Drug Administration Services
A. Background
B. Proposed Coding and Payment for Drug Administration Services
IX. Proposed OPPS Payment for Hospital Outpatient Visits
A. Background
B. Proposed Policies for Hospital Outpatient Visits
1. Clinic Visits: New and Established Patient Visits
2. Emergency Department Visits
3. Visit Reporting Guidelines
X. Proposed Payment for Partial Hospitalization Services
A. Background
B. Proposed PHP APC Update for CY 2010
C. Proposed Separate Threshold for Outlier Payments to CMHCs
XI. Proposed Procedures That Will Be Paid Only as Inpatient
Procedures
A. Background
B. Proposed Changes to the Inpatient List
XII. Proposed OPPS Nonrecurring Technical and Policy Changes and
Clarifications
A. Kidney Disease Education Services
1. Background
2. Proposed Payment for Services Furnished by Providers of
Services Located in a Rural Area
B. Pulmonary Rehabilitation and Cardiac Rehabilitation Services
1. Legislative Changes
2. Proposed Payment for Services Furnished to Hospital
Outpatients in a Pulmonary Rehabilitation Program
3. Proposed Payment for Services Furnished to Hospital
Outpatients Under a Cardiac Rehabilitation or an Intensive Cardiac
Rehabilitation Program
4. Physician Supervision for Pulmonary Rehabilitation, Cardiac
Rehabilitation, and Intensive Cardiac Rehabilitation Services
C. Stem Cell Transplants
D. Physician Supervision
1. Background
2. Issues Regarding the Physician Supervision of Hospital
Outpatient Services Raised by Hospitals and Other Stakeholders
3. Proposed Policies for Direct Supervision of Hospital and CAH
Outpatient Therapeutic Services

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4. Proposed Policies for Direct Supervision of Hospital and CAH
Outpatient Diagnostic Services
5. Summary of CY 2010 Physician Supervision Proposals
E. Direct Referral for Observation Services
XIII. Proposed OPPS Payment Status and Comment Indicators
A. Proposed OPPS Payment Status Indicator Definitions
1. Proposed Payment Status Indicators To Designate Services That
Are Paid Under the OPPS
2. Proposed Payment Status Indicators To Designate Services That
Are Paid Under a Payment System Other Than the OPPS
3. Proposed Payment Status Indicators To Designate Services That
Are Not Recognized Under the OPPS But That May Be Recognized by
Other Institutional Providers
4. Proposed Payment Status Indicators To Designate Services That
Are Not Payable by Medicare on Outpatient Claims
B. Proposed Comment Indicator Definitions
XIV. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
B. APC Panel Recommendations
C. OIG Recommendations
XV. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment
System
A. Background
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
B. Proposed Treatment of New Codes
1. Proposed Treatment of New Category I and III CPT Codes and
Level II HCPCS Codes
2. Proposed Treatment of New Level II HCPCS Codes Implemented in
April and July 2009
C. Proposed Update to the List of ASC Covered Surgical
Procedures and Covered Ancillary Services
1. Covered Surgical Procedures
a. Proposed Additions to the List of ASC Covered Surgical
Procedures
b. Proposed Covered Surgical Procedures Designated as Office-
Based
(1) Background
(2) Proposed Changes to Covered Surgical Procedures Designated
as Office-Based for CY 2010
c. Covered Surgical Procedures Designated as Device-Intensive
(1) Background
(2) Proposed Changes to List of Covered Surgical Procedures
Designated as Device-Intensive for CY 2010
d. ASC Treatment of Surgical Procedures Proposed for Removal
from the OPPS Inpatient List for CY 2010
2. Covered Ancillary Services
D. Proposed ASC Payment for Covered Surgical Procedures and
Covered Ancillary Services
1. Proposed Payment for Covered Surgical Procedures
a. Background
b. Proposed Update to ASC Covered Surgical Procedure Payment
Rates for CY 2010
c. Proposed Adjustment to ASC Payments for No Cost/Full Credit
and Partial Credit Devices
2. Proposed Payment for Covered Ancillary Services
a. Background
b. Proposed Payment for Covered Ancillary Services for CY 2010
E. 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 2010 and
Deadline for Public Comment
4. Proposed Payment Adjustment
5. Proposed ASC Payment for Insertion of IOLs
F. Proposed ASC Payment and Comment Indicators
1. Background
2. Proposed ASC Payment and Comment Indicators
G. ASC Policy and Payment Recommendations
H. Proposed Revision to Terms of Agreements for Hospital-
Operated ASCs
1. Background
2. Proposed Changes to the Terms of Agreements for ASCs Operated
by a Hospital
I. Calculation of the ASC Conversion Factor and ASC Payment
Rates
1. Background
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2010 and
Future Years
b. Updating the ASC Conversion Factor
3. Display of Proposed ASC Payment Rates
XVI. Reporting Quality Data for Annual Payment Rate Updates
A. Background
1. Overview
2. Hospital Outpatient Quality Data Reporting Under Section
109(a) of Public Law 109-432
3. Reporting ASC Quality Data for Annual Payment Update
4. HOP QDRP Quality Measures for the CY 2009 Payment
Determinations
5. HOP QDRP Quality Measures for the CY 2010 Payment
Determination
a. Background
b. Maintenance of Technical Specifications for Quality Measures
c. Publication of HOP QDRP Data
B. Proposals Regarding Quality Measures
1. Considerations in Expanding and Updating Quality Measures
Under the HOP QRDP Program
2. Retirement of HOP QRDP Quality Measures
3. Proposed HOP QDRP Quality Measures for the CY 2011 Payment
Determination
C. Possible Quality Measures Under Consideration for FY 2012 and
Subsequent Years
D. Proposed Payment Reduction for Hospitals That Fail To Meet
the HOP QDRP Requirements for the CY 2010 Payment Update
1. Background
2. Proposed Reporting Ratio Application and Associated
Adjustment Policy for CY 2010
E. Proposed Requirements for HOPD Quality Data Reporting for CY
2011 and Subsequent Years
1. Administrative Requirements
2. Data Collection and Submission Requirements
a. General Data Collection and Submission Requirements
b. Extraordinary Circumstance Extension or Waiver for Reporting
Quality Data
3. HOP QDRP Validation Requirements
a. Proposed Data Validation Requirements for CY 2011
b. Proposed Data Validation Approach for CY 2012 and Subsequent
Years
c. Additional Data Validation Conditions Under Consideration for
CY 2012 and Subsequent Years
F. Proposed 2010 Publication of HOP QDRP Data
G. Proposed HOP QDRP Reconsideration and Appeals Procedures
H. Reporting of ASC Quality Data
I. Electronic Health Records
XVII. Healthcare-Associated Conditions
A. Background
1. Preventable Medical Errors and Hospital-Acquired Conditions
(HACs) Under the IPPS
2. Expanding the Principles of the IPPS HACs Payment Provision
to the OPPS
3. Discussion in the CY 2009 OPPS/ASC Final Rule With Comment
Period
B. Public Comments and Recommendations on Issues Regarding
Healthcare-Associated Conditions From the Joint IPPS/OPPS Listening
Session
C. CY 2010 Approach to Healthcare-Associated Conditions Under
the OPPS
XVIII. Files Available to the Public via the Internet
A. Information in Addenda Related to the Proposed CY 2010
Hospital OPPS
B. Information in Addenda Related to the Proposed CY 2010 ASC
Payment System
XIX. Collection of Information Requirements
XX. Response to Comments
XXI. Regulatory Impact Analysis
A. Overall Impact
1. Executive Order 12866
2. Regulatory Flexibility Act (RFA)
3. Small Rural Hospitals
4. Unfunded Mandates
5. Federalism
B. Effects of OPPS Changes in This Proposed Rule
1. Alternatives Considered
2. Limitation of Our Analysis
3. Estimated Effects of This Proposed Rule on Hospitals
4. Estimated Effects of This Proposed Rule on CMHCs
5. Estimated Effects of This Proposed Rule on Beneficiaries
6. Conclusion
7. Accounting Statement
C. Effects of ASC Payment System Changes in This Proposed Rule
1. Alternatives Considered
2. Limitations of Our Analysis

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3. Estimated Effects of This Proposed Rule on Payments to ASCs
4. Estimated Effects of This Proposed Rule on Beneficiaries
5. Conclusion
6. Accounting Statement
D. Effects of Proposed Requirements for Reporting of Quality
Data for Annual Hospital Payment Update
E. Executive Order 12866

Regulation Text

Addenda

Addendum A--Proposed OPPS APCs for CY 2010
Addendum AA--Proposed ASC Covered Surgical Procedures for CY 2010
(Including Surgical Procedures for Which Payment Is Packaged)
Addendum B--Proposed OPPS Payment by HCPCS Code for CY 2010
Addendum BB--Proposed ASC Covered Ancillary Services Integral to
Covered Surgical Procedures for CY 2010 (Including Ancillary
Services for Which Payment Is Packaged)
Addendum D1--Proposed OPPS Payment Status Indicators for CY 2010
Addendum DD1--Proposed ASC Payment Indicators for CY 2010
Addendum D2--Proposed OPPS Comment Indicators for CY 2010
Addendum DD2--Proposed ASC Comment Indicators for CY 2010
Addendum E--Proposed HCPCS Codes That Would Be Paid Only as
Inpatient Procedures for CY 2010
Addendum L--Proposed CY 2010 OPPS Out-Migration Adjustment
Addendum M--Proposed HCPCS Codes for Assignment to Composite APCs
for CY 2010

I. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule

A. Legislative and Regulatory Authority for the Hospital Outpatient
Prospective Payment System

When the Medicare statute was 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 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.
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 following Acts made
additional changes to the OPPS: the Medicare, Medicaid, and SCHIP
Benefits Improvement and Protection Act (BIPA) of 2000 (Pub. L. 106-
554); the Medicare Prescription Drug, Improvement, and Modernization
Act (MMA) of 2003 (Pub. L. 108-173); the Deficit Reduction Act (DRA) of
2005 (Pub. L. 109-171), enacted on February 8, 2006; 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; the Medicare, Medicaid, and SCHIP
Extension Act (MMSEA) of 2007 (Pub. L. 110-173), enacted on December
29, 2007; and the Medicare Improvements for Patients and Providers Act
(MIPPA) of 2008 (Pub. L. 110-275), enacted on July 15, 2008.
Under the OPPS, we pay for hospital outpatient services on a rate-
per-service basis that varies according to the ambulatory payment
classification (APC) group to which the service is assigned. We use the
Healthcare Common Procedure Coding System (HCPCS) codes (which include
certain Current Procedural Terminology (CPT) codes) and descriptors to
identify and group the services within each APC group. The OPPS
includes payment for most hospital outpatient services, except those
identified in section I.B. of this proposed rule. Section
1833(t)(1)(B)(ii) of the Act provides for 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 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

[[Page 35237]]

example, the professional services of physicians and nonphysician
practitioners paid under the Medicare Physician Fee Schedule (MPFS);
laboratory services paid under the clinical diagnostic laboratory fee
schedule (CLFS); services for beneficiaries with end-stage renal
disease (ESRD) that are paid under the ESRD composite rate; and
services and procedures that require an inpatient stay that are paid
under the hospital inpatient prospective payment system (IPPS). We set
forth the services that are excluded from payment under the OPPS in
Sec. 419.22 of the regulations.
Under Sec. 419.20(b) of the regulations, we specify the types of
hospitals and entities that are excluded from payment under the OPPS.
These excluded entities include: Maryland hospitals, but only for
services that are paid under a cost containment waiver in accordance
with section 1814(b)(3) of the Act; critical access hospitals (CAHs);
hospitals located outside of the 50 States, the District of Columbia,
and Puerto Rico; and Indian Health Service hospitals.

C. Prior Rulemaking

On April 7, 2000, we published in the Federal Register a final rule
with comment period (65 FR 18434) to implement a prospective payment
system for hospital outpatient services. The hospital OPPS was first
implemented for services furnished on or after August 1, 2000. Section
1833(t)(9) of the Act requires the Secretary to review certain
components of the OPPS, not less often than annually, and to revise the
groups, relative payment weights, and other adjustments that take into
account changes in medical practices, changes in technologies, and the
addition of new services, new cost data, and other relevant information
and factors.
Since initially implementing the OPPS, we have published final
rules in the Federal Register annually to implement statutory
requirements and changes arising from our continuing experience with
this system. These rules can be viewed on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/. We published in the Federal
Register on November 18, 2008 the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68502). 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 2009 OPPS on the basis of claims data
from January 1, 2007, through December 31, 2007, and to implement
certain provisions of Public Law 110-173 and Public Law 110-275. In
addition, in that final rule we also responded to public comments
received on the provisions of the November 27, 2007 final rule with
comment period (72 FR 66580) pertaining to the APC assignment of HCPCS
codes identified in Addendum B to that rule with the new interim
(``NI'') comment indicator, and to public comments received on the July
18, 2008 OPPS/ASC proposed rule for CY 2009 (73 FR 41416).
Subsequent to publication of the CY 2009 OPPS/ASC final rule with
comment period, we published in the Federal Register on January 26,
2009, a correction notice (74 FR 4343 through 4344) to correct certain
technical errors in the CY 2009 OPPS/ASC final rule with comment
period.

D. Advisory Panel on Ambulatory Payment Classification Groups

1. Authority of the APC Panel
Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law
106-113, requires that we consult with an outside panel of experts to
review the clinical integrity of the payment groups and their weights
under the OPPS. The Act further specifies that the panel will act in an
advisory capacity. The Advisory Panel on Ambulatory Payment
Classification (APC) Groups (the APC Panel), discussed under section
I.D.2. of this proposed rule, fulfills these requirements. The APC
Panel is not restricted to using data compiled by CMS, and it may use
data collected or developed by organizations outside the Department in
conducting its review.
2. Establishment of the APC Panel
On November 21, 2000, the Secretary signed the initial charter
establishing the APC Panel. This expert panel, which may be composed of
up to 15 representatives of providers (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 four times: on
November 1, 2002; on November 1, 2004; on November 21, 2006; and on
November 2, 2008. 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 through March 1, 2001. Since
the initial meeting, the APC Panel has held 15 meetings, with the last
meeting taking place on February 18 and 19, 2009. Prior to each
meeting, we publish a notice in the Federal Register to announce the
meeting and, when necessary, to solicit nominations for APC Panel
membership and to announce new members.
The APC Panel has established an operational structure that, in
part, includes the use of three subcommittees to facilitate its
required APC review process. The three current subcommittees are the
Data Subcommittee, the 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 February 2009 APC Panel meeting. At that meeting, the APC Panel
recommended that the work of these three subcommittees continue, and we
accept those recommendations of the APC Panel. All subcommittee
recommendations are discussed and voted upon by the full APC Panel.

[[Page 35238]]

Discussions of the other recommendations made by the APC Panel at
the February 2009 meeting are included in the sections of this proposed
rule that are specific to each recommendation. For discussions of
earlier APC Panel meetings and recommendations, we refer readers to
previously published hospital OPPS/ASC proposed and final rules, the
CMS Web site mentioned earlier in this section, and the FACA database
at http://fido.gov/facadatabase/public.asp.

E. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule

In this proposed rule, we set forth proposed changes to the
Medicare hospital OPPS for CY 2010 to implement statutory requirements
and changes arising from our continuing experience with the system. In
addition, we are setting forth proposed changes to the revised Medicare
ASC payment system for CY2010, including proposed updated payment
weights and covered surgical ancillary services based on the proposed
OPPS update. Finally, we are setting 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 2011
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 the CY 2010 payment update, in accordance with the
statutory requirement. These changes would be effective for services
furnished on or after January 1, 2010. The following is a summary of
the major changes that we are proposing to make:
1. Proposed Updates Affecting OPPS Payments
In section II. of this proposed rule, we set forth--
The methodology used to recalibrate the proposed APC
relative payment weights.
The proposed changes to packaged services.
The proposed update to the conversion factor used to
determine payment rates under the OPPS. In this section, we set forth
proposed changes in the amounts and factors for calculating the full
annual update increase to the conversion factor.
The proposed retention of our current policy to use the
IPPS wage indices to adjust, for geographic wage differences, the
portion of the OPPS payment rate and the copayment standardized amount
attributable to labor-related cost.
The proposed update of statewide average default CCRs.
The proposed application of hold harmless transitional
outpatient payments (TOPs) for certain small rural hospitals.
The proposed payment adjustment for rural SCHs.
The proposed calculation of the hospital outpatient
outlier payment.
The calculation of the proposed national unadjusted
Medicare OPPS payment.
The proposed beneficiary copayments for OPPS services.
2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies
In section III. of this proposed rule, we discuss--
The proposed additions of new HCPCS codes to APCs.
Our proposals to establish a number of new APCs.
Our analyses of Medicare claims data and certain
recommendations of the APC Panel.
The application of the 2 times rule and proposed
exceptions to it.
Proposed changes to specific APCs.
Proposed movement of procedures from New Technology APCs
to clinical APCs.
3. Proposed OPPS Payment for Devices
In section IV. of this proposed rule, we discuss proposed pass-
through payment for specific categories of devices and the proposed
adjustment for devices furnished at no cost or with partial or full
credit.
4. Proposed OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
In section V. of this proposed rule, we discuss proposed CY 2010
OPPS payment for drugs, biologicals, and radiopharmaceuticals,
including the proposed payment for drugs, biologicals, and
radiopharmaceuticals with and without pass-through status.
5. Proposed Estimate of OPPS Transitional Pass-Through Spending for
Drugs, Biologicals, Radiopharmaceuticals, and Devices
In section VI. of this proposed rule, we discuss the estimate of CY
2010 OPPS transitional pass-through spending for drugs, biologicals,
and devices.
6. Proposed OPPS Payment for Brachytherapy Sources
In section VII. of this proposed rule, we discuss our proposal
concerning payment for brachytherapy sources.
7. Proposed OPPS Payment for Drug Administration Services
In section VIII. of this proposed rule, we set forth our proposed
policy concerning coding and payment for drug administration services.
8. Proposed OPPS Payment for Hospital Outpatient Visits
In section IX. of this proposed rule, we set forth our proposed
policies for the payment of clinic and emergency department visits and
critical care services based on claims data.
9. Proposed Payment for Partial Hospitalization Services
In section X. of this proposed rule, we set forth our proposed
payment for partial hospitalization services, including the proposed
separate threshold for outlier payments for CMHCs.
10. Proposed Procedures That Will Be Paid Only as Inpatient Procedures
In section XI. of this proposed rule, we discuss the procedures
that we are proposing to remove from the inpatient list and assign to
APCs for payment under the OPPS.
11. Proposed OPPS Nonrecurring Technical and Policy Changes and
Clarifications
In section XII. of this proposed rule, we set forth our proposals
regarding nonrecurring technical issues and provide policy
clarifications.
12. Proposed OPPS Payment Status and Comment Indicators
In section XIII. of this proposed rule, we discuss our proposed
changes to the definitions of status indicators assigned to APCs and
present our proposed comment indicators for the final rule with comment
period.
13. OPPS Policy and Payment Recommendations
In section XIV. of this proposed rule, We address recommendations
made by the Medicare Payment Advisory Commission (MedPAC) in its March
2009 report to Congress, by the Office of Inspector General (OIG), and
by the APC Panel regarding the OPPS for CY 2010.
14. Proposed Ambulatory Surgical Center (ASC) Payment System
In section XV. of this proposed rule, we discuss the proposed
update of the revised ASC payment system covered surgical procedures
and covered ancillary services and payment rates for CY 2010.

[[Page 35239]]

15. Reporting Quality Data for Annual Payment Rate Updates
In section XVI. of this proposed rule: We discuss the proposed
quality measures for reporting hospital outpatient (HOP) quality data
for the annual payment update factor for CY 2012 and subsequent
calendar years; set forth the requirements for data collection and
submission for the annual payment update; and propose a reduction in
the OPPS payment for hospitals that fail to meet the HOP Quality Data
Reporting Program (QDRP) requirements for CY 2010.
16. Healthcare-Associated Conditions
In section XVII. of this proposed rule, we discuss public responses
to a December 2008 CMS public listening session addressing the
potential extension of the principle of Medicare not paying more under
the IPPS for the care of preventable hospital-acquired conditions
experienced by a Medicare beneficiary during a hospital inpatient stay
to medical care in other settings that are paid under other Medicare
payment systems, including the OPPS, for those healthcare-associated
conditions that occur or result from care in those other settings.
17. Regulatory Impact Analysis
In section XXI. of this proposed rule, we set forth an analysis of
the impact the proposed changes would have on affected entities and
beneficiaries.

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Weights

1. Database Construction
a. Database Source and Methodology
Section 1833(t)(9)(A) of the Act requires that the Secretary review
and revise the relative payment weights for APCs at least annually. In
the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we
explained in detail how we calculated the relative payment weights that
were implemented on August 1, 2000 for each APC group.
For CY 2010, we are proposing to use the same basic methodology
that we described in the April 7, 2000 OPPS final rule with comment
period to recalibrate the APC relative payment weights for services
furnished on or after January 1, 2010, and before January 1, 2011 (CY
2010). That is, we are proposing to recalibrate the relative payment
weights for each APC based on claims and cost report data for hospital
outpatient department (HOPD) services. We are proposing to use the most
recent available data to construct the database for calculating APC
group weights. Therefore, for the purpose of recalibrating the proposed
APC relative payment weights for CY 2010, we used approximately 130
million final action claims for hospital outpatient department services
furnished on or after January 1, 2008, and before January 1, 2009. (For
exact counts of claims used, we refer readers to the claims accounting
narrative under supporting documentation for this proposed rule on the
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/.)
Of the 130 million final action claims for services provided in
hospital outpatient settings used to calculate the CY 2010 OPPS payment
rates for this proposed rule, approximately 100 million claims were the
type of bill potentially appropriate for use in setting rates for OPPS
services (but did not necessarily contain services payable under the
OPPS). Of the 100 million claims, approximately 46 million claims 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 54
million claims, we created approximately 91 million single records, of
which approximately 61 million were ``pseudo'' single or ``single
session'' claims (created from 24 million multiple procedure claims
using the process we discuss later in this section). Approximately
622,000 claims were trimmed out on cost or units in excess of +/- 3
standard deviations from the geometric mean, yielding approximately 90
million single bills for median setting. As described in section
II.A.2. of this proposed rule, our data development process is designed
with the goal of using appropriate cost information in setting the APC
relative weights. The bypass process described in section II.A.1.b. of
this proposed rule discusses how we develop ``pseudo'' single claims,
with the intention of using more appropriate data from the available
claims. In some cases, the bypass process allows us to use some portion
of the submitted claim for cost estimation purposes, while the
remaining information on the claim continues to be unusable. Consistent
with the goal of using appropriate information in our data development
process, we only use claims (or portions of each claim) that are
appropriate for ratesetting purposes. Ultimately, we were able to use
for CY 2010 ratesetting some portion of 95 percent of the CY 2008
claims containing services payable under the OPPS.
The proposed APC relative weights and payments for CY 2010 in
Addenda A and B to this proposed rule were calculated using claims from
CY 2008 that were processed before January 1, 2009, and continue to be
based on the median hospital costs for services in the APC groups. We
selected claims for services paid under the OPPS and matched these
claims to the most recent cost report filed by the individual hospitals
represented in our claims data. We continue to believe that it is
appropriate to use the most current full calendar year claims data and
the most recently submitted cost reports to calculate the median costs
which we are proposing to convert to relative payment weights for
purposes of calculating the CY 2010 payment rates.
b. Proposed Use of Single and Multiple Procedure Claims
For CY 2010, in general, we are proposing to continue to use single
procedure claims to set the medians on which the APC relative payment
weights would be based, with some exceptions as discussed below in this
section. 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 derived from the costs of
furnishing one procedure and because, in many circumstances, we are
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
were submitted as multiple procedure claims that 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. The history of our use of a bypass list to generate
``pseudo'' single claims is well documented, most recently in the CY
2009 OPPS/ASC final rule with comment period (73 FR 68512 through

[[Page 35240]]

68519). In addition, for CY 2008, we increased packaging and created
the first composite APCs. This also increased the number of bills that
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. Further, for CY 2009, we expanded the composite APC model
to one additional clinical area, multiple imaging services (73 FR 68559
through 68569). We refer readers to section II.A.2.e. of this proposed
rule for discussion of the use of claims to establish median costs for
composite APCs.
We are proposing to continue to apply these processes to enable us
to use as much claims data as possible for ratesetting for the CY 2010
OPPS. This process enabled us to create, for this proposed rule,
approximately 61 million ``pseudo'' single claims, including multiple
imaging composite ``single session'' bills (we refer readers to section
II.A.2.e.(5) of this proposed rule for further discussion), to add to
the approximately 30 million ``natural'' single bills. For this
proposed rule, ``pseudo'' single and ``single session'' procedure bills
represent 67 percent of all single bills used to calculate median
costs.
For CY 2010, we are proposing to bypass 438 HCPCS codes for CY 2010
that are identified in Table 1 of this proposed rule. 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 2010, data
available for the February 2009 APC Panel meeting from CY 2008 claims
processed through September 30, 2008) to determine whether it would be
appropriate to propose to add additional codes to the previous year's
bypass list. For CY 2010, we are proposing to continue to bypass all of
the HCPCS codes on the CY 2009 OPPS bypass list. We also are proposing
to add to the bypass list for CY 2010 all HCPCS codes not on the CY
2009 bypass list that, using both CY 2009 final rule and February 2009
APC Panel data, meet the same previously established empirical criteria
for the bypass list that are summarized below. The entire list proposed
for CY 2010 (including the codes that remain on the bypass list from
prior years) is open to public comment. We assume that the
representation of packaging in the ``natural'' single claims for any
given code is comparable to packaging for that code in the multiple
claims. The proposed criteria for the bypass list are:
There are 100 or more ``natural'' 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 ``natural'' 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 ``natural''
single claims is equal to or less than $50. This limits the amount of
error in redistributed costs.
The code is not a code for an unlisted service.
In addition, we are proposing to 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 2010 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 that they requested be added
to the bypass list. We also are proposing to continue to include on the
bypass list certain HCPCS codes in order to purposefully direct the
assignment of packaged costs where codes always appear together and
there would otherwise be few single claims available for ratesetting.
For example, we have previously discussed our reasoning for adding
HCPCS code G0390 (Trauma response team associate with hospital critical
care service) and the CPT codes for additional hours of drug
administration to the bypass list (73 FR 68513 and 71 FR 68117 through
68118).
As a result of the multiple imaging composite APCs that we
established in CY 2009, we note that the program logic for creating
``pseudo'' singles from bypassed codes that are also members of
multiple imaging composite APCs changed. 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 session'' 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, at the end of the ``pseudo''
single processing logic, we 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.b. of
this proposed rule 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 are members of the
proposed multiple imaging composite APCs are identified by asterisks
(*) in Table 1 below.
At the February 2009 APC Panel Meeting, the APC Panel recommended
that CMS place CPT code 76098 (Radiological examination, surgical
specimen) on the bypass list and reassign the code to APC 0260 (Level I
Plain Film Except Teeth) in response to a public presentation
requesting that CMS makes these changes. Although CPT code 76098 would
not be eligible for addition to the bypass list because the frequency
and magnitude of packaged costs in its ``natural'' single claims exceed
the empirical criteria, the presenter suggested that the ``natural''
single claims represented aberrant billing with inappropriate packaged
services and pointed out that the packaged services support the
surgical procedures that commonly are also reported on claims for CPT
code 76098. The presenter suggested that bypassing CPT code 76098 would
properly allocate packaged costs to surgical procedures on these
claims, and would increase the number of single claims available for
ratesetting for both CPT code 76098 and the associated surgical breast
procedures. The APC Panel indicated that the issues raised by the
presenter appeared to be consistent with clinical practice and
subsequently made the recommendation to bypass CPT code 76098 and
reassign the code to APC 0260 based on its revised cost.
Based on the APC Panel's specific recommendation for CPT code
76098, we studied the billing patterns for the code in the ``natural''
single and multiple major claims in the CY 2008 claims data available
for the February 2009 APC Panel. The presenter asserted that CPT code
76098 is commonly billed with surgical breast procedures and our claims
data from the multiple procedure

[[Page 35241]]

claims confirm this observation. However, as noted above, there are
also a significant number of ``natural'' single bills in those data
(1,303), and these ``natural'' single claims include packaged services,
such as CPT code 19290 (Preoperative placement of needle localization
wire, breast) and CPT 77032 code (Mammographic guidance for needle
placement, breast (e.g., for wire localization or for injection), each
lesion, radiological supervision and interpretation). We have received
anecdotal information that hospitals may place guidance wires prior to
surgery in the hospital's radiology department and then examine the
surgical specimen in the radiology department after its surgical
removal. This information, along with the number of observed
``natural'' single claims, suggests that the packaged costs might
appropriately be associated with the radiological examination of the
breast specimen. Although bypassing CPT code 76098 would allow for the
creation of more ``pseudo'' single claims for ratesetting, it would
also require the assumption that all packaging on the claim would be
correctly assigned to the remaining major procedure where it exists and
that on ``natural'' single bills no packaging would be appropriately
associated with CPT code 76098. Given the number of ``natural'' single
bills for CPT code 76098 and the significant packaged costs on these
claims, we are not confident that placement on the bypass list is
appropriate.
While we are not proposing to place CPT code 76098 on the bypass
list, and we want to continue to provide separate payment for this
procedure when appropriate, we do believe that CPT code 76098 is
generally ancillary and supportive to surgical breast procedures. In CY
2008 we established a group of conditionally packaged codes, called
``T-packaged codes,'' whose payment is packaged when one or more
separately paid surgical procedures with status indicator ``T'' are
provided during a hospital encounter. In order to provide separate
payment for CPT code 76098 when not provided with a separately payable
surgical procedure, and also to recognize its ancillary and supportive
nature when it accompanies separately payable procedures, we are
proposing to conditionally package CPT code 76098 as a ``T-packaged
code'' for CY 2010, identified with status indicator ``Q2'' in Addendum
B to this proposed rule. As a ``T-packaged code,'' CPT code 76098 would
receive separate payment except where it appears with a surgical
procedure, in which case its payment would be packaged. Designating CPT
76098 in this way allows the separate payment to appropriately account
for the packaged costs that appear on the code's ``natural'' single
bills, while also allowing us to use more multiple procedure claims
that include both a surgical procedure and CPT code 76098 to set the
payment rates for the related surgical procedures. The code-specific
median cost of CPT code 76098 is approximately $346, consistent with
its CY 2009 assignment to APC 0317 (Level II Miscellaneous Radiology
Procedures) which has an APC median cost of approximately $339. In
contrast, the median cost of APC 0260, the APC reassignment recommended
by the APC Panel, is much lower at approximately $46. Therefore, we are
not accepting the APC Panel's recommendation to reassign CPT code
76098. Instead, we are proposing to continue its assignment to APC 0317
for CY 2010 in those cases where CPT code 76098 is separately paid.
Table 1 includes the proposed list of bypass codes for CY 2010.
This list contains bypass codes that are appropriate to claims for
services in CY 2008 and, therefore, includes codes that were deleted
for CY 2009. We retain these deleted bypass codes on the bypass list
because these codes existed in CY 2008, the year of our claims data.
Using these deleted bypass codes for bypass purposes allows us to
potentially create more ``pseudo'' single claims for ratesetting
purposes. ``Overlap bypass codes'' that are members of the proposed
multiple imaging composite APCs are identified by asterisks (*) in
Table 1 below.
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c. Proposed Calculation of CCRs
(1) Development of the CCRs
We calculated hospital-specific overall ancillary CCRs and
hospital-specific departmental CCRs for each hospital for which we had
CY 2008 claims data from the most recent available hospital cost
reports, in most cases, cost reports beginning in CY 2007. For the CY
2010 OPPS proposed rates, we used the set of claims processed during CY
2008. 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

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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.
For a discussion of the hospital-specific overall ancillary CCR
calculation, we refer readers to the CY 2007 OPPS/ASC final rule with
comment period (71 FR 67983 through 67985).
For CY 2010, we are proposing to continue using the hospital-
specific overall ancillary and departmental CCRs to convert charges on
the claims reported under specific revenue codes to estimated costs
through application of a revenue code-to-cost center crosswalk.
(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. We discuss our CCR calculation in section
II.A.1.c. of this proposed rule and how we use these CCRs to estimate
cost on hospital outpatient claims in detail in section II.A.2.a. of
this proposed rule. 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 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).
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
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 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. 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. For a complete discussion of the RTI
recommendations, public comments, and our responses, we refer readers
to the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519
through 68527).
In the FY 2009 IPPS final rule, we finalized our proposal for both
the 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 said that we would create one
cost center for ``Medical Supplies Charged to Patients'' and one cost
center ``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 the majority of commenters on the
proposal set forth in 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). This change to the
cost report form will be made and will be reflected in cost reports for
cost reporting periods beginning in 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
believe we will be able to use data from the revised cost report form
to estimate costs from charges associated with UB-04 revenue codes
0275, 0276, 0278, and 0624 for implantable devices in order to more
accurately estimate the costs of device-related procedures for the CY
2013 OPPS relative weights. For a complete discussion of the proposal,
public comments, and our responses, we refer readers to the FY2009 IPPS
final rule (73 FR 48458 through 48467).
For the CY 2009 OPPS/ASC proposed rule, we made a similar proposal
for drugs, proposing to split the Drugs Charged to Patients cost center
into two cost centers: One for drugs with high pharmacy overhead costs
and one for drugs with low pharmacy overhead costs (73 FR 41492). We
noted that we expected that CCRs from the proposed new cost centers
would be available in 2 to 3 years to refine OPPS drug cost

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estimates by accounting for differential hospital markup practices for
drugs with high and low pharmacy overhead costs. However, after
consideration of the public comments received and the APC Panel
recommendations, we did not finalize our proposal to split the single
standard Drugs Charged to Patients cost center into two cost centers,
and instead indicated in the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68659) that we would continue to explore other potential
approaches to improve our drug cost estimation methodology. Unlike
implantable devices, we do not currently have a policy to address
charge compression in our cost estimation for expensive drugs and
biologicals. In section V.B.3.of this proposed rule, we are proposing
an adjustment to our cost estimation methodology for drugs and
biologicals in CY 2010 to address charge compression by proposing to
shift a portion of the pharmacy overhead cost associated with packaged
drugs and biologicals from those packaged drugs and biologicals to
separately payable drugs and biologicals; proposing payment for
separately payable drugs and biologicals at ASP +4 percent; and
proposing a proportional reduction in the total amount of pharmacy
overhead cost associated with packaged drugs and biologicals prior to
our estimating the total resource costs of individual OPPS services.
Finally, in the CY 2009 OPPS/ASC final rule with comment period, we
indicated that we would be making some OPPS-specific changes in
response to the RTI report recommendations. With regard to modifying
the cost reporting preparation software in order to impose fixed
descriptions for nonstandard cost centers, we indicated that the change
would be made for the next release of the cost report software. We
anticipate that these changes will be made to the cost reporting
software in CY 2010 and will act as a quality check for hospitals to
review their choice of nonstandard cost center code to ensure that the
reporting of nonstandard cost centers is accurate, while not
significantly increasing provider burden. In addition to improving the
reporting mechanism for the nonstandard cost centers, we indicated in
the CY 2009 final rule with comment period that we also planned to add
the new nonstandard cost centers for Cardiac Rehabilitation, Hyperbaric
Oxygen Therapy, and Lithotripsy. We expect that changes to add these
nonstandard cost centers will be proposed for cost reports beginning in
CY 2011 as part of a larger effort to update the Medicare cost report.
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, and that
we planned 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 believe that improved cost report
software, the incorporation of new nonstandard cost centers, and
elimination of outdated requirements will improve the accuracy of the
cost data contained in the electronic cost report data files and,
therefore, the accuracy of our cost estimation processes for the OPPS
relative weights. As has been described above, CMS has taken steps to
address charge compression in the IPPS and OPPS, and continues to
examine ways in which it can improve the accuracy of its cost
estimation process.
2. Proposed Data Development Process and Calculation of Median Costs
In this section of this proposed rule, we discuss the use of claims
to calculate the proposed OPPS payment rates for CY 2010. The hospital
OPPS page on the CMS Web site on which this proposed rule is posted
provides an accounting of claims used in the development of the
proposed payment rates at: http://www.cms.hhs.gov/HospitalOutpatientPPS. The accounting of claims used in the development
of this proposed rule is included on the Web site under supplemental
materials for the CY 2010 proposed rule. That accounting provides
additional detail regarding the number of claims derived at each stage
of the process. In addition, below in this section we discuss the file
of claims that comprise the data set that is available for purchase
under a CMS data use agreement. Our CMS Web site, http://www.cms.hhs.gov/HospitalOutpatientPPS, includes information about
purchasing the ``OPPS Limited Data Set,'' which will now include the
additional variables previously available only in the OPPS Identifiable
Data Set, including ICD-9-CM diagnosis codes and revenue code payment
amounts. This file is derived from the CY 2008 claims that were used to
calculate the proposed payment rates for the CY2010 OPPS.
We used the following methodology to establish the relative weights
used in calculating the proposed OPPS payment rates for CY 2010 shown
in Addenda A and B to this proposed rule.
a. Claims Preparation
We used the CY 2008 hospital outpatient claims processed before
January 1, 2009 to calculate the median costs of APCs, which in turn
are used to set the proposed relative weights for CY 2010. To begin the
calculation of the relative weights for CY 2010, we pulled all claims
for outpatient services furnished in CY 2008 from the national claims
history file. This is not the population of claims paid under the OPPS,
but all outpatient claims (including, for example, critical access
hospital (CAH) claims and hospital claims for clinical laboratory
services for persons who are neither inpatients nor outpatients of the
hospital).
We then excluded claims with condition codes 04, 20, 21, and 77.
These are claims that providers submitted to Medicare knowing that no
payment would be made. For example, providers submit claims with a
condition code 21 to elicit an official denial notice from Medicare and
document that a service is not covered. We then excluded claims for
services furnished in Maryland, Guam, the U.S. Virgin Islands, American
Samoa, and the Northern Mariana Islands because hospitals in those
geographic areas are not paid under the OPPS.
We divided the remaining claims into the three groups shown below.
Groups 2 and 3 comprise the 100 million claims that contain hospital
bill types paid under the OPPS.
1. Claims that were not bill types 12X, 13X (hospital bill types),
14X (laboratory specimen bill types), or 76X (CMHC bill types). Other
bill types are not paid under the OPPS and, therefore, these claims
were not used to set OPPS payment.
2. Claims that were bill types 12X, 13X or 14X. Claims with bill
types 12X and 13X are hospital outpatient claims. Claims with bill type
14X are laboratory specimen claims, of which we use a subset for the
limited number of services in these claims that are paid under the
OPPS.
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 rates determined through a
separate process.)
To convert charges on the claims to estimated cost, we needed to
multiply those charges by the CCR associated with each revenue code as
discussed in section II.A.1.c.(1) of this proposed rule. For the CCR
calculation process, we used the same general approach that we used in
developing the final APC rates

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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 2008 before determining whether the CCRs for
such hospitals were valid.
We then calculated the CCRs for each cost center and the overall
ancillary CCR for each hospital for which we had claims data. We did
this using hospital-specific data from the Hospital Cost Report
Information System. We used the most recent available cost report data,
in most cases, cost reports beginning in CY 2007. For this proposed
rule, we used the most recently submitted cost reports to calculate the
CCRs to be used to calculate median costs for the proposed CY 2010 OPPS
payment 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 ancillary CCR,
and we then adjusted the most recent available submitted but not
settled cost report using that ratio. We calculated both an overall
ancillary CCR and cost center-specific CCRs for each hospital. We used
the overall ancillary CCR referenced in section II.A.1.c.(1) of this
proposed rule for all purposes that require use of an overall ancillary
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 ancillary 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 ancillary 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 ancillary 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 are proposing to update the revenue code-to-cost center
crosswalk to more accurately reflect the current use of revenue codes.
We indicated in the CY 2009 OPPS/ASC final rule with comment period (73
FR 68531) that we intended to assess the National Uniform Billing
Committee (NUBC) revenue codes to determine whether any changes to the
list of packaged revenue codes should be proposed for the CY 2010 OPPS.
We expanded this evaluation to review all revenue codes in the revenue
code-to-cost center crosswalk that we have used for OPPS ratesetting
purposes in recent years against the CY 2008 NUBC definitions of
revenue codes in place for CY 2008. As a result of that review we are
proposing to revise the revenue code-to-cost center crosswalk as
described in Table 2 below to update the revenue codes for which we
would estimate costs on each claim and incorporate the costs for those
revenue codes into APC median cost estimates. In Table 2, Column A
provides the 2008 revenue code and description. Column B indicates
whether the charges reported with the revenue code would be converted
to cost and incorporated into median cost estimates for CY 2010. Column
C indicates whether the charges reported with the revenue code were
converted to cost and incorporated into median cost estimates for the
CY 2009 OPPS. In both columns, a ``Y'' indicates that the charges would
be converted to cost in CY 2010 (or were converted for CY 2009), and an
``N'' indicates that charges reported under the revenue code would not
be converted to cost and incorporated into median cost estimates.
Finally, Column D provides our rationale for the proposed CY 2010
change.
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Also, as a result of our comprehensive review of the revenue codes
included in the revenue code-to-cost center crosswalk, we are proposing
to add revenue codes to the hierarchy of primary, secondary, and
tertiary hospital cost report cost centers that result in the
departmental CCRs that we use to estimate cost from charges for some
revenue codes or to revise the applicable cost centers associated with
a given revenue code. Table below lists the revenue codes for which we
are proposing changes to the revenue code-to-cost center crosswalk and
our rationale for each proposed change. With the exception of revenue
code 0942 (Other Therapeutic Services; Education/Training), the revenue
codes for which we are proposing changes to the designated departmental
CCRs are those identified in our comprehensive review that are also
listed above in Table 2.

Table 3--Proposed Changes to CY 2010 OPPS Hierarchy of Cost Centers in
the Revenue Code-to-Cost Center Crosswalk
------------------------------------------------------------------------
2008 Revenue code and
description Rationale for proposed CY 2010 change
------------------------------------------------------------------------
0392--Administration, We are proposing to crosswalk charges
Processing and Storage for under revenue code 0392 to cost center
Blood and Blood Components; 4700 (Blood Storing, Processing, &
Processing and Storage. Transfusing) because we believe that
cost center 4700 is the most likely
departmental cost center to which
hospitals would assign the costs of
blood processing and storage. We are
proposing no secondary or tertiary cost
centers because we believe that no other
departmental cost centers are
appropriate.
0623--Medical Surgical We are proposing to crosswalk the charges
Supplies--Extension of 027X; reported under revenue code 0623 to cost
Surgical Dressings. center 5500 (Medical Supplies Charged to
Patients) as the primary cost center
because we believe that the costs
associated with the charges for surgical
dressings are most likely to be assigned
by hospitals to cost center 5500. We are
proposing no secondary or tertiary cost
centers because we believe that no other
departmental cost centers are
appropriate.
0931--Medical Rehabilitation We are proposing to crosswalk charges
Day Program; Half Day. reported under revenue codes 0931 and
0932 to cost center 6000 (Clinic) as the
primary cost center. We are proposing no
secondary or tertiary cost centers
because we believe that no other
departmental cost centers are
appropriate.
0932--Medical Rehabilitation
Day Program; Full Day
0942--Other Therapeutic We are proposing to crosswalk the charges
Services (also see 095x, an under revenue code 0942 to cost center
extension of 094x); Educ/ 6000 (Clinic) as the primary cost
Training. center. Currently, the charges under
revenue code 0942 are crosswalked to the
overall ancillary CCR. We believe that
cost center 6000 is a more appropriate
primary cost center. We are proposing no
secondary or tertiary cost centers
because we believe that no other
departmental cost centers are
appropriate.
0948--Other Therapeutic We are proposing to crosswalk the charges
Services (also see 095x, an under revenue code 0948 to cost center
extension of 094x); 4900 (Respiratory Therapy) as primary
Pulmonary Rehabilitation. and to cost center 6000 (Clinic) as
secondary because we believe that
hospitals are most likely to assign the
costs of these services to these cost
centers. We are proposing no tertiary
cost center.
------------------------------------------------------------------------

Having revised the revenue code-to-cost center crosswalk, 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. One exception to this general methodology for
converting charges to costs on each claim is the calculation of median
blood costs, as discussed in section II.A.2.d.(2) of this proposed
rule.
Thus, we applied CCRs as described above to claims with bill type
12X, 13X, or 14X, excluding all claims from CAHs and hospitals in
Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the
Northern Mariana Islands and

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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 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 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 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,
therapeutic radiopharmaceutical agents, and brachytherapy sources, as
well as other information used to set payment rates, such as a unit-to-
day ratio for drugs.
To implement our proposal to redistribute some portion of total
cost for packaged drugs and biologicals to separately payable drugs and
biologicals as acquisition and pharmacy overhead and handling costs
discussed in section V.B.3. of this proposed rule, we used the line-
item cost data for drugs and biologicals for which we had a HCPCS code
with ASP pricing information to calculate the ASP+X values first for
all drugs and biologicals, and then for separately payable drugs and
biologicals and for packaged drugs and biologicals, respectively, by
taking the ratio of total claim cost for each group relative to total
ASP dollars (per unit of each drug or biological HCPCS code's April
2009 ASP amount multiplied by total units for each drug or biological
in the CY 2008 claims data). These values are ASP+13 percent, ASP-2
percent, and ASP+247 percent, respectively. As we discuss in greater
detail in section V.B.3. of this proposed rule, we believe that between
one-third and one-half of the total cost in our claims data in excess
of ASP dollars for packaged drugs and biologicals, about $150 million,
is currently allocated to packaged drugs and biologicals due to the
combined effects of charge compression and our choice of a drug
packaging threshold but should instead be allocated to separately
payable drugs and biologicals as acquisition and pharmacy overhead and
handling cost. The $150 million is between one-third and one-half of
the difference of $395 million between the total cost of packaged drugs
and biologicals in our CY 2008 claims data ($555 million) and ASP
dollars for the same drugs and biologicals ($160 million). Removing
$150 million in pharmacy overhead cost from packaged drugs and
biologicals reduces the $555 million to $405 million, a 27 percent
reduction. To implement our CY 2010 proposal to redistribute $150
million in claim cost from packaged drugs and biologicals to separately
payable drugs and biologicals, we multiplied the cost of each packaged
drug or biological with a HCPCS code and ASP pricing information in our
CY 2008 claims data by 0.73. We also added the redistributed $150
million to the total cost of separately payable drugs and biologicals
in our CY 2008 claims data, which increased the relationship between
the total cost for separately payable drugs and biologicals and ASP
dollars for the same drugs and biologicals to ASP+4 percent.
For CY 2010, we added an additional trim in our claims preparation
to remove line-items that were not paid during claim processing,
presumably for a line-item rejection or denial. The number of edits for
valid OPPS payment in the Integrated Outpatient Code Editor (I/OCE) and
elsewhere has grown significantly in the past few years, especially
with the implementation of the full spectrum of National Correct Coding
Initiative (NCCI) edits. To ensure that we are using valid claims that
represent the cost of payable services to set payment rates, we removed
line-items with an OPPS status indicator for the claim year (CY 2008)
and a status indicator of ``S,'' ``T,'' ``V,'' or ``X'' when separately
paid under the proposed CY 2010 payment system. This logic preserves
charges for services that would not have been paid in the claim year
but for which some estimate of cost is needed for the prospective year,
such as services newly proposed to come off the inpatient list for CY
2010 which were assigned status indicator ``C'' in the claim year.
Using February 2009 APC Panel data, we estimate that the impact of
removing line-items with valid status indicators that received no CY
2008 payment was limited to approximately 1.4 percent of all line-items
for separately paid services. This additional trim reduced the number
of single bills available for ratesetting by 1.5 percent. For
approximately 92 percent of procedural APCs, we observed a change in
the APC median cost of less than 1 percent. A handful of APCs
experienced greater changes in median cost. For example, APC 0618
(Trauma Response with Critical Care) experienced declines in both the
number of single bills used to set the median cost and the estimated
median cost itself. This occurred because the I/OCE has an edit to
ensure that HCPCS code G0390 (Trauma response team activation
associated with hospital critical care service), which is assigned to
APC 0618, receives payment only when one unit of G0390 appears with
both a revenue code in the 68x series and CPT code 99291 (Critical
care, evaluation and management of the critically ill or critically
injured patient; first 30-74 minutes) on the claim for the same date of
service, as described in the CY 2007 OPPS/ASC final rule with comment
period (71 FR 68134). If the I/OCE criteria are not met, HCPCS code
G0390 is not separately paid, and we found that a number of CY2008
claims including HCPCS code G0390 did not meet the criteria for
payment. On the other hand, a few APCs had greater estimated median
costs and greater numbers of single bills as a result of this
additional trim, presumably because removing lines from the claim
allowed us to identify more single bills. We believe that removing
lines with valid status indicators that were edited and not paid during
claims processing increases the accuracy of the single bills used to
determine the APC median costs for ratesetting.
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.) We are proposing
to continue our current policy of defining major procedures as any
HCPCS code 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 2010,
we are proposing to continue assigning status indicator ``R'' to blood
and blood products; status indicator ``U'' to brachytherapy sources;
status indicator ``Q1'' to all ``STVX-packaged codes''; status
indicator ``Q2'' to all ``T-packaged codes''; and status indicator
``Q3'' to all codes that may be paid through a

[[Page 35263]]

composite APC based on composite-specific criteria or paid separately
through single code APCs when the criteria are not met. As discussed in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68709), we
established status indicators ``Q1,'' ``Q2,'' and ``Q3'' to facilitate
identification of the different categories of codes. We are proposing
to treat these codes in the same manner for data purposes for CY 2010
as we have treated them since CY 2008. Specifically, we are proposing
to continue to evaluate whether the criteria for separate payment of
codes with status indicator ``Q1'' or ``Q2'' are met in determining
whether they are treated as major or minor codes. As discussed earlier
in this section, because we are proposing to treat CPT code 76098 as
conditionally packaged, this logic now includes the addition of CPT
code 76098 as a ``Q2'' code. Codes with status indicator ``Q1'' or
``Q2'' are carried through the data either with status indicator ``N''
as packaged or, if they meet the criteria for separate payment, they
are given the status indicator of the APC to which they are assigned
and are considered as ``pseudo'' single major codes. Codes assigned
status indicator ``Q3'' are paid under individual APCs unless they
occur in the combinations that qualify for payment as composite APCs
and, therefore, they carry the status indicator of the individual APC
to which they are assigned through the data process and are treated as
major codes during both the split and ``pseudo'' single creation
process. The calculation of the median costs for composite APCs from
multiple major claims is discussed in section II.A.2.e. of this
proposed rule.
Specifically, we divided the remaining claims into the following
five groups:
1. Single Major Claims: Claims with a single separately payable
procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or ``X,''
which includes codes with status indicator ``Q3''); claims with one
unit of a status indicator ``Q1'' code (``STVX-packaged'') where there
was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X'' on the
same claim on the same date; or claims with one unit of a status
indicator ``Q2'' code (``T- packaged'') where there was no code with a
status indicator ``T'' on the same claim on the same date.
2. Multiple Major Claims: Claims with more than one separately
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or
``X,'' which includes codes with status indicator ``Q3''), or multiple
units of one payable procedure. These claims include those codes with a
status indicator ``Q2'' code (``T-packaged'') where there was no
procedure with a status indicator ``T'' on the same claim on the same
date of service but where there was another separately paid procedure
on the same claim with the same date of service (that is, another code
with status indicator ``S,'' ``V,'' or ``X''). We also include in this
set claims that contained one unit of one code when the bilateral
modifier was appended to the code and the code was conditionally or
independently bilateral. In these cases, the claims represented more
than one unit of the service described by the code, notwithstanding
that only one unit was billed.
3. Single Minor Claims: Claims with a single HCPCS code that was
assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,''
``U,'' or ``N'' and not status indicator ``Q1'' (``STVX-packaged'') or
status indicator ``Q2'' (``T-packaged'') code.
4. Multiple Minor Claims: Claims with multiple HCPCS codes that are
assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,''
``U,'' or ``N;'' claims that contain more than one code with status
indicator ``Q1'' (``STVX-packaged'') or more than one unit of a code
with status indicator ``Q1'' but no codes with status indicator ``S,''
``T,'' ``V,'' or ``X'' on the same date of service; or claims that
contain more than one code with status indicator ``Q2'' (T-packaged),
or ``Q2'' and ``Q1,'' or more than one unit of a code with status
indicator ``Q2'' but no code with status indicator ``T'' on the same
date of service.
5. Non-OPPS Claims: Claims that contain no services payable under
the OPPS (that is, all status indicators other than those listed for
major or minor status). These claims were excluded from the files used
for the OPPS. Non-OPPS claims have codes paid under other fee
schedules, for example, durable medical equipment or clinical
laboratory tests, and do not contain a code for a separately payable or
packaged OPPS 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 file 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 proposed rule. Claims that contain codes to which we
have assigned status indicator ``Q3'' (composite APC members) appear in
the data of both the single and multiple major files used in this
proposed rule, depending on the specific composite calculation.
(2) Creation of ``Pseudo'' Single Claims
To develop ``pseudo'' single claims for this proposed rule, we
examined both the multiple major claims and the multiple minor claims.
We first examined the multiple major claims for dates of service to
determine if we could break them into ``pseudo'' single procedure
claims using the dates of service for all lines on the claim. If we
could create claims with single major procedures by using dates of
service, we created a single procedure claim record for each separately
payable procedure on a different date of service (that is, a ``pseudo''
single).
We also used the bypass codes listed earlier in Table 1 and
discussed in section II.A.1.b. of this proposed rule to remove
separately payable procedures that we determined contained limited or
no packaged costs or that were otherwise suitable for inclusion on the
bypass list from a multiple procedure bill. As discussed above, we
ignore the ``overlap bypass codes,'' that is, those HCPCS codes that
are both on the bypass list and are members of the multiple imaging
composite APCs, in this initial assessment for ``pseudo'' single
claims. The proposed CY 2010 ``overlap bypass codes'' are listed in
Table 1 in section II.A.1.b. of this proposed rule. 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
payable 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

[[Page 35264]]

otherwise be multiple procedure claims and could not be used.
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 proposed rule, 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. Having identified ``single
session'' claims for the imaging composite APCs, we reassessed 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 payable code remained on the claim. If so, we attributed the
packaged costs on the claim to the single unit of the single remaining
separately payable code other than the bypass code to create a
``pseudo'' single claim. We also identified line items of overlap
bypass codes as a ``pseudo'' single claim. This allowed us to use more
claims data for ratesetting purposes for this proposed rule.
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, set the units to one on that HCPCS code to reflect our
policy of paying only one unit of a code with a status indicator of
''Q1.'' We then packaged all costs for the following into a single cost
for the ``Q1'' HCPCS code that had the highest CY 2008 relative weight
to create a ``pseudo'' single claim for that code: Additional units of
the status indicator ``Q1'' HCPCS code with the highest CY 2008
relative weight; other codes with status indicator ``Q1;'' and all
other packaged HCPCS codes and packaged revenue code costs. 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, set the units to one on that HCPCS code to reflect our policy
of paying only one unit of a code with a status indicator of ''Q2.'' We
then packaged all costs for the following into a single cost for the
``Q2'' HCPCS code that had the highest CY 2008 relative weight to
create a ``pseudo'' single claim for that code: Additional units of the
status indicator ``Q2'' HCPCS code with the highest CY 2008 relative
weight; other codes with status indicator ``Q2''; and other packaged
HCPCS codes and packaged revenue code costs. 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 and
set the units to one on that HCPCS code to reflect our policy of paying
only one unit of a code with a status indicator of ``Q2.'' We then
packaged all costs for the following into a single cost for the
selected (``T-packaged'') HCPCS code to create a ``pseudo'' single
claim for that code: additional units of the status indicator ``Q2''
HCPCS code with the highest CY 2008 relative weight; other codes with
status indicator ``Q2;'' codes with status indicator ``Q1'' (``STVX-
packaged''); and other packaged HCPCS codes and packaged revenue code
costs. 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.
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 major and to multiple minor claims. As
has been our practice in recent years, we also excluded claims that
contained codes that were viewed as independently or conditionally
bilateral and that contained the bilateral modifier (Modifier 50
(Bilateral procedure)) because the line-item cost for the code
represented the cost of two units of the procedure, notwithstanding
that the code appeared with a unit of one.
c. Completion of Claim Records and Median Cost Calculations
We then packaged the costs of packaged HCPCS codes (codes with
status indicator ``N'' listed in Addendum B to this proposed rule and
the costs of those lines for codes with status indicator ``Q1'' or
``Q2'' when they are not separately paid), and the costs of packaged
revenue codes into the cost of the single major procedure remaining on
the claim. For CY 2010, this packaging also included the redistributed
packaged pharmacy overhead cost relative to the units of separately
payable drugs on each single procedure 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 2009 OPPS
(73 FR 68531 through 68532) that we used for packaging costs in median
calculation. As a result of that analysis, we are proposing to use the
packaged revenue codes for CY 2010 that are displayed in Table 4 below.
As noted in the CY 2009 OPPS/ASC final rule with comment period (73
FR 68531), 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 descriptions of the revenue code categories and
subcategories to better articulate the meanings of the revenue codes
without actually changing the proposed list of revenue codes. In the
course of making the changes in labeling for the revenue codes in Table
2 of the CY 2009 OPPS/ASC final rule with comment period, we noticed
some changes to revenue categories and subcategories that we

[[Page 35265]]

believed warranted further review for future OPPS updates. Although we
finalized the list of packaged revenue codes in Table 2 for CY 2009, we
indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68531) that we intended 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 specifically requested public input
and discussion on this issue during the comment period of the CY 2009
OPPS/ASC final rule with comment period. We did not receive any public
comments on this issue. As we discuss in section II.A.2.a. of this
proposed rule, we have completed that analysis for all revenue codes in
the revenue code-to-cost center crosswalk and, as a result, we are
proposing to add several revenue codes to the list of packaged revenue
codes for the CY 2010 OPPS. Specifically, we believe that the costs
derived from charges reported under revenue codes 0261 (IV Therapy;
Infusion Pump); 0392 (Administration, Processing and Storage for Blood
and Blood Components; Processing and Storage); 0623 (Medical Supplies--
Extension of 027X, Surgical Dressings); 0943 (Other Therapeutic
Services (also see 095X, an extension of 094X), Cardiac
Rehabilitation); and 0948 (Other Therapeutic Services (also see 095X,
an extension of 094X), Pulmonary Rehabilitation) are appropriately
packaged into payment for other OPPS services when charges appear on
lines with these revenue codes but no HCPCS code appears on the line.
Revenue codes that we are proposing to add to the CY 2010 packaged
revenue code list are identified by asterisks (*) in Table 4 below.

Table 4--Proposed CY 2010 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.
0260.......................... IV Therapy; General Classification.
0261 *........................ IV Therapy; Infusion Pump.
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.
0392 *........................ Administration, Processing and Storage
for Blood and Blood Components;
Processing and Storage.
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.
0623 *........................ Medical Supplies--Extension of 027X,
Surgical Dressings.
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.

[[Page 35266]]

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.
0943 *........................ Other Therapeutic Services (also see
095X, an extension of 094X), Cardiac
Rehabilitation.
0948 *........................ Other Therapeutic Services (also see
095X, an extension of 094X), Pulmonary
Rehabilitation.
------------------------------------------------------------------------

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 payable 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 relative weight of the APC to which each code was assigned. We do
not believe that these charges, which were token charges as submitted
by the hospital, are valid reflections of hospital resources.
Therefore, we deleted these claims. We also deleted claims for which
the charges equaled the revenue center payment (that is, the Medicare
payment) on the assumption that where the charge equaled the payment,
to apply a CCR to the charge would not yield a valid estimate of
relative provider cost.
For the remaining claims, we then standardized 60 percent of the
costs of the claim (which we have previously determined to be the
labor-related portion) for geographic differences in labor input costs.
We made this adjustment by determining the wage index that applied to
the hospital that furnished the service and dividing the cost for the
separately paid HCPCS code furnished by the hospital by that wage
index. As has been our policy since the inception of the OPPS, we are
proposing to use the pre-reclassified wage indices for standardization
because we believe that they better reflect the true costs of items and
services in the area in which the hospital is located than the post-
reclassification wage indices and, therefore, would result in the most
accurate unadjusted median costs.
We also excluded claims that were outside 3 standard deviations
from the geometric mean of units for each HCPCS code on the bypass list
(because, as discussed above, we used claims that contain multiple
units of the bypass codes).
After removing claims for hospitals with error CCRs, claims without
HCPCS codes, claims for immunizations not covered under the OPPS, and
claims for services not paid under the OPPS, approximately 54 million
claims were left for this proposed rule. Using these 54 million claims,
we created approximately 91 million single and ``pseudo'' single
claims, of which we used 90 million single bills (after trimming out
approximately 622,000 claims as discussed above in this section) in the
proposed CY 2010 median development and ratesetting.
We used these claims to calculate the proposed CY 2010 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 for this proposed rule and
reassigned HCPCS codes to different APCs where we believed that it was
appropriate. Section III. of this proposed rule includes a discussion
of certain 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.
In some cases, APC median costs are calculated using variations of
the process outlined above. Section II.A.2.d. of this proposed rule
that follows addresses the calculation of single APC criteria-based
median costs. Section II.A.2.e. of this proposed rule discusses the
calculation of composite APC criteria-based median costs. Section X.B.
of this proposed rule addresses the methodology for calculating the
median cost for partial hospitalization services.
At the February 2009 APC Panel Meeting, the APC Panel recommended
that CMS study the claims data for any APC in which the calculated
payment reduction would be greater than 10 percent. The APC Panel also
recommended that CMS provide a list of APCs to the APC Panel at the
next meeting with a proposed payment rate change of greater than 10
percent. While we recognize the concerns the APC Panel expressed with
regards to cost variability in the system, we already engage in a
standard review process for all APCs that experience significant
changes in median costs. We study all significant changes in estimated
cost to determine the effect that proposed and final payment policies
have on the APC payment rates and ensure that these policies are
appropriate and that the intended cost estimation methodologies have
been correctly applied. We note that there are a number of factors that
cause APC median costs to change from one year to the next. Some of
these are

[[Page 35267]]

a reflection of hospital behavior, and some of them are a reflection of
fundamental characteristics of the OPPS as defined in the statute. With
limited exceptions, we are required by law to reassign HCPCS codes to
APCs where it is necessary to avoid 2 times violations. Thus, there are
various mechanisms already in place to ensure that we assess changes in
cost and adjust APC weights accordingly or justify why we have not made
adjustments. We plan to continue our examination of all APCs that
experience changes of greater than10 percent, and we will provide the
APC Panel with a list of the APCs with proposed changes in costs of
more than 10 percent for CY 2010 at the next CY 2009 APC Panel meeting.
Accordingly, we are accepting this recommendation of the APC Panel in
full.
At the February 2009 APC Panel meeting, we reviewed and examined
the data process in preparation for the CY 2010 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 closely with the APC Panel's Data Subcommittee to
prepare and review data and analyses relevant to the APC configurations
and OPPS payment policies for hospital outpatient items and services.
d. Proposed Calculation of Single Procedure APC Criteria-Based Median
Costs
(1) Device-Dependent APCs
Device-dependent APCs are populated by HCPCS codes that usually,
but not always, require that a device be implanted or used to perform
the procedure. For a full history of how we have calculated payment
rates for device-dependent APCs in previous years and a detailed
discussion of how we developed the standard device-dependent APC
ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66739 through 66742). Overviews of the
procedure-to-device edits and device-to-procedure edits used in
ratesetting for device-dependent APCs are available in the CY 2005 OPPS
final rule with comment period (69 FR 65761 through 65763) and the CY
2007 OPPS/ASC final rule with comment period (71 FR 68070 through
68071).
For CY 2010, we are proposing to revise 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, to exclude claims that contain the ``FC'' modifier.
Specifically, we are proposing to calculate the median costs for
device-dependent APCs for CY 2010 using only the subset of single
procedure claims from CY 2008 claims data that pass the procedure-to-
device and device-to-procedure edits; do not contain token charges
(less than $1.01) for devices; 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; and do
not contain the ``FC'' modifier signifying that the hospital received
partial credit for the device. The ``FC'' modifier became effective
January 1, 2008, and is present for the first time on claims that would
be used in OPPS ratesetting for CY 2010. We believe that the standard
methodology for calculating median costs for device-dependent APCs,
further refined to exclude claims with the ``FC'' modifier, gives us
the most appropriate proposed median costs for device-dependent APCs in
which the hospital incurs the full cost of the device.
The median costs for the majority of device-dependent APCs that are
calculated using the CY 2010 proposed rule claims data are generally
stable, with most median costs increasing moderately compared to the
median costs upon which the CY 2009 OPPS payment rates were based.
However, the median costs for APC 0225 (Implantation of Neurostimulator
Electrodes, Cranial Nerve) and APC 0418 (Insertion of Left Ventricular
Pacing Electrode) demonstrate significant fluctuation. Specifically,
the CY 2010 proposed median cost for APC 0225 increases approximately
49 percent compared to the CY 2009 final median cost, although this APC
median cost had declined by approximately the same proportion from CY
2008 to CY 2009. The CY 2010 proposed median cost for APC 0418, which
had decreased approximately 45 percent from CY 2008 to CY 2009, shows
an increase of approximately 56 percent based on the claims data
available for the CY 2010 proposed rule. We believe the fluctuations in
median costs for these two APCs are a consequence of the small number
of single bills upon which the median costs are based and the small
number of providers of these 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 for low volume device-dependent APCs,
particularly where there are small numbers of single bills from a small
number of providers. The additional single bills available for
ratesetting in the CY 2010 final rule data and updated cost report data
may result in less fluctuation in the median costs for these APCs for
CY 2010.
At the February 2009 meeting of the APC Panel, one presenter stated
that the assignment of the cranial neurostimulator implantation
procedure described by CPT code 61885 (Insertion or replacement of
cranial neurostimulator pulse generator or receiver, direct or
inductive coupling; with connection to a single electrode array) to APC
0039 (Level I Implantation of Neurostimulator Generator), along with
the peripheral/gastric neurostimulator implantation procedure described
by CPT code 64590 (Insertion or replacement of peripheral or gastric
neurostimulator pulse generator or receiver, direct or inductive
coupling) is not appropriate, given the clinical and cost differences
between the two procedures. According to the presenter, the cranial
procedure described by CPT code 61885 is more similar clinically and in
terms of resource utilization to the spinal neurostimulator
implantation procedure described by CPT code 63685 (Insertion or
replacement of spinal neurostimulator pulse generator or receiver,
direct or inductive coupling), which is the only CPT code assigned to
APC 0222 (Level II Implantation of Neurostimulator) for CY 2009. The
presenter requested that the APC Panel recommend CMS restructure the
existing configuration of neurostimulator pulse generator implantation
APCs for CY 2010 by splitting APC 0039, so that procedures involving
peripheral/gastric neurostimulators and cranial neurostimulators would
be in distinct APCs, or by reassigning the cranial neurostimulator
implantation procedure described by CPT code 61885 from APC 0039 to APC
0222. In response to this request, the APC Panel recommended that CMS
combine APC 0039 and APC 0222 for CY 2010, given the overall similarity
in median costs among the cranial, peripheral/gastric, and spinal
neurostimulator pulse generator implantation procedures assigned to
these two APCs. The APC Panel also recommended that CMS maintain the
configuration of APC 0315 (Level III Implantation of Neurostimulator
Generator) as it currently exists in CY 2009 for CY 2010.
We agree with the APC Panel that the median costs of the procedures
described by CPT codes 61885, 63685, and 64590 are sufficiently similar
to warrant placement of the CPT codes into a single APC, rather than
two APCs. We are accepting the APC Panel's

[[Page 35268]]

recommendation and, therefore, are proposing to reassign CPT code 63685
to APC 0039, to delete APC 0222, and to maintain the current
configuration of APC 0315 for CY 2010. We also are proposing to change
the title of APC 0315 to ``Level II Implantation of Neurostimulator
Generator'' to reflect the proposed two-level, rather than three-level,
structure of the neurostimulator generator implantation APCs.
In reviewing the APC Panel recommendation for consolidating APC
0039 and APC 0222, we observed that the median costs of the procedures
assigned to APC 0425 (Level II Arthroplasty or Implantation with
Prosthesis) and APC 0681 (Knee Arthroplasty) also are sufficiently
similar to warrant combining these two APCs into one APC. The proposed
HCPCS code-specific median cost for the only procedure currently
assigned to APC 0681, described by CPT code 27446 (Arthroplasty, knee,
condyle and plateau; medial OR lateral compartment), is approximately
$7,464 based on the claims data available for the CY 2010 proposed
rule. This proposed median cost is very similar to the proposed median
cost of approximately $7,852 calculated for APC 0425, which includes
other procedures involving the implantation of prosthetic devices into
bone, similar to the procedure described by CPT code 27446. Given the
shared resource and clinical characteristics of the procedures included
in APC 0425 and the only procedure assigned to APC 0681 for CY 2009, we
are proposing to consolidate these two APCs by reassigning CPT code
27446 to APC 0425, and deleting APC 0681. We also note that over the
past several years, the median cost for CPT code 27446 has fluctuated
due to a low volume of services being performed by a small number of
providers, and to a single provider performing the majority of services
(73 FR 68535). We believe that by reassigning CPT code 27446 to APC
0425 and deleting APC 0681, we can maintain greater stability from year
to year in the payment rate for this knee arthroplasty service, while
also paying appropriately for the service.
Table 5 below lists the APCs for which we are proposing to use our
standard device-dependent APC rate setting methodology for CY 2010,
with the proposed amendment to exclude claims that contain the ``FC''
modifier. We refer readers to Addendum A to this proposed rule for the
proposed payment rates for these APCs.

Table 5--Proposed CY 2010 Device-Dependent APCs
------------------------------------------------------------------------
Proposed CY 2010 status Proposed CY 2010 APC
Proposed CY 2010 APC indicator title
------------------------------------------------------------------------
0039................... S...................... Level I Implantation
of Neurostimulator
Generator.
0040................... S...................... Percutaneous
Implantation of
Neurostimulator
Electrodes.
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.
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 II Implantation
of Neurostimulator
Generator.
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
Electrode.
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.
------------------------------------------------------------------------

(2) Blood and Blood Products
Since the implementation of the OPPS in August 2000, we have made
separate payments for blood and blood products through APCs rather than
packaging payment for them into payments for the procedures with which
they are administered. Hospital payments for the costs of blood and
blood products, as

[[Page 35269]]

well as for the costs of collecting, processing, and storing blood and
blood products, are made through the OPPS payments for specific blood
product APCs.
For CY 2010, we are proposing to continue to establish payment
rates for blood and blood products using our blood-specific CCR
methodology, which utilizes actual or simulated CCRs from the most
recently available hospital cost reports to convert hospital charges
for blood and blood products to costs. This methodology has been our
standard ratesetting methodology for blood and blood products since CY
2005. It was developed in response to data analysis indicating that
there was a significant difference in CCRs for those hospitals with and
without blood-specific cost centers, and past comments indicating that
the former OPPS policy of defaulting to the overall hospital CCR for
hospitals not reporting a blood-specific cost center often resulted in
an underestimation of the true hospital costs for blood and blood
products. Specifically, in order to address the differences in CCRs and
to better reflect hospitals' costs, we are proposing to continue to
simulate blood CCRs for each hospital that does not report a blood cost
center by calculating the ratio of the blood-specific CCRs to
hospitals' overall CCRs for those hospitals that do report costs and
charges for blood cost centers. We would then apply this mean ratio to
the overall CCRs of hospitals not reporting costs and charges for blood
cost centers on their cost reports in order to simulate blood-specific
CCRs for those hospitals. We calculated the median costs upon which the
proposed CY 2010 payment rates for blood and blood products are based
using the actual blood-specific CCR for hospitals that reported costs
and charges for a blood cost center and a hospital-specific simulated
blood-specific CCR for hospitals that did not report costs and charges
for a blood cost center.
We continue to believe that the hospital-specific, blood-specific
CCR methodology better responds to the absence of a blood-specific CCR
for a hospital than alternative methodologies, such as defaulting to
the overall hospital CCR or applying an average blood-specific CCR
across hospitals. Because this methodology takes into account the
unique charging and cost accounting structure of each provider, we
believe that it yields more accurate estimated costs for these
products. We believe that continuing with this methodology in CY 2010
would 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.
We refer readers to Addendum B to this proposed rule for the CY
2010 proposed payment rates for blood and blood products, which are
identified with status indicator ``R.'' For more detailed discussion of
the blood-specific CCR methodology, we refer readers to the CY 2005
OPPS proposed rule (69 FR 50524 through 50525). For a full history of
OPPS payment for blood and blood products, we refer readers to the CY
2008 OPPS/ASC final rule with comment period (72 FR 66807 through
66810).
(3) Single Allergy Tests
We are proposing to continue with our methodology of
differentiating single allergy tests (``per test'') from multiple
allergy tests (``per visit'') by assigning these services to two
different APCs to provide accurate payments for these tests in CY 2010.
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. Our CY 2008 claims data available
for this proposed rule for APC 0381 do not reflect improved and more
consistent hospital billing practices of ``per test'' for single
allergy tests. The median cost of APC 0381, calculated for this
proposed rule according to the standard single claims OPPS methodology,
is approximately $55, significantly higher than the CY 2009 median cost
of APC 0381 of approximately $23 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
single allergy tests since CY 2006, we are proposing to calculate a
``per unit'' median cost for APC 0381, based upon 530 claims containing
multiple units or multiple occurrences of a single CPT code. The CY
2010 proposed median cost for APC 0381 using the ``per unit''
methodology is approximately $29. For a full discussion of this
methodology, we refer readers to the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66737).
(4) Echocardiography Services
In CY 2008, we implemented a policy whereby payment for all
contrast agents is packaged 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
echocardiography 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

[[Page 35270]]

pharmacologically induced stress, with interpretation and report).
After reviewing HCPCS code-specific median costs, we determined
that all echocardiography procedures that may be performed with
contrast agents are reasonably similar both clinically and in terms of
resource use. In CY 2008, we created APC 0128 (Echocardiogram With
Contrast) to provide payment for echocardiography procedures that are
performed with a contrast agent. We refer readers to the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66643 through 66646) for more
information on this methodology.
In order for hospitals to identify 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 to report
the CPT codes when performing echocardiography procedures without
contrast and to report the new HCPCS C-codes when performing
echocardiography procedures with contrast, or without contrast followed
by with contrast. As is our standard policy with regard to new codes,
the APC assignment of these codes was then open to comment in that
final rule.
We used the same process to calculate median costs for these codes
for CY 2009 as we used for CY 2008 to separately identify
echocardiography services provided with contrast and those provided
without contrast because the data reported under these new codes were
not yet available for CY 2009 ratesetting.
In addition, for CY 2009, 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 new CPT code 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) includes the services described in CY 2008 by three
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 was reported with three CPT
codes, specifically CPT codes 93307, 93320, and 93325. For CY 2008, the
hospital received separate payment for CPT code 93307 through APC 0269
(Level II Echocardiogram Without Contrast Except Transesophageal), into
which payment for the other two services was 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 estimate the hospital costs of CPT codes 93306 and 93307 based
on their CY 2009 descriptors and the corresponding HCPCS codes C8929
and C8923 for CY 2009, we used claims data from CY 2007. As described
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68542
through 68544), we manipulated our CY 2007 single and ``pseudo'' single
claims data to simulate the new CY 2009 definitions of these services.
Specifically, we selected claims for CPT code 93307 on which CPT codes
93320 and 93325 were also present and we treated the summed costs on
these claims as if they were a single procedure claim for CPT code
93306. Similarly, we selected single claims for CPT code 93307 to
reflect the newly revised descriptor for CY 2009; that is, we included
those claims where CPT code 93307 was not billed with packaged CPT code
93320 or CPT code 93325 on the same claim. We then applied our CY 2009
methodology for calculating HCPCS code-specific median costs for these
echocardiography procedures with and without contrast by dividing the
new set of claims for CPT codes 93306 and 93307 into those billed with
and without contrast agents. We assigned the costs for simulated CPT
codes 93306 and 93307 reported without contrast to those CPT codes. We
then assigned the costs for simulated CPT codes 93306 and 93307
reported with contrast to 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) and
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),
respectively. In the CY 2009 OPPS/ASC final rule with comment period,
we assigned these CPT and HCPCS codes to APCs for CY 2009 based on
their simulated median costs and clinical characteristics. New CY 2009
CPT code 93306 and HCPCS code C8929 were assigned comment indicator
``NI'' in that final rule, to signify that they were new codes whose
interim final OPPS treatment was open to comment on that final rule.
This CY 2010 proposed rule is the first opportunity that we have
claims data available from hospitals for echocardiography services
performed with contrast (or without contrast followed by with contrast)
and reported with HCPCS codes C8921 through C8928. With the exception
of HCPCS code C8923, which had a significant change in its code
descriptor for CY 2009, we are proposing to use our standard
methodology to set the CY 2010 OPPS payment rates for these
echocardiography services performed with contrast, taking into
consideration their HCPCS code-specific median costs from CY 2008
claims.
For CY 2010 ratesetting, we are proposing to employ an alternative
ratesetting methodology for CPT codes 93306 and 93307 and HCPCS codes
C8929 and C8923 that is similar to the approach we used for CY 2009 in
order to account for the new codes and revised code descriptors for
which CY 2008 data are unavailable. However, in the case of the
proposed CY 2010 cost estimation, our CY 2008 claims for CPT code 93307
are only for services performed without contrast, and we have CY 2008
claims for HCPCS C8923 for the comparable services performed with
contrast. Specifically, we selected claims for CPT code 93307 on which
CPT codes 93320 and 93325 were also present and we treated the summed
costs on these claims as if they were a single procedure claim for CPT
code 93306 in order to simulate the median cost for CPT code 93306, for
which CY 2008 claims data are not available. We then selected single
claims for CPT code 93307 to reflect the newly revised descriptor for
CY 2009; that is, we included those claims where CPT code 93307 was not
billed with either packaged CPT code 93320 or CPT code 93325 on the
same claim in order to simulate an appropriate CY 2010 proposed median
cost for CPT code 93307. We assigned the costs of HCPCS code C8923 when
reported with CPT codes 93320 and 93325 to HCPCS code C8929 and the
costs of HCPCS code

[[Page 35271]]

C8923 when reported without CPT code 93320 or 93325 to HCPCS code
C8923.
Following publication of the CY 2009 OPPS/ASC final rule with
comment period, several stakeholders brought a number of concerns to
our attention, including the interim APC assignment of new CPT code
93351 (Echocardiography, transthoracic, real-time with image
documentation (2D), includes M-mode recording, when performed, during
rest and cardiovascular stress test using treadmill, bicycle exercise
and/or pharmacologically induced stress, with interpretation and
report; including performance of continuous electrocardiographic
monitoring, with physician supervision) and the corresponding new HCPCS
code C8930 (Transthoracic echocardiography, with contrast, or without
contrast followed by with contrast, real-time with image documentation
(2D), includes M-mode recording, when performed, during rest and
cardiovascular stress test using treadmill, bicycle exercise and/or
pharmacologically induced stress, with interpretation and report;
including performance of continuous electrocardiographic monitoring,
with physician supervision). These stakeholders noted that new CY 2009
CPT code 93351 was created to include the services reported previously
by CPT codes 93015 (Cardiovascular stress test using maximal or
submaximal treadmill or bicycle exercise, continuous
electrocardiographic monitoring, and/or pharmacological stress; with
physician supervision, with interpretation and report) and 93350
(Echocardiography, transthoracic, real-time with image documentation
(2D), includes M-mode recording, when performed, during rest and
cardiovascular stress test using treadmill, bicycle exercise and/or
pharmacologically induced stress, with interpretation and report).
Because new CY 2009 CPT code 93351 was meant to include the services
previously reported with both the CPT codes for a transthoracic
echocardiogram during rest and stress (CPT code 93350 is recognized
under the OPPS) and a cardiovascular stress test (CPT code 93017 is
recognized under the OPPS, rather than CPT code 93015), these
stakeholders disagreed with our assignments of both CPT codes 93350 and
93351 to APC 0269 for CY 2009.
Upon review of these concerns and our CY 2008 data, for CY 2010, we
are proposing to use an alternative methodology to simulate median
costs for CPT code 93351 and corresponding HCPCS code C8930, for which
CY 2008 claims data are unavailable, and for CPT code 93350 and
corresponding HCPCS code C8928 (Transthoracic echocardiography with
contrast, or without contrast followed by with contrast, real-time with
image documentation (2D), includes M-mode recording, when performed,
during rest and cardiovascular stress test using treadmill, bicycle
exercise and/or pharmacologically induced stress, with interpretation
and report). That is, we are proposing to use claims that contain both
CPT codes 93350 and 93017 (Cardiovascular stress test using maximal or
submaximal treadmill or bicycle exercise, continuous
electrocardiographic monitoring, and/or pharmacological stress; tracing
only, without interpretation and report) to simulate the median cost
for CPT code 93351. We also are proposing to use the remaining claims
that contain CPT code 93350 but that do not contain CPT code 93017 to
develop the proposed CY 2010 median cost for CPT code 93350. We
identified over 74,000 CY 2008 claims with both CPT code 93350 and CPT
code 93017 on the same date of service and no other separately paid
services appearing on the same date after applying our bypass
processing logic, discussed in section II.A.1.b. of this proposed rule,
that we modified to treat CPT codes 93350 and code 93017 as a single
service. We calculated a proposed median cost of approximately $604.
Therefore, for CY 2010, we are proposing to reassign CPT code 93351 to
revised APC 0270 (Level III Echocardiogram Without Contrast) which has
a proposed APC median cost of approximately $596. We are proposing to
continue to assign CPT code 93350 to APC 0269, which has a proposed APC
median cost of approximately $456, based on its HCPCS code-specific
median cost of approximately $406 based on approximately 11,000 single
claims. Furthermore, we are proposing to use claims for HCPCS code
C8928 that are reported with CPT code 93017 on the same claim to
simulate the CY 2010 median cost for HCPCS code C8930. We identified
over 4,000 claims with both HCPCS code C8930 and CPT code 93017 on the
same date of service and no other separately paid services appearing on
the same date after applying our bypass processing logic, discussed in
section II.A.1.b. of this proposed rule, that we modified to treat
HCPCS code C8930 and CPT code 93017 as a single service. We calculated
a HCPCS code-specific median cost of approximately $706. Therefore, we
are proposing to continue to assign HCPCS code C8930 to APC 0128 with a
proposed APC median cost of approximately $660. We also are proposing
to continue to assign HCPCS code C8928 to APC 0128, based on its HCPCS
code-specific median cost of approximately $595 based on approximately
1,000 single claims.
Table 6 below shows CY 2009 CPT codes for billing echocardiography
services without contrast, their proposed APC assignments for CY 2010,
and the corresponding HCPCS codes for use when echocardiography
services are performed with contrast (or without contrast followed by
with contrast), along with their proposed APC assignments for CY 2010.
BILLING CODE 4120-01-P

[[Page 35272]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.317

[[Page 35273]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.318

[[Page 35274]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.319

[[Page 35275]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.320

BILLING CODE 4120-01-C
Finally, for CY 2010, based upon our proposed APC configurations,
we also are proposing to revise the titles of our existing series of
echocardiography APCs to more accurately describe the groups of
services identified by CPT codes 93303 through 93352 and HCPCS codes
C8921 through C8930 that are assigned to these APCs. We are proposing
to rename APCs 0269, 0270, and 0697 as described in Table 7 below.

[[Page 35276]]

Table 7--Proposed CY 2010 Echocardiography APCs
------------------------------------------------------------------------
Proposed CY 2010
Proposed CY 2010 APC Proposed CY 2010 APC approximate APC
title median cost
------------------------------------------------------------------------
0128.......................... Echocardiogram With $660
Contrast.
0269.......................... Level II 456
Echocardiogram
Without Contrast.
0270.......................... Level III 596
Echocardiogram
Without Contrast.
0697.......................... Level I 263
Echocardiogram
Without Contrast.
------------------------------------------------------------------------

(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 with comment period 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 (other than implantable biologicals), and
radiopharmaceuticals.
Packaging costs into a single aggregate payment for a service,
encounter, or episode-of-care is a fundamental principle that
distinguishes a prospective payment system from a fee schedule. In
general, packaging the costs of supportive items and services into the
payment for the independent procedure or service with which they are
associated encourages hospital efficiencies and also enables hospitals
to manage their resources with maximum flexibility. All nuclear
medicine procedures require the use of at least 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 that include 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 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 were not available for setting payment rates
in CY 2009. Therefore, as described in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68545), we continued to use our established
CY 2008 methodology for setting the payment rates for APCs that
included 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 to calculate median costs for
nuclear medicine procedures and their associated APCs. 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 ensured that the costs of diagnostic
radiopharmaceuticals were included in the CY 2009 ratesetting process
for these APCs.
As discussed in section II.A.4.b.(1) of this proposed rule, during
the September 2007 APC Panel meeting, the APC Panel requested that CMS
evaluate the impact of expanded packaging on beneficiaries. Also,
during the March 2008 APC Panel meeting, the APC Panel requested that
CMS report to the APC Panel at the first meeting in CY 2009 regarding
the impact of packaging on net payments for patient care. In response
to these requests, we shared data with the APC Panel at the February
2009 APC Panel meeting that compared the frequency of the billing of
diagnostic radiopharmaceuticals billed under the OPPS in CY 2007,
before the packaging of all diagnostic radiopharmaceuticals went into
effect, to the frequency of the billing of those same products in
CY2008, their first year of packaged payment. We also reviewed
information about the aggregate payment for diagnostic
radiopharmaceuticals and nuclear medicine procedures during those same
2 years. A summary of these data analyses is provided in section
II.A.4.b.(1) of this proposed rule.
In addition to these aggregate analyses of total frequency and
payment, we also presented our analyses of the number of hospitals
performing nuclear medicine scans and the specific diagnostic

[[Page 35277]]

radiopharmaceuticals appearing with cardiac and tumor imaging nuclear
medicine procedures, excluding positron emission tomography (PET)
scans, by classes of hospitals between the CY 2007 claims processed
through September 30, 2007 and the CY 2008 claims processed through
September 30, 2008. At the March 2008 APC Panel meeting, the APC Panel
also recommended that we evaluate the usage and frequency, geographic
distribution, and size and type of hospitals performing nuclear
medicine studies using radioisotopes to assess beneficiaries' access
and that we present these analyses at the first APC Panel meeting in CY
2009. The number of all hospitals reporting any nuclear medicine
procedure declined by 2 percent between the CY 2007 claims data and the
CY 2008 claims data. Across several classes of hospitals (urban and
rural, teaching and nonteaching, and small and large OPPS service
volume), the number of hospitals billing any nuclear medicine procedure
declined by up to 4 percent over that same time period. With regard to
the specific diagnostic radiopharmaceuticals reported with cardiac and
tumor imaging nuclear medicine procedure, we generally observed
comparable distributions of radiopharmaceuticals between the CY 2007
claims data and the CY 2008 claims data. However, the utility of this
analysis was limited due to the introduction of the procedure-to-
radiolabeled product claims processing edits discussed above. There are
nuclear medicine procedures reported with a diagnostic
radiopharmaceutical HCPCS code on the CY 2008 claims that would have
not necessarily been billed with a diagnostic radiopharmaceutical HCPCS
code on the CY 2007 claims. Specifically, we observed an increase in
billing for many radiopharmaceuticals, some new and costly, between the
CY 2007 claims data and the CY 2008 claims data. We do not know how
much of this was attributable to changes in hospitals' use of
radiopharmaceuticals or to the CY 2008 introduction of the procedure-
to-radiolabeled product edits that require a radiolabeled product on
the claim for payment of the nuclear medicine procedure. With the
exception of the notable increases in the frequencies of certain
radiopharmaceutical HCPCS codes that potentially resulted from the
introduction of these edits, in general, hospital billing patterns for
diagnostic radiopharmaceuticals associated with cardiac and tumor
imaging nuclear medicine scans did not change dramatically between CY
2007 and CY 2008 for all hospitals and classes of hospitals. We
concluded that very few hospitals stopped providing nuclear medicine
procedures as a result of our CY 2008 policy to package payment for
diagnostic radiopharmaceuticals and that, in general, hospitals did not
decrease their use of expensive radiopharmaceuticals.
As a result of the discussions of the APC Panel following our
presentation of the analyses of the impact of packaging payment for all
diagnostic radiopharmaceuticals in the OPPS, the APC Panel further
recommended that CMS continue to analyze the impact on beneficiaries of
increased packaging of diagnostic radiopharmaceuticals and provide more
detailed analyses at the next APC Panel meeting. Further, the APC Panel
requested that, in the more detailed analyses of packaging of
diagnostic radiopharmaceuticals by type of nuclear medicine scan, CMS
analyze the data according to the specific CPT codes billed with the
diagnostic radiopharmaceuticals. We are accepting the APC Panel's
recommendation and will provide additional data to the APC Panel at an
upcoming meeting.
For CY 2010 ratesetting, we are able to use CY 2008 OPPS claims
that were subject to the procedure-to-radiolabeled product claims
processing edits incorporated into the I/OCE prior to payment of claims
in order to develop single and ``pseudo'' single claims for nuclear
medicine procedures according to our standard methodology. We believe
that using the CY 2008 claims for these services without further
editing for the presence of a radiolabeled product is now appropriate
for CY 2010 because these claims reflect all possible relationships
between the nuclear medicine procedures and their associated
radiolabeled products that we have accommodated for payment of nuclear
medicine procedures. Moreover, as we indicated in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68548 through 68549), in the rare
circumstance where a diagnostic radiopharmaceutical is not provided in
association with a nuclear medicine procedure, for example, because a
beneficiary receives 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 again for the study, we believe it is appropriate to use
these claims for ratesetting purposes. We believe that just as these
situations are representative of the performance of a nuclear medicine
scan, it is also appropriate to include them for ratesetting purposes.
(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
public 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. We are proposing to continue using the same methodology to
estimate a ``per unit'' median cost for HCPCS code C1300 for CY 2010 of
approximately $108, using 279,139 claims with multiple units or
multiple occurrences.
(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

[[Page 35278]]

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 the development of the payment
methodology for these services, we refer readers to the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68157 through 68158).
For CY 2010, we are proposing to continue to use our established
ratesetting methodology for calculating the median cost of APC 0375
(Ancillary Outpatient Services When Patient Expires) and to continue to
make one payment under APC 0375 for the services that meet the specific
conditions for using modifier -CA. We are proposing 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.
We believe that hospitals are reporting the -CA modifier according
to the policy initially established in CY 2003. We note that the claims
frequency for APC 0375 has been decreasing over the past few years. For
this proposed rule, there are only 131 claims for this APC. Although
the median cost for APC 0375 has increased in recent years, the median
in the data for this proposed rule is only slightly higher than the
final median cost for CY 2009. 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 8
below shows the number of claims and the final median costs for APC
0375 for CYs 2007, 2008 and 2009. For CY 2010, we are proposing a
median cost for APC 0375 of approximately $5,784.

Table 8--Claims for Ancillary Outpatient Services When Patient Expires (-
Ca Modifier) for CYs 2007 Through 2009
------------------------------------------------------------------------
Number of APC median
Prospective payment year claims cost
------------------------------------------------------------------------
CY 2007................................. 260 $3,549
CY 2008................................. 183 4,945
CY 2009................................. 168 5,545
------------------------------------------------------------------------

e. Proposed Calculation of Composite APC Criteria-Based Median Costs
As discussed in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66613), we believe it is important that the OPPS enhance
incentives for hospitals to provide only necessary, high quality care
and to provide that care as efficiently as possible. For CY 2008, we
developed composite APCs to provide a single payment for groups of
services that are typically performed together during a single clinical
encounter and that result in the provision of a complete service.
Combining payment for multiple independent services into a single OPPS
payment in this way enables hospitals to manage their resources with
maximum flexibility by monitoring and adjusting the volume and
efficiency of services themselves. An additional advantage to the
composite APC model is that we can use data from correctly coded
multiple procedure claims to calculate payment rates for the specified
combinations of services, rather than relying upon single procedure
claims which may be low in volume and/or incorrectly coded. Under the
OPPS, we currently have composite APC policies for extended assessment
and management services, low dose rate (LDR) prostate brachytherapy,
cardiac electrophysiologic evaluation and ablation services, mental
health services, and multiple imaging services. We refer readers to 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).
While 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, we are not proposing any new composite
APCs for CY 2010 so that we may monitor the effects of the existing
composite APCs on utilization and payment. In response to our CY 2009
proposal to apply a composite payment methodology to multiple imaging
procedures provided on the same date of service, several public
commenters stated that we should proceed cautiously as we expand
service bundling. They commented that we should not implement
additional composite methodologies until adequate data are available to
evaluate the composite policies' effectiveness and impact on
beneficiary access to care (73 FR 68561 through 68562).
In response to the concerns of the public commenters and the APC
Panel, we reviewed the CY 2008 claims data for claims processed through
September 30, 2008, for the services in the following composite APCs:
APC 8000 (Cardiac Electrophysiologic Evaluation and Ablation
Composite); APC 8001 (Low Dose Rate Prostate Brachytherapy Composite);
APC 8002 (Level I Extended Assessment and Evaluation Composite); and
APC 8003 (Level II Extended Assessment and Evaluation Composite). Our
analyses did not consider inflation, changes in beneficiary population,
or other comparable variables that can affect changes in aggregate
payment from year to year. We found that the average payment for the
package of services in both APC 8000 and APC 8001 increased from CY
2007, when payments were made for all individual services, to CY 2008
under the composite payment methodology. We also note that the proposed
median costs for these composite APCs for CY 2010 are higher than the
median costs upon which the CY 2009 payments are based. We believe
that, in part, this is because we are using more claims data for common
clinical scenarios to calculate the median costs of these APCs than we
were prior to the implementation of the composite payment methodology.
With regard to APCs 8002 and 8003, we compared payment for all
visits appearing with observation services in CY 2007 with payments for
all visits appearing with observation services in CY 2008 and found
that total payment

[[Page 35279]]

for visits and observation services increased from approximately $197
million to $270 million for claims processed through September 30 in
each year. We attribute this increase in payments, in part, to the
introduction of a composite payment for visits and observation through
the extended assessment and management composite methodology that
occurred for CY 2008 and that did not incorporate the International
Classification of Diseases, Ninth Edition, Clinical Modification (ICD-
9-CM) diagnosis criteria previously necessary for separate payment of
observation.
We will continue to review the claims data for the impact of all of
the composite APCs on payments to hospitals and on services to
beneficiaries and will take such data into consideration before
proposing new composite APCs. As stated in the CY 2009 OPPS/ASC final
rule with comment period, we believe that we proceeded with an
appropriate level of caution by implementing multiple imaging composite
APCs as the one new composite APC policy for CY 2009 (73 FR 68563).
However, we do recognize the concerns expressed by the public
commenters that moving ahead too quickly with any nonstandard OPPS
payment methodology (even one such as composite APCs that may improve
the accuracy of the OPPS payment rates by utilizing more complete and
valid claims in ratesetting) could have unintended consequences and
requires close monitoring. Because the multiple imaging composite APCs
were implemented for the first time in CY 2009, we will not have data
available for such monitoring until early CY 2010. Therefore, we
believe that it is in the best interest of hospitals and the integrity
of the OPPS that we do not propose any new composite APC policies for
at least one year.
At its February 2009 meeting, the APC Panel recommended that CMS
evaluate the implications of creating composite APCs for cardiac
resynchronization therapy with a defibrillator or pacemaker and report
its findings to the APC Panel. While we are not proposing any new
composite APCs for CY2010, we are accepting this APC Panel
recommendation, and we will evaluate the implications of creating
composite APCs for cardiac resynchronization therapy services and
report our findings to the APC Panel at a future meeting. We also will
consider bringing other potential composite APCs to the APC Panel for
further discussion.
For CY 2010, we are proposing to continue our established composite
APC policies for extended assessment and management, LDR prostate
brachytherapy, cardiac electrophysiologic evaluation and ablation,
mental health services, and multiple imaging services, as discussed in
sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), and
II.A.2.e.(5), respectively, of this proposed rule.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and
8003)
For CY 2010, we are proposing to continue to include composite APC
8002 (Level I Extended Assessment and Management Composite) and
composite APC 8003 (Level II Extended Assessment and Management
Composite) in the OPPS. 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 referral 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 referral 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) Type A emergency
department visit, a high level (Level 5) Type B 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 through66649), the Integrated
Outpatient Code Editor (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 OPPS 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 2010 median costs for
these composite APCs. We are not proposing to change these criteria for
the CY 2010 OPPS.
When we created composite APCs 8002 and 8003 for CY 2008, we
retained as general reporting requirements for all observation services
those criteria related to physician order and evaluation,
documentation, and observation beginning and ending time as listed in
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66812).
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. We are not proposing to
change these reporting requirements for the CY 2010 OPPS. However, as
discussed below, the APC Panel at its February 2009 meeting requested
that CMS issue guidance clarifying the correct method for reporting the
starting time for observation services. The APC Panel noted that the
descriptions of the start time for observation services located in the
Medicare Claims Processing Manual (Pub. 100-4), Chapter 4, sections
290.2.2 through 290.5, cause confusion for hospitals. We are accepting
this recommendation and plan to issue clarifying guidance in the Claims
Processing Manual through a future quarterly update of the OPPS.
As noted in detail 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 visit levels in
the OPPS claims data through CY 2006 available at that time. We stated
that we did 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. Similarly, we stated that we expected that
hospitals would 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 CY2008 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

[[Page 35280]]

Integrity contractors or other contractors review the claims against
the medical record.
As noted above, we observed a 37 percent increase in total payments
for all visits appearing with observation services for claims processed
through September 30 in CY 2007 and CY 2008. We believe this increase
is, in part, attributable to the expansion of payment under the
extended assessment and management composites to all ICD-9-CM
diagnoses. To confirm this, we calculated the percentage of visit HCPCS
codes billed with HCPCS code G0378 (Observation services, per hour)
between CY 2007 and CY 2008 and compared the percentage associated with
visit codes included in the extended assessment and management
composites in each year. If hospitals had inappropriately changed their
visit reporting behavior to maximize payment through the new composite
APCs, we would expect to see significant changes in the percentage of
visit HCPCS codes included in the composite APCs billed with
observation services relative to all other visit HCPCS codes billed
with observation services between CY 2007 and CY 2008. We did not
observe a sizable increase in the proportion of visit HCPCS codes
included in the composite APCs relative to the proportion of all other
visit HCPCS codes billed with observation services. For example, the
percentage of claims billed with CPT code 99285 (Emergency department
visit for the evaluation and management of a patient (Level 5)) and
HCPCS code G0378 was 51 percent in the CY 2007 data and 54 percent in
the CY 2008 data. Similarly, the percentage of claims billed with CPT
code 99284 (Emergency department visit for the evaluation and
management of a patient (Level 4)) and HCPCS code G0378 decreased only
slightly from 28 percent in the CY 2007 data to 27 percent in the CY
2008 data. We conclude that although the volume of visits billed with
HCPCS code G0378 increased between CY 2007 and CY2008, the overall
pattern of billing visit levels did not change significantly. We will
continue to carefully monitor any changes in billing practices on a
service-specific and hospital-specific level.
For CY 2010, we are proposing to continue the extended assessment
and management composite APC payment methodology for APCs 8002 and
8003. As stated earlier, we also are proposing to continue the general
reporting requirements for observation services reported with HCPCS
code G0378. We continue to believe that the composite APCs 8002 and
8003 and related policies provide the most appropriate means of paying
for these services. We are proposing to calculate the median costs for
APCs 8002 and8003 using all single and ``pseudo'' single procedure
claims for CY 2008 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:
In the case of composite APC 8002, HCPCS code G0379
(Direct referral 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. We refer readers to section XII.F. of this proposed rule for a
full discussion of our proposed revision of the code descriptor for
HCPCS code G0379 for CY 2010.
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
(Level 5 Hospital Emergency Department Visit Provided in a Type B
Emergency Department) provided on the same date of service or one day
before the date of service for HCPCS code G0378. (As discussed in
detail in the CY2009 OPPS/ASC final rule with comment period (73 FR
68684), we finalized our proposal 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 CY2010 median costs. The proposed CY
2010 median cost resulting from this process for composite APC8002 is
approximately $384, which was calculated from 14,981 single and
``pseudo'' single bills that met the required criteria. The proposed CY
2010 median cost for composite APC 8003 is approximately $709, which
was calculated from 154,843 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 further in sections III.D and IX. of this proposed
rule, and consistent with our CY 2008 and CY 2009 final policies, 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 are utilizing 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
results in the most accurate cost estimates for APCs 0604 through 0617
and 0626 through 0629 for CY 2010.
At the February 2009 meeting of the APC Panel, the APC Panel
recommended that CMS present at the next APC Panel meeting an analysis
of CY 2008 claims data for clinic, emergency department (Types A and
B), and extended assessment and management composite APCs. We are
accepting this recommendation, and we will share the requested claims
data with the APC Panel at its next meeting.
In summary, for CY 2010, we are proposing to continue to include
composite APC 8002 (Level I Extended Assessment and Management
Composite) and composite APC 8003 (Level II Extended Assessment and
Management Composite) in the OPPS. We are proposing to continue the
extended assessment and management composite APC payment methodology
and criteria that we finalized for CY 2009. We also are proposing to
calculate the median costs for APCs 8002 and 8003 using all single and
``pseudo'' single procedure claims from CY 2008 that meet the criteria
for payment of each composite APC. We are not proposing to change the
reporting requirements for observation services for the CY 2010 OPPS.
However, we plan to issue further clarifying guidance in the Medicare
Claims Processing Manual related to observation start time, as
recommended by the APC Panel.

[[Page 35281]]

(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
LDR prostate brachytherapy is a treatment for prostate cancer in
which hollow needles or catheters are inserted into the prostate,
followed by permanent implantation of radioactive sources into the
prostate through the needles/catheters. At least two CPT codes are used
to report the composite treatment service because there are separate
codes that describe placement of the needles/catheters and the
application of the brachytherapy sources: CPT code 55875 (Transperineal
placement of needles or catheters into prostate for interstitial
radioelement application, with or without cystoscopy) and CPT code
77778 (Interstitial radiation source application; complex). Generally,
the component services represented by both codes are provided in the
same operative session in the same hospital on the same date of service
to the Medicare beneficiary being 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, had 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 further 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, reported as CPT
codes 55875 and 77778, is furnished in a single hospital encounter. We
base the payment for composite APC 8001 (LDR Prostate Brachytherapy
Composite) on the median cost derived from claims for the same date of
service that contain both CPT codes 55875 and 77778 and that do not
contain other separately paid codes that are not on the bypass list. In
uncommon occurrences in which the services are billed individually,
hospitals continue to receive separate payments for the individual
services. We refer readers to the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66652 through 66655) for a full history of OPPS
payment for LDR prostate brachytherapy and a detailed description of
how we developed the LDR prostate brachytherapy composite APC.
For CY 2010, we are proposing to continue paying for LDR prostate
brachytherapy services using the composite APC methodology proposed and
implemented for CY 2008 and CY 2009. That is, we are proposing to use
CY 2008 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 and CY 2009 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), the APCs to which CPT codes 55875 and 77778 are
assigned, respectively. The median costs for APCs 0163 and 0651 would
continue to be calculated using single and ``pseudo'' single procedure
claims. 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 2008 claims data available for this proposed
rule, we were able to use 669 claims that contained both CPT codes
77778 and 55875 to calculate the median cost upon which the proposed CY
2010 payment for composite APC 8001 is based. The proposed median cost
for composite APC 8001 for CY 2010 is approximately $3,106. This is an
increase compared to the CY2009 OPPS/ASC final rule with comment period
in which we calculated a final median cost for this composite APC of
approximately $2,967 based on a full year of CY 2007 claims data. The
CY 2010 proposed median cost for this composite APC is slightly less
than $3,268, the sum of the proposed median costs for APCs 0163 and
0651 ($2,453+$815), the APCs to which CPT codes 55875 and 77778 map if
one service is billed on a claim without the other. We believe the
proposed CY 2010 median cost for composite APC 8001 of approximately
$3,106 calculated from claims we believe to be correctly coded results
in a reasonable and appropriate payment rate for this service in CY
2010.
(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 specified 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 is based, we used multiple procedure claims that contained at
least one CPT code from group A for evaluation services and at least
one CPT code from group B for ablation services reported on the same
date of service on an individual claim. Table 9 in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66656) identified the CPT codes
that are

[[Page 35282]]

assigned to groups A and B. For a full discussion of how we identified
the group A and group B procedures and established the payment rate for
the cardiac electrophysiologic evaluation and ablation composite APC,
we refer readers to the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66655 through 66659). Where a service in group A is furnished on
a date of service that is different from the date of service for a code
in group B for the same beneficiary, payments are made under the
appropriate single procedure APCs and the composite APC does not apply.
For CY 2010, we are proposing to continue paying for cardiac
electrophysiologic evaluation and ablation services using the composite
APC methodology proposed and implemented for CY 2008 and CY 2009.
Consistent with our CY 2008 and CY 2009 practice, we would not use the
claims that meet the composite payment criteria in the calculation of
the median costs for APC 0085 and APC 0086, to which the CPT codes in
both groups A and B for composite APC 8000 are otherwise assigned.
Median costs for APCs 0085 and 0086 continue to be calculated using
single procedure claims. We continue to believe that the composite APC
methodology 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 2008 claims data available for this proposed
rule, we were able to use 6,975 claims containing a combination of
group A and group B codes and calculated a proposed median cost of
approximately $10,105 for composite APC 8000. This is an increase
compared to the CY 2009 OPPS/ASC final rule with comment period in
which we calculated a final median cost for this composite APC of
approximately $9,206 based on a full year of CY 2007 claims data. We
believe that the proposed median cost of $10,105 calculated from a high
volume of correctly coded multiple procedure claims results in an
accurate and appropriate proposed payment for cardiac
electrophysiologic evaluation and ablation services when at least one
evaluation service is furnished during the same clinical encounter as
at least one ablation service. Table 9 below lists the groups of
procedures upon which we are proposing to base composite APC 8000 for
CY 2010.

Table 9--Proposed Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which Composite
APC 8000 Is Based
----------------------------------------------------------------------------------------------------------------
Proposed Proposed CY
Codes used in combinations: at least one in Group A and one in CY 2009 HCPCS single code 2010 SI
Group B code CY 2010 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 and 93620 0085 Q3
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 function, 93650 0085 Q3
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)
For CY 2010, we are proposing to continue our longstanding policy
of limiting the aggregate payment for specified less resource-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
2010. 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.
Therefore, 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 2010, as discussed further in section X.B. of this proposed
rule, we are proposing to continue using the two tiered payment
approach for partial hospitalization services that we implemented in CY
2009: One APC for days with three services (APC 0172) (Level I Partial
Hospitalization (3 services)) and one APC for days with four or more
services (APC 0173) (Level II Partial Hospitalization (4 or more
services)). When a CMHC or hospital provides three units of partial
hospitalization services and meets all other partial hospitalization
payment criteria, we are proposing that the CMHC or hospital be paid
through APC 0172. When the CMHC or hospital provides 4 or more units of
partial hospitalization services and meets all other partial
hospitalization payment criteria, we are proposing that the CMHC or
hospital be paid through APC 0173. We are proposing to set the CY 2010
payment rate for mental health services composite APC 0034 (Mental
Health Services Composite) at the same

[[Page 35283]]

rate as we are proposing for APC 0173, which is the maximum partial
hospitalization per diem payment. We believe 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. When the
aggregate 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
exceeds the maximum per diem partial hospitalization payment, we are
proposing that those specified mental health services would be assigned
to APC 0034. We are proposing that APC 0034 would continue to have the
same payment rate as APC 0173, and that the hospital would continue to
be paid one unit of APC 0034. The I/OCE currently determines, and we
are proposing for CY 2010 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 by the hospital on that single date of service.
For CY 2010, we are proposing to continue assigning status
indicator ``Q3'' (Codes that May be Paid Through a Composite APC) to
the HCPCS codes that are assigned to composite APC 0034 in Addendum M
to this proposed rule. We also are proposing to continue assigning
status indicator ``S'' (Significant Procedure, Not Discounted when
Multiple), as adopted for CY 2009, to APC 0034 for CY 2010.
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and
8008)
Prior to CY 2009, hospitals received a full APC payment for each
imaging service on a claim, regardless of how many procedures were
performed during a single session using the same imaging modality.
Based on extensive data analysis, we determined that this practice
neither reflected nor promoted the efficiencies hospitals can achieve
when performing multiple imaging procedures during a single session (73
FR 41448 through 41450). As a result of our data analysis, and in
response to ongoing requests from MedPAC to improve payment accuracy
for imaging services under the OPPS, we expanded the composite APC
model developed in CY 2008 to multiple imaging services. Effective
January 1, 2009, we provide a single payment each time a hospital bills
more than one imaging procedure within an imaging family on the same
date of service. We utilize three imaging families based on imaging
modality for purposes of this methodology: Ultrasound, computed
tomography (CT) and computed tomographic angiography (CTA), and
magnetic resonance imaging (MRI) and magnetic resonance angiography
(MRA). The HCPCS codes subject to the multiple imaging composite
policy, and their respective families, are listed in Table 8 of the CY
2009 OPPS/ASC final rule with comment period (73 FR 68567 through
68569).
While there are three imaging families, there are five multiple
imaging composite APCs due to the statutory requirement at section
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging
services provided with and without contrast. While the ultrasound
procedures included in the policy do not involve contrast, both CT/CTA
and MRI/MRA scans can be provided either with or without contrast. The
five multiple imaging composite APCs established in 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). We define the single imaging session for the
``with contrast'' composite APCs as having at least one or more imaging
procedures from the same family performed with contrast on the same
date of service. For example, if the hospital performs an MRI without
contrast during the same session as at least one other MRI with
contrast, the hospital will receive payment for APC 8008, the ``with
contrast'' composite APC.
Hospitals continue to use the same HCPCS codes to report imaging
procedures, and the I/OCE determines 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. The
standard (noncomposite) APC assignments continue to apply for single
imaging procedures and multiple imaging procedures performed across
families.
For a full discussion of the development of the multiple imaging
composite APC methodology, we refer readers to the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68559 through 68569).
During the February 2009 meeting of the APC Panel, the APC Panel
heard from stakeholders who claimed that a composite payment is not
appropriate when multiple imaging procedures are provided on the same
date of service but at different times. Some APC Panel members
expressed concern that the same efficiencies that may be gained when
multiple imaging procedures are performed during the same sitting may
not be gained if a significant amount of time passes between the second
and subsequent imaging procedures, when the patient may leave not only
the scanner, but also the radiology department or hospital. The APC
Panel recommended that CMS continue to work with stakeholders to
examine different options for APCs for multiple imaging sessions and
multiple imaging procedures. We are accepting this recommendation, and
we will continue to work with any stakeholders who are interested in
our multiple imaging composite payment methodology. We note that we
routinely seek broad public input on OPPS payment rates and payment
policies, including the multiple imaging composite APCs, through a
variety of forums. Through our annual rulemaking process, we consider
all timely public comments received from interested organizations and
individuals, and respond to each of those public comments in the final
rule for the forthcoming year. We also seek input from the public at
meetings of the APC Panel, and consider opinions expressed in
correspondences received outside of the annual rulemaking cycle.
Furthermore, we note that we regularly accept requests from all
interested parties to discuss with us their views about OPPS payment
policy issues, and that we do not work exclusively with any single
stakeholder or stakeholder group.
While we are accepting the APC Panel recommendation that CMS
continue to work with stakeholders to examine different options for
APCs for multiple imaging sessions and multiple imaging procedures, we
do not believe it is appropriate to propose modifications to the
multiple imaging composite policy for CY 2010. As stated in the CY 2009
OPPS/ASC final rule with comment period (73 FR 68565), we continue to
believe that composite payment is appropriate even when procedures are
provided on the same date of service but at different times, because
hospitals do

[[Page 35284]]

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 those circumstances would
receive imaging procedures at different times during a single prolonged
hospital outpatient encounter, and that the efficiencies that may be
gained from providing multiple imaging procedures during a single
session are achieved in such ways as not having to register the patient
again, or not having to re-establish new intravenous access for an
additional study when contrast is required. Furthermore, we stated that
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 their payment rates.
In summary, for CY 2010, we are proposing to continue paying for
all multiple imaging procedures within an imaging family performed on
the same date of service using the multiple imaging composite payment
methodology, without modification. The proposed CY 2010 payment rates
for the five multiple imaging composite APCs (APC 8004, APC 8005, APC
8006, APC 8007, and APC 8008) are based on median costs calculated from
the partial year CY 2008 claims available for the proposed rule that
would have qualified for composite payment under the current policy
(that is, those claims with more than one procedure within the same
family on a single date of service). To calculate the proposed median
costs, we used the same methodology that we used to calculate the final
CY 2009 median costs for these composite APCs. That is, we removed any
HCPCS codes in the OPPS imaging families that overlapped with codes on
our bypass list (``overlap bypass codes'') 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
proposed multiple imaging composite APC median costs appear in Table 11
below. 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
in order to determine 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.''
We were able to identify 1.7 million ``single session'' claims out
of an estimated 2.5 million potential composite cases from our
ratesetting claims data, or well over half of all eligible claims, to
calculate the proposed CY 2010 median costs for the multiple imaging
composite APCs. The HCPCS codes subject to the proposed multiple
imaging composite policy, and their respective families, are listed
below in Table 10.

Table 10--Proposed OPPS Imaging Families and Multiple Imaging Procedure
Composite APCs
------------------------------------------------------------------------
Proposed CY 2010 APC 8004 (ultrasound Proposed CY 2010 approximate
composite) APC median cost = $197.
------------------------------------------------------------------------
Family 1--Ultrasound
------------------------------------------------------------------------
76604..................................... Us exam, chest.
76700..................................... Us exam, abdom, complete.
76705..................................... Echo exam of abdomen.
76770..................................... Us exam abdo back wall,
comp.
76775..................................... Us exam abdo back wall, lim.
76776..................................... Us exam k transpl w/Doppler.
76831..................................... Echo exam, uterus.
76856..................................... Us exam, pelvic, complete.
76870..................................... Us exam, scrotum.
76857..................................... Us exam, pelvic, limited.
------------------------------------------------------------------------
Family 2--CT and CTA with and without Contrast
------------------------------------------------------------------------

------------------------------------------------------------------------
Proposed CY 2010 APC 8005 (CT and CTA Proposed CY 2010 approximate
without contrast composite)* APC median cost = $429
------------------------------------------------------------------------
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.
74150..................................... Ct abdomen w/o dye.

------------------------------------------------------------------------
Proposed CY 2010 APC 8006 (CT and CTA with Proposed CY 2010 approximate
contrast composite) APC median cost = $634
------------------------------------------------------------------------
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.

[[Page 35285]]

73701..................................... Ct lower extremity w/dye.
73702..................................... Ct lwr extremity w/o & w/
dye.
73706..................................... Ct angio lwr extr w/o & w/
dye.
74160..................................... Ct abdomen w/dye.
74170..................................... Ct abdomen w/o & w/dye.
74175..................................... Ct angio abdom w/o & w/dye.
75635..................................... Ct angio abdominal arteries.
------------------------------------------------------------------------
* If a ``without contrast'' CT or CTA procedure is performed during
the same session as a ``with contrast'' CT or CTA procedure, the I/
OCE will assign APC 8006 rather than APC 8005.
------------------------------------------------------------------------
Family 3--MRI and MRA with and without Contrast
------------------------------------------------------------------------

------------------------------------------------------------------------
Proposed CY 2010 APC 8007 (MRI and MRA Proposed CY 2010 approximate
without contrast composite) * APC median cost = $732
------------------------------------------------------------------------
70336..................................... Magnetic image, jaw joint.
70540..................................... Mri orbit/face/neck w/o dye.
70544..................................... Mr angiography head w/o dye.
70547..................................... Mr angiography neck w/o dye.
70551..................................... Mri brain w/o dye.
70554..................................... Fmri brain by tech.
71550..................................... Mri chest w/o dye.
72141..................................... Mri neck spine w/o dye.
72146..................................... Mri chest spine w/o dye.
72148..................................... Mri lumbar spine w/o dye.
72195..................................... Mri pelvis w/o dye.
73218..................................... Mri upper extremity w/o dye.
73221..................................... Mri joint upr extrem w/o
dye.
73718..................................... Mri lower extremity w/o dye.
73721..................................... Mri jnt of lwr extre w/o
dye.
74181..................................... Mri abdomen w/o dye.
75557..................................... Cardiac mri for morph.
75559..................................... Cardiac mri w/stress img.
C8901..................................... MRA w/o cont, abd.
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.

------------------------------------------------------------------------
Proposed CY 2010 APC 8008 (MRI and MRA Proposed CY 2010 approximate
with contrast composite) APC median cost = $1,013
------------------------------------------------------------------------
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'' 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 11--Proposed OPPS Imaging Family Services Overlapping With HCPCS
Codes on the Proposed CY 2010 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.
------------------------------------------------------------------------
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.

[[Page 35286]]

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. Proposed Calculation of OPPS Scaled Payment Weights
Using the APC median costs discussed in sections II.A.1. and 2. of
this proposed rule, we calculated the proposed relative payment weights
for each APC for CY 2010 shown in Addenda A and B to this proposed
rule. In years prior to CY 2007, we standardized all the relative
payment weights to APC 0601 (Mid Level Clinic Visit) because mid-level
clinic visits were among the most frequently performed services in the
hospital outpatient setting. We assigned APC 0601 a relative payment
weight of 1.00 and divided the median cost for each APC by the median
cost for APC 0601 to derive the relative payment weight for each APC.
Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all
of the relative payment weights to APC 0606 (Level 3 Clinic Visits)
because we deleted APC 0601 as part of the reconfiguration of the
clinic visit APCs. We selected APC 0606 as the base because APC 0606
was the mid-level clinic visit APC (that is, Level 3 of five levels).
Therefore, for CY 2010, to maintain consistency in using a median for
calculating unscaled weights representing the median cost of some of
the most frequently provided services, we are proposing to continue to
use the median cost of the mid-level clinic visit APC, APC 0606, to
calculate unscaled weights. Following our standard methodology, but
using the proposed CY2010 median cost for APC 0606, for CY 2010 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 proposed unscaled relative payment weight for each APC. The
choice of the APC on which to base the proposed 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 weight under the OPPS for CY 2010 is neither
greater than nor less than the estimated aggregate weight that would
have been made without the changes. To comply with this requirement
concerning the APC changes, we are proposing to compare estimated
aggregate weight using the CY 2009 scaled relative weights to estimated
aggregate weight using the CY 2010 unscaled relative weights. For CY
2009, we multiply the CY 2009 scaled APC relative weight applicable to
a service paid under the OPPS by the volume of that service from CY
2008 claims to calculate the total weight for each service. We then add
together the total weight for each of these services in order to
calculate an estimated aggregate weight for the year. For CY 2010, we
perform the same process using the CY 2010 unscaled weights rather than
scaled weights. We then calculate the weight scaler by dividing the CY
2009 estimated aggregate weight by the CY 2010 estimated aggregate
weight. The service mix is the same in the current and prospective
years because we use the same set of claims for service volume in
calculating the aggregate weight for each year. For a detailed
discussion of the weight scaler calculation, we refer readers to the
OPPS claims accounting document available on the CMS Web site at:
http://www.cms.hhs.gov/HospitalOutpatientPPS/. Again this year, we
included payments to CMHCs in our comparison of estimated unscaled
weight in CY 2010 to estimated total weight in CY 2009 using CY 2008
claims data and holding all other things constant. Based on this
comparison, we adjusted the unscaled relative weights for purposes of
budget neutrality. The CY 2010 unscaled relative payment weights were
adjusted by multiplying them by a proposed weight scaler of 1.2863 to
ensure budget neutrality of the proposed CY 2010 relative weights in
this proposed rule.
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 proposed rule) is included in the proposed budget neutrality
calculations for the CY 2010 OPPS.
4. Proposed Changes to Packaged Services
a. Background
The OPPS, like other prospective payment systems, relies on the
concept of averaging, where the payment may be more or less than the
estimated cost of providing a service or bundle of services for a
particular patient, but with the exception of outlier cases, the
payment 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 that payment is adequate to enable the hospital to
provide quality care and establishing incentives for efficiency through
larger units of payment. In the CY 2008 OPPS/

[[Page 35287]]

ASC final rule with comment period (72 FR66610 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 assign status indicator ``N'' to those HCPCS codes that we
believe are always integral to the performance of the primary modality;
therefore, we always package their costs into the costs of the
separately paid primary services with which they are billed. Services
assigned status indicator ``N'' are unconditionally packaged.
We assign status indicator ``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. An ``STVX-
packaged code'' describes a HCPCS code whose payment is packaged when
one or more separately paid primary services with the status indicator
of ``S,'' ``T,'' ``V,'' or ``X'' 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 with the status indicator of ``T'' 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'' are conditionally packaged. We refer readers
to section XIII.A.1. of this proposed rule for a complete listing of
status indicators.
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.''
In addition, in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66650 through 66659), we finalized additional packaging for the
CY 2008 OPPS, which included the establishment of 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). In the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68559 through 68569), we expanded the composite APC model
to one new clinical area, multiple imaging services. We created five
multiple imaging composite APCs for payment in CY 2009 that incorporate
statutory requirements to differentiate between imaging services
provided with contrast and without contrast as required by section
1833(t)(2)(G) of the Act. The multiple imaging composite APCs are: APC
8004 (Ultrasound Composite); APC 8005 (CT and CTA without Contrast
Composite); APC 8006 (CT and CTA with Contrast Composite); APC 8007
(MRI and MRA without Contrast Composite); and APC 8008 (MRI and MRA
with Contrast Composite). We discuss composite APCs in more detail in
section II.A.2.e. of this proposed rule.
Hospitals include charges for packaged services on their claims,
and the estimated 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 the CPT Editorial
Panel or CMS provides 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.
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 packaged HCPCS codes. In deciding whether to package a service
or pay for a code separately, we have historically considered a variety
of factors, including whether the service is normally provided
separately or in conjunction with other services; how likely it is for
the costs of the packaged code to be appropriately mapped to the
separately payable codes with which it was performed; and whether the
expected cost of the service is relatively low. As discussed in section
II.A.4.a. of this proposed rule regarding our packaging approach for CY
2008, we established packaging criteria that apply to seven categories
of codes whose payments are packaged.
During the September 2007 APC Panel meeting, the APC Panel
requested that CMS evaluate the impact of expanded packaging on
beneficiaries. During the March 2008 APC Panel meeting, the APC Panel
requested that CMS report to the Panel at the first Panel meeting in CY
2009 regarding the impact of packaging on net payments for patient
care. In response to these requests, we shared data with the APC Panel
at the February 2009 APC Panel meeting that compared the frequency of
specific categories of services billed under the OPPS in CY 2007,
before the expanded packaging went into effect, to the frequency of
those same categories of services in CY 2008, their first year of
packaged payment. In each category, the HCPCS codes that we compared
are the ones that we identified in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66659 through 66664) as fitting into one of the
seven packaging categories listed in section II.A.4.a. of this proposed
rule. The data shared with the APC Panel at the February 2009 APC Panel
meeting compared CY 2007 claims processed through September 30, 2007 to
CY 2008 claims processed through September 30, 2008. We did not make
any adjustments for inflation, changes in Medicare population, or other
variables that potentially influenced billing between CY 2007 and CY
2008. These data represent about 60 percent of the full year data. A
summary of these data analyses is provided below.
Analysis of the diagnostic radiopharmaceuticals category showed
that the frequency of the reporting of diagnostic radiopharmaceuticals
increased by 1 percent between the first 9 months of CY 2007 and the
first 9 months of CY 2008. In CY 2007, some diagnostic
radiopharmaceuticals were packaged and others were separately payable,
depending on whether their per day mean costs fell above or below the
$55 drug packaging threshold for CY 2007. All diagnostic

[[Page 35288]]

radiopharmaceuticals were uniformly packaged in CY 2008. Two percent
more hospitals reported one or more diagnostic radiopharmaceuticals
during CY 2008 as compared to CY 2007. Effective for CY 2008, we first
required reporting of a radiolabeled product (including diagnostic
radiopharmaceuticals) when billing a nuclear medicine procedure, and we
believe that the increases in frequency and the number of reporting
hospitals reflect hospitals meeting this reporting requirement.
We also found that nuclear medicine procedures (into which
diagnostic radiopharmaceuticals were packaged) and associated
diagnostic radiopharmaceuticals were billed approximately 3 million
times during the first 9 months of both CY 2007 and CY 2008. Further
analysis revealed that we paid hospitals over $637 million for nuclear
medicine procedures and diagnostic radiopharmaceuticals during the
first 9 months of CY 2007, when diagnostic radiopharmaceuticals were
separately payable, and over $619 million for nuclear medicine
procedures and diagnostic radiopharmaceuticals during the first 9
months of CY 2008, when payment for diagnostic radiopharmaceuticals was
packaged. This represents a 3 percent decrease in aggregate payment
between the first 9 months of CY 2007 and the first 9 months of CY
2008.
Using the same data, we calculated an average payment per service
or item billed (including nuclear medicine procedures and packaged or
separately payable diagnostic radiopharmaceuticals) of $203 in CY 2007
and $198 in CY 2008 for nuclear medicine procedures. This represents a
decrease of 2 percent in average payment per item or service billed
between CY 2007 and CY 2008. It is unclear how much of the decrease in
estimated aggregate or average per service or item billed payment may
be due to packaging payment for diagnostic radiopharmaceuticals (and
other services that were newly packaged for CY 2008) and how much may
be due to the usual annual APC recalibration and typical fluctuations
in service frequency. However, we believe that all of these factors
likely contributed to the slight decrease in aggregate payment in CY
2008, as compared to CY 2007. Overall, the observed changes between CY
2007 and CY 2008 are very small and indicate that there has been very
little change in frequency or aggregate payment in this clinical area
between CY 2007 and CY 2008.
We similarly analyzed 9 months of CY 2007 and CY 2008 data related
to all services that were packaged during CY 2008 because they were
categorized as guidance services. Analysis of the guidance category
(which includes image-guided radiation therapy services) showed that
the frequency of guidance services increased by 2 percent between the
first 9 months of CY 2007 and the first 9 months of CY 2008. One
percent fewer hospitals reported one or more guidance services during
CY 2007 as compared to CY 2008.
We further analyzed 9 months of CY 2007 and CY 2008 claims data for
radiation oncology services that would be accompanied by radiation
oncology guidance. We found that radiation oncology services (including
radiation oncology guidance services) were billed approximately 4
million times in CY 2007 and 3.9 million times in CY 2008, representing
a decrease in frequency of approximately 5 percent between CY 2007 and
CY 2008. These numbers represent each instance where a radiation
oncology service or a radiation oncology guidance service was billed.
Our analysis indicates that hospitals were paid over $818 million for
radiation oncology services and radiation oncology guidance services
under the OPPS during the first 9 months of CY 2007, when radiation
oncology guidance services were separately payable. During the first 9
months of CY 2008, when payments for radiation oncology guidance were
packaged, hospitals were paid over $740 million for radiation oncology
services under the OPPS. This $740 million includes packaged payment
for radiation oncology guidance services and represents a 10 percent
decrease in aggregate payment from CY 2007 to CY 2008. Using the first
9 months of data for both CY 2007 and CY 2008, we calculated an average
payment per radiation oncology service or item billed of $201 in CY
2007 and $190 in CY 2008, representing a decrease of 5 percent from CY
2007 to CY 2008. It is unclear how much of the decrease in aggregate
payment and the decrease in average payment per service provided may be
due to packaging payment for radiation oncology guidance services (and
other services that were newly packaged for CY 2008) and how much may
be due to the usual annual APC recalibration and typical fluctuations
in service frequency. This analysis is discussed in further detail
below, under ``Recommendation 1'' in this section of this proposed
rule. In that analysis, we demonstrate that the volume of some packaged
radiation oncology guidance services increased during the period,
leading us to conclude that, irrespective of the decline in the
frequency of radiation oncology services in general, hospitals do not
appear to be changing their practice patterns specifically in response
to packaged payment for radiation oncology guidance services.
We similarly analyzed 9 months of CY 2007 and CY 2008 data related
to all services that were packaged during CY 2008 because they were
categorized as intraoperative services. Analysis of the intraoperative
category (which includes intravascular ultrasound (IVUS), intracardiac
echocardiography (ICE), and coronary fractional flow reserve (FFR))
showed minimal changes in the frequency and the number of reporting
hospitals between CY 2007 and CY 2008.
We found that cardiac catheterization and other percutaneous
vascular procedures that would typically be accompanied by IVUS, ICE
and FFR (including IVUS, ICE, and FFR) were billed approximately
375,000 times in CY 2007 and approximately 400,000 times in CY 2008,
representing an increase of 8 percent in the number of services and
items billed between CY 2007 and CY 2008. Further analysis revealed
that the OPPS paid hospitals over $912 million for cardiac
catheterizations, other related services, and IVUS, ICE, and FFR in CY
2007, when IVUS, ICE, and FFR were separately payable. In the first 9
months of CY 2008, the OPPS paid hospitals approximately $1.1 billion
for cardiac catheterization and other percutaneous vascular procedures
and IVUS, ICE, and FFR, when payments for IVUS, ICE, and FFR were
packaged. This represents a 25 percent increase in payment from CY 2007
to CY 2008. Using the 9 months of data for both CY 2007 and CY 2008, we
calculated an average payment per service or item provided of $2,430 in
CY 2007 and $2,800 in CY 2008 for cardiac catheterization and other
related services. This represents an increase of 15 percent in average
payment per item or service from CY 2007 to CY 2008.
We cannot determine how much of the 25 percent increase in
aggregate payment for these services may be due to the packaging of
payment for IVUS, ICE, and FFR (and other services that were newly
packaged for CY 2008) and how much may be due to the usual annual APC
recalibration and typical fluctuations in service frequency. However,
we believe that all of these factors contributed to the increase in
payment between these 2 years.
The three remaining packaging categories (excluding observation
services, which are further discussed in section II.A.2.e.(1) of this
proposed

[[Page 35289]]

rule), contrast agents, image processing services, and imaging
supervision and interpretation services, show minimal changes in
frequency between CY 2007 and CY 2008, ranging from a 2 percent
increase to a 1 percent decrease in frequency. Similarly, when
examining the number of hospitals reporting these services, the data
show similar numbers of hospitals reporting these services in CY 2007,
when these services were separately payable, and CY2008, when they were
packaged. Specifically, the percentage change in the number of
reporting hospitals for these categories between CY 2007 and CY 2008
ranges from 0 percent to a decrease of 1 percent.
In summary, these preliminary data indicate that hospitals in
aggregate do not appear to have significantly changed their service
reporting patterns as a result of the expanded packaging adopted for
the OPPS beginning in CY 2008.
The APC Panel's Packaging Subcommittee reviewed the packaging
status of several CPT codes and reported its findings to the APC Panel
at its February 2009 meeting. The full report of the February 18-19,
2009 APC Panel meeting can be found on the CMS Web site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp. The APC Panel
accepted the report of the Packaging Subcommittee, heard several
presentations related to packaged services, discussed the deliberations
of the Packaging Subcommittee, and recommended that--
1. CMS pay separately for radiation therapy guidance services
performed in the treatment room for 2 years and then reevaluate
packaging on the basis of claims data. (Recommendation 1)
2. CMS continue to analyze the impact of increased packaging on
beneficiaries and provide more detailed versions of the analyses
presented at the February 2009 meeting of services initially packaged
in CY 2008 at the next Panel meeting. In addition, the Panel requested
that, in the more detailed analyses of radiation oncology services that
would be accompanied by radiation oncology guidance, CMS stratify the
data according to the type of radiation oncology service, specifically,
intensity modulated radiation therapy, stereotactic radiosurgery,
brachytherapy, and conventional radiation therapy. (Recommendation 2)
3. CMS continue to analyze the impact on beneficiaries of increased
packaging of diagnostic radiopharmaceuticals and provide more detailed
analyses at the next Panel meeting. In addition, the Panel requested
that, in the more detailed analyses of packaging of diagnostic
radiopharmaceuticals by type of nuclear medicine scan, CMS break down
the data according to the specific CPT codes billed with the diagnostic
radiopharmaceuticals. (Recommendation 3)
4. CPT code 36592 (Collection of blood specimen using established
central or peripheral catheter, venous, not otherwise specified) remain
assigned to APC 0624 (Phlebotomy and Minor Vascular Access Device
Procedures) for CY 2010. (Recommendation 4)
5. The Packaging Subcommittee continue its work until the next APC
Panel meeting. (Recommendation 5)
We address each of these recommendations in turn in the discussion
that follows.
Recommendation 1
We are not proposing to pay separately for radiation therapy
guidance services provided in the treatment room for CY 2010, which
would be consistent with the APC Panel's recommendation. Instead, we
are proposing to maintain the packaged status of radiation therapy
guidance services performed in the treatment room for CY 2010.
As discussed above in this section, during the February 2009 APC
Panel meeting, we presented data that estimated that aggregate payment
for radiation oncology services, including the payment for radiation
oncology guidance services, decreased by approximately 10 percent
between the first 9 months of CY 2007 (before the expanded packaging
went into effect) and the first 9 months of CY 2008 (after the expanded
packaging went into effect). This decline may be attributable to many
factors, including lower payment rates for common radiation oncology
services in CY 2008 specifically and generally reduced volume for
separately paid radiation oncology services. The APC Panel expressed
concern that this aggregate payment decrease could inhibit patient
access to technologically advanced and clinically valuable radiation
oncology guidance services whose payment became packaged effective
January 1, 2008.
While we presented data to the APC Panel comparing payment between
CY 2007 and CY 2008 in response to past APC Panel recommendations, we
note that we made changes to the bypass list for CY 2009 to ensure that
we more fully captured all packaged costs on each claim, which resulted
in significantly increased payment rates for many of these radiation
oncology services for CY 2009, as compared to the CY 2008 payment rates
for these services.
Specifically, as discussed in detail in the CY 2009 OPPS/ASC final
rule with comment period (73 FR 68575), in response to public comments
received, several radiation oncology CPT codes had been included on the
bypass list for the CY 2008 OPPS although they failed to meet the
empirical criteria for inclusion on the bypass list. For CY 2009, we
removed from the bypass list those radiation oncology codes that did
not meet the empirical criteria. As a result of these changes to the
bypass list, the CY 2009 median costs for several common radiation
oncology APCs increased by more than 9 percent as compared to the CY
2008 median costs, while the median costs for some of the other lower
volume radiation oncology APCs, most notably the brachytherapy source
application APCs, declined. For example, as noted in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68575), these changes to the
bypass list resulted in payment for the common combination of intensity
modulated radiation therapy (IMRT) and image guided radiation therapy
(IGRT) increasing from $348 in CY 2008 to $411 in CY 2009. Notably, the
CY 2007 total payment rate for this combination of services, before the
expanded packaging went into effect, was $403.
We do not yet have CY 2009 claims data reflecting utilization based
on the payment rates in effect for CY 2009. However, we do not expect
that an overall per service payment comparison between CY 2007 and CY
2009 would likely demonstrate a significant decrease in payment for
radiation oncology services because we have adopted a significant
increase in the CY 2009 payment rates for the most common radiation
oncology services. In addition, we note that CY 2010 proposed rule data
indicate that the CY 2010 APC median costs applicable to most radiation
oncology services experience increases of approximately 2 to 15 percent
when compared to their CY 2009 median costs. Although a small number of
other lower volume radiation oncology APCs, most notably the
brachytherapy and stereotactic radiosurgery APCs, experience declines
in median costs, we do not expect that an overall per service payment
comparison between CY 2007 and CY 2010 would likely demonstrate a
significant decrease in payment for radiation oncology services over
this time period.
While we understand that the CY 2007 to CY 2008 aggregate payment

[[Page 35290]]

comparison provided to the APC Panel during the February 2009 meeting
may have contributed to the APC Panel's particular concern about
payment for radiation oncology services for CY 2010, we do not believe
that packaging payment for radiation oncology guidance services has
primarily caused this decline. In addition, we do not believe that
beneficiaries' access to these services has been limited as a result of
packaging payment for radiation oncology guidance services. In the data
presented to the APC Panel at the February 2009 meeting, the number of
all packaged guidance services provided during the first 9 months of CY
2008 represented a 2 percent increase from the number of guidance
services provided during the first 9 months of CY 2007. Further,
although the CY 2008 volume of the radiation oncology guidance codes
that we newly packaged for CY 2008 varied, with some of the services
experiencing increases in volume and others experiencing decreases in
volume, in aggregate, the reporting of radiation oncology guidance
services increased by 4 percent in the first 9 months of claims for CY
2008, as compared to the first 9 months of CY 2007, and the number of
hospitals reporting these services also increased. This further
supports our belief that, irrespective of the decline in the frequency
of radiation oncology services in general, hospitals do not appear to
be changing their practice patterns specifically in response to
packaged payment for radiation oncology guidance services.
Therefore, we are not proposing to pay separately for radiation
therapy guidance services performed in the treatment room for 2 years
as the APC Panel recommended. Instead, for CY 2010, we are proposing to
maintain the packaged status of all radiation therapy guidance
services, including those radiation therapy guidance services performed
in the treatment room.
Recommendation 2
We are accepting the APC Panel recommendation to continue to
analyze the impact of increased packaging on beneficiaries and to share
more data with the APC Panel. We will carefully consider which
additional data would be most informative for the APC Panel and will
discuss these data with the APC Panel at the next CY 2009 APC Panel
meeting and/or the first CY 2010 APC Panel meeting. Similarly, we will
determine what additional detailed data related to radiation oncology
services would be helpful to the APC Panel and will share these data at
the next CY 2009 APC Panel meeting and/or the first CY 2010 APC Panel
meeting.
Recommendation 3
We are accepting the APC Panel's recommendation that CMS continue
to analyze the impact on beneficiaries of increased packaging of
diagnostic radiopharmaceuticals and provide more detailed analyses at
the next APC Panel meeting. In these analyses of diagnostic
radiopharmaceuticals by type of nuclear medicine scan, the APC Panel
further recommended that CMS analyze the data according to the specific
CPT codes billed with the diagnostic radiopharmaceuticals. This APC
Panel recommendation is discussed in detail in section II.A.2.d (5) of
this proposed rule. We are accepting the APC Panel's recommendation and
will provide additional data to the APC Panel at an upcoming meeting.
Recommendation 4
For CY 2010, we are proposing to continue 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 to assign it to APC 0624 (Phlebotomy and Minor Vascular Access
Device Procedures), the same APC to which CPT code 36591 (Collection of
blood specimen from a completely implantable venous access device) is
currently assigned as the APC Panel recommended. 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. For CY
2009, in response to public comments, we proposed to treat CPT code
36592 as a conditionally packaged code, with assignment to APC 0624. In
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68576), we
discussed the public comments we received regarding our proposed
treatment of CPT code 36592. Several of these commenters supported our
proposal to treat CPT code 36592 as a conditionally packaged code with
assignment to APC 0624. We stated in the CY 2009 OPPS/ASC final rule
with comment period that when cost data for CPT code 36592 became
available for the CY 2010 OPPS annual update, we would reevaluate
whether assignment to APC 0624 continued to be appropriate.
Based on our analysis of claims data, our clinical understanding of
the service, and our discussion with the APC Panel Packaging
Subcommittee, we are proposing to maintain the assignment of CPT code
36592 to APC 0624 for CY 2010, consistent with the APC Panel
recommendation, and we are proposing to continue to treat CPT code
36592 as an ``STVX packaged code'' and assign it to APC 0624. We note
that we expect hospitals to follow the CPT guidance related to CPT
codes 36591 and 36592 regarding when these services should be
appropriately reported.
Recommendation 5
In response to the APC Panel's recommendation for the Packaging
Subcommittee to remain active until the next APC Panel meeting, we note
that we have accepted this recommendation and the APC Panel Packaging
Subcommittee remains active. 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. We also encourage
recommendations of specific services or procedures whose payment would
be most appropriately packaged under the OPPS. Additional detailed
suggestions for the Packaging Subcommittee should be submitted by e-
mail to [email protected] with Packaging Subcommittee in the subject
line.
(2) Other Service-Specific Packaging Issues
The APC Panel also recommended that CMS reassign CPT code 76098
(Radiological examination, surgical specimen) from APC 0317 (Level II
Miscellaneous Radiology Procedures) to APC 0260 (Level I Plain Film),
and to place CPT code 76098 on the bypass list. Based on our analysis
of the CY 2010 claims containing CPT 76098 and clinical review of the
services being furnished, we are proposing to treat CPT code 76098 as a
``T-packaged'' code for CY 2010 with continued assignment to APC 0317.
As discussed above, a ``T-packaged code,'' identified with status
indicator ``Q2,'' describes a code whose payment is packaged when one
or more separately paid surgical procedures with a status indicator of
``T'' are provided during the hospital encounter. The assignment of
status indicator ``Q2'' to CPT code 76098 would result in more claims
data being available to set the median costs for the surgical
procedures with which CPT code 76098 is most commonly billed (for
example, CPT code 19101 (Biopsy of breast, percutaneous, needle core,
not using image guidance; open incisional)), while continuing to
provide appropriate

[[Page 35291]]

separate payment that reflects the costs of the service, including its
packaged costs, when it is not billed with a surgical procedure.
Further discussion related to this proposal is included in section
II.A.1.b. of this proposed rule.

B. Proposed Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires us to update the
conversion factor used to determine payment rates under the OPPS on an
annual basis. Section 1833(t)(3)(C)(iv) of the Act provides that, for
CY 2010, the update is equal to the hospital inpatient market basket
percentage increase applicable to hospital discharges under section
1886(b)(3)(B)(iii) of the Act. The proposed hospital market basket
increase for FY 2010 published in the FY 2010 IPPS/LTCH PPS proposed
rule (74 FR24239 through 24241) is 2.1 percent. To set the proposed
OPPS conversion factor for CY 2010, we increased the CY 2009 conversion
factor of $66.059, as specified in the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68584 through 68585), by 2.1 percent. Hospitals
that fail to meet the reporting requirements of the Hospital Outpatient
Quality Data Reporting Program (HOP QDRP) 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 proposed rule.
In accordance with section 1833(t)(9)(B) of the Act, we further
adjusted the conversion factor for CY 2010 to ensure that any revisions
we are proposing to make 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 1.0000 for wage index changes by
comparing total payments from our simulation model using the FY 2010
IPPS proposed wage index values to those payments using the current (FY
2009) IPPS wage index values. For CY 2010, we are not proposing a
change to our rural adjustment policy. Therefore, the proposed budget
neutrality factor for the rural adjustment is 1.0000.
For this proposed rule, we estimate that pass-through spending for
both drugs and biologicals and devices for CY 2010 would equal
approximately $38 million, which represents 0.12 percent of total
projected CY 2010 OPPS spending. Therefore, the conversion factor is
also adjusted by the difference between the 0.11 percent estimate of
pass-through spending set aside for CY 2009 and the 0.12 percent
estimate of CY 2010 pass-through spending. Finally, estimated payments
for outliers remain at 1.0 percent of total OPPS payments for CY 2010.
The proposed market basket increase update factor of 2.1 percent
for CY 2010 and the adjustment of 0.01 percent of projected OPPS
spending for the difference in the pass-through spending set aside
resulted in a full proposed market basket conversion factor for CY 2010
of $67.439. To calculate the proposed CY 2010 reduced market basket
conversion factor for those hospitals that fail to meet the
requirements of the HOP QDRP for the full CY 2010 payment update, we
made all other adjustments discussed above, but used a proposed reduced
market basket increase update factor of 0.1 percent. This resulted in a
proposed reduced market basket conversion factor for CY 2010 of $66.118
for those hospitals that fail to meet the HOP QDRP requirements.

C. Proposed Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to
determine a wage adjustment factor to adjust, for geographic wage
differences, the portion of the OPPS payment rate, which includes the
copayment standardized amount, that is attributable to labor and labor-
related cost. This adjustment must be made in a budget neutral manner
and budget neutrality is discussed in section II.B. of this proposed
rule.
The OPPS labor-related share is 60 percent of the national OPPS
payment. This labor-related share is based on a regression analysis
that determined that approximately 60 percent of the costs of services
paid under the OPPS were attributable to wage costs. We confirmed that
this labor-related share for outpatient services is still appropriate
during our regression analysis for the payment adjustment for rural
hospitals in the CY 2006 OPPS final rule with comment period (70 FR
68553). Therefore, we are not proposing to revise this policy for the
CY 2010 OPPS. We refer readers to section II.G. of this proposed rule
for a description and example of how the wage index for a particular
hospital is used to determine the payment for the hospital.
As discussed in section II.A.2.c. of this proposed rule, for
estimating national median APC costs, we standardize 60 percent of
estimated claims costs for geographic area wage variation using the
same FY 2010 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 care short-stay hospital under
the IPPS would also apply to that hospital under the OPPS. As initially
explained in the September 8, 1998 OPPS proposed rule, we believed and
continue to believe that using the IPPS wage index as the source of an
adjustment factor for the OPPS is reasonable and logical, given the
inseparable, subordinate status of the HOPD within the hospital
overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS
wage index is updated annually. Therefore, in accordance with our
established policy, we are proposing to use the final FY 2010 version
of the IPPS wage indices used to pay IPPS hospitals to adjust the CY
2010 OPPS payment rates and copayment amounts for geographic
differences in labor cost for all providers that participate in the
OPPS, including providers that are not paid under the IPPS (referred to
in this section as ``non-IPPS'' providers).
We note that the proposed FY 2010 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. For the FY
2010 wage indices, these changes include a continuing transition to the
new reclassification threshold criteria that were finalized in the FY
2009 IPPS final rule (73 FR 48568 through 48570), updated 2007-2008
occupational mix survey data, and a continuing transition to State-
level budget neutrality for the rural and imputed floors. We refer
readers to the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24137 through
24153) for a detailed discussion of all proposed changes to the FY 2010
IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS
final rule with comment period (69 FR 65842 through 65844) and
subsequent OPPS

[[Page 35292]]

rules for a detailed discussion of the history of these wage index
adjustments as applied under the OPPS.
The IPPS wage indices that we are proposing to adopt in this
proposed rule include all reclassifications that are approved by the
Medicare Geographic Classification Review Board (MGCRB) for FY 2010. 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 Public Law 109-432 (MIEA-TRHCA) and section 117(a)(1)
of Public Law 110-173 (MMSEA) were set to terminate September 30, 2008,
but were further extended by section 124 of Public Law 110-275 (MIPPA)
through September 30, 2009.
As noted in the CY 2009 OPPS/ASC final rule with comment period (73
FR 68585), after issuance of the CY 2009 OPPS/ASC proposed rule,
section 124 of Public Law 110-275 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 CY 2009 proposed rule because Public Law 110-275 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 adopted all
section 508 geographic reclassifications through September 30, 2009.
Similar to our treatment of section 508 reclassifications extended
under Public Law 110-173 as described in the CY 2009 OPPS/ASC final
rule with comment period (73 FR 68586), hospitals with section 508
reclassifications 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 have extended 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 Public Law 110-275 (73
FR 57888). Because the provisions of section 124 of Public Law 110-275
expire in 2009 and are not applicable to FY 2010, we are not making any
proposals related to those provisions for the OPPS wage indices for CY
2010.
For purposes of the OPPS, we are proposing to continue our policy
in CY 2010 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 for the FY 2010 IPPS proposed wage
indices (74 FR 24446 through 24462) 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 proposed rule, with the addition of non-IPPS hospitals that
would receive the section 505 out-migration adjustment under the CY
2010 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 are
proposing to use the final FY 2010 IPPS wage indices for calculating
the OPPS payments in CY 2010. With the exception of the out-migration
wage adjustment table (Addendum L to this proposed rule), which
includes non-IPPS hospitals paid under the OPPS, we are not reprinting
the FY 2010 IPPS proposed 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 FY 2010 IPPS proposed wage index tables.

D. Proposed Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims
for ratesetting, CMS uses CCRs to determine outlier payments, payments
for pass-through devices, and monthly interim transitional corridor
payments under the OPPS during the PPS year. Medicare contractors
cannot calculate a CCR for some hospitals 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). We are
proposing to update the default ratios for CY 2010 using the most
recent cost report data. We discuss our policy for using default CCRs,
including setting the ceiling threshold for a valid CCR, in the CY 2009
OPPS/ASC final rule with comment period (73 FR 68594 through 68599) in
the context of our adoption of an outlier reconciliation policy for
cost reports beginning on or after January 1, 2009.
For CY 2010, 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 for setting the
CY 2010 proposed OPPS relative weights. Table 12 below lists the
proposed CY 2010 default urban and rural CCRs by State and compares
them to last year's default CCRs. These proposed 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 the volume of separately paid
line-items on hospital claims corresponding to the year of the majority
of cost reports used to calculate the overall CCRs. We refer readers to
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 our
trimming criteria.
For this proposed rule, approximately 85 percent of the submitted
cost reports utilized in the default ratio calculations represented
data for cost reporting periods ending in CY 2007 and 14 percent were
for cost reporting periods ending in CY 2006. For Maryland, we used 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

[[Page 35293]]

general, observed changes in the statewide average default CCRs between
CY 2009 and CY 2010 are modest and the few significant changes are
associated with areas that have a small number of hospitals.

Table 12--Proposed CY 2010 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
Previous
Proposed CY default CCR
State Urban/rural 2010 default (CY 2009 OPPS
CCR Final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA....................................... RURAL............................ 0.511 0.562
ALASKA....................................... URBAN............................ 0.334 0.345
ALABAMA...................................... RURAL............................ 0.218 0.221
ALABAMA...................................... URBAN............................ 0.202 0.202
ARKANSAS..................................... RURAL............................ 0.256 0.256
ARKANSAS..................................... URBAN............................ 0.259 0.268
ARIZONA...................................... RURAL............................ 0.260 0.267
ARIZONA...................................... URBAN............................ 0.219 0.226
CALIFORNIA................................... RURAL............................ 0.210 0.219
CALIFORNIA................................... URBAN............................ 0.212 0.218
COLORADO..................................... RURAL............................ 0.343 0.346
COLORADO..................................... URBAN............................ 0.251 0.248
CONNECTICUT.................................. RURAL............................ 0.371 0.372
CONNECTICUT.................................. URBAN............................ 0.333 0.322
DISTRICT OF COLUMBIA......................... URBAN............................ 0.327 0.329
DELAWARE..................................... RURAL............................ 0.320 0.302
DELAWARE..................................... URBAN............................ 0.382 0.349
FLORIDA...................................... RURAL............................ 0.205 0.204
FLORIDA...................................... URBAN............................ 0.189 0.189
GEORGIA...................................... RURAL............................ 0.267 0.267
GEORGIA...................................... URBAN............................ 0.247 0.251
HAWAII....................................... RURAL............................ 0.357 0.367
HAWAII....................................... URBAN............................ 0.307 0.344
IOWA......................................... RURAL............................ 0.332 0.439
IOWA......................................... URBAN............................ 0.292 0.294
IDAHO........................................ RURAL............................ 0.477 0.449
IDAHO........................................ URBAN............................ 0.425 0.419
ILLINOIS..................................... RURAL............................ 0.277 0.280
ILLINOIS..................................... URBAN............................ 0.261 0.266
INDIANA...................................... RURAL............................ 0.295 0.298
INDIANA...................................... URBAN............................ 0.297 0.295
KANSAS....................................... RURAL............................ 0.297 0.300
KANSAS....................................... URBAN............................ 0.238 0.238
KENTUCKY..................................... RURAL............................ 0.233 0.236
KENTUCKY..................................... URBAN............................ 0.260 0.255
LOUISIANA.................................... RURAL............................ 0.281 0.283
LOUISIANA.................................... URBAN............................ 0.265 0.258
MARYLAND..................................... RURAL............................ 0.299 0.303
MARYLAND..................................... URBAN............................ 0.271 0.276
MASSACHUSETTS................................ URBAN............................ 0.325 0.328
MAINE........................................ RURAL............................ 0.451 0.452
MAINE........................................ URBAN............................ 0.436 0.428
MICHIGAN..................................... RURAL............................ 0.319 0.317
MICHIGAN..................................... URBAN............................ 0.319 0.321
MINNESOTA.................................... RURAL............................ 0.485 0.488
MINNESOTA.................................... URBAN............................ 0.330 0.348
MISSOURI..................................... RURAL............................ 0.274 0.269
MISSOURI..................................... URBAN............................ 0.276 0.282
MISSISSIPPI.................................. RURAL............................ 0.261 0.261
MISSISSIPPI.................................. URBAN............................ 0.198 0.209
MONTANA...................................... RURAL............................ 0.468 0.455
MONTANA...................................... URBAN............................ 0.466 0.439
NORTH CAROLINA............................... RURAL............................ 0.272 0.272
NORTH CAROLINA............................... URBAN............................ 0.288 0.292
NORTH DAKOTA................................. RURAL............................ 0.349 0.369
NORTH DAKOTA................................. URBAN............................ 0.352 0.354
NEBRASKA..................................... RURAL............................ 0.346 0.345
NEBRASKA..................................... URBAN............................ 0.264 0.283
NEW HAMPSHIRE................................ RURAL............................ 0.350 0.350
NEW HAMPSHIRE................................ URBAN............................ 0.288 0.296
NEW JERSEY................................... URBAN............................ 0.251 0.257
NEW MEXICO................................... RURAL............................ 0.264 0.263
NEW MEXICO................................... URBAN............................ 0.337 0.328
NEVADA....................................... RURAL............................ 0.311 0.312
NEVADA....................................... URBAN............................ 0.192 0.192
NEW YORK..................................... RURAL............................ 0.421 0.412

[[Page 35294]]

NEW YORK..................................... URBAN............................ 0.385 0.388
OHIO......................................... RURAL............................ 0.348 0.353
OHIO......................................... URBAN............................ 0.254 0.258
OKLAHOMA..................................... RURAL............................ 0.275 0.278
OKLAHOMA..................................... URBAN............................ 0.238 0.238
OREGON....................................... RURAL............................ 0.311 0.318
OREGON....................................... URBAN............................ 0.353 0.374
PENNSYLVANIA................................. RURAL............................ 0.282 0.284
PENNSYLVANIA................................. URBAN............................ 0.224 0.232
PUERTO RICO.................................. URBAN............................ 0.487 0.519
RHODE ISLAND................................. URBAN............................ 0.293 0.294
SOUTH CAROLINA............................... RURAL............................ 0.243 0.242
SOUTH CAROLINA............................... URBAN............................ 0.245 0.240
SOUTH DAKOTA................................. RURAL............................ 0.328 0.336
SOUTH DAKOTA................................. URBAN............................ 0.263 0.267
TENNESSEE.................................... RURAL............................ 0.237 0.244
TENNESSEE.................................... URBAN............................ 0.220 0.221
TEXAS........................................ RURAL............................ 0.256 0.257
TEXAS........................................ URBAN............................ 0.230 0.238
UTAH......................................... RURAL............................ 0.406 0.413
UTAH......................................... URBAN............................ 0.409 0.430
VIRGINIA..................................... RURAL............................ 0.253 0.257
VIRGINIA..................................... URBAN............................ 0.263 0.266
VERMONT...................................... RURAL............................ 0.412 0.406
VERMONT...................................... URBAN............................ 0.422 0.422
WASHINGTON................................... RURAL............................ 0.354 0.349
WASHINGTON................................... URBAN............................ 0.336 0.342
WISCONSIN.................................... RURAL............................ 0.402 0.399
WISCONSIN.................................... URBAN............................ 0.334 0.346
WEST VIRGINIA................................ RURAL............................ 0.292 0.293
WEST VIRGINIA................................ URBAN............................ 0.348 0.349
WYOMING...................................... RURAL............................ 0.413 0.418
WYOMING...................................... URBAN............................ 0.315 0.331
----------------------------------------------------------------------------------------------------------------

E. Proposed 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 payments or transitional outpatient payments (TOPs)) if the
payments it received for covered OPD services under the OPPS were less
than the payments it would have received for the same services under
the prior reasonable cost-based system (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 and were
intended 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 was less than the provider's pre-BBA
amount, the amount of payment was 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.

[[Page 35295]]

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 of 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.
For CY 2009, we revised Sec. Sec. 419.70(d)(2) and (d)(4) and
added a new paragraph (d)(5) to incorporate the provisions of section
147 of Public Law 110-275. In addition, we made other technical changes
to Sec. 419.70(d)(2) to more precisely capture our existing policy and
to correct an inaccurate cross-reference. We also made technical
corrections to the cross-references in paragraphs (e), (g), and (i) of
Sec. 419.70. For CY 2010, we are proposing to make a technical
correction to the heading of Sec. 419.70(d)(5) to correctly identify
the policy as described in the subsequent regulation text. The
paragraph heading should indicate that the adjustment applies to small
SCHs, rather than to rural SCHs.
Effective for services provided on or after January 1, 2010, rural
hospitals and SCHs (including EACHs) having 100 or fewer beds will no
longer be eligible for hold harmless TOPs, in accordance with section
147 of Public Law 110-275.
2. Proposed 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 devices 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 hospitals
in 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 separately payable drugs and
biologicals, brachytherapy sources, and devices 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, including
EACHs, again in CY 2008 and CY 2009. Further, in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68590), we updated 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.
For the CY 2010 OPPS, we are proposing to continue our 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
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs. 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.

F. Proposed Hospital Outpatient Outlier Payments

1. Background
Currently, the OPPS pays outlier payments on a service-by-service
basis. For CY 2009, 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 $1,800
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 the cost of a service 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.
Before CY 2009, this outlier payment had historically been considered a
final payment by longstanding OPPS policy. We implemented a
reconciliation process similar to the IPPS outlier reconciliation
process for cost reports with cost reporting periods beginning on or
after January 1, 2009 (73 FR 68594 through 68599).
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. We previously estimated
that CY 2008 outlier payments were approximately 0.73 percent of the
total CY 2008 OPPS payments (73 FR 68592). Our current estimate of
total outlier payments as a percent of total CY 2008 OPPS payment,
using available CY 2008 claims and the revised OPPS expenditure
estimate, is approximately 1.2 percent of the total aggregated OPPS
payments. Therefore, for CY 2008, we estimate that we paid
approximately 0.2 percent more than the CY 2008 outlier target of 1.0
percent of total aggregated OPPS payments. We will update our estimate
of CY 2008 outlier spending in the CY 2010 OPPS/ASC final rule with
comment period.
As explained in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68594), we set our projected target for aggregate outlier
payments at 1.0 percent of the aggregate total payments under the OPPS
for CY 2009. The outlier thresholds were set so that estimated CY 2009
aggregate outlier payments would equal 1.0 percent of

[[Page 35296]]

the total aggregated payments under the OPPS. Using the same set of CY
2008 claims and CY 2009 payment rates, we currently estimate that the
aggregate outlier payments for CY 2009 would be approximately 1.08
percent of the total CY 2009 OPPS payments. The difference between 1.0
percent and 1.08 percent is reflected in the regulatory impact analysis
in section XXI.B. of this proposed rule. We note that we provide
estimated CY 2010 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
For CY 2010, we are proposing 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. We are proposing that a
portion of that 1.0 percent, specifically 0.02 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 as a proportion of total estimated outlier payments.
As discussed in section X.C. of this proposed rule, for CMHCs, we are
proposing that if a CMHC's cost for partial hospitalization services,
paid under either APC 0172 (Level I Partial Hospitalization (3
services)) or APC 0173 (Level II Partial Hospitalization (4 or more
services)), exceeds 3.40 times the payment for APC 0173, the outlier
payment would be calculated as 50 percent of the amount by which the
cost exceeds 3.40 times the APC 0173 payment rate. For further
discussion of CMHC outlier payments, we refer readers to section X.C.
of this proposed rule. To ensure that the estimated CY 2010 aggregate
outlier payments would equal 1.0 percent of estimated aggregate total
payments under the OPPS, we are proposing that the hospital outlier
threshold be set so that outlier payments would be triggered when the
cost of furnishing a service or procedure by a hospital exceeds 1.75
times the APC payment amount and exceeds the APC payment rate plus a
$2,225 fixed-dollar threshold. This proposed threshold reflects the
methodology discussed below in this section, as well as the proposed
APC recalibration for CY 2010.
We calculated the fixed-dollar threshold for this proposed rule
using largely the same methodology as we did in CY 2009 (73 FR 41462).
For purposes of estimating outlier payments for this proposed rule, we
used the CCRs available in the April 2009 update to the Outpatient
Provider Specific File (OPSF). The OPSF contains provider-specific
data, such as the most current CCR, which are 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 this
proposed rule, we used CY 2008 claims to model the CY 2010 OPPS. In
order to estimate the CY 2010 hospital outlier payments for this
proposed rule, we inflated the charges on the CY 2008 claims using the
same inflation factor of 1.1511 that we used to estimate the IPPS
fixed-dollar outlier threshold for the FY 2010 IPPS/LTCH PPS proposed
rule (74 FR 24245). For 1 year, the inflation factor we used is 1.0729.
The methodology for determining this charge inflation factor was
discussed in the FY 2010 IPPS/LTCH PPS proposed rule (74 FR 24245). 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 could systematically overestimate
the OPPS hospital outlier threshold if we did not apply a CCR inflation
adjustment factor. Therefore, we are proposing to apply the same CCR
inflation adjustment factor that we proposed to apply for the FY 2010
IPPS outlier calculation to the CCRs used to simulate the CY 2010 OPPS
outlier payments that determine the fixed-dollar threshold.
Specifically, for CY 2010, we are proposing to apply an adjustment of
0.9840 to the CCRs that were in the April 2009 OPSF to trend them
forward from CY 2009 to CY 2010. The methodology for calculating this
adjustment is discussed in the FY 2010 IPPS/LTCH PPS proposed rule (74
FR 24245 through 24247).
Therefore, to model hospital outlier payments for this proposed
rule, we applied the overall CCRs from the April 2009 OPSF file after
adjustment (using the proposed CCR inflation adjustment factor of
0.9840 to approximate CY 2010 CCRs) to charges on CY 2008 claims that
were adjusted (using the proposed charge inflation factor of 1.1511 to
approximate CY 2010 charges). We simulated aggregated CY 2010 hospital
outlier payments using these costs for several different fixed-dollar
thresholds, holding the 1.75 multiple threshold 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 2010 OPPS payments. We
estimate that a proposed fixed-dollar threshold of $2,225, combined
with the proposed multiple threshold of 1.75 times the APC payment
rate, would allocate 1.0 percent of aggregated total OPPS payments to
outlier payments. We are proposing to continue to make an outlier
payment that equals 50 percent of the amount by which the cost of
furnishing the service exceeds 1.75 times the APC payment amount when
both the 1.75 multiple threshold and the proposed fixed-dollar $2,225
threshold are met. For CMHCs, if a CMHC's cost for partial
hospitalization services, paid under either APC 0172 or APC 0173,
exceeds 3.40 times the payment for APC 0173, the outlier payment would
be calculated as 50 percent of the amount by which the cost exceeds
3.40 times the APC 0173 payment rate.
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 furnished 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 are proposing to continue our policy that we
implemented in CY 2009 that the hospitals' costs would be compared to
the reduced payments for purposes of outlier eligibility and payment
calculation. For more information on the HOP QDRP, we refer readers to
section XVI. of this proposed rule.
3. Outlier Reconciliation
In the CY 2009 OPPS/ASC final rule with comment period (73 CFR
68599), we adopted as final policy a process to reconcile hospital or
CMHC outlier payments at cost report settlement for services furnished
during cost reporting periods beginning in CY 2009. OPPS outlier
reconciliation ensures accurate

[[Page 35297]]

outlier payments for those facilities whose CCRs fluctuate
significantly relative to the CCRs of other facilities, and who receive
a significant amount of outlier payments. OPPS outlier reconciliation
thresholds are provided in section 10.7.2.1 of Chapter 4 of the
Medicare Claims Processing Manual (Pub. 100-4), reevaluated annually,
and modified if necessary. When the cost report is settled,
reconciliation of outlier payments will be based on the overall CCR,
calculated as 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 outlier payments ensures that the outlier payments
made are appropriate and that final outlier payments reflect the most
accurate cost data. In the CY 2009 OPPS/ASC finale rule with comment
period (73 FR 68599), we also finalized a proposal to adjust the amount
of final outlier payments determined during reconciliation for the time
value of money. The OPPS outlier reconciliation process will require
recalculating outlier payments for individual claims in order to
accurately determine the net effect of a change in an overall CCR on a
facility's total outlier payments. For cost reporting periods beginning
in CY 2009, Medicare contractors will begin to identify cost reports
that require outlier reconciliation as a component of cost report
settlement. At this time, CMS continues to develop a method for
reexamining claims to calculate the change in total outlier payments in
order to reconcile outlier payments for these cost reports.
As under the IPPS, we do not adjust the fixed-dollar threshold or
amount of total OPPS payment set aside for outlier payments for
reconciliation activity. The predictability of the fixed-dollar
threshold is an important component of a prospective payment system. We
do not adjust the prospectively set outlier threshold for the amount of
outlier payment reconciled at cost report settlement because such
action would be contrary to the prospective nature of the system. Our
outlier threshold calculation assumes that CCRs accurately estimate
hospital costs based on the information available to us at the time we
set the prospective fixed-dollar outlier threshold. For these reasons,
we are not incorporating any assumptions about the effects of
reconciliation into our calculation of the proposed OPPS fixed-dollar
outlier threshold.

G. Proposed 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 42
CFR Part 419, subparts C and D. The payment rate for most services and
procedures for which payment is made under the OPPS is the product of
the conversion factor calculated in accordance with section II.B. of
this proposed rule and the relative weight determined under section
II.A. of this proposed rule. Therefore, the proposed national
unadjusted payment rate for most APCs contained in Addendum A to this
proposed rule and for most HCPCS codes to which separate payment under
the OPPS has been assigned in Addendum B to this proposed rule was
calculated by multiplying the proposed CY 2010 scaled weight for the
APC by the proposed CY 2010 conversion factor.
We note that section 1833(t)(17) of the Act, which applies to
hospitals as defined under section 1886(d)(1)(B) of the Act, requires
that hospitals that fail to submit data required to be submitted on
quality measures selected by the Secretary, in the form and manner and
at a time specified by the Secretary, receive 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 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 proposed payment
reduction for hospitals that fail to meet the requirements of the HOP
QDRP, we refer readers to section XVI.D. of this proposed rule.
We demonstrate in the steps below how to determine the APC payments
that would 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,'' ``U,'' ``V,'' or ``X'' (as defined in Addendum D1 to this
proposed rule), in a circumstance in which the multiple procedure
discount does not apply and the procedure is not bilateral.
Individual providers interested in calculating the payment amount
that they would receive for a specific service from the proposed
national unadjusted payment rates presented in Addenda A and B to this
proposed rule should follow the formulas presented in the following
steps. For purposes of the payment calculations below, we refer to the
national unadjusted payment rate for hospitals that meet 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 0.98 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 2010 OPPS
increase factor.
Step 1. Calculate 60 percent (the labor-related portion) of the
proposed 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 a
specific service.

X is the 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
geographic statistical areas (which are based upon OMB standards) to
which hospitals are assigned for FY 2010 under the IPPS,
reclassifications through the MGCRB, section 1886(d)(8)(B) of the Act,
as well as ``Lugar'' reclassifications under section

[[Page 35298]]

1886(d)(8)(B) of the Act. We note that the reclassifications of
hospitals under section 508 of Public Law 108-173, as extended by
section 124 of Public Law 110-275, will expire on September 30, 2009,
and will not be applicable under the IPPS for FY 2010. Therefore, these
reclassifications will not apply to the CY 2010 OPPS. For further
discussion of the proposed changes to the FY 2010 IPPS wage indices, as
applied to the CY 2010 OPPS, we refer readers to section II.C. of this
proposed rule. The proposed wage index values include the occupational
mix adjustment described in section II.C. of this proposed rule that
was developed for the FY 2010 IPPS proposed payment rates appearing in
the Federal Register on May 22, 2009 (74 FR 24140 through 24144).
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 proposed rule contains the qualifying
counties and the proposed wage index increase developed for the FY 2010
IPPS published in the FY 2010 IPPS/LTCH PPS proposed rule as Table 4J
(74 FR 24446 through24462). 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 is the 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 is the 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, set forth 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
proposed full and reduced national unadjusted payment rates that would
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 Wayne, New Jersey that is assigned to CBSA
35644. This provider bills one service that is assigned to APC 0019
(Level I Excision/Biopsy). The proposed CY 2010 full national
unadjusted payment rate for APC 0019 is $292.33. The proposed reduced
national unadjusted payment rate for a hospital that fails to meet the
HOP QDRP requirements is $286.48. This reduced rate is calculated by
multiplying the reporting ratio of 0.98 by the full unadjusted payment
rate for APC 0019.
The proposed FY 2010 wage index for a provider located in CBSA
35644 in New Jersey is 1.2986. The labor portion of the full national
unadjusted payment is $227.77 (.60 * $292.33 *1.2986). The labor
portion of the reduced national unadjusted payment is $223.21 (.60 *
$286.48 *1.2986). The nonlabor portion of the full national unadjusted
payment is $116.93 (.40 * $292.33). The nonlabor portion of the reduced
national unadjusted payment is $114.59 (.40 * $286.48). The sum of the
labor and nonlabor portions of the full national adjusted payment is
$344.70 ($227.77 + $116.93). The sum of the reduced national adjusted
payment is $337.80 ($223.21 + $114.59).

H. Proposed Beneficiary Copayments

1. Background
Section 1833(t)(3)(B) of the Act requires the Secretary to set
rules for determining the unadjusted 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 2010, 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. Proposed Copayment Policy
For CY 2010, we are proposing to determine copayment amounts for
new and revised APCs using the same methodology that we implemented
beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS
final rule with comment period (68 FR 63458)). In addition, we are
proposing to use the same standard rounding principles that we have
historically used 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) in which we discuss our
rationale for applying these rounding principles.) The national
unadjusted copayment amounts for services payable under the OPPS that
would be effective January 1, 2010, are shown in Addenda A and B to
this proposed rule. As discussed in section XVI.D. of this proposed
rule, we are proposing that for CY 2010, 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.

[[Page 35299]]

3. Proposed 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, $64.13 is 22 percent of the full national
unadjusted payment rate of $292.33.
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 is the beneficiary payment percentage.
B = National unadjusted copayment for APC/national unadjusted payment
rate for APC

Step 2. Calculate the appropriate wage-adjusted payment rate for
the APC for the provider in question, as indicated in section II.G. of
this proposed rule. Calculate the rural adjustment for eligible
providers as indicated in Step 6 under section II.G. of this proposed
rule.
Step 3. Multiply the percentage calculated in Step 1 by the payment
rate calculated in Step 2. The result is the wage-adjusted copayment
amount for the APC.
The formula below is a mathematical representation of Step 3 and
applies the beneficiary percentage to the adjusted payment rate for a
service calculated under section II.G. of this proposed rule, 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 0.98.
The proposed unadjusted copayments for services payable under the
OPPS that would be effective January 1, 2010 are shown in Addenda A and
B to this proposed rule. We note that the proposed national unadjusted
payment rates and copayment rates shown in Addenda A and B to this
proposed rule reflect the full market basket conversion factor
increase, as discussed in section XVI.D. of this proposed rule.

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

A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes

CPT and Level II HCPCS codes are used to report procedures,
services, items, and supplies under the hospital OPPS. Specifically,
CMS recognizes the following codes on OPPS claims: (1) Category I CPT
codes, which describe medical services and procedures; (2) Category III
CPT codes, which describe new and emerging technologies, services, and
procedures; and (3) Level II HCPCS codes, which are used primarily to
identify products, supplies, temporary procedures, and services not
described by CPT codes. CPT codes are established by the AMA and the
Level II HCPCS codes are established by the CMS HCPCS Workgroup. These
codes are updated and changed throughout the year. CPT and HCPCS code
changes that affect the OPPS are published both through the annual
rulemaking cycle and through the OPPS quarterly update Change Requests
(CRs). CMS releases new Level II HCPCS codes to the public or
recognizes the release of new CPT codes by the AMA and makes these
codes effective (that is, the codes can be reported on Medicare claims)
outside of the formal rulemaking process via OPPS quarterly update CRs.
This quarterly process offers hospitals access to codes that may more
accurately describe items or services furnished and/or provides payment
or more accurate payment for these items or services in a more timely
manner than if CMS waited for the annual rulemaking process. We solicit
comments on these new codes and finalize our proposals related to these
codes through our annual rulemaking process. In Table 13 below, we
summarize our proposed process for updating codes through our OPPS
quarterly update CRs, seeking public comment, and finalizing their
treatment under the OPPS.

Table 13--Comment Timeframe for New or Revised HCPCS CODES
----------------------------------------------------------------------------------------------------------------
OPPS quarterly update CR Type of code Effective date Comments sought When finalized
----------------------------------------------------------------------------------------------------------------
April 1, 2009................... Level II HCPCS April 1, 2009..... CY 2010 OPPS/ASC CY 2010 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
July 1, 2009.................... Level II HCPCS July 1, 2009...... CY 2010 OPPS/ASC CY 2010 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
Category I July 1, 2009...... CY 2010 OPPS/ASC CY 2010 OPPS/ASC
(certain vaccine proposed rule. final rule with
codes) and III comment period.
CPT Codes.
October 1, 2009................. Level II HCPCS October 1, 2009... CY 2010 OPPS/ASC CY 2011 OPPS/ASC
Codes. final rule with final rule with
comment period. comment period.
January 1, 2010................. Level II HCPCS January 1, 2010... CY 2010 OPPS/ASC CY 2011 OPPS/ASC
Codes. final rule with final rule with
Comment Period. comment period.
Category I and III January 1, 2010... CY 2010 OPPS/ASC CY 2011 OPPS/ASC
CPT Codes. final rule with final rule with
comment period. comment period.
----------------------------------------------------------------------------------------------------------------

This process is discussed in detail below and we have separated our
discussion into two sections based on whether we are proposing to
solicit public comments in this CY 2010 proposed rule on a specific
group of the CPT and Level II HCPCS codes or whether we are proposing
to solicit public comments on another specific group of the codes in
the CY 2010 final rule with comment period. We note that we sought
public comments in the CY 2009 OPPS/ASC final rule with comment period
on the new CPT and Level II HCPCS codes that were effective January 1,
2009. Earlier, the AMA had released the new Category I vaccine codes
and Category III CPT codes effective January 1, 2009, on the AMA Web
site in July 2009. The new Level II HCPCS codes and Category I and III
CPT codes were included in our January 2009 OPPS quarterly update CR.
We also sought public comments in the CY2009 OPPS/ASC final rule with
comment period on the new Level II HCPCS codes effective October 1,
2008.

[[Page 35300]]

These new codes with effective dates of October 1, 2008, or January 1,
2009, were flagged with comment indicator ``NI'' (New code, interim APC
assignment; comments will be accepted on the interim APC assignment for
the new code) in Addendum B to the CY 2009 OPPS/ASC final rule with
comment period to indicate that we were assigning them an interim
payment status and an APC and payment rate, if applicable, which were
subject to public comment following publication of the CY2009 OPPS/ASC
final rule with comment period. We will respond to public comments and
finalize our proposed OPPS treatment of these codes in the CY 2010
OPPS/ASC final rule with comment period.
1. Proposed Treatment of New Level II HCPCS Codes and Category I CPT
Vaccine Codes and Category III CPT Codes for Which We Are Soliciting
Public Comments in this Proposed Rule
Effective April 1 and July 1 of CY 2009, we made effective a total
of 13 new Level II HCPCS codes and 5 new Category I vaccine and
Category III CPT codes that were not addressed in the CY 2009 OPPS/ASC
final rule with comment period that updated the OPPS. Thirteen new
Level II HCPCS codes were made effective for the April and July 2009
updates, and 13 Level II HCPCS codes were newly recognized for separate
payment. Although one of the new Level II HCPCS codes is not payable
under the OPPS, we changed the OPPS status indicator for one existing
Level II HCPCS code from the interim status indicator designated in the
CY 2009 OPPS/ASC final rule with comment period.
Through the April 2009 OPPS quarterly update CR (Transmittal 1702,
Change Request 6416, dated March 13, 2009), we allowed separate payment
for a total of 2 additional Level II HCPCS codes, specifically existing
HCPCS code C9247 (Iobenguane, I-123, diagnostic, per study dose, up to
10 millicuries) and new HCPCS code C9249 (Injection, certolizumab
pegol, 1 mg). HCPCS code C9249, which received separate payment as a
result of its pass-through status under the OPPS, was made effective on
April 1, 2009. HCPCS code C9247 was released January 1, 2009, through
the January 2009 OPPS quarterly update CR (Transmittal 1657, Change
Request 6320, dated December 31, 2008). From January 1, 2009, through
March 31, 2009, because HCPCS code C9247 is a nonpass-through
diagnostic radiopharmaceutical, and nonpass-through diagnostic
radiopharmaceutical are always packaged under the CY 2009 OPPS, it was
packaged under the OPPS and assigned status indicator ``N'' (Items and
Services Packaged into APC Rates. Paid under OPPS; payment is packaged
into payment for other services, including outliers). Therefore, there
was no separate APC payment for HCPCS code C9247 from January 1, 2009,
through March 31, 2009. Effective April 1, 2009, HCPCS code C9247 was
allowed separate pass-through payment and its status indicator was
changed from ``N'' to ``G'' (Pass-Through Drugs and Biologicals. Paid
under OPPS; separate APC payment includes pass-through amount).
Through the July 2009 OPPS quarterly update CR (Transmittal 107,
Change Request 6492, dated May 22, 2009) which included HCPCS codes
that were made effective July 1, 2009, we allowed separate payment for
a total of 11 new Level II HCPCS codes for pass-through drugs and
biologicals and new nonpass-through drugs and nonimplantable
biologicals. Specifically, we provided separate payment for HCPCS codes
C9250 (Human plasma fibrin sealant, vapor-heated, solvent-detergent
(Artiss), 2ml); C9251 (Injection, C1 esterase inhibitor (human), 10
units); C9252 (Injection, plerixafor, 1 mg); C9253 (Injection,
temozolomide, 1 mg); C9360 (Dermal substitute, native, non-denatured
collagen, neonatal bovine origin (SurgiMend Collagen Matrix), per 0.5
square centimeters); C9361 (Collagen matrix nerve wrap (NeuroMend
Collagen Nerve Wrap), per 0.5 centimeter length); C9362 (Porous
purified collagen matrix bone void filler (Integra Mozaik
Osteoconductive Scaffold Strip), per 0.5 cc); C9363 (Skin substitute,
Integra Meshed Bilayer Wound Matrix, per square centimeter); C9364
(Porcine implant, Permacol, per square centimeter); Q2023 (Injection,
factor viii (antihemophilic factor, recombinant) (Xyntha), per i.u.);
and Q4116 (Skin substitute, Alloderm, per square centimeter).
Although HCPCS code Q4115 (Skin substitute, Alloskin, per square
centimeter) was initially assigned status indicator ``K'' (Nonpass-
Through Drugs and Biologicals) for July 2009 to signify its separate
payment, we are correcting its status indicator assignment to ``M''
(Items and Services Not Billable to the Fiscal Intermediary/MAC)
retroactive to July 2009 because no July 2009 pricing information is
available for the ASP payment methodology that applies to payment of
new HCPCS codes for drugs and biologicals. If ASP information becomes
available for a later quarter in CY 2009 or for a quarter in CY 2010,
we would reassign HCPCS code Q4115 status indicator ``K'' for that
quarter and pay separately for the new biological HCPCS code at ASP+4
percent, consistent with the final CY 2009 policy and the proposed CY
2010 policy for payment of new drug and biological HCPCS codes.
For CY 2010, we are proposing to continue our established policy of
recognizing Category I CPT vaccine codes for which FDA approval is
imminent and Category III CPT codes that the AMA releases in January of
each year for implementation in July through the OPPS quarterly update
process. Under the OPPS, Category I vaccine codes and Category III CPT
codes that are released on the AMA Web site in January are made
effective in July of the same year through the July OPPS quarterly
update CR, consistent with the AMA's implementation date for the codes.
Through the July 2009 OPPS quarterly update CR, we allowed separate
payment for 3 of the 5 new Category I vaccine and Category III CPT
Codes effective July 1, 2009. Specifically, as displayed in Table 16,
we allowed payment for CPT codes 0199T (Physiologic recording of tremor
using accelerometer(s) and gyroscope(s), (including frequency and
amplitude) including interpretation and report); 0200T (Percutaneous
sacral augmentation (sacroplasty), unilateral injection(s), including
the use of a balloon or mechanical device (if utilized), one or more
needles); and 0201T (Percutaneous sacral augmentation (sacroplasty),
bilateral injections, including the use of a balloon or mechanical
device (if utilized), two or more needles). We note that CPT code 0202T
(Posterior vertebral joint(s) arthroplasty (e.g. , facet joint[s]
replacement) including facetectomy, laminectomy, foraminotomy and
vertebral column fixation, with or without injection of bone cement,
including fluoroscopy, single level, lumbar spine) was assigned status
indicator ``C'' (Inpatient procedures. Not paid under OPPS. Admit
patient. Bill as inpatient.) because we believe that this procedure may
only be safely performed on Medicare beneficiaries in the hospital
inpatient setting. In addition, CPT code 90670 (Pneumococcal conjugate
vaccine, 13 valent, for intramuscular use), a Category I CPT vaccine
code, was assigned status indicator ``E'' (Items, Codes, and Services *
* * Not paid by Medicare when submitted on outpatient claims (any
outpatient bill type)) because the drug has not yet been approved by
the FDA for marketing.
In this proposed rule, we are soliciting public comments on the
proposed status indicators and the

[[Page 35301]]

proposed APC assignments and payment rates, if applicable, for the 14
Level II HCPCS codes and the 5 Category I vaccine and Category III CPT
codes that were newly recognized or had a change in OPPS status
indicator in April or July 2009 through the respective OPPS quarterly
update CRs. These codes are listed in Tables 14, 15, and 16 of this
proposed rule. We are proposing to finalize their status indicators and
their APC assignments and payment rates, if applicable, in the CY 2010
OPPS/ASC final rule with comment period. Because the July 2009 OPPS
quarterly update CR was issued close to the publication of this
proposed rule, the Level II HCPCS codes and the Category I vaccine and
Category III CPT codes implemented through the July 2009 OPPS quarterly
update CR could not be included in Addendum B to this proposed rule,
but these codes are listed in Tables 15 and 16, respectively. We are
proposing to incorporate them into Addendum B to the CY 2010 OPPS/ASC
final rule with comment period, which is consistent with our annual
OPPS update policy. The Level II HCPCS codes implemented or modified
through the April 2009 OPPS update CR and displayed in Table 14 are
included in Addendum B to this proposed rule, where their proposed CY
2010 payment rates also are shown.

Table 14--Level II HCPCS Codes With a Change in OPPS Status Indicator or Newly Implemented in April 2009
----------------------------------------------------------------------------------------------------------------
Proposed CY 2010 Status Proposed CY
CY 2009 HCPCS Code CY 2009 Long Descriptor Indicator 2010 APC
----------------------------------------------------------------------------------------------------------------
C9247........................... Iobenguane, I-123, diagnostic, G........................... 9247
per study dose, up to 10
millicuries.
C9249........................... Injection, certolizumab pegol, 1 G........................... 9249
mg.
----------------------------------------------------------------------------------------------------------------

Table 15--New Level II HCPCS Codes Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
Proposed CY 2010 Proposed CY 2010 Proposed CY 2010
CY 2009 HCPCS Code CY 2009 Long Descriptor Status Indicator APC Payment Rate*
----------------------------------------------------------------------------------------------------------------
C9250................... Human plasma fibrin G.................. 9250............... $155.00
sealant, vapor-heated,
solvent-detergent
(Artiss), 2ml.
C9251................... Injection, C1 esterase G.................. 9251............... 41.34
inhibitor (human), 10
units.
C9252................... Injection, plerixafor, G.................. 9252............... 276.04
1 mg.
C9253................... Injection, G.................. 9253............... 5.00
temozolomide, 1 mg.
C9360................... Dermal substitute, G.................. 9360............... 14.31
native, non-denatured
collagen, neonatal
bovine origin
(SurgiMend Collagen
Matrix), per 0.5
square centimeters.
C9361................... Collagen matrix nerve G.................. 9361............... 124.55
wrap (NeuroMend
Collagen Nerve Wrap),
per 0.5 centimeter
length.
C9362................... Porous purified G.................. 9362............... 56.71
collagen matrix bone
void filler (Integra
Mozaik Osteoconductive
Scaffold Strip), per
0.5 cc.
C9363................... Skin substitute, G.................. 9363............... 11.13
Integra Meshed Bilayer
Wound Matrix, per
square centimeter.
C9364................... Porcine implant, G.................. 9364............... 18.57
Permacol, per square
centimeter.
Q2023................... Injection, factor viii K.................. 1268............... 1.15
(antihemophilic
factor, recombinant)
(Xyntha), per i.u.
Q4115................... Skin substitute, M.................. Not Applicable..... Not Applicable
Alloskin, per square
centimeter.
Q4116................... Skin substitute, K.................. 1270............... 32.42
Alloderm, per square
centimeter.
----------------------------------------------------------------------------------------------------------------
*Based on July 2009 ASP information.

Table 16--Category I Vaccine and Category III CPT Codes Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
Proposed CY 2010 Proposed CY 2010 Proposed CY 2010
CY 2009 HCPCS code CY 2009 long descriptor status indicator APC payment rate
----------------------------------------------------------------------------------------------------------------
0199T................... Physiologic recording S.................. 0215............... $40.79
of tremor using
accelerometer(s) and
gyroscope(s),
(including frequency
and amplitude)
including
interpretation and
report.
0200T................... Percutaneous sacral T.................. 0049............... 1,489.69
augmentation
(sacroplasty),
unilateral
injection(s),
including the use of a
balloon or mechanical
device (if utilized),
one or more needles.
0201T................... Percutaneous sacral T.................. 0050............... 2,134.51
augmentation
(sacroplasty),
bilateral injections,
including the use of a
balloon or mechanical
device (if utilized),
two or more needles.
0202T................... Posterior vertebral C.................. Not applicable..... Not applicable
joint(s) arthroplasty
(e.g., facet joint[s]
replacement) including
facetectomy,
laminectomy,
foraminotomy and
vertebral column
fixation, with or
without injection of
bone cement, including
fluoroscopy, single
level, lumbar spine.
90670................... Pneumococcal conjugate E.................. Not applicable..... Not applicable
vaccine, 13 valent,
for intramuscular use.
----------------------------------------------------------------------------------------------------------------

[[Page 35302]]

2. Proposed Process for New Level II HCPCS Codes and Category I and III
CPT Codes for Which We Will Be Soliciting Public Comments in the CY
2010 OPPS/ASC Final Rule With Comment Period
As has been our practice in the past, we incorporate those new
Category I and III CPT codes and new Level II HCPCS codes that are
effective January 1 in the final rule with comment period updating the
OPPS for the following calendar year. These codes are released to the
public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites
(for CPT codes), and also through the January OPPS quarterly update
CRs. In the past, we also have released new Level II HCPCS codes that
are effective October 1 through the October OPPS quarterly update CRs
and incorporated these new codes in the final rule with comment period
updating the OPPS for the following calendar year. All of 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 and the APC assignment, and payment
rate, if applicable, for all such codes flagged with comment indicator
``NI'' are open to public comment in the OPPS/ASC final rule with
comment period, and we respond to these comments in the final rule with
comment period for the next calendar year's OPPS/ASC update. We are
proposing to continue this process for CY 2010. Specifically, for CY
2010, we are proposing to include in Addendum B to the CY 2010 OPPS/ASC
final rule with comment period the new Category I and III CPT codes
effective January 1, 2010 (including those Category I vaccine and
Category III CPT codes that were released by the AMA in July 2009) that
would be incorporated in the January 2010 OPPS quarterly update CR and
the new Level II HCPCS codes, effective October 1, 2009 or January 1,
2010, that would be released by CMS in its October 2009 and January
2010 OPPS quarterly update CRs. These codes would be flagged with
comment indicator ``NI'' in Addendum B to the CY 2010 OPPS/ASC final
rule with comment period to indicate that we have assigned them an
interim OPPS payment status. Their status indicators and their APC
assignments and payment rates, if applicable, would be open to public
comment in the CY 2010 OPPS/ASC final rule with comment period and
would be finalized in the CY 2011 OPPS/ASC final rule with comment
period.

B. Proposed OPPS Changes--Variations Within APCs

1. Background
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered outpatient department services.
Section 1833(t)(2)(B) of the Act provides that the Secretary may
establish groups of covered outpatient department services within this
classification system, so that services classified within each group
are comparable clinically and with respect to the use of resources (and
so that an implantable item is classified to the group that includes
the service to which the item relates). In accordance with these
provisions, we developed a grouping classification system, referred to
as APCs, as set forth in Sec. 419.31 of the regulations. We use Level
I and Level II HCPCS codes and descriptors to identify and group the
services within each APC. The APCs are organized such that each group
is homogeneous both clinically and in terms of resource use. Using this
classification system, we have established distinct groups of similar
services, as well as medical visits. We also have developed separate
APC groups for certain medical devices, drugs, biologicals, therapeutic
radiopharmaceuticals, and brachytherapy devices.
We have packaged into payment for each procedure or service within
an APC group the costs associated with those items or services that are
directly related to and supportive of performing the main independent
procedures or furnishing the services. Therefore, we do not make
separate payment for these packaged items or services. For example,
packaged items and services include: (1) Use of an operating,
treatment, or procedure room; (2) use of a recovery room; (3)
observation services; (4) anesthesia; (5) medical/surgical supplies;
(6) pharmaceuticals (other than those for which separate payment may be
allowed under the provisions discussed in section V. of this proposed
rule); (7) incidental services such as venipuncture; and (8) guidance
services, image processing services, intraoperative services, imaging
supervision and interpretation services, diagnostic
radiopharmaceuticals, and contrast media. Further discussion of
packaged services is included in section II.A.4. of this proposed rule.
In CY 2008 (72 FR 66650), 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 our CY 2009 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, mental health
services, and multiple imaging services. Further discussion of
composite APCs is included in section II.A.2.e. of this proposed rule.
Under the OPPS, we generally pay for hospital outpatient services
on a rate-per-service basis, where the service may be reported with one
or more HCPCS codes. Payment varies according to the APC group to which
the independent service or combination of services is assigned. Each
APC weight represents the hospital median cost of the services included
in that APC relative to the hospital median cost of the services
included in APC 0606 (Level 3 Hospital Clinic Visits). The APC weights
are scaled to APC 0606 because it is the middle level clinic visit APC
(that is, where the Level 3 clinic visit CPT code of five levels of
clinic visits is assigned), and because middle level clinic visits are
among the most frequently furnished services in the hospital outpatient
setting.
Section 1833(t)(9)(A) of the Act requires the Secretary to review
not less often than annually and revise the groups, relative payment
weights, and the wage and other adjustments under the OPPS to take into
account changes in medical practice, changes in technology, 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 to consult with an
outside panel of experts to review (and advise the Secretary
concerning) the clinical integrity of the APC groups and the relative
payment weights (the APC Panel recommendations for specific services
for the CY 2010 OPPS and our responses to them are discussed in the
relevant specific sections throughout this proposed rule).
Finally, section 1833(t)(2) of the Act provides that, subject to
certain exceptions, the items and services within an APC group cannot
be considered comparable with respect to the use of resources if the
highest median cost (or mean cost as elected by the Secretary) for an
item or service in the group is more than 2 times greater than the
lowest median cost (or mean cost, if so elected) for an item or service
within the same group (referred to as the ``2 times rule''). We use the
median cost

[[Page 35303]]

of the item or service in implementing this provision. Section
1833(t)(2) of the Act authorizes the Secretary to make exceptions to
the 2 times rule in unusual cases, such as low-volume items and
services (but the Secretary may not make such an exception in the case
of a drug or biological that has been designated as an orphan drug
under section 526 of the Federal Food, Drug, and Cosmetic Act).
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. We are proposing to
make exceptions to this limit on the variation of costs within each APC
group in unusual cases, such as low-volume items and services for CY
2010.
During the APC Panel's February 2009 meeting, we presented median
cost and utilization data for services furnished during the period of
January 1, 2008 through September 30, 2008, 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, and our proposals for CY 2010 are contained mainly in
sections III.C. and III.D. of this proposed rule.
In addition to the assignment of specific services to APCs that we
discussed with the APC Panel, we also identified APCs with 2 times
violations that were not specifically discussed with the APC Panel but
for which we are proposing changes to their HCPCS codes APC assignments
in Addendum B to this proposed rule. In these cases, to eliminate a 2
times violation or to improve clinical and resource homogeneity, we are
proposing to reassign the codes to APCs that contain services that are
similar with regard to both their clinical and resource
characteristics. We also are proposing to rename existing APCs or
create new clinical APCs to complement proposed HCPCS code
reassignments. In many cases, the proposed HCPCS code reassignments and
associated APC reconfigurations for CY 2010 included in this proposed
rule are related to changes in median costs of services that were
observed in the CY 2008 claims data newly available for CY 2010
ratesetting. In addition, we are proposing changes to the status
indicators for some codes that are not specifically and separately
discussed in this proposed rule. In these cases, we are proposing to
change the status indicators for some codes because we believe that
another status indicator would more accurately describe their payment
status from an OPPS perspective based on the policies that we are
proposing for CY 2010.
Addendum B to this proposed rule identifies with comment indicator
``CH'' those HCPCS codes for which we are proposing a change to the APC
assignment or status indicator that were initially assigned in the
April 2009 Addendum B update (Transmittal 1702, Change Request 6416,
dated March13, 2009).
3. Proposed Exceptions to the 2 Times Rule
As discussed earlier, we may make exceptions to the 2 times limit
on the variation of costs within each APC group in unusual cases such
as low-volume items and services. Taking into account the APC changes
that we are proposing for CY 2010 based on the APC Panel
recommendations discussed mainly in sections III.C. and III.D. of this
proposed rule, the other proposed changes to status indicators and APC
assignments as identified in Addendum B to this proposed rule, and the
use of CY 2008 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 and to determine which APCs
should be proposed as exceptions to the 2 times rule for CY 2010. 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 17 of this proposed rule lists 14 APCs that we are proposing
to exempt from the 2 times rule for CY 2010 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 2008
claims data used to determine the APC payment rates that we are
proposing for CY 2010. The median costs for hospital outpatient
services for these and all other APCs that were used in the development
of this proposed rule can be found on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp.

Table 17--Proposed APC Exceptions to the 2 Times Rule for CY 2010
------------------------------------------------------------------------
Proposed CY 2010 APC Proposed CY 2010 APC title
------------------------------------------------------------------------
0080........................................ Diagnostic Cardiac
Catheterization.
0105........................................ Repair/Revision/Removal of
Pacemakers, AICDs, or
Vascular Devices.
0128........................................ Echocardiogram with
Contrast.
0141........................................ Level I Upper GI
Procedures.
0142........................................ Small Intestine Endoscopy.
0237........................................ Level II Posterior Segment
Eye Procedures.
0245........................................ Level I Cataract
Procedures without IOL
Insert.
0303........................................ Treatment Device
Construction.
0325........................................ Group Psychotherapy.
0381........................................ Single Allergy Tests.
0432........................................ Health and Behavior
Services.
0436........................................ Level I Drug
Administration.
0604........................................ Level 1 Hospital Clinic
Visits.
0664........................................ Level I Proton Beam
Radiation Therapy.
------------------------------------------------------------------------

[[Page 35304]]

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 cost bands identify the APCs to
which new technology procedures and services with estimated service
costs that fall within those cost bands are assigned under the OPPS.
Payment for each APC is made at the mid-point of the APC's assigned
cost band. For example, payment for New Technology APC 1507 (New
Technology--Level VII ($500-$600)) is made at $550. Currently, there
are 82 New Technology APCs, ranging from the lowest cost band assigned
to APC 1491 (New Technology--Level IA ($0-$10)) through the highest
cost band assigned to APC 1574 (New Technology--Level XXXVII ($9,500-
$10000). In CY 2004 (68 FR 63416), we last restructured the New
Technology APCs to make the cost intervals more consistent across
payment levels and refined the cost bands for these APCs to retain two
parallel sets of New Technology APCs, one set with a status indicator
of ``S'' (Significant Procedures, Not Discounted when Multiple. Paid
under OPPS; separate APC payment) and the other set with a status
indicator of ``T'' (Significant Procedure, Multiple Reduction Applies.
Paid under OPPS; separate APC payment). These current New Technology
APC configurations allow us to price new technology services more
appropriately and consistently.
2. Proposed Movement of Procedures from New Technology APCs to Clinical
APCs
As we explained in the November 30, 2001 final rule (66 FR 59902),
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 this proposed rule, for CY
2010 we are proposing to retain services within New Technology APC
groups until we gather sufficient claims data to enable us to assign
the service to a clinically appropriate APC. The flexibility associated
with this policy allows us to move a service from a New Technology APC
in less than 2 years if sufficient data are available. It also allows
us to retain a service in a New Technology APC for more than 2 years if
sufficient hospital claims data upon which to base a decision for
reassignment have not been collected.
Table 18 below lists the HCPCS code and its associated status
indicator that we are proposing to reassign from a New Technology APC
to a clinically appropriate APC for CY 2010. Based on the CY2008 OPPS
claims data available for this proposed rule, we believe we have
sufficient claims data to propose reassignment of CPT code 0182T to a
clinically appropriate APC. Specifically, we are proposing to reassign
this electronic brachytherapy service from APC 1519 (New Technology--
Level IXX ($1700-$1800)) to APC 0313 (Brachytherapy), where other
brachytherapy services also reside. Based on hospital claims data for
CPT code 0182T, its hospital resource costs are similar to those of
other services assigned to APC 0313.

Table 18--Proposed CY 2010 Reassignment of a New Technology Procedure to a Clinical APC
----------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY
CY 2009 HCPCS code CY 2009 short descriptor CY 2009 SI CY 2009 APC 2010 SI 2010 APC
----------------------------------------------------------------------------------------------------------------
0182T..................... Hdr elect brachytherapy......... S 1519 S 0313
----------------------------------------------------------------------------------------------------------------

D. Proposed OPPS APC Specific Policies: Insertion of Posterior Spinous
Process Distraction Device (APC 0052)

For CY 2009 (73 FR 68620), we reassigned 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).
For CY 2007 and CY 2008, the device implanted in procedures described
by CPT codes 0171T and 0172T, HCPCS code C1821 (Interspinous process
distraction device (implantable)), was assigned pass-through payment
status and, therefore, was paid separately at charges adjusted to cost.
The period of pass-through payment for HCPCS code C1821 expired after
December 31, 2008. According to our established 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.
Therefore, the costs of the implanted device identified by HCPCS code
C1821 are packaged into the costs of CPT codes 0171T and 0172T
beginning in CY 2009.
At the February 2009 meeting, the APC Panel heard a public
presentation that recommended reassignment of CPT codes 0171T and 0172T
from APC 0052 to APC 0425 (Level II Arthroplasty or Implantation with
Prosthesis). The presenter believed that APC resource homogeneity would
be improved if CPT codes 0171T and 0172T were reassigned to APC 0425.
The presenter asserted, based on its analysis of CY 2007 claims

[[Page 35305]]

data, that the median cost of CPT code 0171T was significantly higher
than the median cost of APC 0052, while only slightly lower than the
median cost of APC 0425. The presenter indicated that, while the median
cost of APC 0052 was significantly higher than the median cost of
device HCPCS code C1821, device costs are only one element of the
overall procedure cost and other associated procedure costs are more
than $3,200. Regarding clinical homogeneity, the presenter stated that
kyphoplasty is the only spine procedure currently assigned to APC 0052
other than CPT codes 0171T and 0172T. The presenter also claimed that
36 percent of claims for CPT code 0171T are reported without HCPCS code
C1821, which identified a device that is always implanted in procedures
reported with CPT codes 0171T and 0172T. The presenter requested
reassignment of CPT codes 0171T and 0172T to APC 0425 because this APC
is a device-dependent APC, and CPT codes 0171T and 0172T would then be
subject to procedure-to-device claims processing edits.
The APC Panel recommended that CMS continue the assignment of CPT
codes 0171T and 0172T to APC 0052 for CY 2010, institute procedure-to-
device claims processing edits for HCPCS code C1821, and then
reevaluate the APC assignments of CPT codes 0171T and 0172T in one
year.
Under our existing policy, we generally do not identify any
individual HCPCS codes as device-dependent codes under the OPPS. 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. As we noted
in the CY 2009 OPPS/ASC final rule with comment period regarding APC
0052 (73 FR 68621), we typically do not implement procedure-to-device
edits for an APC 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 examined the CY 2008 claims data available for this proposed
rule to determine the frequency of billing CPT code 0171T (which is the
main procedure code reported with HCPCS code C1821) with and without
device HCPCS code C1821. CPT code 0172T is an add-on code to CPT code
0171T. We recognize that our single claims for CPT code 0172T may not
be correctly coded claims and, therefore, our cost estimation for CPT
code 0172T may not be accurate. Our analysis shows that the CY 2010
proposed rule median cost for CPT code 0171T is approximately $7,717
based on over 800 single claims. The CY 2010 proposed rule claims data
for CPT code 0171T reveal a median cost of approximately $7,916 based
on over 500 single claims with HCPCS code C1821, and a median cost of
approximately $7,387 based on about 300 single claims without HCPCS
code C1821. Therefore, the median cost of claims for CPT code 0171T
reported with HCPCS code C1821 is similar to the median cost of claims
for the procedure reported without HCPCS code C1821. We have no reason
to believe that those hospitals not reporting the device HCPCS code
have failed to consider the cost of the device in charging for the
procedure. Furthermore, claims for CPT code 0171T reported with HCPCS
code C1821 account for about two-thirds of the single claims available
for ratesetting. The overall median cost of CPT code 0171T falls within
an appropriate range of HCPCS code-specific median costs for those
services proposed for CY 2010 assignment to APC 0052, which has a
proposed APC median cost of approximately $5,939 and no 2 times
violation. Moreover, we do not believe that procedure-to-device claims
processing edits are necessary to ensure accurate cost estimation for
CPT code 0171T.
The CY 2010 proposed rule line-item median cost for HCPCS code
C1821 is approximately $4,625, while the CY 2010 proposed rule median
cost of APC 0052 is approximately $1,300 more than this device cost.
Previous estimates of procedure time presented to us at the time of the
device pass-through application for the interspinous process
distraction device described by HCPCS code C1821 were approximately 30
to 60 minutes of procedure time for the service currently described by
CPT code 0171T. This is reasonably comparable to the typical procedure
time for kyphoplasty 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),
which are also assigned to APC 0052.
In summary, because we believe that APC 0052 pays appropriately for
the procedure cost of CPT codes 0171T and 0172T, we are proposing to
maintain the assignment of CPT codes 0171T and 0172T to APC0052 for CY
2010 and not to implement device edits for these procedures. We are
accepting one part of the APC Panel's recommendation regarding the
continued assignment of CPT codes 0171T and 0172T to APC 0052, but we
are not accepting the APC Panel's further recommendation to institute
procedure-to-device edits for these services for CY 2010. As we do for
all OPPS services, we will reevaluate the APC assignments of CPT codes
0171T and 0172T when additional claims data become available for CY
2011 ratesetting, in accordance with the final part of the APC Panel's
recommendation for these procedures.

IV. Proposed OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
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 pass-through
payment eligibility period begins with the first date on which
transitional pass-through payments may be made for any medical device
that is described by the category. We may establish a new device
category for pass-through payment in any quarter. Under our established
policy, we base the pass-through status expiration dates for the
category codes on the date on which a category is in effect. The date
on which a category is in effect is the first date on which pass-
through payment may be made for any medical device that is described by
such category. We propose and finalize the dates for expiration of
pass-through status for device categories as part of the OPPS annual
update.
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

[[Page 35306]]

section 1833(t)(2)(H) of the Act, are an exception to this established
policy.
There currently are no device categories eligible for pass-through
payment, and there are no categories for which we would propose
expiration of pass-through status. If we create new device categories
for pass-through payment status during the remainder of CY 2009 or
during CY 2010, we will propose future expiration dates in accordance
with the statutory requirement that they be eligible for pass-through
payments for at least 2, but not more than 3, years from the date on
which pass-through payment for any medical device described by the
category may first be made.
2. Proposed Provisions for Reducing Transitional Pass-Through Payments
to Offset Costs Packaged into APC Groups
a. Background
We have an established policy to estimate the portion of each APC
payment rate that could reasonably be attributed to the cost of the
associated devices that are eligible for pass-through payments (66 FR
59904). We deduct from the pass-through payments for identified device
categories eligible for pass-through payments an amount that reflects
the portion of the APC payment amount that we determine is associated
with the cost of the device, defined as the device 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 device APC offset amounts for
eligible pass-through device categories through the transmittals that
implement the quarterly OPPS updates.
We currently have published a list of all procedural APCs with the
CY 2009 portions (both percentages and dollar amounts) of the APC
payment amounts that we determine are associated with the cost of
devices, on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp. The dollar amounts are used as
the device APC offset amounts. In addition, in accordance with our
established practice, the device APC offset amounts in a related APC
are 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. Proposed Policy
For CY 2010, we are proposing to continue our established policies
for calculating and setting the device APC offset amounts for each
device category eligible for pass-through payment. We also are
proposing to continue to review each new device category on a case-by-
case basis to determine whether device costs associated with the new
category are 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 device APC offset amount
from the pass-through payment for the device category. As stated
earlier, these device APC offset amounts also would 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 (Sec. 419.66(d)).
We are proposing in section V.A.4. of this proposed rule to specify
that, beginning in CY 2010, the pass-through evaluation process and
pass-through payment methodology for implantable biologicals that are
surgically inserted or implanted (through a surgical incision or a
natural orifice) would be the device pass-through process and payment
methodology only. As a result of that proposal, we are proposing in
this section that, beginning in CY 2010, we would include implantable
biologicals in our calculation of the device APC offset amounts. As of
CY 2009, the costs of implantable biologicals not eligible for pass-
through payment are packaged into the costs of the procedures in which
they are implanted because nonpass-through implantable biologicals are
not separately paid. We are proposing to calculate and set any device
APC offset amount for a new device pass-through category that includes
a newly eligible implantable biological beginning in CY 2010 using the
same methodology we have historically used to calculate and set device
APC offset amounts for device categories eligible for pass-through
payment (72 FR 66751 through 66752), with one modification. Because
implantable biologicals would be considered devices rather than drugs
for purposes of pass-through evaluation and payment under this proposal
for CY 2010, the device APC offset amounts would include the costs of
implantable biologicals for the first time. We also would utilize these
revised device APC offset amounts to evaluate whether the cost of an
implantable biological 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.
Further, we are proposing to no longer use the ``policy-packaged'' drug
APC offset amounts for evaluating the cost significance of implantable
biological pass-through applications under review and for setting the
APC offset amounts that would apply to pass-through payment for those
implantable biologicals, effective for new pass-through status
determinations beginning in CY 2010. In addition, we are proposing to
update, on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS, the list of all procedural APCs with the final
CY 2010 portions of the APC payment amounts that we determine are
associated with the cost of devices so that this information is
available for use by the public in developing potential CY2010 device
pass-through payment applications and by CMS in reviewing those
applications.

B. Proposed 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 not
contain the ``FB'' modifier signifying that the device was furnished
without cost or with a full credit. As discussed in section
II.A.2.d.(1) of this proposed rule, we are proposing to refine further
our standard ratesetting methodology for device-dependent APCs for CY
2010 by also excluding claims with the ``FC'' modifier signifying that
the device was furnished with partial 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

[[Page 35307]]

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 instructed
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 instructed 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. We
reduce the OPPS payment for the implantation procedure 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 the ``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
policies (72 FR 66743 through 66749).
2. Proposed APCs and Devices Subject to the Adjustment Policy
For CY 2010, we are proposing 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 provide equitable payment in these
cases. (We refer readers to section II.A.2.d.(1) of this proposed rule
for a description of our standard ratesetting methodology for device-
dependent APCs.) Moreover, the payment for these devices comprises a
large part of the APC payment on which the beneficiary copayment is
based, and we continue to believe it is equitable that the beneficiary
cost sharing reflects the reduced costs in these cases.
We also are proposing to continue using the three criteria
established in the CY 2007 OPPS/ASC final rule with comment period for
determining the APCs to which this policy applies (71 FR 68072 through
68077). Specifically, (1) all procedures assigned to the selected APCs
must 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 procedure (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
are proposing 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 device
credits are likely to be associated with particular cases only when the
device must be reported on the claim and is of a type that is implanted
and remains in the body when the beneficiary leaves the hospital. We
believe that the reduction in payment is appropriate only when the cost
of the device is a significant part of the total cost of the APC into
which the device cost is packaged, and that the 40-percent threshold is
a reasonable definition of a significant cost.
We examined the offset amounts calculated from the CY 2010 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 2009 continue to meet the criteria for
CY 2010, and to determine whether other APCs to which the policy does
not apply in CY 2009 would meet the criteria for CY 2010. Based on the
CY 2008 claims data available for this proposed rule, we are not
proposing any changes to the APCs and devices to which this policy
applies. Table 19 below lists the proposed APCs to which the payment
reduction policy for no cost/full credit and partial credit devices
would apply in CY 2010 and displays the proposed payment reduction
percentages for both no cost/full credit and partial credit
circumstances. Table 20 below lists the proposed devices to which this
policy would apply in CY 2010. We will update the lists of APCs and
devices to which the no cost/full credit and partial credit device
adjustment policy would apply in CY 2010, consistent with the three
selection criteria discussed earlier in this section, based on the
final CY 2008 claims data available for the CY 2010 OPPS/ASC final rule
with comment period.

Table 19--Proposed APCs to Which the No Cost/Full Credit and Partial
Credit Device Adjustment Policy Would Apply
------------------------------------------------------------------------
Proposed CY
2010 device Proposed CY
offset 2010 device
Proposed CY 2010 APC Proposed CY percentage offset
2010 APC title for no cost/ percentage
full credit for partial
case credit case
------------------------------------------------------------------------
0039......................... Level I 85 43
Implantation
of
Neurostimulato
r Generator.

[[Page 35308]]

0040......................... Percutaneous 58 29
Implantation
of
Neurostimulato
r Electrodes.
0061......................... Laminectomy, 63 31
Laparoscopy,
or Incision
for
Implantation
of
Neurostimulato
r Electrodes.
0089......................... Insertion/ 71 35
Replacement of
Permanent
Pacemaker and
Electrodes.
0090......................... Insertion/ 73 37
Replacement of
Pacemaker
Pulse
Generator.
0106......................... Insertion/ 41 20
Replacement of
Pacemaker
Leads and/or
Electrodes.
0107......................... Insertion of 88 44
Cardioverter-
Defibrillator.
0108......................... Insertion/ 88 44
Replacement/
Repair of
Cardioverter-
Defibrillator
Leads.
0225......................... Implantation of 73 37
Neurostimulato
r Electrodes,
Cranial Nerve.
0227......................... Implantation of 82 41
Drug Infusion
Device.
0259......................... Level VII ENT 85 42
Procedures.
0315......................... Level II 88 44
Implantation
of
Neurostimulato
r Generator.
0385......................... Level I 58 29
Prosthetic
Urological
Procedures.
0386......................... Level II 70 35
Prosthetic
Urological
Procedures.
0418......................... Insertion of 81 40
Left
Ventricular
Pacing Elect.
0425......................... Level II 57 28
Arthroplasty
or
Implantation
with
Prosthesis.
0648......................... Level IV Breast 47 23
Surgery.
0654......................... Insertion/ 74 37
Replacement of
a permanent
dual chamber
pacemaker.
0655......................... Insertion/ 75 37
Replacement/
Conversion of
a permanent
dual chamber
pacemaker.
0680......................... Insertion of 73 36
Patient
Activated
Event
Recorders.
------------------------------------------------------------------------

Table 20--Proposed Devices to Which the No Cost/Full Credit and Partial
Credit Device Adjustment Policy Would Apply
------------------------------------------------------------------------
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.
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. Proposed OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals

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

1. Background
Section 1833(t)(6) of the Act provides for temporary additional
payments or ``transitional pass-through payments'' for certain drugs
and biological agents. As 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.
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 for a drug or
biological described in section 1833(t)(6)(C)(i)(II) of the Act can be
made for at least 2 years but not more than 3 years after the product's
first payment as a hospital outpatient service under Part B. The pass-
through payment eligibility period is discussed in detail in section
V.A.5. of this proposed rule. Proposed CY 2010 pass-through drugs and
biologicals and their designated APCs are assigned status indicator
``G''

[[Page 35309]]

as indicated in Addenda A and B to this proposed rule.
Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through
payment amount, in the case of a drug or biological, is the amount by
which the amount determined under section 1842(o) of the Act (or, if
the drug or biological is covered under a competitive acquisition
contract under section 1847B of the Act, an amount determined by the
Secretary to be equal to the average price for the drug or biological
for all competitive acquisition areas and the 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 establishes the use of the average sales price (ASP)
methodology as the basis for payment for drugs and biologicals
described in section 1842(o)(1)(C) of the Act that are furnished on or
after January 1, 2005. The ASP methodology, as applied under the OPPS,
uses several sources of data as a basis for payment, including the ASP,
wholesale acquisition cost (WAC), and average wholesale price (AWP). In
this proposed rule, the term ``ASP methodology'' and ``ASP-based'' are
inclusive of all data sources and methodologies described therein.
Additional information on the ASP methodology can be found on the CMS
Web site at: http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice.
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 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 included approximately 190 of the most
common Part B drugs provided in the physician's office setting. As we
noted in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68633), the Part B drug CAP program was suspended beginning in CY 2009
(Medicare Learning Network (MLN) Matters Special Edition 0833,
available via the Web site: http://www.medicare.gov). Therefore, there
is no effective Part B drug CAP rate for pass-through drugs and
biologicals as of January 1, 2009. As we noted in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68633), if the program is
reinstituted during CY 2010 and Part B drug CAP rates become available,
we would 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 would continue to use the rate that would be paid in the
physician's office setting for drugs and biologicals with pass-through
status. We note that the June 2009 CY 2010 MPFS proposed rule (CMS-
1413-P; Medicare Program; Payment Policies under the Physician Fee
Schedule and Other Revisions to Part B for CY 2010) includes proposed
changes to the operation of the Part B drug CAP program, including a
proposal to change the frequency of CAP drug pricing updates.
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 CYs
2008 and 2009, we estimated the OPPS pass-through payment amount for
drugs and biologicals to be $6.6 million and $23.3 million,
respectively. Our proposed OPPS pass-through payment estimate for drugs
and biologicals in CY 2010 is $28 million, which is discussed in
section VI.B. of this proposed rule.
The pass-through application and review process for drugs and
biologicals is explained on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.
2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in
CY 2009
We are proposing that the pass-through status of 6 drugs and
biologicals would expire on December 31, 2009, as listed in Table 21
below. All of these drugs and biologicals will have received OPPS pass-
through payment for at least 2 years and no more than 3 years by
December 31, 2009. These items were approved for pass-through status on
or before January 1, 2008. With the exception of those groups of drugs
and biologicals that are always packaged when they do not have pass-
through status, specifically diagnostic radiopharmaceuticals, contrast
agents, and implantable biologicals, 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 is proposed at $65 for CY
2010), as discussed further in section V.B.2. of this proposed rule. If
the drug's or biological's estimated per day cost is less than or equal
to the applicable OPPS drug packaging threshold, we would package
payment for the drug or biological into the payment for the associated
procedure in the upcoming calendar year. If the estimated per day cost
is greater than the OPPS drug packaging threshold, we would provide
separate payment at the applicable relative ASP-based payment amount
(which is proposed at ASP+4 percent for CY 2010). Section V.B.2.d. of
this proposed rule discusses the packaging of all nonpass-through
contrast agents, diagnostic radiopharmaceuticals, and implantable
biologicals.

Table 21--Proposed Drugs and Biologicals for Which Pass-Through Status Would Expire December 31, 2009
----------------------------------------------------------------------------------------------------------------
Proposed
CY 2009 HCPCS code CY 2009 short descriptor Proposed CY 2010 SI CY 2010
APC
----------------------------------------------------------------------------------------------------------------
C9354.................................... Veritas collagen matrix, cm2 N........................... N/A
C9355.................................... Neuromatrix nerve cuff, cm.. N........................... N/A
J1300.................................... Eculizumab injection........ K........................... 9236

[[Page 35310]]

J3488.................................... Reclast injection........... K........................... 0951
J9261.................................... Nelarabine injection........ K........................... 0825
J9330.................................... Temsirolimus injection...... K........................... 1168
----------------------------------------------------------------------------------------------------------------

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or
Continuing Pass-Through Status in CY 2010
We are proposing to continue pass-through status in CY 2010 for 31
drugs and biologicals. None of these products will have received OPPS
pass-through payment for at least 2 years and no more than 3 years by
December 31, 2009. These items, which were approved for pass-through
status between April 1, 2008 and July 1, 2009, are listed in Table 22
below. The APCs and HCPCS codes for these drugs and biologicals are
assigned status indicator ``G'' in Addenda A and B to this proposed
rule.
Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through
payment for pass-through drugs and biologicals (the pass-through
payment amount) as the difference between the amount authorized under
section 1842(o) of the Act (or, if the drug or biological is covered
under a CAP under section 1847B of the Act, an amount determined by the
Secretary equal to the average price for the drug or biological for all
competitive acquisition areas and the year established under such
section as calculated and adjusted by the Secretary) and the portion of
the otherwise applicable OPD fee schedule that the Secretary determines
is associated with the drug or biological. Payment for drugs and
biologicals with pass-through status under the OPPS is currently made
at the physician's office payment rate of ASP+6 percent. We believe it
is consistent with the statute to continue to provide payment for drugs
and biologicals with pass-through status at a rate of ASP+6 percent in
CY 2010, the amount that drugs and biologicals receive under section
1842(o) of the Act. Thus, for CY 2010, we are proposing to pay for
pass-through drugs and biologicals at ASP+6 percent, equivalent to the
rate these drugs and biologicals would receive in the physician's
office setting in CY 2010. The difference between ASP+4 percent that we
are proposing to pay for nonpass-through separately payable drugs under
the CY 2010 OPPS and ASP+6 percent, therefore, would be the CY 2010
pass-through payment amount for these drugs and biologicals. In the
case of pass-through contrast agents, diagnostic radiopharmaceuticals,
and implantable biologicals, their pass-through payment amount would be
equal to ASP+6 percent because, if not on pass-through status, payment
for these products would be packaged into the associated procedures.
In addition, we are proposing to update pass-through payment rates
on a quarterly basis on the CMS Web site during CY 2010 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 or biologicals are necessary. If the Part B drug CAP
is reinstated during CY 2010, and a drug or biological that has been
granted pass-through status for CY 2010 becomes covered under the Part
B drug CAP, we are proposing to provide pass-through payment at the
Part B drug CAP rate and to make the appropriate adjustments to the
payment rates for these drugs and biologicals on a quarterly basis as
appropriate.
In CY 2010, consistent with our CY 2009 policy for diagnostic
radiopharmaceuticals, we are proposing to provide payment for both
diagnostic and therapeutic radiopharmaceuticals that are granted pass-
through status based on the ASP methodology. As stated above, for
purposes of pass-through payment, we consider radiopharmaceuticals to
be drugs under the OPPS and, therefore, if a diagnostic or therapeutic
radiopharmaceutical receives pass-through status during CY 2010, we are
proposing to follow the standard ASP methodology to determine its pass-
through payment rate under the OPPS. If ASP information is available,
the payment rate would be equivalent to the payment rate that drugs
receive under section 1842(o) of the Act, that is, ASP+6 percent. If
ASP data are not available for a radiopharmaceutical, we are proposing
to provide pass-through payment at WAC+6 percent, the equivalent
payment provided to nonradiopharmaceutical pass-through drugs and
biologicals without ASP information. If WAC information is also not
available, we are proposing to provide payment for the pass-through
radiopharmaceutical at 95 percent of its most recent AWP.

Table 22--Proposed Drugs and Biologicals With Pass-Through Status in CY
2010
------------------------------------------------------------------------
CY 2009 short Proposed CY Proposed CY
CY 2009 HCPCS code descriptor 2010 SI 2010 APC
------------------------------------------------------------------------
C9245........................ Injection, G 9245
romiplostim.
C9246........................ Inj, gadoxetate G 9246
disodium.
C9247........................ Inj, G 9247
iobenguane, I-
123, dx.
C9248........................ Inj, G 9248
clevidipine
butyrate.
C9249........................ Inj, G 9249
certolizumab
pegol.
C9250........................ Artiss fibrin G 9250
sealant.
C9251........................ Inj, C1 G 9251
esterase
inhibitor.
C9252........................ Injection, G 9252
plerixafor.
C9253........................ Injection, G 9253
temozolomide.
C9356........................ TendoGlide G 9356
Tendon Prot,
cm2.
C9358........................ SurgiMend, G 9358
fetal.
C9359........................ Implnt, bon G 9359
void filler-
putty.

[[Page 35311]]

C9360........................ SurgiMend, G 9360
neonatal.
C9361........................ NeuraMend nerve G 9361
wrap.
C9362........................ Implnt, bon G 9362
void filler-
strip.
C9363........................ Integra Meshed G 9363
Bil Wound Mat.
C9364........................ Porcine G 9364
implant,
Permacol.
J0641........................ Levoleucovorin G 1236
injection.
J1267........................ Doripenem G 9241
injection.
J1453........................ Fosaprepitant G 9242
injection.
J1459........................ Inj IVIG G 1214
privigen 500
mg.
J1571........................ Hepagam b im G 0946
injection.
J1573........................ Hepagam b G 1138
intravenous,
inj.
J1953........................ Levetiracetam G 9238
injection.
J2785........................ Injection, G 9244
regadenoson.
J8705........................ Topotecan oral. G 1238
J9033........................ Bendamustine G 9243
injection.
J9207........................ Ixabepilone G 9240
injection.
J9225........................ Vantas implant. G 1711
J9226........................ Supprelin LA G 1142
implant.
Q4114........................ Flowable Wound G 1251
Matrix, 1 cc.
------------------------------------------------------------------------

As discussed in more detail in section V.B.2.d. of this proposed
rule, over the last 2 years, we implemented a policy whereby payment
for all nonpass-through diagnostic radiopharmaceuticals, contrast
agents, and implantable biologicals is packaged into payment for the
associated procedure, and we are proposing to continue the packaging of
these items, regardless of their per-day cost, in CY 2010. As stated
earlier, pass-through payment is 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 the year
established under such section as calculated and adjusted by the
Secretary) and the portion of the otherwise applicable OPD fee schedule
that the Secretary determines is associated with the drug or
biological. Because payment for a drug that is either a diagnostic
radiopharmaceutical or a contrast agent (identified as a ``policy-
packaged'' drug, first described in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68639)) or for an implantable biological
(which we are proposing to consider to be a device for all payment
purposes beginning in CY2010 as discussed in sections V.A.4. and
V.B.2.d. of this proposed rule) would otherwise be packaged if the
product did not have pass-through status, we believe the otherwise
applicable OPPS payment amount would be equal to the ``policy-
packaged'' drug or the device APC offset amount for the associated
clinical APC in which the drug or biological is utilized. The
calculation of the ``policy-packaged'' drug and the device APC offset
amounts are described in more detail in sections V.A.6.b. and IV.A.2.
of this proposed rule, respectively. It follows that the copayment for
the nonpass-through payment portion (the otherwise applicable fee
schedule amount that we would also offset from payment for the drug or
biological if a payment offset applies) of the total OPPS payment for
this subset of drugs and biologicals would, therefore, be accounted for
in the copayment for the associated clinical APC in which the drug or
biological is used. According to section 1833(t)(8)(E) of the Act, the
amount of copayment associated with pass-through items is equal to the
amount of copayment that would be applicable if the pass-through
adjustment was not applied. Therefore, beginning in CY 2010, we are
proposing to set the associated copayment amount for pass-through
diagnostic radiopharmaceuticals, contrast agents, and implantable
biologicals that would otherwise be packaged if the item did not have
pass-through status to zero. The separate OPPS payment to a hospital
for the pass-through diagnostic radiopharmaceutical, contrast agent, or
implantable biological, after taking into account any applicable
payment offset for the item due to the device or ``policy-packaged''
APC offset policy, is the item's pass-through payment, which is not
subject to a copayment according to the statute. Therefore, we are not
publishing a copayment amount for these items in Addendum A and B to
this proposed rule.
4. Pass-Through Payment for Implantable Biologicals
a. Background
Section 1833(t)(6)(A)(iv) of the Act authorizes transitional pass-
through payments for new medical devices, drugs, and biologicals, for
those items where payment was not being made as a hospital outpatient
service under Part B as of December 31, 1996, and whose cost is not
insignificant in relation to the OPD fee schedule amount payable for
the service (or group of services) involved. These pass-through
payments are in addition to the usual APC payments for services in
which the product is used. Coding and payment for drugs and biologicals
with pass-through status are generally provided on a product-specific
basis, while coding and payment for devices with pass-through status
are provided for categories of devices that may describe numerous
products. The Act specifies that the duration of transitional pass-
through payments for devices must be no less than 2 and no more than 3
years from the first date on which payment is made for any medical
device that is described by the category. For drugs and biologicals, as
further discussed in section V.A.5. of this proposed rule, generally
beginning in CY 2010 we are specifying, consistent with the statute,
that the pass-through payment eligibility period for drugs and
biologicals is no less than 2 and no more than 3 years from the first
date on which payment is made for the drug or biological under Part B
as an outpatient

[[Page 35312]]

hospital service. Therefore, we utilize separate pass-through
application and evaluation processes and criteria for drugs and
biologicals and device categories because the statutory provisions are
not the same for all items that may receive pass-through payment. These
processes and the applicable evaluation criteria are available on the
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp#TopOf Page. The regulations that govern pass-
through payment for drugs and biologicals are found in Sec. 419.64 and
those applicable to pass-through device categories are found in Sec.
419.66.
Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through
payment amount, in the case of a drug or biological, is the amount by
which the amount determined under section 1842(o) of the Act (or, if
the drug or biological is covered under a competitive acquisition
contract under section 1847B of the Act, an amount determined by the
Secretary equal to the average price for the drug or biological for all
competitive acquisition areas and the 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. For the drugs and biologicals that would have otherwise
been paid under the Part B drug CAP, because the Part B drug CAP has
been suspended beginning January 1, 2009, pass-through payment for
these drugs and biologicals is currently made at the physician's office
payment rate of ASP+6 percent. In the case of diagnostic
radiopharmaceuticals, where all products without pass-through status
are packaged into payment for nuclear medicine procedures, the pass-
through payment is reduced by an amount that reflects the diagnostic
radiopharmaceutical portion of the APC payment amount for the
associated nuclear medicine procedure (the ``policy-packaged'' drug APC
offset) that we determine is associated with the cost of predecessor
diagnostic radiopharmaceuticals. We are proposing a similar payment
offset policy for contrast agents beginning in CY 2010, as discussed in
section V.A.6. of this proposed rule. Pass-through payment for a
category of devices is made at the hospital's charge for the device
adjusted to cost by application of the hospital's CCR. If applicable,
the device payment is reduced by an amount that reflects the portion of
the APC payment amount for the associated surgical procedure that we
determine is associated with the cost of the device, called the device
APC offset and discussed further in section IV.A.2. of this proposed
rule.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68633
through 68636), we finalized a policy to package payment for
implantable biologicals without pass-through status that are surgically
inserted or implanted (through a surgical incision or a natural
orifice) into payment for the associated surgical procedure. Prior to
our implementation of this policy for nonpass-through implantable
biologicals, we adopted in the CY 2003 OPPS final rule with comment
period (67 FR 66763) the current OPPS policy that packages payment for
an implantable device into the associated surgical procedures when its
pass-through payment period ends because payment for all implantable
devices without pass-through status under the OPPS is packaged. We
consider nonpass-through implantable devices to be integral and
supportive items for which packaged payment is most appropriate. As we
stated in the CY2009 OPPS/ASC final rule with comment period (73 FR
68634), we believe this policy to package payment for implantable
devices that are integral to the performance of procedures paid
separately through an APC payment should also apply to payment for
implantable biologicals without pass-through status, when those
biologicals function as implantable devices. Implantable biologicals
may be used in place of other implantable nonbiological devices whose
costs are already accounted for in the associated procedural APC
payments for surgical procedures. We reasoned that if we were to
provide separate payment for nonpass-through implantable biologicals,
we would potentially be providing duplicate device payment, both
through the packaged nonbiological device cost included in the surgical
procedure's payment and the separate biological payment.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68634), we stated our belief that the three implantable biologicals
with expiring pass-through status for CY 2009 differ from other
biologicals paid under the OPPS in that they specifically always
function as surgically implanted devices. We noted that both
implantable nonbiological devices under the OPPS and the three
biologicals with expiring pass-through status in CY 2009 are surgically
inserted or implanted (including through a surgical incision or a
natural orifice). These three biologicals are approved by the FDA as
devices, and they are solely surgically implanted according to their
FDA-approved indications. Furthermore, in some cases, these implantable
biologicals can substitute for implantable nonbiological devices (such
as for synthetic nerve conduits or synthetic mesh used in tendon
repair).
For other nonpass-through biologicals paid under the OPPS that may
sometimes be used as implantable devices, we have instructed hospitals,
beginning via Transmittal 1336, Change Request 5718, dated September
14, 2007, to not separately bill 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. We stated
that hospitals may include the charge for the biological in their
charge for the procedure, report the charge on an uncoded revenue
center line, or report the charge under a device HCPCS code, if one
exists, so that the biological costs may be considered in future
ratesetting for the associated surgical procedures.
Several commenters to the CY 2009 OPPS/ASC proposed rule supported
CMS' proposal to package payment for implantable biologicals without
pass-through status into payment for the associated surgical procedure
(73 FR 68635). One commenter also recommended that CMS treat
biologicals that are always surgically implanted or inserted and have
FDA device approval, as devices for purposes of pass-through payment,
rather than as drugs. The commenter observed 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 and payment for
these products functioning as implantable devices during their pass-
through payment period, as well as after the expiration of pass-through
status.
We finalized in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68635) our proposal to package payment for any nonpass-through
biological that is surgically inserted or implanted (through a surgical
incision or a natural orifice) into the payment for the associated
surgical procedure, just as we package payment for all nonpass-through,
implantable, nonbiological devices. As a result of this final policy,
the three implantable biologicals with

[[Page 35313]]

expiring pass-through status in CY 2009 were packaged and assigned
status indicator ``N'' as of January 1, 2009. In addition, any new
biologicals without pass-through status that are surgically inserted or
implanted (through a surgical incision or a natural orifice) are also
packaged beginning in CY 2009. Hospitals continue to report the HCPCS
codes that describe biologicals that are always used as implantable
devices on their claims, and we package the costs of those biologicals
into the associated procedures, according to the standard OPPS
ratesetting methodology that is described in section II.A.2. of this
proposed rule. 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 always, used as implanted
biologicals are appropriately packaged into payment for the associated
implantation procedures when the products are used as implantable
devices.
b. Proposed Policy for CY 2010
Some implantable biologicals are described by device category codes
for expired pass-through categories, including HCPCS code C1781 (Mesh
(implantable)), HCPCS code C1762 (Connective tissue, human), and HCPCS
code C1763 (Connective tissue, non-human). All implantables described
by the latter two categories are biologicals, while HCPCS code C1781
describes both implantable biological and nonbiological devices.
Historically, these category codes included biological products that we
approved for pass-through payment under the device pass-through
process, initially when we paid for pass-through devices on a brand-
specific basis from CY 2000 through March 31, 2001, and later through
the device categories described by HCPCS codes C1781, C1762, and C1763
which were developed effective April 1, 2001.
We believe that it is most appropriate for a product to be eligible
for a single period of OPPS pass-through payment, rather than a period
of device pass-through payment and a period of drug or biological pass-
through payment. The limited timeframe for transitional pass-through
payment ensures that new devices, drugs, and biologicals may receive
special payment consideration under the OPPS for the first few years
after their initial use, in order to allow sufficient time for their
cost information to be reflected in hospital claims data and,
therefore, to be available for OPPS ratesetting. After the pass-through
payment period ends, like other existing services, we have cost
information regarding these new products provided to us by hospitals
from claims and cost report data. We then utilize that information when
packaging the costs of the items (all devices, diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals, and
other drugs with an estimated per day cost equal to or less than the
annual drug packaging threshold) or paying separately for the products
(drugs except contrast agents and diagnostic radiopharmaceuticals and
also nonimplantable biologicals with estimated per day costs above the
annual drug packaging threshold). Further, although implantable
biologicals with pass-through status may substitute for nonpass-through
implantable devices whose costs are packaged into procedural APC
payments, our existing APC offset policies for the costs of predecessor
items packaged into APC payment for the associated services do not
apply to pass-through payment for biologicals. We note that the APC
offset amount that would be most applicable to implantable biologicals,
were we to establish such an offset policy for them, would be the
device APC offset amount, based on their similarity of function to the
implantable devices whose costs have been included in establishing the
procedural APC payment, not the ``policy-packaged'' or ``threshold-
packaged'' drug APC offset amounts that one would expect to apply to
pass-through drugs and biologicals. Similarly, when we currently
evaluate a pass-through implantable biological application for the cost
significance of the product, our methodology utilizes the ``policy-
packaged'' APC offset amount to assess the candidate implantable
biological, not the device APC offset amount that would be more
reflective of the costs of predecessor devices related to the candidate
implantable biological, such as those of device category HCPCS codes
C1781, C1762, and C1763.
Many implantable biologicals, such as the three biologicals that
expired from pass-through status after CY 2008, have FDA approval as
devices. A number of other implantable biologicals with FDA approval as
devices have also been approved for OPPS pass-through payment over the
past several years, based on their product-specific pass-through
applications as biologicals, not devices. Moreover, outside of the
period of pass-through payment, the costs of implantable biologicals,
like the costs of implantable devices, are now packaged into the cost
of the procedure in which they are used. Implantable biologicals may be
used in place of other implantable nonbiological devices whose costs
are already accounted for in the associated procedural APC payments.
Payment is made for nonpass-through implantable biologicals, like for
devices, through the APC payment for the associated surgical procedure.
In view of these considerations, we are proposing that the pass-
through evaluation process and pass-through payment methodology for
implantable biologicals that are surgically inserted or implanted
(through a surgical incision or a natural orifice) and that are newly
approved for pass-through status beginning on or after January 1, 2010,
be the device pass-through process and payment methodology only. Given
the shared payment methodologies for implantable biological and
nonbiological devices during their nonpass-through payment periods, as
well as their overlapping and sometimes identical clinical uses and
their similar regulation by the FDA as devices, we believe that the
most consistent pass-through payment policy for these different types
of items that are surgically inserted or implanted and that may
sometimes substitute for one another is to evaluate all such devices,
both biological and nonbiological, only under the device pass-through
process. As a result, implantable biologicals would no longer be
eligible to submit biological pass-through applications and to receive
biological pass-through payment at ASP+6 percent. While we understand
that implantable biologicals have characteristics that result in their
meeting the definitions of both devices and biologicals, we believe
that biologicals are most similar to devices because of their required
surgical insertion or implantation and that it would be appropriate to
only evaluate them as devices because they share significant clinical
similarity with implantable nonbiological devices. We refer readers to
the CMS Web site specified previously in this section to view the
device pass-through application requirements and review criteria that
would apply to the evaluation of all implantable biologicals for pass-
through status when their pass-through payment would begin on or after
January 1, 2010.
However, those implantable biologicals that are surgically inserted
or implanted (through a surgical incision or natural orifice) and that
are receiving pass-through payment as biologicals prior to January 1,
2010, would continue

[[Page 35314]]

to be considered pass-through biologicals for the duration of their
period of pass-through payment. These products have already been
evaluated for pass-through status based on their application as
biologicals and have been approved for pass-through status based on the
established criteria for biological pass-through payment. We believe it
would be most appropriate for them to complete their 2- to 3-year
period of pass-through payment as biologicals in accordance with the
pass-through payment policies that were applicable at the time their
pass-through status was initially approved.
We note that, in conducting our pass-through review of implantable
biologicals as devices beginning for CY 2010 pass-through payment, we
would apply the portions of APC payment amounts associated with devices
(that is, the device APC offset amounts) to assess the cost
significance of the candidate implantable biologicals, as we do for
other devices. The CY 2009 device APC offset amounts are posted on the
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp. The result of evaluating all implantable
biological items only for device pass-through payment is that payment
for implantable biologicals eligible for pass-through payment beginning
on or after January 1, 2010, would be based on hospital charges
adjusted to cost, rather than the ASP methodology that is applicable to
pass-through drugs and biologicals. Treating implantable biologicals as
devices for pass-through payment evaluation and payment would result in
their consistent treatment with respect to coding and payment during
their pass-through and nonpass-through periods of payment. This
proposed policy would allow us to appropriately offset the pass-through
payment for an implantable biological using the device APC offset
amounts, which would incorporate the costs of predecessor devices (both
biological and nonbiological) that are similar to the implantable
biological item with pass-through status. Finally, this proposed policy
would ensure that each implantable biological is eligible for OPPS
pass-through payment for only one 2- to 3-year time period (as a device
only, not as a biological), so that once OPPS claims data incorporate
cost information for the implantable biological, the product would not
be again eligible for OPPS pass-through payment in the future.
Further, because we are proposing that the pass-through evaluation
process for CY 2010 pass-through status approvals and pass-through
payment methodology for implantable biologicals that are surgically
inserted or implanted (through a surgical incision or a natural
orifice) beginning in CY 2010 be the device pass-through process and
payment methodology only, we also are proposing to revise our
regulations at Sec. Sec. 419.64 and 419.66 to conform to this new
policy. Specifically, we are proposing to amend Sec. 419.64 by adding
a new paragraph (a)(4)(iii) and language under a new paragraph (c)(3)
to exclude implantable biologicals from consideration for drug and
biological pass-through payment. Furthermore, proposed new paragraph
(a)(4)(iv) of Sec. 419.64 would specify the continued inclusion of
implantable biologicals for which pass-through payment as a biological
is made on or before December 31, 2009, as eligible for biological
pass-through payment, consistent with our proposal to allow these
products to complete their period of pass-through payment as
biologicals.
Moreover, in light of our CY 2010 proposal that implantable
biological applications approved for pass-through status beginning on
or after January 1, 2010, would be considered only for device pass-
through evaluation and payment, we believe it would also be appropriate
to clarify the current example in Sec. 419.66(b)(4)(iii) of the
regulations regarding the exclusion of materials, for example
biological or synthetic materials, that may be used to replace human
skin from device pass-through payment eligibility. While, by
definition, implantable biologicals that are surgically implanted or
inserted would not be biological materials that replace human skin, we
are proposing to more precisely state this in the regulations.
Therefore, we are proposing to revise Sec. 419.66(b)(4) (iii), which
currently states that a device is not a material that may be used to
replace human skin and provides an example of such a material as ``a
biological or synthetic material.'' We are proposing to revise Sec.
419.66(b)(4)(iii) to specify that the biological materials be a
``biological skin replacement material'' rather than a ``biological''
and the synthetic materials be a ``synthetic skin replacement
material'' rather than a ``synthetic material'' because we do not
believe this example should refer to biologicals or synthetic materials
that are used for purposes other than as a skin replacement material,
given that the regulatory provision in Sec. 419.66(b)(4)(iii) applies
only to a material that may be used to replace human skin.
5. Definition of Pass-Through Payment Eligibility Period for New Drugs
and Biologicals
Section 1833(t)(6) of the Act provides for transitional pass-
through payments for medical devices, drugs, and biologicals. Section
1833(t)(6)(A) of the Act generally describes two groups of services--
``current'' and ``new''--that are eligible for pass-through payments,
depending, in part, on when they were first paid. One of the criteria
for ``new'' drugs and biologicals to receive pass-through payments
under section 1833(t)(6)(A)(iv)(I) of the Act is that payment for the
item as an outpatient hospital service under Part B was not being made
as of December 31, 1996. For those ``new'' drugs and biologicals,
section 1833(t)(6)(C)(i)(II) of the Act specifies that there is a 2- to
3-year limitation on the pass-through period that begins on the first
date on which payment is made under Part B for the drug or biological
as an outpatient hospital service.
Section 419.64 of the regulations codifies the transitional pass-
through payment provisions for drugs and biologicals. Section 419.64(a)
describes the drugs and biologicals that are eligible for pass-through
payments, essentially capturing the distinction between ``new'' and
``current'' services. Section 419.64(c)(2) provides that the pass-
through payment eligibility period for drugs and biologicals that fall
into the ``new'' category begins on the date that CMS makes its first
pass-through payment for the drug or biological.
It has come to our attention that our pass-through payment
eligibility period for ``new'' drugs and biologicals in Sec.
419.64(c)(2) does not most accurately reflect the statutory
requirements of section1833(t)(6)(C)(i)(II) of the Act. Where our
regulations indicate that the pass-through payment eligibility period
for ``new'' drugs and biologicals begins on the first date on which
pass-through payment is made for the item, section 1833(t)(6)(c)(i)(II)
of the Act specifies that the pass-through period of 2 to 3 years for
``new'' drugs and biologicals begins on the first date on which payment
is made under Part B for the drug or biological as an outpatient
hospital service. In order to better reflect the statutory requirement
for the pass-through period for a ``new'' drug or biological, we are
proposing to revise paragraph (c)(2) of Sec. 419.64 and add a new
paragraph (c)(3) to Sec. 419.64 of the regulations.
In order to conform the regulations to the statutory provisions, we
are proposing to change the start date of the pass-through payment
eligibility period

[[Page 35315]]

for a drug or biological from the first date on which pass-through
payment is made to the date on which payment is first made for a drug
or biological as an outpatient hospital service under Part B. Under
this proposal, we would need to identify a first date of payment for a
drug or biological as an outpatient hospital service under Part B.
(Under our current policy, we have not needed to establish a first date
on which payment is made under Part B for the drug or biological as an
outpatient hospital service because the pass-through payment
eligibility period begins on the first date pass-through payment is
made for the item.) Due to the 2-year delay in the availability of
claims data, under our CY 2010 proposal we would not be able to
identify an exact date of first payment for a drug or biological as an
outpatient hospital service under Part B in order to determine the
start date of the pass-through payment eligibility period until years
after an application for pass-through payment for a ``new'' drug or
biological has been submitted. At that later point in time, the pass-
through payment eligibility period may be close to expiring, and the
result of relying upon our claims data to evaluate an item for its
eligibility for pass-through status could be a very short period of
pass-through payment for the new drug or biological. Consequently, we
believe it would be desirable to identify an appropriate and timely
proxy for the date of first payment for the drug or biological as an
outpatient hospital service under Part B. We believe the date of first
sale for a drug or biological in the U.S. following FDA approval is an
appropriate proxy, as explained below, and we are proposing this as the
date on which the pass-through payment eligibility period would begin.
We also note that, in light of our CY 2010 proposal, described in
section V.A.4. of this proposed rule, to treat implantable biologicals
as medical devices for purposes of pass-through eligibility and payment
under section 1833(t)(6) of the Act, these proposed revisions to the
pass-through payment eligibility period for a drug or biological
approved for pass-through payment beginning on or after January 1,
2010, would not apply to implantable biologicals, but rather only to
nonimplantable biologicals.
We believe that the date of first sale of the drug or
nonimplantable biological in the U.S. following FDA approval is an
appropriate proxy for the first date of payment for the drug or
nonimplantable biological as an outpatient hospital service under Part
B for several reasons. We anticipate that Medicare beneficiaries would
be among the first to use these drugs and nonimplantable biologicals
and that the date of first sale is the date upon which a drug or
nonimplantable biological would become available to those beneficiaries
and be paid under Part B as an outpatient hospital service. Further, we
already use the date of first sale of a drug or biological in the U.S.
following FDA approval under the ASP methodology and in the existing
OPPS pass-through payment eligibility determination. In determining the
ASP for a drug under the ASP payment methodology in section 1847A of
the Act, we use the date of first sale of a drug or biological in the
U.S. following FDA approval to identify ``single source drugs'' and
``biological products'' when determining a payment amount. We also use
the date of first sale of a drug or biological in the U.S. under our
current OPPS pass-through payment application process to determine if a
drug or biological is ``new,'' that is, whether the item was paid as an
outpatient hospital service on or after January 1, 1997. Finally, we do
not believe that there is a more accurate and readily available proxy
for the first date of payment for a drug or biological under Part B as
an outpatient hospital service. In summary, we believe that the date of
first sale of the drug or nonimplantable biological in the U.S.
following FDA approval is an appropriate proxy for the first date on
which payment is made under Part B for the item as an outpatient
hospital service because it is an accepted and available indicator of
initial payment for the Medicare program.
In proposed new Sec. 419.64(c)(3), we indicate that the date of
first sale of a drug or nonimplantable biological in the U.S. following
FDA approval would be the start date of the pass-through payment
eligibility period for drugs or nonimplantable biologicals approved for
pass-through payment beginning on or after January 1, 2010. We also are
proposing modifications to Sec. 419.64(c) (2) to specify that our
current policy--that the pass-through payment eligibility period of 2
to 3 years begins on the first date that pass-through payment is made
for the drug or biological--applies only to drugs and biologicals
approved for and receiving pass-through payment on or before December
31, 2009. Although we believe that we have the authority to stop pass-
through payments and to recover pass-through payments already made for
such drugs and biologicals, we are proposing in these specific limited
circumstances to permit pass-through status to continue.
We currently implement new approvals of pass-through status for
drugs and biologicals on a quarterly basis, and for CY 2010, we would
continue to implement these new approvals on a quarterly basis. We
describe our quarterly process for reviewing and approving applications
for drugs and biologicals to receive pass-through payment on the CMS
Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp. Interested parties may submit a complete
application at any time. We typically review and make pass-through
status approval decisions about complete applications for initiation of
pass-through payment within 4 months of their submission and implement
new pass-through status approvals on a quarterly basis through the next
available OPPS quarterly update. The CMS Web site provides a timeline
showing the relationship between the date of submission of a complete
application and the earliest date of pass-through payment that would
result from approval of pass-through status for the drug or biological.
Under our current policy, the pass-through payment eligibility
period and period of pass-through payment are the same. However, the
pass-through payment eligibility period and the period of pass-through
payment would not be identical under our proposed policy. For our
proposed policy, we need to identify both the pass-through payment
eligibility period as well as the period during which pass-through
payments would be made, including the respective start and expiration
dates of the pass-through payment eligibility period and the period of
pass-through payment. The period of pass-through payment would coincide
with the time period during which the drug or biological is designated
as having pass-through status. (We note that being within the pass-
through payment eligibility period alone does not qualify a ``new''
drug or biological for pass-through payment; the drug or biological
must also meet the other requirements for pass-through payment,
including that CMS determines that the cost of a drug or biological is
not insignificant.) Under our proposal, the pass-through payment
eligibility period would run for at least 2 years but no more than 3
years. For example, for a drug with a first date of sale in the United
States after FDA approval of May 3, 2009, the pass-through payment
eligibility period would start on May 3, 2009. If the pass-through
payment eligibility period ran

[[Page 35316]]

for 3 years, it would expire on May 2, 2012. We are proposing to modify
Sec. 419.64 accordingly by adding new paragraph (c)(3) to state: ``For
a drug or nonimplantable biological described in paragraph (a)(4) of
this section and approved for pass-through payment beginning on or
after January 1, 2010--[the pass-through payment eligibility period
begins on] the date of first sale of the drug or nonimplantable
biological in the United States after FDA approval.'' Next, we are
proposing that pass-through payment would start on the first day of the
calendar quarter following the calendar quarter during which the
completed application was approved. We would reflect this in regulation
text, in proposed new Sec. 419.64(c)(3), as follows. ``Pass-through
payment for the drug or nonimplantable biological begins on the first
day of the hospital outpatient prospective payment system update (for
example, calendar quarter) following the update period during which the
drug or nonimplantable biological was approved for pass-through
status.'' The start date for the period of pass-through payment would
be specified in a letter to the applicant conveying pass-through status
approval for the new drug or biological and would be the first day of
the calendar quarter following the calendar quarter during which a
complete pass-through application is approved by CMS for pass-through
status.
We also are proposing to expire pass-through status on a quarterly
basis. We would use the pass-through payment eligibility period
expiration date to determine when the period of pass-through payment
would expire. The way we would operationalize this would be to make the
last date of the period of pass-through payment be the last day of the
calendar quarter that preceded the pass-through payment eligibility
period expiration date. This proposal to expire the pass-through status
of drugs and nonimplantable biologicals on a quarterly basis would be a
departure from our current policy for expiring the pass-through status
of drugs and biologicals. Presently, we expire the pass-through status
of drugs and biologicals at the end of the calendar year preceding the
year of the applicable annual OPPS update. (We discuss our CY 2010
proposal to expire the pass-through status of drugs and biologicals
currently receiving pass-through payment that will have already
received between 2 and 3 years of pass-through payment by January 1,
2010, in section V.A.2. of this proposed rule.) Because our current
pass-through payment eligibility period policy effectively aligns the
start of pass-through payment with the beginning of the 2- to 3-year
pass-through payment eligibility period, expiration of pass-through
status on a calendar year basis affords those drugs and biologicals at
least 2 but not more than 3 years of pass-through payment. This would
continue to be the case for drugs and biologicals that have been
approved for pass-through status and that are receiving pass-through
payment on or before December 31, 2009, as reflected in our proposed
revision to Sec. 419.64(c) (2). However, beginning in CY 2010, for
``new'' drugs and nonimplantable biologicals with a pass-through
payment eligibility period described by proposed new Sec.
419.64(c)(3), we would expire pass-through status on a quarterly basis.
Under the proposed revised definition of the pass-through payment
eligibility period, the pass-through payment eligibility period may
begin well before application is made for pass-through payment for the
drug or nonimplantable biological and pass-through status is approved,
which could have the effect of a shorter period of pass-through payment
for some drugs and biologicals than would be the case under our current
policy. Therefore, we are proposing to expire pass-through status on a
quarterly basis to ensure that drugs and nonimplantable biologicals for
which a pass-through payment application has been made after the pass-
through payment eligibility period has begun can most benefit from
pass-through payment. We provide the following examples to illustrate
how our proposed policies would work.
First, if CMS receives a complete pass-through payment application
on March 1, 2010, for a ``new'' drug with a date of first sale in the
United States after FDA approval of December 15, 2009, the pass-through
payment eligibility period would begin on December 15, 2009. If the
pass-through payment eligibility period ran for 3 years, it would
expire on December 14, 2012. If we process the application and approve
pass-through status within 4 months, the period of pass-through payment
for that drug would begin on July 1, 2010, because that would be the
first day of the calendar quarter following the calendar quarter during
which the completed application was approved for pass-through status.
The period of pass-through payment would expire no later than September
30, 2012, because that would be the last day of the calendar quarter
that preceded the pass-through eligibility period expiration date. We
would indicate the drug's change from pass-through to nonpass-through
status, as discussed below, in the October 2012 OPPS quarterly update.
In another example, if CMS receives a complete pass-through payment
application on December 1, 2009, for a ``new'' drug with a date of
first sale of the drug in the United States after FDA approval of May
3, 2009, the pass-through payment eligibility period for that drug
would begin on May 3, 2009, and would end no later than May 2, 2012. If
we process the application and approve pass-through status within 4
months, the period of pass-through payment would begin on April 1,
2010, because that would be the first day of the calendar quarter
following the calendar quarter during which the completed application
was approved for pass-through status, and would end no later than March
31, 2012, because that would be the last day of the calendar quarter
that preceded the pass-through payment eligibility period expiration
date. We would indicate the drug's change from pass-through to nonpass-
through status, as discussed below, in the April 2012 OPPS quarterly
update.
In another example, in the case of a complete application for a
``new'' drug, with a date of first sale of the drug in the United
States after FDA approval of November 16, 2006, that is received by
December 1, 2009, the pass-through payment eligibility period for that
drug would have begun on November 16, 2006. The pass-through payment
eligibility period would expire no later than November 15, 2009,
because that would be 3 years from the date on which the pass-through
payment eligibility period began. In this example, the drug would not
be approved for pass-through status because the pass-through payment
eligibility period would have already expired. The earliest date that
the period of pass-through payment for the drug could have begun would
have been April 1, 2010, which would be after the expiration of the
pass-through payment eligibility period.
As noted above, for those ``new'' drugs or biologicals approved for
pass-through status beginning in a calendar quarter prior to CY 2010
that are described by Sec. 419.64(c)(2), we would continue our current
policy. That means that we would expire pass-through status for the
drug or biological at the end of the calendar year after the drug or
biological has received at least 2 but not more than 3 years of pass-
through payment.
In addition to proposing to expire the pass-through status of
``new'' drugs and nonimplantable biologicals described by

[[Page 35317]]

proposed new Sec. 419.64(c)(3) on a quarterly basis, we also would
continue our established policy of determining whether a drug or
biological would receive separate payment or packaged payment, after
the expiration of the period of pass-through payment, on a calendar
year basis through the annual OPPS rulemaking process as described in
section V.B.2. of this proposed rule. Under our current drug payment
policies, we propose and finalize packaging determinations for drugs
and biologicals subject to the OPPS annual drug packaging threshold
only once a year based on the most updated claims data and ASP
information available for the annual rulemaking cycle. We are not
proposing to change this annual packaging determination process.
Therefore, after the expiration of pass-through status of a ``new''
drug or biological in a given year's calendar quarter, we would
continue to make separate payment through the end of that calendar year
for those drugs and nonimplantable biologicals that would be subject to
the drug packaging threshold when they did not have pass-through status
(therefore, excluding contrast agents and diagnostic
radiopharmaceuticals for CY 2010 which would always be packaged when
not on pass-through status) at the applicable OPPS payment rate for
separately payable drugs and biologicals without pass-through status
for that year, proposed to be ASP+4 percent for CY 2010. We would
change their status indicator from ``G'' (Pass-Through Drugs and
Biologicals) to ``K'' (Nonpass-Through Drugs and Nonimplantable
Biologicals) in the applicable quarterly OPPS update that immediately
followed the last day of the calendar quarter in which the pass-through
status of the drug or nonimplantable biological expired. In our
proposed rule for the upcoming prospective payment year that is after
the calendar year quarter in which the pass-through status of a drug or
nonimplantable biological expired, we would use ASP information and our
claims data to assess whether the drug or biological would be packaged
or separately payable in the upcoming calendar year. For those drugs
with expiring pass-through status that are always packaged when not on
pass-through status (``policy-packaged''), specifically diagnostic
radiopharmaceuticals and contrast agents for CY 2010 as discussed in
section V.B.2.d. of this proposed rule, we would make packaged payment
for them for the remainder of the calendar year after the expiration of
pass-through payment. We would change their status indicator from ``G''
to ``N'' (Items and Services Packaged into APC Rates) in the applicable
quarterly OPPS update that immediately followed the last day of the
calendar quarter in which the pass-through status of the drug or
nonimplantable biological expired. For example, for a drug (excluding
contrast agents and diagnostic radiopharmaceuticals) described by
proposed new Sec. 419.64(c)(3) with pass-through status expiring on
September 30, 2010, we would make separate pass-through payment for the
drug at ASP+6 percent until September 30, 2010, and we would then make
separate nonpass-through payment for the drug at ASP+4 percent between
October 1, 2010 and December 31, 2010. For CY2011, we would use ASP
information and our claims data to propose whether the drug would be
packaged or separately payable.
6. Proposed Provisions for Reducing Transitional Pass-Through Payments
for Diagnostic Radiopharmaceuticals and Contrast Agents to Offset Costs
Packaged Into APC Groups
a. Background
Prior to CY 2008, diagnostic radiopharmaceuticals and contrast
agents 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 began a policy of packaging payment for all
nonpass-through diagnostic radiopharmaceuticals and contrast agents as
ancillary and supportive items and services into their associated
nuclear medicine procedures. Therefore, beginning in CY2008, nonpass-
through diagnostic radiopharmaceuticals and contrast agents were not
subject to the annual OPPS drug packaging threshold to determine their
packaged or separately payable payment status, and instead all nonpass-
through diagnostic radiopharmaceuticals and contrast agents were
packaged as a matter of policy. For CY 2010, we are proposing to
continue to package payment for all nonpass-through diagnostic
radiopharmaceuticals and contrast agents as discussed in section
V.B.2.d. of this proposed rule.
b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
As previously noted, radiopharmaceuticals are considered to be
drugs for OPPS pass-through payment purposes. As described above,
section 1833(t)(6)(D)(i) of the Act specifies that the transitional
pass-through payment amount for pass-through drugs and biologicals is
the difference between the amount paid under section 1842(o) (or the
Part B drug CAP rate) and the otherwise applicable OPD fee schedule
amount. There is currently one radiopharmaceutical with pass-through
status under the OPPS, HCPCS code C9247 (Iobenguane, I-123, diagnostic,
per study dose, up to 10 millicuries). HCPCS code C9247 was granted
pass-through status beginning April 1, 2009, and will continue to
receive pass-through status in CY 2010. We currently apply the
established radiopharmaceutical payment offset policy to pass-through
payment for this product. As described earlier in section V.A.3. of
this proposed rule, new pass-through diagnostic radiopharmaceuticals
would be paid at ASP+6 percent, while those without ASP information
would be paid at WAC+6 percent or, if WAC is not available, based on 95
percent of the product's most recently published AWP.
As a payment offset is necessary in order to provide an appropriate
transitional pass-through payment, we deduct from the payment for pass-
through radiopharmaceuticals an amount that reflects the portion of the
APC payment associated with predecessor radiopharmaceuticals in order
to ensure no duplicate radiopharmaceutical payment. In CY 2009, we
established a policy to estimate the portion of each APC payment rate
that could reasonably be attributed to the cost of predecessor
diagnostic radiopharmaceuticals when considering a new diagnostic
radiopharmaceutical for pass-through payment (73 FR 68638 through
68641). Specifically, we utilize the ``policy-packaged'' drug offset
fraction for APCs containing nuclear medicine procedures, calculated as
1 minus (the cost from single procedure claims in the APC after
removing the cost for ``policy-packaged'' drugs divided by the cost
from single procedure claims in the APC). We have previously defined
``policy-packaged'' drugs and biologicals as nonpass-through diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals (73
FR 68639). We are proposing for CY 2010 to redefine ``policy-packaged''
drugs as only nonpass-through diagnostic radiopharmaceuticals and
contrast agents, as a result of the CY 2010 proposals discussed in
sections V.A.4. and V.B.2.d. of this proposed rule that would treat
nonpass-through implantable biologicals that are surgically inserted or
implanted (through a surgical incision or a natural

[[Page 35318]]

orifice) and implantable biologicals that are surgically inserted or
implanted (through a surgical incision or a natural orifice) with newly
approved pass-through status beginning in CY 2010 or later as devices,
rather than drugs. To determine the actual APC offset amount for pass-
through diagnostic radiopharmaceuticals that takes into consideration
the otherwise applicable OPPS payment amount, we multiply the ``policy-
packaged'' drug offset fraction by the APC payment amount for the
nuclear medicine procedure with which the pass-through diagnostic
radiopharmaceutical is used and, accordingly, reduce the separate OPPS
payment for the pass-through diagnostic radiopharmaceutical by this
amount.
We will continue to post annually on the CMS Web site at http://www.cms.hhs.gov/HospitalOutpatientPPS, a file that contains the APC
offset amounts that would be used for that year for purposes of both
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 continue to provide, for every
OPPS clinical APC, the amounts and percentages of APC payment
associated with packaged implantable devices, ``policy-packaged''
drugs, and ``threshold-packaged'' drugs and biologicals.
Table 23 below displays the proposed APCs to which nuclear medicine
procedures would be assigned in CY 2010 and for which we expect that an
APC offset could be applicable in the case of new diagnostic
radiopharmaceuticals with pass-through status.

Table 23--Proposed APCs to Which Nuclear Medicine Procedures Would Be
Assigned for CY 2010
------------------------------------------------------------------------
Proposed CY 2010 APC Proposed CY 2010 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.
------------------------------------------------------------------------

c. Proposed Payment Offset Policy for Contrast Agents
As described above, section 1833(t)(6)(D)(i) of the Act specifies
that the transitional pass-through payment amount for pass-through
drugs and biologicals is the difference between the amount paid under
section 1842(o) (or the Part B drug CAP rate) and the otherwise
applicable OPD fee schedule amount. There is currently one contrast
agent with pass-through status under the OPPS, HCPCS code C9246
(Injection, gadoxetate disodium, per ml). HCPCS code C9246 was granted
pass-through status beginning January 1, 2009, and will continue to
receive pass-through status in CY 2010. As described earlier in section
V.A.3. of this proposed rule, new pass-through contrast agents would be
paid at ASP+6 percent, while those without ASP information would be
paid at WAC+6 percent or, if WAC is not available, paid based on 95
percent of the product's most recently published AWP.
We believe that a payment offset, similar to the offset currently
in place for pass-through devices and diagnostic radiopharmaceuticals,
is necessary in order to provide an appropriate transitional pass-
through payment for contrast agents because all of these items are
packaged when they do not have pass-through status. In accordance with
our standard offset methodology, we are proposing to deduct from the
payment for pass-through contrast agents an amount that reflects the
portion of the APC payment associated with predecessor contrast agents
in order to ensure no duplicate contrast agent payment is made.
In CY 2009, we established a policy to estimate the portion of each
APC payment rate that could reasonably be attributed to the cost of
predecessor diagnostic radiopharmaceuticals when considering a new
diagnostic radiopharmaceutical for pass-through payment (73 FR 68638
through 68641). For CY 2010, we are proposing to apply this same policy
to contrast agents. Specifically, we are proposing to utilize the
``policy-packaged'' drug offset fraction for clinical APCs calculated
as 1 minus (the cost from single procedure claims in the APC after
removing the cost for ``policy-packaged'' drugs divided by the cost
from single procedure claims in the APC). As discussed above, while we
have previously defined the ``policy-packaged'' drugs and biologicals
as nonpass-through diagnostic radiopharmaceuticals, contrast agents,
and implantable biologicals (73 FR 68639), we are proposing for CY 2010
to redefine ``policy-packaged'' drugs as only nonpass-through
diagnostic radiopharmaceuticals and contrast agents, as a result of the
CY 2010 proposal discussed in sections V.A.4. and V.B.2.d. of this
proposed rule that would treat all implantable biologicals as devices,
rather than drugs. To determine the actual APC offset amount for pass-
through contrast agents that takes into consideration the otherwise
applicable OPPS payment amount, we are proposing to multiply the
``policy-packaged'' drug offset fraction by the APC payment amount for
the procedure with which the pass-through contrast agent is used and,
accordingly, reduce the separate OPPS payment for the pass-through
contrast agent by this amount.
We are proposing to continue to post annually on the CMS Web site
at http://www.cms.hhs.gov/HospitalOutpatientPPS, a file that contains
the APC offset amounts that would be used for that year for purposes of
both evaluating cost significance for candidate pass-through device
categories and drugs and biologicals, including contrast agents, and
establishing any appropriate APC offset amounts. Specifically, the file
will continue to provide, for every OPPS clinical APC, the amounts and
percentages of APC payment associated with packaged implantable
devices, ``policy-packaged'' drugs, and ``threshold-packaged'' drugs
and biologicals.

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

1. Background
Under the CY 2009 OPPS, we currently pay for drugs, biologicals,
and

[[Page 35319]]

radiopharmaceuticals that do not have pass-through status in one of two
ways: packaged payment into the payment for the associated service; or
separate payment (individual APCs). We explained in the April 7, 2000
OPPS final rule with comment period (65 FR 18450) that we generally
package the cost of drugs and radiopharmaceuticals into the APC payment
rate for the procedure or treatment with which the products are usually
furnished. Hospitals do not receive separate payment for packaged items
and supplies, and hospitals may not bill beneficiaries separately for
any packaged items and supplies whose costs are recognized and paid
within the national OPPS payment rate for the associated procedure or
service. (Transmittal A-01-133, issued on November 20, 2001, explains
in greater detail the rules regarding separate payment for packaged
services.)
Packaging costs into a single aggregate payment for a service,
procedure, or episode-of-care is a fundamental principle that
distinguishes a prospective payment system from a fee schedule. In
general, packaging the costs of items and services into the payment for
the primary procedure or service with which they are associated
encourages hospital efficiencies and also enables hospitals to manage
their resources with maximum flexibility.
Section 1833(t)(16)(B) of the Act, as added by section 621(a)(2) of
Public Law 108-173, set the threshold for establishing separate APCs
for drugs and biologicals at $50 per administration for CYs 2005 and
2006. Therefore, for CYs 2005 and 2006, we paid separately for drugs,
biologicals, and radiopharmaceuticals whose per day cost exceeded $50
and packaged the costs of drugs, biologicals, and radiopharmaceuticals
whose per day cost was equal to or less than $50 into the procedures
with which they were billed. For CY 2007, the packaging threshold for
drugs, biologicals, and radiopharmaceuticals that were not new and did
not have pass-through status was established at $55. For CYs 2008 and
2009, the packaging threshold for drugs, biologicals, and
radiopharmaceuticals that are not new and do not have pass-through
status was established at $60. The methodology used to establish the
$55 threshold for CY 2007, the $60 threshold for CYs 2008 and 2009, and
our proposed approach for CY 2010 are discussed in more detail in
section V.B.2.b. of this proposed rule.
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
a. Background
As indicated in section V.B.1. of this proposed rule, in accordance
with section 1833(t)(16)(B) of the Act, the threshold for establishing
separate APCs for payment of drugs and biologicals was set to $50 per
administration during CYs 2005 and 2006. In CY 2007, we used the fourth
quarter moving average Producer Price Index (PPI) levels for
prescription preparations to trend the $50 threshold forward from the
third quarter of CY 2005 (when the Pub. L. 108-173 mandated threshold
became effective) to the third quarter of CY 2007. We then rounded the
resulting dollar amount to the nearest $5 increment in order to
determine the CY 2007 threshold amount of $55. Using the same
methodology as that used in CY 2007 (which is discussed in more detail
in the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085
through 68086)), we set the packaging threshold for establishing
separate APCs for drugs and biologicals at $60 for CYs 2008 and 2009.
Following the CY 2007 methodology, for CY 2010 we used updated
fourth quarter moving average PPI levels to trend the $50 threshold
forward from the third quarter of CY 2005 to the third quarter of CY
2009 and again rounded the resulting dollar amount ($65.07) to the
nearest $5 increment, which yielded a figure of $65. In performing this
calculation, we used the most up-to-date forecasted, quarterly PPI
estimates from CMS' Office of the Actuary (OACT). As actual inflation
for past quarters replaced forecasted amounts, the PPI estimates for
prior quarters have been revised (compared with those used in the CY
2007 OPPS/ASC final rule with comment period) and have been
incorporated into our calculation. Based on the calculations described
above, we are proposing a packaging threshold for CY 2010 of $65. (For
a more detailed discussion of the OPPS drug packaging threshold and the
use of the PPI for prescription drugs, we refer readers to the CY 2007
OPPS/ASC final rule with comment period (71 FR 68085 through 68086).)
b. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes
That Describe Certain Drugs, Nonimplantable Biologicals, and
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
To determine their proposed CY 2010 packaging status, for this
proposed rule we calculated the per day cost of all drugs on a HCPCS
code-specific basis (with the exception of those drugs and biologicals
with multiple HCPCS codes that include different dosages as described
in section V.B.2.c. of this proposed rule and excluding diagnostic
radiopharmaceuticals and contrast agents that we are proposing to
continue to package in CY 2010 as discussed in section V.B.2.d. of this
proposed rule), nonimplantable biologicals, and therapeutic
radiopharmaceuticals (collectively called ``threshold-packaged'' drugs)
that had a HCPCS code in CY 2008 and were paid (via packaged or
separate payment) under the OPPS, using CY 2008 claims data processed
before January 1, 2009. In order to calculate the per day costs for
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals
to determine their proposed packaging status in CY 2010, we used the
methodology that was described in detail in the CY 2006 OPPS proposed
rule (70 FR 42723 through 42724) and finalized in the CY 2006 OPPS
final rule with comment period (70 FR 68636 through 70 FR 68638).
To calculate the CY 2010 proposed rule per day costs, we used an
estimated payment rate for each drug and nonimplantable biological
HCPCS code of ASP+4 percent (which is the payment rate we are proposing
for separately payable drugs and nonimplantable biologicals in CY 2010,
as discussed in more detail in section V.B.3.b. of this proposed rule).
We used the manufacturer submitted ASP data from the fourth quarter of
CY 2008 (data that were used for payment purposes in the physician's
office setting, effective April 1, 2009) to determine the proposed rule
per day cost.
As is our standard methodology, for CY 2010, we are proposing to
use payment rates based on the ASP data from the fourth quarter of CY
2008 for budget neutrality estimates, packaging determinations, impact
analyses, and completion of Addenda A and B to this proposed rule
because these are the most recent data available for use at the time of
development of this proposed rule. These data are also the basis for
drug payments in the physician's office setting, effective April 1,
2009. For items that did not have an ASP-based payment rate, such as
therapeutic radiopharmaceuticals, we used their mean unit cost derived
from the CY 2008 hospital claims data to determine their proposed per
day cost. We packaged items with a per day cost less than or equal to
$65 and identified items with a per day cost greater than $65 as
separately payable. Consistent with our past practice, we crosswalked

[[Page 35320]]

historical OPPS claims data from the CY 2008 HCPCS codes that were
reported to the CY 2009 HCPCS codes that we display in Addendum B to
this proposed rule for payment in CY 2010.
Our policy during previous cycles of the OPPS has been to use
updated ASP and claims data to make final determinations of the
packaging status of HCPCS codes for drugs, nonimplantable biologicals,
and therapeutic radiopharmaceuticals for the final rule with comment
period. We note that it is also our policy to make an annual packaging
determination for a HCPCS code only when we develop the OPPS/ASC final
rule for the update year. Only HCPCS codes that are identified as
separately payable in the final rule with comment period are subject to
quarterly updates. For our calculation of per day costs of HCPCS codes
for drugs and nonimplantable biologicals in the CY 2010 OPPS/ASC final
rule with comment period, we are proposing to use ASP data from the
first quarter of CY 2009, which is the basis for calculating payment
rates for drugs and biologicals in the physician's office setting using
the ASP methodology, effective July 1, 2009, along with updated
hospital claims data from CY 2008. We note that we also would use these
data for budget neutrality estimates and impact analyses for the CY
2010 OPPS/ASC final rule with comment period. Payment rates for HCPCS
codes for separately payable drugs and nonimplantable biologicals
included in Addenda A and B to that final rule with comment period
would be based on ASP data from the second quarter of CY 2009, which
are the basis for calculating payment rates for drugs and biologicals
in the physician's office setting using the ASP methodology, effective
October 1, 2009. These rates would then be updated in the January 2010
OPPS update, based on the most recent ASP data to be used for
physician's office and OPPS payment as of January 1, 2010. For items
that do not currently have an ASP-based payment rate, such as
therapeutic radiopharmaceuticals, we would recalculate their mean unit
cost from all of the CY 2008 claims data and updated cost report
information available for the CY 2010 final rule to determine their
final per day cost.
Consequently, the packaging status of some HCPCS codes for drugs,
nonimplantable biologicals, and therapeutic radiopharmaceuticals in the
CY 2010 OPPS/ASC final rule with comment period using the updated data
may be different from the same drug HCPCS code's packaging status
determined based on the data used for this proposed rule. Under such
circumstances, we are proposing to continue the established policies
initially adopted for the CY 2005 OPPS (69 FR 65780) in order to more
equitably pay for those drugs whose median costs fluctuate relative to
the CY 2010 OPPS drug packaging threshold and the drugs' payment status
(packaged or separately payable) in CY 2009. Specifically, we are
proposing for CY 2010 to apply the following policies to these HCPCS
codes for drugs, nonimplantable biologicals, and therapeutic
radiopharmaceuticals whose relationship to the $65 drug packaging
threshold changes based on the final updated data:
HCPCS codes for drugs and nonimplantable biologicals that
were paid separately in CY 2009 and that were proposed for separate
payment in CY 2010, and then have per day costs equal to or less than
$65, based on the updated ASPs and hospital claims data used for the CY
2010 final rule with comment period, would continue to receive separate
payment in CY 2010.
HCPCS codes for drugs and nonimplantable biologicals that
were packaged in CY 2009 and that were proposed for separate payment in
CY 2010, and then have per day costs equal to or less than $65, based
on the updated ASPs and hospital claims data used for the CY 2010 final
rule with comment period, would remain packaged in CY 2010.
HCPCS codes for drugs and nonimplantable biologicals for
which we proposed packaged payment in CY 2010 but then have per day
costs greater than $65, based on the updated ASPs and hospital claims
data used for the CY 2010 final rule with comment period, would receive
separate payment in CY 2010.
In CY 2005 (69 FR 65779 through 65780), we implemented a policy
that exempted the oral and injectable forms of 5-HT3 antiemetic
products from our packaging policy, providing separate payment for
these drugs regardless of their estimated per day costs through CY
2009. There are currently seven Level II HCPCS codes for 5-HT3
antiemetics that describe four different drugs, specifically dolasetron
mesylate, granisetron hydrochloride, ondansetron hydrochloride, and
palonosetron hydrochloride. Each of these drugs except palonosetron
hydrochloride is available in both injectable and oral forms, so seven
HCPCS codes are available to describe the four drugs in all of their
forms. As of 2008, both odansetron hydrochloride and granisetron
hydrochloride were available in generic versions. We have now paid
separately for all 5-HT3 antimetics for 5 years. While we continue to
believe that use of these antiemetics is an integral part of an
anticancer treatment regimen and that OPPS claims data demonstrate
their increasingly common hospital outpatient utilization, we no longer
believe that a specific exemption to our standard drug payment
methodology is necessary for CY 2010 to ensure access to the most
appropriate antiemetic product for Medicare beneficiaries.
We analyzed historical hospital outpatient claims data for the
seven 5-HT3 antiemetic products that have been subject to this
packaging exemption, and we found that HCPCS code J2405 (Injection,
ondansetron hydrochloride, per 1 mg) was the dominant product used in
the hospital outpatient setting both before and after the adoption of
our 5-HT3 packaging exemption in CY 2005. Prior to this packaging
exemption, payment for HCPCS code J2405 was packaged in CY 2004. HCPCS
code J2405 was modestly costly relative to the other 5-HT3 antiemetics
in CY 2004, but its per day cost still fell below the applicable
packaging threshold of $50. Since CY 2005, the injectable form of
ondansetron hydrochloride has experienced a significant change in its
pricing structure as generic versions of the drug have become
available, including a steady decline in its estimated per day cost.
Notwithstanding this change in price, we have observed continued growth
in its OPPS utilization. For CY 2008, HCPCS code J2405 was the least
costly of the seven 5-HT3 antiemetics, with an estimated per day cost
of only approximately $1 in CY 2008 (based on July 2008 ASP
information), yet we observed that it constituted 88 percent of all
treatment days of 5-HT3 antiemetics in the CY 2008 OPPS claims data.
Using updated April 2009 ASP information for this CY 2010 proposed
rule, we continue to estimate a per day cost of only approximately $1
for HCPCS code J2405. For the five modestly priced 5-HT3 antiemetics,
we estimate CY 2010 per day costs between approximately $7 and $50,
while we estimate a per day cost for the most costly 5-HT3 antiemetic,
J2469 (Injection, palonosetron hcl, 25 mcg), of $174 per day. In light
of an anticipated relatively constant pricing structure for these drugs
in CY 2010, combined with our experience that prescribing patterns for
these 5-HT3 antiemetics are not very sensitive to changes in price, we
do not believe that continuing to exempt these drugs from our standard
OPPS drug packaging methodology is appropriate for CY 2010. Therefore,
for CY 2010,

[[Page 35321]]

because we are proposing to no longer exempt the 5-HT3 antiemetic
products from our standard packaging methodology, we are proposing to
package payment for all of the 5-HT3 antiemetics except palonosetron
hydrochloride, consistent with their estimated per day costs from CY
2008 claims data.
c. Proposed Packaging Determination for HCPCS Codes That Describe the
Same Drug or Biological But Different Dosages
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS
codes reporting different dosages for the same covered Part B drugs or
biologicals in order to reduce hospitals' administrative burden by
permitting them to report all HCPCS codes for drugs and biologicals. In
general, prior to CY 2008, the OPPS recognized for payment only the
HCPCS code that described the lowest dosage of a drug or biological. We
extended this recognition to multiple HCPCS codes for several other
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009,
we applied a policy that assigned the status indicator of the
previously recognized HPCCS code to the associated newly recognized
code(s), reflecting the new code(s)' packaged or separately payable
status. In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66775), we explained that once claims data were available for these
previously unrecognized HCPCS codes, we would determine the packaging
status and resulting status indicator for each HCPCS code according to
the general, established HCPCS code-specific methodology for
determining a code's packaging status for a given update year. However,
we also stated that we planned to closely follow our claims data to
ensure that our annual packaging determinations for the different HCPCS
codes describing the same drug or biological did not create
inappropriate payment incentives for hospitals to report certain HCPCS
codes instead of others.
CY 2008 is the first year of claims data for the HCPCS codes
describing different dosages of the same drug or biological that were
newly recognized in CY 2008. Applying our standard HCPCS code-specific
packaging determination methodology as described in section V.B.2.b. of
this proposed rule, we found that our CY 2008 claims data would result
in several different packaging determinations for different codes
describing the same drug or biological. Furthermore, our claims data
include few units and days for a number of these newly recognized HCPCS
codes, resulting in our concern that these data reflect claims from
only a small number of hospitals, even though the drug or biological
itself may be reported by many other hospitals under the most common
HCPCS code. We are concerned about proposing different packaging
determinations for multiple HCPCS codes for the same drug or biological
driven by different costs associated with the varying dosages of the
same drug or biological and a small number of claims for the less
common dosages that are not representative of the costs of all
hospitals billing for the drug or biological. This is especially true
when the general policy of the current CMS HCPCS Workgroup is to
establish a single HCPCS code for a drug or biological, with a dosage
that would allow accurate reporting of a patient dose for all
anticipated clinical uses of the drug or biological.
Based on these findings from our first available claims data for
the newly recognized HCPCS codes, we believe that adopting our standard
HCPCS code-specific packaging determinations for these codes could lead
to payment incentives for hospitals to report certain HCPCS codes
instead of others, particularly because we do not currently require
hospitals to report all drug and biological HCPCS codes under the OPPS
in consideration of our previous policy that generally recognized only
the lowest dosage HCPCS code for a drug or biological for OPPS payment.
Therefore, for CY 2010 we are proposing to make packaging
determinations on a drug-specific basis, rather than a HCPCS code-
specific basis, for those HCPCS codes that describe the same drug or
biological but different dosages. To identify all HCPCS codes for drugs
and biologicals to which this proposed policy would apply, we first
included the drugs and biologicals with multiple HCPCS codes that we
newly recognized for payment in CY 2008 and CY 2009. We then reviewed
all of the remaining drug and biological HCPCS codes to identify other
drugs and biologicals for which longstanding OPPS policy recognized for
payment multiple HCPCS codes for different dosages of the same drug or
biological, so that our CY 2010 proposal would apply to the packaging
determinations for these drugs and biologicals and their associated
HCPCS codes. All of the drug and biological HCPCS codes that we are
proposing to be subject to this drug-specific packaging determination
methodology are listed in Table 24 below.
In order to propose a packaging determination that is consistent
across all HCPCS codes that describe different dosages of the same drug
or biological, we aggregated both our CY 2008 claims data and our
pricing information at ASP+4 percent across all of the HCPCS codes that
describe each distinct drug or biological in order to determine the
mean units per day of the drug or biological in terms of the HCPCS code
with the lowest dosage descriptor. We then multiplied the weighted
average ASP+4 percent payment amount across all dosage levels of a
specific drug or biological by the estimated units per day for all
HCPCS codes that describe each drug or biological from our claims data
to determine the estimated per day cost of each drug or biological at
less than or equal to $65 (whereupon all HCPCS codes for the same drug
or biological would be packaged) or greater than $65 (whereupon all
HCPCS codes for the same drug or biological would be separately
payable). The proposed packaging status of each drug and biological
HCPCS code to which this methodology would apply is displayed in Table
24.

Table 24--HCPCS Codes to Which the Proposed CY 2010 Drug-Specific
Packaging Determination Methodology Applies
------------------------------------------------------------------------
Proposed CY 2010
CY 2009 HCPCS code CY 2009 long descriptor SI
------------------------------------------------------------------------
J0530................... Injection, penicillin g N
benzathine and penicillin g
procaine, up to 600,000
units.
J0540................... Injection, penicillin g N
benzathine and penicillin g
procaine, up to 1,200,000
units.
J0550................... Injection, penicillin g N
benzathine and penicillin g
procaine, up to 2,400,000
units.
J0560................... Injection, penicillin g N
benzathine, up to 600,000
units.
J0570................... Injection, penicillin g N
benzathine, up to 1,200,000
units.
J0580................... Injection, penicillin g N
benzathine, up to 2,400,000
units.

[[Page 35322]]

J1380................... Injection, estradiol N
valerate, up to 10 mg.
J0970................... Injection, estradiol N
valerate, up to 40 mg.
J1390................... Injection, estradiol N
valerate, up to 20 mg.
J1020................... Injection, N
methylprednisolone acetate,
20 mg.
J1030................... Injection, N
methylprednisolone acetate,
40 mg.
J1040................... Injection, N
methylprednisolone acetate,
80 mg.
J1070................... Injection, testosterone N
cypionate, up to 100 mg.
J1080................... Injection, testosterone N
cypionate, 1 cc, 200 mg.
J1440................... Injection, filgrastim (g- K
csf), 300 mcg.
J1441................... Injection, filgrastim (g- K
csf), 480 mcg.
J1460................... Injection, gamma globulin, K
intramuscular, 1 cc.
J1470................... Injection, gamma globulin, K
intramuscular, 2 cc.
J1480................... Injection, gamma globulin, K
intramuscular, 3 cc.
J1490................... Injection, gamma globulin, K
intramuscular, 4 cc.
J1500................... Injection, gamma globulin, K
intramuscular, 5 cc.
J1510................... Injection, gamma globulin, K
intramuscular, 6 cc.
J1520................... Injection, gamma globulin, K
intramuscular, 7 cc.
J1530................... Injection, gamma globulin, K
intramuscular, 8 cc.
J1540................... Injection, gamma globulin, K
intramuscular, 9 cc.
J1550................... Injection, gamma globulin, K
intramuscular, 10 cc.
J1560................... Injection, gamma globulin, K
intramuscular, over 10 cc.
J1642................... Injection, heparin sodium, N
(heparin lock flush), per
10 units.
J1644................... Injection, heparin sodium, N
per 1000 units.
J1850................... Injection, kanamycin N
sulfate, up to 75 mg.
J1840................... Injection, kanamycin N
sulfate, up to 500 mg.
J2270................... Injection, morphine sulfate, N
up to 10 mg.
J2271................... Injection, morphine sulfate, N
100mg.
J2320................... Injection, nandrolone K
decanoate, up to 50 mg.
J2321................... Injection, nandrolone K
decanoate, up to 100 mg.
J2322................... Injection, nandrolone K
decanoate, up to 200 mg.
J2788................... Injection, rho d immune K
globulin, human, minidose,
50 micrograms (250 i.u.).
J2790................... Injection, rho d immune K
globulin, human, full dose,
300 micrograms (1500 i.u.).
J2920................... Injection, N
methylprednisolone sodium
succinate, up to 40 mg.
J2930................... Injection, N
methylprednisolone sodium
succinate, up to 125 mg.
J3120................... Injection, testosterone N
enanthate, up to 100 mg.
J3130................... Injection, testosterone N
enanthate, up to 200 mg.
J3471................... Injection, hyaluronidase, N
ovine, preservative free,
per 1 usp unit (up to 999
usp units).
J3472................... Injection, hyaluronidase, N
ovine, preservative free,
per 1000 usp units.
J7050................... Infusion, normal saline N
solution, 250 cc.
J7040................... Infusion, normal saline N
solution, sterile (500 ml=1
unit).
J7030................... Infusion, normal saline N
solution, 1000 cc.
J7515................... Cyclosporine, oral, 25 mg... N
J7502................... Cyclosporine, oral, 100 mg.. N
J8520................... Capecitabine, oral, 150 mg.. K
J8521................... Capecitabine, oral, 500 mg.. K
J9060................... Injection, cisplatin, powder N
or solution, per 10 mg.
J9062................... Cisplatin, 50 mg............ N
J9070................... Injection, cyclophosphamide, N
100 mg.
J9080................... Cyclophosphamide, 200 mg.... N
J9090................... Cyclophosphamide, 500 mg.... N
J9091................... Injection, cyclophosphamide, N
1.0 gram.
J9092................... Cyclophosphamide, 2.0 gram.. N
J9093................... Injection, cyclophosphamide, N
lyophilized, 100 mg.
J9094................... Cyclophosphamide, N
lyophilized, 200 mg.
J9095................... Cyclophosphamide, N
lyophilized, 500 mg.
J9096................... Injection, cyclophosphamide, N
lyophilized, 1.0 gram.
J9097................... Cyclophosphamide, N
lyophilized, 2.0 gram.
J9100................... Injection, cytarabine, 100 N
mg.
J9110................... Injection, cytarabine, 500 N
mg.
J9130................... Injection, dacarbazine, 100 N
mg.
J9140................... Injection, dacarbazine, 200 N
mg.
J9250................... Injection, methotrexate N
sodium, 5 mg.
J9260................... Methotrexate sodium, 50 mg.. N
J9280................... Injection, mitomycin, 5 mg.. K
J9290................... Mitomycin, 20 mg............ K
J9291................... Mitomycin, 40 mg............ K
J9370................... Injection, vincristine N
sulfate, 1 mg.
J9375................... Vincristine sulfate, 2 mg... N
J9380................... Vincristine sulfate, 5 mg... N

[[Page 35323]]

Q0164................... Prochlorperazine maleate, 5 N
mg, oral, fda approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an iv anti-emetic at the
time of chemotherapy
treatment, not to exceed a
48 hour dosage regimen.
Q0165................... Prochlorperazine maleate, 10 N
mg, oral, fda approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an iv anti-emetic at the
time of chemotherapy
treatment, not to exceed a
48 hour dosage regimen.
Q0167................... Dronabinol, 2.5 mg, oral, N
fda approved prescription
anti-emetic, for use as a
complete therapeutic
substitute for an iv anti-
emetic at the time of
chemotherapy treatment, not
to exceed a 48 hour dosage
regimen.
Q0168................... Dronabinol, 5 mg, oral, fda N
approved prescription anti-
emetic, for use as a
complete therapeutic
substitute for an iv anti-
emetic at the time of
chemotherapy treatment, not
to exceed a 48 hour dosage
regimen.
Q0169................... Promethazine hydrochloride, N
12.5 mg, oral, fda approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an iv anti-emetic at the
time of chemotherapy
treatment, not to exceed a
48 hour dosage regimen.
Q0170................... Promethazine hydrochloride, N
25 mg, oral, fda approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an iv anti-emetic at the
time of chemotherapy
treatment, not to exceed a
48 hour dosage regimen.
Q0171................... Chlorpromazine N
hydrochloride, 10 mg, oral,
fda approved prescription
anti-emetic, for use as a
complete therapeutic
substitute for an iv anti-
emetic at the time of
chemotherapy treatment, not
to exceed a 48 hour dosage
regimen.
Q0172................... Chlorpromazine N
hydrochloride, 25 mg, oral,
fda approved prescription
anti-emetic, for use as a
complete therapeutic
substitute for an iv anti-
emetic at the time of
chemotherapy treatment, not
to exceed a 48 hour dosage
regimen.
Q0175................... Perphenazine, 4 mg, oral, N
fda approved prescription
anti-emetic, for use as a
complete therapeutic
substitute for an iv anti-
emetic at the time of
chemotherapy treatment, not
to exceed a 48 hour dosage
regimen.
Q0176................... Perphenazine, 8 mg, oral, N
fda approved prescription
anti-emetic, for use as a
complete therapeutic
substitute for an iv anti-
emetic at the time of
chemotherapy treatment, not
to exceed a 48 hour dosage
regimen.
Q0177................... Hydroxyzine pamoate, 25 mg, N
oral, fda approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an iv anti-emetic at the
time of chemotherapy
treatment, not to exceed a
48 hour dosage regimen.
Q0178................... Hydroxyzine pamoate, 50 mg, N
oral, fda approved
prescription anti-emetic,
for use as a complete
therapeutic substitute for
an iv anti-emetic at the
time of chemotherapy
treatment, not to exceed a
48 hour dosage regimen.
------------------------------------------------------------------------

d. Proposed Packaging of Payment for Diagnostic Radiopharmaceuticals,
Contrast Agents, and Implantable Biologicals (``Policy-Packaged'' Drugs
and Devices)
Prior to CY 2008, the methodology of calculating a product's
estimated per day cost and comparing it to the annual OPPS drug
packaging threshold was used to determine the packaging status of
drugs, biologicals, and radiopharmaceuticals under the OPPS (except for
our CY 2005 through 2009 exemption for 5-HT3 antiemetics). However, as
established in the CY 2008 OPPS/ASC final rule with comment period (72
FR 66766 through 66768), we began packaging payment for all diagnostic
radiopharmaceuticals and contrast agents into the payment for the
associated procedure, regardless of their per day costs. In addition,
in CY 2009 we adopted a policy that packaged the payment for nonpass-
through implantable biologicals into payment for the associated
surgical procedure on the claim (73 FR 68633 through 68636). We refer
to diagnostic radiopharmaceuticals and contrast agents collectively as
``policy-packaged'' drugs and to implantable biologicals as devices
because we are proposing to treat implantable biologicals as devices
for all OPPS payment purposes beginning in CY 2010.
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. Packaging costs into a single aggregate payment for
a service, encounter, or episode-of-care is a fundamental principle
that distinguishes a prospective payment system from a fee schedule. In
general, packaging the costs of items and services into the payment for
the primary procedure or service with which they are associated
encourages hospital efficiencies and also enables hospitals to manage
their resources with maximum flexibility.
Prior to CY 2008, we noted that the proportion of drugs,
biologicals, and radiopharmaceuticals that were separately paid under
the OPPS had increased in recent years, a pattern that we also observed
for procedural services under the OPPS. Our final CY 2008 policy that
packaged payment for all nonpass-through diagnostic
radiopharmaceuticals and contrast agents, regardless of their per day
costs, contributed significantly to expanding the size of the OPPS
payment bundles and is consistent with the principles of a prospective
payment system.
We believe that packaging the payment for diagnostic
radiopharmaceuticals and contrast agents into the payment for their
associated procedures continues to be appropriate for CY 2010. As
discussed in more detail the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68645 through 68649), we presented several reasons
supporting our initial policy to package payment of diagnostic
radiopharmaceuticals and contrast agents into their associated
procedures on a claim. Specifically, we stated that we believed
packaging was appropriate because: (1) The statutory requirement that
we must pay separately for drugs

[[Page 35324]]

and biologicals for which the per day cost exceeds $50 under section
1833(t)(16)(B) of the Act has expired; (2) we believe that diagnostic
radiopharmaceuticals and contrast agents function effectively as
supplies that enable the provision of an independent service; and (3)
section 1833(t)(14)(A)(iii) of the Act requires that payment for
specified covered outpatient drugs (SCODs) be set prospectively based
on a measure of average hospital acquisition cost. For these reasons,
we continue to believe that our proposal to continue to treat
diagnostic radiopharmaceuticals and contrast agents differently from
other SCODs is appropriate for CY 2010. Therefore, we are proposing to
continue packaging payment for all contrast agents and diagnostic
radiopharmaceuticals, collectively referred to as ``policy-packaged''
drugs, regardless of their per day costs, for CY 2010.
For more information on how we are proposing to set CY 2010 payment
rates for nuclear medicine procedures in which diagnostic
radiopharmaceuticals are used and echocardiography services provided
with and without contrast agents, we refer readers to sections
II.A.2.d.(5) and (4), respectively, of this proposed rule.
In CY 2009 (73 FR 68634), we began packaging the payment for all
nonpass-through implantable biologicals into payment for the associated
surgical procedure. Because implantable biologicals may sometimes
substitute for nonbiological devices, we noted that if we were to
provide separate payment for implantable biologicals without pass-
through status, we would potentially be providing duplicate device
payment, both through the packaged nonbiological device cost already
included in the surgical procedure's payment and separate biological
payment. We concluded that we saw no basis for treating implantable
biological and nonbiological devices without pass-through status
differently for OPPS payment purposes because both are integral to and
supportive of the separately paid surgical procedures in which either
may be used. Therefore, in CY 2009, we adopted a final policy to
package payment for all nonpass-through implantable biologicals that
are surgically inserted or implanted (through a surgical incision or a
natural orifice), like our longstanding policy that packages payment
for all implantable nonbiological devices without pass-through status.
For CY 2010, we continue to believe that the policy to package
payment for implantable devices that are integral to the performance of
separately paid procedures should also apply to payment for all
implantable biologicals without pass-through status, when those
biologicals function as implantable devices. Therefore, we are
proposing to continue to package payment for nonpass-through
implantable biologicals that are surgically inserted or implanted
(through a surgical incision or a natural orifice) into the body,
referred to as devices, in CY 2010. In accordance with this proposal,
two of the products with expiring pass-through status for CY 2010 are
biologicals that are solely surgically implanted according to their
FDA-approved indications. These products are described by HCPCS codes
C9354 (Acellular pericardial tissue matrix of non-human origin
(Veritas), per square centimeter) and C9355 (Collagen nerve cuff
(NeuroMatrix), per 0.5 centimeter length). Like the three implantable
biologicals with expiring pass-through status in CY 2009 that were
discussed in the CY2009 OPPS/ASC final rule with comment period (73 FR
68633 through 68634), we believe that the two biologicals specified
above with expiring pass-through status for CY 2010 differ from other
biologicals paid under the OPPS in that they specifically function as
surgically implanted devices. As a result of the proposed CY 2010
packaged payment methodology for all nonpass-through implantable
biologicals, we are proposing to package payment for HCPCS codes C9354
and C9355 and assign them status indicator ``N'' for CY 2010. In
addition, any new biologicals without pass-through status that are
surgically inserted or implanted (through a surgical incision or a
natural orifice) would be packaged in CY 2010. Moreover, for nonpass-
through biologicals that may sometimes be used as implantable devices,
we would continue to instruct hospitals to not bill separately for the
HCPCS codes for the products when used as implantable devices. This
reporting would ensure that the costs of these products that may be,
but are not always, used as implanted biologicals are appropriately
packaged into payment for the associated implantation procedures.
3. Proposed Payment for Drugs and Biologicals Without Pass-Through
Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and
Other Separately Payable and Packaged Drugs and Biologicals
Section 1833(t)(14) of the Act defines certain separately payable
radiopharmaceuticals, drugs, and biologicals and mandates specific
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a
``specified covered outpatient drug'' is a covered outpatient drug, as
defined in section 1927(k)(2) of the Act, for which a separate APC has
been established and that either is a radiopharmaceutical agent or is a
drug or biological for which payment was made on a pass-through basis
on or before December 31, 2002.
Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and
biologicals are designated as exceptions and are not included in the
definition of ``specified covered outpatient drugs,'' known as SCODs.
These exceptions are--
A drug or biological for which payment is first made on or
after January 1, 2003, under the transitional pass-through payment
provision in section 1833(t)(6) of the Act.
A drug or biological for which a temporary HCPCS code has
not been assigned.
During CYs 2004 and 2005, an orphan drug (as designated by
the Secretary).
Section 1833(t)(14)(A)(iii) of the Act requires that payment for
SCODs in CY 2006 and subsequent years be equal to the average
acquisition cost for the drug for that year as determined by the
Secretary, subject to any adjustment for overhead costs and taking into
account the hospital acquisition cost survey data collected by the
Government Accountability Office (GAO) in CYs 2004 and 2005. If
hospital acquisition cost data are not available, the law requires that
payment be equal to payment rates established under the methodology
described in section 1842(o), section 1847A, or section 1847B of the
Act, as calculated and adjusted by the Secretary as necessary.
Section 1833(t)(14)(E) of the Act provides for an adjustment in
OPPS payment rates for overhead and related expenses, such as pharmacy
services and handling costs. Section 1833(t)(14)(E)(i) of the Act
required MedPAC to study pharmacy overhead and to make recommendations
to the Secretary regarding whether, and if so how, a payment adjustment
should be made to compensate hospitals for them. Section
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the
weights for ambulatory procedure classifications for SCODs to take into
account the findings of the MedPAC study.
In the CY 2006 OPPS proposed rule (70 FR 42728), we discussed the
June 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs
and summarized the findings of that study:

[[Page 35325]]

Handling costs for drugs, biologicals, and
radiopharmaceuticals administered in the HOPD are not insignificant;
Little information is available about the magnitude of
pharmacy overhead costs;
Hospitals set charges for drugs, biologicals, and
radiopharmaceuticals at levels that reflect their respective handling
costs; and
Hospitals vary considerably in their likelihood of
providing services which utilize drugs, biologicals, or
radiopharmaceuticals with different handling costs.
As a result of these findings, MedPAC developed seven drug
categories for pharmacy and nuclear medicine handling costs based on
the estimated level of hospital resources used to prepare the products
(70 FR 42729). Associated with these categories were two
recommendations for accurate payment of pharmacy overhead under the
OPPS.
1. CMS should establish separate, budget neutral payments to cover
the costs hospitals incur for handling separately payable drugs,
biologicals, and radiopharmaceuticals.
2. CMS should define a set of handling fee APCs that group drugs,
biologicals, and radiopharmaceuticals based on attributes of the
products that affect handling costs; CMS should instruct hospitals to
submit charges for these APCs and base payment rates for the handling
fee APCs on submitted charges reduced to costs.
In response to the MedPAC findings, in the CY 2006 OPPS proposed
rule (70 FR 42729), we discussed our belief that, because of the varied
handling resources required to prepare different forms of drugs, it
would be impossible to exclusively and appropriately assign a drug to a
certain overhead category that would apply to all hospital outpatient
uses of the drug. Therefore, our CY 2006 OPPS proposal included a
proposal to establish three distinct Level II HCPCS C-codes and three
corresponding APCs for drug handling categories to differentiate
overhead costs for drugs and biologicals (70 FR 42730). We also
proposed: (1) To combine several overhead categories recommended by
MedPAC; (2) to establish three drug handling categories, as we believed
that larger groups would minimize the number of drugs that may fit into
more than one category and would lessen any undesirable payment policy
incentives to utilize particular forms of drugs or specific preparation
methods; (3) to collect hospital charges for these C-codes for 2 years;
and (4) to ultimately base payment for the corresponding drug handling
APCs on CY 2006 claims data available for the CY 2008 OPPS.
In the CY 2006 OPPS final rule with comment period (70 FR 68659
through 68665), we discussed the public comments we received on our
proposal regarding pharmacy overhead. The overwhelming majority of
commenters did not support our proposal and urged us not to finalize
this policy, as it would be administratively burdensome for hospitals
to establish charges for HCPCS codes for pharmacy overhead and to
report them. Therefore, we did not finalize this proposal for CY 2006.
Instead, we established payment for separately payable drugs and
biologicals at ASP+6 percent, which we calculated by comparing the
estimated aggregate cost of separately payable drugs and biologicals in
our claims data to the estimated aggregate ASP dollars for separately
payable drugs and biologicals, using the ASP as a proxy for average
acquisition cost (70 FR 68642). Hereinafter, we refer to this
methodology as our standard drug payment methodology. We concluded that
payment for drugs and biologicals and pharmacy overhead at a combined
ASP+6 percent rate would serve as the best proxy for the combined
acquisition and overhead costs of each of these products.
In the CY 2007 OPPS/ASC final rule with comment period (71 FR
68091), we finalized our proposed policy to provide a single payment of
ASP+6 percent for the hospital's acquisition cost for the drug or
biological and all associated pharmacy overhead and handling costs. The
ASP+6 percent rate that we finalized was higher than the equivalent
average ASP-based amount calculated from claims of ASP+4 percent
according to our standard drug payment methodology, but we adopted
payment at ASP+6 percent for stability while we continued to examine
the issue of the costs of pharmacy overhead in the HOPD.
In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to
ongoing discussions with interested parties, we proposed to continue
our methodology of providing a combined payment rate for drug and
biological acquisition and pharmacy overhead costs. We also proposed to
instruct hospitals to remove the pharmacy overhead charge for both
packaged and separately payable drugs and biologicals from the charge
for the drug or biological and report the pharmacy overhead charge on
an uncoded revenue code line on the claim. We believed that this would
provide us with an avenue for collecting pharmacy handling cost data
specific to drugs in order to package the overhead costs of these items
into the associated procedures, most likely drug administration
services. Similar to the public response to our CY 2006 pharmacy
overhead proposal, the overwhelming majority of commenters did not
support our CY 2008 proposal and urged us to not finalize this policy
(72 FR 66761). At its September 2007 meeting, the APC Panel recommended
that hospitals not be required to separately report charges for
pharmacy overhead and handling and that payment for overhead be
included as part of drug payment. The APC Panel also recommended that
CMS continue to evaluate alternative methods to standardize the capture
of pharmacy overhead costs in a manner that is simple to implement at
the organizational level (72 FR 66761). Because of concerns expressed
by the APC Panel and public commenters, we did not finalize the
proposal to instruct hospitals to separately report pharmacy overhead
charges for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66763), we finalized a policy of providing
payment for separately payable drugs and biologicals and their pharmacy
overhead at ASP+5 percent as a transition from their CY 2007 payment of
ASP+6 percent to payment based on the equivalent average ASP-based
payment rate calculated from hospital claims according to our standard
drug payment methodology, which was ASP+3 percent for the CY 2008 OPPS/
ASC final rule with comment period. Hospitals continued to include
charges for pharmacy overhead costs in the line-item charges for the
associated drugs reported on claims.
For CY 2009, we proposed to pay separately payable drugs and
biologicals at ASP+4 percent, including both SCODs and other drugs
without CY 2009 OPPS pass-through status, based on our standard drug
payment methodology, and we also proposed to split the Drugs Charged to
Patients cost center into two cost centers: One for drugs with high
pharmacy overhead costs and one for drugs with low pharmacy overhead
costs (73 FR 41492). We noted that we expected that CCRs from the
proposed new cost centers would be available in 2 to 3 years to refine
OPPS drug cost estimates by accounting for differential hospital markup
practices for drugs with high and low overhead costs. After
consideration of the public comments received and the APC Panel
recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide
payment for separately payable

[[Page 35326]]

nonpass-through drugs and biologicals based on costs calculated from
hospital claims at a 1-year transitional rate of ASP+4 percent, in the
context of an equivalent average ASP-based payment rate of ASP+2
percent calculated according to our standard drug payment methodology
from the final rule claims and cost report data. We did not finalize
our proposal to split the single standard Drugs Charged to Patients
cost center into two cost centers largely due to concerns raised to us
by hospitals about the associated administrative burden. Instead, we
indicated in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68659) that we would continue to explore other potential approaches to
improve our drug cost estimation methodology, thereby increasing
payment accuracy for separately payable drugs and biologicals.
In response to the CMS proposals for the CY 2008 and CY 2009 OPPS,
a group of pharmacy stakeholders (hereinafter referred to as the
pharmacy stakeholders), including some cancer hospitals, some
pharmaceutical manufacturers, and some hospital and professional
associations, commented that CMS should pay an acquisition cost of
ASP+6 percent for separately payable drugs, should substitute ASP+6
percent for the packaged cost of all packaged drugs and biologicals on
procedure claims, and should redistribute the difference between the
aggregate estimated packaged drug cost in claims and payment for all
drugs, including packaged drugs at ASP+6 percent, as separate pharmacy
overhead payments for separately payable drugs. They indicated that
this approach would preserve the aggregate drug cost observed in the
claims data, while significantly increasing payment accuracy for
individual drugs and procedures using packaged drugs. Their suggested
approach would provide a separate overhead payment for each separately
payable drug or biological at one of three different levels, depending
on the pharmacy stakeholders' assessment of the complexity of pharmacy
handling associated with each specific drug or biological (73 FR 68651
through 68652). Each separately payable drug or biological HCPCS code
would be assigned to one of the three overhead categories, and the
separate pharmacy overhead payment applicable to the category would be
made when each of the separately payable drugs or biologicals was paid.
At the February 2009 meeting, the APC Panel recommended that CMS
pay for the acquisition cost of all separately payable drugs at no less
than ASP+6 percent. The APC Panel also recommended that CMS package
payment at ASP+6 percent on claims for all drugs that are not
separately payable and use the difference between these rates and CMS'
cost derived from charges to create a pool to provide more appropriate
payment for pharmacy service costs and that CMS pay for pharmacy
services costs using this pool, applying a tiered approach to payments
based on some objective criteria related to the pharmacy resources
required for groups of drugs. The APC Panel further recommended that,
if CMS does not implement the drug payment recommendations specified
above, CMS should exclude data from hospitals that participate in the
340B Federal drug pricing program from its ratesetting calculations for
drugs and CMS should pay 340B hospitals in the same manner as it pays
non-340B hospitals. Hospitals that participate in the 340B program are
generally hospitals that serve a disproportionate share of low-income
patients and receive disproportionate share payments under the IPPS.
These facilities may acquire outpatient drugs and biologicals at prices
that are substantially below ASP because the 340B program requires drug
manufacturers to provide outpatient drugs to eligible entities at a
reduced price and these reduced price sales are not included in the ASP
submissions of manufacturers to Medicare. Public presenters at the
February 2009 APC Panel meeting emphasized that the purpose of the 340B
Federal drug pricing program is to ensure access to drugs for low-
income patients by supplementing the higher cost of providing care to
low-income patients born by hospitals serving a disproportionate share
of these patients. The agenda, recommendations, and report from the
February 2009 APC Panel meeting are posted on the CMS Web site at:
http://www.cms.hhs.gov/FACA. We respond to these APC Panel
recommendations in our discussion of the proposed CY 2010 policy that
follows.
b. Proposed Payment Policy
Section 1833(t)(14)(A)(iii) of the Act, as described above,
continues to be applicable to determining payments for SCODs for CY
2010. This provision requires that payment for SCODs be equal to the
average acquisition cost for the drug for that year as determined by
the Secretary, subject to any adjustment for overhead costs and taking
into account the hospital acquisition cost survey data collected by the
GAO in CYs 2004 and 2005. If hospital acquisition cost data are not
available, the law requires that payment be equal to payment rates
established under the methodology described in section 1842(o), section
1847A, or section 1847B of the Act, as calculated and adjusted by the
Secretary as necessary. In addition, section 1833(t)(14)(E)(ii) of the
Act authorizes the Secretary to adjust APC weights to take into account
the 2005 MedPAC report relating to overhead and related expenses, such
as pharmacy services and handling costs. Since CY 2006, when we first
adopted our standard methodology of paying for separately payable drugs
and biologicals based on the equivalent average ASP-based payment rate
calculated from claims and cost report data, we have applied this
methodology to payment for all separately payable drugs and biologicals
without pass-through status, both SCODs and other drugs and biologicals
that do not meet the statutory definition of SCODs. We have seen no
reason to distinguish SCODs from these other separately payable drugs
and biologicals, and under our standard drug payment methodology, we
have used the costs from hospital claims data as a proxy for the
average hospital acquisition cost that the statute requires for payment
of SCODs and to provide payment for the associated pharmacy overhead
cost.
We are proposing that, for CY 2010, we would make payment for
separately payable drugs and biologicals not receiving pass-through
payment at ASP+4 percent, which would continue to include payment for
both the acquisition costs of separately payable drugs and biologicals
and the pharmacy overhead costs applicable to these separately payable
drugs and biologicals. Based on the rationale described below, we
believe that approximately $150 million of the estimated $395 million
total in pharmacy overhead cost, specifically between one-third and
one-half of that cost, included in our claims data for packaged drugs
and biologicals above the aggregate ASP dollars of these packaged
products should be attributed to separately payable drugs and
biologicals to provide an adjustment for the pharmacy overhead costs of
these separately payable products. As a result, we also are proposing
to reduce the cost of packaged drugs and biologicals that is included
in the payment for procedural APCs to offset the $150 million
adjustment to payment for separately payable drugs and biologicals. We
are proposing that any redistribution of pharmacy overhead cost that
may arise from CY 2010 final rule data would occur only from some drugs
and

[[Page 35327]]

biologicals to other drugs and biologicals, thereby maintaining the
estimated total cost of drugs and biologicals (no redistribution of
cost would occur from other services to drugs and biologicals or vice
versa) that we calculate based on the charges and costs reported by
hospitals on claims and cost reports.
Using our CY 2010 proposed rule data, and applying our longstanding
methodology for calculating the total cost of separately payable drugs
and biologicals in our claims compared to the ASP dollars for the same
drugs and biologicals, without applying the proposed overhead cost
redistribution, we determined that the estimated aggregate cost of
separately payable drugs and biologicals (status indicators ``K'' and
``G''), including acquisition and pharmacy overhead costs, is
equivalent to ASP-2 percent. Therefore, under our standard drug payment
methodology, we would pay for separately payable drugs and biologicals
at ASP-2 percent for CY 2010, their equivalent average ASP-based
payment rate. We also determined that the estimated aggregate cost of
packaged drugs and biologicals (status indicator ``N''), including
acquisition and pharmacy overhead costs, is equivalent to ASP+247
percent. We found that the estimated aggregate cost for all drugs and
biologicals (status indicators ``N,'' ``K,'' and ``G''), including
acquisition and pharmacy overhead costs, is equivalent to ASP+13
percent. For a detailed explanation of our standard process for these
calculations, we refer readers to the CY 2006 OPPS proposed rule (70 FR
42725). Table 25 summarizes these findings.

Table 25--Standard Drug Payment Methodology Using CY 2010 OPPS Proposed Rule Data: ASP+X Calculation
----------------------------------------------------------------------------------------------------------------
Total ASP
dollars for Total cost of
drugs and drugs and
biologicals in biologicals in Ratio of cost ASP+X percent
claims data claims data to ASP
(in millions) (in millions)
* **
----------------------------------------------------------------------------------------------------------------
Packaged Drugs and Biologicals....... $160 $555 3.47 ASP+247
Separately Payable Drugs and 2,589 2,539 0.98 ASP-2
Biologicals.
--------------------------------------------------------------------------
All Drugs and Biologicals........ 2,749 3,094 1.13 ASP+13
----------------------------------------------------------------------------------------------------------------
* Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and
biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2008 claims data for drugs and biologicals with a HCPCS code and April 2009 ASP
information.

We recognize that there may be concern over whether the actual full
cost (acquisition and pharmacy overhead) of separately payable drugs
and biologicals could be 2 percent less than ASP for these products,
although we do not have ASP information specifically for their sales to
hospitals. Similarly, we acknowledge that a full cost (acquisition and
pharmacy overhead) of ASP+247 percent for packaged drugs may seem
relatively high. When we subtract the total ASP dollars for packaged
drugs and biologicals in the CY 2008 claims data ($160 million), our
proxy for their acquisition cost, from the total cost of packaged drugs
and biologicals in the same claims ($555 million), we find that the
difference, which we view as the pharmacy overhead cost currently
attributed to packaged drugs and biologicals is $395 million. While we
currently have no way of assessing whether this current distribution of
overhead cost to packaged drugs and biologicals is appropriate, we
acknowledge that the current method of converting billed charges to
costs has the potential to ``compress'' the calculated costs to some
degree. Further, we recognize that the attribution of pharmacy overhead
costs to packaged or separately payable drugs and biologicals through
our standard drug payment methodology of a combined payment for
acquisition and pharmacy overhead costs depends, in part, on the
treatment of all drugs and biologicals each year under our annual drug
packaging threshold. Changes to the packaging threshold may result in
changes to payment for the overhead cost of drugs and biologicals that
do not reflect actual changes in hospital pharmacy overhead cost for
those products. For these reasons, we believe that some portion, but
not all, of the $395 million in total overhead cost that is associated
with packaged drugs and biologicals based on our standard drug payment
methodology should, at least for CY 2010, be attributed to separately
payable drugs and biologicals. Although we believe that for CY 2010 it
would be prudent to redistribute some pharmacy overhead cost between
packaged drugs and biologicals at ASP+247 percent and separately
payable drugs at ASP-2 percent that would result from our standard drug
payment methodology, the amount of overhead cost redistribution that
would be appropriate between the packaged and separately payable drugs
and biologicals in a payment system that is fundamentally based on
averages is not fully evident. Pharmacy overhead cost includes, but is
not limited to, some costs of indirect overhead that are shared by all
hospital items and services, such as administrative and general costs,
capital costs, staff benefits, and other facility costs. With regard to
these indirect overhead costs, the amount of indirect overhead cost
that is attributable to an inexpensive (typically packaged) drug is the
same in dollar value as the amount of indirect overhead cost that is
attributable to an extremely costly drug (typically separately
payable). Hence, the indirect overhead costs that are common to all
drugs and biologicals have no relationship to the cost of an individual
drug or biological, or to the complexity of the handling, preparation,
or storage of that individual drug or biological. Therefore, we believe
that the indirect overhead cost alone for an inexpensive drug or
biological could be far in excess of the ASP for that inexpensive
product.
Layered on these indirect overhead costs are the pharmacy overhead
direct costs of staff, supplies, and equipment that are directly
attributable only to the storage, handling, preparation, and
distribution of drugs and biologicals and which do vary, sometimes
considerably, depending upon the drug being furnished. As we indicate
above, in its June 2005 Report to Congress, MedPAC found that drugs can
be categorized into seven different categories based on the handling
costs (that is, the direct costs) incurred (70 FR 42729). Similarly,
the pharmacy stakeholders, whose suggested approach the APC Panel

[[Page 35328]]

recommended that we accept for CY 2010, identified three categories of
pharmacy overhead complexity with variable costs, to which they
assigned individual drugs and biologicals for purposes of implementing
their recommended redistribution of the difference between aggregate
dollars for all drugs and biologicals at ASP+6 percent and aggregate
cost for all drugs and biologicals in the claims data as additional
pharmacy overhead payments.
We acknowledge that the observed combined payment for acquisition
and pharmacy overhead costs of ASP-2 percent for separately payable
drugs and biologicals may be too low and ASP+247 percent for packaged
drugs and biologicals in the CY 2010 claims data may be too high.
However, we also believe that the pharmacy stakeholders' recommendation
to set packaged drug and biologicals dollars to ASP+6 percent is
inappropriate given our understanding that an equal allocation of
indirect overhead costs among packaged and separately payable drugs and
biologicals would lead to a higher observed ASP+X percent than ASP+6
percent for packaged drugs and biologicals. As discussed above, the
indirect overhead costs that are common to all drugs and biologicals
have no relationship to the cost of an individual drug or biological,
or to the complexity of the handling, preparation, or storage of that
individual drug or biological. Therefore, we believe that the indirect
overhead cost alone for an inexpensive drug or biological which would
be packaged could be far in excess of the ASP for that inexpensive
product. In contrast, we would expect that the indirect overhead cost
alone for an expensive drug or biological which would be separately
paid could be far less than the ASP for that expensive product.
Therefore, we believe that some middle ground would represent the
most accurate redistribution of pharmacy overhead cost. The assumption
that approximately one-third to one-half of the total pharmacy overhead
cost currently associated with packaged drugs and biologicals is a
function of both charge compression and our choice of an annual drug
packaging threshold offers a more appropriate allocation of drug and
biological cost to separately payable drugs and biologicals. One-third
of the $395 million of pharmacy overhead cost associated with packaged
drugs and biologicals is $132 million, whereas one-half is $198
million. Within the one-third to one-half parameters, we are proposing
that reallocating $150 million in drug and biological cost observed in
the claims data from packaged drugs and biologicals to separately
payable drugs and biologicals for CY 2010 would more appropriately
distribute pharmacy overhead cost among packaged and separately payable
drugs and biologicals than either of the two other options, that is,
paying for separately payable drugs and biologicals at ASP-2 percent
according to our standard drug payment methodology or adopting the
pharmacy stakeholders' recommendation. If we attribute $150 million in
additional cost to the payment for the drugs and biologicals we are
proposing to pay separately for the CY 2010 OPPS, we calculate a
payment rate for separately payable drugs and biologicals of ASP+4
percent as displayed in Table 26. Thus, we are proposing a pharmacy
overhead adjustment for separately payable drugs and biologicals in CY
2010 that would result in their payment at ASP+4 percent. We would
accomplish this adjustment by redistributing one-third to one-half of
the pharmacy overhead cost of packaged drugs and biologicals ($150
million), which represents a reduction in the packaged drug and
biological cost in the CY 2010 claims data of 27 percent.

Table 26--Proposed CY 2010 Pharmacy Overhead Adjustment Payment Methodology for Separately Payable and Packaged
Drugs and Biologicals
----------------------------------------------------------------------------------------------------------------
Total cost of
Total ASP drugs and
dollars for biologicals in Ratio of cost
drugs and claims data to ASP
biologicals in after (column C/ ASP+X percent
claims data adjustment column B)
(in millions) (in millions)
* **
----------------------------------------------------------------------------------------------------------------
Packaged Drugs and Biologicals....... $160 $405 2.53 ASP+153
Separately Payable Drugs and 2,589 2,689 1.04 ASP+4
Biologicals.
--------------------------------------------------------------------------
All Drugs and Biologicals........ 2,749 3,094 1.13 ASP+13
----------------------------------------------------------------------------------------------------------------
* Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and
biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2008 claims data for drugs and biologicals with a HCPCS code and April 2009 ASP
information.

We note that we are not proposing to redistribute pharmacy overhead
cost from packaged to separately payable drugs and biologicals
utilizing a methodology that would provide a separate pharmacy overhead
payment for each separately payable drug and biological based on its
pharmacy complexity. The OPPS is a prospective payment system that
provides payment for groups of services and we believe that it is
important, at a minimum, to maintain the current size of the OPPS
payment bundles, in order to encourage efficiency in the hospital
outpatient setting. As we stated in the CY2008 OPPS/ASC final rule with
comment period (72 FR 66613), we believe it is important that the OPPS
create incentives for hospitals to provide only necessary, high quality
care and to provide that care as efficiently as possible. We have
considered in recent years how we could increase packaging under the
OPPS in a manner that would create incentives for efficiency while
providing hospitals with flexibility to provide care in the most
appropriate way for each Medicare beneficiary. Hospitals have
repeatedly explained that they consider the acquisition and pharmacy
overhead costs of drugs in setting their charges for drugs, and we have
continued to provide a single payment for the acquisition and pharmacy
overhead costs of separately payable drugs and biologicals under the
OPPS consistent with this hospital charging practice. While we have
worked to develop, and are now proposing, a refined payment methodology
for drugs and biologicals for the CY 2010 OPPS that we believe would
pay more accurately for the pharmacy overhead cost of packaged

[[Page 35329]]

and separately payable drugs and biologicals, we do not believe it
would be appropriate to unbundle the current single combined payment
for the acquisition and overhead costs of a separately payable drug
into two distinct payments, a drug payment and a pharmacy overhead
payment. Furthermore, we note that section 1833(t)(14)(E)(ii) of the
Act specifically authorizes the Secretary to adjust the APC payment
weights for SCODs to take into account the recommendations of MedPAC on
pharmacy overhead costs. We believe our proposed CY 2010 approach that
would adjust the APC payment for separately payable drugs and
biologicals to more accurately pay for their associated pharmacy
overhead cost, rather than provide a separate payment for a drug's
pharmacy overhead cost each time the product is separately paid, is
consistent with this statutory provision. Therefore, we are proposing
to continue to make a single bundled payment for the acquisition and
pharmacy overhead costs of separately payable drugs and biologicals
under the CY 2010 OPPS, an approach we believe both continues to
encourage hospital efficiencies in the provision of drugs and
biologicals to Medicare beneficiaries in the hospital outpatient
setting and improves payment accuracy for the acquisition and pharmacy
overhead costs of drugs and biologicals.
To confirm the portion of the $395 million in estimated pharmacy
overhead cost currently associated with packaged drugs and biologicals
that should be attributable to separately payable drugs and
biologicals, we used information from a variety of sources in order to
corroborate the appropriateness of our proposal to redistribute between
one-third and one-half of the difference ($150 million) between the
aggregate claims cost for packaged drugs and biologicals and ASP
dollars for the same drugs and biologicals to separately payable drugs
and biologicals. In order to improve the accuracy of payment for
separately payable drugs and biologicals, we would incorporate an
adjustment for pharmacy overhead and pay for these drugs and
biologicals at ASP+4 percent. We would also improve the accuracy of
payment for procedures using packaged drugs and biologicals by reducing
the packaged drug and biological cost by 27 percent. We used our claims
data, the April 2009 ASP information, and information provided by
MedPAC and the pharmacy stakeholders to estimate an appropriate portion
of the pharmacy overhead cost currently associated with packaged drugs
and biologicals that may be attributed to the pharmacy overhead cost of
separately payable drugs and biologicals. We conducted two separate
analyses described below which confirm that our proposal to
redistribute $150 million in pharmacy overhead cost currently
associated with the cost of packaged drugs and biologicals is
appropriate.
We began this exercise with three fundamental assumptions. The
first assumption is that the hospital acquisition cost of separately
payable drugs and biologicals, on average, is not less than 100 percent
of ASP. We believe that this assumption is valid because we have been
told that hospitals pay a range of prices for the same drug or
biological. Some hospitals may be able to take advantage of volume and
group purchasing to achieve significant discounts for certain drugs and
biologicals, but other hospitals may pay more than average for drugs
and biologicals because of their low volume usage or a hospital's
remote geographic location. Further, hospitals often serve as community
care resources so they must provide drugs and biologicals to meet the
needs of all of the patients who present to their facilities for care.
The amounts and nature of those drugs and biologicals may vary
significantly and unpredictably over time, particularly for smaller
hospitals, due to changing availability of other care settings in their
communities, such as physicians' offices, or emergencies, and this
variability may constrain hospitals' ability to purchase all necessary
quantities of certain drugs and biologicals based on best price
contractual agreements negotiated in advance. Hence, we believe that
the ASP is likely a fair estimate of hospitals' average acquisition
cost of drugs and biologicals in general, excluding direct and indirect
overhead costs.
The second assumption is that packaged drugs and biologicals, as a
group, typically have an aggregate absolute pharmacy overhead cost
(direct and indirect) that exceeds the acquisition cost of the packaged
drugs and biologicals. We believe that this assumption is appropriate
because packaged drugs and biologicals carry the same absolute amount
of indirect overhead cost per drug or biological administered as
separately payable drugs and biologicals and because many packaged
drugs and biologicals have extremely low ASPs but some of the same
direct costs (for example, recordkeeping, storage, safety precautions,
and disposal requirements) as separately payable drugs and biologicals.
Our claims data show that the weighted average ASP for the drugs and
biologicals we are proposing to package for CY 2010 is approximately $7
per day per packaged drug or biological, and we believe that it is a
reasonable assumption that the full pharmacy overhead cost for a drug
or biological (direct and indirect) equals or exceeds that amount.
Our final assumption is that, on average, the pharmacy overhead
cost of separately payable drugs and biologicals, as a group, is not
greater than the acquisition cost of the separately payable drugs and
biologicals. We believe that this assumption is appropriate because
separately payable drugs and biologicals carry the same absolute amount
of indirect pharmacy overhead cost per drug or biological administered
as packaged drugs and biologicals. While we have been told by MedPAC
and the pharmacy stakeholders that separately payable drugs and
biologicals generally have direct pharmacy overhead costs that are
significantly higher than the direct overhead costs of packaged drugs
and biologicals, we do not believe that they exceed the acquisition
cost of separately payable drugs and biologicals. The weighted average
ASP for the drugs and biologicals we are proposing for separate payment
for CY 2010 is approximately $954 per day per separately payable drug
or biological. We do not believe that the full pharmacy overhead cost
for a separately payable drug or biological would, on average, exceed
$954 per day for a single drug or biological. Hence, we believe these
last two assumptions about the relationship of ASP to full pharmacy
overhead cost (direct and indirect) for packaged and separately payable
drugs and biologicals are appropriate for purposes of these analyses.
Having made these assumptions, we reduced the $395 million in
estimated pharmacy overhead cost that exceeds the ASP dollars for
packaged drugs and biologicals (their average acquisition cost) by $50
million. Fifty million dollars in additional cost would be necessary to
raise the estimated cost calculated for separately payable drugs and
biologicals from hospital claims data from 98 percent of ASP to 100
percent of ASP, in order to reach our estimate of the average hospital
acquisition cost of separately payable drugs and biologicals of ASP.
This left $345 million in estimated residual pharmacy overhead cost
that continued to be associated with packaged drugs and biologicals. We
believe that a portion of this cost has been associated with packaged
drugs and biologicals in our claims data, both due to charge

[[Page 35330]]

compression and our choice of an annual drug packaging threshold, and
would continue to be less accurately associated with packaged drugs and
biologicals were we not to engage in further redistribution of that
portion of this residual pharmacy overhead cost of packaged drugs and
biologicals.
We then performed two analyses using information provided by the
MedPAC Report (June 2005 Report to Congress) and by the pharmacy
stakeholders (February 2009 presentation to the APC Panel and other
meetings with CMS) that we applied to our claims data to estimate the
amount of residual pharmacy overhead cost associated with packaged
drugs and biologicals that should more accurately be attributed to
separately payable drugs and biologicals. To perform these analyses, we
used claims data only for those drugs and biologicals described by
HCPCS codes that met the following criteria:
The proposed CY 2010 OPPS status indicator for the HCPCS
code was ``G'' for pass-through drugs and biologicals (excluding pass-
through radiopharmaceuticals), ``K'' for separately payable drugs and
biologicals that do not have pass-through status, or ``N'' for packaged
drugs and biologicals, where the packaging status of these nonpass-
through drugs and biologicals was determined by an estimate of cost per
day based on ASP+4 percent;
April 2009 pricing information based on the ASP
methodology (other than mean cost from claims data) was available for
the HCPCS code, and we would use the ASP methodology to pay for the
HCPCS code if it had a status indicator of ``K'' or ``G''; and
CY 2008 OPPS claims data included claims for the HCPCS
code or an equivalent predecessor code.
We first converted six of the seven categories that MedPAC
recommended be created for reporting pharmacy overhead costs to three
CMS categories (low, medium, and high), as we had proposed for the CY
2006 OPPS (70 FR 42729 through 42730); the seventh MedPAC category was
not pertinent for this exercise because it is for the overhead cost
attributable to radiopharmaceuticals. The CMS categories are defined
as: Low (Orals); medium (Injection/Sterile Preparation; Single IV
Solution/Sterile Preparation; Compounded Reconstituted IV
Preparations); and high (Specialty IV or Agents requiring special
handling in order to preserve their therapeutic value; Cytotoxic Agents
in all formulations requiring personal protective equipment). We then
derived a relative overhead weight for each of the three CMS categories
by averaging the overhead weights for the six pertinent MedPAC
categories. These averages were not weighted. The derived relative
overhead weights for the CMS categories are as follows: Low = 1.00
(corresponding to MedPAC Category 1); medium = 3.61 (corresponding to
MedPAC Categories 1, 2, and 3); and high = 11.11 (corresponding to
MedPAC categories 5 and 6).
We also calculated a relative overhead weight for each of the three
categories of pharmacy overhead complexity that were provided by the
pharmacy stakeholders, using the different fixed dollar amounts that
these stakeholders recommended that CMS pay for pharmacy overhead costs
if we were to make such payments for ``all drugs'' (packaged and
separately payable). The pharmacy stakeholders' categories are defined
as: Low (Dispense without manipulation: e.g., oral drugs, pre-filled
syringes); medium (Injectable drug with one step manipulation: e.g.,
simple injections); and high (Multiple step injectable products and
chemotherapy that require safety considerations). The pharmacy
stakeholders' relative overhead weights are as follows: Low = 1; medium
= 2.67; and high = 5.50.
Using the pharmacy stakeholders' overhead categories (low, medium,
and high) and incorporating the pharmacy stakeholders' assignments of
specific drugs and biologicals to levels of pharmacy complexity that
they previously provided to CMS, we then assigned the remaining HCPCS
codes for drugs and biologicals (approximately 50 percent of all drug
and biological HCPCS codes qualifying for this exercise) based on our
understanding of the characteristics of the categories. Similarly, we
assigned all drug and biological HCPCS codes to the CMS categories
created from the MedPAC groups for the derived relative overhead
weights based on the definitions of those categories. Although the
subsequent analytic processes were identical, we performed these
analyses separately using the derived CMS overhead category weights
(results are in Table 27) and using the pharmacy stakeholders' overhead
category weights (results are in Table 28).
Specifically, we assigned the overhead weights to each drug and
biological in the set of drugs and biologicals qualifying for this
exercise. We then calculated a per unit overhead cost by dividing the
total relative weight for all drugs and biologicals in this exercise
(low, medium, and high) into the residual pharmacy overhead cost from
packaged drugs and biologicals of $345 million. Using the relative
weights for each scenario, we estimated the exact per unit pharmacy
overhead cost reallocation for each low, medium, and high pharmacy
overhead category. We then added this payment amount to ASP for each
drug and biological and reassessed the amount of total claims cost for
separately payable and packaged drugs and biologicals and calculated
our standard ratio of aggregate claims cost to aggregate ASP dollars
for separately payable and packaged drugs and biologicals. The results
of these analyses are shown in Tables 27 and 28 below.

Table 27--Estimated Redistribution of Pharmacy Overhead Costs Using Relative Weights Derived From MedPAC
Pharmacy Overhead Categories and CY 2010 OPPS Proposed Rule Data
----------------------------------------------------------------------------------------------------------------
Total ASP Total cost of
dollars for drugs and
drugs and biologicals in Ratio of cost
biologicals in claims data to ASP ASP+X percent
claims data after (column C/
(in millions) adjustment (in column B)
* millions) **
----------------------------------------------------------------------------------------------------------------
Packaged Drugs and Biologicals....... $160 $390 2.44 ASP+144
Separately Payable Drugs and 2,589 2,704 1.04 ASP+4
Biologicals.
--------------------------------------------------------------------------
All Drugs........................ 2,749 3,094 1.13 ASP+13
----------------------------------------------------------------------------------------------------------------
* Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and
biologicals with a HCPCS code and ASP information.

[[Page 35331]]

** Total cost in the CY 2008 claims data after adjustment for drugs and biologicals with a HCPCS code and April
2009 ASP information.

Table 28--Estimated Redistribution of Pharmacy Overhead Cost Using Relative Weights Calculated From Pharmacy
Stakeholders Recommended Pharmacy Overhead Payment Levels and CY 2010 Propposed Rule Data
----------------------------------------------------------------------------------------------------------------
Total ASP Total cost of
dollars for drugs and
drugs and biologicals in Ratio of cost
biologicals in claims data to ASP ASP+X percent
claims data after (column C/
(in millions) adjustment (in column B)
* millions) **
----------------------------------------------------------------------------------------------------------------
Packaged Drugs and Biologicals....... $160 $402 2.51 ASP+151
Separately Payable Drugs and 2,589 2,692 1.04 ASP+4
Biologicals.
--------------------------------------------------------------------------
All Drugs and Biologicals........ 2,749 3,094 1.13 ASP+13
----------------------------------------------------------------------------------------------------------------
* Total April 2009 ASP dollars (ASP multiplied by drug units in CY 2008 claims) for drugs with a HCPCS code and
ASP information.
** Total cost in the CY 2008 claims data after adjustment for drugs with a HCPCS code and April 2009 ASP
information.

As shown in Tables 27 and 28, the ratio of adjusted cost in the
claims data for separately payable drugs and biologicals to ASP
increased compared to the value derived from our standard methodology
and declined for packaged drugs and biologicals compared to the value
calculated according to our standard drug payment methodology as shown
in Table 26. Specifically, under our standard methodology without
adjustment of the pharmacy overhead cost currently attributed to
packaged drugs and biologicals, packaged drugs and biologicals would be
paid at ASP+247 percent. Using the CMS overhead weights, this value
declined to ASP+144 percent and using the pharmacy stakeholders'
overhead weights, it declined to ASP+151 percent.
Under our standard drug payment methodology, without adjustment of
the pharmacy overhead cost currently attributed to separately payable
drugs and biologicals, separately payable drugs and biologicals would
be paid at ASP-2 percent. Assuming a base average acquisition cost for
all drugs and biologicals of ASP and using the CMS overhead weights to
redistribute the residual $345 million in pharmacy overhead cost
associated with packaged drugs and biologicals in the claims data, this
value increased to ASP+4 percent, and using the pharmacy stakeholders'
overhead weights to redistribute the residual $345 million in pharmacy
overhead cost, this value also increased to ASP+4 percent.
Based on these analyses, we estimate that we would redistribute
$165 million in pharmacy overhead cost from packaged to separately
payable drugs and biologicals by setting the average acquisition cost
for all drugs and biologicals to ASP and using the CMS overhead
weights, and we would redistribute $153 million in pharmacy overhead
cost from packaged to separately payable drugs and biologicals by
setting the average acquisition cost for all drugs and biologicals to
ASP and using the pharmacy stakeholders' overhead weights. These
observed outcomes are consistent with our CY 2010 proposal to
redistribute between one-third and one-half of the $395 million of
pharmacy overhead cost currently associated with packaged drugs and
biologicals to separately payable drugs and biologicals. These values
are also consistent with the $150 million we are proposing to
redistribute from the cost of packaged drugs and biologicals to
separately payable drugs and biologicals for CY 2010, which would
represent a reduction in the cost of packaged drugs and biologicals of
27 percent.
After we performed these analyses, the pharmacy stakeholders
provided us with updated assignments of CY 2009 drug HCPCS codes to
their recommended levels of pharmacy complexity. We then assigned the
remaining HCPCS codes for drugs and biologicals that the pharmacy
stakeholders had not assigned based on our understanding of the
characteristics of their categories. We recalibrated our model to
incorporate the updated information. We observed no substantive changes
in our findings, with the revised overhead category assignments
redistributing $159 million from packaged to separately payable drugs
and biologicals and resulting in an ASP+X percentage of ASP+4 percent
for separately payable drugs and biologicals and ASP+148 percent for
packaged drugs and biologicals.
This analysis based on our synthesis of existing data and
information from a variety of sources supports the appropriateness of a
redistribution of the magnitude we are proposing for CY 2010. We
believe that our analyses of the claims data using the CMS relative
overhead weights derived from the 2005 MedPAC pharmacy overhead study
and using the pharmacy overhead category payments, levels of
complexity, and assignments of drugs provided by the pharmacy
stakeholders (where available), confirm that payment for separately
payable drugs and biologicals at ASP+4 percent represents a reasonable
aggregate adjustment for the pharmacy overhead cost of these separately
payable drugs and biologicals, compared to the payment that would
result from the standard drug payment methodology. Payment for
separately payable drugs at ASP+4 percent would ensure that hospitals
are paid appropriately for the average hospital acquisition cost and
the pharmacy overhead cost that our analyses show would be
appropriately redistributed from the estimated cost of drugs that we
are proposing to package for CY 2010.
Our proposal for CY 2010 relies upon the premise of providing a
pharmacy overhead adjustment to payment for separately payable drugs by
redistributing pharmacy overhead cost from packaged drugs to separately
payable drugs. Therefore, regardless of whether similar analyses for
the CY 2010 OPPS/ASC final rule based on updated claims and cost report
data result in a different payment level for separately payable drugs
than ASP+4 percent, we believe that any redistributed amount of
pharmacy overhead cost should be removed from the estimated cost of
packaged drugs and biologicals. We are proposing to redistribute
pharmacy overhead cost within the estimated total amount of acquisition
and overhead cost for all drugs and biologicals that has been

[[Page 35332]]

reported to us by hospitals by making a pharmacy overhead adjustment to
payment for separately payable drugs and biologicals that is based upon
a partial redistribution of the pharmacy overhead cost of packaged
drugs and biologicals. As described previously in this section, we are
proposing that any redistribution of pharmacy overhead cost that may
arise from CY 2010 final rule claims data would occur only from some
drugs and biologicals to other drugs and biologicals, thereby
maintaining the estimated total cost of drugs and biologicals (no
redistribution of cost would occur from other services to drugs and
biologicals or vice versa). While there is some evidence that
relatively more pharmacy overhead cost should be associated with
separately payable drugs and biologicals and less pharmacy overhead
cost should be associated with packaged drugs and biologicals in order
to improve payment accuracy, the recent RTI report on the OPPS'
hospital-specific CCR methodology (``Refining Cost to Charge Ratios for
Calculating APC and DRG Relative Payment Weights,'' July 2008 final
report), the June 2005 MedPAC study of hospital outpatient pharmacy
overhead costs, and our claims analyses discussed in this proposed rule
present no evidence that the total cost of drugs and biologicals
(including acquisition and overhead costs) is understated in claims in
relation to the costs of other services paid under the OPPS. Therefore,
to improve the distribution of pharmacy overhead cost within the total
estimated cost for all drugs and biologicals, without adversely
affecting the relativity of payment weights for all services paid under
the OPPS, we believe that it is most appropriate to redistribute
pharmacy overhead cost only within the total estimated cost of packaged
and separately payable drugs and biologicals. By redistributing
pharmacy overhead cost only within the total estimated cost of packaged
and separately payable drugs and biologicals, we would maintain a
constant total cost of drugs and biologicals under the OPPS as reported
to us by hospitals, without redistributing cost from other OPPS
services to the cost of drugs and biologicals under the budget neutral
OPPS.
While we agree conceptually with the APC Panel that a
redistribution of pharmacy overhead cost in our claims data from
packaged to separately payable drugs and biologicals is appropriate, we
are not proposing to accept the APC Panel's recommendations that CMS
pay for the acquisition cost of all separately payable drugs at no less
than ASP+6 percent because, as we discussed previously in this section,
our analyses of claims data indicate that appropriate payment for the
acquisition and pharmacy overhead costs of separately payable drugs
would be ASP+4 percent. We also are not accepting the APC Panel's
recommendation that CMS package the cost of packaged drugs at ASP+6
percent, use the difference between this cost and CMS' cost derived
from charges to provide more appropriate payment for pharmacy services
costs, and pay for pharmacy services using this amount by applying a
tiered approach to payments based on criteria related to the pharmacy
resources required for groups of drugs. We believe that the
recommendation to package the cost of packaged drugs at ASP+6 percent
would underpay for the pharmacy overhead cost of packaged drugs, which
we expect would be higher in relation to ASP than the pharmacy overhead
cost of separately payable drugs. Further, as discussed earlier in this
section, because the OPPS is a prospective payment system that relies
on payment for groups of services to encourage hospital efficiencies,
we do not believe payment for pharmacy overhead costs that is separate
from the OPPS payment for the acquisition costs of drugs would be
appropriate.
The APC Panel further recommended that, if CMS did not adopt a
methodology consistent with their recommendations summarized above, CMS
should exclude data from hospitals that participate in the 340B program
from its ratesetting calculations for drugs and that CMS should pay
340B hospitals in the same manner as it pays non-340B hospitals. We are
not accepting the APC Panel's recommendation that CMS propose to
exclude data from hospitals that participate in the 340B program from
its ratesetting calculations for drugs. For CY 2010, we note that we
are proposing a drug payment methodology that partially resembles the
methodology recommended by the APC Panel because the proposal
incorporates a redistribution of pharmacy overhead cost from packaged
to separately payable drugs and biologicals. However, excluding data
from hospitals that participate in the 340B program from our ASP+X
calculation, but paying those hospitals at that derived payment amount,
would effectively redistribute payment to drugs and biologicals from
payment for other services under the OPPS, and we do not believe this
redistribution would be appropriate. We are accepting the APC Panel
recommendation that CMS propose to pay 340B hospitals in the same
manner as non-340B hospitals are paid. Commenters on the CY 2009 OPPS/
ASC final rule with comment period were generally opposed to
differential payment for hospitals based on their 340B participation
status, and we do not believe it would be appropriate to exclude claims
from this subset of hospitals in the context of our CY 2010 proposal to
pay all hospitals at the same rate for separately payable drugs and
biologicals. Moreover, as discussed above, while we are not proposing
to adopt the APC Panel's specific recommended methodology to
redistribute pharmacy overhead cost that would otherwise by paid
through payment for packaged drugs, our proposed CY 2010 pharmacy
adjustment methodology that would result in the payment of separately
payable drugs and biologicals at ASP+4 percent incorporates a more
limited redistribution of pharmacy overhead cost that would,
nevertheless, preserve the aggregate drug cost in the claims, a result
consistent with the APC Panel's recommendations. Therefore, we believe
that it is appropriate to propose to pay 340B hospitals at the same
rates that we are proposing to pay non-340B hospitals, and we are
proposing to include the claims and cost report data for 340B hospitals
in the data we have used for our analyses in order to calculate the
proposed payment rates for drugs and biologicals and other services for
the CY 2010 OPPS.
In conclusion, we are proposing for CY 2010 to redistribute between
one-third and one-half of the difference between the aggregate claims
cost for packaged drugs and biologicals and ASP dollars for those
products, which results in payment for the acquisition and pharmacy
overhead costs of separately payable drugs and biologicals that do not
have pass-through payment status of ASP+4 percent. This payment amount
reflects an APC drug payment adjustment for pharmacy overhead cost. To
accomplish this payment adjustment, we also are proposing to reduce the
cost of packaged drugs and biologicals that is incorporated into the
payment for procedural APCs by the amount of pharmacy overhead cost
that is redistributed from packaged drugs and biologicals to the
payment for separately payable drugs and biologicals. This proposal is
based on the proposed redistribution of $150 million (through a 27
percent reduction in packaged drug and biological cost), between one-
third and one-half of the

[[Page 35333]]

pharmacy overhead cost (the cost above ASP) of packaged drugs and
biologicals in hospital outpatient claims, to the cost of separately
payable drugs and biologicals, preserving the aggregate cost of all
drugs and biologicals observed in the most recent claims and cost
report data available for this proposed rule. We are further proposing
that the claims data for 340B hospitals be included in the calculation
of payment for drugs and biologicals under the CY 2010 OPPS, and that
340B hospitals would be paid the same amounts for separately payable
drugs and biologicals as hospitals that do not participate in the 340B
program. Finally, we are proposing that, in accordance with our
standard drug payment methodology, the estimated payments for
separately payable drugs and biologicals would be taken into account in
the calculation of the weight scaler that would apply to the relative
weights for all procedural services (but would not to separately
payable drug and biologicals) paid under the OPPS, as required by
section 1833(t)(14)(H) of the Act.
4. Proposed Payment for Blood Clotting Factors
For CY 2009, we are providing payment for blood clotting factors
under the OPPS at ASP+4 percent, plus an additional payment for the
furnishing fee that is also a part of the payment for blood clotting
factors furnished in physicians' offices under Medicare Part B. The CY
2009 updated furnishing fee is $0.164 per unit.
For CY 2010, we are proposing to pay for blood clotting factors at
ASP+4 percent, consistent with our proposed payment policy for other
nonpass-through separately payable drugs and biologicals, and to
continue our policy for payment of the furnishing fee using an updated
amount. Because the furnishing fee update is based on the percentage
increase in the Consumer Price Index (CPI) for medical care for the 12-
month period ending with June of the previous year and the Bureau of
Labor Statistics releases the applicable CPI data after the MPFS and
OPPS/ASC proposed rules are published, we are not able to include the
actual updated furnishing fee in this proposed rule. Therefore, in
accordance with our policy as finalized in the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66765), we will announce the actual
figure for the percent change in the applicable CPI and the updated
furnishing fee calculated based on that figure through applicable
program instructions and posting on the CMS Web site at: http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/.
5. Proposed Payment for Therapeutic Radiopharmaceuticals
a. Background
Section 303(h) of Public Law 108-173 exempted radiopharmaceuticals
from ASP pricing in the physician's office setting. Beginning in the CY
2005 OPPS final rule with comment period, we have exempted
radiopharmaceutical manufacturers from reporting ASP data for payment
purposes under the OPPS. (For more information, we refer readers to the
CY 2005 OPPS final rule with comment period (69 FR 65811) and the CY
2006 OPPS final rule with comment period (70 FR 68655).) Consequently,
we did not have ASP data for radiopharmaceuticals for consideration for
previous years' OPPS ratesetting. In accordance with section
1833(t)(14)(B)(i)(I) of the Act, we have classified
radiopharmaceuticals under the OPPS as SCODs. As such, we have paid for
radiopharmaceuticals at average acquisition cost as determined by the
Secretary and subject to any adjustment for overhead costs.
Radiopharmaceuticals also are subject to the policies affecting all
similarly classified OPPS drugs and biologicals, such as pass-through
payment for diagnostic and therapeutic radiopharmaceuticals and
individual packaging determinations for therapeutic
radiopharmaceuticals, discussed earlier in this proposed rule.
For CYs 2006 and 2007, we used mean unit cost data from hospital
claims to determine each radiopharmaceutical's packaging status and
implemented a temporary policy to pay for separately payable
radiopharmaceuticals based on the hospital's charge for each
radiopharmaceutical adjusted to cost using the hospital's overall CCR.
In addition, in the CY 2006 OPPS final rule with comment period (70 FR
68654), we instructed hospitals to include charges for
radiopharmaceutical handling in their charges for the
radiopharmaceutical products so these costs would be reflected in the
CY 2008 ratesetting process. The methodology of providing separate
radiopharmaceutical payment based on charges adjusted to cost through
application of an individual hospital's overall CCR for CYs 2006 and
2007 was finalized as an interim proxy for average acquisition cost
because of the unique circumstances associated with providing
radiopharmaceutical products to Medicare beneficiaries. The single OPPS
payment represented Medicare payment for both the acquisition cost of
the radiopharmaceutical and its associated handling costs.
During the CY 2006 and CY 2007 rulemaking processes, we encouraged
hospitals and radiopharmaceutical stakeholders to assist us in
developing a viable long-term prospective payment methodology for these
products under the OPPS. As reiterated in the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66766), we were pleased to note that we
had many discussions with interested parties regarding the availability
and limitations of radiopharmaceutical cost data.
In considering payment options for therapeutic radiopharmaceuticals
for CY 2008, we examined several alternatives that we discussed in the
CY 2008 OPPS/ASC proposed rule (72 FR 42738 through 42739) and CY 2008
OPPS/ASC final rule with comment period (72 FR 66769 through 66770).
After considering the options and the public comments received, we
finalized a CY 2008 methodology to provide prospective payment for
therapeutic radiopharmaceuticals (defined as those Level II HCPCS codes
that include the term ``therapeutic'' along with a radiopharmaceutical
in their long code descriptors) using mean costs derived from the CY
2006 claims data, where the costs were determined using our standard
methodology of applying hospital-specific departmental CCRs to
radiopharmaceutical charges, defaulting to hospital-specific overall
CCRs only if appropriate departmental CCRs were unavailable (72 FR
66772). In addition, we finalized a policy to package payment for all
diagnostic radiopharmaceuticals (defined as those Level II HCPCS codes
that include the term ``diagnostic'' along with a radiopharmaceutical
in their long code descriptors) for CY 2008. As discussed in the CY
2008 OPPS/ASC proposed rule (72 FR 42739), we believed that adopting
prospective payment for therapeutic radiopharmaceuticals based on
historical hospital claims data was appropriate because it served as
our most accurate available proxy for the average hospital acquisition
cost of separately payable therapeutic radiopharmaceuticals. In
addition, we noted that we have found that our general prospective
payment methodology based on historical hospital claims data results in
more consistent, predictable, and equitable payment amounts across
hospitals and likely provides incentives to hospitals for efficiently
and economically providing these outpatient services.
Prior to implementation of the final CY 2008 methodology of
providing a prospective payment for therapeutic radiopharmaceuticals,
section 106(b) of Public Law 110-173 was enacted on

[[Page 35334]]

December 29, 2007, that specified payment for therapeutic
radiopharmaceuticals based on individual hospital charges adjusted to
cost. Therefore, hospitals continued to receive payment for therapeutic
radiopharmaceuticals by applying the hospital-specific overall CCR to
each hospital's charge for a therapeutic radiopharmaceutical from
January 1, 2008, through June 30, 2008. As we stated in the CY2009
OPPS/ASC proposed rule (73 FR 41493), thereafter, the OPPS would
provide payment for separately payable therapeutic radiopharmaceuticals
on a prospective basis, with payment rates based upon mean costs from
hospital claims data as set forth in the CY 2008 OPPS/ASC final rule
with comment period, unless otherwise required by law.
Following issuance of the CY 2009 OPPS/ASC proposed rule, section
142 of Public Law 110-275 amended section 1833(t)(16)(C) of the Act, as
amended by section 106(a) of Public Law 110-173, to further extend the
payment period for therapeutic radiopharmaceuticals based on hospital's
charges adjusted to cost through December 31, 2009. Therefore, we are
continuing to pay hospitals for therapeutic radiopharmaceuticals at
charges adjusted to cost through the end of CY 2009.
b. Proposed Payment Policy
Since the start of the temporary cost-based payment methodology for
radiopharmaceuticals in CY 2006, we have met with several interested
parties on a number of occasions regarding payment under the OPPS for
radiopharmaceuticals and have received numerous different suggestions
from these stakeholders regarding payment methodologies that we could
employ for future use under the OPPS.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66771), we solicited comments requesting interested parties to provide
information related to if and how the existing ASP methodology could be
used to establish payment for specific therapeutic radiopharmaceuticals
under the OPPS. Similar to the recommendations we received during the
CY 2008 OPPS/ASC proposed rule comment period (72 FR 66770), we
received several suggestions regarding the establishment of an OPPS-
specific methodology for radiopharmaceutical payment that would be
similar to the ASP methodology, without following the established ASP
procedures referenced at section 1847A of the Act and implemented
through rulemaking. Some commenters recommended using external data
submitted by a variety of sources other than manufacturers. Along this
line, commenters suggested gathering information from nuclear
pharmacies using methodologies with a variety of names such as Nuclear
Pharmacy Calculated Invoiced Price (Averaged) (CIP) and Calculated
Pharmacy Sales Price (CPSP). Other commenters recommended that CMS base
payment for certain radiopharmaceuticals on manufacturer-reported ASP.
As noted in the CY 2008 OPPS/ASC final rule with comment period (72
FR 66771), a ratesetting approach based on external data would be
administratively burdensome for us because we would be required to
collect, process, and review external information to ensure that it was
valid, reliable, and representative of a diverse group of hospitals so
that it could be used to establish rates for all hospitals. However, we
specifically requested additional comments regarding the use of the
existing ASP reporting structure for therapeutic radiopharmaceuticals
as this established methodology was already used for payment of other
drugs provided in the hospital outpatient setting (72 FR 66771). While
we received several recommendations from commenters on the CY 2008
OPPS/ASC final rule with comment period regarding payment of
therapeutic radiopharmaceuticals based on estimated costs provided by
manufacturers or other parties, we believe that the use of external
data for payment of therapeutic radiopharmaceuticals should only be
adopted if those external data are subject to the same well-established
regulatory framework as the ASP data currently used for payment of
separately payable drugs and biologicals under the OPPS. We have
previously indicated that nondevice external data used for setting
payment rates should be publicly available and representative of a
diverse group of hospitals both by location and type, and should also
identify the relevant data sources. We do not believe that external
therapeutic radiopharmaceutical cost data voluntarily provided outside
of the established ASP methodology, either by manufacturers or nuclear
pharmacies, would generally satisfy these criteria that are minimum
standards for setting OPPS payment rates.
We received public comments on the CY 2008 OPPS/ASC final rule with
comment period from certain radiopharmaceutical manufacturers who
indicated that the standard ASP methodology could be used for payment
of certain therapeutic radiopharmaceutical products. Specifically,
these manufacturers expressed interest in providing ASP for their
therapeutic radiopharmaceutical products as a basis for payment under
the OPPS.
In the CY 2009 OPPS/ASC proposed rule (73 FR 41495), we proposed to
allow manufacturers to submit ASP information for any separately
payable therapeutic radiopharmaceutical for payment purposes under the
OPPS. If ASP information was not submitted or appropriately certified
by the manufacturer for a given calendar year quarter, then for that
quarter we proposed to provide prospective payment based on the
therapeutic radiopharmaceuticals mean cost from hospital claims data.
However, as stated above, section 142 of Public Law 110-275 amended
section 1833(t)(16)(C) of the Act, as amended by section 106(a) of
Public Law 110-173, to further extend the payment period for
therapeutic radiopharmaceuticals based on hospital's charges adjusted
to cost through December 31, 2009, so we did not finalize this
proposal. We note that, in response to our proposed therapeutic
radiopharmaceutical payment methodology for CY 2009, we received a
number of public comments that were supportive of the proposal for
future years.
At the February 2009 meeting of the APC Panel, the APC Panel
recommended that CMS use the ASP methodology to pay for therapeutic
radiopharmaceuticals and, where ASP data are not available, to pay
based on mean costs from claims data for CY 2010. We are accepting this
recommendation, and for CY 2010, we are proposing to allow
manufacturers to submit ASP information for any separately payable
therapeutic radiopharmaceutical in order for therapeutic
radiopharmaceuticals to be paid based on ASP beginning in CY 2010 under
the OPPS. Similar to our CY 2009 proposal, we are not proposing to
compel manufacturers to submit ASP information. Also, as discussed in
the CY 2009 OPPS/ASC proposed rule (73 FR 41495), the ASP data
submitted would need to be provided for a patient-specific dose, or
patient-ready form, of the therapeutic radiopharmaceutical in order to
properly calculate the ASP amount for a given HCPCS code. In addition,
in those instances where there is more than one manufacturer of a
particular therapeutic radiopharmaceutical, we note that all
manufacturers would need to submit ASP information in order for payment
to be made on an ASP basis. We are specifically requesting public
comment on the development of a crosswalk, similar to the NDC/HCPCS
crosswalk for

[[Page 35335]]

separately payable drugs and biologicals posted on the CMS Web site at:
http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/ 01a_
2008aspfiles.asp, for use for therapeutic radiopharmaceuticals.
We continue to believe that the use of ASP information for OPPS
payment would provide an opportunity to improve payment accuracy for
these products by applying an established methodology that has already
been successfully implemented under the OPPS for other separately
payable drugs and biologicals. As is the case with other drugs and
biologicals subject to ASP reporting, in order for a therapeutic
radiopharmaceutical to receive payment based on ASP beginning January
1, 2010, we would need to receive ASP information from the manufacturer
no later than November 1, 2009, that would reflect therapeutic
radiopharmaceutical sales in the third quarter of CY 2009 (July 1,
2009, through September 30, 2009). These data would not be available
for publication in the CY 2010 OPPS/ASC final rule with comment period
but would be included in the January 2010 OPPS quarterly release that
would update the payment rates for separately payable drugs,
biologicals, and therapeutic radiopharmaceuticals based on the most
recent ASP data, consistent with our customary practice over the past 4
years when we have used the ASP methodology for payment of separately
payable drugs and biologicals under the OPPS. In addition, we would
need to receive information from radiopharmaceutical manufacturers that
would allow us to calculate a unit dose cost estimate based on the
applicable HCPCS code for the therapeutic radiopharmaceutical.
We realize that not all therapeutic radiopharmaceutical
manufacturers may be willing or able to submit ASP information for a
variety of reasons. We are proposing to provide payment at the ASP rate
if ASP information is available for a given calendar year quarter or,
if ASP information is not available, we are proposing to provide
payment based on the most recent hospital mean unit cost data that we
have available. We believe that both methodologies represent an
appropriate and adequate proxy for average hospital acquisition cost
and associated handling costs for these products. Therefore, if ASP
information for the appropriate period of sales related to payment in
any CY 2010 quarter is not available, we would rely on the CY 2008 mean
unit cost data derived from hospital claims to set the payment rates
for therapeutic radiopharmaceuticals. We note that this is not the
usual OPPS process that relies on alternative data sources, such as WAC
or AWP, when ASP information is temporarily unavailable, prior to
defaulting to the mean unit cost from hospital claims data. We are
proposing this methodology specifically for therapeutic
radiopharmaceuticals whereby we would immediately default to the mean
unit cost from hospital claims if sufficient ASP data were not
available because we are not proposing to require therapeutic
radiopharmaceutical manufacturers to report ASP data at this time. We
do not believe that WAC or AWP is an appropriate proxy to provide OPPS
payment for average therapeutic radiopharmaceutical acquisition cost
and associated handling costs when manufacturers are not required to
submit ASP data and, therefore, payment based on WAC or AWP could
continue for the full calendar year.
Recognizing that we may need to utilize mean unit cost data to pay
for therapeutic radiopharmaceuticals in CY 2010 if ASP data are not
submitted, we evaluated the mean unit cost information in the CY 2010
claims data for all therapeutic radiopharmaceuticals for this proposed
rule. We noticed that we had numerous claims with service units greater
than one for HCPCS code A9543 (Yttrium Y-90 ibritumomab tiuxetan,
therapeutic, per treatment dose, up to 40 millicuries) and A9545
(Iodine I-131 tositumomab, therapeutic, per treatment dose), when the
long descriptors for these therapeutic radiopharmaceuticals clearly
indicate ``per treatment dose'' and, therefore, we would expect the
service units on every claim to be one. In contrast, the other six
therapeutic radiopharmaceuticals that would be separately payable in CY
2010 all include ``per millicurie'' in their HCPCS code descriptors, so
reporting multiple service units for those items could be appropriate.
We do not believe that hospitals billing more than one unit of HCPCS
codes A9543 orA9545 on a claim are correctly reporting these products
and, therefore, we believe these claims are incorrectly coded. Although
we do not normally examine hospital reporting patterns for individual
services, pricing an individual item, such as a therapeutic
radiopharmaceutical with low volume, may argue for more aggressive
trimming to remove inaccurate claims. Therefore, we removed all claims
with units greater than one for these two therapeutic
radiopharmaceuticals before estimating their mean unit costs. Because
we do not have ASP data for therapeutic radiopharmaceuticals that were
used for payment in April 2009, the proposed payment rates included in
Addenda A and B to this proposed rule are based on mean costs from
historical hospital claims data available for this proposed rule,
subject to the additional trimming of incorrectly coded claims for
HCPCS codes A9543 and A9545 as described above.
Similar to the ASP process already in place for drugs and
biologicals, we are proposing to update ASP data for therapeutic
radiopharmaceuticals through our quarterly process as updates become
available. In addition, we are proposing to assess the availability of
ASP data for therapeutic radiopharmaceuticals quarterly, and if ASP
data become available midyear, we would transition at the next
available quarter to ASP-based payment. For example, if ASP data are
not available for the quarter beginning January 2010 (that is, ASP
information reflective of third quarter CY 2009 sales are not submitted
in October 2009), then the next opportunity to begin payment based on
ASP data for a therapeutic radiopharmaceutical would be April 2010 if
ASP data reflective of fourth quarter CY 2009 sales were submitted in
January 2010.

Table 29--Proposed CY 2010 Separately Payable Therapeutic
Radiopharmaceuticals
------------------------------------------------------------------------
CY 2009 short Proposed CY Proposed CY
CY 2009 HCPCS Code descriptor 2010 APC 2010 SI
------------------------------------------------------------------------
A9517............. I131 iodide cap, rx 1064 K
A9530............. I131 iodide sol, rx 1150 K
A9543............. Y90 ibritumomab, rx 1643 K
A9545............. I131 tositumomab, 1645 K
rx.
A9563............. P32 Na phosphate... 1675 K
A9564............. P32 chromic 1676 K
phosphate.

[[Page 35336]]

A9600............. Sr89 strontium..... 0701 K
A9605............. Sm 153 lexidronm... 0702 K
------------------------------------------------------------------------

6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital Claims
Data
Public Law 108-173 does not address the OPPS payment in CY 2005 and
after for drugs, biologicals, and radiopharmaceuticals that have
assigned HCPCS codes, but that do not have a reference AWP or approval
for payment as pass-through drugs or biologicals. Because there is no
statutory provision that dictated payment for such drugs, biologicals
and radiopharmaceuticals in CY 2005, and because we had no hospital
claims data to use in establishing a payment rate for them, we
investigated several payment options for CY 2005 and discussed them in
detail in the CY 2005 OPPS final rule with comment period (69 FR 65797
through 65799).
For CYs 2005 to 2007, we implemented a policy to provide separate
payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS
codes (specifically those new drug, biological, and radiopharmaceutical
HCPCS codes in each of those calendar years that did not crosswalk to
predecessor HCPCS codes) but which did not have pass-through status, at
a rate that was equivalent to the payment they received in the
physician's office setting, established in accordance with the ASP
methodology for drugs and biologicals, and based on charges adjusted to
cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a
policy to provide payment for new drugs (excluding contrast agents) and
biologicals (excluding implantable biologicals for CY 2009) with HCPCS
codes, but which did not have pass-through status and were without OPPS
hospital claims data, at ASP+5 percent and ASP+4 percent, respectively,
consistent with the final OPPS payment methodology for other separately
payable drugs and biologicals. New therapeutic radiopharmaceuticals
were paid at charges adjusted cost based on the statutory requirement
for CY 2008 and CY 2009 and payment for new diagnostic
radiopharmaceuticals was packaged in both years. For CY 2010, we are
proposing to continue the CY 2009 payment methodology for new drugs
(excluding contrast agents) and nonimplantable biologicals and extend
the methodology to payment for new therapeutic radiopharmaceuticals,
when their period of payment at charges adjusted to cost no longer
would apply. Therefore, for CY 2010, we are proposing to provide
payment for new drugs (excluding contrast agents), nonimplantable
biologicals, and therapeutic radiopharmaceuticals with HCPCS codes
(those new CY 2010 drug (excluding contrast agents), nonimplantable
biological, and therapeutic radiopharmaceutical HCPCS codes that do not
crosswalk to CY 2009 HCPCS codes), but which do not have pass-through
status and are without OPPS hospital claims data, at ASP+4 percent,
consistent with the proposed CY 2010 payment methodology for other
separately payable nonpass-through drugs, nonimplantable biologicals,
and therapeutic radiopharmaceuticals. We believe this proposed policy
would ensure that new nonpass-through drugs, nonimplantable
biologicals, and therapeutic radiopharmaceuticals would be treated like
other drugs, nonimplantable biologicals, and therapeutic
radiopharmaceuticals under the OPPS, unless they are granted pass-
through status. Only if they are pass-through drugs, nonimplantable
biologicals, or therapeutic radiopharmaceuticals would they receive a
different payment for CY 2010, generally equivalent to the payment
these drugs and biologicals would receive in the physician's office
setting, consistent with the requirements of the statute. We are
proposing to continue packaging payment for all new nonpass-through
diagnostic radiopharmaceuticals, contrast agents, and implantable
biologicals with HCPCS codes (those new CY 2010 diagnostic
radiopharmaceutical, contrast agent, and implantable biological HCPCS
codes that do not crosswalk to predecessor HCPCS codes), consistent
with the proposed packaging of all existing nonpass-through diagnostic
radiopharmaceuticals, contrast agents and implantable biologicals, as
discussed in more detail in section V.B.2.d. of this proposed rule.
In accordance with the OPPS ASP methodology, in the absence of ASP
data, we are proposing, for CY 2010, to continue the policy we
implemented beginning in CY 2005 of using the WAC for the product to
establish the initial payment rate for new nonpass-through drugs and
biologicals with HCPCS codes, but which are without OPPS claims data.
However, we note that if the WAC is also unavailable, we would make
payment at 95 percent of the product's most recent AWP. We also are
proposing to assign status indicator ``K'' to HCPCS codes for new drugs
and nonimplantable biologicals without OPPS claims data and for which
we have not granted pass-through status. We further note that, with
respect to new items for which we do not have ASP data, once their ASP
data become available in later quarter submissions, their payment rates
under the OPPS would be adjusted so that the rates would be based on
the ASP methodology and set to the finalized ASP-based amount (proposed
for CY 2010 at ASP+4 percent) for items that have not been granted
pass-through status.
For CY 2010, we also are proposing to base payment for new
therapeutic radiopharmaceuticals with HCPCS codes as of January 1,
2010, but which do not have pass-through status, on the WACs for these
products if ASP data for these therapeutic radiopharmaceuticals are not
available. If the WACs are also unavailable, we are proposing to make
payment for new therapeutic radiopharmaceuticals at 95 percent of their
most recent AWPs because we would not have mean costs from hospital
claims data upon which to base payment. Analogous to new drugs and
biologicals, we are proposing to assign status indicator ``K'' to HCPCS
codes for new therapeutic radiopharmaceuticals for which we have not
granted pass-through status.
Consistent with other ASP-based payments, for CY 2010, we are
proposing to make any changes to the payment amounts for new drugs and
biologicals in the CY 2010 OPPS/ASC final rule with comment period and
also on a quarterly basis on the CMS Web site during CY 2010 if later
quarter ASP submissions (or more recent WACs or

[[Page 35337]]

AWPs) indicate that changes to the payment rates for these drugs and
biologicals are necessary. The payment rates for new therapeutic
radiopharmaceuticals would also be changed accordingly, based on later
quarter ASP submissions. We note that the new CY 2010 HCPCS codes for
drugs, biologicals, and therapeutic radiopharmaceuticals are not
available at the time of development of this proposed rule. However,
they will be included in the CY 2010 OPPS/ASC final rule with comment
period where they will be assigned comment indicator ``NI'' to reflect
that their interim final OPPS treatment is open to public comment on
the CY 2010 OPPS/ASC final rule with comment period.
There are several nonpass-through drugs and biologicals that were
payable in CY 2008 and/or CY 2009 for which we do not have any CY 2008
hospital claims data available for this proposed rule and for which
there are no other HCPCS codes that describe different doses of the
same drug but for which we do have pricing information for the ASP
methodology. We note that there are currently no therapeutic
radiopharmaceuticals in this category. In order to determine the
packaging status of these items for CY2010, we calculated an estimate
of the per day cost of each of these items by multiplying the payment
rate for each product based on ASP+4 percent, similar to other nonpass-
through drugs and biologicals paid separately under the OPPS, by an
estimated average number of units of each product that would typically
be furnished to a patient during one administration in the hospital
outpatient setting. We are proposing to package items for which we
estimated the per administration cost to be less than or equal to $65,
which is the general packaging threshold that we are proposing for
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals
in CY 2010. We are proposing to pay separately for items with an
estimated per day cost greater than $65 (with the exception of
diagnostic radiopharmaceuticals, contrast agents and implantable
biologicals, which we are proposing to continue to package regardless
of cost, as discussed in more detail in section V.B.2.d. of this
proposed rule) in CY 2010. We are proposing that the CY 2010 payment
for separately payable items without CY 2008 claims data would be ASP+4
percent, similar to payment for other separately payable nonpass-
through drugs and biologicals under the OPPS. In accordance with the
ASP methodology used in the physician's office setting, in the absence
of ASP data, we are proposing to use the WAC for the product to
establish the initial payment rate. However, we note that if the WAC is
also unavailable, we would make payment at 95 percent of the most
recent AWP available.
Table 30 lists all of the nonpass-through drugs and biologicals
without available CY 2008 claims data to which these policies would
apply in CY 2010.

Table 30--Drugs and Biologicals Without CY 2008 Claims Data
----------------------------------------------------------------------------------------------------------------
Estimated
average number Proposed CY
CY 2009 HCPCS code CY 2009 long descriptor of units per Proposed CY 2010 SI 2010 APC
administration
----------------------------------------------------------------------------------------------------------------
90681........................ Rotavirus vaccine, 1 K 1239
human, attenuated, 2
dose schedule, live,
for oral use.
90696........................ Diphtheria, tetanus 1 N
toxoids, acellular
pertussis vaccine and
poliovirus vaccine,
inactivated (DTaP-
IPV), when
administered to
children 4 through 6
years of age, for
intramuscular use.
J0364........................ Injection, apomorphine 12 N
hydrochloride, 1 mg.
J2724........................ Injection, protein c 2240 K 1139
concentrate,
intravenous, human, 10
iu.
J3355........................ Injection, 2 K 1741
urofollitropin, 75 IU.
J9215........................ Injection, interferon, 5 K 0865
alfa-n3, (human
leukocyte derived),
250,000 iu.
----------------------------------------------------------------------------------------------------------------

Finally, there are eight drugs and biologicals, shown in Table 31
below, that were payable in CY 2008, but for which we lack CY 2008
claims data and any other pricing information for the ASP methodology.
In CY 2009, for similar items without CY 2007 claims data and without
pricing information for the ASP methodology, we stated that we were
unable to determine their per day cost and we packaged these items for
the year, assigning these items status indicator ``N.''
For CY 2010, we are proposing to change the status indicator for
the eight drugs and biologicals shown in Table 31 below to status
indicator ``E'' (Not paid by Medicare when submitted on outpatient
claims (any outpatient bill type)) as these drugs and biologicals are
not currently sold or have been identified as obsolete. In addition, we
are proposing to provide separate payment for these drugs and
biologicals if pricing information reflecting recent sales becomes
available mid-year in CY 2010 for the ASP methodology. If pricing
information becomes available, we would assign the products status
indicator ``K'' and pay for them separately for the remainder of CY
2010.

Table 31--Drugs and Biologicals Without Information on per day Cost and
Without Pricing Information for the ASP Methodology
------------------------------------------------------------------------
CY 2009 HCPCS code CY 2009 short descriptor Proposed CY 2010 SI
------------------------------------------------------------------------
90296................... Diphtheria antitoxin.... E
90581................... Anthrax vaccine, sc..... E
90727................... Plague vaccine, im...... E
J0128................... Abarelix injection...... E
J0350................... Injection anistreplase E
30 u.
J0395................... Arbutamine hcl injection E
J1452................... Intraocular Fomivirsen E
na.
J2460................... Oxytetracycline E
injection.
------------------------------------------------------------------------

[[Page 35338]]

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

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount
of transitional pass-through payments for drugs, biologicals,
radiopharmaceuticals, and categories of devices for a given year to an
''applicable percentage'' of total program payments estimated to be
made under section 1833(t) of the Act for all covered services
furnished for that year under the hospital OPPS. For a year before CY
2004, the applicable percentage was 2.5 percent; for CY 2004 and
subsequent years, we specify the applicable percentage up to 2.0
percent.
If we estimate before the beginning of the calendar year that the
total amount of pass-through payments in that year would exceed the
applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a
uniform reduction in the amount of each of the transitional pass-
through payments made in that year to ensure that the limit is not
exceeded. We make an estimate of pass-through spending to determine not
only whether payments exceed the applicable percentage, but also to
determine the appropriate reduction to the conversion factor for the
projected level of pass-through spending in the following year in order
to ensure that total estimated pass-through spending for the
prospective payment year is budget neutral as required by section
1883(t)(6)(E) of the Act.
For devices, developing an estimate of pass-through spending in CY
2010 entails estimating spending for two groups of items. The first
group of items consists of device categories that were recently made
eligible for pass-through payment and that would continue to be
eligible for pass-through payment in CY 2010. The CY 2008 OPPS/ASC
final rule with comment period (72 FR 66778) describes the methodology
we have used in previous years to develop the pass-through spending
estimate for known device categories continuing into the applicable
update year. The second group contains items that we know are newly
eligible, or project would be newly eligible, for device pass-through
payment in the remaining quarters of CY 2009 or beginning in CY 2010.
As discussed in section V.A.4. of this proposed rule, because we are
proposing that, beginning in CY 2010, the pass-through evaluation
process and pass-through payment for implantable biologicals newly
approved for pass-through payment beginning on or after January 1,
2010, that are always surgically inserted or implanted (through a
surgical incision or a natural orifice) would be the device pass-
through process and payment methodology only, the estimate of pass-
through spending for these implantable biologicals newly eligible for
pass-through payment beginning in CY 2010 would be included in the
pass-through spending estimate for this second group of device
categories. The sum of the CY 2010 pass-through estimates for these two
groups of device categories would equal the total CY 2010 pass-through
spending estimate for device categories with pass-through status.
For devices eligible for pass-through payment, section
1833(t)(6)(D)(ii) of the Act establishes the pass-through amount as the
amount by which the hospital's charges for the device, adjusted to
cost, exceeds the portion of the otherwise applicable Medicare OPD fee
schedule that the Secretary determines is associated with the device.
As discussed in section IV.A.2. of this proposed rule, we deduct from
the pass-through payment for an identified device category eligible for
pass-through payment 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 device APC offset amount, when we believe that
predecessor device costs for the device category newly approved for
pass-through payment (hereinafter referred to as the new device
category) are already packaged into the existing APC structure. For
each device category that becomes newly eligible for device pass-
through payment, including an implantable biological under our CY 2010
proposal, we estimate pass-through spending to be the difference
between payment for the device category and the device APC offset
amount, if applicable, for the procedures that would use the device. If
we determine that predecessor device costs for the new device category
are not already included in the existing APC structure, the pass-
through spending estimate for the device category would be the full
payment at charges adjusted to cost.
For drugs and biologicals eligible for pass-through payment,
section 1833(t)(6)(D)(i) of the Act establishes the pass-through
payment amount as the amount by which the amount authorized under
section 1842(o) of the Act (or, if the drug or biological is covered
under a competitive acquisition contract under section 1847B of the
Act, an amount determined by the Secretary equal to the average price
for the drug or biological for all competitive acquisition areas and
year established under such section as calculated and adjusted by the
Secretary) exceeds the portion of the otherwise applicable fee schedule
amount that the Secretary determines is associated with the drug or
biological. Because we are proposing to pay for most nonpass-through
separately payable drugs and nonimplantable biologicals under the CY
2010 OPPS at ASP+4 percent, which represents the otherwise applicable
fee schedule amount associated with most pass-through drugs and
biologicals, and because we would pay for pass-through drugs and
nonimplantable biologicals at ASP+6 percent or the Part B drug CAP
rate, if applicable, our estimate of drug and nonimplantable biological
pass-through payment for CY 2010 is not zero. Furthermore, payment for
certain drugs, specifically diagnostic radiopharmaceuticals, contrast
agents, and implantable biologicals without pass-through status, would
always be packaged into payment for the associated procedures because
these products would never be separately paid. However, all pass-
through diagnostic radiopharmaceuticals and contrast agents and those
implantable biologicals with pass-through status approved prior to CY
2010 would be paid based at ASP+6 percent or the Part B drug CAP rate,
if applicable, like other pass-through drugs and biologicals.
Therefore, our estimate of pass-through payment for all diagnostic
radiopharmaceuticals and contrast agents and those implantable
biologicals with pass-through status approved prior to CY 2010 is also
not zero.
In section V.A.6. of this proposed rule, we discuss our proposal to
determine if the cost of certain ``policy-packaged'' drugs, including
diagnostic radiopharmaceuticals and contrast agents, are already
packaged into the existing APC structure. If we determine that a
``policy-packaged'' drug approved for pass-through payment resembles
predecessor diagnostic radiopharmaceuticals and contrast agents already
included in the costs of the APCs that would be associated with the
drug receiving pass-through payment, we are proposing to offset the
amount of pass-through payment for diagnostic radiopharmaceuticals and
contrast agents. For these drugs, the APC offset amount would be the
portion of the APC payment for the specific procedure being performed
with the diagnostic radiopharmaceutical or contrast agent receiving
pass-through payment that is attributable to diagnostic
radiopharmaceuticals and contrast agents, which we refer to as the

[[Page 35339]]

``policy-packaged'' drug APC offset amount. If we determine that an
offset is appropriate for a specific diagnostic radiopharmaceutical or
contrast agent receiving pass-through payment, we would reduce our
estimate of pass-through payment for these drugs by this amount. We
have not established a policy to offset pass-through payment for
implantable biologicals when approved for pass-through payment as a
drug or biological, that is, for CY 2009 and earlier, so we would
consider full payment at ASP+6 percent for these implantable
biologicals receiving biological pass-through payment in our estimate
of CY 2010 pass-through spending for drugs and biologicals.
We note that the Part B drug CAP program has been suspended
beginning January 1, 2009. We refer readers to the Medicare Learning
Network (MLN) Matters Special Edition article SE0833 for more
information on this suspension. As of the publication of this proposed
rule, the Part B drug CAP program has not been reinstituted. Therefore,
for this proposed rule, we will continue to not have an effective Part
B drug CAP rate for pass-through drugs and biologicals. Similar to
estimates for devices, the first group of drugs and biologicals
requiring a pass-through payment estimate consists of those products
that were recently made eligible for pass-through payment and that
would continue to be eligible for pass-through payment in CY 2010. The
second group contains drugs and nonimplantable biologicals that we know
are newly eligible, or project would be newly eligible, beginning in CY
2010. The sum of the CY 2010 pass-through estimates for these two
groups of drugs and biologicals would equal the total CY 2010 pass-
through spending estimate for drugs and biologicals with pass-through
status.

B. Proposed Estimate of Pass-Through Spending

We are proposing to set the applicable percentage limit at 2.0
percent of the total OPPS projected payments for CY 2010, consistent
with our OPPS policy from CY 2004 through 2009. As we discuss in
section IV.A. of this proposed rule, there are currently no device
categories receiving pass-through payment in CY 2009 that would
continue for payment during CY 2010. Therefore, there are no device
categories in the first group, that is, device categories recently made
eligible for pass-through payment and continuing into CY 2010, and the
estimate for this group is $0.
As stated earlier, we are proposing in section V.A.4. of this
proposed rule to specify that, beginning in CY 2010, the pass-through
evaluation process and pass-through payment for implantable biologicals
that are always surgically inserted or implanted (through a surgical
incision or a natural orifice) would be the device pass-through process
and payment methodology only. Therefore, we are proposing to continue
considering existing implantable biologicals approved for pass-through
payment under the drugs and biologicals pass-through provision prior to
CY 2010 as drugs and biologicals for pass-through payment estimate
purposes. These implantable biologicals that have been approved for
pass-through status prior to CY 2010 would continue to be considered
drugs and biologicals until they expire from pass-through status.
Therefore, the pass-through spending estimate for this first group of
pass-through devices would not include currently eligible implantable
biologicals that have been granted pass-through status prior to CY
2010.
In section V.A.4. of this proposed rule, we are proposing that
payment for implantable biologicals newly eligible for pass-through
payment beginning in CY 2010 would be based on hospital charges
adjusted to cost, rather than the ASP methodology that is applicable to
pass-through drugs and biologicals. Therefore, we are proposing that,
beginning in CY 2010, the estimate of pass-through spending for
implantable biologicals first paid as pass-through devices in CY 2010
be based on the payment methodology for pass-through devices, and be
included in the device pass-through spending estimate.
In estimating CY 2010 pass-through spending for device categories
in the second group, that is, device categories that we knew at the
time of the development of this proposed rule would be newly eligible
for pass-through payment in CY 2010 (of which there are none),
additional device categories (including categories that would describe
implantable biologicals) that we estimate could be approved for pass-
through status subsequent to the development of this proposed rule and
before January 1, 2010, and contingent projections for new categories
(including categories that would describe implantable biologicals in
the second through fourth quarters of CY 2010), we are proposing to use
the general methodology described in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66778), while also taking into account
recent OPPS experience in approving new pass-through device categories.
There are no new device categories (including categories that would
describe implantable biologicals) for CY 2010 of which we are aware at
the time of development of this proposed rule. The estimate of CY 2010
pass-through spending for this second group is $10.0 million.
Employing our established methodology that the estimate of pass-
through device spending in CY 2010 incorporates CY 2010 estimates of
pass-through spending for known device categories continuing in CY
2010, those known or projected to be first effective January 1, 2010,
and those device categories projected to be approved during subsequent
quarters of CY 2009 or CY 2010, our proposed estimate of total pass-
through spending for device categories is $10.0 million for CY 2010.
To estimate CY 2010 pass-through spending for drugs and biologicals
in the first group, specifically those drugs (including
radiopharmaceuticals and contrast agents) and biologicals (including
implantable biologicals) recently made eligible for pass-through
payment and continuing into CY 2010, we are proposing to utilize the
most recent Medicare physician's office data regarding their
utilization, information provided in the respective pass-through
applications, historical hospital claims data, pharmaceutical industry
information, and clinical information regarding those drugs or
biologicals, in order to project the CY 2010 OPPS utilization of the
products. For the known drugs and biologicals (excluding diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals)
that would continue on pass-through status in CY 2010, we then estimate
the total pass-through payment amount as the difference between ASP+6
percent or the Part B drug CAP rate, as applicable, and ASP+4 percent,
aggregated across the projected CY 2010 OPPS utilization of these
products. Because payment for a diagnostic radiopharmaceutical or
contrast agent would be packaged if the product were not paid
separately due to its pass-through status, we include in the pass-
through estimate the difference between payment for the drug or
biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if
ASP information is not available) and the ``policy-packaged'' drug APC
offset amount, if we have determined that the diagnostic
radiopharmaceutical or contrast agent approved for pass-through payment
resembles predecessor diagnostic radiopharmaceuticals and contrast
agents already included in the costs of the APCs that would be
associated with the drug receiving pass-through payment. Because
payment for an

[[Page 35340]]

implantable biological continuing on pass-through status in CY 2010
would be packaged if the product were not paid separately due to its
pass-through status and because we have not established a pass-through
payment offset policy for implantable biologicals when approved for
pass-through payment as biologicals, that is, for CY 2009 and earlier,
we include in the pass-through spending estimate the full payment for
these implantable biological at ASP+6 percent (or WAC+6 percent or 95
percent of AWP, if ASP is not available). Based on the results of these
analyses, we are proposing the estimated pass-through spending
attributable to the first group (that is, the known drugs and
biologicals, including implantable biologicals continuing with pass-
through eligibility in CY 2010) described above to be approximately
$8.9 million for CY 2010. This $8.9 million estimate of CY 2010 pass-
through spending for the first group of pass-through drugs and
biologicals reflects the current pass-through drugs and biologicals
that are continuing on pass-through status into CY 2010; these products
are displayed in Table 22 in section V.A.3. of this proposed rule.
To estimate CY 2010 pass-through spending for drugs and
nonimplantable biologicals in the second group (that is, drugs and
nonimplantable biologicals that we know at the time of development of
this proposed rule would be newly eligible for pass-through payment in
CY 2010 (of which there are none), additional drugs and nonimplantable
biologicals that we estimate could be approved for pass-through status
subsequent to the development of this proposed rule and before January
1, 2010, and projections for new drugs and nonimplantable biologicals
that could be initially eligible for pass-through payment in the second
through fourth quarters of CY 2010, we are proposing to use utilization
estimates from pass-through applicants, pharmaceutical industry data,
clinical information, recent trends in the per unit ASPs of hospital
outpatient drugs, and projected annual changes in service volume and
intensity as our basis for making the CY 2010 pass-through payment
estimate. We also are considering the most recent OPPS experience in
approving new pass-through drugs and nonimplantable biologicals. As
noted earlier, consistent with our proposal discussed in section V.A.4.
of this proposed rule, we are proposing to include new implantable
biologicals that we would expect to be approved for pass-through status
as devices beginning in CY 2010 in the second group of items considered
for device pass-through estimate purposes. Therefore, we are not
including implantable biologicals in the second group of items in the
drug and biological pass-through spending estimate. We also are
proposing in section V.A.5. of this proposed rule to revise our pass-
through payment policy regarding ``new'' drugs and biologicals that
were not receiving hospital outpatient payment as of December 31, 1996
and that also meet the other criteria for receiving pass-through
payment. Specifically, we are proposing to change the start date of the
pass-through payment eligibility period for a ``new'' drug or
biological from the first date on which pass-through payment is made to
the date on which payment is first made for a drug or biological as an
outpatient hospital service under Part B, using the date of first sale
of the drug or biological in the United States after FDA approval as a
proxy, to better reflect the statutory provisions for pass-through
payment under section 1833(t)(6) of the Act. As we developed our CY
2010 estimate of pass-through spending, we considered the most recent
OPPS experience in approving new pass-through drugs and nonimplantable
biologicals. We note that a number of the drugs and biologicals
currently receiving pass-through payment in CY 2009 would not be
eligible for pass-through payment under the proposed revised definition
of the pass-through payment eligibility period. Therefore, we have
reduced our estimate of CY 2010 pass-through spending for new drugs and
nonimplantable biologicals that could be initially eligible for pass-
through payment beginning in CY 2010 to take into consideration the
potential effect of our proposed CY 2010 pass-through payment
eligibility period policy on the future number of drugs and biologicals
newly approved for pass-through payment in comparison with our
historical OPPS experience over the past several years.
Based on the results of these analyses, we are proposing the
estimated pass-through spending attributable to this second group of
drugs and biologicals to be approximately $19.1 million for CY 2010. We
note that, as discussed in section V.A. of this proposed rule,
radiopharmaceuticals are considered drugs for pass-through purposes.
Therefore, we have included radiopharmaceuticals as drugs in our
proposed CY 2010 pass-through spending estimate.
In accordance with the comprehensive methodology described above in
this section, we estimate that total pass-through spending for the
device categories and the drugs and biologicals that are continuing for
pass-through payment into CY 2010 and those device categories, drugs,
and nonimplantable biologicals that first become eligible for pass-
through status during CY 2010, would be approximately $38 million,
which represents 0.12 percent of total OPPS projected payments for CY
2010. Because we estimate that pass-through spending in CY 2010 would
not amount to 2.0 percent of total projected OPPS CY 2010 program
spending, we are proposing to return 1.88 percent of the pass-through
pool to adjust the conversion factor, as we discuss in section II.B. of
this proposed rule.

VII. Proposed OPPS Payment for Brachytherapy Sources

A. Background

Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C)
of Public Law 108-173 (MMA), mandated the creation of additional groups
of covered OPD services that classify devices of brachytherapy
consisting of a seed or seeds (or radioactive source) (``brachytherapy
sources'') separately from other services or groups of services. The
additional groups must reflect the number, isotope, and radioactive
intensity of the brachytherapy sources furnished and include separate
groups for palladium-103 and iodine-125 sources.
Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of
Public Law 108-173, established payment for brachytherapy sources
furnished from January 1, 2004, through December 31, 2006, based on a
hospital's charges for each brachytherapy source furnished adjusted to
cost. Under section 1833(t)(16)(C) of the Act, charges for the
brachytherapy sources may not be used in determining any outlier
payments under the OPPS for that period of payment. Consistent with our
practice under the OPPS to exclude items paid at cost from budget
neutrality consideration, these items were excluded from budget
neutrality for that time period as well.
In our CY 2007 annual OPPS rulemaking, we proposed and finalized a
policy of prospective payment based on median costs for the 11
brachytherapy sources for which we had claims data. We based the
prospective payment rates on median costs for each source from our CY
2005 claims data (71 FR 68102 through 71 FR 68115).
Subsequent to publication of the CY 2007 OPPS/ASC final rule with
comment period, section 107 of Public

[[Page 35341]]

Law 109-432 (MIEA-TRHCA) amended section 1833 of the Act. Specifically,
section 107(a) of Public Law 109-432 amended section 1833(t)(16)(C) of
the Act by extending the payment period for brachytherapy sources based
on a hospital's charges adjusted to cost for 1 additional year, through
December 31, 2007. Therefore, we continued to pay for brachytherapy
sources based on charges adjusted to cost for CY 2007.
Section 107(b)(1) of Public Law 109-432 amended section
1833(t)(2)(H) of the Act by adding a requirement for the establishment
of separate payment groups for ``stranded and non-stranded''
brachytherapy sources furnished on or after July 1, 2007, in addition
to the existing requirements for separate payment groups based on the
number, isotope, and radioactive intensity of brachytherapy sources
under section 1833(t)(2)(H) of the Act. Section 107(b)(2) of Public Law
109-432 authorized the Secretary to implement this requirement by
``program instruction or otherwise.'' We note that public commenters
who responded to the CY 2007 OPPS/ASC proposed rule asserted that
stranded sources, which they described as embedded into the stranded
suture material and separated within the strand by material of an
absorbable nature at specified intervals, had greater production costs
than non-stranded sources (71 FR 68113 through 68114).
As a result of the statutory requirement to create separate groups
for stranded and non-stranded sources as of July 1, 2007, we
established several coding changes through a transmittal, effective
July 1, 2007 (Transmittal 1259, dated June 1, 2007). Based on public
comments received on the CY 2007 OPPS/ASC proposed rule and industry
input, we were aware of three sources available in stranded and non-
stranded forms at that time: Iodine-125; palladium-103; and cesium-131
(72 FR 42746). We created six new HCPCS codes to differentiate the
stranded and non-stranded versions of iodine, palladium, and cesium
sources.
In Transmittal 1259, we indicated that if we receive information
that any of the other sources now designated as non-stranded are also
FDA-approved and marketed as a stranded source, we would create a code
for the stranded source. We also established two ``Not Otherwise
Specified'' (NOS) codes for billing stranded and non-stranded sources
that are not yet known to us and for which we do not have source-
specific codes. We established HCPCS code C2698 (Brachytherapy source,
stranded, not otherwise specified, per source) for stranded NOS sources
and HCPCS code C2699 (Brachytherapy source, non-stranded, not otherwise
specified, per source) for non-stranded NOS sources.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66784), we again finalized prospective payment for brachytherapy
sources, beginning in CY 2008, with payment rates determined using the
CY 2006 claims-based costs per source for each brachytherapy source.
Consistent with our policy regarding APC payments made on a prospective
basis, we finalized the policy in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66686) to subject the cost of brachytherapy
sources to the outlier provision of section 1833(t)(5) of the Act, and
to also subject brachytherapy source payment weights to scaling for
purposes of budget neutrality. Therefore, brachytherapy sources could
receive outlier payments if the costs of furnishing brachytherapy
sources met the criteria for outlier payment. In addition, as noted in
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66683),
implementation of prospective payment for brachytherapy sources would
provide opportunities for hospitals to receive additional payments
under certain circumstances through the 7.1 percent rural SCH
adjustment.
For CY 2008, we also proposed and finalized a policy regarding
payment for new brachytherapy sources for which we have no claims data
(72 FR 42749 and 72 FR 66786, respectively). We indicated we would
assign future new HCPCS codes for new brachytherapy sources to their
own APCs, with prospective payment rates set based on our consideration
of external data and other relevant information regarding the expected
costs of the sources to hospitals. Finally, we proposed and finalized
our policy to discontinue using status indicator ``H'' (Pass-Through
Device Categories. Separate cost based pass-through payment; not
subject to co-payment) because we would not be paying charges adjusted
to costs after December 31, 2007, and instead adopted a policy of using
status indicator ``K'' (which includes, among others, ``Brachytherapy
Sources. Paid under OPPS; separate APC payment'') for CY 2008 (72 FR
42749 and 72 FR 66785, respectively).
After we finalized these proposals for CY 2008, section 106(a) of
Public Law 110-173 (MMSEA) extended the charges-adjusted-to-cost
payment methodology for brachytherapy sources for an additional 6
months, through June 30, 2008. Because our final CY 2008 policies paid
for brachytherapy sources at prospective rates based on median costs,
we were unable to implement these policies during this extension.
In the CY 2009 OPPS/ASC proposed rule (73 FR 41502), we again
proposed prospective payment rates for brachytherapy sources for CY
2009. We proposed to pay for brachytherapy sources at prospective rates
based on their source-specific median costs as calculated from CY 2007
claims data available for CY 2009 ratesetting. Subsequent to issuance
of the CY 2009 OPPS/ASC proposed rule, Public Law 110-275 (MIPPA) was
enacted on July 15, 2008. Section 142 of Public Law 110-275 amended
section 1833(t)(16)(C) of the Act, as amended by section 106(a) of
Public Law 110-173 (MMSEA), to further extend the payment period for
brachytherapy sources based on a hospital's charges adjusted to cost
from July 1, 2008, through December 31, 2009. Therefore, we continued
to pay for brachytherapy sources at charges adjusted to cost in CY 2008
from July 1 through December 31, and we maintained the assignment of
status indicator ``H'' to brachytherapy sources for claims processing
purposes in CY 2008. For CY 2009, we have continued to pay for all
separately payable brachytherapy sources based on a hospital's charges
adjusted to cost. Because brachytherapy sources are paid at charges
adjusted to cost, we did not subject them to outlier payments under
section 1833(t)(5) of the Act, or subject brachytherapy source payment
weights to scaling for purposes of budget neutrality. Moreover, during
the CY 2009 period of payment at charges adjusted to cost,
brachytherapy sources are not eligible for the 7.1 percent rural SCH
adjustment (as discussed in detail in section II.E. of this proposed
rule).
Furthermore, for CY 2009, we did not adopt the policy we
established in the CY 2008 OPPS/ASC final rule with comment period of
paying stranded and non-stranded NOS codes for brachytherapy sources,
C2698 and C2699, based on a rate equal to the lowest stranded or non-
stranded prospective payment for such sources. Also, for CY 2009, we
did not adopt the policy we established in the CY 2008 OPPS/ASC final
rule with comment period regarding payment for new brachytherapy
sources for which we have no claims data. NOS HCPCS codes C2698 and
C2699 and newly established specific source codes are paid at charges
adjusted to cost through December 31, 2009, consistent with section 142
of Public Law 110-275.
For CY 2009, we finalized our proposal to create new status
indicator ``U'' (Brachytherapy Sources. Paid

[[Page 35342]]

under OPPS; separate APC payment) for brachytherapy source payment,
instead of using status indicator ``K'' as proposed and finalized for
CY 2008 for prospective payment, or status indicator ``H,'' used during
the period of charges adjusted to cost payment. As noted in the CY 2009
OPPS/ASC final rule with comment period (73 FR 68670), assigning a
status indicator, such as status indicator ``K,'' to several types of
items and services with potentially differing payment policies added
unnecessary complexity to our operations. Status indicator ``U'' is
used only for brachytherapy sources, regardless of their specific
payment methodology for any period of time.
At the February 2009 meeting, the APC Panel recommended paying for
brachytherapy sources in CY 2010 using a prospective payment
methodology based on median costs from claims data. The APC Panel
reviewed CY 2007 and CY 2008 brachytherapy source median costs from
claims data and noted the stability of the data from year to year.

B. Proposed OPPS Payment Policy

Under section 142 of Public Law 110-275, payment for brachytherapy
sources is mandated at charges adjusted to cost only through CY 2009.
For CY 2010, we are proposing to adopt the general OPPS prospective
payment methodology for brachytherapy sources, consistent with section
1833(t)(2)(C) of the Act.
As we have previously stated (72 FR 66780 and 73 FR 41502), we
believe that adopting the general OPPS prospective payment methodology
for brachytherapy sources is appropriate for a number of reasons. The
general OPPS payment methodology uses median costs based on claims data
to set the relative payment weights for hospital outpatient services.
This payment methodology results in more consistent, predictable, and
equitable payment amounts per source across hospitals by eliminating
some of the extremely high and low payment amounts resulting from
payment based on hospitals' charges adjusted to cost. We believe the
OPPS prospective payment methodology would also provide hospitals with
incentives for efficiency in the provision of brachytherapy services to
Medicare beneficiaries. Moreover, this approach is consistent with our
payment methodology for the vast majority of items and services paid
under the OPPS.
We are proposing to use CY 2008 claims data for setting the CY 2010
payment rates for brachytherapy sources, as we are proposing for most
other items and services that will be paid under the CY 2010 OPPS. For
CY 2008, we have a full year of claims data for each of the separately
payable sources, including iodine, palladium, and cesium sources that
have stranded and non-stranded configurations. As indicated earlier,
the APC Panel, at the February 2009 meeting, recommended using the
median cost data for CY 2010 rates. Our proposal is consistent with the
APC Panel's recommendation.
We are proposing to adopt the other payment policies for
brachytherapy sources we finalized in previous final rules. We are
proposing to pay for the stranded and non-stranded NOS codes, HCPCS
codes C2698 and C2699, at a rate equal to the lowest stranded or non-
stranded prospective payment rate for such sources, respectively, on a
per source basis (as opposed, for example, to a per mci), which is
based on the policy we established in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66785). This proposed payment methodology
for NOS sources would provide payment to a hospital for new sources,
while encouraging interested parties to quickly bring new sources to
our attention so that specific coding and payment could be established.
We also are proposing to implement the policy we established in the
CY 2008 OPPS/ASC final rule with comment period (which was superseded
by section 142 of Pub. L. 110-275) regarding payment for new
brachytherapy sources for which we have no claims data, based on the
same reasons we discussed in that final rule with comment period (72 FR
66786). That policy is intended to enable us to assign future new HCPCS
codes for new brachytherapy sources to their own APCs, with prospective
payment rates set based on our consideration of external data and other
relevant information regarding the expected costs of the sources to
hospitals.
Consistent with our policy regarding APC payments made on a
prospective basis, we are proposing to subject brachytherapy sources to
outlier payments under section 1833(t)(5) of the Act, and also to
subject brachytherapy source payment weights to scaling for purposes of
budget neutrality. Therefore, brachytherapy sources could receive
outlier payments if the costs of furnishing brachytherapy sources meet
the criteria for outlier payment. In addition, as noted in the CY 2008
OPPS/ASC final rule with comment period (72 FR 66683), implementation
of prospective payments for brachytherapy sources would provide
opportunities for hospitals to receive additional payments in CY 2010
under certain circumstances through the 7.1 percent rural adjustment as
described in section II.E. of this proposed rule. Therefore, we are
proposing to pay for brachytherapy sources at prospective payment rates
based on their source-specific median costs for CY 2010. The separately
payable brachytherapy source HCPCS codes, long descriptors, APCs,
status indicators, and approximate median costs that we are proposing
for CY 2010 are presented in Table 32.

Table 32--Proposed Separately Payable Brachytherapy Sources for CY 2010
----------------------------------------------------------------------------------------------------------------
CY 2010
CY 2009 HCPCS code CY 2009 long descriptor Proposed CY Proposed CY 2010 SI approximate
2010 APC median cost
----------------------------------------------------------------------------------------------------------------
A9527........................ Iodine I-125, sodium 2632 U $38
iodide solution,
therapeutic, per
millicurie.
C1716........................ Brachytherapy source, 1716 U 42
non-stranded, Gold-
198, per source.
C1717........................ Brachytherapy source, 1717 U 220
non-stranded, High
Dose Rate Iridium-192,
per source.
C1719........................ Brachytherapy source, 1719 U 35
non-stranded, Non-High
Dose Rate Iridium-192,
per source.
C2616........................ Brachytherapy source, 2616 U 15,599
non-stranded, Yttrium-
90, per source.
C2634........................ Brachytherapy source, 2634 U 60
non-stranded, High
Activity, Iodine-125,
greater than 1.01 mCi
(NIST), per source.
C2635........................ Brachytherapy source, 2635 U 28
non-stranded, High
Activity, Palladium-
103, greater than 2.2
mCi (NIST), persource.
C2636........................ Brachytherapy linear 2636 U 19
source, non-stranded,
Palladium-103, per 1
MM.
C2638........................ Brachytherapy source, 2638 U 43
stranded, Iodine-125,
per source.
C2639........................ Brachytherapy source, 2639 U 36
non-stranded, Iodine-
125, per source.

[[Page 35343]]

C2640........................ Brachytherapy source, 2640 U 58
stranded, Palladium-
103, per source.
C2641........................ Brachytherapy source, 2641 U 58
non-stranded,
Palladium-103, per
source.
C2642........................ Brachytherapy source, 2642 U 100
stranded, Cesium-131,
per source.
C2643........................ Brachytherapy source, 2643 U 66
non-stranded, Cesium-
131, per source.
C2698........................ Brachytherapy source, 2698 U *43
stranded, not
otherwise specified,
per source.
C2699........................ Brachytherapy source, 2699 U *28
non-stranded, not
otherwise specified,
per source.
----------------------------------------------------------------------------------------------------------------
* Median cost is that of the lowest cost stranded or non-stranded source upon which CY 2010 payment for the NOS
HCPCS code would be based.

We continue to invite hospitals and other parties to submit
recommendations to us for new HCPCS codes to describe new brachytherapy
sources consisting of a radioactive isotope, including a detailed
rationale to support recommended new sources. Such recommendations
should be directed to the Division of Outpatient Care, Mail Stop C4-05-
17, Centers for Medicare and Medicaid Services, 7500 Security
Boulevard, Baltimore, MD 21244. We will continue to add new
brachytherapy source codes and descriptors to our systems for payment
on a quarterly basis.

VIII. Proposed OPPS Payment for Drug Administration Services

A. Background

In CY 2005, in response to the recommendations made by public
commenters and the hospital industry, OPPS transitioned from Level II
HCPCS Q-codes to the use of CPT codes for drug administration services.
These CPT codes allowed specific reporting of services regarding the
number of hours for an infusion and provided consistency in coding
between Medicare and other payers. (For a discussion regarding coding
and payment for drug administration services prior to CY 2005, we refer
readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR
66787).)
While hospitals began adopting CPT codes for outpatient drug
administration services in CY 2005, physicians paid under the MPFS were
using HCPCS G-codes in CY 2005 to report office-based drug
administration services. These G-codes were developed in anticipation
of substantial revisions to the drug administration CPT codes by the
CPT Editorial Panel that were expected for CY 2006.
In CY 2006, as anticipated, the CPT Editorial Panel revised its
coding structure for drug administration services and incorporated new
concepts such as initial, sequential, and concurrent services, into a
structure that previously distinguished services based on type of
administration (chemotherapy/nonchemotherapy), method of administration
(injection/infusion/push), and for infusion services, first hour and
additional hours. For CY 2006, we implemented the CY 2006 drug
administration CPT codes that did not reflect the concepts of initial,
sequential, and concurrent services under the OPPS, and we created
HCPCS C-codes that generally paralleled the CY 2005 CPT codes for
reporting these other services.
For CY 2007, as a result of public comments on the proposed rule
and feedback from the hospital community and the APC Panel, we
implemented the full set of CPT codes for drug administration services,
including codes incorporating the concepts of initial, sequential, and
concurrent services. In addition, the CY 2007 update process offered us
the first opportunity to consider data gathered from the use of CY 2005
CPT codes for purposes of ratesetting. For CY 2007, we used CY 2005
claims data to implement a six-level APC structure for drug
administration services. In CY 2008, we continued to use the full set
of CPT codes for drug administration services and continued our
assignment of drug administration services to this six-level APC
structure.
For CY 2009, we continued to allow hospitals to use the full set of
CPT codes for drug administration services but moved from a six-level
APC structure to a five-level APC structure. We note that, while there
were changes in the CPT numerical coding for nonchemotherapy drug
administration services in CY 2009, the existing CPT codes were only
renumbered and there were no significant changes to the code
descriptors themselves. As we discussed in the CY 2009 OPPS/ASC final
rule with comment period (73 FR 68672), the CY 2009 ratesetting process
afforded us the first opportunity to examine hospital claims data for
the full set of CPT codes that reflected the concepts of initial,
sequential, and concurrent services. For CY 2009, we performed our
standard annual OPPS review of the clinical and resource
characteristics of the drug administration CPT codes assigned to the
six-level CY 2008 APC structure based on the CY 2007 claims data
available for the CY 2009 OPPS/ASC proposed rule. As a result of our
hospital cost analysis and detailed clinical review, we adopted a five-
level APC structure for CY 2009 drug administration services to more
appropriately reflect their resource utilization in APCs that also
group clinically similar services. As we noted in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68671), these APCs generally
demonstrated the clinically expected and actually observed comparative
relationships between the median costs of different types of drug
administration services, including initial and additional services;
chemotherapy and other diagnostic, prophylactic, or therapeutic
services; injections and infusions; and simple and complex methods of
drug administration. In the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68673), we indicated our belief that the five-level APC
structure was the most appropriate structure based on updated hospital
claims data for the full range of CPT drug administration codes for the
CY 2009 OPPS/ASC final rule with comment period because the structure
resulted in payment groups with greater clinical and resource
homogeneity.

B. Proposed Coding and Payment for Drug Administration Services

For CY 2010, we are proposing to continue to use the full set of
CPT codes for drug administration services. In addition, as a part of
our standard annual review, we analyzed the assignments of drug
administration CPT codes into the five-level APC structure and, based
on the results of this review, are proposing to continue a five-level
APC structure for CY 2010. Further, we are proposing some minor
reconfigurations of the APCs as

[[Page 35344]]

described below to account for changes in HCPCS code-specific median
costs resulting from updated CY 2008 claims data and the most recent
cost report data, and the CY 2010 drug payment proposal that is
discussed in section V.B.3.b. of this proposed rule.
In the CY 2007 OPPS/ASC final rule with comment period (71 FR
68117), we explained that we expected CPT codes for additional hours of
infusion to be reported with CPT codes for the initial hour of drug
infusion. This would result in a substantial number of claims for drug
administration services that were unusable for ratesetting purposes
because multiple services would be present on the same bill and result
in essentially no correctly coded claims upon which to set the median
costs for the CPT codes describing additional hours of infusion. (We
refer readers to section II.A.1.b. of this proposed rule for a further
discussion of multiple bills and our ratesetting methodology.) In order
to use these claims for ratesetting purposes for both the initial drug
administration codes and the additional hour drug administration codes,
we adopted the policy of adding the additional hour drug administration
codes to the bypass list in order to create ``pseudo'' single claims
that would be useable for OPPS ratesetting purposes. After the creation
of these ``pseudo'' single claims, we applied the standard OPPS
methodology to calculate HCPCS code-specific median costs for these
initial and additional hour drug administration codes.
As we explained further in the CY 2007 OPPS/ASC final rule with
comment period, bypassing these additional hour drug administration CPT
codes and developing additional ``per unit'' claims provided a
methodology for calculating median costs for these previously packaged
drug administration services which attributed all of their line-item
cost data to their assigned APCs. However, we noted that this
methodology allocates all packaged costs on claims for drug
administration services to the associated initial hour of infusion
code. Because these additional hours of infusion codes were always
reported with other drug administration services, we expected that the
packaging related to additional hours of infusion would be
appropriately assigned to the initial drug administration service also
included on the same claim. While we stated our belief that there are
some packaged costs that are clinically related to the second and
subsequent hours of infusion, especially for infusions of packaged
drugs spanning several hours, we were not able to accurately assign
representative portions of packaged costs to multiple different
services due to the limitations of our claims data.
We indicated that while this methodology did not assign any
packaged costs to the additional hours of drug administration codes, we
believed this methodology took into account all of the packaging on
claims for drug administration services and provided a reasonable
framework for developing median costs for drug administration services
that were often provided in combination with one another.
Since this approach was first adopted for CY 2007, we have updated
and expanded the bypass methodology to reflect changing drug
administration HCPCS codes that are recognized under the OPPS. We
placed all of the add-on CPT codes for drug administration services,
including the sequential infusion and intravenous push codes, on the
bypass list in CY 2009 (73 FR 68513) in order to continue this
framework for transforming these otherwise unusable multiple bills into
``pseudo'' single claims that can be used for OPPS ratesetting
purposes.
Table 33 below displays the proposed configurations of the five
drug administration APCs for CY 2010. In proposing to reassign several
HCPCS codes for CY 2010, we have taken into consideration the resource
characteristics of the services, as reflected in their HCPCS code-
specific median costs and their clinical characteristics. We believe
the proposed APC configurations group drug administration services that
share sufficiently similar clinical and resource characteristics,
taking into consideration updated CY 2008 claims data and the most
recent cost report data and common clinical scenarios that have been
described to us.
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IX. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

Currently, hospitals report visit HCPCS codes to describe three
types of OPPS services: Clinic visits, emergency department visits, and
critical care services. For OPPS purposes, we recognize clinic visit
codes as those codes defined in the CPT codebook to report evaluation
and management (E/M) services provided in the physician's office or in
an outpatient or other ambulatory facility. We recognize emergency
department visit codes as those codes used to report E/M services
provided in the emergency department. Emergency department visit codes
consist of five CPT codes that apply to Type A emergency departments,
and five Level II HCPCS codes that apply to Type B emergency
departments. For OPPS purposes, we recognize critical care codes as
those CPT codes used by hospitals to report critical care services that
involve the ``direct delivery by a physician(s) of medical care for a
critically ill or critically injured patient,'' as defined by the CPT
codebook. In Transmittal 1139, Change Request 5438, dated December 22,
2006, we stated that, under the OPPS, the time that can be reported as
critical care is the time spent by a physician and/or hospital staff
engaged in active face-to-face critical care of a critically ill or
critically injured patient. Under the OPPS, we also recognize HCPCS
code G0390 (Trauma response team associated with hospital critical care
service) for the reporting of a trauma response in association with
critical care services.
We are proposing to continue recognizing these CPT and HCPCS codes
describing clinic visits, Type A and B emergency department visits,
critical care services, and trauma team activation provided in
association with critical care services for CY 2010. These codes are
listed below in Table 34.

Table 34--Proposed HCPCS Codes Used To Report Clinic and Emergency
Department Visits and Critical Care Services
------------------------------------------------------------------------
CY 2009 HCPCS code CY 2009 descriptor
------------------------------------------------------------------------
Clinic Visit HCPCS Codes
------------------------------------------------------------------------
99201.......................... Office or other outpatient visit for
the evaluation and management of a new
patient (Level 1).
99202.......................... Office or other outpatient visit for
the evaluation and management of a new
patient (Level 2).

[[Page 35350]]

99203.......................... Office or other outpatient visit for
the evaluation and management of a new
patient (Level 3).
99204.......................... Office or other outpatient visit for
the evaluation and management of a new
patient (Level 4).
99205.......................... Office or other outpatient visit for
the evaluation and management of a new
patient (Level 5).
99211.......................... Office or other outpatient visit for
the evaluation and management of an
established patient (Level 1).
99212.......................... Office or other outpatient visit for
the evaluation and management of an
established patient (Level 2).
99213.......................... Office or other outpatient visit for
the evaluation and management of an
established patient (Level 3).
99214.......................... Office or other outpatient visit for
the evaluation and management of an
established patient (Level 4).
99215.......................... Office or other outpatient visit for
the evaluation and management of an
established patient (Level 5).
------------------------------------------------------------------------
Emergency Department Visit HCPCS Codes
------------------------------------------------------------------------
99281.......................... Emergency department visit for the
evaluation and management of a patient
(Level 1).
99282.......................... Emergency department visit for the
evaluation and management of a patient
(Level 2).
99283.......................... Emergency department visit for the
evaluation and management of a patient
(Level 3).
99284.......................... Emergency department visit for the
evaluation and management of a patient
(Level 4).
99285.......................... Emergency department visit for the
evaluation and management of a patient
(Level 5).
G0380.......................... Type B emergency department visit
(Level 1).
G0381.......................... Type B emergency department visit
(Level 2).
G0382.......................... Type B emergency department visit
(Level 3).
G0383.......................... Type B emergency department visit
(Level 4).
G0384.......................... Type B emergency department visit
(Level 5).
------------------------------------------------------------------------
Critical Care Services HCPCS Codes
------------------------------------------------------------------------
99291.......................... Critical care, evaluation and
management of the critically ill or
critically injured patient; first 30-
74 minutes.
99292.......................... Critical care, evaluation and
management of the critically ill or
critically injured patient;
eachadditional 30 minutes.
G0390.......................... Trauma response associated with
hospital critical care service.
------------------------------------------------------------------------

During the February 2009 APC Panel meeting, the APC Panel
recommended that CMS present at the next APC Panel meeting an analysis
of the most common diagnoses and services associated with Type A and
Type B emergency department visits, including an analysis by hospital-
specific characteristics, as well as an analysis of CY 2008 claims data
for clinic and emergency department (Types A and B) visits. The APC
Panel also recommended that the work of the Visits and Observation
Subcommittee continue. We are adopting these recommendations and plan
to provide the requested data and analyses to the APC Panel at an
upcoming meeting.

B. Proposed Policies for Hospital Outpatient Visits

1. Clinic Visits: New and Established Patient Visits
As reflected in Table 34, hospitals use different CPT codes for
clinic visits based on whether the patient being treated is a new or an
established patient. Beginning in CY 2009, we refined the definitions
of new and established patients to reflect whether or not the patient
has been registered as an inpatient or outpatient of the hospital
within the past 3 years. A patient who has been registered as an
inpatient or outpatient of the hospital within the 3 years prior to a
visit would be considered to be an established patient for that visit,
while a patient who has not been registered as an inpatient or
outpatient of the hospital within the 3 years prior to a visit would be
considered to be a new patient for that visit. We refer readers to the
CY 2009 OPPS/ASC final rule with comment period (73 FR 68677 through
68680) for a full discussion of the refined definitions.
We continue to believe that defining new or established patient
status based on whether the patient has been registered as an inpatient
or outpatient of the hospital within the 3 years prior to a visit will
reduce hospitals' administrative burden associated with reporting
appropriate clinic visit CPT codes. For CY 2010, we are proposing to
continue recognizing the refined definitions of new and established
patients, and to continue our policy of calculating median costs for
clinic visits under the OPPS using historical hospital claims data. As
discussed in detail in section II.A.2.e.(1) of this proposed rule and
consistent with our CY 2009 policy, when calculating the median costs
for the clinic visit APCs (0604 through 0608), we would utilize our
methodology that excludes those claims for visits that are eligible for
payment through the extended assessment and management composite APC
8002 (Level I Extended Assessment and Management Composite). We believe
that this approach would continue to result in the most accurate cost
estimates for APCs 0604 through 0608 for CY 2010.
2. Emergency Department Visits
Since CY 2007, we have recognized two different types of emergency
departments for payment purposes under the OPPS--Type A emergency
departments and Type B emergency departments. As described in greater
detail below, by providing payment for two types of emergency
departments, we recognize for OPPS payment purposes both the CPT
definition of an emergency department, which requires the facility to
be available 24 hours, and the requirements for emergency departments
specified in the provisions of the Emergency Medical Treatment and
Labor Act (EMTALA) (Pub. L. 99-272), which do not stipulate 24 hour
availability but do specify other obligations for hospitals that offer
emergency services. For more detailed information on the EMTALA
provisions, we refer readers to the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68680).
In the CY 2007 OPPS/ASC final rule with comment period (71 FR
68132), we finalized the definition of Type A emergency departments to
distinguish them from Type B emergency

[[Page 35351]]

departments. A Type A emergency department must be available to provide
services 24 hours a day, 7 days a week, and meet one or both of the
following requirements related to the EMTALA definition of a dedicated
emergency department, specifically: (1) It is licensed by the State in
which it is located under the applicable State law as an emergency room
or emergency department; or (2) It is held out to the public (by name,
posted signs, advertising, or other means) as a place that provides
care for emergency medical conditions on an urgent basis without
requiring a previously scheduled appointment. For CY 2007 (71 FR
68140), we assigned the five CPT E/M emergency department visit codes
for services provided in Type A emergency departments to five created
Emergency Visit APCs, specifically APC 0609 (Level 1 Emergency Visits),
APC 0613 (Level 2 Emergency Visits), APC 0614 (Level 3 Emergency
Visits), APC 0615 (Level 4 Emergency Visits), and APC 0616 (Level 5
Emergency Visits). We defined a Type B emergency department as any
dedicated emergency department that incurred EMTALA obligations, but
did not meet the CPT definition of an emergency department. For
example, a hospital department or facility that may be characterized as
a Type B emergency department would meet the definition of a dedicated
emergency department, but may not be available 24 hours a day, 7 days a
week. Hospitals or facilities with such dedicated emergency departments
incur EMTALA obligations with respect to an individual who presents to
the department and requests, or has a request made on his or her
behalf, examination or treatment for a medical condition.
To determine whether visits to Type B emergency departments have
different resource costs than visits to either clinics or Type A
emergency departments, in the CY 2007 OPPS/ASC final rule with comment
period (71 FR 68132), we finalized a set of five HCPCS G-codes for use
by hospitals to report visits to all entities that meet the definition
of a dedicated emergency department under the EMTALA regulations but
that are not Type A emergency departments. These codes are called
``Type B emergency department visit codes.'' In the CY 2007 OPPS/ASC
final rule with comment period (71 FR 68132), we explained that these
new HCPCS G-codes would serve as a vehicle to capture median cost and
resource differences among visits provided by Type A emergency
departments, Type B emergency departments, and clinics. We stated that
the reporting of specific HCPCS G-codes for emergency department visits
provided in Type B emergency departments would permit us to
specifically collect and analyze the hospital resource costs of visits
to these facilities in order to determine if, in the future, a proposal
for an alternative payment policy might be warranted. We expected
hospitals to adjust their charges appropriately to reflect differences
in Type A and Type B emergency department visit costs.
As we noted in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68681), the CY 2007 claims data used for that rulemaking system
were from the first year of claims data available for analysis that
included hospital's cost data for these new Type B emergency department
HCPCS visit codes. Based on our analysis of the CY 2007 claims data, we
confirmed that the median costs of Type B emergency department visits
were less than the median costs of Type A emergency department visits
for all but the level 5 visit. In other words, the median costs from
the CY 2007 hospital claims represented real differences in the
hospital resource costs for the same level of visits in a Type A or
Type B emergency department. Therefore, for CY 2009, we adopted the
August 2008 APC Panel recommendation to assign levels 1 through 4 Type
B emergency department visits to their own APCs and to assign the level
5 Type B emergency department visit to the same APC as the level 5 Type
A emergency department visit.
We now have CY 2008 cost data for CY 2010 ratesetting for the Type
B emergency department HCPCS G-codes, representing a second year of
claims data for these Type B emergency department visit HCPCS codes.
Overall, we observe the same frequency and pattern of billing for the
type B emergency department visit codes as we did in the CY 2007 claims
data (72 FR 68681). In the CY 2008 claims available for this proposed
rule, we observe that 334 hospitals billed at least one Type B
emergency department visit code in CY 2008, with a total frequency of
visits provided in Type B emergency departments of approximately
210,000. All except 5 of the 334 hospitals reporting Type B emergency
department visits in CY 2007 also reported Type A emergency department
visits. Overall, many more hospitals (approximately 3,225 total
hospitals) reported Type A emergency department visits than Type B
emergency department visits. For comparison purposes, the total
frequency of visits provided in hospital outpatient clinics and Type A
emergency departments is approximately 14.8 million and 10.4 million,
respectively. The median costs for the Type B emergency department
visit HCPCS codes, as compared to the Type A emergency department visit
HCPCS codes and the clinic visit APC median costs, are shown in Table
35 below.

Table 35--Comparison of Proposed Median Costs for Clinic Visit APCs, Type B Emergency Department Visit HCPCS
Codes, and Type A Emergency Department Visit HCPCS Codes
----------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY
Proposed CY 2010 type B 2010 type A
2010 clinic emergency emergency
Visit level visit department visit
approximate approximate approximate
APC median HCPCS code HCPCS code
cost median cost median cost
--------------------------------------------------------------------------------------------------
Level 1........................................... $55 $46 $54
Level 2........................................... 71 65 89
Level 3........................................... 87 95 141
Level 4........................................... 112 132 227
Level 5........................................... 164 251 334
----------------------------------------------------------------------------------------------------------------

[[Page 35352]]

As demonstrated in Table 35, the median costs of the lowest level
visits based on the CY 2008 claims data are similar across all
settings, including clinic and Type A and B emergency departments.
Visit levels 2 and 3 share similar resource costs in the clinic and
Type B emergency department settings, while visits provided in Type A
emergency departments have higher estimated resource costs at these
levels. The level 4 clinic visit APC is less resource-intensive than
the level 4 Type B emergency department visit, which is similarly less
resource-intensive than the level 4 Type A emergency department visit.
Similarly, the level 5 clinic visit APC is less resource-intensive than
the level 5 Type B emergency department visit, which is less resource-
intensive than the level 5 Type A emergency department visit.
This pattern of relative cost differences between Type A and Type B
emergency department visits is largely consistent with the
distributions we observed in the CY 2007 data, with the exception that,
in the CY 2008 claims data, we observe a relatively lower HCPCS code-
specific median cost associated with level 5 Type B emergency
department visits compared to the HCPCS-code specific median cost of
level 5 Type A emergency department visits. In contrast, in our CY 2007
claims data we observed similar resource costs for level 5 Type A and
Type B emergency department visits. In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68683), we hypothesized that for the highest
level of emergency department visits, the resources required would be
the same in both emergency department settings. Now that more data on
Type B emergency department visits are available, and hospitals have
more experience billing for Type B services, we observe differences in
the resources for the highest level emergency department visits to Type
A and Type B emergency departments. We shared this cost and frequency
data with the Visits and Observation Subcommittee of the APC Panel
during the February 2009 meeting.
As noted in the CY 2009 OPPS/ASC final rule with comment period (73
FR 68683), we performed data analyses regarding the costs of Type A and
Type B emergency department visits in addition to our standard median
cost calculations. These analyses included studying the emergency
department visit costs of hospitals that billed Type B emergency
department visits only, analyzing the cost data for hospitals that
billed both Type A and Type B emergency department visits, and
evaluating whether there were differences in the costs of Type A and
Type B emergency department visits by Medicare contractor to ascertain
whether there were differences in how Medicare contractors have
interpreted our Type A and Type B emergency department visit policies.
In the CY 2007 data, we observed that hospitals that billed both Type A
and Type B emergency department visits had lower costs for Type B
emergency department visits than Type A emergency department visits at
all levels except for the level 5 Type B emergency department visit.
Our analyses of differences in Type A and Type B emergency department
visit median costs by Medicare contractor did not identify concerning
differences. Overall, we observed a distribution of visit costs as
expected, including generally lower Type B emergency department visit
costs in comparison with Type A emergency department visits, and
increasing costs for Type B emergency department visits from levels 1
through 5, similar to the cost increases we observed from levels 1
through 5 for Type A emergency department visits. We did observe a few
contractors with more unusual cost distributions for Type B emergency
department visits, including relatively similar or higher costs across
levels 1 through 5 for Type B emergency department visits. For CY 2009,
we concluded that we had no reason to believe that the cost differences
between Type A and Type B emergency department visits evident in our
aggregate OPPS claims data resulted from varying contractor criteria as
to what defines Type A and Type B emergency departments. We also
committed to monitoring these distributions in future years.
For this CY 2010 proposed rule, we repeated some of our analyses of
Type B emergency department visits using updated CY 2008 claims data to
confirm that Type B emergency department visit costs are generally
lower than Type A emergency department visit costs and to again assess
whether there are systematic differences in the costs of Type A and
Type B emergency department visits by Medicare contractor. As noted
above, we observed that hospitals that billed both Type A and Type B
emergency department visits had lower costs for Type B emergency
department visits than Type A emergency department visits, including
level 5 Type B emergency department visits, which is a change from the
CY 2007 data. We further evaluated differences in the costs of Type A
and Type B emergency department visits by Medicare contractor. Based on
our analysis of CY 2008 claims, we observed similar patterns in HCPCS
code-specific median cost differences between Type A and Type B
emergency department visits as observed in the CY 2007 claims.
Hospitals in the jurisdictions of most Medicare contractors have
generally lower Type B emergency department visit costs in comparison
with Type A emergency department visits, as well as increasing costs
for Type B emergency department visits from levels 1 through 5, similar
to the cost increases we observed from levels 1 through 5 for Type A
emergency department visits.
Like last year, we also observed a few contractors with more
unusual cost distributions for Type B emergency department visits,
including those with Type B emergency department visit costs that are
relatively similar or higher than Type A emergency department visit
costs across levels 1 through 5. Some of these Medicare contractors are
the same contractors that we noted had more unusual relative cost
distributions for Type B emergency department visits relative to Type A
emergency department visit costs in the CY 2007 claims data. In order
to confirm that these Medicare contractors are applying our policies
consistently, we examined the HCPCS code-specific median costs for Type
A and Type B emergency department visits for the providers in each
Medicare contractor's area. For almost all of these Medicare
contractors, we see one or two providers with relatively high Type B
emergency department visit costs relative to Type B emergency
department visit costs nationwide or with Type B emergency department
visit costs that are relatively similar to or higher than Type A
emergency department visit costs. These one or two providers have
sufficient visit volumes to influence the calculation of the HCPCS
code-specific median costs for their respective Medicare contractors.
In summary, our further analyses of Type B emergency department
visit costs for this CY 2010 OPPS/ASC proposed rule confirm that the
median costs of Type B emergency department visits are less than the
median costs of Type A emergency department visits across all levels.
Our further analyses also confirm that there are no significant
differences in how Medicare contractors have interpreted our Type A and
Type B emergency department visit reporting policies. The median costs
from CY 2008 hospital claims represent real differences in the hospital
resource costs for the same level of visit in a

[[Page 35353]]

Type A or Type B emergency department.
Therefore, we are proposing to pay for Type B emergency department
visits in CY 2010 consistent with their median costs. Specifically, we
are proposing to pay levels 1 through 4 Type B emergency department
visits through four levels of APCs: APC 0626 (Level 1 Type B Emergency
Visits), APC 0627 (Level 2 Type B Emergency Visits), APC 0628 (Level 3
Type B Emergency Visits), and APC 0629 (Level 4 Type B Emergency
Visits). In addition, we are proposing to create new APC 0630 (Level 5
Type B Emergency Visits) and pay level 5 Type B emergency department
visits through this new APC. We are proposing to assign HCPCS codes
G0380, G0381, G0382, G0383, and G0384 (the levels 1, 2, 3, 4, and 5
Type B emergency department visit Level II HCPCS codes) to APCs 0626,
0627, 0628, 0629, and 0630, respectively, for CY 2010. These HCPCS
codes would be the only HCPCS codes assigned to these APCs.
Furthermore, to distinguish new APC 0630 from the APC for the level 5
Type A emergency visits, we are proposing to modify the title of the
current level 5 Type A emergency visit APC to incorporate Type A in the
title. Therefore, the proposed revised title of APC 0616 would be
``Level 5 Type A Emergency Visits.''
This proposal to pay for Type B emergency department visits based
on their median costs is consistent with the APC Panel's March 2008
recommendation for payment of Type B emergency department visits. As
part of their recommended configuration of APCs for Type B emergency
department visits in CY2009, the APC Panel also said that, given the
limited CY 2007 claims data available for Type B emergency department
visits, CMS should reconsider payment adjustments as more claims data
become available. In general, the APC Panel's recommended CY 2009
configuration paid appropriately for each level of the Type B emergency
department visits, based on the resource costs of the Type B emergency
department visits that are reflected in claims data. We believe our
proposed CY 2010 configuration also would pay appropriately for each
level of Type B emergency department visits based on estimated resource
costs from more recent claims data.
Table 36 below displays the proposed APC median costs for each
level of Type B emergency department visit under our proposed CY 2010
configuration. As more cost data become available and hospitals gain
additional experience with reporting visits to Type B emergency
departments, we will continue to regularly reevaluate patterns of Type
A and Type B emergency department visit reporting to ensure that
hospitals continue to bill appropriately and differentially for these
services. In addition, according to our usual practice, we will examine
trends in cost data over time and consider proposing alternative
emergency department visit APC configurations in the future if updated
data indicate that changes to the payment structure should be
considered.

Table 36--Proposed CY 2010 Type B Emergency Department Visit APC
Assignments and Median Costs
------------------------------------------------------------------------
Proposed CY
Proposed CY 2010
Type B emergency department level 2010 APC approximate
assignment APC median
cost
------------------------------------------------------------------------
Level 1................................. 0626 $46
Level 2................................. 0627 65
Level 3................................. 0628 95
Level 4................................. 0629 132
Level 5................................. 0630 251
------------------------------------------------------------------------

3. Visit Reporting Guidelines
Since April 7, 2000, we have instructed hospitals to report
facility resources for clinic and emergency department hospital
outpatient visits using the CPT E/M codes and to develop internal
hospital guidelines for reporting the appropriate visit level. Because
a national set of hospital-specific codes and guidelines do not
currently exist, we have advised hospitals that each hospital's
internal guidelines that determine the levels of clinic and emergency
department visits to be reported should follow the intent of the CPT
code descriptors, in that the guidelines should be designed to
reasonably relate the intensity of hospital resources to the different
levels of effort represented by the codes.
As noted in detail in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66802 through 66805), we observed a normal and stable
distribution of clinic and emergency department visit levels in
hospital claims over the past several years. The data indicated that
hospitals, on average, were billing all five levels of visit codes with
varying frequency, in a consistent pattern over time. Overall, both the
clinic and emergency department visit distributions indicated that
hospitals were billing consistently over time and in a manner that
distinguished between visit levels, resulting in relatively normal
distributions nationally for the OPPS, as well as for specific classes
of hospitals. The results of these analyses were generally consistent
with our understanding of the clinical and resource characteristics of
different levels of hospital outpatient clinic and emergency department
visits. In the CY 2008 OPPS/ASC proposed rule (72 FR 42764 through
42765), we specifically invited public comment as to whether a pressing
need for national guidelines continued at this point in the maturation
of the OPPS, or if the current system where hospitals create and apply
their own internal guidelines to report visits was currently more
practical and appropriately flexible for hospitals. We explained that
although we have reiterated our goal since CY 2000 of creating national
guidelines, this complex undertaking for these important and common
hospital services was proving more challenging than we initially
thought as we received new and expanded information from the public on
current hospital reporting practices that led to appropriate payment
for the hospital resources associated with clinic and emergency
department visits. We stated our belief that many hospitals had worked
diligently and carefully to develop and implement their own internal
guidelines that reflected the scope and types of services they provided
throughout the hospital outpatient system. Based on public comments, as
well as our own knowledge of how clinics operate, it seemed unlikely
that one set of straightforward national guidelines could apply to the
reporting of visits in all hospitals and specialty clinics. In

[[Page 35354]]

addition, the stable distribution of clinic and emergency department
visits reported under the OPPS over the past several years indicated
that hospitals, both nationally in the aggregate and grouped by
specific hospital classes, were generally billing in an appropriate and
consistent manner as we would expect in a system that accurately
distinguished among different levels of service based on the associated
hospital resources.
Therefore, we did not propose to implement national visit
guidelines for clinic or emergency department visits for CY 2008. Since
publication of the CY 2008 OPPS/ASC final rule with comment period, we
have again examined the distribution of clinic and Type A emergency
department visit levels based upon updated CY 2008 claims data
available for this proposed rule and confirmed that we continue to
observe a normal and stable distribution of clinic and emergency
department visit levels in hospital claims. We continue to believe
that, based on the use of their own internal guidelines, hospitals are
generally billing in an appropriate and consistent manner that
distinguishes among different levels of visits based on their required
hospital resources. As a result of our updated analyses, we are
encouraging hospitals to continue to report visits during CY 2010
according to their own internal hospital guidelines. In the absence of
national guidelines, we will continue to regularly reevaluate patterns
of hospital outpatient visit reporting at varying levels of
disaggregation below the national level to ensure that hospitals
continue to bill appropriately and differentially for these services.
As originally noted in detail in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66648), we continue to expect that hospitals will
not purposely change their visit guidelines or otherwise upcode clinic
and emergency department visits for purposes of composite Extended
Assessment & Management Composite APC payment.
In addition, we note our continued expectation that hospitals'
internal guidelines will comport with the principles listed in the CY
2008 OPPS/ASC final rule with comment period (72 FR 66805). We
encourage hospitals with more specific questions related to the
creation of internal guidelines to contact their local fiscal
intermediary or MAC.
We appreciate all of the comments we have received in the past from
the public on visit guidelines, and we encourage continued submission
of comments throughout the year that would assist us and other
stakeholders interested in the development of national guidelines.
Until national guidelines are established, hospitals should continue
using their own internal guidelines to determine the appropriate
reporting of different levels of clinic and emergency department
visits. While we understand the interest of some hospitals in having us
move quickly to promulgate national guidelines that would ensure
standardized reporting of hospital outpatient visit levels, we believe
that the issues and concerns identified both by us and others that may
arise are important and require serious consideration prior to the
implementation of national guidelines. Because of our commitment to
provide hospitals with 6 to 12 months notice prior to implementation of
national guidelines, we would not implement national guidelines prior
to CY 2011. Our goal is to ensure that OPPS national or hospital-
specific visit guidelines continue to facilitate consistent and
accurate reporting of hospital outpatient visits in a manner that is
resource-based and supportive of appropriate OPPS payments for the
efficient and effective provision of visits in hospital outpatient
settings.

X. Proposed Payment for Partial Hospitalization Services

A. Background

Partial hospitalization is an intensive outpatient program of
psychiatric services provided to patients as an alternative to
inpatient psychiatric care for individuals who have an acute mental
illness. Section 1833(t)(1)(B)(i) of the Act provides the Secretary
with the authority to designate the HOPD services to be covered under
the OPPS. The Medicare regulations at Sec. 419.21 that implement this
provision specify that payments under the OPPS will be made for partial
hospitalization services furnished by community mental health centers
(CMHCs) as well as those services furnished by hospitals to their
outpatients. Section 1833(t)(2)(C) of the Act requires the Secretary to
establish relative payment weights for covered HOPD services (and any
APCs) based on median (or mean, at the election of the Secretary)
hospital costs using data on claims from 1996 and data from the most
recent available cost reports. Because a day of care is the unit that
defines the structure and scheduling of partial hospitalization
services, we established a per diem payment methodology for the partial
hospitalization program (PHP) APC, effective for services furnished on
or after August 1, 2000 (65 FR 18452).
Historically, the median per diem cost for CMHCs greatly exceeded
the median per diem cost for hospital-based PHPs and fluctuated
significantly from year to year, while the median per diem cost for
hospital-based PHPs remained relatively constant ($200-$225). We
believe that CMHCs may have increased and decreased their charges in
response to Medicare payment policies. As discussed in more detail in
section X.B. of this proposed rule and in the CY 2004 OPPS final rule
with comment period (68 FR 63470), we also believe that some CMHCs
manipulated their charges in order to inappropriately receive outlier
payments.
In developing the CY 2008 update, we began an effort to strengthen
the PHP benefit through extensive data analysis and policy and payment
changes. We began this effort as a result of the significant
fluctuations and declines in the CMHC PHP median per diem costs (we
refer readers to the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66670 through 66676) for a detailed discussion). The analysis
included an examination of revenue-to-cost center mapping, refinements
to the per diem methodology, and an in-depth analysis of the number of
units of service furnished per day.
For CY 2008, we proposed and finalized two refinements to the
methodology for computing the PHP median. Although these refinements
did not appreciably impact the median per diem cost, we believe the
refinements resulted in more accurate per diem medians. First, we
remapped 10 revenue codes that are common among hospital-based PHP
claims to the most appropriate cost centers (72 FR 66671 through
66672). Typically, we map the revenue code to the most specific cost
center with a provider-specific CCR. However, if the hospital does not
have a CCR for any of the listed cost centers, we consider the overall
hospital CCR as the default. For partial hospitalization services, the
revenue center codes billed by hospital-based PHPs are mapped to
Primary Cost Center 3550 (Psychiatric/Psychological Services). If that
cost center is not available, they are mapped to the Secondary Cost
Center 6000 (Clinic). We use the overall facility CCR for CMHCs because
PHPs are CMHCs only Medicare cost, and CMHCs do not have the same cost
structure as hospitals. Therefore, for CMHCs, we use the CCR from the
outpatient provider-specific file. A closer examination of the revenue-
code-to-cost-center crosswalk revealed that 10 of the revenue center
codes did not map to a Primary Cost Center 3550 or a Secondary Cost
Center of 6000. We believe this occurred

[[Page 35355]]

because these codes may also be used for services that are not
furnished in a PHP or services that are not psychiatric related (for
example, occupational therapy). As discussed in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66671 through 66672), we updated
this analysis using more recent PHP claims and CCR data. After
remapping codes, we computed an alternate cost for each line item of
the hospital-based PHP claims. Remapping those 10 revenue center codes
reduced the number of lines that defaulted to the hospitals' overall
CCR and thus created a more accurate estimate of PHP per diem costs for
a significant number of claims.
Secondly, we refined our methodology for calculating PHP per diem
costs by computing the median using a per day methodology. We developed
an alternate method to determine median cost by computing a separate
per diem cost for each day rather than for each claim. When there were
multiple days of care entered on a claim, a unique cost was computed
for each day of care. We only assigned costs for line items on days
when a payment was made. All of these costs were then arrayed from
lowest to highest, and the middle value of the array was considered the
median per diem cost. A complete discussion of the refined method of
computing the PHP median cost can be found in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66672).
After completing extensive data analysis, we continued to observe a
clear downward trend in the median per diem cost based on the CY 2006
data used to develop the CY 2008 OPPS/ASC final rule with comment
period. The analysis revealed that fewer PHP services were being
provided in a given day. We believed, and continue to believe, that the
data reflects the level of cost for the type of services that were
being provided and continue to be provided.
Because partial hospitalization is provided in lieu of inpatient
care, it should be a highly structured and clinically intensive
program, usually lasting most of the day. In order to improve the level
of services furnished in a PHP day, in the CY 2008 OPPS/ASC final rule
with comment period (72 FR 66673), we reiterated our expectation that
hospitals and CMHCs must provide a comprehensive program consistent
with the statutory intent. We also indicated our intent to explore
changes to our regulations and claims processing systems in order to
deny payment for low intensity days.
For CY 2009, we implemented several regulatory, policy, and payment
changes, including a two-tiered payment approach for PHP services under
which we would pay one amount for days with 3 units of service (APC
0172 (Level I Partial Hospitalization) and a higher amount for days
with 4 or more units of service (APC 0173 (Level II Partial
Hospitalization). We implemented this payment approach to reflect the
lower costs of a less intensive day while still paying programs that
provide 4 or more units of service an amount that recognizes that they
have provided a more intensive day of care. In this way, we can pay
appropriately for the level of care provided while still allowing PHPs
necessary scheduling flexibility (73 FR 68689). As we reiterated in the
CY 2009 OPPS/ASC final rule with comment period (73 FR 68688), it was
never our intention that days with only 3 units of service become the
number of services provided in a typical day. Our intention was to
provide payment to cover days that consisted of 3 units of service only
in certain limited circumstances. For example, we believe 3 units of
service a day may be appropriate when a patient is transitioning
towards discharge or when a patient is required to leave the PHP early
for the day due to an unexpected medical appointment. As we noted in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68689),
although we do not expect Level I days to be frequent, we recognize
that there are times when a patient may need a less intensive day. We
refer readers to section X.C.2. of the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68688 through 68695) for a full discussion of
this requirement.
For CY 2009, we proposed to calculate the payment rates for PHP
APCs 0172 and 0173 using both hospital-based and CMHC PHP data (73 FR
41513). After consideration of the public comments received on our
proposal, we decided to base payment rates for the two-tiered approach
on hospital-based PHP data only. As we explained in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68689), using the CMHC data
for CY 2009 would have significantly reduced the CY 2009 PHP rates and
negatively impacted hospital-based PHPs. Because hospital-based PHPs
are geographically diverse, whereas CMHCs are located in only a few
States, we were concerned that a significant drop in the rate could
result in hospital-based PHPs closing and lead to possible beneficiary
access to care problems. To calculate the CY 2009 PHP payment rate for
APC 0172, we used the median per diem cost for hospital-based PHP days
with 3 units of service to derive a PHP payment rate of $157. For APC
0173, we used the median per diem cost for hospital-based PHP days with
4 or more units of service to derive a CY 2009 PHP payment rate of
$200.
In addition, for CY 2009, we finalized our policy to deny payment
for any PHP claims for days when fewer than 3 units of therapeutic
services are provided. As noted in the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68694), we believe that 3 units of service should
be the minimum number of services allowed in a PHP day because a day
with 1 or 2 units of service does not meet the statutory intent of a
PHP program. Three units of service are a minimum threshold that
permits unforeseen circumstances, such as medical appointments, while
allowing payment, but maintains the integrity of the PHP benefit.
Further, for CY 2009, we revised the regulations at Sec. 410.43 to
codify existing basic PHP patient eligibility criteria and added a
reference to current physician certification requirements at Sec.
424.24. We believed these changes would help strengthen the PHP benefit
by conforming our regulations to our longstanding policy (73 FR 68694
through 68695). Specifically, we revised Sec. 410.43 to add a
reference to existing regulations at Sec. 424.24(e) that require that
PHP services be furnished pursuant to a physician certification and
plan of care. While the requirements at Sec. 424.24(e) are not new, we
included the reference in Sec. 410.43 to provide a more complete
description of our expectations for PHP programs in one regulatory
section. We also revised Sec. 410.43 to add the following patient
eligibility criteria and reiterate that PHPs are intended for patients
who--(1) require a minimum of 20 hours per week of therapeutic services
as evidenced in their plan of care; (2) are likely to benefit from a
coordinated program of services and require more than isolated sessions
of outpatient treatment; (3) do not require 24-hour care; (4) have an
adequate support system while not actively engaged in the program; (5)
have a mental health diagnosis; (6) are not judged to be dangerous to
self or others; and (7) have the cognitive and emotional ability to
participate in the active treatment process and can tolerate the
intensity of the PHP. We refer readers to section X.C.2. of the CY 2009
OPPS/ASC final rule with comment period (73 FR 68694 through 68695) for
a full discussion of this requirement.

[[Page 35356]]

Lastly, in the CY 2009 OPPS/ASC final rule with comment period (73
FR 68695 through 68697), we revised the partial hospitalization benefit
to include several coding updates. We removed three PHP billable codes
(CPT codes 90899 (Unlisted psychiatric service or procedure), 90853
(Group psychotherapy other than of a multiple-family group), and 90857
(Interactive group psychotherapy)), and created two new timed HCPCS
codes (GO410 (Group psychotherapy other than of a multiple- family
group, in a partial hospitalization setting, approximately 45 to 50
minutes) and G0411(Interactive group psychotherapy in a partial
hospitalization setting, approximately 45 to 50 minutes)). The
elimination of CPT code 90899 was a result of our concerns about the
type of services that may be billed using an unlisted CPT code when a
more appropriate code may be available that better describes the
services for which PHP payment may be made. The decision to eliminate
the two group therapy CPT codes (90853 and 90857) and replace them with
two new parallel timed HCPCs G-codes (G-0410 and G-0411) was based on
the need for consistency. As most of the current PHP codes already
include time estimates, we wanted to maintain consistency with the
existing HCPCS codes used in the PHP by applying a time descriptor to
the group therapy codes. In addition to these coding updates, we also
decided to eliminate CPT code 90849 (multi-family group psychotherapy)
as a billable PHP code because we believed that CPT code 90849 focuses
the service on the needs of the family and not specifically on the
needs of the patient, which is not consistent with the intent of the
statute that treatment in a PHP be focused on the patient's condition
(73 FR 68696).

B. Proposed PHP APC Update for CY 2010

For CY 2010, we used CY 2008 claims data and computed median per
diem costs in the following three categories: (1) All days; (2) days
with 3 units of service; and (3) days with 4 or more units of service.
These updated median per diem costs were computed separately for CMHCs
and hospital-based PHPs and are shown in the table below:

------------------------------------------------------------------------
Hospital-
CMHCs based PHPs Combined
------------------------------------------------------------------------
All Days......................... $140 $200 $144
Days with 3 units of service..... 129 149 131
Days with 4 units or more units 173 213 175
of service......................
------------------------------------------------------------------------

Using CY 2008 data and the refined methodology for computing PHP
per diem costs that we adopted in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66672), we computed the median per diem cost from
all claims of $144. The data indicate that CMHCs continue to provide
far fewer days with 4 or more units of service (33 percent compared to
70 percent for hospital-based PHPs) and that the CMHC median per diem
cost for 4 or more units of service ($173) is substantially lower than
the comparable data from hospital-based PHPs ($213). The median for
claims containing 4 or more units of service for all PHP claims,
regardless of site of service, is $175. Medians for claims containing 3
units of service are $129 for CMHCs, $149 for hospital-based PHPs, and
$131 for all PHP claims, regardless of site of service.
For CY 2010, we are proposing to continue to use the two-tiered
payment approach for PHP services established in CY 2009. As mentioned
previously, this payment approach reflects the lower costs of a less
intensive day while still recognizing the higher costs associated with
more intensive days. This payment approach is consistent with our
intent that the PHP benefit be a comprehensive program in keeping with
the statutory intent while still providing flexibility in recognizing
the need for lower intensive days in certain circumstances.
In addition, for CY 2010, we are proposing to use only hospital-
based PHP data to develop the two PHP APC per diem payment rates for
the following reasons. If we used combined CMHC and hospital-based PHP
data to develop the rates, the two per diem payment rates would be
reduced by approximately $26 for APC 0172 and $25 for APC 0173. We are
concerned about further reducing both PHP APC per diem payment rates
without knowing the impact of the policy and payment changes we made in
CY 2009. Because there is a 2-year delay between data collection and
rulemaking, the changes we made in CY 2009 will not be reflected in the
claims data until next year when we are developing the update for CY
2011. As noted above, we believe the changes we made last year will
strengthen the integrity of the benefit while at the same time
positively impact the PHP data for both CMHC and hospital-based PHP
providers, thus causing the medians to increase over time as the number
of services provided in a given day of partial hospitalization
increases. It is for these reasons that we are proposing to use only
hospital-based PHP data to develop the two proposed APC payment rates
for PHP for CY 2010: one for days with 3 units of service and one for
days with 4 or more units of service. The proposed two APCs medians for
PHP are as follows:

------------------------------------------------------------------------
Proposed
Proposed APC Group title median Per
diem rate
------------------------------------------------------------------------
0172........................... Level I Partial $149
Hospitalization (3
services).
0173........................... Level II Partial 213
Hospitalization (4 or
more services).
------------------------------------------------------------------------

Although we are proposing to use only hospital-based PHP data to
develop the two proposed PHP APC per diem payment rates for CY 2010, we
are requesting public comment about the possibility of using both CMHC
and hospital-based PHP data to develop the PHP payment rates for CY
2010. We are requesting public comments because we have concerns about
not using data from both PHP provider types. Both CMHCs and hospital-
based PHPs are paid the

[[Page 35357]]

same two APC per diem payment rates. Therefore, we believe that both
provider types should have their data utilized in the development of
the payment rates. However, as noted above, we have concerns about
further reducing the two payment rates without knowing the impact of
the policy and payment changes made in CY 2009.
In summary, for CY 2010, we are proposing to use only hospital-
based PHP data for developing the two proposed PHP APC per diem payment
rates, although we are requesting public comments on the possibility of
using both CMHC and hospital-based data for the final rule.

C. Proposed Separate Threshold for Outlier Payments to CMHCs

In the November 7, 2003 final rule with comment period (68 FR
63469), we indicated that, given the difference in PHP charges between
hospitals and CMHCs, we did not believe it was appropriate to make
outlier payments to CMHCs using the outlier percentage target amount
and threshold established for hospitals. Prior to that time, there was
a significant difference in the amount of outlier payments made to
hospitals and CMHCs for PHP services. In addition, further analysis
indicated that using the same OPPS outlier threshold for both hospitals
and CMHCs did not limit outlier payments to high cost cases and
resulted in excessive outlier payments to CMHCs. Therefore, beginning
in CY 2004, we established a separate outlier threshold for CMHCs. The
separate outlier threshold for CMHCs has resulted in more commensurate
outlier payments.
In CY 2004, the separate outlier threshold for CMHCs resulted in
$1.8 million in outlier payments to CMHCs. In CY 2005, the separate
outlier threshold for CMHCs resulted in $0.5 million in outlier
payments to CMHCs. In contrast, in CY 2003, more than $30 million was
paid to CMHCs in outlier payments. We believe this difference in
outlier payments indicates that the separate outlier threshold for
CMHCs has been successful in keeping outlier payments to CMHCs in line
with the percentage of OPPS payments made to CMHCs. The table below
includes a listing of the outlier target amounts and the portion of the
target amount allocated to CMHCs for PHP outliers for CYs 2004 through
2009.

------------------------------------------------------------------------
Portion of
target amount
Outlier target allocated to
Year amount CMHCs for PHP
percentage outliers (in
Percent)
------------------------------------------------------------------------
CY 2004.............................. 2.0 0.5
CY 2005.............................. 2.0 0.6
CY 2006.............................. 1.0 0.6
CY 2007.............................. 1.0 0.15
CY 2008.............................. 1.0 0.02
CY 2009.............................. 1.0 0.12
------------------------------------------------------------------------

As noted in section II.F. of this proposed rule, for CY 2010, we
are proposing to continue our policy of identifying 1.0 percent of the
aggregate total payments under the OPPS for outlier payments. We are
proposing that a portion of that 1.0 percent, an amount equal to 0.02
percent of outlier payments (or 0.0002 percent of total OPPS payments),
would be allocated to CMHCs for PHP outliers. As discussed in section
II.F. of this proposed rule, we are proposing to set a dollar threshold
in addition to an APC multiplier threshold for OPPS outlier payments.
However, because the PHP APC is the only APC for which CMHCs may
receive payment under the OPPS, we would not expect to redirect outlier
payments by imposing a dollar threshold. Therefore, we are not
proposing to set a dollar threshold for CMHC outliers. As noted in
section II.F. of this proposed rule, we are proposing to set the
outlier threshold for CMHCs for CY 2010 at 3.40 times the APC payment
amount and the CY 2010 outlier payment percentage applicable to costs
in excess of the threshold at 50 percent. Specifically, we are
proposing that if a CMHC's cost for partial hospitalization services,
paid under either APC 0172 or APC 0173, exceeds 3.40 times the payment
for APC 0173, the outlier payment would be calculated as 50 percent of
the amount by which the cost exceeds 3.40 times the APC 0173 payment
rate.

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

A. Background

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

[[Page 35358]]

In the November 1, 2002 final rule with comment period (67 FR
66741), we added the following criteria for use in reviewing procedures
to determine whether they should be removed from the inpatient list and
assigned to an APC group for payment under the OPPS:
A determination is made that the procedure is being
performed in numerous hospitals on an outpatient basis; or
A determination is made that the procedure can be
appropriately and safely performed in an ASC, and is on the list of
approved ASC procedures or has been proposed by us for addition to the
ASC list.
The list of codes that we are proposing to be paid by Medicare in
CY 2010 only as inpatient procedures is included as Addendum E to this
proposed rule.

B. Proposed Changes to the Inpatient List

For the CY 2010 OPPS, we are proposing to use the same methodology
as described in the November 15, 2004 final rule with comment period
(69 FR 65835) to identify a subset of procedures currently on the
inpatient list that are being performed a significant amount of the
time on an outpatient basis. Using this methodology, we identified
three procedures that met the criteria for potential removal from the
inpatient list. We then clinically reviewed these three potential
procedures for possible removal from the inpatient list and found them
to be appropriate candidates for removal from the inpatient list.
During the February 2009 meeting of the APC Panel, we solicited the APC
Panel's input on the appropriateness of proposing to remove the
following three procedures from the CY 2010 OPPS inpatient list: CPT
codes 21256 (Reconstruction of orbit with osteotomies (extracranial)
and with bone grafts (includes obtaining autografts) (e.g., micro-
ophthalmia)); 27179 (Open treatment of slipped femoral epiphysis;
osteoplasty of femoral neck (Heyman type procedure)); and 51060
(Transvesical ureterolithotomy).
In addition to presenting to the APC Panel the three procedures
above, we also presented utilization data for the first 9 months of CY
2008 for two other specific procedures, in response to a request by the
APC Panel from the March 2008 meeting: CPT code 20660 (Application of
cranial tongs, caliper or stereotactic frame, including removal
(separate procedure)), a procedure that we removed from the inpatient
list for CY 2009; and CPT code 64818 (Sympathectomy, lumbar), a
procedure that we maintained on the inpatient list for CY 2009.
Following the discussion at the February 2009 meeting, the APC
Panel recommended that CMS propose to remove from the CY 2010 OPPS
inpatient list CPT codes 21256, 27179, and 51060. The APC Panel also
recommended that CPT code 64818 remain on the inpatient list for CY
2010. The APC Panel made no recommendation regarding CPT code 20660.
For CY 2010, we are proposing to accept the APC Panel's
recommendations to remove the procedures described by CPT codes 21256,
27179, and 51060 from the inpatient list because we agree with the APC
Panel that the procedures may be appropriately provided as hospital
outpatient procedures for some Medicare beneficiaries. We also are
proposing to retain CPT code 64818 on the inpatient list because we
agree with the APC Panel that this procedure should be provided to
Medicare beneficiaries only in the hospital inpatient setting. The
three procedures we are proposing to remove from the inpatient list for
CY 2010 and their CPT codes, long descriptors, and proposed APC
assignments are displayed in Table 37 below.

Table 37--Procedures Proposed for Removal From the Inpatient List and Their Proposed APC Assignments for CY 2010
----------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY
HCPCS code Long descriptor 2010 APC 2010 status
assignment indicator
----------------------------------------------------------------------------------------------------------------
21256..................................... Reconstruction of orbit with 0256 T
osteotomies (extracranial) and
with bone grafts (includes
obtaining autografts) (eg, micro-
ophthalmia).
27179..................................... Open treatment of slipped femoral 0052 T
epiphysis; osteoplasty of femoral
neck (Heyman type procedure).
51060..................................... Transvesical ureterolithotomy..... 0163 T
----------------------------------------------------------------------------------------------------------------

XII. OPPS Nonrecurring Technical and Policy Changes and Clarifications

A. Kidney Disease Education Services

1. Background
Section 152(b) of Public Law 110-275 (MIPPA) amended section
1861(s)(2) of the Act by adding a new subsection (EE) to provide for
coverage of kidney disease education (KDE) services as a Medicare Part
B benefit for Medicare beneficiaries diagnosed with stage IV chronic
kidney disease (CKD) who, according to accepted clinical guidelines
identified by the Secretary, will require dialysis or a kidney
transplant, effective for services furnished on or after January 1,
2010. Section 152(b) also added a new subsection (ggg) to section 1861
of the Act to define ``kidney disease education services'' and to
specify who may furnish these services as a ``qualified person.''
Section 1861(ggg)(2)(A) (i) of the Act, as added by section 152(b) of
Public Law 110-275, defines a qualified person as a physician (as
defined in section 1861(r)(1) of the Act); or a physician assistant,
nurse practitioner, or clinical nurse specialist (as defined in section
1861(aa)(5) of the Act) who furnishes services for which payment may be
made under the fee schedule established under section 1848 of the Act.
Section 1861(ggg)(2)(A)(ii) of the Act also defines a qualified person
as a ``provider of services located in a rural area (as defined in
section 1886(d)(2)(D) [of the Act]).'' The definition of a ``qualified
person'' for this benefit includes certain rural providers of services,
such as hospitals, critical access hospitals (CAHs), skilled nursing
facilities (SNFs), home health agencies (HHAs), comprehensive
outpatient rehabilitation facilities (CORFs), and hospices. Section
1861(ggg)(2)(B) of the Act provides that a qualified person does not
include a provider of services (other than a provider of services
described in section 1861(ggg)(2)(A)(ii)) or a renal dialysis facility.
We are proposing to implement the provisions of section
1861(s)(2)(EE) and 1861(ggg) of the Act, as added by section 152(b) of
Public Law 110-275, mainly through the June 2009 CY 2010

[[Page 35359]]

MPFS proposed rule (CMS-1413-P; Medicare Program; Payment Policies
under the Physician Fee Schedule and Other Revisions to Part B for CY
2010), hereinafter referred to as the CY 2010 MPFS proposed rule.
Specifically, in section II.G.10. of the CY 2010 MPFS proposed rule, we
are proposing to define the Medicare coverage criteria that would be
applicable to KDE services and who may provide these services (that is,
a ``qualified person''), consistent with the provisions of sections
1861(s)(2)(EE) and1861(ggg) of the Act. In that proposed rule, we also
are proposing to define a provider of services in a rural area as
defined in section 1886(d)(2)(D) of the Act as a hospital, CAH, SNF,
CORF, HHA, or hospice that is physically located in a rural area as
defined in Sec. 412.64(b)(ii)(C) of the regulations or a hospital or
CAH that is reclassified from urban to rural status pursuant to section
1886(d)(8)(E) of the Act, as defined in Sec. 412.103 of the
regulations. According to the proposal included in the CY 2010 MPFS
proposed rule, a hospital, CAH, SNF, CORF, HHA, or hospice would not be
considered to be a qualified person if the facility providing KDE
services is located outside of a rural area unless the service is
furnished in a hospital or CAH that has reclassified as rural under
Sec. 412.103.
In addition, in the CY 2010 MPFS proposed rule, consistent with the
provisions of section 1861(ggg) of the Act, we are proposing a payment
amount for KDE services furnished by a ``qualified person.''
Specifically, we are proposing to establish two new Level II HCPCS G-
codes to describe KDE services and to specify the associated relative
value units under the MPFS for payment for these codes.
Individuals who wish to comment on the proposed coverage criteria
for KDE services under section 1861(ggg) of the Act, including the
definition of a ``qualified person,'' the proposed HCPCS codes, and the
proposed relative value units for KDE services should submit their
comments to CMS in response to the CY 2010 MPFS proposed rule that we
describe above. Below we discuss our proposed payment for KDE services
furnished by providers of services located in a rural area. Public
comments relating to payment for KDE services furnished by providers of
services located in a rural area should be submitted in response to
this OPPS/ASC proposed rule.
2. Proposed Payment for Services Furnished by Providers of Services
Located in a Rural Area
We are proposing to pay under the MPFS for KDE services under
section 1861(ggg) of the Act when the services are furnished by a
qualified person that is a hospital, CAH, SNF, CORF, HHA, or hospice
that is located in a rural area as defined in section 1886(d)(2)(D) of
the Act or a hospital or CAH that is reclassified from urban to rural
status pursuant to section 1886(d)(8)(E) of the Act, as defined in
Sec. 412.103 of the regulations. Section 152(b) of Public Law 100-275
amended section 1848(j)(3) of the Act to add section 1861(s)(2)(EE)
(kidney disease education services) to the list of subsections of
section 1861(s)(2) of the Act, which are included in the definition of
physician services in section 1848(j)(3) of the Act. However, the
statute does not specify the payment methodology for KDE services
furnished by providers of these services located in rural areas.
Given that the statute provides the Secretary with the flexibility
to pay all qualified persons under the MPFS and there is precedent for
paying both diabetes self-management training and medical nutrition
therapy services (which we believe KDE is similar to in terms of
resource use, specifically staffing and infrastructure) under the MPFS,
we are proposing to pay all qualified persons for KDE services under
the MPFS. This single payment methodology would apply to all qualified
persons, including providers of services in a rural area as we are
proposing to define such providers in the CY 2010 MPFS proposed rule.
The language in section 1861(ggg) of the Act that defines KDE
services is similar to the language in section 1861(qq) of the Act that
defines ``diabetes self-management training services,'' which is a
medical or other health service under section 1861(s)(2)(S) of the Act.
In addition, the language in section 1861(ggg) of the Act is similar to
the language in section 1861(vv) of the Act that defines medical
nutrition therapy services, which is also a medical or other health
service under section 1861(s)(2)(V) of the Act. Finally, both diabetes
self-management training and medical nutrition therapy are included in
the definition of ``physicians' services'' for purposes of the MPFS at
section 1848(j)(3) of the Act, and our standard policy is to pay for
both services under the MPFS when they are furnished in an HOPD. Given
that the statute permits us to pay all qualified persons under the MPFS
and the precedent for paying both diabetes self-management training and
medical nutrition therapy under the MPFS when these services are
provided in the hospital outpatient setting, we believe that payment
under the MPFS is the most appropriate methodology for payment to
qualified persons who are providers of services located in a rural area
or who are CAHs or hospitals that have been reclassified as rural
pursuant to Sec. 412.103 of the regulations for the KDE services they
furnish.
The proposed CY 2010 MPFS payments for HCPCS codes GXX26
(Educational services related to the care of chronic kidney disease;
individual, per session; face-to-face) and GXX27 (Educational services
related to the care of chronic kidney disease; group, per session;
face-to-face) are discussed in the CY 2010 MPFS proposed rule. When the
qualified person is a rural provider, we would pay the provider the
applicable amount under the MPFS and a single payment would be made for
each KDE session, limited to no more than six sessions as discussed in
the CY 2010 MPFS proposed rule. We would not provide separate payment
for both a physician's professional services and the associated
facility services if a single session of KDE services was furnished in
a rural hospital. Therefore, because of operational constraints, we are
proposing that payment would be made to only one qualified person for
KDE services on the same day for the same beneficiary. We also note
that the MPFS' geographic practice cost index would apply to the
calculation of the payment in a particular fee schedule locality
because this locality adjustment methodology is applicable to payment
for all services paid under the MPFS. We are proposing to assign status
indicator ``A'' to HCPCS codes GXX26 and GXX27 in Addendum B to this CY
2010 OPPS/ASC proposed rule to signify that these services, when
covered, would be paid under a payment system other than the OPPS,
specifically the MPFS in the case of both HCPCS codes.
Public comments on this proposal to pay under the MPFS for covered
KDE services furnished by qualified persons who are hospitals, CAHs,
SNFs, CORFs, HHAs, or hospices that are located in a rural area or are
treated as being rural under Sec. 412.103 should be submitted in
accordance with the instructions for commenting on this OPPS/ASC
proposed rule. Public comments on all other aspects of the proposed
implementation of sections 1861(s)(2)(EE) and 1861(ggg) of the Act,
including, but not limited to, the proposed criteria for coverage of
the services, the proposed definition of

[[Page 35360]]

``session,'' the proposed HCPCS codes, and the proposed content of the
program, should be submitted in response to the CY 2010 MPFS proposed
rule.

B. Pulmonary Rehabilitation, Cardiac Rehabilitation, and Intensive
Cardiac Rehabilitation Services

1. Legislative Changes
Section 144(a) of Public Law 110-275 (MIPPA) made a number of
changes to the Act to provide Medicare Part B coverage and payment for
pulmonary and cardiac rehabilitation services furnished to
beneficiaries with chronic obstructive pulmonary disease and certain
other conditions, respectively, effective January 1, 2010.
Specifically, section 144(a)(1) of the Act amended section 1861(s)(2)
of the Act by adding new subparagraphs (CC) and (DD) to specify
Medicare Part B coverage of items and services furnished under (1) a
cardiac rehabilitation (CR) program (as defined in an added new section
1861(eee)(1) of the Act) or under a pulmonary rehabilitation (PR)
program (as defined under an added new section 1861(fff)(1) of the Act;
and (2) an intensive cardiac rehabilitation (ICR) program (as defined
in an added new section 1861(eee)(4) of the Act). The amendments made
by section 144(a) of Public Law 110-275 provide for coverage of CR, PR,
and ICR services provided in a physician's office, in a hospital on an
outpatient basis, or in other settings as the Secretary determines
appropriate. Section 144(a)(2) of Public Law 110-275 amended section
1848(j)(3) to provide for payment for services furnished in an ICR
program under the MPFS and also added a new section 1848(b)(5) to
provide specific language governing payment for ICR services. Under
that specific section, the Secretary shall substitute the Medicare OPD
fee schedule amount established under the prospective payment system
for hospital outpatient department services under section 1833(t)(3)(D)
of the Act for cardiac rehabilitation (under HCPCS codes 93797
(Physician services for outpatient cardiac rehabilitation; without
continuous ECG monitoring (per session)) and 93798 (Physician services
for outpatient cardiac rehabilitation; with continuous ECG monitoring
(per session)) for CY 2007, or any succeeding HCPCS codes established
for cardiac rehabilitation). Section 144(a)(2) also defined under the
new section 1848(b)(5) a ``session'' for each of the component cardiac
rehabilitation items and services defined in subparagraphs (A) through
(E) of section 1861(eee)(3) of the Act, when furnished for one hour, as
a separate session of intensive cardiac rehabilitation, and specified
that payment may be made for up to 6 sessions per day of the series of
72 one-hour sessions of ICR services. Section 144(a)(1)(B) also
requires that a physician must be immediately available and accessible
for medical consultations and medical emergencies at all times items
and services are being furnished under CR, ICR, and PR programs, except
that in the case of such items and services furnished under such a
program in a hospital, such availability shall be presumed.
As we discuss in detail in section II.G.8. of the June 2009 CY 2010
MPFS proposed rule, we are using the MPFS and the OPPS rulemaking
processes, and may use the national coverage determination (NCD)
process as well, to implement the amendments made by section 144(a) of
Public Law 110-275. In the CY 2010 MPFS proposed rule, we specify our
policy proposals for implementing Medicare Part B coverage and payment
for services furnished in a CR, ICR, and PR program under the MPFS.
Therefore, public comments on the proposed coverage and payment under
the MPFS for a CR, ICR, or PR program beginning in CY 2010 should be
submitted in response to the CY 2010 MPFS proposed rule. In this
section of this CY 2010 OPPS/ASC proposed rule, we are proposing the CY
2010 OPPS payment for services in a CR, ICR, or PR program furnished to
hospital outpatients. Therefore, public comments on the proposed OPPS
payments for CY 2010 should be submitted in response to this CY 2010
OPPS/ASC proposed rule.
2. Proposed Payments for Services Furnished to Hospital Outpatients in
a Pulmonary Rehabilitation Program
For CY 2010, we are proposing to create one new Level II HCPCS code
for hospitals to report and bill for the services furnished under a PR
program as specified in section 1861(fff) of the Act. Specifically, we
would use HCPCS code GXX30 (Pulmonary rehabilitation, including aerobic
exercise (includes monitoring), per session, per day). This proposed
new HCPCS G-code would be used by hospitals to report PR services
furnished to patients performing physician-prescribed exercises that
are targeted to improving the patient's physical functioning and may
also include the provision of other aspects of PR, such as education
and training. Consistent with our proposal in the CY 2010 MPFS proposed
rule, we are proposing that hospitals would use proposed HCPCS code
GXX30 to report sessions lasting a minimum of 60 minutes each,
generally for two to three sessions of PR per week, under the OPPS. We
also are proposing to allow no more than one session per day because
individuals who are furnished services in a PR program have significant
respiratory compromise and would not typically be capable of performing
more than one session of exercise per day.
PR described by proposed HCPCS code GXX30 would be a new
comprehensive service. We do not believe there is an existing clinical
APC to which this service could be appropriately assigned under the
OPPS based on the information currently available to us. We do not
believe that any services currently paid under the OPPS are
sufficiently similar to PR, based on both clinical and resource
characteristics, to justify the initial assignment of proposed HCPCS
code GXX30 to the same clinical APC as an existing service.
Historically, individual services that comprise comprehensive PR have
been reported separately with existing HCPCS codes that are paid under
the OPPS through the individual APC that is most appropriate for each
service described by the specific HCPCS code reported.
For payment under the MPFS, we are proposing relative value units
for new HCPCS code GXX30 for CY 2010 based on the estimated resources
and work intensity associated with existing cardiac rehabilitation and
respiratory therapy services. The nonfacility practice expense amount
is the component of the MPFS payment that is most comparable to what
Medicare pays under the OPPS. Both the MPFS nonfacility practice
expense payment and the OPPS payment include payment for the service
costs other than the physician professional services that are billed
and paid under the MPFS in all service settings. The CY 2010 proposed
nonfacility practice expense payment amount under the MPFS is between
$10 and $20.
Given the lack of OPPS hospital cost data to guide the initial
assignment of the proposed new HCPCS code that would describe services
furnished under the new PR benefit, for the CY 2010 OPPS, we are
proposing to assign HCPCS code GXX30 to New Technology APC 1492 (New
Technology--Level IB ($10-$20)), the New Technology APC that provides
payment for new services with estimated facility costs between $10 and
$20 and for which no existing clinical APC is appropriate. The New
Technology APC payment of $15, at the midpoint of the cost band, would
be approximately the same as the proposed

[[Page 35361]]

CY 2010 MPFS nonfacility practice expense amount for PR described by
HCPCS code GXX30. As discussed above, this is the portion of the
proposed MPFS payment that is most comparable to what Medicare would
pay under the OPPS. We believe this proposed temporary assignment to a
New Technology APC would allow us to pay appropriately for the service
under the OPPS, at a rate that is similar to the corresponding
physician's office payment amount, while we gather hospital claims data
and experience with the new service on which to base a clinically
relevant APC assignment in the future.
3. Proposed Payment for Services Furnished to Hospital Outpatients
Under a Cardiac Rehabilitation or an Intensive Cardiac Rehabilitation
Program
Currently, CR services furnished by hospitals are reported using
CPT codes 93797 and 93798. In the CY 2010 MPFS proposed rule, we are
proposing that each day CR items and services are furnished to a
patient, aerobic exercises along with other exercises must be included
(that is, a patient must exercise aerobically every day he or she
attends a CR session). In addition, we are proposing that each session
must be a minimum of 60 minutes and patients must participate in a
minimum of two CR sessions a week, with a maximum of two CR sessions a
day.
With respect to ICR services, section 1861(eee)(4)(C) of the Act,
states that ``an intensive cardiac rehabilitation program may be
provided in a series of 72 one-hour sessions (as defined in
section1848(b)(5)), up to 6 sessions per day, over a period of up to 18
weeks.'' For the CY 2010 OPPS, we are proposing to create two new Level
II HCPCS codes to report the services of an ICR program that are
furnished to hospital outpatients, consistent with the provisions of
section 1861(eee)(4)(C) of the Act: Proposed HCPCS code GXX28
(Intensive cardiac rehabilitation; with or without continuous ECG
monitoring with exercise, per session) and proposed HCPCS code GXX29
(Intensive cardiac rehabilitation; with or without continuous ECG
monitoring; without exercise, per session). These proposed new HCPCS G-
codes would be used to report ICR services furnished by hospitals that
have an ICR program that has received a designation as a qualified ICR
program. Consistent with the proposal in the CY 2010 MPFS proposed
rule, we are proposing that each session of ICR must be a minimum of 60
minutes and that each day ICR items and services are provided to a
patient, aerobic exercises along with other exercises must be included
(that is, a patient must exercise aerobically every day he or she
attends a ICR session).
For the CY 2010 OPPS, we are proposing to assign proposed HCPCS
codes GXX28 and GXX29 to APC0095 (Cardiac Rehabilitation) with a status
indicator of ``S.'' The proposed median cost of APC 0095 for CY 2010 is
approximately $39. This proposed median cost reflects historical
hospital cost data for one session of general CR services reported with
CPT code 93797 or 93798. Both CR and ICR programs consist of exercise,
cardiac risk factor modification, psychosocial assessment, outcomes
assessment and other services, as described in the CY 2010 MPFS
proposed rule. Although more sessions per day for a beneficiary may be
provided in an ICR program than a CR program, we believe the hospital
costs for a single session would be similar, and OPPS payment for CR
and ICR would be provided on a per-session basis. Therefore, because CR
and ICR services are similar from both clinical and resource
perspectives, we believe that it would be appropriate to assign the two
proposed new Level II HCPCS codes for ICR to APC 0095 while we collect
cost information from hospitals specific to ICR. We would make a single
payment of APC 0095 for each session of ICR reported on hospital
outpatient claims.
4. Physician Supervision for Pulmonary Rehabilitation, Cardiac
Rehabilitation, and Intensive Cardiac Rehabilitation Services
Section 144 of Public Law 110-275 includes requirements for
immediate and ongoing physician availability and accessibility for both
medical consultations and medical emergencies at all times items and
services are being furnished under CR, ICR, and PR programs. In section
II.G.8. of the June 2009 CY 2010 MPFS proposed rule, we have proposed
that these requirements would be met through existing definitions for
direct physician supervision in physicians' offices and hospital
outpatient departments at Sec. 410.26(a)(2) (defined through cross
reference to Sec. 410.32(b)(3)(ii)) and Sec. 410.27, respectively.
Direct supervision, as defined in the regulations, is consistent with
the requirements of Public Law 110-275 because the physician must be
present and immediately available where the services are being
furnished. The physician must also be able to furnish assistance and
direction throughout the performance of the services, which would
include medical consultations and medical emergencies.
For CR, ICR, and PR services provided to hospital outpatients,
direct physician supervision is the standard set forth in the April 7,
2000 OPPS final rule with comment period (68 FR 18524 through 18526)
for supervision of hospital outpatient therapeutic services covered and
paid by Medicare in hospitals and provider-based departments of
hospitals. We noted in the discussions of cardiac and pulmonary
rehabilitation in the CY 2010 MPFS proposed rule that if we were to
propose future changes to the physician office or hospital outpatient
policies for direct physician supervision, we would provide our
assessment of the implications of those proposals for the supervision
of cardiac and pulmonary rehabilitation services at that time.
As discussed in more detail in section XII.D of this proposed rule,
we are proposing to refine the definition of the direct supervision of
hospital outpatient therapeutic services for those services provided in
the hospital and in an on-campus PBD of the hospital. For services,
including CR, ICR, and PR services, provided in the hospital and in an
on-campus PBD of the hospital, direct supervision would mean that the
physician must be present on the same campus, in the hospital or the
on-campus PBD of the hospital, as defined in Sec. 413.65, and
immediately available to furnish assistance and direction throughout
the performance of the procedure. We are also proposing to define ``in
the hospital'' in proposed new paragraph Sec. 410.27(g) to mean areas
in the main building(s) of the hospital that are under the ownership,
financial, and administrative control of the hospital; are operated as
part of the hospital; and for which the hospital bills the services
furnished under the hospital's CMS Certification Number (CCN). We are
proposing no significant change to the definition or requirements for
direct supervision of hospital outpatient therapeutic services provided
in off-campus PBDs of a hospital. Thus, with respect to CR, ICR, and PR
services furnished in off-campus PBDs of the hospital, direct
supervision would continue to mean that the physician must be in the
off-campus PBD and immediately available to furnish assistance and
direction throughout the performance of the procedure. We believe that
direct supervision, as defined in the proposed regulations for hospital
outpatient therapeutic services, continues to be consistent with the
requirements of Public Law 110-275 for CR, ICR, and PR services because
the physician must be present and

[[Page 35362]]

immediately available where the services are being furnished. The
physician must also be able to furnish assistance and direction
throughout the performance of the services, which would include medical
consultations and medical emergencies. For a complete discussion of the
current and proposed requirements for the direct supervision of
hospital outpatient therapeutic services, we refer readers to section
XII.D. of this proposed rule.
Section 144 of Public Law 110-275 also states that in the case of
items and services furnished under such a CR, ICR, or PR program in a
hospital, physician availability shall be presumed. As we have stated
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68702
through 68704), the longstanding presumption of direct physician
supervision for hospital outpatient services means that direct
physician supervision is the standard for supervision of hospital
outpatient therapeutic services covered and paid by Medicare in
hospitals and PBDs of hospitals, and we expect that hospitals are
providing services in accordance with this standard.
We note that in section XII.D. of this proposed rule, we are also
proposing that nonphysician practitioners, defined for the purpose of
proposed revised Sec. 410.27 of the regulations as clinical
psychologists, physician assistants, nurse practitioners, clinical
nurse specialists, and certified nurse-midwives, may directly supervise
all hospital outpatient therapeutic services that they may perform
themselves within their State scope of practice and hospital-granted
privileges, provided that they meet all additional requirements,
including any collaboration or supervision requirements as specified in
Sec. Sec. 410.71, 410.74, 410.75, 410.76, and 410.77. However, in the
CY 2010 MPFS proposed rule and in the corresponding proposed regulation
text, we proposed a different requirement for the direct supervision of
CR, ICR, and PR services. We proposed that services provided in CR,
ICR, and PR programs must be supervised by a doctor of medicine or
osteopathy, as defined in section 1861(r)(i) of the Act. In addition,
we proposed specific requirements for the expertise and licensure of
physicians supervising CR and ICR services. It would not be in
accordance with the proposed regulations for a nonphysician
practitioner to supervise services furnished in a CR, ICR, or PR
program. The physician supervision and expertise requirements proposed
in the coverage policy and regulations for CR, ICR, and PR services
must be met for those services to be covered and, therefore, paid by
Medicare in hospital outpatient settings.

C. Stem Cell Transplant

Stem cell transplantation is a treatment in which stem cells that
are harvested from either a patient's or a donor's bone marrow or
peripheral blood are later infused into that patient to treat an
illness. Autologous stem cell transplantation is a technique for
providing additional stem cells using the patient's own previously
harvested stem cells. Allogeneic stem cell transplantation is a
procedure in which stem cells from a healthy donor are acquired and
prepared to provide a patient with new stem cells.
We recently revised section 90.3.3 of Chapter 3 of the Medicare
Claims Processing Manual (Pub. 100-04) and created new section 231.10
of Chapter 4 of the Medicare Claims Processing Manual in order to
clarify billing under Medicare for autologous and allogeneic stem cell
transplant services. As stated in the cited new and revised manual
sections, autologous stem cell transplants performed on Medicare
beneficiaries may be provided on an inpatient or an outpatient basis.
Hospitals are instructed to bill and show all charges for autologous
stem cell harvesting, processing, and transplant procedures based on
the status of the patient (that is, inpatient or outpatient) when the
individual services are furnished. The CPT codes describing these
services may be billed and are separately payable under the OPPS when
the services are provided in the hospital outpatient setting.
In contrast, allogeneic stem cell transplants performed on Medicare
beneficiaries are provided on an inpatient basis, and all services
related to acquiring the stem cells from a donor (whether performed
inpatient or outpatient) are billed and are payable under Medicare Part
A through the IPPS MS-DRG payment for the stem cell transplant. In
addition to payment for the stem cell transplant procedure itself, the
MS-DRG payment for the stem cell transplant includes payment for stem
cell acquisition services, which include, but are not limited to,
National Marrow Donor Program fees for stem cells from an unrelated
donor (if applicable); tissue typing of donor and recipient; donor
evaluation; physician pre-admission/pre-procedure donor evaluation
services; costs associated with the harvesting procedure; post-
operative/post-procedure evaluation of donor; and preparation and
processing of stem cells. While certain acquisition services, such as
donor harvesting procedures, may be performed in the hospital
outpatient setting, hospitals are instructed to include the charges for
these services in the recipient's inpatient transplant bill as
acquisition services and not to bill them under the OPPS.
In order to be consistent with the revised section 90.3.3 and the
new section 231.10 of the Medicare Claims Processing Manual cited
earlier, which reflect what we believe to be the current clinical
practice of performing allogeneic stem cell transplants on Medicare
beneficiaries on an inpatient basis only, we are proposing to revise
the status indicator assignments of certain stem cell transplant-
related CPT codes under the OPPS. Specifically, we are proposing to
change the status indicator for CPT code 38205 (Blood-derived
hematopoietic progenitor cell harvesting for transplantation, per
collection; allogenic) from ``S'' to ``E'' for the CY 2010 OPPS to
reflect that, while an allogeneic stem cell harvesting procedure
performed on the donor may take place in the HOPD, payment for the
service is made through the IPPS MS-DRG payment for the associated
transplant procedure performed on the recipient. We also are proposing
to change the status indicators for CPT code 38240 (Bone marrow or
blood-derived peripheral stem cell transplantation; allogenic) and CPT
code 38242 (Bone marrow or blood-derived peripheral stem cell
transplantation; allogeneic donor lymphocyte infusions) from ``S'' to
``C'' for the CY 2010 OPPS to reflect that these allogeneic transplant
procedures are payable by Medicare as inpatient procedures only.
We refer readers to section 90.3.3 of Chapter 3 and section 231.10
of Chapter 4 of the Medicare Claims Processing Manual for more detailed
information on billing and payment for autologous and allogeneic stem
cell transplants and related services.

D. Physician Supervision

1. Background
In the CY 2009 OPPS/ASC proposed rule and final rule with comment
period (73 FR 41518 through 41519 and 73 FR 68702 through 68704,
respectively), we provided a restatement and clarification of the
requirements for physician supervision of hospital outpatient
diagnostic and therapeutic services that were set forth in the April
2000 OPPS final rule with comment period (65 FR 18524 through 18526).
As we stated in those rules, section 1861(s)(2)(C) of the Act
authorizes payment for diagnostic services that are furnished to a
hospital

[[Page 35363]]

outpatient for the purpose of diagnostic study. We have further defined
the requirements for diagnostic services furnished to hospital
outpatients, including requirements for physician supervision of
diagnostic services, in Sec. Sec. 410.28 and 410.32 of our
regulations. Section 410.28(e) states that Medicare Part B will make
payment for diagnostic services furnished at provider-based departments
(PBDs) of hospitals ``only when the diagnostic services are furnished
under the appropriate level of physician supervision specified by CMS
in accordance with the definitions in Sec. Sec. 410.32(b)(3)(i),
(b)(3)(ii), and (b)(3)(iii).'' In addition, in the April 2000 OPPS
final rule with comment period (65 FR 18526), we stated that our model
for the requirement was the requirement for physician supervision of
diagnostic tests payable under the MPFS that was set forth in the CY
1998 MPFS final rule (62 FR 59048). In 2000, we also explained with
respect to the supervision requirements for individual diagnostic tests
that we intended to instruct hospitals and fiscal intermediaries to use
the MPFS as a guide pending issuance of updated requirements. For
diagnostic services not listed in the MPFS, we stated that fiscal
intermediaries, in consultation with their medical directors, would
define appropriate supervision levels in order to determine whether
claims for these services are reasonable and necessary. Since 2000, we
have continued to follow the supervision requirements for individual
diagnostic tests as listed in the MPFS Relative Value File. The file is
updated quarterly and is available on the CMS Web site at: http://www.cms.hhs.gov/PhysicianFeeSched/.
In the CY 2009 OPPS/ASC proposed rule and final rule with comment
period (73 FR 41518 through 41519 and 73 FR 68702 through 68704,
respectively), we also reiterated that direct physician supervision is
the standard for physician supervision as set forth in the April 2000
OPPS final rule with comment period for supervision of hospital
outpatient therapeutic services covered and paid by Medicare in
hospitals and PBDs of hospitals. We noted that section 1861(s)(2)(B) of
the Act authorizes payment for hospital services ``incident to
physicians' services rendered to outpatients.'' We have further defined
the supervision requirements for hospital outpatient therapeutic
services and supplies ``incident to'' a physician's service in Sec.
410.27 of our regulations. More specifically, Sec. 410.27(f) states:
``Services furnished at a department of a provider, as defined in Sec.
413.65(a)(2) of this subchapter, that has provider-based status in
relation to a hospital under Sec. 413.65 of this subchapter, must be
under the direct supervision of a physician. `Direct supervision' means
the physician must be present and on the premises of the location and
immediately available to furnish assistance and direction throughout
the performance of the procedure. It does not mean that the physician
must be present in the room when the procedure is performed.'' This
language makes no distinction between on-campus and off-campus PBDs.
In the preamble of the April 2000 OPPS final rule with comment
period (65 FR 18525), we further discussed the requirement for
physician supervision and the finalization of the proposed regulation
text. In that discussion, we stated that the language of Sec.
410.27(f) ``applies to services furnished at an entity that is located
off the campus of a hospital that we designate as having provider-based
status as a department of a hospital in accordance with Sec. 413.65.''
We also stated that, for services furnished in a department of a
hospital that is located on the campus of a hospital, ``we assume the
direct supervision requirement to be met as we explain in section
3112.4(a) of the Intermediary Manual.'' We further stated that ``we
assume the physician supervision requirement is met on hospital
premises because staff physicians would always be nearby within the
hospital.''
In the CY 2009 OPPS/ASC proposed rule and final rule with comment
period (73 FR 41518 through 41519 and 73 FR 68702 through 68704,
respectively), we restated the existing physician supervision policy
for hospital outpatient therapeutic services because we were concerned
that some stakeholders may have misunderstood our use of the term
``assume'' in the April 2000 OPPS final rule with comment period,
believing that our statement meant that we do not require any
supervision in the hospital or in an on-campus PBD for hospital
outpatient therapeutic services, or that we only require general
supervision for those services. This is not the case. It has been our
expectation that hospital outpatient therapeutic services are provided
under the direct supervision of physicians in the hospital and in all
PBDs of the hospital, specifically, both on-campus and off-campus
departments of the hospital. The expectation that a physician would
always be nearby predates the OPPS and is related to the statutory
authority for payment of hospital outpatient services--that Medicare
makes payment for hospital outpatient services ``incident to'' the
services of physicians in the treatment of patients as described in
section 1861(s)(2)(B) of the Act. Section 410.27(a)(1)(ii) of the
regulations states that Medicare Part B pays for hospital services and
supplies furnished incident to a physician service to outpatients if
they are provided ``as an integral though incidental part of a
physician's services.'' In addition, we have stated in section 20 of
chapter 6 of the Medicare Benefit Policy Manual (Pub. 100-2) that
hospitals provide two distinct types of services to outpatients:
services that are diagnostic in nature, and other services that aid the
physician in the treatment of the patient. We further defined these
therapeutic services and supplies in section 20.5.1 of the Medicare
Benefit Policy Manual, stating ``therapeutic services and supplies
which hospitals provide on an outpatient basis are those services and
supplies (including the use of hospital facilities) which are incident
to the services of physicians in the treatment of patients.'' We also
provide in section 20.5.1 that services and supplies must be furnished
on a physician's order and delivered under physician supervision.
However, the manual indicates further that each occasion of a service
by a nonphysician does not need to also be the occasion of the actual
rendition of a personal professional service by the physician
responsible for the care of the patient. Nevertheless, as stipulated in
that same section of the manual ``during any course of treatment
rendered by auxiliary personnel, the physician must personally see the
patient periodically and sufficiently often enough to assess the course
of treatment and the patient's progress and, where necessary, to change
the treatment regimen.''
The expectation that a physician would always be nearby within the
hospital also dates back to a time when hospital inpatient services
provided in a single hospital building represented the majority of
hospital payments by Medicare. Since that time, advances in medical
technology, changes in the patterns of health care delivery, and
changes in the organizational structure of hospitals have led to the
development of extensive hospital campuses, sometimes spanning several
city blocks, as well as off-campus and satellite provider-based
campuses at different locations. In the April 2000 OPPS final rule with
comment period (65 FR 18525), we described the focus of the direct
physician supervision requirement for off-campus PBDs. In the CY 2009
OPPS/ASC final rule with

[[Page 35364]]

comment period (73 FR 68703), we stated that we do expect direct
physician supervision of all hospital outpatient therapeutic services,
regardless of their on-campus or off-campus location, but that we would
continue to emphasize the physician supervision requirement for off-
campus PBDs. However, we also noted that if there were problems with
outpatient care in a hospital or in an on-campus PBD where direct
supervision was not in place (that is, the expectation of direct
physician supervision was not met), we would consider that to be a
quality concern. We noted that we want to ensure that payment is made
for high quality hospital outpatient services provided to beneficiaries
in a safe and effective manner and consistent with Medicare
requirements.
Finally, we noted that the definition of direct supervision in
Sec. 410.27(f) for PBDs requires that the physician must be present
and on the premises of the location and immediately available to
furnish assistance and direction throughout the performance of the
procedure. In the April 2000 OPPS final rule with comment period (65 FR
18525), we further distinguished ``on the premises of the location'' by
stating ``* * * a physician must be present on the premises of the
entity accorded status as a department of the hospital and therefore,
immediately available to furnish assistance and direction for as long
as patients are being treated at the site.'' We also stated that this
characterization does not mean that the physician must be physically in
the room where a procedure or service is furnished. We noted in the CY
2009 OPPS/ASC final rule with comment period (73 FR 68703) that
although we have not further defined the term ``immediately available''
for this specific context, the lack of timely physician response to a
problem in the HOPD would represent a quality concern from our
perspective that hospitals should consider in structuring their
provision of services in ways that meet the direct physician
supervision requirement for HOPD services.
In response to a comment requesting clarification, we also
discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68703 through 68704) that a nonphysician practitioner may not provide
the physician supervision in a PBD, even if a nurse practitioner's or a
physician assistant's professional service was being billed as a nurse
practitioner or a physician assistant service and not a physician
service. We noted that section 1861(r) of the Act defines a physician
as follows: ``[t]he term `physician', when used in connection with the
performance of any function or action, means (1) a doctor of medicine
or osteopathy legally authorized to practice medicine and surgery by
the State in which he performs such function or action * * *; (2) a
doctor of dental surgery or of dental medicine * * *; (3) a doctor of
podiatric medicine * * *; (4) a doctor of optometry * * *; or (5) a
chiropractor. In addition, we pointed out that the conditions of
participation for hospitals under Sec. 482.12(c)(1)(i) through
(c)(1)(vi) of our regulations require that every Medicare hospital
patient is under the care of a doctor of medicine or osteopathy, a
doctor of dental surgery or dental medicine, a doctor of podiatric
medicine, a doctor of optometry, a chiropractor, or a clinical
psychologist; each practicing within the extent of the Act, the Federal
regulations, and State law. Further, Sec. 482.12(c)(4) of our
regulations requires that a doctor of medicine or osteopathy must be
responsible for the care of each Medicare patient with respect to any
medical or psychiatric condition that is present on admission or
develops during hospitalization and is not specifically within the
scope of practice of one of the other practitioners listed in Sec.
482.12(c)(1)(ii) through (c)(1)(vi).
Moreover, section 1861(s)(2)(B) of the Act authorizes payment for
hospital services ``incident to physicians' services rendered to
outpatients.'' We have further defined the requirements for hospital
outpatient therapeutic services and supplies ``incident to'' a
physician's service in Sec. 410.27 of our regulations. Section
410.27(a)(1)(ii) describes payment for hospital outpatient services
when they are ``an integral though incidental part of a physician's
services.'' Also, Sec. 410.27(f) requires that hospital outpatient
services provided in PBDs must be under the direct supervision of a
physician. We stated that the language of the statute and regulations
does not include nonphysician practitioners other than clinical
psychologists. Therefore, it would not be in accordance with the law
and regulations for a nonphysician practitioner other than a clinical
psychologist to be providing the physician supervision in a PBD, even
if a nurse practitioner's or a physician assistant's professional
service was being billed as a nurse practitioner or a physician
assistant service and not a physician service.
2. Issues Regarding the Physician Supervision of Hospital Outpatient
Services Raised by Hospitals and Other Stakeholders
Although we received a few public comments on the discussion of
physician supervision in the CY 2009 OPPS/ASC proposed rule, since
publication of the CY 2009 OPPS/ASC final rule with comment period on
November 18, 2008, we have received many questions and concerns about
the current policies from hospitals and other stakeholders. Some
stakeholders expressed appreciation for the CMS clarification, stating
that the supervision policies were clear and represented needed
safeguards for beneficiaries. On the other hand, we have received
numerous questions about the application of the policies to hospital
outpatient therapeutic services furnished in areas of the hospital that
some stakeholders believe have not clearly been discussed, such as the
application of direct supervision to hospital outpatient therapeutic
services furnished within the main buildings of the hospital that may
not be PBDs of the hospital. Some hospitals expressed difficulty in
determining whether certain areas of their hospitals were considered
provider-based. Other stakeholders cited the direct supervision policy
as first articulated in 2000 as problematic because they believe that
CMS failed to consider hospitals' current organizational structures.
Some hospitals and other stakeholders inquired about a physician's
qualifications for providing supervision or questioned whether
physician supervision must be provided by a physician in a particular
medical specialty. A number of stakeholders challenged the current
policy that nonphysician practitioners cannot provide direct
supervision for those hospital outpatient therapeutic services they may
personally perform or that they may order to be provided by other
hospital staff incident to the nonphysician practitioner's services. In
addition, numerous stakeholders, especially rural hospitals, raised
budgetary and patient access concerns related to ensuring adequate
physician staffing, especially because nonphysician practitioners may
not directly supervise the delivery of hospital outpatient therapeutic
services. Furthermore, rural hospitals and CAHs raised concerns
regarding the inconsistency of the direct supervision requirements for
CAHs with other CAH policies, pointing out that the Medicare conditions
of participation for CAHs allow nurse practitioners and physician

[[Page 35365]]

assistants to be responsible for the care of Medicare patients in CAHs.
Some stakeholders specifically questioned whether Sec. 410.27(f)
applied to CAHs because the term ``CAH'' is not in the heading of Sec.
410.27, which currently reads ``Outpatient hospital services and
supplies incident to a physician service: Conditions.'' Other
stakeholders complained about the significant burden on hospitals to
provide direct physician supervision because they believe there is no
clear clinical need for such supervision, particularly a uniform level
of supervision for all types of hospital outpatient therapeutic
services. Some stakeholders challenged the applicability of the direct
supervision requirements to specific types of hospital outpatient
services, such as partial hospitalization or chemotherapy
administration services.
Similar to the issues related to direct supervision of hospital
outpatient therapeutic services raised by hospitals and other
stakeholders, we have received questions since publication of the CY
2009 OPPS/ASC final rule with comment period, citing confusion
regarding the application of physician supervision policies for
hospital outpatient diagnostic services, especially with respect to
services provided within the main buildings of the hospital that are
not PBDs. In addition, some stakeholders have pointed out that there is
no site-of-service requirement for hospital outpatient diagnostic
services, and that, therefore, hospitals may send patients to
independent diagnostic testing facilities (IDTFs) or other entities to
receive diagnostic services under arrangement. They added that although
these facilities are not PBDs, the hospital would bill for these
services as hospital outpatient services in accordance with the
hospital bundling rules. Some of these stakeholders have asked what
type of physician supervision is required for diagnostic services
provided under arrangement.
A number of stakeholders urged CMS to withdraw or delay the
physician supervision policies discussed in the CY 2009 OPPS/ASC final
rule with comment period, arguing that this rule included policy
changes rather than clarification and, therefore, sufficient
opportunity for public notice and comment was not provided. Some
further argued that CMS should suspend enforcement of these policies
while CMS gathers additional public input and considered alternatives.
These stakeholders suggested a variety of additional approaches to
soliciting full feedback from the hospital and physician communities on
the supervision policies and their impact, including holding an open
door forum or town hall meeting and reopening the discussion during the
CY 2010 OPPS rulemaking process.
As stated previously in this section, we provided a restatement and
clarification of existing policy in the CY 2009 OPPS/ASC proposed rule
(73 FR 41518 through 41519), citing numerous existing statutory,
regulatory, manual, and prior rule preamble statements in section
XII.A. of that rule specifically titled, ``Physician Supervision of
HOPD Services.'' The CY 2009 OPPS/ASC proposed rule provided for a 60-
day comment period. We continue to believe that the CY 2009 restatement
and clarification made no change to longstanding hospital outpatient
physician supervision policies as incorporated in prior statements of
policy, including the codified Federal regulations. In addition, we
provided for public notice and comment regarding these physician
supervision polices through the CY2009 OPPS/ASC proposed rule in which,
as noted above, we discussed physician supervision in a distinct
section of the proposed rule. However, we received only a few public
comments on that section. We note that the physician supervision
policies for hospital outpatient diagnostic and therapeutic services as
described in the CY 2009 OPPS/ASC final rule with comment period (73 FR
68702 through 68704) continue to be in effect for CY 2009. We have not
instructed contractors to delay initiation of enforcement actions or to
discontinue pursuing pending enforcement actions regarding the
physician supervision of hospital outpatient services.
However, while we are not proposing to withdraw the longstanding
physician supervision policies for hospital outpatient services, we
have extensively considered the many questions and concerns on this
topic raised to us by stakeholders in the course of developing this CY
2010 OPPS/ASC proposed rule in order to assess whether proposed changes
to the existing policies should be considered. We appreciate the many
detailed comments and suggestions interested stakeholders have raised
in the first few months since publication of the CY 2009 OPPS/ASC final
rule with comment period. We have considered a wide variety of
potential modifications to our physician supervision policies in
response to this information about current health care delivery
practices and challenges. The dialogue with interested stakeholders has
provided us with sufficient information to develop proposals for
certain changes to the supervision policies for hospital outpatient
services for CY 2010 in order to take into full consideration current
clinical practice and patterns of care, the need to ensure patient
access, the associated hospital and physician responsibilities,
consistency among requirements for different sites of services, and
other important factors. We believe that these proposals address many
of the concerns and questions regarding our existing policies that have
been raised to us by stakeholders over the past several months. We look
forward to robust public comments on this proposed rule regarding our
CY 2010 proposals for physician supervision in order to inform our
decisions regarding final policies for CY 2010.
In considering the questions and concerns that have been raised
over the past several months, we have identified three areas within our
existing hospital outpatient physician supervision policies for which
we believe proposals of policy changes are appropriate for CY 2010, two
related to the supervision of therapeutic services and one related to
the supervision of diagnostic services. Our specific CY 2010 proposals,
including the proposed changes to our regulations to conform to these
proposals, are discussed below.
3. Proposed Policies for Direct Supervision of Hospital and CAH
Outpatient Therapeutic Services
First, for CY 2010 we are proposing that nonphysician
practitioners, specifically physician assistants, nurse practitioners,
clinical nurse specialists, and certified nurse-midwives, may directly
supervise all hospital outpatient therapeutic services that they may
perform themselves in accordance with their State law and scope of
practice and hospital-granted privileges, provided that they continue
to meet all additional requirements, including any collaboration or
supervision requirements as specified in the regulations at Sec. Sec.
410.74 through 410.77. Clinical psychologists may already provide
direct supervision, as we mentioned in the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68703 through 68704) because they, along
with physicians (as defined in section 1861(r)(1) of the Act), may be
responsible for the care of a hospital patient, as discussed in the
Medicare conditions of participation for hospitals in Sec. 482.12(c)
of our regulations. We believe that allowing certain nonphysician
practitioners (nurse practitioners, physician assistants, clinical
nurse specialists, and certified nurse-midwives) to provide direct
supervision of certain hospital

[[Page 35366]]

outpatient therapeutic services is appropriate because, even though
these practitioners are not physicians, they are recognized in statute
and regulation as providing services that are analogous to physicians'
services. Medicare Part B covers the professional services of clinical
psychologists, nurse practitioners, physician assistants, clinical
nurse specialists, and certified nurse-midwives when the services would
be covered as physicians' services if furnished by a physician (a
doctor of medicine or osteopathy, as set forth in section 1861(r)(1) of
the Act). The coverage of their services is described in Sec. Sec.
410.71(a), 410.74(a), 410.75(a) and (c), 410.76(a) and (c), and
410.77(a), respectively, of our regulations. Medicare also makes
payment for services provided incident to the services of these
nonphysician practitioners as specified in Sec. Sec.
410.71(a)(2)(iii), 410.74(b), 410.75(d), 410.76(d), and 410.77(c),
respectively.
We also note that section 1861(r) of the Act does not include
clinical psychologists, nurse practitioners, physician assistants,
clinical nurse specialists, or certified nurse-midwives in the
definition of a physician. However, as previously mentioned, the
conditions of participation for hospitals at Sec. 482.12(c)(1)(vi) of
our regulations do include clinical psychologists as practitioners who
may be responsible for the care of Medicare patients. The conditions of
participation at Sec. Sec. 482.12(c)(1)(i) through (c)(1)(vi) require
that every Medicare hospital patient be under the care of a doctor of
medicine or osteopathy, a doctor of dental surgery or dental medicine,
a doctor of podiatric medicine, a doctor of optometry, a chiropractor,
or a clinical psychologist; each practicing in accordance with the Act,
Federal regulations, and State law. Further, Sec. 482.12(c)(4) of our
regulations requires that a doctor of medicine or osteopathy must be
responsible for the care of each Medicare patient with respect to any
medical or psychiatric condition that is present on admission or
develops during hospitalization and is not specifically within the
scope of practice of one of the other practitioners listed in Sec.
482.12(c)(1)(ii) through (c)(1)(vi). Also, as permitted by State law,
certain nonphysician practitioners may admit individuals to a hospital
or CAH and order and provide therapeutic services to them. Since 1998,
we have allowed payment for the professional services of these
nonphysician practitioners in addition to payment for physicians'
services when the nonphysician practitioner's professional services are
furnished in an HOPD. We also have made outpatient facility payments to
the hospital for those facility services provided incident to the
professional services of these nonphysician practitioners (63 FR
58873). In addition, the conditions of participation for CAHs at Sec.
485.631 require that a doctor of medicine or osteopathy, a nurse
practitioner, a physician assistant, or a clinical nurse specialist is
available to furnish patient care services at all times the CAH
operates. A doctor of medicine or osteopathy must be present for
sufficient periods of time to provide medical direction, medical care
services, consultation and supervision as described in the conditions
of participation and must be available through radio or telephone
contact for assistance with medical emergencies or patient referral.
Taking into consideration the totality of these existing conditions
and requirements, we are proposing to revise Sec. 410.27 of the
regulations to make clear that Medicare Part B payment may be made for
hospital outpatient services and supplies furnished incident to the
services of a physician, clinical psychologist, nurse practitioner,
physician assistant, clinical nurse specialist, or certified nurse-
midwife service; and to add that, effective January 1, 2010, clinical
psychologists, nurse practitioners, physician assistants, clinical
nurse specialists, or certified nurse-midwives may provide direct
supervision for hospital outpatient therapeutic services that they may
perform themselves under State law and within their scope of practice
and hospital-granted privileges in the context of the existing
requirements in Sec. Sec. 410.71, 410.74, 410.75, 410.76, and 410.77.
However, we note that, as discussed in section XII.B.4 of this proposed
rule, the direct supervision of CR, ICR, and PR services must be
furnished by a doctor of medicine or osteopathy, as specified in the
proposed coverage policy and regulations for CR, ICR, and PR services.
We also note that Medicare does not make a payment to a physician under
the MPFS when the physician solely provides the direct physician
supervision of hospital outpatient therapeutic services but furnishes
no direct professional services to a patient. This also would apply to
the supervision of hospital outpatient therapeutic services provided by
nonphysician practitioners.
We also note that we are not proposing to modify requirements
relating to physician supervision or collaboration for these
nonphysician practitioners. In regard to the supervision of physician
assistants, Sec. 410.74(a)(iv) requires that physician assistants
perform services under the general supervision of a physician. We have
further defined this general supervision in section 190(c) of chapter
15 of the Medicare Benefit Policy Manual. Section 190(c) states that
``the PA's physician supervisor (or a physician designated by the
supervising physician or employer as provided under State law or
regulations) is primarily responsible for the overall direction and
management of the PA's professional activities and for assuring that
the services provided are medically appropriate for the patient. The
physician supervisor (or physician designee) need not be physically
present with the PA when a service is being furnished to a patient and
may be contacted by telephone, if necessary, unless State law or
regulations require otherwise.''
The requirements for collaboration of nurse practitioners are
defined in Sec. 410.75(c)(3) of the regulations and section 200(D) of
chapter 15 of the Medicare Benefit Policy Manual. The requirements for
clinical nurse specialists are located in Sec. 410.76(c)(3) of the
regulations and section 210(D) of Chapter 15 of the Medicare Benefit
Policy Manual. These sections define collaboration as a process in
which the nurse practitioner or the clinical nurse specialist works
with one or more physicians (doctors or medicine or osteopathy) to
deliver health care services within the scope of the practitioner's
expertise, with medical direction and appropriate supervision as
required by the law of the State in which the services are being
furnished. In the absence of more stringent State law requirements
governing collaboration, collaboration is to be evidenced by the nurse
practitioner or the clinical nurse specialist documenting his or her
scope of practice and indicating the relationships that he or she has
with physicians to deal with issues outside their scope of practice.
The collaborating physician does not need to be present with the nurse
practitioner or clinical nurse specialist when the services are
furnished or to make an independent evaluation of each patient who is
seen by the nurse practitioner or clinical nurse specialist.
Second, for CY 2010 we are proposing to refine the definition of
direct supervision of hospital outpatient therapeutic services for
those services furnished in a hospital and in on-campus PBDs of a
hospital. For services furnished on a hospital's main campus, we are
proposing that direct supervision means that the supervisory physician
or

[[Page 35367]]

nonphysician practitioner must be present on the same campus, in the
hospital or the on-campus PBD of the hospital as defined in Sec.
413.65, and immediately available to furnish assistance and direction
throughout the performance of the procedure. We are proposing to add a
new paragraph (a)(1)(iv)(A) to Sec. 410.27(a)(1)(iv)(A) to reflect
this requirement. We also are proposing to define ``in the hospital''
in new paragraph Sec. 410.27(g) as meaning areas in the main
building(s) of a hospital that are under the ownership, financial, and
administrative control of the hospital; that are operated as part of
the hospital; and for which the hospital bills the services furnished
under the hospital's CCN. Therefore, to be present in the hospital or
the on-campus PBD of the hospital and immediately available requires
that the physician or nonphysician practitioner must be physically
present in areas on the campus of the hospital that are part of the
hospital, including on-campus PBDs, that are operated by the hospital,
and where services furnished in those areas are billed under the
hospital's CCN. The supervisory physician or nonphysician practitioner
of the hospital's outpatient therapeutic services may not be located in
any other entity, such as a physician's office, IDTF, co-located
hospital, or hospital-operated provider or supplier such as a skilled
nursing facility (SNF), end stage renal disease (ESRD) facility, or
home health agency (HHA), or any other nonhospital space that may be
co-located on the hospital's campus, as ``hospital campus'' is defined
in Sec. 413.65(a)(2) of the regulations.
While we have not previously specified in policy guidance a
definition for the term ``immediately available'' with respect to
services provided in areas of the hospital on its main campus that are
not PBDs, we believe that the existing definitions of direct
supervision in Sec. Sec. 410.27(f) and 410.32(b)(3)(ii) that apply to
PBDs and physician office settings indicate that the physician must be
physically present in order to provide direct supervision of services.
With regard to services provided in PBDs of hospitals or physicians'
offices, these regulations specify that the physician must be present
in the PBD or in the office suite, respectively. Thus, we have
previously established that direct supervision requires immediate
physical presence. While we also have not specifically defined the word
``immediate'' for direct supervision in terms of time or distance, the
general definition of the word means ``without interval of time.''
Therefore, the supervisory physician or nonphysician practitioner could
not be immediately available while, for example, performing another
procedure or service that he or she could not interrupt. In addition,
we understand that advances in medical technology, changes in the
patterns of health care delivery, and changes in the organizational
structure of hospitals have led to the development of extensive
hospital campuses, sometimes spanning several city blocks. However, in
the context of direct physician or nonphysician practitioner
supervision, we believe that it would be neither appropriate nor
``immediate'' for the supervisory physician or nonphysician
practitioner to be so physically far away on the main campus from the
location where hospital outpatient services are being furnished that he
or she could not intervene right away. As we stated in the CY 2009
OPPS/ASC final rule with comment period (73 FR 68703), if there were
problems with outpatient care in a hospital or in an on-campus PBD
where the requirement for direct supervision was not met, we would
consider that to be a quality concern. Appropriate supervision is a key
aspect of the delivery of safe and high quality hospital outpatient
services that are paid under Medicare.
In addition, the definition of direct supervision in existing Sec.
410.27(f) has included and would continue to specify under our CY 2010
proposal that the physician or nonphysician practitioner must be
available to furnish assistance and direction throughout the
performance of the procedure. This means that the physician or
nonphysician practitioner must be prepared to step in and perform the
service, not just to respond to an emergency. This includes the ability
to take over performance of a procedure and, as appropriate to both the
supervisory physician or nonphysician practitioner and the patient, to
change a procedure or the course of treatment being provided to a
particular patient. We originally stated in the April 2000 OPPS final
rule (65 FR 18525) that the physician does not ``necessarily need to be
of the same specialty as the procedure or service that is being
performed.'' We also have stated in manual guidance that hospital
medical staff that supervises the services ``need not be in the same
department as the ordering physician'' (section 20.5.1 of chapter 6 of
the Medicare Benefits Policy Manual). However, in order to furnish
appropriate assistance and direction for any given service or
procedure, we believe the supervisory physician or nonphysician
practitioner must have, within his or her State scope of practice and
hospital-granted privileges, the ability to perform the service or
procedure.
We are proposing no significant changes to the definition or
requirements for direct supervision in off-campus PBDs of the hospital
other than to allow nonphysician practitioners to provide direct
supervision in these PBDs for the services that these practitioners may
perform. With respect to off-campus PBDs of hospitals, direct
supervision will continue to mean that the physician or nonphysician
practitioner must be in the off-campus PBD and immediately available to
furnish assistance and direction throughout the performance of the
procedure. We are proposing to revise existing Sec. 410.27(f) by
redesignating it as Sec. 410.27(a)(1)(iv)(B) and making a technical
change to clarify the current language by removing ``present and on the
premises of the location'' and replacing it with ``present in the off-
campus provider-based department.'' While the meaning of this provision
is the same, we believe this proposed modification to the language
defining direct supervision is more consistent with the language of the
other proposed changes to Sec. 410.27. As we clarified in the CY 2009
OPPS/ASC final rule with comment period (73 FR 68704), the supervisory
physician for hospital outpatient therapeutic services must be in each
PBD of a particular off-campus remote location, but that does not mean
that the physician must be in the room when the procedure is performed.
In the April 2000 OPPS final rule (65 FR 18525), we responded to public
commenters who asserted that requiring a physician to be onsite at a
PBD throughout the performance of all ``incident to'' (therapeutic)
services would be burdensome and costly for hospitals where there are a
limited number of physicians available to provide coverage,
particularly in rural settings. We disagreed then that the supervision
requirement was unnecessary and burdensome because hospitals, prior to
2000, were already required to ``meet a direct supervision of `incident
to' services requirement that is unrelated to the provider-based rules.
That is, we require that hospital services and supplies furnished to
outpatients that are incident to physician services be furnished on a
physician's order by hospital personnel and under a physician's
supervision'' (section 3112.4 of the Medicare Intermediary Manual). In
addition, when we discussed the ``assumption'' or expectation that the
physician supervision requirement is

[[Page 35368]]

met on the hospital's main campus in the April 2000 OPPS final rule (65
FR 18525), we specifically did not extend that assumption to off-campus
departments of the hospital. We continue to believe that it would be
inappropriate to allow one physician or nonphysician practitioner to
supervise all services being provided in all PBDs at a particular off-
campus remote location. Since first allowing off-campus sites to be
considered PBDs of hospitals, we have placed particular emphasis on
ensuring the quality and safety of the services provided in these
locations, which can be many miles from the main hospital campus,
through both additional provider-based requirements in Sec. 413.65(e)
and our emphasis on direct physician supervision under Sec. 410.27(f).
In addition, because the physician or nonphysician practitioner must be
immediately available and have, within his or her State scope of
practice and hospital-granted privileges, the ability to perform the
services being supervised, we believe it would be highly unlikely that
one physician or nonphysician practitioner would be both immediately
available at all times that therapeutic services are being provided and
would have the knowledge and ability to adequately supervise all
services being performed at once in multiple off-campus PBDs.
To reflect these proposed changes for the provision of direct
supervision of therapeutic services provided to hospital outpatients in
our regulations, we are proposing to revise the language of the
existing Sec. 410.27(f) and redesignate it as a new paragraph
(a)(1)(iv) of Sec. 410.27 to specify that direct physician or
nonphysician practitioner supervision of hospital outpatient
therapeutic services is required for Medicare Part B payment. We are
proposing to add a new paragraph (a)(1)(iv)(A) to Sec. 410.27 to state
that, for services provided on the hospital's main campus, direct
supervision means that the physician or nonphysician practitioner must
be present on the same campus, in the hospital or on-campus PBD of the
hospital, as defined in Sec. 413.65, and immediately available to
furnish assistance and direction throughout the performance of the
procedure. It does not mean that the physician or nonphysician
practitioner must be in the room when the procedure is performed. We
also are proposing to add new paragraph (a)(1)(iv)(B) to Sec. 410.27
to reflect that, for off-campus PBDs of hospitals, the physician or
nonphysician practitioner must be present in the off-campus PBD, as
defined in Sec. 413.65, and immediately available to furnish
assistance and direction throughout the performance of the procedure.
It does not mean that the physician or nonphysician practitioner must
be in the room when the procedure is performed. As we stated
previously, the proposed language of paragraph (a)(1)(iv)(B) is similar
to existing Sec. 410.27(f) that we are proposing to revise and
redesignate. Furthermore, we are proposing to make a technical change
to clarify the language in this paragraph to remove ``present and on
the premises of the location'' and replace it with ``present in the
off-campus provider-based department.'' Also, as discussed above in
section XII.B.4 of this proposed rule and as proposed in the CY 2010
MPFS proposed rule, the direct supervision of CR, ICR, and PR services
must be furnished by a doctor of medicine or osteopathy, as specified
in proposed Sec. Sec. 410.47 and 410.49, respectively. We are
proposing to include this exception in proposed paragraphs
(a)(1)(iv)(A) and (a)(1)(iv)(B) in Sec. 410.27. In addition, we are
proposing to add a new paragraph (f) to Sec. 410.27 to define a
nonphysician practitioner for purposes of Sec. 410.27 as a clinical
psychologist, a physician assistant, a nurse practitioner, a clinical
nurse specialist, or a certified nurse-midwife. Proposed new Sec.
410.27(a)(1)(iv) would provide that these nonphysician practitioners
may directly supervise services that they could furnish themselves in
accordance with State law and within their scope of practice and
hospital-granted privileges, as long as all requirements for coverage,
including the physician supervision or collaboration for these
nonphysician practitioners, are met in accordance with Sec. Sec.
410.71, 410.74, 410.75, 410.76, and 410.77, respectively. We also are
proposing to define ``in the hospital'' in new paragraph Sec.
410.27(g) to mean areas in the main building(s) of the hospital that
are under the ownership, financial, and administrative control of the
hospital; that are operated as part of the hospital; and for which the
hospital bills the services furnished under the hospital's CCN.
Finally, we are proposing to make a technical correction to the title
of Sec. 410.27 to read, ``Outpatient hospital or CAH services and
supplies incident to a physician service: Conditions'' to clarify in
the title that the requirements for payment of hospital outpatient
therapeutic services incident to a physician or nonphysician
practitioner service in that section apply to both hospitals and CAHs.
Similarly, we are proposing to include the phrase ``hospital or CAH''
throughout the text of Sec. 410.27 wherever the text currently refers
just to ``hospital.'' The omission of the term ``CAH'' from Sec.
410.27 was a drafting oversight. However, we have applied the
requirements of Sec. 410.27, including ``incident to'' requirements
such as the site-of-service requirement and physician supervision as
well as other hospital policies, such as the bundling rules, to CAHs,
just as we have in 42 CFR Part 409 (Subparts A through D and F through
H) and Sec. 410.28 and Sec. 413.65 of the regulations where CAHs are
explicitly mentioned.
4. Proposed Policies for Direct Supervision of Hospital and CAH
Outpatient Diagnostic Services
As we discussed in detail in section XII.D.1. of this proposed
rule, with respect to the physician supervision requirements for
individual diagnostic tests, we have continued since the April 2000
OPPS final rule discussion (65 FR 18526) to instruct hospitals that,
for diagnostic services furnished in PBDs of hospitals, hospitals
should follow the supervision requirements for individual diagnostic
tests as listed in the MPFS Relative Value File. For diagnostic
services not listed in the MPFS file, Medicare contractors, in
consultation with their medical directors, define appropriate
supervision levels in order to determine whether claims for these
services are reasonable and necessary. To further specify the
supervision policy across service settings and to provide consistency
for all hospital outpatient diagnostic services, for CY 2010 we are
proposing to require that all hospital outpatient diagnostic services
that are provided directly or under arrangement, whether provided in
the main buildings of the hospital, in a PBD, or at a nonhospital
location, follow the physician supervision requirements for individual
tests as listed in the MPFS Relative Value File. We also are proposing
that the definitions of general, direct, and personal supervision as
defined in Sec. Sec. 410.32(b)(3) (i) through (b)(3)(iii) would also
apply. In the case of direct supervision of diagnostic services
furnished directly by the hospital or under arrangement in the main
hospital buildings or on-campus in a PBD, we are proposing that the
definition of direct supervision would be the same as the definition we
are proposing for therapeutic services provided on-campus as discussed
in section XII.D.3. of this proposed rule, meaning that the physician
would be present on the same campus, in the hospital or the on-campus
PBD of the hospital, as defined in Sec. 413.65, and immediately
available to furnish

[[Page 35369]]

assistance and direction throughout the performance of the procedure.
In addition, the definition of ``in the hospital'' as defined in
proposed Sec. 410.27(g), discussed above, would apply. This means that
the supervisory physician may not be located in any entity such as a
physician's office, co-located hospital, IDTF, or hospital-operated
provider or supplier such as a SNF, ESRD facility, or HHA, or any other
nonhospital space that may be co-located on the hospital's campus, as
campus is defined in Sec. 413.65(a)(2).
Similarly, in the case of direct physician supervision of
diagnostic services furnished directly or under arrangement in an off-
campus PBD, we are proposing that the definition of direct supervision
would be the same as the current definition for therapeutic services
provided in an off-campus PBD as discussed in section XII.D.3. of this
proposed rule, meaning the physician must be present in the off-campus
PBD, as defined in Sec. 413.65 and immediately available to furnish
assistance and direction throughout the performance of the procedure.
As we discussed in the April 2000 OPPS final rule (65 FR 18524 through
18525) and the CY 2009 OPPS/ASC final rule with comment period (73 FR
68702 through 68704), we have long made the analogy of the PBD to the
physician's office suite, as described in the definition of direct
supervision in Sec. 410.32(b)(3)(ii).
In addition to providing diagnostic services directly or under
arrangement in the hospital, including provider-based departments of
the hospital, a hospital may also send its outpatients to another
entity, such as an IDTF, to furnish these services under arrangement
for the hospital. For example, in the April 2000 OPPS final rule (65 FR
185440 through 185441), in a discussion of the hospital bundling rules,
we discussed that an entity, like an IDTF, may be located in the main
buildings of a hospital or on the hospital campus but operated
independently of the hospital. In addition, these suppliers, providers,
or other entities may be located elsewhere, not on hospital's main
campus or other hospital property. These entities, like IDTFs and
physicians' offices, may provide services to their own patients (not
hospital outpatients) and to hospital outpatients under arrangements
with the hospital. They follow the physician supervision requirements
of the MPFS and Sec. 410.32 when providing services to Medicare
beneficiaries who are not hospital outpatients. For consistency, we are
proposing for CY 2010 that all diagnostic services provided to hospital
outpatients under arrangement in nonhospital entities, whether those
entities are located on the main campus of the hospital or elsewhere,
would also follow the requirements as described in Sec.
410.32(b)(3)(i) through (iii). When hospitals contract with other
entities to provide services under arrangement, the hospital must
exercise professional responsibility over the arrangement for services,
in accordance with the guidance provided in the section 10.3 of chapter
5 of the Medicare General Information, Eligibility and Entitlement
Manual (Pub 100-1). This means that for the hospital to receive
payment, it is responsible for ensuring that all applicable
requirements in Sec. Sec. 410.28 and 410.32 are met. In the case of
hospital outpatient diagnostic services provided under arrangement at
nonhospital locations, such as IDTFs, we believe that the term ``office
suite'' used in Sec. 410.32(b)(3)(ii) is directly applicable because
these facilities usually also provide diagnostic services to their own
patients and, therefore, would be able to apply the direct supervision
requirement in Sec. 410.32(b)(3)(ii) without further definition.
Physician assistants, nurse practitioners, clinical nurse
specialists, and certified nurse-midwives who operate within the scope
practice under State law may order and perform diagnostic tests, as
discussed in Sec. 410.32(a)(3) and corresponding manual guidance in
section 80 of chapter 15 of the Medicare Benefit Policy Manual.
However, this manual guidance and the regulation at Sec. 410.32(b)(1)
also state that diagnostic x-ray and other diagnostic tests must be
furnished under the appropriate level of supervision by a physician as
defined in section 1861(r) of the Act. Thus, physician assistants,
nurse practitioners, clinical nurse specialists, and certified nurse-
midwives may not function as supervisory physicians for the purposes of
diagnostic tests. In keeping with these existing requirements, we are
not proposing to allow physician assistants, nurse practitioners,
clinical nurse specialists, and certified nurse-midwives to provide the
supervision of diagnostic tests provided to hospital outpatients.
Clinical psychologists may supervise only diagnostic psychological and
neuropsychological testing services as described in an exception to the
basic rule at Sec. 410.32(b)(2)(iii) for diagnostic psychological and
neuropsychological testing services, when these services are personally
furnished by a clinical psychologist or an independently practicing
psychologist or when they are furnished under the general supervision
of a physician or clinical psychologist.
To reflect these proposed changes for the provision of direct
supervision of diagnostic services provided to hospital outpatients in
the regulations, we are proposing to revise existing Sec. 410.28(e).
First, we are proposing to specify that the provisions of proposed
revised paragraph (e) apply to diagnostic services furnished by the
hospital, directly or under arrangement, consistent with our proposal
to apply the existing diagnostic services supervision requirement for
PBDs to diagnostic services provided directly by the hospital or under
arrangement. We would continue to specify that the definitions of
general and personal physician supervision included in Sec.
410.32(b)(3)(i) and (b)(3)(iii) apply to these levels of supervision of
hospital outpatient diagnostic services. Furthermore, we are proposing
to add new paragraph (e)(1) to Sec. 410.28 to indicate that, for
services furnished directly or under arrangement, in the hospital or in
an on-campus department of a provider, as defined in Sec. 413.65,
direct supervision means that the physician must be present on the same
campus, in the hospital or PBD of the hospital as defined in Sec.
413.65, and immediately available to furnish assistance and direction
throughout the performance of the procedure. We also would continue to
provide that direct supervision does not mean that the physician must
be in the room when the procedure is performed. As discussed above, we
would apply the definition of ``in the hospital'' as proposed in Sec.
410.27(g) of the regulations. In addition, we are proposing to add new
paragraph (e)(2) to Sec. 410.28 to reflect that, for the direct
physician supervision of diagnostic services furnished directly or
under arrangement in off-campus PBDs of hospitals, the physician must
present in the off-campus PBD, as defined in Sec. 413.65, and
immediately available to furnish assistance and direction throughout
the performance of the procedure. We would continue to provide that
direct supervision does not mean that the physician must be in the room
when the procedure is performed. Finally, we are proposing to add new
paragraph (e)(3) to specify that for the direct supervision of hospital
outpatient services provided under arrangement in physicians' offices
and other nonhospital locations, the definition of direct supervision
in Sec. 410.32(b)(3)(ii) applies.

[[Page 35370]]

5. Summary of CY 2010 Physician Supervision Proposals
In summary, for CY 2010, we are proposing that nonphysician
practitioners, defined for the purpose of Sec. 410.27 of the
regulations as clinical psychologists, physician assistants, nurse
practitioners, clinical nurse specialists, and certified nurse-
midwives, may directly supervise all hospital outpatient therapeutic
services that they may perform themselves within their State scope of
practice and hospital-granted privileges, provided that they meet all
additional requirements, including any collaboration or supervision
requirements as specified in Sec. Sec. 410.71, 410.74, 410.75, 410.76,
and 410.77. However, nonphysician practitioners may not provide the
direct supervision of CR, ICR, and PR services, since we have also
proposed in the CY 2010 MPFS proposed rule that the direct supervision
of CR, ICR, and PR services must be furnished by a doctor of medicine
or osteopathy, as specified in proposed Sec. Sec. 410.47 and 410.49,
respectively. We also are proposing to refine the definition of the
direct supervision of hospital outpatient therapeutic services for
those services provided in the hospital and in an on-campus PBD of the
hospital. For services provided in the hospital and in an on-campus PBD
of the hospital, direct supervision would mean that the physician or
nonphysician practitioner must be present on the same campus, in the
hospital or the on-campus PBD of the hospital or CAH, as defined in
Sec. 413.65, and immediately available to furnish assistance and
direction throughout the performance of the procedure. We also are
proposing to define ``in the hospital'' in new paragraph Sec.
410.27(g) to mean areas in the main building(s) of a hospital or CAH
that are under the ownership, financial, and administrative control of
the hospital or CAH; that are operated as part of the hospital or CAH;
and for which the hospital or CAH bills the services furnished under
the hospital's or CAH's CCN. We are proposing no significant change to
the definition or requirements for direct supervision of hospital
outpatient therapeutic services provided in off-campus PBDs of a
hospital or CAH other than to allow nonphysician practitioners to
provide direct supervision for the services that they may perform in
those locations.
For CY 2010, we are proposing to require that all hospital
outpatient diagnostic services provided directly or under arrangement,
whether provided in the hospital, in a PBD, or at a nonhospital
location, follow the physician supervision requirements for individual
tests as listed in the MPFS Relative Value File. The existing
definitions of general and personal supervision as defined in Sec.
410.32(b)(3)(i) and (iii) would also apply. For services furnished
directly or under arrangement in the hospital or on-campus PBD, direct
supervision would mean that the physician must be present on the same
campus, in the hospital or on-campus PBD of the hospital, and
immediately available to furnish assistance and direction throughout
the performance of the procedure. For this purpose, the definition of
``in the hospital'', as proposed in Sec. 410.27(g), would apply. For
diagnostic services furnished directly or under arrangement off-campus
in a PBD of the hospital, direct supervision would mean that the
physician must be present in the off-campus PBD and immediately
available to furnish assistance and direction throughout the
performance of the procedures. For all hospital outpatient diagnostic
services provided under arrangement in nonhospital locations, such as
IDTFs and physicians' offices, the existing definition of direct
supervision Sec. 410.32(b)(3)(ii) would apply. We are proposing to
revise Sec. Sec. 410.27 and 410.28 of the regulations to reflect these
changes as discussed under sections XII.D.3. and 4. of this proposed
rule.

E. Direct Referral for Observation Services

Since CY 2003, hospitals have reported a Level II HCPCS code for
Medicare billing purposes for a ``direct admission'' to a hospital for
outpatient observation services. In section 290 of Chapter 4 of the
Medicare Claims Processing Manual (Publication 100-4), we define a
``direct admission'' as the direct referral of a patient by a community
physician to a hospital for observation services without an associated
emergency room visit, hospital outpatient clinic visit, critical care
service, or hospital outpatient surgical procedure (that is, a status
indicator ``T'' procedure) on the day of the initiation of observation
services. Since CY 2006, we have instructed hospitals to report a
``direct admission'' referred for observation services using HCPCS code
G0379 (Direct admission of patient for hospital observation care) (70
FR 68688 through 68691).
Observation care is a hospital outpatient service that is reported
using HCPCS code G0378 (Hospital observation services, per hour).
Hospitals report outpatient observation services, which are commonly
provided in association with a hospital clinic visit, emergency
department visit, or other major service, on hospital outpatient
claims, just like other outpatient services. Physicians order
observation care, defined as clinically appropriate services, including
ongoing short-term treatment, assessment, and reassessment furnished in
order for the physician to determine whether the beneficiary will
require further treatment as an inpatient or whether the beneficiary
may be safely discharged from the hospital.
We have become aware that, because the word ``admission'' is
generally used in reference to inpatient hospital care, our historical
use of the phrase ``direct admission'' in the code descriptor for HCPCS
code G0379 and the use of the phrase ``observation status'' in the
Medicare Claims Processing Manual (Chapter 4, section 290) and the
Medicare Benefit Policy Manual (Chapter 6, section 20) may be
contributing to confusion for hospitals and beneficiaries related to a
beneficiary's status as an inpatient or an outpatient when he or she is
receiving observation services. For Medicare payment purposes, there is
no patient status termed ``observation status.'' Hospitals may only
bill for items and services furnished to inpatients, outpatients, or
nonpatients. We believe that using terminology such as ``observation
status'' or ``admission to observation'' may be confusing for
physicians, hospitals, and beneficiaries. Therefore, for CY 2010, we
are proposing to modify the code descriptor for HCPCS code G0379 to
remove the reference to the word ``admission'' and to replace it with
``referral.'' The proposed long code descriptor for HCPCS code G0379
would be ``Direct referral for hospital observation care.'' We are
proposing this change to more accurately reflect that the physician in
the community has referred the beneficiary to the hospital for
observation services as a hospital outpatient. In addition to the
proposed CY 2010 change to the code descriptor for HCPCS code G0379 in
this proposed rule, we plan to modify the Medicare Claims Processing
Manual and the Medicare Benefit Policy Manual to remove references
related to ``admission'' for observation services or ``observation
status.'' We are not proposing to change the status indicator or
payment methodology for HCPCS code G0379 for CY 2010. Instead, we are
proposing to continue the payment policy that was finalized for the CY
2009 OPPS (73 FR 68554). HCPCS code G0379 is assigned status indicator
``Q3,''

[[Page 35371]]

indicating that it is eligible for payment through APC 8002 (Level I
Extended Assessment & Management Composite) when certain criteria are
met or through APC 0604 (Level I Hospital Clinic Visits) when other
criteria are met; otherwise, its payment is packaged into payment for
other separately payable services in the same encounter. 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.

XIII. Proposed OPPS Payment Status and Comment Indicators

A. Proposed OPPS Payment Status Indicator Definitions

The OPPS payment status indicators (SIs) that we assign to HCPCS
codes and APCs play an important role in determining payment for
services under the OPPS. They indicate whether a service represented by
a HCPCS code is payable under the OPPS or another payment system and
also whether particular OPPS policies apply to the code. Our CY 2010
proposed status indicator assignments for APCs and HCPCS codes are
shown in Addendum A and Addendum B, respectively, to this proposed
rule. For CY2010, we are only proposing to change the definitions of
status indicators ``H'' and ``K.'' We are not proposing any changes to
the other status indicators that were listed in Addendum D1 of the CY
2009 OPPS/ASC final rule with comment period. These status indicators
are listed in the tables under sections XIII.A.1., 2., 3., and 4. of
this proposed rule.
1. Proposed Payment Status Indicators To Designate Services That Are
Paid Under the OPPS
BILLING CODE 4120-01-P

[[Page 35372]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.326

[[Page 35373]]

[GRAPHIC] [TIFF OMITTED] TP20JY09.327

BILLING CODE 4120-01-C
Section 142 of Public Law 110-275 (MIPPA) required CMS to pay for
therapeutic radiopharmaceuticals for the period of July 1, 2008,
through December 31, 2009, at hospitals' charges adjusted to the costs.
The status indicator ``H'' was assigned to therapeutic
radiopharmaceuticals to indicate that an item was paid at charges
adjusted to cost during CY 2009. For CY 2010, we are proposing to pay
prospectively and separately for therapeutic radiopharmaceuticals with
average per day costs greater than the proposed CY 2010 drug packaging
threshold of $65 under the OPPS. Therefore, we are proposing to change
the status indicator for HCPCS codes used to report separately payable
therapeutic radiopharmaceuticals from ``H'' to ``K,'' which indicates
that an item is separately paid under the OPPS at the APC payment rate
established for the item. We refer readers to section V.B.4. of this
proposed rule for the discussion of the proposed CY 2010 change to our
payment policy for therapeutic radiopharmaceuticals.
As discussed in detail in section V.A.4. of this proposed rule, we
are proposing to consider implantable biologicals that are not on pass-
through status as a biological before January 1, 2010, as devices
beginning in CY 2010. Therefore, as devices, pass-through implantable
biologicals would be assigned a status indicator of ``H,'' while
nonpass-through implantable biologicals would be assigned a status
indicator of ``N'' beginning in CY 2010. Those implantable biologicals
that have been granted pass-through status under the drug and
biological criteria prior to January 1, 2010, would continue to be
assigned a status indicator of ``G'' until they are proposed for
expiration from pass-through status during our annual rulemaking cycle.
We are proposing to assign status indicator ``K'' to nonimplantable
biologicals and to adjust the definition of status indicator ``K''
accordingly.
2. Proposed Payment Status Indicators To Designate Services That Are
Paid Under a Payment System Other Than the OPPS

[[Page 35374]]

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

3. Proposed Payment Status Indicators To Designate Services That Are
Not Recognized under the OPPS But That May Be Recognized by Other
Institutional Providers

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

4. Proposed Payment Status Indicators To Designate Services That Are
Not Payable by Medicare on Outpatient Claims

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

Addendum B, with a complete listing of HCPCS codes that includes
their proposed payment status indicators and proposed APC assignments
for CY 2010, is available electronically on the CMS Web site under
supporting documentation for this proposed rule at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage.

B. Proposed Comment Indicator Definitions

For the CY 2010 OPPS, we are proposing to use the two comment
indicators that are in effect for the CY 2009 OPPS.
``CH''--Active HCPCS codes in current and next calendar
year; status indicator and/or APC assignment have changed or active
HCPCS code that will be discontinued at the end of the current calendar
year.
``NI''--New code, interim APC assignment; comments will be
accepted

[[Page 35375]]

on the interim APC assignment for the new code.
We are proposing to use the ``CH'' comment indicator in the CY 2010
OPPS/ASC final rule with comment period to indicate HCPCS codes for
which the status indicator or APC assignment, or both, would change in
CY 2010 compared to their assignment as of December 31, 2009.
We are using the ``CH'' indicator in this proposed rule to call
attention to proposed changes in the payment status indicator and/or
APC assignment for HCPCS codes for CY 2010 compared to their assignment
as of June 30, 2009. We believe that using the ``CH'' indicator in this
proposed rule would help facilitate the public's review of the changes
that we are proposing for CY 2010. The use of the comment indicator
``CH'' in association with a composite APC indicates that the
configuration of the composite APC is proposed for change in this
proposed rule.
For the CY 2010 OPPS, we are proposing to continue our policy of
using comment indicator ``NI'' in the CY 2010 OPPS/ASC final rule with
comment period. Only HCPCS codes with comment indicator ``NI'' in the
CY 2010 OPPS/ASC final rule with comment period would be subject to
comment. We are proposing that HCPCS codes that do not appear with
comment indicator ``NI'' in the CY 2010 OPPS/ASC final rule with
comment period would not be open to public comment, unless we
specifically request additional comments elsewhere in the CY 2010 OPPS/
ASC final rule with comment period. The CY 2010 treatment of HCPCS
codes that appear in the CY 2010 OPPS/ASC final rule with comment
period to which comment indicator ``NI'' is not appended will have been
open to public comment during the comment period for this proposed
rule.

XIV. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

MedPAC was established under section 1805 of the Act to advise the
U.S. Congress on issues affecting the Medicare program. As required
under the statute, MedPAC submits reports to Congress not later than
March and June of each year that present its Medicare payment policy
recommendations. The following section describes recent recommendations
relevant to the OPPS that have been made by MedPAC.
The March 2009 MedPAC ``Report to Congress: Medicare Payment
Policy'' included the following recommendation relating specifically to
the Medicare hospital OPPS:
Recommendation 2A-1: The Congress should increase payment rates for
the acute inpatient and outpatient prospective payment systems in 2010
by the projected rate of increase in the hospital market basket index,
concurrent with implementation of a quality incentive payment program.
CMS Response: We are proposing to increase payment rates for the CY
2010 OPPS by the projected rate of increase in the hospital market
basket through adjustment of the full CY 2010 conversion factor.
Simultaneously, we are proposing for CY 2010 to continue to reduce the
annual update factor by 2.0 percentage points for hospitals that are
defined under section 1886(d)(1)(B) of the Act and that do not meet the
hospital outpatient quality data reporting required by section
1833(t)(17) of the Act. Specifically, we are proposing to calculate two
conversion factors, a full conversion factor based on the full hospital
market basket increase and a reduced conversion factor that reflects
the 2.0 percentage point reduction to the market basket. We discuss our
proposed update of the conversion factor and our proposed adoption and
implementation of the reduced conversion factor that would apply to
hospitals that fail their quality reporting requirements for the full
CY 2010 OPPS update in section XVI of this proposed rule.
The full March 2009 MedPAC report can be downloaded from MedPAC's
Web site at: http://www.medpac.gov/documents/Mar09_EntireReport.pdf.

B. APC Panel Recommendations

Recommendations made by the APC Panel at its February 2009 meeting
are discussed in the sections of this proposed rule that correspond to
topics addressed by the APC Panel. The report and recommendations from
the APC Panel's February 18-19, 2009 meeting are available on the CMS
Web site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp .

C. OIG Recommendations

The mission of the Office of the Inspector General (OIG), as
mandated by Public Law 95-452, as amended, is to protect the integrity
of the U.S. Department of Health and Human Services (HHS) programs, as
well as the health and welfare of beneficiaries served by those
programs. This statutory mission is carried out through a nationwide
network of audits, investigations, and inspections. In June 2007, the
OIG released a report, entitled ``Impact of Not Retroactively Adjusting
Outpatient Outlier Payments,'' that described the OIG's research into
sources of errors in CMHC outlier payments. The OIG report included the
following two recommendations relating specifically to the hospital
OPPS under which payment is made for outpatient services provided by
CMHCs.
Recommendation 1: The OIG recommended that CMS require adjustments
of outpatient outlier payments at final cost report settlement,
retroactive to the beginning of the cost report period.
Recommendation 2: The OIG recommended that CMS require retroactive
adjustments of outpatient outlier payments when an error caused by the
fiscal intermediary or provider is identified after a cost report is
settled.
We addressed both of these recommendations in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68594). We noted in that final
rule that the OIG's findings were based largely on information from the
OPPS' early implementation period, between CY 2000 and CY 2003, and
that we believed we had taken several steps since that time in order to
improve the accuracy and frequency of the Medicare contractors' CCR
calculations, including updating our instructions for calculating CCRs,
increasing the frequency of CCR calculation, and conducting an annual
review of CMHC CCRs.
However, taking into account these OIG recommendations, we proposed
and finalized a policy to provide for reconciliation of outlier
payments under the OPPS at final cost report settlement as recommended
by the OIG, beginning in CY 2009. We discuss our rationale for this
policy in detail in section II.F.4. of the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68594 through 68599).
There are no more recent OIG recommendations that pertain to the
OPPS than the June 2007 recommendations.

XV. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment
System

A. Background

1. Legislative Authority for the ASC Payment System
Section 1832(a)(2)(F)(i) of the Act provides that benefits under
Medicare Part B include payment for facility services furnished in
connection with surgical procedures specified by the Secretary that are
performed in an ASC. To participate in the Medicare program as an ASC,
a facility must meet the standards specified in section

[[Page 35376]]

1832(a)(2)(F)(i) of the Act, which are set forth in 42 CFR Part 416,
Subpart B and Subpart C of our regulations. The regulations at 42 CFR
Part 416, Subpart B describe the general conditions and requirements
for ASCs, and the regulations at Subpart C explain the specific
conditions for coverage for ASCs.
Section 141(b) of the Social Security Act Amendments of 1994,
Public Law 103-432, required establishment of a process for reviewing
the appropriateness of the payment amount provided under section
1833(i)(2)(A)(iii) of the Act for intraocular lenses (IOLs) that belong
to a class of new technology intraocular lenses (NTIOLs). That process
was the subject of a final rule entitled ``Adjustment in Payment
Amounts for New Technology Intraocular Lenses Furnished by Ambulatory
Surgical Centers,'' published on June 16, 1999, in the Federal Register
(64 FR 32198).
Section 626(b) of the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA), Public Law 108-173, added subparagraph
(D) to section 1833(i)(2) of the Act, which required the Secretary to
implement a revised ASC payment system to be effective not later than
January 1, 2008. Section 626(c) of the MMA amended section 1833(a)(1)
of the Act by adding new subparagraph (G), which requires that,
beginning with implementation of the revised ASC payment system,
payment for surgical procedures furnished in ASCs shall be 80 percent
of the lesser of the actual charge for the services or the amount
determined by the Secretary under the revised payment system.
Section 5103 of the Deficit Reduction Act of 2005 (DRA), Public Law
109-171, amended section 1833(i)(2) of the Act by adding a new
subparagraph (E) to place a limitation on payment amounts for surgical
procedures furnished in ASCs on or after January 1, 2007, but before
the effective date of the revised ASC payment system (that is, January
1, 2008). Section 1833(i)(2)(E) of the Act provides that if the
standard overhead amount under section 1833(i)(2)(A) of the Act for an
ASC facility service for such surgical procedures, without application
of any geographic adjustment, exceeds the Medicare payment amount under
the hospital OPPS for the service for that year, without application of
any geographic adjustment, the Secretary shall substitute the OPPS
payment amount for the ASC standard overhead amount.
Section 109(b) of the Medicare Improvements and Extension Act of
2006 of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA), Public
Law 109-432, amended section 1833(i) of the Act, in part, by
redesignating clause (iv) as clause (v) and adding a new clause (iv) to
paragraph (2)(D) and adding paragraph (7)(A), which provide the
Secretary the authority to require ASCs to submit data on quality
measures and to reduce the annual update by 2 percentage points for an
ASC that fails to submit data as required by the Secretary on selected
quality measures. Section 109(b) of the MIEA-TRHCA also amended section
1833(i) of the Act by adding new paragraph (7)(B), which requires that,
to the extent the Secretary establishes such an ASC quality reporting
program, certain quality of care reporting requirements mandated for
hospitals paid under the OPPS, under section 109(a) of the MIEA-TRHCA,
be applied in a similar manner to ASCs unless otherwise specified by
the Secretary.
For a detailed discussion of the legislative history related to
ASCs, we refer readers to the June 12, 1998 proposed rule (63 FR 32291
through 32292).
2. Prior Rulemaking
On August 2, 2007, we published in the Federal Register (72 FR
42470) the final rule for the revised ASC payment system, effective
January 1, 2008 (the ``August 2, 2007 final rule''). We revised our
criteria for identifying surgical procedures that are eligible for
Medicare payment when furnished in ASCs and adopted the method we would
use to set payment rates for ASC covered surgical procedures and
covered ancillary services furnished in association with those covered
surgical procedures beginning in CY 2008. In that final rule, we also
established a policy for updating on an annual calendar year basis the
ASC conversion factor, the relative payment weights, the ASC payment
rates, and the list of procedures for which Medicare would not make an
ASC payment. We also established a policy for treating new and revised
HCPCS and CPT codes under the ASC payment system. This policy is
consistent with the OPPS to the extent possible (72 FR 42533).
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66827), we updated and finalized the CY 2008 ASC rates and lists of
covered surgical procedures and covered ancillary services. We also
made regulatory changes to 42 CFR Parts 411, 414, and 416 related to
our final policies to provide payments to physicians who perform
noncovered ASC procedures in ASCs based on the facility practice
expense (PE) relative value units (RVUs), to exclude covered ancillary
radiology services and covered ancillary drugs and biologicals from the
categories of designated health services (DHS) that are subject to the
physician self-referral prohibition, and to reduce ASC payments for
surgical procedures when the ASC receives full or partial credit toward
the cost of the implantable device. In the CY 2009 OPPS/ASC final rule
with comment period (73 FR 68722), we updated and finalized the CY 2009
ASC rates and lists of covered surgical procedures and covered
ancillary services.
3. Policies Governing Changes to the Lists of Codes and Payment Rates
for ASC Covered Surgical Procedures and Covered Ancillary Services
The August 2, 2007 final rule established our policies for
determining which procedures are ASC covered surgical procedures and
covered ancillary services. Under Sec. Sec. 416.2 and 416.166 of the
regulations, subject to certain exclusions, covered surgical procedures
are surgical procedures that are separately paid under the OPPS, that
would not be expected to pose a significant risk to beneficiary safety
when performed in an ASC, and that would not be expected to require
active medical monitoring and care at midnight following the procedure
(``overnight stay''). We adopted this standard for defining which
surgical procedures are covered surgical procedures under the ASC
payment system as an indicator of the complexity of the procedure and
its appropriateness for Medicare payment in ASCs. We use this standard
only for purposes of evaluating procedures to determine whether or not
they are appropriate for Medicare beneficiaries in ASCs. We define
surgical procedures as those described by Category I CPT codes in the
surgical range from 10000 through 69999, as well as those Category III
CPT codes and Level II HCPCS codes that crosswalk or are clinically
similar to ASC covered surgical procedures (72 FR 42478). We note that
we added over 800 surgical procedures to the list of covered surgical
procedures for ASC payment in CY 2008, the first year of the revised
ASC payment system, based on the criteria for payment that we adopted
in the August 2, 2007 final rule as described above in this section.
Patient safety and health outcomes continue to be important to us as
more health care moves to the ambulatory care setting. Therefore, as we
gain additional experience with the ASC payment system, we are
interested in any information the public may have regarding the
comparative patient

[[Page 35377]]

outcomes of surgical care provided in ambulatory settings, including
HOPDs, ASCs, and physicians' offices, particularly with regard to the
Medicare population.
In the August 2, 2007 final rule, we also established our policy to
make separate ASC payments for the following ancillary items and
services when they are provided integral to ASC covered surgical
procedures: brachytherapy sources; certain implantable items that have
pass-through status under the OPPS; certain items and services that we
designate as contractor-priced, including, but not limited to,
procurement of corneal tissue; certain drugs and biologicals for which
separate payment is allowed under the OPPS; and certain radiology
services for which separate payment is allowed under the OPPS. These
covered ancillary services are specified in Sec. 416.164(b) and, as
stated previously, are eligible for separate ASC payment (72 FR 42495).
Payment for ancillary items and services that are not paid separately
under the ASC payment system is packaged into the ASC payment for the
covered surgical procedure.
The full CY 2009 lists of ASC covered surgical procedures and
covered ancillary services are included in Addenda AA and BB,
respectively, to the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68840 through 68933 and 69270 through 69308).
We update the lists of, and payment rates for, covered surgical
procedures and covered ancillary services, in conjunction with the
annual proposed and final rulemaking process to update the OPPS and ASC
payment systems (Sec. 416.173; 72 FR 42535). In addition, because we
base ASC payment policies for covered surgical procedures, drugs,
biologicals, and certain other covered ancillary services on the OPPS
payment policies, we also provide quarterly updates for ASC services
throughout the year (January, April, July, and October), just as we do
for the OPPS. The updates are to implement newly created Level II HCPCS
codes and Category III CPT codes for ASC payment and to update the
payment rates for separately paid drugs and biologicals based on the
most recently submitted ASP data. New Category I CPT codes, except
vaccine codes, are released only once a year and, therefore, are
implemented through the January quarterly update. New Category I CPT
vaccine codes are released twice a year and thus are implemented
through the January and July quarterly updates.
In our annual updates to the ASC list of, and payment rates for,
covered surgical procedures and covered ancillary services, we
undertake a review of excluded surgical procedures (including all
procedures newly proposed for removal from the OPPS inpatient list),
new procedures, and procedures for which there is revised coding, to
identify any that we believe meet the criteria for designation as ASC
covered surgical procedures or covered ancillary services. Updating the
lists of covered surgical procedures and covered ancillary services, as
well as their payment rates, in association with the annual OPPS
rulemaking cycle is particularly important because the OPPS relative
payment weights and, in some cases, payment rates, are used as the
basis for the payment of covered surgical procedures and covered
ancillary services under the revised ASC payment system. This joint
update process ensures that the ASC updates occur in a regular,
predictable, and timely manner.

B. Proposed Treatment of New Codes

1. Proposed Treatment of New Category I and III CPT Codes and Level II
HCPCS Codes
We finalized a policy in the August 2, 2007 final rule to evaluate
each year all new Category I and Category III CPT codes and Level II
HCPCS codes that describe surgical procedures, and to make preliminary
determinations in the annual OPPS/ASC final rule with comment period
regarding whether or not they meet the criteria for payment in the ASC
setting and, if so, whether they are office-based procedures (72 FR
42533). In addition, we identify new codes as ASC covered ancillary
services based upon the final payment policies of the revised ASC
payment system. New HCPCS codes that are released in the summer through
the fall of each year, to be effective January 1, are included in the
final rule with comment period updating the ASC payment system for the
following calendar year. These new codes are flagged with comment
indicator ``NI'' in Addenda AA and BB to the OPPS/ASC final rule with
comment period to indicate that we are assigning a payment indicator to
the codes on an interim basis. The interim payment indicators assigned
to the new codes under the revised ASC payment system are subject to
public comment in that final rule with comment period. These interim
determinations must be made in the OPPS/ASC final rule with comment
period because, in general, the new HCPCS codes and their descriptors
for the upcoming calendar year are not available at the time of
development of the OPPS/ASC proposed rule. We will respond to those
comments in the OPPS/ASC final rule with comment period for the
following calendar year. We are proposing to continue this
identification and recognition process for CY 2010.
In addition, we are proposing to continue our policy of
implementing through the ASC quarterly update process new mid-year CPT
codes, generally Category III CPT codes, that the AMA releases in
January to become effective the following July, and released in July to
become effective the following January. We are proposing to include in
Addenda AA or BB, as appropriate, to the CY 2010 OPPS/ASC final rule
with comment period the new Category III CPT codes released in January
2009 for implementation on July 1, 2009 (through the ASC quarterly
update process) that we identify as ASC covered services. Similarly, we
are proposing to include in Addenda AA and BB to that final rule with
comment period any new Category III CPT codes that the AMA releases in
July 2009 to be effective on January 1, 2010, that we identify as ASC
covered services. However, only those new Category III CPT codes
implemented effective January 1, 2010, will be designated by comment
indicator ``NI'' in the Addenda to the CY 2010 OPPS/ASC final rule with
comment period to indicate that we have assigned them an interim
payment status that is subject to public comment. The two Category III
CPT codes implemented in July 2009 for ASC payment, which appear in
Table 38 below, are subject to comment through this proposed rule, and
we are proposing to finalize their payment indicators in the CY 2010
OPPS/ASC final rule with comment period.
We are proposing to assign payment indicator ``G2'' (Non office-
based surgical procedure added in CY2008 or later; payment based on
OPPS relative payment weight) to both of these two new codes. Because
new Category III CPT codes that become effective for July are not
available to CMS in time for incorporation into the Addenda to the
OPPS/ASC proposed rule, our policy is to include the codes, their
proposed payment indicators, and proposed payment rates in the preamble
to the proposed rule but not in the Addenda to the proposed rule. These
codes and their final payment indicators and rates will be included in
the Addenda to the OPPS/ASC final rule with comment period.
The new mid-year codes for the covered surgical procedures
implemented in July 2009 are displayed in Table 38 below, along with
their

[[Page 35378]]

proposed payment indicators and proposed payment rates. These codes and
their final payment indicators and rates will be included in Addendum
AA to the CY 2010 OPPS/ASC final rule with comment period.

Table 38--New Category III CPT Codes Implemented in July 2009 as ASC Covered Surgical Procedures
----------------------------------------------------------------------------------------------------------------
Proposed CY
2010 ASC Proposed CY
CY 2009 HCPCS code CY 2009 long descriptor payment 2010 ASC
indicator payment rate
----------------------------------------------------------------------------------------------------------------
0200T...................................... Percutaneous sacral augmentation G2 $879.13
(sacroplasty), unilateral
injection(s), including the use
of a balloon or mechanical device
(if utilized), one or more
needles.
0201T...................................... Percutaneous sacral augmentation G2 1,206.09
(sacroplasty), bilateral
injections, including the use of
a balloon or mechanical device
(if utilized), two or more
needles.
----------------------------------------------------------------------------------------------------------------

2. Proposed Treatment of New Level II HCPCS Codes Implemented in April
and July 2009
New Level II HCPCS codes may describe covered surgical procedures
or covered ancillary services. All new Level II HCPCS codes implemented
in April and July 2009 for ASCs describe covered ancillary services.
During the second quarter of CY 2009, we added to the list of covered
ancillary services two new Level II HCPCS codes because they are drugs
or biologicals for which separate payment was newly allowed under the
OPPS in the same calendar quarter. The two Level II HCPCS codes added
effective April 1, 2009, are HCPCS code C9247 (Iobenguane, I-123,
diagnostic, per study dose, up to 10 millicuries) and HCPCS code C9249
(Injection, certolizumab pegol, 1 mg). Although HCPCS code C9247 was
created for use beginning on January 1, 2009, it was initially not paid
separately under the hospital OPPS and, therefore, its payment was
packaged under the ASC payment system until April 1, 2009.
For the third quarter of CY 2009, we are adding a total of 11 new
Level II drug and biological HCPCS codes to the list of ASC covered
ancillary services because they are newly eligible for separate payment
under the OPPS. These HCPCS codes are: C9250 (Human plasma fibrin
sealant, vapor-heated, solvent-detergent (Artiss), 2 ml); C9251
(Injection, C1 esterase inhibitor (human) 10 units); C9252 (Injection,
plerixafor, 1 mg); C9253 (Injection, temozolomide, 1 mg); C9360 (Dermal
substitute, native, non-denatured collagen, neonatal bovine origin
(SurgiMend Collagen Matrix), per 0.5 square centimeters); C9361
(Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5
centimeter length); C9362 (Porous purified collagen matrix bone void
filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 cc);
C9363 (Skin substitute, Integra Meshed Bilayer Wound Matrix, per square
centimeter); C9364 (Porcine implant, Permacol, per square centimeter);
Q2023 (Injection, factor viii (antihemophilic factor, recombinant)
(Xyntha), per i.u.); and Q4116 (Skin substitute, Alloderm, per square
centimeter).
We assigned payment indicator ``K2'' (Drugs and biologicals paid
separately when provided integral to a surgical procedure on ASC list;
payment based on OPPS rate) to all of these new Level II HCPCS codes
and added the codes to the list of covered ancillary services through
either the April update (Transmittal 1698, Change Request 6424, dated
March 13, 2009) or the July update (Transmittal 1740, Change Request
6496, dated May 22, 2009) to the CY 2009 ASC payment system. While we
also initially assigned payment indicator ``K2'' to new HCPCS code
Q4115 (Skin substitute, Alloskin, per square centimeter) for July 2009,
we are correcting that assignment retroactive to July 2009 to signify
that this HCPCS code is not a covered ancillary service because it is
not recognized for payment under the OPPS during that same time period.
In this CY 2010 OPPS/ASC proposed rule, we are soliciting public
comment on the proposed CY 2010 ASC payment indicators and payment
rates for the drugs and biologicals, as listed in Tables 39 and 40
below. Those HCPCS codes became payable in ASCs, beginning in April or
July 2009, respectively, and are paid at the ASC rates posted for the
appropriate calendar quarter on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/.
The codes listed in Table 39 are included in Addendum BB to this
proposed rule. However, because HCPCS codes that become effective for
July are not available to CMS in time for incorporation into the
Addenda to the OPPS/ASC proposed rule, our policy is to include these
HCPCS codes and their CY 2010 proposed payment indicators and payment
rates in the preamble to the proposed rule but not in the Addenda to
the proposed rule. These codes and their final payment indicators and
rates will be included in the appropriate Addendum to the CY 2010 OPPS/
ASC final rule with comment period. Thus, the codes implemented by the
July 2009 ASC quarterly update and their proposed CY 2010 payment rates
(based on July 2009 ASP data) that are displayed in Table 40 are not
included in Addendum BB to this proposed rule. We are proposing to
include the services reported using the new HCPCS codes displayed in
Tables 39 and 40 as covered ancillary services for payment to ASCs for
CY 2010. The final list of covered ancillary services and the
associated payment weights and payment indicators will be included in
the CY 2010 OPPS/ASC final rule with comment period, consistent with
our annual update policy.

Table 39--New Level II HCPCS Codes for Covered Ancillary Services
Implemented in April 2009
------------------------------------------------------------------------
Proposed CY
CY 2009 long 2010 ASC
CY 2009 HCPCS code descriptor payment
indicator
------------------------------------------------------------------------
C9247.......................... Iobenguane, I-123, K2
diagnostic, per study
dose, up to 10
millicuries.
C9249.......................... Injection, K2
certolizumab pegol, 1
mg.
------------------------------------------------------------------------

[[Page 35379]]

Table 40--New Level II HCPCS Codes for Covered Ancillary Services Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
Proposed CY
2010 ASC Proposed CY
CY 2009 HCPCS code CY 2009 long descriptor payment 2010 ASC
indicator payment rate *
----------------------------------------------------------------------------------------------------------------
C9250...................................... Human plasma fibrin sealant, vapor- K2 $155.00
heated, solvent-detergent
(Artiss), 2 ml.
C9251...................................... Injection, C1 esterase inhibitor K2 41.34
(human), 10 units.
C9252...................................... Injection, plerixafor, 1 mg....... K2 276.04
C9253...................................... Injection, temozolomide, 1 mg..... K2 5.00
C9360...................................... Dermal substitute, native, non- K2 14.31
denatured collagen, neonatal
bovine origin (SurgiMend Collagen
Matrix), per 0.5 square
centimeters.
C9361...................................... Collagen matrix nerve wrap K2 124.55
(NeuroMend Collagen Nerve Wrap),
per 0.5 centimeter length.
C9362...................................... Porous purified collagen matrix K2 56.71
bone void filler (Integra Mozaik
Osteoconductive Scaffold Strip),
per 0.5 cc.
C9363...................................... Skin substitute, Integra Meshed K2 11.13
Bilayer Wound Matrix, per square
centimeter.
C9364...................................... Porcine implant, Permacol, per K2 18.57
square centimeter.
Q2023...................................... Injection, factor viii K2 1.15
(antihemophilic factor,
recombinant) (Xyntha), per i.u..
Q4116...................................... Skin substitute, Alloderm, per K2 32.42
square centimeter.
----------------------------------------------------------------------------------------------------------------
Based on July 2009 ASP information.

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

1. Covered Surgical Procedures
a. Proposed Additions to the List of ASC Covered Surgical Procedures
We are proposing to update the ASC list of covered surgical
procedures by adding 28 procedures to the list. Twenty-six of these
procedures were among those excluded from the ASC list for CY 2009
because we believed they did not meet the definition of a covered
surgical procedure based on our expectation that they would pose a
significant safety risk to Medicare beneficiaries or would require an
overnight stay if performed in ASCs. The other two procedures,
specifically those described by CPT code 0200T (Percutaneous sacral
augmentation (sacroplasty), unilateral injection(s), including the use
of a balloon or mechanical device (if utilized), one or more needles)
and CPT code 0201T (Percutaneous sacral augmentation (sacroplasty),
bilateral injections, including the use of a balloon or mechanical
device (if utilized), two or more needles), are new Category III CPT
codes that became effective July 1, 2009, and were implemented in the
July 2009 ASC update (Table 38 above). As a result of our clinical
evaluation of the procedures described by the new Category III codes,
we determined that these two new procedures may be appropriately
provided to Medicare beneficiaries in ASCs.
In response to comments on the CY 2009 proposed rule, we stated in
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68724) that,
as we developed the CY 2010 proposed rule, we would perform a
comprehensive review of the APCs in order to identify potentially
inconsistent ASC treatment of procedures assigned to a single APC under
the OPPS. Thus, we examined surgical procedures that are excluded from
the current ASC list of covered surgical procedures and the APCs to
which they are assigned under the OPPS. We identified for review 223
excluded surgical procedures that were assigned to the same APCs in CY
2009 as one or more ASC covered surgical procedures. Based upon our
clinical review of those procedures, we determined that 26 surgical
procedures may be appropriate for performance in ASCs and are proposing
to add them to the CY 2010 ASC list of covered surgical procedures and
to assign payment indicator ``G2'' (Non office-based surgical procedure
added in CY 2008 or later; payment based on OPPS relative payment
weight) to each of them. We found that the remaining 197 excluded
procedures would pose significant safety risks to beneficiaries or
would be expected to require an overnight stay if provided in ASCs.
Therefore, we are not proposing to add those 197 procedures to the CY
2010 ASC list of covered surgical procedures.
The 28 procedures that we are proposing to add to the ASC list of
covered surgical procedures, including their HCPCS code short
descriptors and proposed CY 2010 payment indicators, are displayed in
Table 41 below.

Table 41--Proposed New ASC Covered Surgical Procedures for CY 2010
------------------------------------------------------------------------
Proposed CY 2010
CY 2009 HCPCS code CY 2009 short ASC payment
descriptor indicator
------------------------------------------------------------------------
26037.......................... Decompress fingers/ G2
hand.
27475.......................... Surgery to stop G2
leg growth.
27479.......................... Surgery to stop G2
leg growth.
27720.......................... Repair of tibia... G2
35460.......................... Repair venous G2
blockage.
35475.......................... Repair arterial G2
blockage.
41512.......................... Tongue suspension. G2
42225.......................... Reconstruct cleft G2
palate.
42227.......................... Lengthening of G2
palate.

[[Page 35380]]

43130.......................... Removal of G2
esophagus pouch.
43752.......................... Nasal/orogastric w/ G2
stent.
45541.......................... Correct rectal G2
prolapse.
49435.......................... Insert subq exten G2
to ip cath.
49436.......................... Embedded ip cath G2
exit-site.
49442.......................... Place cecostomy G2
tube perc.
50080.......................... Removal of kidney G2
stone.
50081.......................... Removal of kidney G2
stone.
50727.......................... Revise ureter..... G2
51535.......................... Repair of ureter G2
lesion.
57295.......................... Revise vag graft G2
via vagina.
60210.......................... Partial thyroid G2
excision.
60212.......................... Partial thyroid G2
excision.
60220.......................... Partial removal of G2
thyroid.
60225.......................... Partial removal of G2
thyroid.
61770.......................... Incise skull for G2
treatment.
0193T.......................... Rf bladder neck G2
microremodel.
0200T *........................ Perq sacral augmt G2
unilat inj.
0201T *........................ Perq sacral augmt G2
bilat inj.
------------------------------------------------------------------------
* Indicates codes are new, effective July 2009.

Among the procedures we identified as meeting the criteria for
designation as a covered surgical procedure was CPT code 35475
(Transluminal balloon angioplasty, percutaneous; brachiocephalic trunk
or branches, each vessel). The volume and utilization data for this
procedure indicate that it is most frequently performed in outpatient
settings. After review, our CMS medical advisors found that it would be
appropriate to propose designation of CPT code 35475 as an ASC covered
surgical procedure for CY 2010. Related to our proposal to add CPT code
35475 to the list of covered surgical procedures is our concurrent
proposal to delete two Level II HCPCS codes we created effective for CY
2007, HCPCS codes G0392 (Transluminal balloon angioplasty,
percutaneous; for maintenance of hemodialysis access, arteriovenous
fistula or graft; arterial) and G0393 (Transluminal balloon
angioplasty, percutaneous; for maintenance of hemodialysis access,
arteriovenous fistula or graft; venous) to enable ASCs to receive
Medicare payment for providing the angioplasty services required to
maintain the arteriovenous fistulae that are important to individuals
who undergo routine dialysis. We are proposing to delete HCPCS codes
G0392 and G0393 concurrently with the designation of CPT code 35475 as
a covered surgical procedure because there no longer would be a need
for the two Level II HCPCS G-codes. ASCs would be able to use CPT 35475
and CPT code 35476 (Transluminal balloon angioplasty, percutaneous;
venous), which was included on the list of ASC covered surgical
procedures beginning in CY 2008, to report the same procedures
currently reported by HCPCS codes G0392 and G0393.
Thus, we are proposing to add the 28 surgical procedures listed in
Table 41 above to the list of covered ASC surgical procedures and to
delete the HCPCS codes displayed in Table 42 below.

Table 42--HCPCS Codes Proposed for Deletion Effective CY 2010
----------------------------------------------------------------------------------------------------------------
CY 2009 ASC payment
CY 2009 HCPCS code CY 2009 short descriptor indicator
----------------------------------------------------------------------------------------------------------------
G0392.......................................... AV fistula or graft arterial.......... A2
G0393.......................................... AV fistula or graft venous............ A2
----------------------------------------------------------------------------------------------------------------

b. Proposed Covered Surgical Procedures Designated as Office-Based
(1) Background
In the August 2, 2007 ASC final rule, we finalized our policy to
designate as ``office-based'' those procedures that are added to the
ASC list of covered surgical procedures in CY 2008 or later years that
we determine are performed predominantly (more than 50 percent of the
time) in physicians offices based on consideration of the most recent
available volume and utilization data for each individual procedure
code and/or, if appropriate, the clinical characteristics, utilization,
and volume of related codes. In that rule, we also finalized our policy
to exempt all procedures on the CY 2007 ASC list from application of
the office-based classification (72 FR 42512). The procedures that were
added to the ASC list of covered surgical procedures beginning in CY
2008 that we determined were office-based were identified in Addendum
AA to that rule by payment indicator ``P2'' (Office-based surgical
procedure added to ASC list in CY 2008 or later with MPFS nonfacility
PE RVUs; payment based on OPPS relative payment weight); ``P3''
(Office-based surgical procedure added to ASC list in CY 2008 or later
with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in
CY 2008 or later without MPFS nonfacility PE RVUs; payment based on
OPPS relative payment weight), depending on whether we estimated it
would be paid according

[[Page 35381]]

to the standard ASC payment methodology based on its OPPS relative
payment weight or at the MPFS nonfacility PE RVU amount.
Consistent with our final policy to annually review and update the
list of surgical procedures eligible for payment in ASCs, each year we
identify surgical procedures as either temporarily or permanently
office-based after taking into account updated volume and utilization
data.
(2) Proposed Changes to Covered Surgical Procedures Designated as
Office-Based for CY 2010
In developing this proposed rule, we followed our policy to
annually review and update the surgical procedures for which ASC
payment is made and to identify new procedures that may be appropriate
for ASC payment, including their potential designation as office-based.
We reviewed CY 2008 volume and utilization data and the clinical
characteristics for all surgical procedures that are assigned payment
indicator ``G2'' in CY 2009, as well as for those procedures assigned
to one of the temporary office-based payment indicators, specifically
``P2*,'' ``P3*,'' or ``R2*'' in the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68730 through 68733). As a result of that review,
we are proposing to newly designate 6 procedures as office-based for CY
2010. We also are proposing to make permanent the office-based
designations of 4 surgical procedures that have temporary office-based
designations in CY 2009.
Our review of CY 2008 volume and utilization data resulted in our
identification of 6 surgical procedures with payment indicators ``G2''
that now meet the criteria for designation as office-based. The data
indicate the procedures are performed more than 50 percent of the time
in physicians' offices. Our medical advisors believe the services are
of a level of complexity consistent with other procedures that are
performed routinely in physicians' offices. The 6 procedures we are
proposing to permanently designate as office-based are: CPT code 15852
(Dressing change (for other than burns) under anesthesia (other than
local)); CPT code 19105 (Ablation, cryosurgical, of fibroadenoma,
including ultrasound guidance, each fibroadenoma); CPT code 20555
(Placement of needles or catheters into muscle and/or soft tissue for
subsequent interstitial radioelement application (at the time of or
subsequent to the procedure)); CPT code 36420 (Venipuncture, cutdown;
younger than age 1 year); CPT code 50386 (Removal (via snare/capture)
of internally dwelling ureteral stent via transurethral approach,
without use of cystoscopy, including radiological supervision and
interpretation); and CPT code 57022 (Incision and drainage of vaginal
hematoma; obstetrical/postpartum). These procedures and their HCPCS
code short descriptors and proposed CY 2010 payment indicators are
displayed in Table 43 below.

Table 43--ASC Covered Surgical Procedures Proposed for Office-Based Designation for CY2010
----------------------------------------------------------------------------------------------------------------
Proposed CY
CY 2009 ASC 2010 ASC
CY 2009 HCPCS code CY 2009 short descriptor payment payment
indicator indicator *
----------------------------------------------------------------------------------------------------------------
15852..................................... Dressing change not for burn...... G2 R2
19105..................................... Cryosurg ablate fa, each.......... G2 P3
20555..................................... Place ndl musc/tis for rt......... G2 R2
36420..................................... Vein access cutdown <1 yr......... G2 R2
50386..................................... Remove stent via transureth....... G2 P2
57022..................................... I & d vaginal hematoma, pp........ G2 R2
----------------------------------------------------------------------------------------------------------------
* Proposed payment indicators are based on a comparison of the proposed rates according to the ASC standard
ratesetting methodology and the MPFS proposed rates. Under current law, the MPFS payment rates will have a
negative update for CY 2010. For a discussion of those rates, we refer readers to the June 2009 CY 2010 MPFS
proposed rule.

We also reviewed CY 2008 volume and utilization data and other
information for the 10 procedures with temporary office-based
designations for CY 2009. Among these 10 procedures, there were no
claims data for the 3 procedures with CPT codes that were new in CY
2009. Those 3 new procedure codes are: CPT code 46930 (Destruction of
internal hemorrhoid(s) by thermal energy (eg, infrared coagulation,
cautery, radiofrequency)); CPT code 64455 (Injection(s), anesthetic
agent and/or steroid, plantar common digital nerve(s) (eg, Morton's
neuroma)); and CPT code 64632 (Destruction by neurolytic agent; plantar
common digital nerve). Consequently, we are proposing to maintain their
temporary office-based designations for CY 2010.
As a result of our review of the remaining 7 procedures that have
temporary office-based designations for CY 2009, we are proposing to
make permanent the office-based designations for 4 procedures for CY
2010. The 4 surgical procedure codes are: CPT code 0084T (Insertion of
a temporary prostatic urethral stent); CPT code 21073 (Manipulation of
temporomandibular joint(s) (TMJ), therapeutic, requiring an anesthesia
service (ie, general or monitored anesthesia care)); CPT code 55876
(Placement of interstitial device(s) for radiation therapy guidance
(eg, fiducial markers, dosimeter), prostate (via needle, any approach),
single or multiple); and HCPCS code C9728 (Placement of interstitial
device(s) for radiation therapy/surgery guidance (eg, fiducial markers,
dosimeter), other than prostate (any approach), single or multiple).
Although we have no Medicare volume and utilization data in physicians'
offices for HCPCS code C9728 because this code is not recognized for
payment under the MPFS, we noted in the CY 2009 OPPS/ASC proposed rule
(73 FR41528) that because HCPCS code C9728 is analogous to CPT code
55876, we believe they should be paid according to the same ASC payment
methodology under the ASC payment system. The volume and utilization
data for CPT code 0084T, 21073, and 55876 are sufficient to support our
determination that these procedures are most commonly provided in
physicians' offices. Therefore, we are proposing to make permanent the
office-based designations for the four procedures (including HCPCS code
C9728) for CY 2010.
We are not proposing to make permanent the office-based
designations for the 3 other procedures for which the CY 2009 office-
based designations are temporary because we do not believe that the
currently available volume and utilization data provide an adequate

[[Page 35382]]

basis for proposing permanent office-based designations. Rather,
available data support our determination that maintaining the temporary
office-based designation is appropriate for CY 2010 for CPT code 0099T
(Implantation of intrastromal corneal ring segments); CPT code 0124T
(Conjunctival incision with posterior extrascleral placement of
pharmacological agent (does not include supply of medication)); and CPT
code 67229 (Treatment of extensive or progressive retinopathy, 1 or
more sessions; preterm infant (less than 37 weeks gestation at birth),
performed from birth up to 1 year of age (eg, retinopathy of
prematurity), photocoagulation or cryotherapy). Thus, we are proposing
to maintain the temporary office-based designation for those procedures
for CY 2010.
The procedures that we are proposing to permanently designate as
office-based for CY 2010 are displayed in Table 44 below. The
procedures that we are proposing to continue to temporarily designate
as office-based for CY 2010 are displayed in Table 45 below. The
procedures for which the proposed office-based designation for CY 2010
is temporary also are indicated by an asterisk in Addendum AA to this
proposed rule.

Table 44--CY 2009 Temporarily Designated Office-Based ASC Covered Surgical Procedures Proposed for Permanent
Office-Based Designation for CY 2010
----------------------------------------------------------------------------------------------------------------
Proposed CY
CY 2009 ASC 2010 ASC
CY 2009 HCPCS code CY 2009 short descriptor payment payment
indicator indicator**
----------------------------------------------------------------------------------------------------------------
0084T..................................... Temp prostate urethral stent...... R2* R2
21073..................................... Mnpj of tmj w/anesth.............. P3* P3
55876..................................... Place rt device/marker, pros...... P3* P3
C9728..................................... Place device/marker, non pro...... R2* R2
----------------------------------------------------------------------------------------------------------------
* If designation is temporary.
** Proposed payment indicators are based on a comparison of the proposed rates according to the ASC standard
ratesetting methodology and the MPFS proposed rates. Under current law, the MPFS payment rates will have a
negative update for CY 2010. For a discussion of those rates, we refer readers to the June 2009 CY 2010 MPFS
proposed rule.

Table 45--CY 2009 Temporarily Designated Office-Based ASC Covered
Surgical Procedures Proposed for Temporary Office-Based Designation in
CY 2010
------------------------------------------------------------------------
Proposed CY
CY 2009 short 2010 ASC
CY 2009 HCPCS code descriptor payment
indicator**
------------------------------------------------------------------------
0099T.......................... Implant corneal ring.. R2*
0124T.......................... Conjunctival drug R2*
placement.
46930.......................... Destroy internal P3*
hemorrhoids.
64455.......................... N block inj, plantar P3*
digit.
64632.......................... N block inj, common P3*
digit.
67229.......................... Tr retinal les preterm R2*
inf.
------------------------------------------------------------------------
* If designation is temporary.
** Proposed payment indicators are based on a comparison the proposed
rates according to the ASC standard ratesetting methodology and the
MPFS proposed rates. Under current law, the MPFS payment rates will
have a negative update for CY 2010. For a discussion of those rates,
we refer 010 MPFS proposed rule.

c. ASC-Covered Surgical Procedures Designated as Device-Intensive
(1) Background
As discussed in the August 2, 2007 ASC final rule (72 FR 42503
through 42508), we adopted a modified payment methodology for
calculating the ASC payment rates for covered surgical procedures that
are assigned to the subset of OPPS device-dependent APCs with a device
offset percentage greater than 50 percent of the APC cost under the
OPPS, in order to ensure that payment for the procedure is adequate to
provide packaged payment for the high-cost implantable devices used in
those procedures. We assigned payment indicators ``H8'' (Device-
intensive procedure on ASC list in CY 2007; paid at adjusted rate) and
``J8'' (Device-intensive procedure added to ASC list in CY2008 or
later; paid at adjusted rate) to identify the procedures that were
eligible for ASC payment calculated according to the modified
methodology, depending on whether the procedure was included on the ASC
list of covered surgical procedures prior to CY 2008 and, therefore,
subject to transitional payment as discussed in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68739 through 68742). The 52
device-intensive procedures for which the modified rate calculation
methodology applies in CY 2009 were displayed in Table 47 and in
Addendum AA to the CY 2009 OPPS/ASC final rule with comment period (73
FR 68736 through 68738 and 68840 through 68933).
(2) Proposed Changes to List of Covered Surgical Procedures Designated
as Device-Intensive for CY 2010
We are proposing to update the ASC list of covered surgical
procedures that are eligible for payment according to the device-
intensive procedure payment methodology for CY 2010, consistent with
the proposed OPPS device-dependent APC update, reflecting the proposed
APC assignments of procedures, designation of APCs as device-dependent,
and APC device offset percentages based on CY 2008 OPPS claims data.
The OPPS device-dependent APCs are discussed further in section
II.A.2.d.(1) of this proposed rule. The ASC covered surgical procedures
that we are proposing to designate as device-intensive and that would
be subject to the device-intensive

[[Page 35383]]

procedure payment methodology for CY2010 are listed in Table 46 below.
The HCPCS code, the HCPCS code short descriptor, the proposed CY2010
ASC payment indicator, the proposed CY 2010 OPPS APC assignment, and
the proposed CY 2010 OPPS APC device offset percentage are also listed
in Table 46 below. Each proposed device-intensive procedure is assigned
payment indicator ``H8'' or ``J8,'' depending on whether it is subject
to transitional payment, and all of these procedures are included in
Addendum AA to this proposed rule.

Table 46--ASC Covered Surgical Procedures Proposed for Device-Intensive Designation for CY 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY
Proposed CY Proposed CY 2010 device-
CY 2009 HCPCS code CY 2009 short descriptor 2010 ASC 2010 OPPS OPPS APC title dependent
payment APC APC offset
indicator percentage
--------------------------------------------------------------------------------------------------------------------------------------------------------
24361.................................... Reconstruct elbow joint.......... H8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
24363.................................... Replace elbow joint.............. H8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
24366.................................... Reconstruct head of radius....... H8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
25441.................................... Reconstruct wrist joint.......... H8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
25442.................................... Reconstruct wrist joint.......... H8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
25446.................................... Wrist replacement................ H8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
27446.................................... Revision of knee joint........... J8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
33206.................................... Insertion of heart pacemaker..... J8 0089 Insertion/Replacement of 71
Permanent Pacemaker and
Electrodes.
33207.................................... Insertion of heart pacemaker..... J8 0089 Insertion/Replacement of 71
Permanent Pacemaker and
Electrodes.
33208.................................... Insertion of heart pacemaker..... J8 0655 Insertion/Replacement/Conversion 75
of a permanent dual chamber
pacemaker.
33212.................................... Insertion of pulse generator..... H8 0090 Insertion/Replacement of 73
Pacemaker Pulse Generator.
33213.................................... Insertion of pulse generator..... H8 0654 Insertion/Replacement of a 74
permanent dual chamber
pacemaker.
33214.................................... Upgrade of pacemaker system...... J8 0655 Insertion/Replacement/Conversion 75
of a permanent dual chamber
pacemaker.
33224.................................... Insert pacing lead & connect..... J8 0418 Insertion of Left Ventricular 81
Pacing Elect..
33225.................................... Lventric pacing lead add-on...... J8 0418 Insertion of Left Ventricular 81
Pacing Elect..
33240.................................... Insert pulse generator........... J8 0107 Insertion of Cardioverter- 88
Defibrillator.
33249.................................... Eltrd/insert pace-defib.......... J8 0108 Insertion/Replacement/Repair of 88
Cardioverter-Defibrillator
Leads.
33282.................................... Implant pat-active ht record..... J8 0680 Insertion of Patient Activated 73
Event Recorders.
53440.................................... Male sling procedure............. H8 0385 Level I Prosthetic Urological 58
Procedures.
53444.................................... Insert tandem cuff............... H8 0385 Level I Prosthetic Urological 58
Procedures.
53445.................................... Insert uro/ves nck sphincter..... H8 0386 Level II Prosthetic Urological 70
Procedures.
53447.................................... Remove/replace ur sphincter...... H8 0386 Level II Prosthetic Urological 70
Procedures.
54400.................................... Insert semi-rigid prosthesis..... H8 0385 Level I Prosthetic Urological 58
Procedures.
54401.................................... Insert self-contd prosthesis..... H8 0386 Level II Prosthetic Urological 70
Procedures.
54405.................................... Insert multi-comp penis pros..... H8 0386 Level II Prosthetic Urological 70
Procedures.
54410.................................... Remove/replace penis prosth...... H8 0386 Level II Prosthetic Urological 70
Procedures.
54416.................................... Remv/repl penis contain pros..... H8 0386 Level II Prosthetic Urological 70
Procedures.
55873.................................... Cryoablate prostate.............. H8 0674 Prostate Cryoablation........... 56
61885.................................... Insrt/redo neurostim 1 array..... H8 0039 Level I Implantation of 85
Neurostimulator Generator.
61886.................................... Implant neurostim arrays......... H8 0315 Level II Implantation of 88
Neurostimulator Generator.
62361.................................... Implant spine infusion pump...... H8 0227 Implantation of Drug Infusion 82
Device.
62362.................................... Implant spine infusion pump...... H8 0227 Implantation of Drug Infusion 82
Device.
63650.................................... Implant neuroelectrodes.......... H8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.
63655.................................... Implant neuroelectrodes.......... J8 0061 Laminectomy, Laparoscopy, or 63
Incision for Implantation of
Neurostimulator Electr.
63685.................................... Insrt/redo spine n generator..... H8 0039 Level I Implantation of 85
Neurostimulator Generator.
64553.................................... Implant neuroelectrodes.......... H8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.
64555.................................... Implant neuroelectrodes.......... J8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.

[[Page 35384]]

64560.................................... Implant neuroelectrodes.......... J8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.
64561.................................... Implant neuroelectrodes.......... H8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.
64565.................................... Implant neuroelectrodes.......... J8 0040 Percutaneous Implantation of 58
Neurostimulator Electrodes.
64573.................................... Implant neuroelectrodes.......... H8 0225 Implantation of Neurostimulator 73
Electrodes, Cranial Nerve.
64575.................................... Implant neuroelectrodes.......... H8 0061 Laminectomy, Laparoscopy, or 63
Incision for Implantation of
Neurostimulator Electr.
64577.................................... Implant neuroelectrodes.......... H8 0061 Laminectomy, Laparoscopy, or 63
Incision for Implantation of
Neurostimulator Electr.
64580.................................... Implant neuroelectrodes.......... H8 0061 Laminectomy, Laparoscopy, or 63
Incision for Implantation of
Neurostimulator Electr.
64581.................................... Implant neuroelectrodes.......... H8 0061 Laminectomy, Laparoscopy, or 63
Incision for Implantation of
Neurostimulator Electr.
64590.................................... Insrt/redo pn/gastr stimul....... H8 0039 Level I Implantation of 85
Neurostimulator Generator.
65770.................................... Revise cornea with implant....... H8 0293 Level V Anterior Segment Eye 59
Procedures.
69714.................................... Implant temple bone w/stimul..... H8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
69715.................................... Temple bne implnt w/stimulat..... H8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
69717.................................... Temple bone implant revision..... H8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
69718.................................... Revise temple bone implant....... H8 0425 Level II Arthroplasty or 57
Implantation with Prosthesis.
69930.................................... Implant cochlear device.......... H8 0259 Level VII ENT Procedures........ 85
--------------------------------------------------------------------------------------------------------------------------------------------------------

d. ASC Treatment of Surgical Procedures Proposed for Removal From the
OPPS Inpatient List for CY 2010
As we discussed in the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68724), we adopted a policy to include in our annual
evaluation procedures proposed for removal from the OPPS inpatient list
for possible inclusion on the ASC list of covered surgical procedures.
We evaluated each of the 3 procedures we are proposing to remove from
the OPPS inpatient list for CY 2010 according to the criteria for
exclusion from the list of covered ASC surgical procedures. We believe
that all of these procedures should continue to be excluded from the
ASC list of covered surgical procedures for CY 2010 because they would
be expected to pose a significant risk to beneficiary safety in ASCs or
would be expected to require an overnight stay.
A full discussion about the APC Panel's recommendations regarding
the removal of procedures from the OPPS inpatient list for CY 2010 and
the procedures we are proposing to remove from the OPPS inpatient list
for CY 2010 may be found in section XI.B. of this proposed rule. The
HCPCS codes for these procedures and their long descriptors are listed
in Table 47 below.

Table 47--Procedures Proposed for Exclusion From the ASC List of Covered
Procedures for CY 2010 That Are Proposed for Removal From the OPPS
Inpatient List
------------------------------------------------------------------------
CY 2009 HCPCS code CY 2009 long descriptor
------------------------------------------------------------------------
21256...................... Reconstruction of orbit with osteotomies
(extracranial) and with bone grafts
(includes obtaining autografts) (eg, micro-
ophthalmia).
27179...................... Open treatment of slipped femoral
epiphysis; osteoplasty of femoral neck
(Heyman type procedure).
51060...................... Transvesical ureterolithotomy.
------------------------------------------------------------------------

2. Covered Ancillary Services
Consistent with the established ASC payment system policy, we are
proposing to update the ASC list of covered ancillary services to
reflect the proposed payment status for the services under the CY 2010
OPPS. Maintaining consistency with the OPPS may result in proposed
changes to ASC payment indicators for some covered ancillary items and
services because of changes that are being proposed under the OPPS for
CY 2010. For example, a covered ancillary service that was separately
paid under the revised ASC payment system in CY 2009 may be proposed
for packaged status under the CY 2010 OPPS and, therefore, also under
the ASC payment system for CY 2010. Comment indicator ``CH,'' discussed
in section XV.F. of this proposed rule, is used in Addendum BB to this
proposed rule to indicate covered ancillary services for which we are
proposing a change in the ASC payment indicator to reflect a proposed
change in

[[Page 35385]]

the OPPS treatment of the service for CY 2010.
Except for the Level II HCPCS codes listed in Table 40 of this
proposed rule, all ASC covered ancillary services and their proposed
payment indicators for CY 2010 are included in Addendum BB to this
proposed rule.

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

1. Proposed Payment for Covered Surgical Procedures
a. Background
Our ASC payment policies for covered surgical procedures under the
revised ASC payment system are fully described in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66828 through 66831). Under our
established policy for the revised ASC payment system, the ASC standard
ratesetting methodology of multiplying the ASC relative payment weight
for the procedure by the ASC conversion factor for that same year is
used to calculate the national unadjusted payment rates for procedures
with payment indicator ``G2.'' For procedures assigned payment
indicator ``A2,'' our final policy established blended rates to be used
during the transitional period and, beginning in CY 2011, ASC rates
calculated according to the ASC standard ratesetting methodology. The
rate calculation established for device-intensive procedures (payment
indicators ``H8''and ``J8'') is structured so that the packaged device
payment amount is the same as under the OPPS, and only the service
portion of the rate is subject to the ASC standard ratesetting
methodology. In the CY 2009 OPPS/ASC final rule with comment period (73
FR 68722 through 68759), we updated the CY 2008 ASC payment rates for
ASC covered surgical procedures with payment indicators of ``A2,''
``G2,'' ``H8,''and ``J8'' using CY 2007 data, consistent with the CY
2009 OPPS update. Payment rates for device-intensive procedures also
were updated to incorporate the CY 2009 OPPS device offset percentages.
Payment rates for office-based procedures (payment indicators
``P2,'' ``P3,'' and ``R2'') are the lower of the MPFS nonfacility PE
RVU amount (we refer readers to the June 2009 CY 2010 MPFS proposed
rule) or the amount calculated using the ASC standard ratesetting
methodology for the procedure. In the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68722 through 68759), we updated the payment
amounts for office-based procedures (payment indicators ``P2,'' ``P3,''
and ``R2'') using the most recent available MPFS and OPPS data. We
compared the estimated CY 2009 rate for each of the office-based
procedures, calculated according to the ASC standard ratesetting
methodology, to the MPFS nonfacility PE RVU amount to determine which
was lower and, therefore, would be the CY 2009 payment rate for the
procedure according to the final policy of the revised ASC payment
system (see Sec. 416.171(d)).
b. Proposed Update to ASC-Covered Surgical Procedure Payment Rates for
CY 2010
We are proposing to update ASC payment rates for CY 2010 using the
established rate calculation methodologies under Sec. 416.171. Thus,
we are proposing to calculate CY 2010 payments for procedures subject
to the transitional payment methodology (payment indicators ``A2'' and
``H8'') using a blend of 75 percent of the proposed CY 2010 ASC rate
calculated according to the ASC standard ratesetting methodology and 25
percent of the CY 2007 ASC payment rate, incorporating the device-
intensive procedure methodology, as appropriate, for procedures
assigned ASC payment indicator ``H8.'' We are proposing to use the
amount calculated under the ASC standard ratesetting methodology for
procedures assigned payment indicator ``G2'' because these procedures
are not subject to the transitional payment methodology.
We are proposing payment rates for office-based procedures (payment
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures
not subject to transitional payment (payment indicator ``J8'')
calculated according to our established policies. Thus, we are
proposing to update the payment amounts for device-intensive procedures
based on the CY 2010 OPPS proposal that reflects updated OPPS device
offset percentages, and to make payment for office-based procedures at
the lesser of the CY 2010 proposed MPFS nonfacility PE RVU amount or
the proposed CY 2010 ASC payment amount calculated according to the ASC
standard ratesetting methodology.
c. Proposed Adjustment to ASC Payments for No Cost/Full Credit and
Partial Credit Devices
Our ASC policy with regard to payment for costly devices implanted
in ASCs at no cost or with full or partial credit as set forth in Sec.
416.179 is consistent with the OPPS policy. The proposed CY 2010 OPPS
APCs and devices subject to the adjustment policy are discussed in
section IV.B.2. of this proposed rule. The established ASC policy
includes adoption of the OPPS policy for reduced payment to providers
when a specified device is furnished without cost or with full or
partial credit for the cost of the device for those ASC covered
surgical procedures that are assigned to APCs under the OPPS to which
this policy applies. We refer readers to the CY 2009 OPPS/ASC final
rule with comment period for a full discussion of the ASC payment
adjustment policy for no cost/full credit and partial credit devices
(73 FR 68742 through 68745).
Consistent with the OPPS, we are proposing to update the list of
ASC covered device-intensive procedures and devices that would be
subject to the no cost/full credit and partial credit device adjustment
policy for CY 2010. Table 48 below displays the ASC covered device-
intensive procedures that we are proposing would be subject to the no
cost/full credit and partial credit device adjustment policy for CY
2010. When a procedure that is listed in Table 48 is performed to
implant a device that is listed in Table 49, where that device is
furnished at no cost or with full credit from the manufacturer, the ASC
must append the HCPCS ``FB'' modifier on the line with the procedure to
implant the device. The contractor would reduce payment to the ASC by
the device offset amount that we estimate represents the cost of the
device when the necessary device is furnished without cost to the ASC
or with full credit. We would provide the same amount of payment
reduction based on the device offset amount in ASCs that would apply
under the OPPS under the same circumstances. We continue to believe
that the reduction of ASC payment in these circumstances is necessary
to pay appropriately for the covered surgical procedure being furnished
by the ASC.
We also are proposing to reduce the payment for implantation
procedures listed in Table 48 by one-half of the device offset amount
that would be applied if a device was provided at no cost or with full
credit, if the credit to the ASC is 50 percent or more of the cost of
the new device. The ASC must append the HCPCS ``FC'' modifier to the
HCPCS code for a surgical procedure listed in Table 48 when the
facility receives a partial credit of 50 percent or more of the cost of
a device listed in Table 49 below. In order to report that they
received a partial credit of 50 percent or more of the cost of a new
device, ASCs have the option of either: (1) submitting the claim for
the device replacement procedure to their

[[Page 35386]]

Medicare contractor after the procedure's performance but prior to
manufacturer acknowledgment of credit for the device, and subsequently
contacting the contractor regarding a claim adjustment once the credit
determination is made; or (2) holding the claim for the device
implantation procedure until a determination is made by the
manufacturer on the partial credit and submitting the claim with the
``FC'' modifier appended to the implantation procedure HCPCS code if
the partial credit is 50 percent or more of the cost of the replacement
device. Beneficiary coinsurance would continue to be based on the
reduced payment amount.

Table 48--Proposed Procedures to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Would
Apply in CY 2010
----------------------------------------------------------------------------------------------------------------
Proposed
Proposed Proposed CY 2010
CY 2009 HCPCS CY 2009 short CY 2010 ASC Proposed CY 2010 OPPS
code descriptor payment CY 2010 OPPS APC title OPPS full partial APC
indicator OPPS APC APC offset offset
percentage percentage
----------------------------------------------------------------------------------------------------------------
24361......... Reconstruct elbow H8 0425 Level II Arthroplasty 57 28
joint. or Implantation with
Prosthesis.
24363......... Replace elbow joint H8 0425 Level II Arthroplasty 57 28
or Implantation with
Prosthesis.
24366......... Reconstruct head of H8 0425 Level II Arthroplasty 57 28
radius. or Implantation with
Prosthesis.
25441......... Reconstruct wrist H8 0425 Level II Arthroplasty 57 28
joint. or Implantation with
Prosthesis.
25442......... Reconstruct wrist H8 0425 Level II Arthroplasty 57 28
joint. or Implantation with
Prosthesis.
25446......... Wrist replacement.. H8 0425 Level II Arthroplasty 57 28
or Implantation with
Prosthesis.
27446......... Revision of knee J8 0425 Level II Arthroplasty 57 28
joint. or Implantation with
Prosthesis.
33206......... Insertion of heart J8 0089 Insertion/Replacement 71 35
pacemaker. of Permanent Pacemaker
and Electrodes.
33207......... Insertion of heart J8 0089 Insertion/Replacement 71 35
pacemaker. of Permanent Pacemaker
and Electrodes.
33208......... Insertion of heart J8 0655 Insertion/Replacement/ 75 37
pacemaker. Conversion of a
permanent dual chamber
pacemaker.
33212......... Insertion of pulse H8 0090 Insertion/Replacement 73 37
generator. of Pacemaker Pulse
Generator.
33213......... Insertion of pulse H8 0654 Insertion/Replacement 74 37
generator. of a permanent dual
chamber pacemaker.
33214......... Upgrade of J8 0655 Insertion/Replacement/ 75 37
pacemaker system. Conversion of a
permanent dual chamber
pacemaker.
33224......... Insert pacing lead J8 0418 Insertion of Left 81 40
& connect. Ventricular Pacing
Elect.
33225......... Lventric pacing J8 0418 Insertion of Left 81 40
lead add-on. Ventricular Pacing
Elect.
33240......... Insert pulse J8 0107 Insertion of 88 44
generator. Cardioverter-
Defibrillator.
33249......... Eltrd/insert pace- J8 0108 Insertion/Replacement/ 88 44
defib. Repair of Cardioverter-
Defibrillator Leads.
33282......... Implant pat-active J8 0680 Insertion of Patient 73 36
ht record. Activated Event
Recorders.
53440......... Male sling H8 0385 Level I Prosthetic 58 29
procedure. Urological Procedures.
53444......... Insert tandem cuff. H8 0385 Level I Prosthetic 58 29
Urological Procedures.
53445......... Insert uro/ves nck H8 0386 Level II Prosthetic 70 35
sphincter. Urological Procedures.
53447......... Remove/replace ur H8 0386 Level II Prosthetic 70 35
sphincter. Urological Procedures.
54400......... Insert semi-rigid H8 0385 Level I Prosthetic 58 29
prosthesis. Urological Procedures.
54401......... Insert self-contd H8 0386 Level II Prosthetic 70 35
prosthesis. Urological Procedures.
54405......... Insert multi-comp H8 0386 Level II Prosthetic 70 35
penis pros. Urological Procedures.
54410......... Remove/replace H8 0386 Level II Prosthetic 70 35
penis prosth. Urological Procedures.
54416......... Remv/repl penis H8 0386 Level II Prosthetic 70 35
contain pros. Urological Procedures.
61885......... Insrt/redo H8 0039 Level I Implantation of 85 43
neurostim 1 array. Neurostimulator
Generator.
61886......... Implant neurostim H8 0315 Level II Implantation 88 44
arrays. of Neurostimulator
Generator.
62361......... Implant spine H8 0227 Implantation of Drug 82 41
infusion pump. Infusion Device.
62362......... Implant spine H8 0227 Implantation of Drug 82 41
infusion pump. Infusion Device.

[[Page 35387]]

63650......... Implant H8 0040 Percutaneous 58 29
neuroelectrodes. Implantation of
Neurostimulator
Electrodes.
63655......... Implant J8 0061 Laminectomy, 63 31
neuroelectrodes. Laparoscopy, or
Incision for
Implantation of
Neurostimulator Electr.
63685......... Insrt/redo spine n H8 0039 Level I Implantation of 85 43
generator. Neurostimulator
Generator.
64553......... Implant H8 0040 Percutaneous 58 29
neuroelectrodes. Implantation of
Neurostimulator
Electrodes.
64555......... Implant J8 0040 Percutaneous 58 29
neuroelectrodes. Implantation of
Neurostimulator
Electrodes.
64560......... Implant J8 0040 Percutaneous 58 29
neuroelectrodes. Implantation of
Neurostimulator
Electrodes.
64561......... Implant H8 0040 Percutaneous 58 29
neuroelectrodes. Implantation of
Neurostimulator
Electrodes.
64565......... Implant J8 0040 Percutaneous 58 29
neuroelectrodes. Implantation of
Neurostimulator
Electrodes.
64573......... Implant H8 0225 Implantation of 73 37
neuroelectrodes. Neurostimulator
Electrodes, Cranial
Nerve.
64575......... Implant H8 0061 Laminectomy, 63 31
neuroelectrodes. Laparoscopy, or
Incision for
Implantation of
Neurostimulator Electr.
64577......... Implant H8 0061 Laminectomy, 63 31
neuroelectrodes. Laparoscopy, or
Incision for
Implantation of
Neurostimulator Electr.
64580......... Implant H8 0061 Laminectomy, 63 31
neuroelectrodes. Laparoscopy, or
Incision for
Implantation of
Neurostimulator Electr.
64581......... Implant H8 0061 Laminectomy, 63 31
neuroelectrodes. Laparoscopy, or
Incision for
Implantation of
Neurostimulator Electr.
64590......... Insrt/redo pn/gastr H8 0039 Level I Implantation of 85 43
stimul. Neurostimulator
Generator.
69714......... Implant temple bone H8 0425 Level II Arthroplasty 57 28
w/stimul. or Implantation with
Prosthesis.
69715......... Temple bne implnt w/ H8 0425 Level II Arthroplasty 57 28
stimulat. or Implantation with
Prosthesis.
69717......... Temple bone implant H8 0425 Level II Arthroplasty 57 28
revision. or Implantation with
Prosthesis.
69718......... Revise temple bone H8 0425 Level II Arthroplasty 57 28
implant. or Implantation with
Prosthesis.
69930......... Implant cochlear H8 0259 Level VII ENT 85 42
device. Procedures.
----------------------------------------------------------------------------------------------------------------

Table 49--Proposed Devices for Which the ``FB'' or ``FC'' Modifier Must
Be Reported With the Procedure Code in CY 2010 When Furnished at No Cost
or With Full or Partial Credit
------------------------------------------------------------------------
CY 2009 device HCPCS code CY 2009 short descriptor
------------------------------------------------------------------------
C1721....................... AICD, dual chamber.
C1722....................... AICD, single chamber.
C1764....................... Event recorder, cardiac.
C1767....................... Generator, neurostim, imp.
C1771....................... Rep dev, urinary, w/sling.
C1772....................... Infusion pump, programmable.
C1776....................... Joint device (implantable).
C1778....................... Lead, neurostimulator.
C1779....................... Lead, pmkr, transvenous VDD.
C1785....................... Pmkr, dual, rate-resp.
C1786....................... Pmkr, single, rate-resp.
C1813....................... Prosthesis, penile, inflatab.
C1815....................... Pros, urinary sph, imp.
C1820....................... Generator, neuro rechg bat sys.
C1881....................... Dialysis access system.
C1882....................... AICD, other than sing/dual.
C1891....................... Infusion pump, non-prog, perm.
C1897....................... Lead, neurostim, test kit.
C1898....................... Lead, pmkr, other than trans.
C1900....................... Lead coronary venous.
C2619....................... Pmkr, dual, non rate-resp.
C2620....................... Pmkr, single, non rate-resp.
C2621....................... Pmkr, other than sing/dual.
C2622....................... Prosthesis, penile, non-inf.
C2626....................... Infusion pump, non-prog, temp.
C2631....................... Rep dev, urinary, w/o sling.
L8614....................... Cochlear device/system.
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.
------------------------------------------------------------------------

2. Proposed Payment for Covered Ancillary Services
a. Background
Our final payment policies under the revised ASC payment system for

[[Page 35388]]

covered ancillary services vary according to the particular type of
service and its payment policy under the OPPS. Our overall policy
provides separate ASC payment for certain ancillary items and services
integrally related to the provision of ASC covered surgical procedures
that are paid separately under the OPPS and provides packaged ASC
payment for other ancillary items and services that are packaged under
the OPPS. Thus, we established a final policy to align ASC payment
bundles with those under the OPPS (72 FR 42495).
Our ASC payment policies provide separate payment for drugs and
biologicals that are separately paid under the OPPS at the OPPS rates,
while we pay for separately payable radiology services at the lower of
the MPFS nonfacility PE RVU (or technical component) amount or the rate
calculated according to the ASC standard ratesetting methodology (72 FR
42497). In all cases, ancillary items and services must be provided
integral to the performance of ASC covered surgical procedures for
which the ASC bills Medicare, in order for those ancillary services
also to be paid.
ASC payment policy for brachytherapy sources generally mirrors the
payment policy under the OPPS. We finalized our policy in the CY 2008
OPPS/ASC final rule with comment period (72 FR 42499) to pay for
brachytherapy sources applied in ASCs at the same prospective rates
that were adopted under the OPPS or, if OPPS rates were unavailable, at
contractor-priced rates. Subsequent to publication of that rule,
section 106 of the Medicare, Medicaid, and SCHIP Extension Act of 2007
(Pub. L. 110-173) mandated that, for the period January 1, 2008 through
June 30, 2008, brachytherapy sources be paid under the OPPS at charges
adjusted to cost. Therefore, consistent with our final overall ASC
payment policy, we paid ASCs at contractor-priced rates for
brachytherapy sources provided in ASCs during that period of time.
Beginning July 1, 2008, brachytherapy sources applied in ASCs were to
be paid at the same prospectively set rates that were finalized in the
CY 2008 OPPS/ASC final rule with comment period (72 FR 67165 through
67188). Immediately prior to the publication of the CY 2009 OPPS/ASC
proposed rule, section 142 of the Medicare Improvements for Patients
and Providers Act of 2008 (Pub. L. 110-275) amended section
1833(t)(16)(C) of the Act (as amended by section 106 of the Medicare,
Medicaid, and SCHIP Extension Act of 2007) to extend the requirement
that brachytherapy sources be paid under the OPPS at charges adjusted
to cost through December 31, 2009. Therefore, consistent with final ASC
payment policy, ASCs continued to be paid at contractor-priced rates
for brachytherapy sources provided integral to ASC covered surgical
procedures during that period of time.
Other separately paid covered ancillary services in ASCs,
specifically corneal tissue acquisition and device categories with OPPS
pass-through status, do not have prospectively established ASC payment
rates according to the final policies of the revised ASC payment system
(72 FR 42502 and 42509). Under the revised ASC payment system, corneal
tissue acquisition is paid based on the invoiced costs for acquiring
the corneal tissue for transplantation. As discussed in section IV.A.1.
of this proposed rule, new pass-through device categories may be
established on a quarterly basis, but currently there are no OPPS
device pass-through categories that would continue for OPPS pass-
through payment (and, correspondingly, separate ASC payment) in CY
2010.
b. Proposed Payment for Covered Ancillary Services for CY 2010
For CY 2010, we are proposing to update the ASC payment rates and
make changes to ASC payment indicators as necessary to maintain
consistency between the OPPS and ASC payment system regarding the
packaged or separately payable status of services and the proposed CY
2010 OPPS and ASC payment rates. The proposed CY 2010 OPPS payment
methodologies for separately payable drugs and biologicals and
brachytherapy sources are discussed in sections V. and VII. of this
proposed rule, respectively, and we are proposing to set the CY 2010
ASC payment rates for those services equal to the proposed CY 2010 OPPS
rates.
Consistent with established ASC payment policy (72 FR 42497), the
proposed CY 2010 payment for separately payable covered radiology
services is based on a comparison of the CY 2010 proposed MPFS
nonfacility PE RVU amounts (we refer readers to the June 2009 CY 2010
MPFS proposed rule) and the proposed CY 2010 ASC payment rates
calculated according to the ASC standard ratesetting methodology and
then set at the lower of the two amounts. Alternatively, payment for a
radiology service may be packaged into the payment for the ASC covered
surgical procedure if the radiology service is packaged under the OPPS.
The payment indicators in Addendum BB indicate whether the proposed
payment rates for radiology services are based on the MPFS nonfacility
PE RVU amount or the ASC standard ratesetting methodology, or whether
payment for a radiology service is packaged into the payment for the
covered surgical procedure (payment indicator ``N1''). Radiology
services that we are proposing to pay based on the ASC standard
ratesetting methodology are assigned payment indicator ``Z2''
(Radiology service paid separately when provided integral to a surgical
procedure on ASC list; payment based on OPPS relative payment weight)
and those for which the proposed payment is based on the MPFS
nonfacility PE RVU amount are assigned payment indicator ``Z3''
(Radiology service paid separately when provided integral to a surgical
procedure on ASC list; payment based on MPFS nonfacility PE RVUs).
All covered ancillary services and their proposed payment
indicators are listed in Addendum BB to this proposed rule.

E. New Technology Intraocular Lenses

1. Background
In the CY 2007 OPPS/ASC final rule with comment period (71 FR
68176), we finalized our current process for reviewing applications to
establish new active classes of new technology intraocular lenses
(NTIOLs) and for recognizing new candidate intraocular lenses (IOLs)
inserted during or subsequent to cataract extraction as belonging to a
NTIOL class that is qualified for a payment adjustment. Specifically,
we established the following process:
We announce annually in the Federal Register a document
that proposes the update of ASC payment rates for the following
calendar year, a list of all requests to establish new NTIOL classes
accepted for review during the calendar year in which the proposal is
published and the deadline for submission of public comments regarding
those requests. Pursuant to Section 141(b)(3) of Public Law 103-432 and
our regulations at Sec. 416.185(b), the deadline for receipt of public
comments is 30 days following publication of the list of requests.
In the Federal Register document that finalizes the update
of ASC payment rates for the following calendar year, we--
[cir] Provide a list of determinations made as a result of our
review of all new class requests and public comments; and
[cir] Announce the deadline for submitting requests for review of
an application for a new NTIOL class for the following calendar year.

[[Page 35389]]

In determining whether a lens belongs to a new class of NTIOLs and
whether the ASC payment amount for insertion of that lens in
conjunction with cataract surgery is appropriate, we expect that the
insertion of the candidate IOL would result in significantly improved
clinical outcomes compared to currently available IOLs. In addition, to
establish a new NTIOL class, the candidate lens must be distinguishable
from lenses already approved as members of active or expired classes of
NTIOLs that share a predominant characteristic associated with improved
clinical outcomes that was identified for each class. Furthermore, in
the CY 2007 OPPS/ASC final rule with comment period (71 FR 68227), we
finalized our proposal to base our determinations on consideration of
the following factors set out at Sec. 416.195:
The IOL must have been approved by the FDA and claims of
specific clinical benefits and/or lens characteristics with established
clinical relevance in comparison with currently available IOLs must
have been approved by the FDA for use in labeling and advertising;
The IOL is not described by an active or expired NTIOL
class; that is, it does not share the predominant, class-defining
characteristic associated with improved clinical outcomes with
designated members of an active or expired NTIOL class; and
Evidence demonstrates that use of the IOL results in
measurable, clinically meaningful, improved outcomes in comparison with
use of currently available IOLs. According to the statute, and
consistent with previous examples provided by CMS, superior outcomes
that we consider include the following:
[cir] Reduced risk of intraoperative or postoperative complication
or trauma;
[cir] Accelerated postoperative recovery;
[cir] Reduced induced astigmatism;
[cir] Improved postoperative visual acuity;
[cir] More stable postoperative vision; and/or
[cir] Other comparable clinical advantages, such as--
[squ] Reduced dependence on other eyewear (for example, spectacles,
contact lenses, and reading glasses);
[squ] Decreased rate of subsequent diagnostic or therapeutic
interventions, such as the need for YAG laser treatment;
[squ] Decreased incidence of subsequent IOL exchange; and
[squ] Decreased blurred vision, glare, other quantifiable symptom
or vision deficiency.
For a request to be considered complete, we require submission of
the information that is found in the guidance document entitled
``Application Process and Information Requirements for Requests for a
New Class of New Technology Intraocular Lens (NTIOL)'' posted on the
CMS Web site at: http://www.cms.hhs.gov/ASCPayment/08_NTIOLs.asp#TopOfPage.
As we stated in the CY 2007 OPPS/ASC final rule with comment period
(71 FR 68180), there are three possible outcomes from our review of a
request for establishment of a new NTIOL class. As appropriate, for
each completed request for consideration of a candidate IOL into a new
class that is received by the established deadline, one of the
following determinations is announced annually in the final rule
updating the ASC payment rates for the next calendar year:
The request for a payment adjustment is approved for the
candidate IOL for 5 full years as a member of a new NTIOL class
described by a new HCPCS code;
The request for a payment adjustment is approved for the
candidate IOL for the balance of time remaining as a member of an
active NTIOL class; or
The request for a payment adjustment is not approved.
We also discussed our plan to summarize briefly in the final rule
with comment period the evidence that we reviewed, the public comments,
and the basis for our determinations in consideration of applications
for establishment of a new NTIOL class. We established that when a new
NTIOL class is created, we identify the predominant characteristic of
NTIOLs in that class that sets them apart from other IOLs (including
those previously approved as members of other expired or active NTIOL
classes) and that is associated with improved clinical outcomes. The
date of implementation of a payment adjustment in the case of approval
of an IOL as a member of a new NTIOL class would be set prospectively
as of 30 days after publication of the ASC payment update final rule,
consistent with the statutory requirement.
2. NTIOL Application Process for Payment Adjustment
In CY 2007, we posted an updated guidance document to the CMS Web
site to provide process and information requirements for applications
requesting a review of the appropriateness of the payment amount for
insertion of an IOL to ensure that the ASC payment for covered surgical
procedures includes payment that is reasonable and related to the cost
of acquiring a lens that is approved as belonging to a new class of
NTIOLs. This guidance document can be accessed on the CMS Web site at:
http://www.cms.hhs.gov/ASCPayment/08_NTIOLs.asp#TopOfPage.
We note that we have also issued a guidance document entitled
``Revised Process for Recognizing Intraocular Lenses Furnished by
Ambulatory Surgery Centers (ASCs) as Belonging to an Active Subset of
New Technology Intraocular Lenses (NTIOLs).'' This guidance document
can be accessed on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/Downloads/Request_for_inclusion_in_current_NTIOL_subset.pdf.
This second guidance document provides specific details regarding
requests for recognition of IOLs as belonging to an existing, active
NTIOL class, the review process, and information required for a request
to review. Currently, there is one active NTIOL class whose defining
characteristic is the reduction of spherical aberration. CMS accepts
requests throughout the year to review the appropriateness of
recognizing an IOL as a member of an active class of NTIOLs. That is,
review of candidate lenses for membership in an existing, active NTIOL
class is ongoing and not limited to the annual review process that
applies to the establishment of new NTIOL classes. We ordinarily
complete the review of such a request within 90 days of receipt of all
information that we consider pertinent to our review, and upon
completion of our review, we notify the requestor of our determination
and post on the CMS Web site notification of a lens newly approved for
a payment adjustment as an NTIOL belonging to an active NTIOL class
when furnished in an ASC.
3. Classes of NTIOLs Approved and New Requests for Payment Adjustment
a. Background
Since implementation of the process for adjustment of payment
amounts for NTIOLs that was established in the June 16, 1999 Federal
Register, we have approved three classes of NTIOLs, as shown in the
following table, with the associated qualifying IOLs to date:

[[Page 35390]]

----------------------------------------------------------------------------------------------------------------
$50 Approved for
NTIOL class HCPCS code services furnished on or NTIOL characteristic IOLs eligible for adjustment
after
----------------------------------------------------------------------------------------------------------------
1.......... Q1001...... May 18, 2000, through Multifocal.............. Allergan AMO Array Multifocal
May 18, 2005. lens, model SA40N
2.......... Q1002...... May 18, 2000, through Reduction in Preexisting STAAR Surgical Elastic Ultraviolet-
May 18, 2005. Astigmatism. Absorbing Silicone Posterior
Chamber IOL with Toric Optic,
models AA4203T, AA4203TF, and
AA4203TL
3.......... Q1003...... February 27, 2006, Reduced Spherical Advanced Medical Optics (AMO)
through February 26, Aberration. Tecnis[reg] IOL models Z9000,
2011. Z9001, Z9002, ZA9003, and AR40xEM
and Tecnis[reg] 1-Piece model
ZCB00; Alcon Acrysof[reg] IQ
Model SN60WF and Acrysert
Delivery System model SN60WS;
Bausch & Lomb Sofport AO models
LI61AO and LI61AOV and Akreos AO
models AO60 and MI60; STAAR
Affinity Collamer model CQ2015A
and CC4204A and Elastimide model
AQ2015A; Hoya model FY-60AD
----------------------------------------------------------------------------------------------------------------

b. Request To Establish New NTIOL Class for CY 2010 and Deadline for
Public Comment
As explained in the guidance document on the CMS Web site, the
deadline for each year's requests for review of the appropriateness of
the ASC payment amount for insertion of a candidate IOL as a member of
a new class of NTIOLs is announced in the final rule updating the ASC
and OPPS payment rates for that calendar year. Therefore, a request for
review for a new class of NTIOLs for CY 2010 must have been submitted
to CMS by March 2, 2009, the due date published in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68752). We did not receive any
requests for review to establish a new NTIOL class for CY 2010 by the
March 2, 2009 due date.
4. Proposed Payment Adjustment
The current payment adjustment for a 5-year period from the
implementation date of a new NTIOL class is $50. In the CY 2007 OPPS/
ASC final rule with comment period, we revised Sec. 416.200(a) through
(c) to clarify how the IOL payment adjustment is made and how an NTIOL
is paid after expiration of the payment adjustment, and made minor
editorial changes to Sec. 416.200(d). For CY 2008 and CY 2009, we did
not revise the payment adjustment amount, and we are not proposing to
revise the payment adjustment amount for CY 2010 in light of our
limited experience with the revised ASC payment system, implemented
initially on January 1, 2008.
5. Proposed ASC Payment for Insertion of IOLs
In accordance with the final policies of the revised ASC payment
system, for CY 2010, payment for IOL insertion procedures is
established according to the standard payment methodology of the
revised payment system, which multiplies the ASC conversion factor by
the ASC payment weight for the surgical procedure to implant the IOL.
CY 2010 ASC payment for the cost of a conventional lens will be
packaged into the payment for the associated covered surgical
procedures performed by the ASC. The HCPCS codes for IOL insertion
procedures are included in Table 50 below, and their proposed CY 2010
payment rates may be found in Addendum AA to this proposed rule.

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

F. Proposed ASC Payment and Comment Indicators

1. Background
In addition to the payment indicators that we introduced in the
August 2, 2007 final rule for the revised ASC payment system, we also
created final comment indicators for the ASC payment system in the CY
2008 OPPS/ASC final rule with comment period (72 FR 66855). We created
Addendum DD1 to define ASC payment indicators that we use in Addenda AA
and BB to provide payment information regarding covered surgical
procedures and covered ancillary services, respectively, under the
revised ASC payment system. The ASC payment indicators in Addendum DD1
are intended to capture policy-relevant characteristics of HCPCS codes
that may receive packaged or separate payment in ASCs, including their
ASC payment status prior to CY 2008; their designation as device-
intensive or office-based and the corresponding ASC payment
methodology; and their classification as separately payable radiology
services, brachytherapy sources, OPPS pass-through devices, corneal
tissue acquisition services, drugs or biologicals, or NTIOLs.
We also created Addendum DD2 that lists the ASC comment indicators.
The ASC comment indicators used in Addenda AA and BB to the proposed
rules and final rules with comment period serve to identify, for the
revised ASC payment system, the status of a specific HCPCS code and its
payment indicator with respect to the timeframe when comments will be
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final
rule with comment period to indicate new HCPCS codes for which the
interim payment indicator assigned is subject to comment. The ``CH''
comment indicator is used in Addenda AA and BB to this CY 2010

[[Page 35391]]

proposed rule to indicate that a new payment indicator (in comparison
with the indicator for the CY 2009 ASC April quarterly update) is
proposed for assignment to an active HCPCS code for the next calendar
year; an active HCPCS code is proposed for addition to the list of
procedures or services payable in ASCs; or an active HCPCS code is
proposed for deletion at the end of the current calendar year. The
``CH'' comment indicators that are published in the final rule with
comment period are provided to alert readers that a change has been
made from one calendar year to the next, but do not indicate that the
change is subject to comment. The full definitions of the payment
indicators and comment indicators are provided in Addendum DD2 to this
proposed rule.
2. Proposed ASC Payment and Comment Indicators
We are not proposing any changes to the definitions of the ASC
payment indicators or comment indicators for CY 2010.

G. ASC Policy and Payment Recommendations

MedPAC was established under section 1805 of the Social Security
Act to advise the U.S. Congress on issues affecting the Medicare
program. Sections 1805(b)(1)(B) and (b)(1)(C) of the Act require MedPAC
to submit reports to Congress not later than March 1 and June 15 of
each year that present its Medicare payment policy reviews and
recommendations. The following section describes a recent MedPAC
recommendation that is relevant to the ASC payment system.
The March 2009 MedPAC ``Report to the Congress: Medicare Payment
Policy'' included the following recommendation relating specifically to
the ASC payment system for CY 2010:
Recommendation 2B-4: The Congress should increase payments for
ambulatory surgery center (ASC) services in calendar year 2010 by 0.6
percent. In addition, the Congress should require ASCs to submit to the
Secretary cost data and quality data that will allow for an effective
evaluation of the adequacy of ASC payment rates.
Response: In the August 2, 2007 final rule (72 FR 42518 through
42519), we adopted a policy to update the ASC conversion factor for
consistency with section 1833(i)(2)(C) of the Act, which requires that,
if the Secretary has not updated the ASC payment amounts in a calendar
year, the payment amounts shall be increased by the percentage increase
in the Consumer Price Index for All Urban Consumers (CPI-U) as
estimated by the Secretary for the 12-month period ending with the
midpoint of the year involved. The statute set the update at zero for
CYs 2008 and 2009. We indicated that we plan to implement the annual
updates through an adjustment to the conversion factor under the ASC
payment system beginning in CY 2010 when the statutory requirement for
a zero update no longer applies. We are proposing to update the
conversion factor for the CY 2010 ASC payment system by the percentage
increase in the CPI-U, consistent with our policy as codified under
Sec. 416.171(a)(2).
We are not proposing to require ASCs to submit cost data to the
Secretary for CY 2010. We have never required ASCs to routinely submit
cost data. The previous ASC payment system payment rates were initially
based on ASC cost data collected almost 30 years ago. The 2006 GAO
report, ``Medicare: Payment for Ambulatory Surgical Centers Should Be
Based on the Hospital Outpatient Payment System'' (GAO-07-86),
concluded that the APC groups in the OPPS reflect the relative costs of
surgical procedures performed in ASCs in the same way that they reflect
the relative costs of the same procedures when they are performed in
HOPDs. Using the OPPS as the basis for an ASC payment system provides
for an annual revision of the ASC payment rates under the budget
neutral ASC payment system. However, MedPAC noted the lack of
information available to assess whether ASC payment rates are
appropriate and recommended that ASCs be required to submit cost and
quality data to the Secretary as soon as feasible. At present under the
methodology of the revised ASC payment system, we do not utilize ASC
cost information to set and revise the payment rates for ASCs but,
instead, rely on the relativity of hospital outpatient costs developed
for the OPPS, consistent with the recommendation of the GAO.
Furthermore, we are concerned that a new Medicare requirement for ASCs
to submit cost data to the Secretary could be administratively
burdensome for ASCs. However, in light of the MedPAC recommendation, we
are soliciting public comment on the feasibility of ASCs submitting
cost information to CMS, including whether costs should be collected
from a sample or the universe of ASCs, the administrative burden
associated with such an activity, the form that such a submission could
take considering existing Medicare requirements for other types of
facilities and the scope of ASC services, the expected accuracy of such
cost information, and any other issues or concerns of interest to the
public on this topic.
Finally, we appreciate MedPAC's recommendation that Congress
require ASCs to submit quality data. Section 109(b) of the MIEA-TRHCA
(Pub. L. 109-432) gives the Secretary the authority to implement ASC
quality measure reporting and to reduce the payment update for ASCs
that fail to report those required measures. As we stated most recently
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68779),
we believe that promoting high quality care in the ASC setting through
quality reporting is highly desirable and fully in line with our
efforts under other payment systems. For the reasons discussed in
section XVI.H. of this proposed rule, we are not proposing to require
ASC quality data reporting for CY 2010, but our clear intention is to
implement ASC quality reporting in the future.

H. Proposed Revision to Terms of Agreements for Hospital-Operated ASCs

1. Background
The August 5, 1982 ASC final rule (47 FR 34082) established the
initial Medicare ASC payment system and implementing Federal
regulations under 42 CFR Part 416. Under Sec. 416.26 of our
regulations, ASCs operated by hospitals, like other ASCs, must meet the
applicable conditions for coverage and enter into an agreement with CMS
in which CMS accepts the ASC as qualified to furnish ambulatory
surgical services. Sections 416.30(a) through (g) of our regulations
specify terms of agreement for ASCs. Section 416.30(f) specifies the
following additional terms of agreement for an ASC operated by a
hospital--
The agreement is made effective on the first day of the
next Medicare cost reporting period of the hospital that operates the
ASC;
The ASC participates and is paid only as an ASC, without
the option of converting to or being paid as a hospital outpatient
department, unless CMS determines there is good cause to do otherwise;
and
Costs incurred by the ASC are treated as a nonreimbursable
cost center on the hospital's Medicare cost report.
In addition, Sec. 416.35 provides guidance regarding the
termination of ASC agreements with CMS. Voluntary terminations are
those initiated by an ASC and as specified in Sec. 416.35, an ASC may
terminate its agreement either by sending written notice to CMS or by

[[Page 35392]]

ceasing to furnish services to the community.
Although some sections of Part 416 of the regulations governing
ASCs have been revised since they were established in 1982, most
recently for CY 2008 with the adoption of the revised ASC payment
system, Sec. Sec. 416.30(a) through 416.30(g) have not been changed or
updated. At the time Sec. Sec. 416.30 and 416.35 were promulgated,
Medicare paid for hospital outpatient services on a reasonable cost
basis. In contrast, Medicare initially paid ASCs for a small number of
surgical procedures at one of only four prospective rates that were
developed for the ASC payment system using cost data obtained from
surveys of ASCs. Since then, Medicare has adopted a prospective payment
system for HOPDs (the OPPS), the ASC list of covered surgical
procedures and payment rates have been updated a number of times, and,
beginning in CY 2008, the revised ASC payment system was introduced.
Under the revised ASC payment system, Medicare greatly increased
the number and types of surgical procedures that are eligible for
payment in ASCs. As a result, many more of the same surgical procedures
may be paid under the OPPS and ASC payment system, with the specific
payment determined by whether the service is provided by a hospital or
an ASC. Further, under the current, revised payment methodology, ASC
payment rates have a direct relationship to the relative payment
weights under the OPPS for the same services. Today, hospital
outpatient and ASC surgical procedures are paid based on the relative
weights adopted for the OPPS, and the difference between payments under
the two systems is largely a reflection of the differences in capital
and operating costs attributable to being an ASC or being an HOPD.
Another change that has taken place since the establishment of the
Medicare ASC payment system and the implementing regulations at Sec.
416.30 has been our effort to simplify the Medicare regulations to
reduce the burden on providers and suppliers. As discussed in the
August 1, 2002 IPPS final rule (67 FR 50084 through 50090), as part of
that effort, we revised the provider-based status regulations at Sec.
413.65 that outline the requirements for a determination that a
facility or an organization has provider-based status as a department
or entity of a hospital (main provider). The provider-based status
rules generally apply to situations where there is a financial
incentive for a facility or organization to claim affiliation with a
main provider. The provider-based status rules establish criteria for a
facility or organization to demonstrate that it is integrated with the
main provider for payment purposes. We do not make provider-based
status determinations for certain facilities, listed under Sec.
413.65(a)(1)(ii) of the regulations, because the outcome of the
determination (that is, whether a facility, unit, or department is
found to be freestanding or provider-based) would not affect the
methodology used to make Medicare or Medicaid payment, the scope of
benefits available to a Medicare beneficiary in or at the facility, or
the deductible or coinsurance liability of a Medicare beneficiary in or
at the facility. According to Sec. 413.65(a)(1)(ii), we do not make
provider-based determinations for ASCs or other suppliers that have
active supplier agreements with Medicare because services provided in
such entities are paid under other fee schedules, specifically in the
case of ASCs regardless of whether the ASC is operated by a hospital.
In the August 1, 2002 IPPS final rule (67 FR 50084 through 50090),
we revised the provider-based status rules where the main providers
were no longer required to submit an attestation to CMS to demonstrate
that their provider-based departments or entities met the provider-
based status rules. However, the provider-based department or entity of
a main provider must still meet the provider-based status rules in
Sec. 413.65 in order for the main provider to bill for services
performed in the provider-based department or entity.
2. Proposed Change to the Terms of Agreements for ASCs Operated by
Hospitals
In order to further streamline our regulations to reduce the
administrative burden on providers and suppliers, we are proposing to
revise existing Sec. 416.30(f)(2) to remove the language requiring a
hospital-operated ASC to satisfy CMS that there is good cause for its
request to become a provider-based department of a hospital prior to
being recognized as such. Specifically, we would remove the language,
``without the option of converting to or being paid as a hospital
outpatient department, unless CMS determines there is good cause to do
otherwise.'' We believe that this proposed revision to the requirements
that apply to hospital-operated ASCs is consistent with our earlier
regulation simplification activities related to the provider-based
status rules under Sec. 413.65. We believe that we would reduce the
administrative burden on hospitals and ASCs that terminate their
supplier agreements with Medicare and bring the requirements into
closer alignment with the provider-based status rules for other
facilities or organizations that wish to be integrated with the main
provider for payment purposes. While an ASC participating in Medicare
would continue to be paid only as an ASC, an ASC would also continue to
be able to voluntarily terminate its agreements in accordance with
Sec. 416.35. Thus, if an ASC chooses to voluntarily terminate its
agreement as an ASC and a main provider wants to consider the surgical
facility a provider-based department of that main provider, the
facility must meet the provider-based status rules under Sec. 413.65.

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

1. Background
In the August 2, 2007 final rule (72 FR 42493), we established our
policy to base ASC relative payment weights and payment rates under the
revised ASC payment system on APC groups and relative payment weights.
Consistent with that policy and the requirement at section
1833(i)(2)(D)(ii) of the Act that the revised payment system be
implemented so that it would be budget neutral, the initial ASC
conversion factor (CY 2008) was calculated so that estimated total
Medicare payments under the revised ASC payment system in the first
year would be budget neutral to estimated total Medicare payments under
the prior (CY 2007) ASC payment system. That is, application of the ASC
conversion factor was designed to result in aggregate Medicare
expenditures under the revised ASC payment system in CY 2008 equal to
aggregate Medicare expenditures that would have occurred in CY 2008 in
the absence of the revised system, taking into consideration the cap on
ASC payments in CY 2007 as required under section 1833(i)(2)(E) of the
Act (72 FR 42521 through 42522).
We note that we consider the term ``expenditures'' in the context
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of
the Act to mean expenditures from the Medicare Part B Trust Fund. We do
not consider expenditures to include beneficiary coinsurance and
copayments. This distinction was important for the CY 2008 ASC budget
neutrality model that considered payments across hospital outpatient,
ASC, and MPFS payment systems. However, because coinsurance is almost
always 20 percent for ASC services, this interpretation of expenditures
has minimal impact for subsequent budget neutrality

[[Page 35393]]

adjustments calculated within the revised ASC payment system.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857
through 66858), we set out a step-by-step illustration of the final
budget neutrality adjustment calculation based on the methodology
finalized in the August 2, 2007 final rule (72 FR 42521 through 42531)
and as applied to updated data available for the CY 2008 OPPS/ASC final
rule with comment period. The application of that methodology to the
data available for the CY 2008 OPPS/ASC final rule with comment period
resulted in a budget neutrality adjustment of 0.65.
For CY 2008, we adopted the OPPS relative payment weights as the
ASC relative payment weights for most services and, consistent with the
final policy, we calculated the CY 2008 ASC payment rates by
multiplying the ASC relative payment weights by the final CY 2008 ASC
conversion factor of $41.401. For covered office-based surgical
procedures and covered ancillary radiology services, the established
policy is to set the relative payment weights so that the national
unadjusted ASC payment rate does not exceed the MPFS unadjusted
nonfacility PE RVU amount. Further, as discussed in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66841 through 66847), we also
adopted alternative ratesetting methodologies for specific types of
services (for example, device-intensive procedures).
As discussed in the August 2, 2007 final rule (72 FR 42518) and as
codified under Sec. 416.172(c) of the regulations, the revised ASC
payment system accounts for geographic wage variation when calculating
individual ASC payments by applying the pre-floor and pre-reclassified
hospital wage index to the labor-related share, which is 50 percent of
the ASC payment amount. Beginning in CY2008, CMS accounted for
geographic wage variation in labor cost when calculating individual ASC
payments by applying the pre-floor and pre-reclassified hospital wage
index values that CMS calculates for payment, using updated Core Based
Statistical Areas (CBSAs) issued by the Office of Management and Budget
in June 2003. The reclassification provision provided at section
1886(d)(10) of the Act is specific to hospitals. We believe the use of
the most recent available raw pre-floor and pre-reclassified hospital
wage index results in the most appropriate adjustment to the labor
portion of ASC costs. In addition, use of the unadjusted hospital wage
data avoids further reductions in certain rural statewide wage index
values that result from reclassification. We continue to believe that
the unadjusted hospital wage index, which is updated yearly and is used
by many other Medicare payment systems, appropriately accounts for
geographic variation in labor costs for ASCs.
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2010 and Future
Years
We update the ASC relative payment weights each year using the
national OPPS relative payment weights (and MPFS nonfacility PE RVU
amounts, as applicable) for that same calendar year and uniformly scale
the ASC relative payment weights for each update year to make them
budget neutral (72 FR 42531 through 42532). Consistent with our
established policy, we are proposing to scale the CY2010 relative
payment weights for ASCs according to the following method. Holding ASC
utilization and the mix of services constant from CY 2008, for CY 2010,
we would compare the total payment weight using the CY 2009 ASC
relative payment weights under the 50/50 blend (of the CY 2007 payment
rate and the ASC payment rate calculated under the ASC standard
ratesetting methodology) with the total payment weight using the CY
2010 ASC relative payment weights under the 25/75 blend (of the CY 2007
ASC payment rate and the ASC payment rate calculated under the ASC
standard ratesetting methodology) to take into account the changes in
the OPPS relative payment weights between CY 2009 and CY 2010. We would
use the ratio of CY 2009 to CY 2010 total payment weight (the weight
scaler) to scale the ASC relative payment weights for CY 2010. The
proposed CY 2010 ASC scaler is 0.9514 and scaling would apply to the
ASC relative payment weights of the covered surgical procedures and
covered ancillary radiology services for which the ASC payment rates
are based on OPPS relative payment weights.
Scaling would not apply in the case of ASC payment for separately
payable covered ancillary services that have a predetermined national
payment amount (that is, their national ASC payment amounts are not
based on OPPS relative payment weights), such as drugs and biologicals
that are separately paid or services that are contractor-priced or paid
at reasonable cost in ASCs. Any service with a predetermined national
payment amount would be included in the ASC budget neutrality
comparison, but scaling of the ASC relative payment weights would not
apply to those services. The ASC payment weights for those services
without predetermined national payment amounts (that is, those services
with national payment amounts that would be based on OPPS relative
payment weights if a payment limitation did not apply) would be scaled
to eliminate any difference in the total payment weight between the
current year and the update year.
The proposed weight scaler that we use only to model our estimate
of payment rates if there was no transition for CY 2010 is equal to
0.9329. We apply this scaler to the payment weights subject to scaling,
in order to estimate the ASC payment rates for CY 2010 without the
transition, for purposes of the ASC impact analysis discussed in
section XXI.C. of this proposed rule.
For any given year's ratesetting, we typically use the most recent
full calendar year of claims data to model budget neutrality
adjustments. We currently have available 95 percent of CY 2008 ASC
claims data. To create an analytic file to support calculation of the
weight scaler and budget neutrality adjustment for the wage index
(discussed below), we summarized available CY 2008 ASC claims by
provider and by HCPCS code. We created a unique supplier identifier
solely for the purpose of identifying unique providers within the CY
2008 claims data. We used the provider zip code reported on the claim
to associate state, county, and CBSA with each ASC. This file,
available to the public as a supporting data file for this proposed
rule, is posted on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/01_Overview.asp#TopOfPage.
b. Updating the ASC Conversion Factor
Under the OPPS, we typically apply a budget neutrality adjustment
for provider-level changes, most notably a change in the wage index for
the upcoming year, to the conversion factor. Consistent with our final
ASC payment policy, for the CY 2010 ASC payment system, we are
proposing to calculate and apply the pre-floor and pre-reclassified
hospital wage index that is used for ASC payment adjustment to the ASC
conversion factor, just as the OPPS wage index adjustment is calculated
and applied to the OPPS conversion factor (73 FR 41539). For CY 2010,
we calculated the proposed adjustment for the ASC payment system by
using the most recent CY 2008 claims data available and estimating the
difference in total payment that would be created by introducing the CY
2010 pre-floor and pre-reclassified hospital wage index. Specifically,
holding CY 2008 ASC utilization and service-mix and CY

[[Page 35394]]

2009 national payment rates after application of the weight scaler
constant, we calculated the total adjusted payment using the CY 2009
pre-floor and pre-reclassified hospital wage index and a total adjusted
payment using the proposed CY 2010 pre-floor and pre-reclassified
hospital wage index. We used the 50-percent labor-related share for
both total adjusted payment calculations. We then compared the total
adjusted payment calculated with the CY 2009 pre-floor and pre-
reclassified hospital wage index to the total adjusted payment
calculated with the proposed CY 2010 pre-floor and pre-reclassified
hospital wage index and applied the resulting ratio of 0.9996 (the
proposed CY 2010 ASC wage index budget neutrality adjustment) to the CY
2009 ASC conversion factor to calculate the proposed CY 2010 ASC
conversion factor.
Section 1833(i)(2)(C) of the Act requires that, if the Secretary
has not updated the ASC payment amounts in a calendar year, the payment
amounts shall be increased by the percentage increase in the Consumer
Price Index for All Urban Consumer (CPI-U) as estimated by the
Secretary for the 12-month period ending with the midpoint of the year
involved. However, section 1833(i)(2)(C)(iv) of the Act required that
the increase of ASC payment amounts for CYs 2008 and 2009 equal zero
percent. As discussed in the August 2, 2007 final rule, we adopted a
final policy to update the ASC conversion factor using the CPI-U in
order to adjust ASC payment rates for CY 2010 and subsequent years (72
FR 42518 through 42519 and Sec. 416.171(a)(2)). We are proposing to
implement the annual updates through an adjustment to the ASC
conversion factor beginning in CY 2010 when the statutory requirement
for a zero update no longer applies.
For the 12-month period ending with the midpoint of CY 2010, the
Secretary estimates that the CPI-U is 0.6 percent. Therefore, we are
proposing to apply to the ASC conversion factor a 0.6 percent increase
for CY 2010.
Thus, for CY 2010, we are proposing to adjust the CY 2009 ASC
conversion factor ($41.393) by the wage adjustment for budget
neutrality of 0.9996 and the update of 0.6 percent, which results in a
proposed CY 2010 ASC conversion factor of $41.625.
3. Display of Proposed ASC Payment Rates
Addenda AA and BB to this proposed rule display the proposed
updated ASC payment rates for CY2010 for covered surgical procedures
and covered ancillary services, respectively. These addenda contain
several types of information related to the proposed CY 2010 payment
rates. Specifically, in Addendum AA, a ``Y'' in the column titled
``Subject to Multiple Procedure Discounting'' indicates that the
surgical procedure would be subject to the multiple procedure payment
reduction policy. As discussed in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66829 through 66830), most covered surgical
procedures are subject to a 50-percent reduction in the ASC payment for
the lower-paying procedure when more than one procedure is performed in
a single operative session. Display of the comment indicator ``CH'' in
the column titled ``Comment Indicator'' indicates a proposed change in
payment policy for the item or service, including identifying new or
discontinued HCPCS codes, designating items or services new for payment
under the ASC payment system, and identifying items or services with
proposed changes in the ASC payment indicator for CY 2010.
The values displayed in the column titled ``CY 2010 Third Year
Transition Payment Weight'' are the proposed relative payment weights
for each of the listed services for CY 2010, the third year of the 4-
year transition period. The CY 2010 ASC payment rates for the covered
surgical procedures subject to transitional payment (payment indicators
``A2'' and ``H8'' in Addendum AA) are based on a blend of 25 percent of
the CY 2007 ASC payment rate for the procedure and 75 percent of the
proposed CY2010 ASC rate calculated under the ASC standard ratesetting
methodology before scaling for budget neutrality, calculated according
to the standard methodology. The payment weights for all covered
surgical procedures and covered ancillary services whose ASC payment
rates are based on OPPS relative payment weights are scaled for budget
neutrality. Thus, scaling was not applied to the device portion of the
device-intensive procedures, services that are paid at the MPFS
nonfacility PE RVU amount, separately payable covered ancillary
services that have a predetermined national payment amount, such as
drugs and biologicals that are separately paid under the OPPS, or
services that are contractor-priced or paid at reasonable cost in ASCs.
To derive the proposed CY 2010 payment rate displayed in the ``CY
2010 Third Year Transition Payment'' column, each ASC payment weight in
the ``CY 2010 Third Year Transition Payment Weight'' column is
multiplied by the proposed CY 2010 ASC conversion factor of $41.625.
The conversion factor includes a budget neutrality adjustment for
changes in the wage index and the CPI-U percentage increase.
In Addendum BB, there are no relative payment weights displayed in
the ``CY 2010 Third Year Transition Payment Weight'' column for items
and services with predetermined national payment amounts, such as
separately payable drugs and biologicals. The ``CY 2010 Third Year
Transition Payment'' column displays the proposed CY 2010 national
unadjusted ASC payment rates for all items and services. The proposed
CY 2010 ASC payment rates for separately payable drugs and biologicals
are based on ASP data used for payment in physicians' offices in April
2009.

XVI. Reporting Quality Data for Annual Payment Rate Updates

A. Background

1. Overview
CMS has implemented quality measure reporting programs for multiple
settings of care. These programs promote higher quality, more efficient
health care for Medicare beneficiaries. The quality data reporting
program for hospital outpatient care, known as the Hospital Outpatient
Quality Data Reporting Program (HOP QDRP), has been generally modeled
after the program for hospital inpatient services, the Reporting
Hospital Quality Data for Annual Payment Update (RHQDAPU) program. Both
of these quality reporting programs for hospital services, as well as
the program for physicians and other eligible professionals, known as
the Physician Quality Reporting Initiative (PQRI), have financial
incentives for reporting of quality data to CMS. CMS has also
implemented quality reporting programs for home health agencies and
skilled nursing facilities that are based on conditions of
participation, and an end-stage renal disease quality reporting program
that is based on conditions for coverage.
2. Hospital Outpatient Quality Data Reporting Under Section 109(a) of
Public Law 109-432
Section 109(a) of the MIEA-TRHCA (Pub. L. 109-432) amended section
1833(t) of the Act by adding a new subsection (17) that affects the
payment rate update applicable to OPPS payments for services furnished
by hospitals in outpatient settings on or after January 1, 2009.
Section 1833(t)(17)(A) of the Act, which applies to hospitals as
defined under section 1886(d)(1)(B) of the Act, states that subsection
(d) hospitals that fail to report data required for the quality

[[Page 35395]]

measures selected by the Secretary in the form and manner required by
the Secretary under section 1833(t)(17)(B) of the Act will receive a
2.0 percentage point reduction to their annual payment update factor.
Section 1833(t)(17)(B) of the Act requires that hospitals submit
quality data in a form and manner, and at a time, that the Secretary
specifies. Section 1833(t)(17)(C)(i) of the Act requires the Secretary
to develop measures appropriate for the measurement of the quality of
care (including medication errors) furnished by hospitals in outpatient
settings, that these measures reflect consensus among affected parties
and, to the extent feasible and practicable, that these measures
include measures set forth by one or more national consensus building
entities.
The National Quality Forum (NQF) is a voluntary consensus standard-
setting organization that is composed of a diverse representation of
consumer, purchaser, provider, academic, clinical, and other health
care stakeholder organizations. NQF was established to standardize
health care quality measurement and reporting through its consensus
development process. We generally prefer to adopt NQF-endorsed measures
for CMS quality reporting programs. However, we believe that consensus
among affected parties also can be reflected by other means, including:
consensus achieved during the measure development process; consensus
shown through broad acceptance and use of measures; and consensus
through public comment. We also note that section 1833(t)(17) does not
require that each measure we adopt for the HOP QDRP be endorsed by a
national consensus building entity, or by the NQF specifically.
Section 1833(t)(17)(C)(ii) of the Act authorizes the Secretary to
select measures for the HOP QDRP that are the same as (or a subset of)
the measures for which data are required to be submitted under section
1886(b)(3)(B)(viii) of the Act (the RHQDAPU program). Section
1833(t)(17)(D) of the Act gives the Secretary the authority to replace
measures or indicators as appropriate, such as when all hospitals are
effectively in compliance or when the measures or indicators have been
subsequently shown not to represent the best clinical practice. Section
1833(t)(17)(E) of the Act requires the Secretary to establish
procedures for making data submitted under the HOP QDRP available to
the public. Such procedures must include giving hospitals the
opportunity to review their data before these data are released to the
public.
As we stated in the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68758 through 68759), we continue to believe that it is most
appropriate and desirable to adopt measures that specifically apply to
the hospital outpatient setting for the HOP QDRP. In other words, we do
not believe that we should simply, without further analysis, adopt the
RHQDAPU program measures as the measures for the HOP QDRP. Nonetheless,
we note that section 1833(t)(17)(C)(ii) of the Act allows the Secretary
to ``[select] measures that are the same as (or a subset of) the
measures for which data are required to be submitted'' under the
RHQDAPU program.
3. Reporting ASC Quality Data for Annual Payment Update
Section 109(b) of the MIEA-TRHCA amended section 1833(i) of the Act
by redesignating clause (iv) as clause (v) and adding new clause (iv)
to paragraph (2)(D) and adding paragraph (7). These amendments may
affect ASC payments for services furnished in ASC settings on or after
January 1, 2009. Section 1833(i)(2)(D)(iv) of the Act authorizes the
Secretary to implement the revised payment system for services
furnished in ASCs (established under section 1833(i)(2)(D) of the Act),
``so as to provide for a reduction in any annual update for failure to
report on quality measures.''
Section 1833(i)(7)(A) of the Act states that the Secretary may
provide that any ASC that fails to report data required for the quality
measures selected by the Secretary in the form and manner required by
the Secretary under section 1833(i)(7) of the Act will incur a
reduction in any annual payment update of 2.0 percentage points.
Section 1833(i)(7)(A) of the Act also specifies that a reduction for
one year cannot be taken into account in computing the ASC update for a
subsequent calendar year.
Section 1833(i)(7)(B) of the Act provides that, ``[e]xcept as the
Secretary may otherwise provide,'' the hospital outpatient quality data
provisions of sections 1833(t)(17)(B) through (E) of the Act,
summarized above, shall apply to ASCs. We did not implement an ASC
quality reporting program for CY 2008 (72 FR66875) or for CY 2009 (73
FR 68779).
We refer readers to section XVI.H. of this proposed rule for a
discussion of our intention to implement ASC quality data reporting in
a later rulemaking.
4. HOP QDRP Quality Measures for the CY 2009 Payment Determination
For the CY 2009 annual payment update, we required HOP QDRP
reporting using seven quality measures--five Emergency Department (ED)
AMI measures and two Perioperative Care measures. These measures
address care provided to a large number of adult patients in hospital
outpatient settings, across a diverse set of conditions, and were
selected for the initial set of HOP QDRP measures based on their
relevance as a set to all hospital outpatient departments.
Specifically, in order for hospitals to receive the full OPPS
payment update for services furnished in CY 2009, in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66860), we required that
subsection (d) hospitals paid under the OPPS submit data on the
following seven measures for hospital outpatient services furnished on
or after April 1, 2008: (1) ED-AMI-1--Aspirin at Arrival; (2) ED-AMI-
2--Median Time to Fibrinolysis; (3) ED-AMI-3--Fibrinolytic Therapy
Received within 30 Minutes of Arrival; (4) ED-AMI-4--Median Time to
Electrocardiogram (ECG); (5) ED-AMI-5--Median Time to Transfer for
Primary PCI; (6) PQRI 20: Perioperative Care--Timing of
Antibiotic Prophylaxis; and (7) PQRI 21: Perioperative Care--
Selection of Perioperative Antibiotic.
5. HOP QDRP Quality Measures for the CY 2010 Payment Determination
a. Background
In the CY 2009 OPPS/ASC final rule with comment period, for the CY
2010 payment update, we required continued submission of data on the
existing seven measures discussed above (73 FR 68761), and adopted four
imaging measures (73 FR 68766). For CY 2010, we changed the measure
designations for the existing seven measures to an ``OP-X'' format in
order to maintain a consistent sequential designation system that we
could expand as we add additional measures.
The four imaging measures that we adopted beginning with the CY
2010 payment determination (OP-8: MRI Lumbar Spine for Low Back Pain,
OP-9: Mammography Follow-up rates, OP-10: Abdomen CT--Use of Contrast
Material, and OP11: Thorax CT--Use of Contrast Material) are claims-
based measures that CMS will calculate using Medicare Part B claims
data without imposing upon hospitals the burden of additional chart
abstraction. For purposes of the CY 2010 payment determination, we will
calculate these

[[Page 35396]]

measures using CY 2008 Medicare administrative claims data.
In the CY 2009 OPPS/ASC proposed rule, OP-10 had 2 submeasures
listed: OP-10a: CT Abdomen--Use of contrast material excluding calculi
of the kidneys, ureter, and/or urinary tract, and OP-10b: CT Abdomen--
Use of contrast material for diagnosis of calculi in the kidneys,
ureter, and or urinary tract. In the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68766), we finalized OP-10: Abdomen CT--Use of
Contrast Material. To clarify, we are calculating OP-10 excluding
patients with renal disease. This exclusion is described in greater
detail in the Specifications Manual for Hospital Outpatient Department
Quality Measures (HOPD Specifications Manual) located at the QualityNet
Web site.
The complete set of measures to be used for the CY 2010 payment
determination is set out below, and is shown with the new measure
designations as well as their former designations:

------------------------------------------------------------------------
HOP QDRP Measurement Set To Be Used for CY 2010
Payment Determination CY 2009 designation
------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis............... ED-AMI-2
OP-2: Fibrinolytic Therapy Received Within 30 ED-AMI-3
Minutes.
OP-3: Median Time to Transfer to Another ED-AMI-5
Facility for Acute Coronary Intervention.
OP-4: Aspirin at Arrival........................ ED-AMI-1
OP-5: Median Time to ECG........................ ED-AMI-4
OP-6: Timing of Antibiotic Prophylaxis.......... PQRI 20
OP-7: Prophylactic Antibiotic Selection for PQRI 21
Surgical Patients.
OP-8: MRI Lumbar Spine for Low Back Pain........ NA
OP-9: Mammography Follow-up Rates............... NA
OP-10: Abdomen CT--Use of Contrast Material..... NA
OP-11: Thorax CT--Use of Contrast Material...... NA
------------------------------------------------------------------------

b. Maintenance of Technical Specifications for Quality Measures
Technical specifications for each HOP QDRP measure are listed in
the HOPD Specifications Manual, which is posted on the CMS QualityNet
Web site at https://www.QualityNet.org. We maintain the technical
specifications for the measures by updating this HOPD Specification
Manual and include detailed instructions and calculation algorithms for
hospitals to use when collecting and submitting data on required
measures.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68766), we established a subregulatory process for updates to the
technical specifications that we use to calculate HOP QDRP measures.
This process is used when changes to the measure specifications are
necessary due to changes in scientific evidence or in the measure as
endorsed by the consensus entity. Changes of this nature may not
coincide with the timing of our regulatory actions, but nevertheless
require inclusion in the measure specifications so that the HOP QDRP
measures are calculated based on the most up-to-date scientific and
consensus standards. We indicated that notification of changes to the
measure specifications on the QualityNet Web site, http://www.QualityNet.org, and in the HOPD Specifications Manual that occurred
as a result of changes in scientific evidence or national consensus
would occur no less than 3 months before any changes become effective
for purposes of reporting under the HOP QDRP.
The HOPD Specification Manual is released every 6 months and
addenda are released as necessary providing at least 3 months of
advance notice for non-substantive changes such as changes to ICD-9,
CPT, NUBC and HCPCS codes, and at least 6 months notice for substantive
changes to data elements that would require significant systems
changes.
c. Publication of HOP QDRP Data
Section 1833(t)(17)(E) of the Act requires that the Secretary
establish procedures to make data collected under the HOP QDRP program
available to the public. CMS also requires hospitals to complete and
submit a registration form (``participation form''), in order to
participate in the HOP QDRP. In submitting this form, participating
hospitals agree that they will allow CMS to publicly report the quality
measures, including those that CMS calculates using Medicare claims, as
required by the HOP QDRP.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68778), we established that for CY 2010, hospitals sharing the same CMS
Certification Number (CCN, previously known as the Medicare Provider
Number (MPN)) must combine data collection and submission across their
multiple campuses for the clinical measures for public reporting
purposes. We finalized that we will publish quality data by CCN under
the HOP QDRP. This approach is consistent with the approach taken under
the RHQDAPU program. In that final rule with comment period, we also
stated that we intend to indicate instances where data from two or more
hospitals are combined to form the publicly reported measures on the
Web site.
We discuss our proposal for publication for 2010 of HOP QDRP data
in section XVI.F. of this proposed rule.

B. Proposals Regarding Quality Measures

1. Considerations in Expanding and Updating Quality Measures Under the
HOP QDRP
In general when selecting measures for the HOP QDRP program, we
take into account several considerations and goals. These include: (a)
Expanding the types of measures beyond process of care measures to
include an increased number of outcome measures, efficiency measures,
and patients' experience-of-care measures; (b) expanding the scope of
hospital services to which the measures apply; (c) considering the
burden on hospitals in collecting chart-abstracted data; (d)
harmonizing the measures used in the HOP QDRP program with other CMS
quality programs to align incentives and promote coordinated efforts to
improve quality; (e) seeking to use measures based on alternative
sources of data that do not require chart abstraction or that utilize
data already being reported by many hospitals, such as data that
hospitals report to clinical data registries, or all-payer claims
databases; and (f) weighing the relevance and utility of the measures
compared to the burden on hospitals in submitting data under the HOP
QDRP program. Specifically, we give priority to quality measures that
assess performance on: (a) Conditions that result in the greatest

[[Page 35397]]

mortality and morbidity in the Medicare population; (b) conditions that
are high volume and high cost for the Medicare program; and (c)
conditions for which wide cost and treatment variations have been
reported, despite established clinical guidelines. We have used and
continue to use these criteria to guide our decisions regarding what
measures to add to the HOP QDRP measure set.
In the CY 2009 OPPS/ASC final rule with comment period, we adopted
four claims-based quality measures that do not require a hospital to
submit chart-abstracted clinical data. This supports our stated goal to
expand the measures for the HOP QDRP while minimizing the burden upon
hospitals and, in particular, without significantly increasing the
chart abstraction burden. In addition to claims-based measures, we are
considering registries \1\ and electronic health records (EHRs) as
alternative ways to collect data from hospitals. Many hospitals submit
data to and participate in existing registries. In addition, registries
often capture outcome information and provide ongoing quality
improvement feedback to registry participants. Instead of requiring
hospitals to submit the same data to CMS that they are already
submitting to registries, we could collect the data directly from the
registries with the permission of the hospital, thereby enabling us to
expand the HOP QDRP measure set without increasing the burden of data
collection for those hospitals participating in the registries. The
data that we would receive from registries would be used to calculate
quality measures required under HOP QDRP, and would be publicly
reported like other HOP QDRP quality measures, encouraging improvements
in the quality of care. We invite comment on such an approach.
---------------------------------------------------------------------------

\1\ A registry is a collection of clinical data for purposes of
assessing clinical performance, quality of care, and opportunities
for quality improvement.
---------------------------------------------------------------------------

In the CY 2009 OPPS/ASC final rule with comment period, we also
stated our intention to explore mechanisms for data submission using
EHRs (73 FR 68769). Establishing such a system will require
interoperability between EHRs and CMS data collection systems,
additional infrastructure development on the part of hospitals and CMS,
and the adoption of standards for the capturing, formatting, and
transmission of data elements that make up the measures. However, once
these activities are accomplished, the adoption of measures that rely
on data obtained directly from EHRs will enable us to expand the HOP
QDRP measure set with less cost and burden to hospitals.
2. Retirement of HOP QDRP Quality Measures
In the FY 2010 IPPS proposed rule, we proposed a process for
immediate retirement of RHQDAPU program measures based on evidence that
the continued use of the measure as specified raises patient safety
concerns (74 FR 24168). As we explained in that proposed rule, in
situations such as the one prompting immediate retirement of the AMI-6
measure from the RHQDAPU program in December 2008, we do not believe
that it would be appropriate to wait for the annual rulemaking cycle to
retire a measure. We are proposing to adopt this same immediate
retirement policy for the HOP QDRP. Specifically, we are proposing that
if we receive evidence that continued collection of a measure that has
been adopted for the HOP QDRP raises patient safety concerns, we would
promptly retire the measure and notify hospitals and the public of the
retirement of the measure and the reasons for its retirement through
the usual means by which we communicate with hospitals, including but
not limited to hospital e-mail blasts and the QualityNet Web site. We
also are proposing to confirm the retirement of the measure in the next
OPPS rulemaking. In other circumstances where we do not believe that
continued use of a measure raises specific patient safety concerns, we
intend to use the regular rulemaking process to retire a measure.
We invite public comment on this proposal allowing for immediate
retirement of a HOP QDRP measure following evidence of a patient safety
concern followed by confirmation in the next rulemaking cycle.
3. Proposed HOP QDRP Quality Measures for the CY 2011 Payment
Determination
For the CY 2011 payment determination, we are proposing to continue
requiring that hospitals submit data on the existing 11 HOP QDRP
measures. These measures continue to address areas of topical
importance regarding the quality of care provided in hospital
outpatient departments, and reflect consensus among affected parties.
Seven of these 11 measures are chart-abstracted measures in two areas
of importance which are also measured for the Inpatient setting: AMI
care and surgical care. The remaining four measures address imaging
efficiency in hospital outpatient departments.
For the CY 2011 payment determination, we are proposing not to add
any new HOP QDRP measures. Although we considered adding a number of
chart-abstracted measures, we are sensitive to the burden upon hospital
outpatient departments associated with chart abstraction, and believe
that adopting such measures at this time would not be consistent with
our stated goal to minimize the collection burden associated with
quality measurement.