[Federal Register Volume 74, Number 223 (Friday, November 20, 2009)]
[Rules and Regulations]
[Pages 60315-60983]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-26499]



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Part II

Book 2 of 2 Books

Pages 60315-61012





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 410, 416, and 419



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

Federal Register / Vol. 74, No. 223 / Friday, November 20, 2009 / 
Rules and Regulations

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 416, and 419

[CMS-1414-FC]
RIN 0938-AP41


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

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

ACTION: Final rule with comment period.

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

DATES: Effective Date: The provisions of this rule are effective 
January 1, 2010.
    Comment Period: We will consider comments on the subject areas 
listed in the SUPPLEMENTARY INFORMATION section of this rule that are 
received at one of the addresses provided in the ADDRESSES section of 
this rule no later than 5 p.m. EST on December 29, 2009.
    Application Deadline for New Class of New Technology Intraocular 
Lenses: Request for review of applications for a new class of new 
technology intraocular lenses must be received by 5 p.m. EST on March 
8, 2010.

ADDRESSES: In commenting, please refer to file code CMS-1414-FC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions for 
``Comment or Submission'' and enter the file code to find the document 
accepting comments.
    2. By regular mail. You may mail written comments (one original and 
two copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-1414-FC, P.O. Box 8013, Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments (one 
original and two copies) to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1414-FC, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments (one original and two copies) before the 
close of the comment period to one of the following addresses:
    a. Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201.
    (Because access to the interior of the HHH Building is not readily 
available to persons without Federal Government identification, 
commenters are encouraged to leave their comments in the CMS drop slots 
located in the main lobby of the building. A stamp-in clock is 
available for persons wishing to retain a proof of filing by stamping 
in and retaining an extra copy of the comments being filed.)
    b. 7500 Security Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-9994 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.
    Applications for a new class of new technology intraocular lenses: 
Requests for review of applications for a new class of new technology 
intraocular lenses must be sent by regular mail to ASC/NTOL, Division 
of Outpatient Care, Mailstop C4-05-17, Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FOR FURTHER INFORMATION CONTACT: 

Alberta Dwivedi, (410) 786-0378, Hospital outpatient prospective 
payment issues.
Dana Burley, (410) 786-0378, Ambulatory surgical center issues.
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: 
    Comment Subject Areas: We will consider comments on the following 
subject areas discussed in this final rule with comment period that are 
received by the date and time indicated in the DATES section of this 
final rule with comment period:
    (1) The payment classifications assigned to HCPCS codes identified 
in Addenda B, AA, and BB to this final rule with comment period with 
the ``NI'' comment indicator;
    (2) Recognition of plasma protein fraction as a blood product or a 
biological for OPPS payment, as discussed in section II.A.1.d.(2) of 
this final rule with comment period;
    (3) Potential alternative coding schemes for reporting hospital 
clinic visits for new and established patients, as discussed in section 
IX.B.1. of this final rule with comment period;
    (4) The possibility of extending the direct supervision 
requirements for hospital-based partial hospitalization program 
services to those same services in community mental health centers, as 
discussed in section XII.D.3. of this final rule with comment period; 
and
    (5) The possibility of establishing direct physician supervision 
requirements for ASC services, as discussed in section XV.A.3. of this 
final rule with comment period.
    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

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instructions on that Web site to view public comments.
    Comments received timely will also be available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, MD 21244, on Monday through Friday of each week from 8:30 
a.m. to 4 p.m. EST. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

Electronic Access

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

Alphabetical List of Acronyms Appearing in This Final Rule

ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AMA American Medical Association
AMP Average manufacturer price
AOA American Osteopathic Association
APC Ambulatory payment classification
ASC Ambulatory Surgical Center
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
BCA Blue Cross Association
BCBSA Blue Cross and Blue Shield Association
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Public Law 106-554
CAH Critical access hospital
CAP Competitive Acquisition Program
CBSA Core-Based Statistical Area
CCR Cost-to-charge ratio
CERT Comprehensive Error Rate Testing
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
HOPQDRP 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 Contractor
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
PBD Provider-based department
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
RAC Recovery Audit Contractor
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 final rule with comment period and 
in Addenda A, B, C (Addendum C is available on the Internet only; we 
refer readers to section XVIII.A. of this final rule with comment 
period), D1, D2, E, L, and M to this final rule with comment period. 
The provisions related to the revised ASC payment system are included 
in sections XV., XVI., and XVIII. through XXI. of this final rule with 
comment period and in Addenda AA, BB, DD1, DD2, and EE to this final 
rule with comment period. (Addendum EE is available on the Internet 
only; we refer readers to section XVIII.B. of this final rule with 
comment period.)

Table of Contents

I. Background and Summary of the CY 2010 OPPS/ASC Final Rule With 
Comment Period
    A. Legislative and Regulatory Authority for the Hospital 
Outpatient Prospective Payment System
    B. Excluded OPPS Services and Hospitals
    C. Prior Rulemaking
    D. Advisory Panel on Ambulatory Payment Classification (APC) 
Groups
    1. Authority of the APC Panel
    2. Establishment of the APC Panel
    3. APC Panel Meetings and Organizational Structure
    E. Background and Summary of the CY 2010 OPPS/ASC Proposed Rule
    1. Updates Affecting OPPS Payments

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    2. OPPS Ambulatory Payment Classification (APC) Group Policies
    3. OPPS Payment for Devices
    4. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    5. Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    6. OPPS Payment for Brachytherapy Sources
    7. OPPS Payment for Drug Administration Services
    8. OPPS Payment for Hospital Outpatient Visits
    9. Payment for Partial Hospitalization Services
    10. Procedures That Will Be Paid Only as Inpatient Services
    11. OPPS Nonrecurring Technical and Policy Changes and 
Clarifications
    12. OPPS Payment Status and Comment Indicators
    13. OPPS Policy and Payment Recommendations
    14. Updates to the Ambulatory Surgical Center (ASC) Payment 
System
    15. Reporting Quality Data for Annual Payment Rate Updates
    16. Healthcare-Associated Conditions
    17. Regulatory Impact Analysis
    F. Public Comments Received in Response to the CY 2010 OPPS/ASC 
Proposed Rule
    G. Public Comments Received in Response to the November 18, 2008 
OPPS/ASC Final Rule With Comment Period
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Use of Single and Multiple Procedure Claims
    c. Calculation of CCRs
    (1) Development of the CCRs
    (2) Charge Compression
    2. Data Development Process and Calculation of Median Costs
    a. Claims Preparation
    b. Splitting Claims and Creation of ``Pseudo'' Single Claims
    (1) Splitting Claims
    (2) Creation of ``Pseudo'' Single Claims
    c. Completion of Claim Records and Median Cost Calculations
    d. Calculation of Single Procedure APC Criteria-Based Median 
Costs
    (1) Device-Dependent APCs
    (2) Blood and Blood Products
    (3) Single Allergy Tests
    (4) Echocardiography Services
    (5) Nuclear Medicine Services
    (6) Hyperbaric Oxygen Therapy
    (7) Payment for Ancillary Outpatient Services When Patient 
Expires (CA Modifier)
    e. Calculation of Composite APC Criteria-Based Median Costs
    (1) Extended Assessment and Management Composite APCs (APCs 8002 
and 8003)
    (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC 
(APC 8001)
    (3) Cardiac Electrophysiologic Evaluation and Ablation Composite 
APC (APC 8000)
    (4) Mental Health Services Composite APC (APC 0034)
    (5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    3. Calculation of OPPS Scaled Payment Weights
    4. Changes to Packaged Services
    a. Background
    b. Packaging Issues
    (1) Packaged Services Addressed by the February 2009 APC Panel 
Recommendations
    (2) Packaged Services Addressed by the August 2009 APC Panel 
Recommendations
    (3) Other Service-Specific Packaging Issues
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default CCRs
    E. OPPS Payment to Certain Rural and Other Hospitals
    1. Hold Harmless Transitional Payment Changes Made by Public Law 
110-275 (MIPPA)
    2. Adjustment for Rural SCHs Implemented in CY 2006 Related to 
Pub. L. 108-173 (MMA)
    F. Hospital Outpatient Outlier Payments
    1. Background
    2. Outlier Calculation
    3. Final Outlier Calculation
    4. Outlier Reconciliation
    G. Calculation of an Adjusted Medicare Payment From the National 
Unadjusted Medicare Payment
    H. Beneficiary Copayments
    1. Background
    2. Copayment Policy
    3. Calculation of an Adjusted Copayment Amount for an APC Group
III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Treatment of New Level II HCPCS Codes and Category I CPT 
Vaccine Codes and Category III CPT Codes
    2. Process for New Level II HCPCS Codes and Category I and 
Category III CPT Codes for Which We Are Soliciting Public Comments 
on the CY 2010 OPPS/ASC Final Rule With Comment Period
    B. OPPS Changes--Variations Within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. Exceptions to the 2 Times Rule
    C. New Technology APCs
    1. Background
    2. Movement of Procedures From New Technology APCs to Clinical 
APCs
    D. OPPS APC-Specific Policies
    1. Cardiovascular Services
    a. Cardiovascular Telemetry (APC 0209)
    b. Implantable Loop Recorder Monitoring (APC 0689)
    c. Transluminal Balloon Angioplasty (APC 0279)
    2. Gastrointestinal Services
    a. Change of Gastrostomy Tube (APC 0676)
    b. Laparoscopic Liver Cryoablation (APC 0131)
    c. Cholangioscopy (APC 0151)
    d. Laparoscopic Hernia Repair (APC 0131)
    3. Genitourinary Services
    a. Percutaneous Renal Cryoablation (APC 0423)
    b. Hemodialysis (APC 0170)
    c. Radiofrequency Remodeling of Bladder Neck (APC 0165)
    d. Change of Bladder Tube (APC 0121)
    4. Nervous System Services
    a. Pain-Related Procedures (APCs 0203, 0204, 0206, 0207, 0221, 
0224, and 0388)
    b. Magnetoencephalography (APCs 0065 and 0067)
    5. Ocular Services
    a. Insertion of Anterior Segment Aqueous Drainage Device (APC 
0234)
    b. Backbench Preparation of Corneal Allograft
    6. Orthopedic and Musculoskeletal Services
    a. Arthroscopic Procedures (APCs 0041 and 0042)
    b. Knee Arthroscopy (APCs 0041 and 0042)
    c. Shoulder Arthroscopy (APC 0042)
    d. Fasciotomy Procedures (APC 0049)
    e. Fibula Repair (APC 0062)
    f. Forearm Orthopedic Procedures (APCs 0050, 0051, and 0052)
    g. Low Energy Extracorporeal Shock Wave Therapy (Low Energy 
ESWT)
    h. Insertion of Posterior Spinous Process Distraction Device 
(APC 0052)
    7. Radiation Therapy Services
    a. Proton Beam Therapy (APCs 0664 and 0667)
    b. Stereotactic Radiosurgery (SRS) Treatment Delivery Services 
(APCs 0065, 0066, 0067, and 0127)
    c. Clinical Brachytherapy (APCs 0312 and 0651)
    8. Other Services
    a. Low Frequency, Non-Contact, Non-Thermal Ultrasound (APC 0013)
    b. Skin Repair (APCs 0134 and 0135)
    c. Group Psychotherapy (APC 0325)
    d. Portable X-Ray Services
    e. Home Sleep Study Tests (APC 0213)
IV. OPPS Payment for Devices
    A. Pass-Through Payments for Devices
    1. Expiration of Transitional Pass-Through Payments for Certain 
Devices
    2. Provisions for Reducing Transitional Pass-Through Payments To 
Offset Costs Packaged Into APC Groups
    a. Background
    b. Final Policy
    B. Adjustment to OPPS Payment for No Cost/Full Credit and 
Partial Credit Devices
    1. Background
    2. APCs and Devices Subject to the Adjustment Policy
V. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Drugs and Biologicals With Expiring Pass-Through Status in CY 
2009
    3. Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2010
    4. Pass-Through Payments for Implantable Biologicals
    a. Background
    b. Policy for CY 2010
    5. Definition of Pass-Through Payment Eligibility Period for New 
Drugs and Biologicals
    6. Provision for Reducing Transitional Pass-Through Payments for 
Diagnostic

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Radiopharmaceuticals and Contrast Agents To Offset Costs Packaged 
Into APC Groups
    a. Background
    b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    c. Payment Offset Policy for Contrast Agents
    B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
Without Pass-Through Status
    1. Background
    2. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
    a. Background
    b. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Nonimplantable Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. Packaging Determination for HCPCS Codes That Describe the 
Same Drug or Biological But Different Dosages
    d. Packaging of Payment for Diagnostic Radiopharmaceuticals, 
Contrast Agents, and Implantable Biologicals (``Policy-Packaged'' 
Drugs and Devices)
    3. Payment for Drugs and Biologicals Without Pass-Through Status 
That Are Not Packaged
    a. Payment for Specified Covered Outpatient Drugs (SCODs) and 
Other Separately Payable and Packaged Drugs and Biologicals
    b. Payment Policy
    4. Payment for Blood Clotting Factors
    5. Payment for Therapeutic Radiopharmaceuticals
    a. Background
    b. Payment Policy
    6. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital 
Claims Data
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Estimate of Pass-Through Spending
VII. OPPS Payment for Brachytherapy Sources
    A. Background
    B. OPPS Payment Policy
VIII. OPPS Payment for Drug Administration Services
    A. Background
    B. Coding and Payment for Drug Administration Services
IX. OPPS Payment for Hospital Outpatient Visits
    A. Background
    B. Policies for Hospital Outpatient Visits
    1. Clinic Visits: New and Established Patient Visits
    2. Emergency Department Visits
    3. Visit Reporting Guidelines
X. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2010
    C. Separate Threshold for Outlier Payments to CMHCs
XI. Procedures That Will Be Paid Only as Inpatient Procedures
    A. Background
    B. Changes to the Inpatient List
XII. OPPS Nonrecurring Technical and Policy Changes and 
Clarifications
    A. Kidney Disease Education Services
    1. Background
    2. Payment for Services Furnished by Providers of Services 
Located in a Rural Area
    B. Pulmonary Rehabilitation, Cardiac Rehabilitation, and 
Intensive Cardiac Rehabilitation Services
    1. Legislative Changes
    2. Payment for Services Furnished to Hospital Outpatients in a 
Pulmonary Rehabilitation Program
    3. 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. Policies for Direct Supervision of Hospital and CAH 
Outpatient Therapeutic Services
    4. Policies for Direct Supervision of Hospital and CAH 
Outpatient Diagnostic Services
    5. Summary of CY 2010 Physician Supervision Final Policies
    E. Direct Referral for Observation Services
XIII. OPPS Payment Status and Comment Indicators
    A. OPPS Payment Status Indicator Definitions
    1. Payment Status Indicators To Designate Services That Are Paid 
Under the OPPS
    2. Payment Status Indicators To Designate Services That Are Paid 
Under a Payment System Other Than the OPPS
    3. Payment Status Indicators To Designate Services That Are Not 
Recognized Under the OPPS But That May Be Recognized by Other 
Institutional Providers
    4. Payment Status Indicators To Designate Services That Are Not 
Payable by Medicare on Outpatient Claims
    B. Comment Indicator Definitions
XIV. OPPS Policy and Payment Recommendations
    A. MedPAC Recommendations
    B. APC Panel Recommendations
    C. OIG Recommendations
XV. 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. Treatment of New Codes
    1. Treatment of New Category I and III CPT Codes and Level II 
HCPCS Codes
    2. Treatment of New Level II HCPCS Codes Implemented in April 
and July 2009
    C. Update to the List of ASC Covered Surgical Procedures and 
Covered Ancillary Services
    1. Covered Surgical Procedures
    a. Additions to the List of ASC Covered Surgical Procedures
    b. Covered Surgical Procedures Designated as Office-Based
    (1) Background
    (2) Changes to Covered Surgical Procedures Designated as Office-
Based for CY 2010
    c. ASC Covered Surgical Procedures Designated as Device-
Intensive
    (1) Background
    (2) Changes to List of Covered Surgical Procedures Designated as 
Device-Intensive for CY 2010
    d. ASC Treatment of Surgical Procedures Removed From the OPPS 
Inpatient List for CY 2010
    2. Covered Ancillary Services
    D. ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
    1. Payment for Covered Surgical Procedures
    a. Background
    b. Update to ASC Covered Surgical Procedure Payment Rates for CY 
2010
    c. Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    2. Payment for Covered Ancillary Services
    a. Background
    b. Payment for Covered Ancillary Services for CY 2010
    E. New Technology Intraocular Lenses (NTIOLs)
    1. Background
    2. NTIOL Application Process for Payment Adjustment
    3. Classes of NTIOLs Approved and New Requests for Payment 
Adjustment
    a. Background
    b. Request To Establish New NTIOL Class for CY 2010 and Deadline 
for Public Comment
    4. Payment Adjustment
    5. ASC Payment for Insertion of IOLs
    6. Announcement of CY 2010 Deadline for Submitting Requests for 
CMS Review of Appropriateness of ASC Payment for Insertion of an 
NTIOL Following Cataract Surgery
    F. ASC Payment and Comment Indicators
    1. Background
    2. ASC Payment and Comment Indicators
    G. ASC Policy and Payment Recommendations
    H. Revision to Terms of Agreements for Hospital-Operated ASCs
    1. Background
    2. Changes to the Terms of Agreements for ASCs Operated by 
Hospitals
    I. Calculation of the ASC Conversion Factor and ASC Payment 
Rates
    1. Background
    2. 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 ASC Payment Rates
XVI. Reporting Quality Data for Annual Payment Rate Updates
    A. Background
    1. Overview

[[Page 60320]]

    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. HOPQDRP Quality Measures for the CY 2009 Payment 
Determination
    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. Quality Measures for the CY 2011 Payment Determination
    1. Considerations in Expanding and Updating Quality Measures 
Under the HOP QDRP Program
    2. Retirement of HOP QDRP Quality Measures
    3. HOP QDRP Quality Measures for the CY 2011 Payment 
Determination
    C. Possible Quality Measures Under Consideration for CY 2012 and 
Subsequent Years
    D. Payment Reduction for Hospitals That Fail To Meet the HOP 
QDRP Requirements for the CY 2010 Payment Update
    1. Background
    2. Reporting Ratio Application and Associated Adjustment Policy 
for CY 2010
    E. 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. Data Validation Requirements for CY 2011
    b. Data Validation Approach for CY 2012 and Subsequent Years
    c. Additional Data Validation Conditions Under Consideration for 
CY 2012 and Subsequent Years
    F. 2010 Publication of HOP QDRP Data
    G. 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 CY 2010 Hospital OPPS
    B. Information in Addenda Related to the CY 2010 ASC Payment 
System
XIX. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Associated Information Collections Not Specified in 
Regulatory Text
    1. Hospital Outpatient Quality Data Reporting Program (HOP QDRP)
    2. HOP QDRP Quality Measures for the CY 2010 and CY 2011 Payment 
Determinations
    3. HOP QDRP Validation Requirements
    4. HOP QDRP Reconsideration and Appeals Procedures
    5. Additional Topics
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 Final Rule With Comment 
Period
    1. Alternatives Considered
    2. Limitations of Our Analysis
    3. Estimated Effects of This Final Rule With Comment Period on 
Hospitals
    4. Estimated Effects of This Final Rule With Comment Period on 
CMHCs
    5. Estimated Effects of This Final Rule With Comment Period on 
Beneficiaries
    6. Conclusion
    7. Accounting Statement
    C. Effects of ASC Payment System Changes in This Final Rule With 
Comment Period
    1. Alternatives Considered
    2. Limitations of Our Analysis
    3. Estimated Effects of This Final Rule With Comment Period on 
Payments to ASCs
    4. Estimated Effects of This Final Rule With Comment Period on 
Beneficiaries
    5. Conclusion
    6. Accounting Statement
    D. Effects of Requirements for Reporting of Quality Data for 
Annual Hospital Payment Update
    E. Executive Order 12866

Regulation Text

Addenda

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

I. Background and Summary of the CY 2010 OPPS/ASC Final Rule With 
Comment Period

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

    When Title XVIII of the Social Security Act (the Act) 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 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

[[Page 60321]]

group the services within each APC group. The OPPS includes payment for 
most hospital outpatient services, except those identified in section 
I.B. of this final rule with comment period. Section 1833(t)(1)(B)(ii) 
of the Act provides for payment under the OPPS for hospital outpatient 
services designated by the Secretary (which includes partial 
hospitalization services furnished by community mental health centers 
(CMHCs)) and hospital outpatient services that are furnished to 
inpatients who have exhausted their Part A benefits, or who are 
otherwise not in a covered Part A stay. Section 611 of Public Law 108-
173 added provisions for Medicare coverage for an initial preventive 
physical examination, subject to the applicable deductible and 
coinsurance, as an outpatient department service, payable under the 
OPPS.
    The OPPS rate is an unadjusted national payment amount that 
includes the Medicare payment and the beneficiary copayment. This rate 
is divided into a labor-related amount and a nonlabor-related amount. 
The labor-related amount is adjusted for area wage differences using 
the hospital inpatient wage index value for the locality in which the 
hospital or CMHC is located.
    All services and items within an APC group are comparable 
clinically and with respect to resource use (section 1833(t)(2)(B) of 
the Act). In accordance with section 1833(t)(2) of the Act, subject to 
certain exceptions, services and items within an APC group cannot be 
considered comparable with respect to the use of resources if the 
highest median (or mean cost, if elected by the Secretary) for an item 
or service in the APC group is more than 2 times greater than the 
lowest median cost for an item or service within the same APC group 
(referred to as the ``2 times rule''). In implementing this provision, 
we generally use the median cost of the item or service assigned to an 
APC group.
    For new technology items and services, special payments under the 
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act 
provides for temporary additional payments, which we refer to as 
``transitional pass-through payments,'' for at least 2 but not more 
than 3 years for certain drugs, biological agents, brachytherapy 
devices used for the treatment of cancer, and categories of other 
medical devices. For new technology services that are not eligible for 
transitional pass-through payments, and for which we lack sufficient 
data to appropriately assign them to a clinical APC group, we have 
established special APC groups based on costs, which we refer to as New 
Technology APCs. These New Technology APCs are designated by cost bands 
which allow us to provide appropriate and consistent payment for 
designated new procedures that are not yet reflected in our claims 
data. Similar to pass-through payments, an assignment to a New 
Technology APC is temporary; that is, we retain a service within a New 
Technology APC until we acquire sufficient data to assign it to a 
clinically appropriate APC group.

B. Excluded OPPS Services and Hospitals

    Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to 
designate the hospital outpatient services that are paid under the 
OPPS. While most hospital outpatient services are payable under the 
OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for 
ambulance, physical and occupational therapy, and speech-language 
pathology services, for which payment is made under a fee schedule. 
Section 614 of Public Law 108-173 amended section 1833(t)(1)(B)(iv) of 
the Act to exclude payment for screening and diagnostic mammography 
services from the OPPS. The Secretary exercised the authority granted 
under the statute to also exclude from the OPPS those services that are 
paid under fee schedules or other payment systems. Such excluded 
services include, for example, the professional services of physicians 
and nonphysician practitioners paid under the Medicare Physician Fee 
Schedule (MPFS); laboratory services paid under the clinical diagnostic 
laboratory fee schedule (CLFS); services for beneficiaries with end-
stage renal disease (ESRD) that are paid under the ESRD composite rate; 
and services and procedures that require an inpatient stay that are 
paid under the hospital inpatient prospective payment system (IPPS). We 
set forth the services that are excluded from payment under the OPPS in 
Sec.  419.22 of the regulations.
    Under Sec.  419.20(b) of the regulations, we specify the types of 
hospitals and entities that are excluded from payment under the OPPS. 
These excluded entities include: Maryland hospitals, but only for 
services that are paid under a 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, we 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 
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.
    On July 20, 2009, we issued in the Federal Register (74 FR 35232) a 
proposed rule for the CY 2010 OPPS/ASC payment system to implement 
statutory requirements and changes arising from our continuing 
experience with both systems.

[[Page 60322]]

D. Advisory Panel on Ambulatory Payment Classification (APC) 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 final rule with comment period, fulfills these 
requirements. The APC Panel is not restricted to using data compiled by 
CMS, and it may use data collected or developed by organizations 
outside the Department in conducting its review.
2. Establishment of the APC Panel
    On November 21, 2000, the Secretary signed the initial charter 
establishing the APC Panel. This expert panel, which may be composed of 
up to 15 representatives of providers (currently employed full-time, 
not as consultants, in their respective areas of expertise) subject to 
the OPPS, reviews clinical data and advises CMS about the clinical 
integrity of the APC groups and their payment weights. The APC Panel is 
technical in nature, and it is governed by the provisions of the 
Federal Advisory Committee Act (FACA). Since its initial chartering, 
the Secretary has renewed the APC Panel's charter 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 16 meetings, with the last 
meeting taking place on August 5 and 6, 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 August 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.
    Discussions of the other recommendations made by the APC Panel at 
the August 2009 meeting are included in the sections of this final rule 
with comment period that are specific to each recommendation. For 
discussions of earlier APC Panel meetings and recommendations, we refer 
readers to previously published hospital OPPS/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.
    Comment: Several commenters requested that CMS include ASC 
representation on the APC Panel. Because the revised ASC payment system 
is based upon the same APC groups and relative payment weights as the 
OPPS, the commenters believed that ASC representation on the APC Panel 
would ensure input from representatives of all care settings that 
provide surgical services whose payment groups and payment weights are 
affected by the OPPS. Further, the commenters urged CMS to revise the 
APC Panel's charter to reflect the current alignment of the OPPS and 
the revised ASC payment system by including representation from the ASC 
industry on the APC Panel, as the commenters believed is permitted by 
the statute.
    Response: We acknowledge that the revised ASC payment system 
provides Medicare payments to ASCs for surgical procedures that are 
based, in most cases, on the relative payment weights of the OPPS. 
However, CMS is statutorily required to have an appropriate selection 
of representatives of ``providers'' as members of the APC Panel. The 
current APC Panel charter requires that ``Each Panel member must be 
employed full-time by a hospital, hospital system, or other Medicare 
provider subject to payment under the OPPS,'' which does not include 
ASCs because ASCs are not providers. We refer readers to section 
1833(t)(9)(A) of the Act and Sec.  400.202 of our regulations for 
specific requirements and definitions. ASCs are suppliers, not 
providers. The charter must comply with the statute, which does not 
include representatives of suppliers on the APC Panel. Therefore, 
although we understand the concerns of the commenters regarding ASC 
input on the APC Panel now that the ASC payment system is based on the 
OPPS relative payment weights, we cannot revise the charter to include 
ASC representation.

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

    A proposed rule appeared in the July 20, 2009 Federal Register (74 
FR 35232) that 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 set 
forth proposed changes to the revised Medicare ASC payment system for 
CY 2010, including updated payment weights, covered surgical 
procedures, and covered ancillary items and services based on the 
proposed OPPS update. Finally, we set forth proposed quality measures 
for the Hospital Outpatient Quality Data Reporting Program (HOP QDRP) 
for reporting quality data for annual payment rate updates for CY 2011 
and subsequent calendar years, the requirements for data collection and 
submission for the annual payment

[[Page 60323]]

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. The following is a 
summary of the major proposed changes included in the CY 2010 OPPS/ASC 
proposed rule:
1. Updates Affecting OPPS Payments
    In section II. of the proposed rule, we set forth--
     The methodology used to recalibrate the 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. OPPS Ambulatory Payment Classification (APC) Group Policies
    In section III. of the proposed rule, we discussed--
     The proposed additions of new HCPCS codes to APCs.
     The proposed establishment of 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.
     The proposed changes to specific APCs.
     The proposed movement of procedures from New Technology 
APCs to clinical APCs.
3. OPPS Payment for Devices
    In section IV. of the proposed rule, we discussed the proposed 
pass-through payment for specific categories of devices and the 
proposed adjustment for devices furnished at no cost or with partial or 
full credit.
4. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    In section V. of the proposed rule, we discussed the 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. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    In section VI. of the proposed rule, we discussed the estimate of 
CY 2010 OPPS transitional pass-through spending for drugs, biologicals, 
and devices.
6. OPPS Payment for Brachytherapy Sources
    In section VII. of the proposed rule, we discussed payment for 
brachytherapy sources.
7. OPPS Payment for Drug Administration Services
    In section VIII. of the proposed rule, we set forth our proposed 
policy concerning coding and payment for drug administration services.
8. OPPS Payment for Hospital Outpatient Visits
    In section IX. of the proposed rule, we set forth our proposed 
policies for the payment of clinic and emergency department visits and 
critical care services based on claims data.
9. Payment for Partial Hospitalization Services
    In section X. of the proposed rule, we set forth the proposed 
payment for partial hospitalization services, including the proposed 
separate threshold for outlier payments for CMHCs.
10. Procedures That Will Be Paid Only as Inpatient Procedures
    In section XI. of the proposed rule, we discussed the procedures 
that we proposed to remove from the inpatient list and assign to APCs 
for payment under the OPPS.
11. OPPS Nonrecurring Technical and Policy Changes and Clarifications
    In section XII. of the proposed rule, we discussed nonrecurring 
technical issues, proposed policy changes, and provided policy 
clarifications.
12. OPPS Payment Status and Comment Indicators
    In section XIII. of the proposed rule, we discussed our proposed 
changes to the definitions of status indicators assigned to APCs and 
presented our proposed comment indicators for the final rule with 
comment period.
13. OPPS Policy and Payment Recommendations
    In section XIV. of the proposed rule, we addressed recommendations 
made by the Medicare Payment Advisory Commission (MedPAC) in its March 
2009 report to Congress, by the Office of Inspector General (OIG), and 
by the APC Panel regarding the OPPS for CY 2010.
14. Updates to the Ambulatory Surgical Center (ASC) Payment System
    In section XV. of the proposed rule, we discussed the proposed 
updates of the revised ASC payment system and payment rates for CY 
2010.
15. Reporting Quality Data for Annual Payment Rate Updates
    In section XVI. of the proposed rule, we discussed the proposed 
quality measures for reporting hospital outpatient (HOP) quality data 
for the annual payment update factor for CY 2011 and subsequent 
calendar years; set forth the requirements for data collection and 
submission for the annual payment update; and discussed the 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 the proposed rule, we discussed 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 the proposed rule, we set forth an analysis of 
the impact the proposed changes would have on affected entities and 
beneficiaries.

[[Page 60324]]

F. Public Comments Received in Response to the CY 2010 OPPS/ASC 
Proposed Rule

    We received approximately 1,527 timely pieces of correspondence 
containing multiple comments on the CY 2010 OPPS/ASC proposed rule. We 
note that we received some public comments that were outside of the 
scope of the CY 2010 OPPS/ASC proposed rule. These out-of-scope public 
comments are not addressed in this final rule with comment period.
    New (and substantially revised) CY 2010 HCPCS codes are designated 
with comment indicator ``NI'' in Addenda B, AA, and BB of this final 
rule with comment period to signify that their CY 2010 interim OPPS 
and/or ASC treatment are open to public comment on this final rule with 
comment period. Summaries of the public comments that are within the 
scope of the CY 2010 proposals and our responses to those comments are 
set forth in the various sections of this final rule with comment 
period under the appropriate headings.

G. Public Comments Received in Response to the November 18, 2008 OPPS/
ASC Final Rule With Comment Period

    We received approximately 41 timely pieces of correspondence on the 
CY 2009 OPPS/ASC final rule with comment period, some of which 
contained multiple comments on the interim APC assignments and/or 
status indicators of HCPCS codes identified with comment indicator 
``NI'' in Addendum B of that final rule with comment period. Summaries 
of those public comments on topics open to comment in the CY 2009 OPPS/
ASC final rule with comment period and our responses to them are set 
forth in the various sections of this final rule with comment period 
under the appropriate headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
and revise the relative payment weights for APCs at least annually. In 
the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we 
explained in detail how we calculated the relative payment weights that 
were implemented on August 1, 2000 for each APC group.
    For CY 2010, we proposed to use the same basic methodology that we 
described in the April 7, 2000 OPPS final rule with comment period to 
recalibrate the APC relative payment weights for services furnished on 
or after January 1, 2010, and before January 1, 2011 (CY 2010). That 
is, we proposed to recalibrate the relative payment weights for each 
APC based on claims and cost report data for hospital outpatient 
department (HOPD) services. We proposed to use the most recent 
available data to construct the database for calculating APC group 
weights. Therefore, for the purpose of recalibrating the APC relative 
payment weights for CY 2010, we used approximately 141 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 final rule with comment period 
on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/.)
    Of the 141 million final action claims for services provided in 
hospital outpatient settings used to calculate the CY 2010 OPPS payment 
rates for this final rule with comment period, approximately 107 
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 107 million claims, 
approximately 50 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 58 million claims, we created 
approximately 99 million single records, of which approximately 68 
million were ``pseudo'' single or ``single session'' claims (created 
from 26 million multiple procedure claims using the process we discuss 
later in this section). Approximately 657,000 claims were trimmed out 
on cost or units in excess of +/-3 standard deviations from the 
geometric mean, yielding approximately 99 million single bills for 
median setting. As described in section II.A.2. of this final rule with 
comment period, our data development process is designed with the goal 
of using appropriate cost information in setting the APC relative 
weights. The bypass process is described in section II.A.1.b. of this 
final rule with comment period. This section 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.
    As proposed, the APC relative weights and payments for CY 2010 in 
Addenda A and B to this final rule with comment period 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 underpinning the APC relative payment 
weights and the CY 2010 payment rates.
    We did not receive any public comments on our proposal to base the 
CY 2010 APC relative weights on the most currently available cost 
reports and on claims for services furnished in CY 2008. Therefore, for 
the reasons noted above in this section, we are finalizing our data 
source for the recalibration of the CY 2010 APC relative payment 
weights as proposed, without modification, as described in this section 
of this final rule with comment period.
b. Use of Single and Multiple Procedure Claims
    For CY 2010, in general, we proposed to continue to use single 
procedure claims to set the medians on which the APC relative payment 
weights would be based, with some exceptions as discussed below 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

[[Page 60325]]

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 spanning multiple dates of service, or 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 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), which also increased the number 
of bills we were able to use to calculate APC median costs. We refer 
readers to section II.A.2.e. of this final rule with comment period for 
discussion of the use of claims to establish median costs for composite 
APCs.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35239 through 35241), 
we proposed 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 final rule with comment period, 
approximately 68 million ``pseudo'' single claims, including multiple 
imaging composite ``single session'' bills (we refer readers to section 
II.A.2.e.(5) of this final rule with comment period for further 
discussion), to add to the approximately 32 million ``natural'' single 
bills. For this final rule with comment period, ``pseudo'' single and 
``single session'' procedure bills represent 68 percent of all single 
bills used to calculate median costs.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35239 through 35241), 
we proposed to bypass 438 HCPCS codes for CY 2010. 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 on each ``natural'' single bill for each code. Each 
year, we generally retain the codes on the previous year's bypass list 
and use 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 and CY 2007 claims data processed through June 30, 
2008 used to model the final payment rates for CY 2009) to determine 
whether it would be appropriate to propose to add additional codes to 
the previous year's bypass list. For CY 2010, we proposed to continue 
to bypass all of the HCPCS codes on the CY 2009 OPPS bypass list. We 
also proposed 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, met the same previously established 
empirical criteria for the bypass list that are summarized below. 
Because we must make some assumptions about packaging in the multiple 
procedure claims in order to assess a HCPCS code for addition to the 
bypass list, we assume that the representation of packaging on 
``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 were:
     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 procedures 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 criterion also limits 
the amount of error in redistributed costs. Throughout the bypass 
process, we do not know the dollar value of the packaged cost that 
should be appropriately attributed to the other procedures on the 
claim. Ensuring that redistributed costs associated with a bypass code 
are small in amount and volume protects the validity of cost estimates 
for low cost services billed with the bypassed service.
     The code is not a code for an unlisted service.
    In addition, we proposed to continue to include on the bypass list 
HCPCS codes that CMS medical advisors believe have minimal associated 
packaging based on their clinical assessment of the complete CY 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 packaging associated with specific 
services, especially on a multiple procedure claim. We also proposed to 
continue to include on the bypass list certain HCPCS codes in order to 
purposefully direct the assignment of packaged costs to a companion 
code where services always appear together and where 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 associated 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 final rule with comment period for further discussion of the 
treatment of ``overlap bypass codes.'') This process also created 
multiple imaging composite ``single session'' bills that could be used 
for calculating composite APC median costs. ``Overlap bypass codes'' 
that would be members of the proposed multiple imaging composite APCs 
were

[[Page 60326]]

identified by asterisks (*) in Table 1 of the CY 2010 OPPS/ASC proposed 
rule (74 FR 35242 through 35252).
    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 the code's 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 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 costly packaged services, such as CPT code 19290 
(Preoperative placement of needle localization wire, breast) and CPT 
77032 code (Mammographic guidance for needle placement, breast (eg, for 
wire localization or for injection), each lesion, radiological 
supervision and interpretation). We have received anecdotal information 
indicating 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 of this code on the bypass list is 
appropriate.
    While we did not propose to place CPT code 76098 on the bypass 
list, we wanted to continue to provide separate payment for this 
procedure when appropriate. We 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 proposed to 
conditionally package CPT code 76098 as a ``T-packaged code'' for CY 
2010, identified with status indicator ``Q2'' in Addendum B to the CY 
2010 OPPS/ASC 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 CPT code-
specific median cost of CPT code 76098 in the CY 2008 claims data 
available for the February 2009 APC Panel meeting was approximately 
$346, consistent with its CY 2009 assignment to APC 0317 (Level II 
Miscellaneous Radiology Procedures), which had an observed APC median 
cost in those data of approximately $339. In contrast, the median cost 
of APC 0260, the APC reassignment recommended by the APC Panel, was 
much lower in the APC Panel data, approximately $46. Therefore, we did 
not accept the APC Panel's recommendation to reassign CPT code 76098. 
Instead, we proposed to continue its assignment to APC 0317 for CY 2010 
in those cases where CPT code 76098 is separately paid.
    Comment: Several commenters requested that CMS add CPT code 76098 
to the bypass list and reassign it to APC 0260. The commenters believed 
that CPT 76098 is similar with respect to resource use to the other 
codes assigned to APC 0260. The commenters also claimed that including 
CPT code 76098 on the bypass list would appropriately make more claims 
available for ratesetting purposes for the CPT code itself and the 
surgical breast procedures that appear with CPT code 76098 in the 
multiple major procedure claims. Another commenter supported the 
proposal to not include CPT code 76098 on the CY 2010 bypass list.
    Response: The hospital claims data show that there is significant 
packaging associated with CPT code 76098. Therefore, we believe CPT 
code 76098 is not appropriate for inclusion on the bypass list.
    In examining the billing patterns for CPT 76098, we noted its 
failure to meet the empirical criteria for inclusion on the bypass 
list. The significant number of ``natural'' single claims suggests that 
these claims are an accurate representation of hospital billing 
practices in certain clinical situations. Further, we believe the 
packaging on these claims is properly associated with the code. 
Anecdotal information on the placement of wires prior to surgery 
suggests that the packaging on the ``natural'' single claims reflects 
appropriate billing in some clinical scenarios, such as when hospitals 
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 example illustrates 
appropriate billing on ``natural'' single claims for CPT code 76098 
because the hospital has accurately reported all services that the 
hospital provided to the patient on the claim. In this case, the 
hospital did not provide the associated surgical breast procedure; 
therefore, all packaging would be appropriately associated with CPT 
code 76098, which is the separately payable service that the hospital 
provided to the patient. This scenario contradicts the commenter's 
belief that the significant packaging on the ``natural'' single claims 
for CPT code

[[Page 60327]]

76098 would represent aberrant hospital billing. As a result, for the 
CY 2010 proposed rule, we did not propose to add CPT code 76098 to the 
bypass list. However, based on our examination of the claims data for 
the proposed rule, we agreed that CPT 76098 is generally ancillary and 
supportive to surgical breast procedures. In order to provide 
appropriate separate payment for CPT code 76098 when the service is not 
furnished with a separately payable surgical procedure, and also to 
recognize its ancillary and supportive nature when it accompanies 
separately payable procedures, we proposed to conditionally package CPT 
code 76098 as a ``T-packaged code'' for CY 2010, identified with status 
indicator ``Q2'' in Addendum B to the proposed rule. Designating CPT 
code 76098 as a ``T-packaged code'' 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 a surgical procedure and CPT code 76098 
to set the payment rates for the related surgical procedures. In turn, 
we are able to use more data from the multiple procedure claims with 
CPT code 76098 to set payment rates for the surgical breast procedures 
on those claims. We continue to believe that classifying CPT code 76098 
as a conditionally packaged code with status indicator ``Q2'' is the 
proper policy to both provide appropriate payment when the service is 
billed by itself and appropriate payment for the associated surgical 
breast procedures that it supports.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to assign status 
indicator ``Q2'' to CPT code 76098. When the service is furnished with 
a separately payable surgical procedure with status indicator ``T'' on 
the same day, payment for CPT code 76098 is packaged. Otherwise, 
payment for CPT code 76098 is made separately through APC 0317, which 
has a final APC median cost of approximately $374. We are not adding 
CPT code 76098 to the bypass list for CY 2010.
    Comment: Many commenters supported the current methodology of 
bypassing HCPCS codes and the goal of using more data from the multiple 
major claims. A few commenters noted that some of the HCPCS codes on 
the proposed CY 2010 bypass list do not meet the empirical criteria 
described above and observed that many codes that meet the empirical 
criteria were not included on the proposed bypass list. The commenters 
highlighted findings from supporting data analysis to illustrate their 
points. Several commenters also raised concerns about the transparency 
of the bypass process. The commenters suggested that the empirical 
criteria were not explained clearly and were applied inconsistently. 
Other commenters believed that there is a lack of transparency 
regarding the addition of codes to the bypass list and the bypass 
process in general.
    The commenters requested detailed explanations about which codes 
are included on the bypass list, asking that CMS identify any codes on 
the bypass list that do not meet the empirical criteria and the reason 
for their inclusion. Several commenters believed that modifying the 
specific empirical criteria that the median packaged cost be less than 
$50 on less than 5 percent of ``natural'' single bills would increase 
the number of potential bypass codes and ``pseudo'' single claims. Some 
commenters suggested adopting a different threshold of some low 
percentage of total packaged costs on the code's single claims as a 
percent of total costs on all single claims. They believed that a 
percentage approach could provide more stability in the ratesetting 
process. One commenter also suggested that more generous empirical 
thresholds could be appropriate for a select set of HCPCS codes by 
subtracting the average packaged cost of the bypass code from other 
costs on the date of service where the code appears and is used as a 
bypass code, specifically to increase the number of claims available 
for setting payment rates for APCs for low dose rate brachytherapy 
services. A few commenters recommended that the median packaged cost 
threshold of $50 on less than 5 percent of ``natural'' single bills be 
updated as CMS has not updated the threshold since its introduction, 
and one commenter claimed the packaged cost threshold was arbitrary. 
Several commenters also indicated that the HCPCS codes CMS proposed to 
add to the CY 2010 OPPS bypass list were not actually incorporated into 
CMS' ratesetting process.
    Response: As discussed above in this section, we only apply the 
empirical criteria to the ``natural'' single claims. The bypass list is 
intended to consist of services that have minimal or no associated 
packaging, and in recent years, also includes codes for services that 
we wish to explicitly treat as not having packaged costs for purposes 
of OPPS payment. We refer readers to our previous discussions regarding 
the inclusion of additional hours of drug administration services (73 
FR 68513) and HCPCS G0390 (71 FR 68117 through 68118) on the bypass 
list for further detail. Extracting ``pseudo'' single bills or unique 
estimates of a single service's total resource cost from claims 
containing multiple procedures requires making some assumptions about 
the amount of packaging associated with every service. As reflected in 
the CY 2005 proposed rule (69 FR 50474 through 50475), our empirical 
criteria of 100 ``natural'' single claims, 5 percent or fewer 
``natural'' single claims with packaging, and median packaged cost less 
than $50 are intended to be conservative, that is, to limit the amount 
and impact of redistributed packaging from expanding the bypass list. 
These criteria ensure that the packaged costs associated with bypass 
codes are limited, based on the best information that we have in the 
``natural'' single procedure claims. Bypassing codes with significant 
associated packaging would inappropriately redistribute these packaged 
costs to major procedures billed with the bypass codes in the multiple 
procedure claims, when the individual line-items for the bypass codes 
are removed to create ``pseudo'' single claims. Because we recognize 
that the ``natural'' single claims are not always good representations 
of the code when it is reported on multiple major claims, for example, 
a service with only 20 ``natural'' single claims, we also judiciously 
include procedures on the bypass list that both CMS' medical advisors 
and public commenters identify as not including significant packaging 
and for which our own data analyses do not suggest that inclusion on 
the bypass list would result in an inappropriate redistribution of 
packaged costs. Finally, our general policy each year has been to 
retain codes from the previous year's bypass list without reevaluation 
of these codes in the context of the empirical criteria based upon 
updated data. We listed and discussed these empirical criteria most 
recently in the CY 2010 OPPS/ASC proposed rule (74 FR 35240 through 
35241). The empirical criteria have remained unchanged since first 
implemented because it has been our experience that they effectively 
limit the inappropriate redistribution of packaged costs when we create 
``pseudo'' single procedure claims.
    In examining the empirical data provided by commenters supporting 
their requests for additions to the bypass list, we believe that the 
research supporting these public comments applied the empirical 
criteria to all single claims rather than only to the ``natural'' 
single claims. We note that

[[Page 60328]]

this application of the empirical criteria is inconsistent with our 
methodology of generalizing about packaging in the multiple procedure 
claims from the ``natural'' single procedure claims. We do not believe 
that it would be appropriate to expand the bypass list by assuming that 
our packaging redistribution after application of the current bypass 
list should be used to identify additional candidates for the bypass 
list. Clearly comparing all single bills, not just ``natural'' single 
bills, would lead to the conclusion that many more codes are eligible 
for inclusion on the bypass list but could also compound any 
inappropriate cost redistribution created by the current ``pseudo'' 
single claim development process. The OPPS pays for individual items 
and services and some APCs do not contain many services and some of 
these services are low cost. Further, some payment rates are based on a 
small sample of single procedure claims. Because redistributing even a 
small amount of packaging could have a potentially large impact on 
median costs for small volume or low cost APCs, we believe our current 
empirical criteria and reliance on ``natural'' single procedure claims 
provide the most appropriate bypass policy.
    Some commenters indicated that a packaged cost threshold based on a 
percentage of low packaged costs out of total costs for all single 
bills would be more appropriate. We believe that using a percentage 
could allow some significant packaged costs to be redistributed. 
Specifically, implementing this change to the empirical criteria could 
redistribute a low percentage of packaged cost out of total cost for 
all single bills to a very inexpensive service, leading to potential 
distortions in the APC relative weights. This would be contrary to one 
primary purpose of the empirical criteria, which is to limit the 
inappropriate redistribution of packaged costs in the bypass process. 
We also do not understand how adopting this policy would introduce 
greater stability. If the policy increased the size of the bypass list, 
it could introduce greater instability by inappropriately 
redistributing more variable packaged costs from year to year. With 
regard to the suggestion that we subtract an average packaged cost for 
the bypass code from each multiple procedure claim, we believe that 
this would inappropriately remove cost information from the claims used 
for ratesetting and assume that the removal of that average cost is 
appropriate in most cases.
    While we are not adopting the commenters' suggested revisions to 
the empirical criteria for the CY 2010 OPPS bypass list, we acknowledge 
that the $50 median packaged cost threshold has not been updated for 
several years and that the real value of this packaged cost threshold 
criterion has declined due to inflation. Consequently, we will consider 
whether it would be appropriate to update the $50 dollar packaged cost 
threshold for inflation when identifying potential bypass codes in 
future rulemaking.
    The bypass list we used to calculate payment rates for this final 
rule with comment period omits 11 of the 14 HCPCS codes that we newly 
proposed to add to the bypass list for the CY 2010 OPPS. Although these 
14 proposed codes met the empirical criteria for inclusion on the 
bypass list for CY 2010 and although we listed them in Table 1 of the 
proposed rule (74 FR 35242 through 35352), we inadvertently omitted 
them from the bypass list that we used to calculate the median costs 
and payment rates that we proposed for CY 2010. To ensure consistency 
between the proposed rule and the final rule with comment period, we 
began our modeling for this final rule with comment period using the 
same list of bypass codes that we used to create the median costs and 
payment rates that we proposed for CY 2010. Three proposed radiation 
oncology code additions are an exception to this approach. In this 
final rule with comment period, we are including these three proposed 
bypass codes both because they meet the empirical criteria and because 
commenters on the CY 2010 OPPS/ASC proposed rule specifically requested 
that we add them to the CY 2010 bypass list. These three codes are: CPT 
code 77300 (Basic radiation dosimetry, central axis depth dose 
calculation, TDF, NSD, gap calculation, off axis factor, tissue 
inhomogeneity factors, calculation of non-ionizing radiation surface 
and depth dose, as required during course of treatment, only when 
prescribed by the treating physician); CPT code 77331 (Special 
dosimetry (e.g., TLD, microdosimetry)(specify), only when prescribed by 
the treating physician); and CPT code 77370 (Special medical radiation 
physics consultation).
    Thus, the bypass list that we used to calculate the payment rates 
in this final rule with comment period does not include 11 of the 14 
codes proposed for inclusion on the CY 2010 bypass list. These 11 HCPCS 
codes are identified in Table 1 of this final rule with comment period. 
In response to commenters' requests that we document additions to the 
bypass list, we have included a column in the list of bypass codes in 
Table 2 to identify additions for the CY 2010 update year, and we will 
continue to identify new additions in future rulemaking.
    Comment: A few commenters noted that CMS removed radiation oncology 
HCPCS codes that did not meet the empirical criteria from the bypass 
list for the CY 2009 OPPS/ASC final rule with comment period. Observing 
that this action had an adverse effect on the median costs for those 
codes and services frequently billed with those codes, the commenters 
requested that a number of the radiation oncology CPT codes be added to 
the bypass list, including CPT codes 77295 (Therapeutic radiology 
simulation-aided field setting, 3-dimensional); 77299 (Unlisted 
procedure, therapeutic radiology clinical treatment planning); 77300 
(Basic radiation dosimetry calculation, central axis depth dose 
calculation, TDF, NSD, gap calculation, off axis factor, tissue 
inhomogeneity factors, calculation of non-ionizing radiation surface 
and depth dose, as required during course of treatment, only when 
prescribed by treating physician); 77301 (Intensity modulated 
radiotherapy plan, including dose-volume histograms for target and 
critical structure partial tolerance specifications); 77310 
(Teletherapy, isodose plan (whether hand or computer calculated); 
intermediate (three or more treatment ports directed to a single area 
of interest)); 77315 (Teletherapy. Isodose plan (whether hand or 
computer calculated); complex (mantle or inverted Y, tangential ports, 
the use of wedges, compensators, complex blocking, rotational beam, or 
special beam considerations)); 77327 (Brachytherapy isodose plan; 
intermediate (multiplane dosage calculations, application involving 5 
to10 sources/ribbons, remote afterloading brachytherapy, 9 to 12 
sources)); 77328 (Brachytherapy isodose plan; complex (multiplane 
isodose plan, volume implant calculations, over 10 sources/ribbons 
used, special spatial reconstruction, remote afterloading 
brachytherapy, over 12 sources)); 77331 (Special dosimetry (e.g., TLD, 
microdosimetry) (specify), only when prescribed by the treating 
physician); 77336 (Continuing medical physics consultation, including 
assessment of treatment parameters, quality assurance of dose delivery, 
and review of patient treatment documentation in support of the 
radiation oncologist, reporter per week of therapy); 77370 (Special 
medical radiation physics consultation); 77371 (Radiation treatment 
delivery, stereotactic radiosurgery (SRS),

[[Page 60329]]

complete course of treatment of cranial lesion(s) consisting of 1 
session; multi-source Cobalt 60 based); 77401 (Radiation treatment 
delivery, superficial and/or ortho voltage); 77470 (Special treatment 
procedure (e.g., total body irradiation, hemibody radiation, per oral, 
endocavitary or intraoperative cone irradiation)); 77600 (Hyperthermia, 
externally generated; superficial (i.e., heating to a depth of 4 cm or 
less)); 77783 (Remote afterloading high intensity brachytherapy; 9-12 
source positions or catheters); and 77789 (Surface application of 
radiation source).
    Response: Some of the HCPCS codes that commenters suggested that we 
add to the bypass list are already included on the bypass list for this 
final rule with comment period, including CPT codes 77301, 77315, 
77336, and 77401. These codes met the empirical criteria in earlier 
years and, because of our policy to retain codes once they have been 
added to the bypass list, these codes continue on the bypass list. 
However, many of the codes that commenters requested for addition the 
CY 2010 bypass list do not meet the empirical criteria because the 
percentage of ``natural'' single procedure claims with packaging 
exceeds 5 percent and, for some, the low volume of ``natural'' single 
claims prevents us from making an accurate assessment about packaging 
in the multiple procedure claims. Most of these codes have a low 
packaged median cost in the ``natural'' single procedure claims.
    We examined the billing patterns for these HCPCS codes in the 
multiple major claims to better understand the potential impact that 
adding the recommended codes that do not meet the empirical criteria to 
the bypass list might have on the redistribution of packaged costs. We 
specifically analyzed the amount of packaged cost on the same date of 
service as the suggested bypass codes and other codes in the same 
clinical series as the recommended bypass codes in the multiple 
procedure claims, as well as the number of other procedures appearing 
on the same date of service, the APCs associated with these procedures, 
and whether any of these other procedures were already included on the 
bypass list. For three codes, specifically CPT codes 77600 
(Hyperthermia, externally generated; superficial (i.e. heating to a 
depth of 4cm or less)); 77605 (Hyperthermia, externally generated; deep 
(i.e. heating to depths greater than 4 cm)); and 77610 (Hyperthermia 
generated by interstitial probe(s); 5 or fewer interstitial 
applicators), we did not observe a significant amount of additional 
packaging on the multiple procedure claims or many other services, so 
we believe that including these codes on the bypass list would result 
in a limited amount of redistributed packaged cost. Therefore, we added 
these three codes to the CY 2010 bypass list. We also observed packaged 
costs associated with CPT code 77327, but the amount was proportionally 
limited relative to the procedure costs on the same date of service, 
and we believe that we can appropriately add this code to the CY 2010 
bypass list.
    As discussed above in this section, we also are adding the 
radiation oncology codes that we proposed to include on the CY 2010 
bypass list, specifically CPT codes 77300, 77331, and 77370, because 
these codes meet the empirical criteria, they were proposed for 
addition to the bypass list, and several commenters specifically 
requested these codes be included on the bypass list. However, several 
codes in the commenters' suggested additions to the bypass list not 
only failed the empirical criteria in the ``natural'' single procedure 
claims, but also were associated with significant packaged costs 
proportional to the costs of the other procedures appearing on the same 
date of service and the presence of many other separately paid 
procedures. Most of this packaged cost on claims for the candidate 
bypass codes was reported as revenue code charges without HCPCS codes, 
and we could not ascertain whether some of the packaging should be 
associated with the suggested bypass code or with one of the many other 
procedures appearing on the same date of service in the multiple 
claims. Because we would be unable to allocate the packaged cost among 
services or to determine that it was not associated with the candidate 
bypass list code, we believe it would be inappropriate to add these 
HCPCS codes to the bypass list. Although previous commenters have 
suggested that packaging of radiation guidance services in CY 2008 
reduced the number of claims available for setting payment rates for 
radiation oncology services, it is notable that only a small portion of 
the packaged costs on the claims for radiation oncology services could 
be attributed to the radiation guidance services. In summary, we are 
not adding CPT codes 77295, 77299, 77310, 77328, 77371, 77470, 77783, 
and 77789 to the final CY 2010 bypass list.
    We always appreciate the empirical information that commenters 
submitted regarding their suggested additions to the bypass list. 
However, we note that, due to the redistributive properties of the 
bypass list and our process for creating ``pseudo'' single procedure 
claims, we always must examine the redistributive impact of additions 
to the bypass list on all HCPCS code and APC median costs. Future 
recommendations from the public for additions to the bypass list should 
consider the global impact on APCs and HCPCS codes of changes to the 
bypass list in order to facilitate our evaluation of codes suggested 
for inclusion on the bypass list in the future.
    Comment: Some commenters supported the inclusion of the HCPCS codes 
for additional hours of drug administration on the bypass list. In 
addition, several commenters requested that CPT 90768 (Intravenous 
infusion, for therapy, prophylaxis, or diagnosis (specify substance or 
drug); concurrent infusion (List separately in addition to code for 
primary procedure)) be made separately payable and added to the bypass 
list to ensure consistent treatment of codes for additional hours of 
drug administration under the bypass list.
    Response: We appreciate the commenters' support and have continued 
to include the separately payable codes for additional hours of drug 
administration on the CY 2010 bypass list. Bypassing these drug 
administration codes, and associating all the packaging with the code 
for the initial hour of drug administration, enables us to use many 
correctly coded claims for initial drug administration services that 
would otherwise not be available for ratesetting. We did not include 
CPT 90768 on the CY 2010 bypass list because we proposed to 
unconditionally package its successor code (CPT code 96368 (Intravenous 
infusion, for therapy, prophylaxis, or diagnosis (specify substance or 
drug); concurrent infusion (List separately in addition to code for 
primary procedure))) in CY 2010 and, therefore, CPT code 90768 is not a 
candidate for the bypass list. Our final CY 2010 policy to package 
payment for CPT code 96368 is discussed in section VIII.B. of this 
final rule with comment period.
    As discussed above, the bypass list consists of separately paid 
services with no or minimal packaging or separately paid services that 
CMS knowingly prices without including packaged costs and associates 
any packaging with the other service(s) billed on the same date of 
service. The purpose of the bypass list is to help develop better 
estimates of total resource costs for a given separately payable 
procedure through creating ``pseudo'' single procedure claims from the 
multiple procedure claims by removing line-items without

[[Page 60330]]

packaging from each claim's date of service. Including packaged codes 
on the bypass list would remove valid packaging from a multiple 
procedure claim and would not allow CMS to derive more estimates of a 
service's total resource costs from multiple procedure claims. We have 
previously discussed our reasons for packaging CPT code 90768 in the CY 
2009 OPPS/ASC final rule with final period (73 FR 68674).
    Comment: Several commenters supported the inclusion of HCPCS code 
G0340 (Image-guided robotic linear accelerator-based stereotactic 
radiosurgery, delivery including collimator changes and custom 
plugging, fractionated treatment, all lesion, per session, second 
through fifth session, maximum) on the bypass list.
    Response: We appreciate the commenters' support and have continued 
to include HCPCS code G0340 on the CY 2010 bypass list.
    Comment: One commenter requested that CMS examine whether changes 
to the bypass list or other edits included in CMS' ratesetting 
processes negatively affected the proposed CY 2010 payment rates for 
APC 0651 (Complex Interstitial Radiation Source Application) and 
composite APC 8001(LDR Prostate Brachytherapy Composite).
    Response: In analyzing the impact of the final CY 2010 bypass list 
changes on APCs 0651 and 8001, we noted modest changes in both single 
procedure claim frequency and median costs. In the case of composite 
APC 8001, bypass list changes increased the single procedure claims 
available for ratesetting purposes and reduced the median cost by 
roughly 2 percent. APC 0651 experienced a modest increase of 3 percent 
in the single procedure claims available for ratesetting and its median 
cost also increased by about 3 percent. Neither APC 0651 nor composite 
APC 8001 experienced significant fluctuations in median cost or single 
procedure claim frequency due to the line-item trim discussed in 
section II.A.2.(a) of this final rule with comment period.
    After consideration of the public comments received, we are 
adopting, as final, our proposed methodology to use a bypass list to 
create ``pseudo'' single claims. To ensure consistency between the CY 
2010 proposed and final rules, we began our consideration of comments 
using the same list of bypass codes for this final rule with comment 
period that we used to calculate the median costs and payment rates 
that we proposed for CY 2010, which was the CY 2009 final rule bypass 
list. We added HCPCS codes to the CY 2010 bypass list based on whether 
they met the empirical criteria and, if they did not, whether we 
believe that the amount of redistributed packaged cost that their 
inclusion on the bypass list would generate would be appropriate. We 
ultimately added seven codes to the CY 2010 bypass list. The list of CY 
2010 bypass code additions that we proposed in the CY 2010 OPPS/ASC 
proposed rule but did not implement in this final rule with comment 
period appears in Table 1. Table 2 below is the final list of bypass 
codes for CY 2010. ``Overlap bypass codes'' that are members of the 
multiple imaging composite APCs are identified by asterisks (*) in 
Table 2. HCPCS codes that have been added for CY 2010 are also 
identified by asterisks (*) in Table 2.

 Table 1--Proposed CY 2010 Bypass Code Additions Excluded from Final CY
                            2010 Bypass List
------------------------------------------------------------------------
       CY 2010 HCPCS Code                CY 2010 Short descriptor
------------------------------------------------------------------------
57452..........................  Exam of cervix w/scope.
76120..........................  Cine/video x-rays.
76813..........................  Ob us nuchal meas, 1 gest.
88314..........................  Histochemical stain.
88367..........................  Insitu hybridization, auto.
92700..........................  Ent procedure/service.
94660..........................  Pos airway pressure, CPAP.
95971..........................  Analyze neurostim, simple.
99406..........................  Behav chng smoking 3-10 min.
99407..........................  Behav chng smoking >10 min.
G0249..........................  Provide INR test mater/equip.
------------------------------------------------------------------------

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BILLING CODE 4120-01-C
c. 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 ratesetting, 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 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).
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35253), we proposed 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 for CY 2010.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal for CY 2010, without modification, to 
calculate hospital-specific overall and departmental CCRs as described 
above in this section.
(2) Charge Compression
    Since the implementation of the OPPS, some commenters have raised 
concerns about potential bias in the OPPS cost-based weights due to 
``charge compression,'' which is the practice of applying a lower 
charge markup to higher-cost services and a higher charge markup to 
lower-cost services. (We discuss our CCR calculation in section

[[Page 60343]]

II.A.1.c. of this final rule with comment period and how we use these 
CCRs to estimate cost on hospital outpatient claims in detail in 
section II.A.2.a. of this final rule with comment period). 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 on previous rules have 
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 created one cost center for 
``Medical Supplies Charged to Patients'' and one cost center for 
``Implantable Devices Charged to Patients.'' This change split the 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). We made this change to the cost report form 
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 FY 2009 
IPPS final rule (73 FR 48458 through 45467).
    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 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 
the CY 2010 OPPS/ASC proposed rule (74 FR 35326 through 35333), we 
proposed an adjustment to our cost estimation methodology for drugs and 
biologicals 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

[[Page 60344]]

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 OPPS/ASC 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 also will be made 
for cost reports beginning in CY 2010. Furthermore, we noted in the FY 
2010 IPPS final rule (74 FR 43781 through 43782) that we are updating 
the cost report form to eliminate outdated requirements, in conjunction 
with the Paperwork Reduction Act (PRA), and that we had proposed actual 
changes to the cost reporting form, the attending cost reporting 
software, and the cost report instructions in Chapters 36 and 40 of the 
PRM-II. The comment period for this proposal (74 FR 31738) ended on 
August 31, 2009. 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.
    Comment: Several commenters expressed support for the policy 
adopted in the FY 2009 IPPS final rule, with application to both the 
OPPS and IPPS, to create one cost center for ``Medical Supplies Charged 
to Patients'' and one cost center for ``Implantable Devices Charged to 
Patients.'' Some commenters recommended that CMS verify the accuracy of 
the CCRs derived from the new cost centers by comparing CCRs calculated 
from the new cost center against regression-based CCRs or by 
undertaking other activities to ensure that data reported in these 
revised cost centers are consistent and accurate.
    One commenter stated that hospitals are reluctant to bill for 
devices that do not remain in the patient upon discharge, specifically 
cryoablation probes, under revenue code 0278 (Medical/Surgical 
Supplies: Other Implants). The commenter requested that CMS work with 
hospitals to revise the common hospital practice of billing for 
cryoablation probes under revenue code 0272 (Medical/Surgical Supplies: 
Sterile Supplies) rather than revenue code 0278. The commenter asserted 
that billing cryoablation probes under revenue code 0272 would result 
in estimating costs from charges using a CCR derived from the revised 
cost center for ``Medical Supplies Charged to Patients,'' rather than 
one derived from the ``Implantable Devices Charged to Patients,'' even 
though cryoablation probes are high cost implantable devices. The 
commenter believed that, without a change in the revenue code under 
which many hospitals report cryoablation probes, the recent cost center 
changes for medical supplies would negatively bias the estimated cost 
of cryoablation probes and the accuracy of the APC payment rates for 
cryoablation procedures.
    Some commenters suggested that CMS engage in outreach and 
educational activities to hospitals on the changes to the cost report 
and the reporting of charges with respect to the medical device and 
medical supply cost centers so that hospitals can appropriately report 
data. The commenters recommended that the outreach activities go beyond 
the ``distribution of bulletins that are used to inform providers about 
changes to the Medicare program.''
    Response: We appreciate the commenters' support for our CY 2009 
policy to split the ``Medical Supplies Charged to Patients'' into one 
cost center for ``Medical Supplies Charged to Patients'' and one cost 
center for ``Implantable Devices Charged to Patients''. In the FY 2009 
IPPS final rule (73 FR 48458 through 48467), we explained in detail the 
reasoning behind the development of the cost center split and our 
decision to ultimately have hospitals use the American Hospital 
Association's National Uniform Billing Committee (NUBC) revenue codes 
to determine what would be reported in the ``Medical Supplies Charged 
to Patients'' and the ``Implantable Devices Charged to Patients'' cost 
centers. In that discussion, we noted that while we require that the 
device broadly be considered implantable to have its costs and charges 
included in the new ``Implantable Devices Charged to Patients'' cost 
center, our final policy did not require the device to remain in the 
patient at discharge (73 FR 48462 through 48463). We typically do not 
specify a revenue code-to-cost center crosswalk that hospitals must 
adopt to prepare their cost report, recognizing hospitals' need to 
interpret the NUBC definitions and cost reporting requirements within 
the context of their own financial systems. In response to comments on 
our proposal to create the new cost center in the FY 2009 IPPS final 
rule, we did define the new ``Implantable Devices Charged to Patients'' 
cost center by the revenue codes that we believe would map to this cost 
center to facilitate ease of reporting by hospitals. We note that 
revenue code definitions are established by the NUBC, and we fully 
expect hospitals to follow existing guidelines regarding revenue code 
use. Specifically with regard to reporting cryoablation probes, we do 
not believe that the current NUBC definition of revenue code 0278 
(Medical/Surgical Supplies and Devices (also see 062x, an extension of 
027x); Other implants (a)) precludes reporting hospital charges for 
cryoablation probes under this revenue code. Therefore, we believe 
hospitals can report charges for cryoablation probes under the revenue 
code 0278 using the definitions in the official UB 04 Data 
Specifications Manual.
    As discussed in the FY 2010 IPPS final rule (74 FR 43780), we 
reiterated that we had not proposed any policy changes with respect to 
the use of revenue codes or alternative ways of identifying high-cost 
devices. We refer readers to the discussion in the FY 2009 IPPS final 
rule concerning our current policy on these matters (73 FR 48462). 
Hospitals were able to report costs and charges for the new 
``Implantable Devices Charged to Patients'' cost center for cost 
reporting periods beginning on or after May 1, 2009 as line 55.30 on 
Form 2552-96 and, at the time of development of this final rule with 
comment period, we anticipate that hospitals will be able to report 
costs and charges for the new cost center as line 69 on the revised 
draft Medicare hospital cost report form CMS-2552-10 beginning February 
1, 2010.
    In the FY 2009 IPPS final rule (73 FR 48463), we agreed that once 
the data reflecting the cost center changes become available for 
ratesetting, we

[[Page 60345]]

would evaluate the CCRs that we derive from the new ``Medical Supplies 
Charged to Patients'' and ``Implantable Devices Charged to Patients'' 
cost centers and that we would continue to analyze cost report data. In 
the FY 2010 IPPS final rule (74 FR 43782), we indicated that we might 
consider the results of regression analyses as one way to evaluate 
costs and charges reported in the new cost center. However, we point 
out that we do not believe it is appropriate to ``pick and choose'' 
between CCRs; rather, the determining factor should be payment 
accuracy, regardless of whether one method increases or decreases 
payment for devices (73 FR 48463). That is, the validity of the CCRs 
resulting from the newly implemented cost center cannot be determined 
to be accurate simply because they will result in higher overall cost 
estimates for procedures that rely on implantable devices and, 
therefore, higher APC payment rates.
    As discussed in the FY 2010 IPPS rule, we believe it is early to 
plan specific outreach activities on the revised cost report form CMS-
2552-10 and the new ``Implantable Devices Charged to Patients'' cost 
center, given that the comment period for the revised cost reporting 
forms closed on August 31, 2009. We agree that such educational 
activities are important, and we have been considering various options 
for educating the provider community that would involve fiscal 
intermediaries, Medicare administrative contractors, and cost report 
vendors. We look forward to working with the provider community on 
these initiatives.
    Comment: A few commenters noted that two revenue codes became 
effective for reporting radiopharmaceuticals, specifically 0343 
(Nuclear Medicine; Diagnostic Radiopharmaceuticals) for diagnostic 
preparations and 0344 (Nuclear Medicine; Therapeutic 
Radiopharmaceuticals) for therapeutic preparations in October 2004; and 
that this more specific revenue code reporting should help capture the 
unique costs and charges of radiopharmaceuticals. The commenters also 
pointed out that the costs and charges associated with these revenue 
codes likely would be reported by hospitals under the broader radiology 
cost center on the Medicare hospital cost report. They expressed 
concern that, because the CCR used to estimate charges for these 
revenue codes encompasses a large volume of many different services, 
the specificity of charge information in the claims data gained through 
use of the new revenue codes would not translate into better cost 
estimation for diagnostic and therapeutic radiopharmaceuticals under 
the OPPS. The commenters suggested that CMS require hospitals to report 
costs and charges for these two revenue codes as unique cost centers on 
the cost report.
    Response: We agree with the commenters that the broader the range 
and volume of services included in a given cost center, the more the 
resulting CCR calculated from the costs and charges for that cost 
center represents a weighted average of included services. To the 
extent that the revenue codes implemented in October 2004, specifically 
0343 (Nuclear Medicine; Diagnostic Radiopharmaceuticals) for diagnostic 
preparations and 0344 (Nuclear Medicine; Therapeutic 
Radiopharmaceuticals) for therapeutic preparations, have no specific 
associated cost center in which to capture their unique costs and 
charges and to the extent hospitals report these costs and charges in 
cost center 4100 ``Radiology--Diagnostic'' or 4200 ``Radiology--
Therapeutic,'' the CCRs for cost centers 4100 and 4200 that CMS uses to 
estimate costs from charges on claims for specific radiopharmaceuticals 
will reflect the average cost and markup associated with all diagnostic 
and therapeutic radiology procedures. However, our policy for 
establishing new cost centers requires a public review process that 
allows commenters the opportunity to provide input on any changes, and 
many commenters historically have not been interested in adding cost 
centers to the cost report because of the associated hospital 
administrative burden.
    As we have noted above, we have recently undertaken regulatory 
comment and response on our effort to update the cost report. The 
proposed draft hospital cost report Form CMS-2552-10 went on Federal 
Register public display at the Office of the Federal Register on July 
2, 2009, for a 60-day review and comment period, which ended on August 
31, 2009. As we stated in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68525 through 68526), that notice and comment procedure 
is the process by which we are considering public comments requesting 
additional cost centers. We will consider all comments for new cost 
centers submitted through that process as we work to improve and modify 
the hospital cost report. We also note that we make the revenue code-
to-cost center crosswalk that we use to match Medicare hospital cost 
report information with claims data continually available for 
inspection and comment on the CMS Web site: http://www.cms.hhs.gov/HospitalOutpatientPPS.
    Comment: One commenter believed that the proposed drug cost center 
split discussed in the CY 2009 OPPS/ASC proposed rule would represent 
an unnecessary burden for hospitals.
    Response: While we welcome comments regarding OPPS policy, we note 
that the drug cost center proposal was a CY 2009 proposal which was not 
finalized (73 FR 68654 through 68657). We have not proposed a policy to 
split the drug cost center for CY 2010.
    Comment: One commenter requested that CMS issue clarifying 
instructions for reporting computed tomography (CT) and magnetic 
resonance imaging (MRI) equipment and supported the creation of new 
cost centers to capture the unique costs and charges of CT scanning, 
MRI, and other radiology procedures.
    Response: We did not propose to implement separate standard 
radiology cost centers for CT Scanning, MRI, and other radiology 
procedures due to the significant number of comments we received in 
response to our general request in the CY 2009 OPPS/ASC proposed rule 
for comments and reactions to RTI's recommendations. The commenters on 
the CY 2009 OPPS/ASC proposed rule were generally in favor of these 
cost centers in theory, but suggested that the allocation of capital 
cost across these cost centers was not consistent or consistently 
accurate across hospitals and that smaller hospitals might not have 
sufficiently sophisticated accounting systems to accurately allocate 
costs (73 FR 68526). In that discussion, we expressed our preference 
for establishing these cost centers as standard cost centers because 
standard cost centers constitute the minimum set of cost centers that a 
hospital is required to report, assuming that the hospital maintains 
separate departments for those services and reports the costs and 
charges for these departments in separate accounts within its own 
internal accounting systems. We believe this step would improve the 
accuracy of radiology payment by encouraging greater and more 
consistent reporting of the costs and charges specifically associated 
with advanced imaging services. However, we also noted that nonstandard 
cost centers already are available for CT Scanning and MRI and that 
hospitals that provide these services and maintain a separate account 
for each of these services in their internal accounting records to 
capture the costs and charges are currently required, in accordance 
with Sec.  413.53(a)(1), to report these cost centers on the cost 
report, even if CMS

[[Page 60346]]

does not identify a nonstandard cost center code for the department(s).
    As we stated in the CY 2009 OPPS/ASC final rule with comment (73 FR 
68525 through 68526) and in response to an earlier comment in this 
section, we will consider public comments requesting additional cost 
centers in response to the PRA Federal Register notice for the proposed 
draft cost report form CMS-2552-10. The comment period for this 
proposal ended August 31, 2009.
    Comment: A few commenters expressed concern about the timing for 
implementing the nonstandard cost center for cardiac rehabilitation, 
suggesting that a delay could limit beneficiary access to cardiac 
rehabilitation services because the proposed CY 2010 payment was too 
low. The commenters noted that the new CCRs would not be available for 
setting OPPS payment rates until CY 2013.
    Response: While we understand the commenters' concern regarding the 
timing of implementing the cardiac rehabilitation nonstandard cost 
center, in our CY 2009 OPPS/ASC final rule with comment period 
discussion (73 FR 68524), we explained our preference for improving the 
accuracy of the APC relative weights through long-term changes to the 
cost report rather than implementing short-term statistical 
adjustments, in order to ensure that actual hospital data are used to 
set payment rates. As discussed above, we currently anticipate we will 
implement new nonstandard cost centers for Cardiac Rehabilitation, 
Hyperbaric Oxygen Therapy, and Lithotripsy with the revised Medicare 
hospital cost report form in CY 2010.
    We have approximately 2.5 million CY 2008 claims from almost 2,000 
hospitals for cardiac rehabilitation sessions available for setting the 
CY 2010 payment rates for these services. Given that the OPPS payment 
for the services has been highly stable for the past several years, we 
have no reason to believe that Medicare beneficiaries' access to 
cardiac rehabilitation will be limited in CY 2010 based on the final 
OPPS payment rates for the services. Further discussion of CY 2010 
payment for traditional and intensive cardiac rehabilitation services 
is included in section XII.B. of this final rule with comment period.
    Comment: One commenter believed that CMS continues to expand and 
complicate the antiquated Medicare cost report rather than to design a 
helpful tool. The commenter believes that the current ``piecemeal'' 
approach to revising the cost report is costly and burdensome. Based on 
that impression, the commenter recommended that CMS partner with the 
hospital industry to consider more comprehensive changes to the cost 
report.
    Response: In the FY 2009 IPPS proposed and final rules (73 FR 23546 
and 73 FR 48461) and CY 2009 OPPS/ASC proposed rule and final rule with 
comment period (73 FR 41431 and 73 FR 68526), we stated that we began a 
comprehensive review of the Medicare hospital cost report, and 
splitting the current cost center for ``Medical Supplies Charged to 
Patients'' into one line for ``Medical Supplies Charged to Patients'' 
and another line for ``Implantable Devices Charged to Patients'' is 
part of that initiative to update and revise the cost report. We also 
explained that in the context of the effort to update the cost report 
and eliminate outdated requirements, we would make changes to the cost 
report form and cost report instructions that would be available to the 
public for comment. Thus, the public would have an opportunity to 
suggest the more comprehensive reforms that one commenter on the CY 
2010 OPPS/ASC proposed rule advocates. Similarly, the public would be 
able to offer suggestions for ensuring that these reforms are made in a 
manner that is not disruptive to hospitals' billing and accounting 
systems, and within the guidelines of General Accepted Accounting 
Principles (GAAP), which are consistent with the Medicare principles of 
reimbursement and sound accounting practices. The proposed draft 
hospital cost report Form CMS-2552-10 went on Federal Register public 
display at the Office of the Federal Register on July 2, 2009, for a 
60-day review and comment period, which ended on August 31, 2009. We 
will consider comments from the public as we work to improve and modify 
the hospital cost report. The cost center for ``Implantable Devices 
Charged to Patients'' is available for use for cost reporting periods 
beginning on or after May 1, 2009. The revised hospital cost report 
Form CMS-2552-10 will be effective for cost reporting periods beginning 
on or after February 1, 2010 (74 FR 43781 through 43782).
2. Data Development Process and Calculation of Median Costs
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate final OPPS payment rates for CY 2010. 
The hospital OPPS page on the CMS Web site on which this final rule 
with comment period is posted provides an accounting of claims used in 
the development of the final payment rates at: http://www.cms.hhs.gov/HospitalOutpatientPPS. The accounting of claims used in the development 
of this final rule with comment period is included on the CMS Web site 
under supplemental materials for the CY 2010 OPPS/ASC final rule with 
comment period. That accounting provides additional detail regarding 
the number of claims derived at each stage of the process. In addition, 
below 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 now includes 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 final payment rates for the CY 
2010 OPPS.
    As proposed, we used the methodology described in sections 
II.A.2.b. through e. of this final rule with comment period to 
establish the relative weights used in calculating the final OPPS 
payment rates for CY 2010 shown in Addenda A and B to this final rule 
with comment period.
a. Claims Preparation
    For the CY 2010 OPPS/ASC proposed rule, 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). In 
the discussion that follows, we have updated the information to reflect 
the claims available for this final rule with comment period, 
specifically CY 2008 claims processed through June 30, 2009.
    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

[[Page 60347]]

document that a service is not covered. We then excluded claims for 
services furnished in Maryland, Guam, the U.S. Virgin Islands, American 
Samoa, and the Northern Mariana Islands because hospitals in those 
geographic areas are not paid under the OPPS.
    We divided the remaining claims into the three groups shown below. 
Groups 2 and 3 comprise the 107 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X, 13X (hospital bill types), 
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 final rule with comment 
period. For the CCR calculation process, we used the same general 
approach that we used in developing the final APC rates for CY 2007, 
using the revised CCR calculation that 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 with cost reporting periods beginning in CY 
2007. As proposed, for this final rule with comment period, we used the 
most recently submitted cost reports to calculate the CCRs to be used 
to calculate median costs for the final 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 then 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 final 
rule with comment period 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, 
which is 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.
    As we proposed, we updated 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 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 proposed to revise the revenue code-to-cost 
center crosswalk as described in Table 2 of the CY 2010 OPPS/ASC 
proposed rule (74 FR 35256 through 35261).
    Comment: Two commenters specifically addressed the proposed OPPS 
treatment of a number of revenue codes for CY 2010 and submitted 
identical, detailed recommendations. In general, the commenters agreed 
with the proposed treatment of revenue codes 0253 (Pharmacy; Take Home 
Drugs); 0290 (Durable Medical Equipment (other than renal); General 
Classification); 0291 (Durable Medical Equipment; Rental); 0292 
(Durable Medical Equipment; Purchase of New DME); 0293 (Durable Medical 
Equipment; Purchase of Used DME); 0294 (Durable Medical Equipment; 
Supplies/Drugs for DME); 052x (Free-Standing Clinic; All 
Classifications); 066X (Respite Care; All Classifications); 0749, 0759, 
0779, 0799, and 0910 (All Reserved); and 0948 (Other Therapeutic 
Services--Pulmonary Rehabilitation). The commenters disagreed with the 
proposed treatment of the revenue codes as displayed in Table 3 below, 
which provides the commenters' perspective on each revenue code.
    Response: Specifically, our revenue proposal addressed: (1) 
Acknowledging that costs estimated from charges are associated with 
specific revenue codes when calculating OPPS payment rates; (2) 
identifying the appropriate cost center CCR that should be used to 
estimate costs for certain revenue codes; and (3) packaging of revenue 
center costs into the costs of separately paid procedures when revenue 
charges are reported without a HCPCS code. The commenters addressed 
some revenue codes that were explicitly identified and discussed in the 
CY 2010 OPPS/ASC proposed rule (74 FR 35256 through 35266), as well as 
some additional revenue codes. Table 3 below displays our response to 
each area where the commenters disagreed with our proposed treatment of 
the revenue code.

[[Page 60348]]

    We note that we continually make our revenue code-to-cost center 
crosswalk available on the CMS Web site for review and comment, and we 
welcome further comments on the crosswalk from the public at any time.
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BILLING CODE 4120-01-C
    Comment: One commenter suggested that CMS include dates in the 
revenue code-to-cost center crosswalk document to allow hospitals and 
CMS to easily track the effective dates for each change.
    Response: We appreciate the desire to track changes to the revenue 
code-to-cost center crosswalk. However, rather than document changes to 
individual revenue codes in the crosswalk, we will provide the public 
with the current and past copies of the same revenue code-to-cost 
center crosswalk that we directly incorporate into our modeling of the 
OPPS payment rates each year.
    Table 4 below shows the update to the revenue codes for which 
estimated costs on each claim for this final rule with comment period 
are based and incorporates the costs for those revenue codes into APC 
median cost estimates. Column A of Table 4 provides the 2008 revenue 
code and description. Column B indicates whether the charges reported 
with the revenue code will 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 will be converted to cost 
in CY 2010 (or were converted for CY 2009), and an ``N'' indicates that 
charges reported under the revenue code will not be converted to cost 
and incorporated into median cost estimates. Finally, Column D provides 
our rationale for the CY 2010 final change.
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BILLING CODE 4120-01-C
    Also, as a result of our comprehensive review of the revenue codes 
included in the revenue code-to-cost center crosswalk, as we proposed, 
we are adding 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 5 below lists the revenue codes for which 
we made changes to the revenue code-to-cost center crosswalk for CY 
2010 ratesetting and our rationale for each change. With the exception 
of revenue code 0942 (Other Therapeutic Services; Education/Training), 
the revenue codes for which we made changes to the designated 
departmental CCRs are those identified in our comprehensive review that 
are also listed above in Table 4.

[[Page 60358]]



    Table 5--Changes to CY 2010 OPPS Hierarchy of Cost Centers in the
                  Revenue Code-to-Cost Center Crosswalk
------------------------------------------------------------------------
    2008 Revenue code and
         description                  Rationale for CY 2010 change
------------------------------------------------------------------------
0392--Administration,          We crosswalked charges under revenue code
 Processing and Storage for     0392 to cost center 4700 (Blood Storing,
 Blood and Blood Components;    Processing, & Transfusing) because we
 Processing and Storage.        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 made
                                no secondary or tertiary cost centers
                                because we believe that no other
                                departmental cost centers are
                                appropriate.
0623--Medical Surgical         We crosswalked the charges reported under
 Supplies--Extension of 027X;   revenue code 0623 to cost center 5500
 Surgical Dressings.            (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 made no
                                secondary or tertiary cost centers
                                because we believe that no other
                                departmental cost centers are
                                appropriate.
0942--Other Therapeutic        We crosswalked the charges under revenue
 Services (also see 095x, an    code 0942 to cost center 6000 (Clinic)
 extension of 094x); Educ/      as the primary cost center. Previously,
 Training.                      the charges under revenue code 0942 were
                                crosswalked to the overall ancillary
                                CCR. As discussed above, we believe that
                                cost center 6000 is a more appropriate
                                primary cost center. We made no
                                secondary or tertiary cost centers
                                because we believe that no other
                                departmental cost centers are
                                appropriate.
0948--Other Therapeutic        We crosswalked the charges under revenue
 Services (also see 095x, an    code 0948 to cost center 4900
 extension of 094x);            (Respiratory Therapy) as primary and to
 Pulmonary Rehabilitation.      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
                                not establishing a 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 the proposed rule 
and this final rule with comment period.
    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 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 an 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 policy to redistribute some portion of total cost 
for packaged drugs and biologicals to the separately payable drugs and 
biologicals as acquisition and pharmacy overhead and handling costs 
discussed in section V.B.3. of this final rule with comment period, we 
used the line-item cost data for drugs and biologicals for which we had 
an 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 July 2009 ASP amount multiplied by total units for each 
drug or biological in the CY 2008 claims data). These values are ASP+11 
percent, ASP-3 percent, and ASP+259 percent, respectively. As we 
discuss in greater detail in section V.B.3. of this final rule with 
comment period, we are finalizing a policy to redistribute $150 million 
of the total cost in our claims data for packaged drugs and biologicals 
that have an associated ASP from packaged drugs with an ASP to 
separately payable drugs and biologicals. The $150 million is, roughly, 
one-third of the difference of $445 million between the total cost of 
packaged drugs and biologicals with an associated ASP in our CY 2008 
claims data ($616 million) and ASP for the same drugs and biologicals 
($171 million). In response to comments that CMS excluded valid 
overhead and handling costs associated with drugs lacking ASP 
information, largely costs estimated from uncoded charges reported 
under pharmacy revenue codes, we also are finalizing a policy to 
redistribute an additional $50 million of the total cost in our claims 
data for drugs and biologicals lacking an ASP, largely for estimated 
costs associated with uncoded charges billed under pharmacy revenue 
code series 025X (Pharmacy (also see 063X, an extension of 025X)), 026X 
(IV Therapy), and 063X (Pharmacy--Extension of 025X). As we state in 
section V.B.3. of this final rule with comment period, because we do 
not know ASP for this subset of drug costs, we do not know the amount 
of associated pharmacy overhead. We observe about $656 million for 
drugs lacking an ASP in our CY 2008 claims data. This total excludes 
the cost of diagnostic and therapeutic radiopharmaceuticals because 
they are not reported under pharmacy revenue codes or under the 
pharmacy cost center on the cost report.
    Removing a total of $150 million in pharmacy overhead cost from 
packaged drugs and biologicals reduces the $616 million to $466 
million, a 24 percent reduction. Removing $50 million from the cost of 
drugs lacking an ASP reduces the $656 million to $606 million, an 8 
percent reduction. To implement our final CY 2010 policy to 
redistribute $150 million in claim cost from

[[Page 60359]]

packaged drugs and biologicals with an ASP to separately payable drugs 
and biologicals and $50 million in claim cost from packaged drugs and 
biologicals lacking an ASP, including uncoded pharmacy revenue code 
charges, we multiplied the cost of each packaged drug or biological 
with an HCPCS code and ASP pricing information in our CY 2008 claims 
data by 0.76, and we multiplied all other packaged drug costs in our CY 
2008 claims data, excluding those for diagnostic radiopharmaceuticals, 
by 0.92. We also added the redistributed $200 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 final 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 CY 2008 
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.
    Comment: One commenter claimed that the removal of charges and 
costs from denied lines was in contrast to longstanding policy for 
hospital inpatient services. A few commenters expressed concern about 
APC 0312 (Radioelement Applications), noting that there has been 
significant fluctuation in the payment rates for this APC in the past. 
They believe that implementing the proposed line-item trim, which 
removed a significant number of single claims, may have contributed to 
that instability. The commenters suggested that historical data would 
not indicate any reason for significant line-items to be trimmed. One 
commenter believed that the payment rates for low dose rate prostate 
brachytherapy were arbitrary and unfair. Based on the commenters' 
impression that the purpose of the line-item trim was to act as a 
quality check, the commenters requested that the line-item trim be 
suppressed for APC 0312.
    Response: While payment systems such as the IPPS do not remove 
charge and cost data, this is largely due to the differences in the 
fundamental structures of the two payment systems. The IPPS is a system 
based on DRGs that relies on significant bundling of services under 
common clinical scenarios, while the OPPS is largely based on payment 
for a specific individual service. These differences in payment 
approach under each system are reflected in the way that data are used 
to establish the payment weights, from the CCRs used to reduce charges 
to cost to the structure of how charge and cost information is 
classified. One byproduct of the differences between the IPPS and the 
OPPS is the level of editing in each system to ensure that a correct 
payment is made. Similarly, there are many NCCI edits to ensure that 
payment is made to hospitals for outpatient services only when there is 
correct coding because there are hundreds of APCs that may contribute 
to inappropriate unbundling of services when those services are 
reported for a hospital outpatient encounter. In the CY 2010 OPPS/ASC 
proposed rule (74 FR 35262), we indicated that removing lines with 
valid status indicators that were edited and not paid during claims 
processing increases the accuracy of the single bills used for 
ratesetting. Doing so allows the single bills used for ratesetting 
purposes to be representative of those services as they would be paid 
in the prospective year.
    In studying the billing patterns for HCPCS codes that are assigned 
to APC 0312, we noted that the line-item trim removes a number of 
unpaid single bills for this APC, as the commenters had suggested. 
However, we also observed a general decline in the reporting of 
services assigned to this APC that was unrelated to the line-item trim, 
suggesting that a portion of the observed decline in the number of 
single bills available for ratesetting is due to an actual reduction in 
the frequency that the services assigned to APC 0312 are furnished. 
While we understand the commenters' concern regarding the reduction of 
single bills used in ratesetting for APC 0312, the data suggest that 
the reduction is due in part to a decline in the billing of individual 
services assigned to the APC. Further, we believe that removing these 
line-items which have likely been rejected or denied is appropriate in 
light of the goal of using accurate single procedure claims for 
ratesetting under the OPPS.
    After consideration of the public comments received relating to our 
CY 2010 proposal for claims preparation, we are adopting it as final, 
with modification to the treatment of certain revenue codes as 
described in Table 4 in this section.
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

[[Page 60360]]

of these groups follow below.) In the CY 2010 OPPS/ASC proposed rule 
(74 FR 35262), we proposed 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 proposed 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 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 proposed to treat these codes in 
the same manner for data purposes for CY 2010 as we have treated them 
since CY 2008. Specifically, we proposed to continue to evaluate 
whether the criteria for separate payment of codes with status 
indicator ``Q1'' or ``Q2'' are met in determining whether they are 
treated as major or minor codes. As discussed earlier in this section, 
because we proposed 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 final rule with comment period.
    Specifically, we divided the remaining claims into the following 
five groups:
    1. Single Major Claims: Claims with a single separately payable 
procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or ``X,'' 
which includes codes with status indicator ``Q3''); claims with one 
unit of a status indicator ``Q1'' code (``STVX-packaged'') where there 
was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X'' on the 
same claim on the same date; or claims with one unit of a status 
indicator ``Q2'' code (``T-packaged'') where there was no code with a 
status indicator ``T'' on the same claim on the same date.
    2. Multiple Major Claims: Claims with more than one separately 
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or 
``X,'' which includes codes with status indicator ``Q3''), or multiple 
units of one payable procedure. These claims include those codes with a 
status indicator ``Q2'' code (``T-packaged'') where there was no 
procedure with a status indicator ``T'' on the same claim on the same 
date of service but where there was another separately paid procedure 
on the same claim with the same date of service (that is, another code 
with status indicator ``S,'' ``V,'' or ``X''). We also include in this 
set, claims that contained one unit of one code when the bilateral 
modifier was appended to the code and the code was conditionally or 
independently bilateral. In these cases, the claims represented more 
than one unit of the service described by the code, notwithstanding 
that only one unit was billed.
    3. Single Minor Claims: Claims with a single HCPCS code that was 
assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' 
``U,'' or ``N'' and not status indicator ``Q1'' (``STVX-packaged'') or 
status indicator ``Q2'' (``T-packaged'') code.
    4. Multiple Minor Claims: Claims with multiple HCPCS codes that are 
assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' 
``U,'' or ``N;'' claims that contain more than one code with status 
indicator ``Q1'' (``STVX-packaged'') or more than one unit of a code 
with status indicator ``Q1'' but no codes with status indicator ``S,'' 
``T,'' ``V,'' or ``X'' on the same date of service; or claims that 
contain more than one code with status indicator ``Q2'' (T-packaged), 
or ``Q2'' and ``Q1,'' or more than one unit of a code with status 
indicator ``Q2'' but no code with status indicator ``T'' on the same 
date of service.
    5. Non-OPPS Claims: Claims that contain no services payable under 
the OPPS (that is, all status indicators other than those listed for 
major or minor status). These claims were excluded from the files used 
for the OPPS. Non-OPPS claims have codes paid under other fee 
schedules, for example, durable medical equipment or clinical 
laboratory tests, and do not contain 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 final rule with comment period. Claims that contain 
codes to which we have assigned status indicator ``Q3'' (composite APC 
members) appear in both the data of the single and multiple major files 
used in this final rule with comment period, depending on the specific 
composite calculation.
    Because we did not receive any public comments on our proposed 
process of organizing claims by type, we are finalizing our CY 2010 
proposal without modification.
(2) Creation of ``Pseudo'' Single Claims
    As we proposed, to develop ``pseudo'' single claims for this final 
rule with comment period, we examined both the multiple major claims 
and the multiple minor claims. We first examined the multiple major 
claims for dates of service to determine if we could break them into 
``pseudo'' single procedure claims using the dates of service for all 
lines on the claim. If we could create claims with single major 
procedures by using dates of service, we created a single procedure 
claim record for each separately 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 final rule with comment period 
to remove separately payable procedures that we determined contained 
limited or no packaged costs or that were otherwise suitable for 
inclusion on the bypass list from a multiple procedure bill. 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

[[Page 60361]]

composite APCs, in this initial assessment for ``pseudo'' single 
claims. The CY 2010 ``overlap bypass codes'' are listed in Table 1 in 
section II.A.1.b. of this final rule with comment period. 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 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 final rule with comment period, were met. Where the criteria for 
the imaging composite APCs were met, we created a ``single session'' 
claim for the applicable imaging composite service and determined 
whether we could use the claim in ratesetting. For HCPCS codes that are 
both conditionally packaged and are members of a multiple imaging 
composite APC, we first assessed whether the code would be packaged and 
if so, the code ceased to be available for further assessment as part 
of the composite APC. Because the packaged code would not be a 
separately payable procedure, we considered it to be unavailable for 
use in setting the composite APC median cost. 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.
    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.
    Comment: One commenter noted that the bilateral procedure logic did 
not appear to appropriately exclude claims with bilateral codes from 
the single major claims, having observed bilateral procedure codes in 
that claims subset. Also, the commenter suggested that the conditional 
packaging of the status indicator ``Q2'' (``T-packaged'') codes did not 
appear to be treated consistently with the policy we proposed, which 
was that a ``Q2'' procedure with the highest scaled weight would be 
paid separately when there is no status indicator ``T'' procedure on 
the claim and that the costs of any other ``Q2'' codes on the claim 
would be packaged.
    Response: In seeking to address the commenter's observations, we 
discovered that the bilateral logic was

[[Page 60362]]

not processed correctly as we proposed. Similarly, inaccurate program 
logic in the weight comparison for status indicator ``Q2'' (``T-
packaged'') codes caused the packaging to be assigned based on order of 
precedence rather than by weight.
    For this final rule with comment period, we accurately applied the 
bilateral and status indicator ``Q2'' (``T-packaged'') weight 
comparison packaging logic, consistent with the proposed and final 
policy. The national unadjusted payments for CY 2010 accurately reflect 
the policy that we proposed to continue for CY 2010 OPPS and that we 
are finalizing in this final rule with comment period.
    After consideration of the public comment received, we are 
finalizing our CY 2010 proposal, without modification, for the process 
by which we develop ``pseudo'' single procedure claims.
c. Completion of Claim Records and Median Cost Calculations
    We then packaged the costs of packaged HCPCS codes (codes with 
status indicator ``N'' listed in Addendum B to this final rule with 
comment period 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 proposed to use the 
packaged revenue codes for CY 2010 that were displayed in Table 4 of 
the CY 2010 OPPS/ASC proposed rule (74 FR 35265 through 35266).
    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 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 
final rule with comment period, we have completed that analysis for all 
revenue codes in the revenue code-to-cost center crosswalk. As 
discussed in the CY 2010 OPPS/ASC proposed rule (74 FR 35264 through 
35265), as a result, we proposed 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 proposed to add 
to the CY 2010 packaged revenue code list were identified by asterisks 
(*) in Table 4 of the CY 2010 OPPS/ASC proposed rule.
    The public comments that we received that resulted in our changing 
the list of packaged revenue codes for CY 2010 are discussed in section 
II.A.2.a. of this final rule with comment period. Thus, we are 
finalizing the proposed packaged revenue codes for CY 2010, with 
modification. The final CY 2010 packaged revenue codes are listed in 
Table 6 below. Revenue codes that we are adding to the CY 2010 packaged 
revenue code list are identified by asterisks (*) in Table 6.

              Table 6--Final 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.
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.

[[Page 60363]]

 
*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.
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.
0710...................................  Recovery Room; General
                                          Classification.
0720...................................  Labor Room/Delivery; General
                                          Classification.
0721...................................  Labor Room/Delivery; Labor.
0732...................................  EKG/ECG (Electrocardiogram);
                                          Telemetry.
0762...................................  Specialty Room--Treatment/
                                          Observation Room; Observation
                                          Room.
0801...................................  Inpatient Renal Dialysis;
                                          Inpatient Hemodialysis.
0802...................................  Inpatient Renal Dialysis;
                                          Inpatient Peritoneal Dialysis
                                          (Non-CAPD).
0803...................................  Inpatient Renal Dialysis;
                                          Inpatient Continuous
                                          Ambulatory Peritoneal Dialysis
                                          (CAPD).
0804...................................  Inpatient Renal Dialysis;
                                          Inpatient Continuous Cycling
                                          Peritoneal Dialysis (CCPD).
0809...................................  Inpatient Renal Dialysis; Other
                                          Inpatient Dialysis.
0810...................................  Acquisition of Body Components;
                                          General Classification.
0819...................................  Inpatient Renal Dialysis; Other
                                          Donor.
0821...................................  Hemodialysis-Outpatient or
                                          Home; Hemodialysis Composite
                                          or Other Rate.
0824...................................  Hemodialysis-Outpatient or
                                          Home; Maintenance--100%.
0825...................................  Hemodialysis-Outpatient or
                                          Home; Support Services.
0829...................................  Hemodialysis-Outpatient or
                                          Home; Other OP Hemodialysis.
0942...................................  Other Therapeutic Services
                                          (also see 095X, an extension
                                          of 094x); Education/Training.
*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 
proposed to use the pre-reclassified wage indices for standardization 
because we believe that they better reflect the true costs of items and 
services in the area in which the hospital is located than the post-
reclassification wage indices and, therefore, would result in the most 
accurate unadjusted median costs.
    We also excluded claims that were outside 3 standard deviations 
from the geometric mean of units for each HCPCS code on the bypass list 
(because, as discussed above, we used claims that contain multiple 
units of the bypass codes).
    After removing claims for hospitals with error CCRs, claims without 
HCPCS codes, claims for immunizations not covered under the OPPS, and 
claims for services not paid under the OPPS, approximately 58 million 
claims were left. Using these 58 million claims, we created 
approximately 99 million single and ``pseudo'' single claims, of which 
we used 99 million single bills (after trimming out approximately 
657,000 claims as discussed above in this section) in the CY 2010 
median development and ratesetting.
    We used these claims to calculate the 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 final rule with 
comment period and reassigned HCPCS codes to different APCs where we 
believed that it was appropriate. Section III. of this final rule with 
comment period includes a discussion of certain HCPCS code assignment 
changes that resulted from examination of the median costs, review of 
the public comments, and for other reasons. The APC medians were 
recalculated after we reassigned the affected HCPCS codes. Both the 
HCPCS code-specific medians and the APC medians were weighted to 
account for the inclusion of multiple units of the bypass codes in the 
creation of ``pseudo'' single bills.

[[Page 60364]]

    Comment: Several commenters objected to the volatility of the OPPS 
rates from year to year. The commenters asserted that the absence of 
stability in the OPPS rates creates budgeting, planning, and operating 
problems for hospitals, and that as more care is provided on an 
outpatient, rather than inpatient basis, the need for stable payment 
rates from one year to the next becomes more important to hospitals. 
Some commenters suggested that CMS limit reductions in APC payments to 
a set percentage, with one commenter noting that CMS dampened payment 
decreases for blood and blood products to mitigate large payment 
fluctuations in order to limit provider losses. One commenter suggested 
that the median costs from claims be adjusted to limit changes from 
year to year. Another commenter suggested that CMS perform a thorough 
examination of the payment rates and examine billed charges, costs, 
median and mean costs, and CCRs to isolate the source of the 
fluctuations as well as mandate a review of all APCs that fluctuate 
above a certain percentage, similar to the 2 times rule.
    Response: There are a number of factors pertinent to the OPPS that 
may cause median costs to change from one year to the next. Some of 
these are a reflection of hospital behavior, and some of them are a 
reflection of fundamental characteristics of the OPPS as defined in 
statute. For example, the OPPS payment rates are based on hospital cost 
report and claims data. However, hospital costs and charges change each 
year and this results in both changes to the CCRs taken from the most 
currently available cost reports and also differences in the charges on 
the claims that are the basis of the calculation of the median costs on 
which OPPS rates are based. Similarly, hospitals adjust their mix of 
services from year to year by offering new services and ceasing to 
furnish services and changing the proportion of the various services 
they furnish, which have an impact on the CCRs that we derive from 
their cost reports. CMS cannot stabilize these hospital-driven 
fundamental inputs to the calculation of OPPS payment rates.
    Moreover, there are other essential elements of the OPPS which 
contribute to the changes in relative weights each year. These include, 
but are not limited to, reassignments of HCPCS codes to APCs to rectify 
2 times violations as required by the law, to address the costs of new 
services, to address differences in hospitals' costs that may result 
from changes in medical practice, and to respond to public comments. 
Our efforts to improve payment accuracy may also contribute to payment 
volatility in the short run, as may be the case when we are eventually 
able to use more specific CCRs to estimate the costs of implantable 
devices, based on the final policy that we adopted to disaggregate the 
single cost center for medical supplies into two more specific cost 
centers, as described in the FY 2009 IPPS final rule (73 FR 48458 
through 48467). Moreover, for some services, we cannot avoid using 
small numbers of claims, either because the volume of services is 
naturally low or because the claims data do not facilitate the 
calculation of a median cost for a single service. Where there are 
small numbers of claims that are used in median calculation, there is 
more volatility in the median cost from one year to the next. Lastly, 
changes to OPPS payment policy (for example, changes to packaging) also 
contribute to some extent to the fluctuations in the OPPS payment rates 
for the same services from year to year.
    We cannot avoid the naturally occurring volatility in the cost 
report and claims data that hospitals submit and on which the payment 
rates are based. Moreover (with limited exceptions), we reassign HCPCS 
codes to APCs where it is necessary to avoid 2 times violations. 
However, we have made other changes to resolve some of the other 
potential reasons for instability from year to year. Specifically, we 
continue to seek ways to use more claims data so that we have fewer 
APCs for which there are small numbers of single bills used to set the 
APC median costs. Moreover, we have tried to eliminate APCs with very 
small numbers of single bills where we could do so. We recognize that 
changes to payment policies, such as the packaging of payment for 
ancillary and supportive services and the implementation of composite 
APCs, may contribute to volatility in payment rates in the short term, 
but we believe that larger payment packages and bundles should help to 
stabilize payments in future years by enabling us to use more claims 
data and by establishing payments for larger groups of services.
    While we recognize the reasoning behind a policy that would dampen 
both increases and decreases in the weights or payment rates of the 
OPPS, this would not be as simple or beneficial as commenters have 
implied. Implementing such a dampening policy would require the 
assumption that payment policy is static from year to year. Based on 
the commenters' own acknowledgement, and the data used to develop the 
OPPS, we know that this is not true. Further, in seeking to mitigate 
fluctuations in the OPPS, implementing such a system would make 
payments less reflective of the true service costs. Dampening payments 
across all APCs in this way could unfairly harm those hospitals whose 
true cost for a service increases significantly, while inappropriately 
benefiting those hospitals whose true cost for a service decreases 
significantly. While one commenter requested that CMS adopt a policy to 
investigate any APCs that fluctuate above a certain threshold, this 
mandate would be unnecessary since we already examine all APCs that 
experience significant median cost fluctuations, as described in the CY 
2010 OPPS/ASC proposed rule (74 FR 35626 through 35627).
    Comment: Some commenters asked that CMS provide an adjustment for 
medical education costs under the OPPS because many of the costs of 
teaching services are now incurred in the HOPD as services previously 
furnished only in the inpatient setting are now being furnished in the 
HOPD. They also noted that the OPPS did not have a teaching adjustment 
while many of the other Medicare payment systems, such as inpatient, 
psychiatric, and rehabilitation facilities, already include one. These 
commenters stated that CMS indicated that it would study the costs and 
payment differential among different classes of providers in the April 
7, 2000 OPPS final rule but has not done so. They recommended that CMS 
study whether the hospital outpatient costs of teaching hospitals are 
higher than the costs of other hospitals for purposes of determining 
whether there should be a teaching hospital adjustment. The commenters 
explained that analysis of 2007 Medicare cost reports showed that the 
average outpatient margins were -30.4 for major teaching hospitals, -
13.8 for other teaching hospitals, and -14.4 for nonteaching hospitals. 
They believed that these findings demonstrated that the hospital 
outpatient costs of major teaching hospitals are significantly greater 
than the costs of other hospitals. The commenters requested that CMS 
conduct its own analysis and that if that analysis showed a difference 
due to the unique missions of teaching hospitals, CMS should add a 
teaching adjustment to the OPPS.
    Response: Unlike payment under the IPPS, the law does not provide 
for payment for indirect medical education costs to be made under the 
OPPS. Section 1833(t)(2)(E) of the Act states that the Secretary shall 
establish, in a budget neutral manner ``* * * other adjustments as 
determined to be necessary to ensure equitable payments,

[[Page 60365]]

such as adjustments for certain classes of hospitals.'' We have not 
found such an adjustment to be necessary to ensure equitable payments 
to teaching hospitals and, therefore, have not developed such an 
adjustment. Furthermore, in this final rule with comment period, we 
have developed payment weights that we believe provide appropriate and 
adequate payment for the complex medical services, such as new 
technology services and device-dependent procedures, which we 
understand are furnished largely by teaching hospitals. We note that 
teaching hospitals benefit from the recalibration of the APCs in this 
final rule with comment period. The final CY 2010 impacts by class of 
hospital are displayed in Table 73 in section XXI.B. of this final rule 
with comment period.
    After consideration of the public comments we received, we are 
finalizing our proposed CY 2010 methodology for calculating the median 
costs upon which the CY 2010 OPPS payment rates are based, with 
modifications as discussed throughout this section.
    In some cases, APC median costs are calculated using variations of 
the process outlined above. Section II.A.2.d. of this final rule with 
comment period that follows addresses the calculation of single APC 
criteria-based median costs. Section II.A.2.e. of this final rule with 
comment period discusses the calculation of composite APC criteria-
based median costs. Section X.B. of this final rule with comment period 
addresses the methodology for calculating the median cost for partial 
hospitalization services.
    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 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 than 10 percent. In the 
CY 2010 OPPS/ASC proposed rule (74 FR 35267), we indicated that we 
would 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 accepted this recommendation of 
the APC Panel in full.
    At the August 2009 meeting of the APC Panel, we provided the APC 
Panel a list of all APCs fluctuating by more than 10 percent when 
comparing the CY 2010 proposed rule APC median costs to those based on 
CY 2009 final rule data. We found that the median costs for 7 APCs 
decreased by 10 percent or more and the median costs for 63 APCs 
increased by 10 percent or more. These changes occurred due to some of 
the reasons described earlier, including reassignment of HCPCS codes 
from one APC to another to resolve 2 times violations, modeling changes 
such as the removal of lines for codes that were not payable in CY 2008 
under the OPPS payment rules, low volumes of services influencing the 
claims used to determine APC median costs, and updated cost and charge 
information from hospital claims and cost reports. We noted that the 
median costs for 63 APCs increased by 10 percent or more and that the 
reasons for the increases were similar to the reasons for the decreases 
of more than 10 percent but, in general, we found nothing that raised 
concern regarding the data process we used to calculate the proposed 
median costs. The APC Panel discussed the different APCs on the list 
but did not express any significant concern with the fluctuations. As a 
result, they did not make any further recommendations related to the 
list of APCs with median costs fluctuating by greater than 10 percent.
    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 accepted that recommendation. The APC Panel 
further recommended at the August 2009 meeting that the Data 
Subcommittee continue its work. We are accepting this most recent 
recommendation, and 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. 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).
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35267), we proposed 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 proposed 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 stated in 
the CY 2010 OPPS/ASC proposed rule (74 FR 35267) that we believe the 
standard methodology for calculating median costs for device-

[[Page 60366]]

dependent APCs, further refined to exclude claims with the ``FC'' 
modifier, gives us the most appropriate 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 
were calculated using the CY 2010 proposed rule claims data were 
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) demonstrated significant 
fluctuation. Specifically, the proposed CY 2010 median cost for APC 
0225 increased approximately 49 percent compared to the final CY 2009 
median cost, although this APC median cost had declined by 
approximately the same proportion from CY 2008 to CY 2009. The proposed 
CY 2010 median cost for APC 0418, which had decreased approximately 45 
percent from CY 2008 to CY 2009, showed an increase of approximately 56 
percent based on the claims data available for the CY 2010 proposed 
rule. As indicated in the CY 2010 OPPS/ASC proposed rule (74 FR 35267), 
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.
    At the February 2009 meeting of the APC Panel, one presenter stated 
that the assignment of the single-array cranial neurostimulator pulse 
generator 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 pulse generator 
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 pulse generator 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 that 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 pulse generator 
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. The dual-
array cranial neurostimulator pulse generator implantation procedure 
described by CPT code 61886 (Insertion or replacement of cranial 
neurostimulator pulse generator or receiver, direct or inductive 
coupling; with connection to two or more electrode arrays) is currently 
the only procedure assigned to APC 0315.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35267 through 35268), 
we stated that 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 accepted the APC Panel's 
recommendation and, therefore, proposed 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 proposed 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 pulse 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 
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), was approximately $7,464 based on the 
claims data available for the CY 2010 OPPS/ASC proposed rule. This 
proposed median cost was very similar to the proposed median cost of 
approximately $7,852 calculated for APC 0425, which included 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, in the CY 
2010 OPPS/ASC proposed rule, we proposed to consolidate these two APCs 
by reassigning CPT code 27446 to APC 0425, and deleting APC 0681. We 
also noted 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 indicated in the 
CY 2010 OPPS/ASC proposed rule (74 FR 35268) that we believe 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.
    At its August 2009 meeting, the APC Panel heard a joint 
presentation from neurostimulator manufacturers who asserted that CMS' 
proposal to consolidate spinal, peripheral/gastric, and single-array 
cranial neurostimulator pulse generator implantation procedures into a 
single APC does not adequately capture facility resources associated 
with the different types of neurostimulator pulse generators involved 
in these procedures and would undermine access to rechargeable 
neurostimulators. The neurostimulator manufacturers asked the APC Panel 
to recommend to CMS a revised, three-level APC configuration for 
neurostimulator pulse generator implantation procedures that would

[[Page 60367]]

differentiate payment for procedures involving rechargeable and 
nonrechargeable neurostimulators. Following discussion of this request, 
the APC Panel recommended that CMS adopt the two-level neurostimulator 
pulse generator implantation APC configuration proposed by CMS for CY 
2010.
    Comment: Many commenters supported CMS' proposal to continue using 
the standard methodology for calculating median costs for device-
dependent APCs, revised to exclude claims that contain the ``FC'' 
modifier. The commenters stated that the exclusion of partial credit 
claims would result in APC median costs that more appropriately reflect 
true hospital costs. Some commenters also supported the mandatory 
reporting of all HCPCS device C-codes to encourage hospitals to remain 
vigilant in reporting the costs of performing services involving 
devices. The commenters urged CMS to continue educating hospitals on 
the importance of accurate coding for devices, supplies, and other 
technologies to help ensure these items are more appropriately 
reflected in future years' payment rates for outpatient services.
    Some commenters recommended CMS continue examining and refining the 
ratesetting methodology for procedures involving devices in order to 
encourage the continued development and proliferation of new 
technology. The commenters also encouraged CMS to develop mechanisms 
for capturing the costs of devices included on multiple procedure 
claims.
    Response: We appreciate the commenters' support of the standard 
device-dependent APC ratesetting methodology, including our proposal to 
refine the methodology to exclude claims that contain the ``FC'' 
modifier. As we have stated in the past (73 FR 68535 through 68536), we 
agree that accurate reporting of device, supply, and technology charges 
will help to ensure that these items are appropriately accounted for in 
future years' OPPS payment rates. We encourage stakeholders to 
carefully review HCPCS code descriptors, as well as any guidance CMS 
may have provided for specific HCPCS codes. In addition, we have 
provided further instructions on the billing of medical and surgical 
supplies in the October 2008 OPPS update (Transmittal 1599, Change 
Request 6196, dated September 19, 2008) and the April 2009 OPPS update 
(Transmittal 1702, Change Request 6416, dated March 13, 2009). For 
HCPCS codes that are paid under the OPPS, providers may also submit 
inquiries to the AHA Central Office on HCPCS, which serves as a 
clearinghouse on the proper use of Level I HCPCS codes for hospitals 
and certain Level II HCPCS codes for hospitals, physicians, and other 
health professionals. Inquiries must be submitted using the approved 
form, which may be downloaded from the AHA Web site (http://www.ahacentraloffice.org) and either faxed to 312-422-4583 or mailed 
directly to the AHA Central Office: Central Office on HCPCS, American 
Hospital Association, One North Franklin, Floor 29, Chicago, IL 60606.
    We agree with the commenters that we should continue to encourage 
the development and proliferation of new technology under the OPPS. We 
have special mechanisms to provide payment for new technologies and 
services under the OPPS, including new technology APCs and transitional 
pass-through payments for certain devices. We refer readers to sections 
III.C. and IV.A., respectively, of this final rule with comment period 
for more information on these payment methodologies. For all OPPS 
services, we continue our efforts to use the data from as many multiple 
procedure claims as possible, through approaches such as use of the 
bypass list and date splitting of claims as described further in 
section II.A. of this final rule with comment period, and through 
methodologies such as increased packaging and composite APCs. We refer 
readers to section II.A.2.e. of this final rule with comment period for 
a detailed summary of the public comments related to the establishment 
of a composite payment methodology for procedures involving cardiac 
resynchronization therapy defibrillators and pacemakers and our 
responses.
    Comment: Many commenters responded to CMS' proposal to revise the 
APC configuration for neurostimulator pulse generator implantation 
procedures from a three-level structure to a two-level structure. While 
one commenter supported the proposal to combine the single-array 
cranial neurostimulator pulse generator implantation procedure, 
described by CPT code 61885 and used for vagus nerve stimulation, with 
the spinal neurostimulator pulse generator implantation procedure, 
described by CPT code 63685, many commenters argued that the proposed 
two-level configuration for neurostimulator pulse generator 
implantation procedures would threaten patient access to rechargeable 
spinal neurostimulators. These commenters asserted that hospitals may 
be unable to offer rechargeable spinal neurostimulator pulse generators 
at the proposed CY 2010 payment rate for APC 0039, which, according to 
the commenters, is substantially less than the cost of the device and 
the CY 2009 payment rate for the procedure. Some commenters presented 
an analysis of CY 2008 OPPS claims data available for the CY 2010 OPPS/
ASC proposed rule that demonstrated a $4,132 difference in costs for 
spinal neurostimulator pulse generator implantation procedures 
involving rechargeable devices compared to the same procedures 
involving nonrechargeable devices. According to these commenters, this 
difference in cost warrants a separate APC for rechargeable spinal 
neurostimulator pulse generator procedures. They argued that while the 
cost difference does not violate the 2 times rule, it is large enough 
to influence hospitals to choose the lower cost nonrechargeable spinal 
neurostimulator pulse generators instead of the rechargeable devices if 
hospitals receive the same payment for the implantation procedure, 
regardless of the type of technology that is used. Several commenters 
noted that the threat to patient access to rechargeable spinal 
neurostimulators should be of particular concern to CMS, given the 
Agency's past recognition of the technology's ability to reduce the 
need for device replacements and the associated surgical risks, thereby 
reducing costs while providing optimal therapy.
    Some commenters also stated that the consolidation of APC 0039 and 
APC 0222 would result in a disproportionately small number of single 
claims for procedures involving spinal neurostimulator pulse generators 
being used in ratesetting compared to the number of single claims for 
other types of neurostimulator pulse generator implantation procedures 
(specifically, peripheral/gastric and single-array cranial), further 
reducing the payment for these procedures relative to their costs. The 
commenters pointed out that, because spinal neurostimulator pulse 
generator implantation procedures are almost always performed with 
permanent lead placement procedures, rather than being staged as is 
common with other neurostimulator implantation procedures, they are 
typically not captured in the single claims used to calculate the 
median cost for consolidated APC 0039, upon which payment for that APC 
would be based. Many commenters argued that the proposed policy would 
be inconsistent with CMS' rationale in the CY 2008 OPPS/ASC final rule 
with comment period for implementing the current

[[Page 60368]]

APC configuration for neurostimulator pulse generator implantation 
procedures, which places the spinal neurostimulator pulse generator 
implantation procedure in its own APC. According to the commenters, CMS 
implemented a separate APC for this procedure because, unlike other 
neurostimulator pulse generator implantation procedures that involve 
only the less costly nonrechargeable devices, spinal neurostimulator 
pulse generator implantation procedures utilize either the more costly 
rechargeable device or the less costly nonrechargeable device. The 
commenters summarized CMS' assessment in the CY 2008 OPPS/ASC final 
rule with comment period that the placement of the procedure described 
by CPT code 63685 as the only procedure in APC 0222 would enable CMS to 
calculate payment rates for spinal neurostimulator implantation 
procedures that reflect changes in surgical practice based on clinical, 
rather than financial, considerations.
    Many commenters asserted that CMS' proposed APC configuration for 
neurostimulator pulse generator implantation procedures would result in 
APC 0039 being overly broad and clinically heterogeneous. The 
commenters stated that the spinal, peripheral/gastric, and single-array 
cranial neurostimulator pulse generator implantation procedures 
proposed for assignment to APC 0039 are clinically disparate and 
involve widely diverse neurostimulator technologies (including vagus 
nerve stimulators for epilepsy, sacral nerve stimulators for urinary 
incontinence, gastric pacemakers for chronic nausea and vomiting, and 
spinal neurostimulators for chronic neuropathic pain). One commenter 
requested that the CY 2010 proposal for neurostimulator pulse generator 
implantation procedures be reviewed by a pain management physician and 
a certified coder working in pain management.
    According to the commenters, in order to address these concerns, 
CMS should differentiate payment for procedures involving rechargeable 
and nonrechargeable neurostimulators by revising the current (CY 2009) 
three-level APC payment structure for neurostimulator pulse generator 
implantation procedures. The commenters stated that their recommended 
configuration would group peripheral/gastric and spinal neurostimulator 
pulse generator implantation procedures (described by CPT codes 64590 
and 63685, respectively) involving nonrechargeable devices in Level 1; 
single-array cranial neurostimulator pulse generator implantation 
procedures (described by CPT code 61885) involving nonrechargeable 
devices in Level 2; and dual-array cranial neurostimulator pulse 
generator implantation procedures (described by CPT code 61886) and any 
neurostimulator pulse generator implantation procedure involving 
rechargeable devices in Level 3. According to the commenters, this APC 
configuration for neurostimulator pulse generator implantation 
procedures could be implemented by assigning APCs based on the presence 
of HCPCS device C-codes present on claims or through the creation of 
new Level II HCPCS G-codes that would distinguish procedures performed 
to implant nonrechargeable neurostimulator pulse generators from those 
performed to implant rechargeable neurostimulator pulse generators. The 
commenters asserted that CMS has shown a willingness to use alternative 
mapping schemes in the past to differentiate resource costs for 
procedures involving technologies such as drug-eluting coronary stents, 
implantable cardioverter defibrillators (ICDs), and linear accelerator-
based stereotactic radiosurgery (LINAC-SRS), when there are important 
technology and facility resource cost differences that cannot be 
identified through the use of existing CPT codes.
    The commenters urged CMS to maintain the current neurostimulator 
pulse generator implantation APC configuration as adopted in CY 2008 if 
the Agency decides not to implement their recommended three-level 
technology-specific APC configuration, or to create a four-level APC 
configuration in which the existing APC 0039 is split, with one APC for 
single-array cranial neurostimulator pulse generator implantation 
procedures and a separate APC for peripheral/gastric neurostimulator 
pulse generator implantation procedures. According to the commenters, 
either approach would yield more accurate payment rates than CMS' 
proposal for CY 2010.
    Response: We do not agree with the commenters who argued that we 
should not implement our CY 2010 proposal to revise the APC 
configuration of neurostimulator pulse generator implantation 
procedures from a three-level structure to a two-level structure. We 
are finalizing our CY 2010 proposal to reassign CPT code 63685 to APC 
0039, to delete APC 0222, and to maintain the current configuration of 
APC 0315. We believe that the final CY 2010 median costs for the 
neurostimulator pulse generator implantation procedures, described by 
CPT codes 61885, 63685, and 64590, are sufficiently similar to warrant 
their placement in a single APC, as demonstrated in Table 7 below. The 
difference between the procedure with the highest median cost in APC 
0039, described by CPT code 63685, and the procedure with the lowest 
median cost in APC 0039, described by CPT code 64590, is approximately 
$3,000. Even if we were to consider the difference in costs between 
spinal neurostimulator pulse generator implantation procedures 
described by CPT code 63685 when they are performed with a rechargeable 
device compared to when they are performed with a nonrechargeable 
device, estimated by the commenters to be approximately $4,000, the 
grouping of these procedures in the same APC would not violate the 2 
times rule. We also point out that, as demonstrated in Table 7, we use 
a similar number of single claims with each of the CPT codes assigned 
to APC 0039 to calculate the median cost upon which the final CY 2010 
payment rate for APC 0039 is based.
    We do not agree with the commenters that these modest differences 
in costs, either among the various types of neurostimulator pulse 
generator implantation procedures assigned to APC 0039 or among the 
same types of procedures involving rechargeable versus nonrechargeable 
devices, are sufficiently substantial to result in hospitals denying 
access to the limited subset of patients for whom the more expensive 
rechargeable technology is clinically indicated. We note that payment 
based on a measure of central tendency is a principle of any 
prospective payment system. As we have stated in the past (73 FR 
68562), in some individual cases, payment exceeds the average cost, and 
in other cases, payment is less than the average cost. On balance, 
however, payment should approximate the relative cost of the average 
case, recognizing that, as a prospective payment system, the OPPS is a 
system of averages.
    In addition to being similar in terms of resource utilization, we 
believe the procedures described by CPT codes 61885, 63685, and 64590 
are comparable from a clinical perspective because they all involve the 
subcutaneous placement of a neurostimulator pulse generator. We do not 
agree with the commenters who argued that these procedures should be 
considered clinically disparate because they use widely diverse 
technologies for very different clinical indications. It is not 
uncommon under the OPPS to group procedures described by relatively 
general HCPCS codes that

[[Page 60369]]

may utilize a wide variety of technologies and may be performed to 
treat different patient populations in the same APC. Furthermore, as 
stated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
66537), the standard device-dependent APC ratesetting methodology does 
not take into consideration patient diagnoses. In response to the 
commenter who requested that the CY 2010 proposal for neurostimulator 
pulse generator implantation procedures be reviewed by a pain 
management physician and a certified coder working in pain management, 
we note that the CMS staff involved in reviewing the clinical 
characteristics of the APC groups include medical advisors from a 
variety of specialties as well as certified coders.
    We also do not agree that we should not implement the two-level APC 
configuration for neurostimulator pulse generator implantation 
procedures as proposed for CY 2010 because, as argued by some 
commenters, it would be inconsistent with our rationale in the CY 2008 
OPPS/ASC final rule with comment period to maintain a separate APC 
solely for spinal neurostimulator pulse generator implantation 
procedures. It is our standard process under the OPPS to reassess the 
composition of APCs, including reviewing the median costs of individual 
HCPCS codes, annually when we have the most current claims and Medicare 
cost report data, and to propose through our annual rulemaking cycle 
changes that we believe are necessary to maintain and improve the 
clinical and resource homogeneity of APCs based on the updated data. In 
CY 2008, the median costs for the single-array cranial and peripheral/
gastric neurostimulator pulse generator implantation procedures 
described by CPT codes 61885 and 64590 of $12,799 and $10,954, 
respectively, were more divergent from the median cost calculated for 
the spinal neurostimulator pulse generator implantation procedure of 
$15,150 using the CY 2006 claims and cost report data available at that 
time, compared to the median costs for these procedures calculated from 
the CY 2008 claims and cost report data available for this CY 2010 
OPPS/ASC final rule with comment period, as demonstrated in Table 7 
below.
    Finally, we do not agree with the commenters that we should 
differentiate payment for neurostimulator pulse generator implantation 
procedures based on the type of technology that is implanted (that is, 
rechargeable or nonrechargeable), nor do we agree with the commenters 
that past CMS policy to use alternative mapping schemes to 
differentiate resource costs for certain procedures, such as those 
involving drug-eluting stents, ICDs, and LINAC-SRS, serves as a 
precedent to do so. As we have stated in the past (72 FR 66715 through 
66716 and 73 FR 68538), a policy to provide different payments for the 
same procedures according to the types of devices implanted would not 
be consistent with our overall strategy under the OPPS to encourage 
hospitals to use resources more efficiently by increasing the size of 
the payment bundles. The circumstances surrounding the payment policies 
and coding configurations for drug-eluting stents (67 FR 66732 through 
66734), ICDs (72 FR 66702 through 66703), and LINAC-SRS (72 FR 66734 
through 66737) are markedly different from the circumstances 
surrounding neurostimulator pulse generator implantation procedures. We 
developed HCPCS G-codes to distinguish payment for procedures involving 
drug-eluting stents from procedures involving non-drug-eluting stents 
because drug-eluting stents did not meet the criteria for transitional 
pass-through payment or for payment under a New Technology APC. Unlike 
drug-eluting stents, rechargeable spinal neurostimulators were granted 
pass-through status under the OPPS in CY 2006, which lasted until 
December 31, 2007. In the case of ICDs, we created HCPCS G-codes to 
gather cost data on single and dual chamber ICDs, but we did not 
differentiate payment for ICD insertion based on the type of technology 
that was used (72 FR 66703). Finally, our policy to utilize HCPCS G-
codes rather than CPT codes for payment under the OPPS for LINAC-SRS 
treatment delivery services recognizes the vastly different capital 
equipment costs required for various LINAC-SRS services, rather than 
differences in the costs of single-use devices implanted in patients 
during the same procedure.
    Comment: Some commenters disagreed with CMS'' presentation at the 
August 2009 APC Panel meeting of the proposed CY 2010 line-item median 
costs for the two device HCPCS C-codes that describe neurostimulator 
pulse generators, specifically HCPCS code C1767 (Generator, 
neurostimulator (implantable), nonrechargeable) and HCPCS code C1820 
(Generator, neurostimulator (implantable), with rechargeable battery 
and charging system). The commenters disputed the accuracy of the data 
presented by CMS, specifically that the line-item median costs for 
HCPCS codes C1767 and C1820 are $9,606 and $9,636, respectively, based 
on CY 2008 claims available for the CY 2010 OPPS/ASC proposed rule. 
According to the commenters, these line-item median costs are 
inconsistent with the commenters'' analyses of CY 2010 OPPS/ASC 
proposed rule data, which indicated that the line-item median costs for 
HCPCS codes C1767 and C1820 are $10,580 and $13,587, respectively. One 
commenter urged CMS to reanalyze the data and to disregard the APC 
Panel's support of the proposed CY 2010 APC configuration for 
neurostimulator pulse generator implantation procedures if the data 
were found to be erroneous. Another commenter characterized CMS'' 
presentation of the line-item median costs for HCPCS codes C1767 and 
C1820 as incomplete because OPPS payment rates are based upon median 
costs that include all packaged items and services associated with 
providing a procedure as they appear on single claims, and not the 
line-item median costs for individual devices. The commenter asked CMS 
to ensure that all data presented to the APC Panel in the future is 
full and appropriate information for decisionmaking.
    Response: In response to the commenters'' concerns, we reassessed 
our methodology for calculating the proposed CY 2010 line-item median 
costs for HCPCS codes C1767 and C1820 and verified that the information 
presented to the APC Panel is accurate based on the CY 2008 claims data 
available for the CY 2010 OPPS/ASC proposed rule. The line-item 
statistics for these HCPCS codes, along with all other HCPCS codes 
recognized under the OPPS, are released to the public as part of the 
OPPS limited data set. We do not agree with the commenters that the 
presentation of these data was incomplete or inappropriate. We 
frequently consider line-item median costs for devices and other 
packaged items and services as one data element among several when we 
evaluate the clinical and resource homogeneity of APCs, particularly 
when stakeholders voice concerns that the costs of different items are 
driving procedure costs or influencing hospitals'' decisions to provide 
certain services. An advantage of the line-item median costs is that 
they represent data from all OPPS claims, and not just the single 
claims that we are able to use in ratesetting for procedures. 
Therefore, we believe that a comparison of line-item costs is 
particularly appropriate for different types of neurostimulator pulse 
generators because one of the commenters'' concerns was that there are 
relatively few single claims available

[[Page 60370]]

for ratesetting for the implantation of spinal neurostimulator pulse 
generators. We would expect the device costs on multiple procedure 
claims to be reflective of the hospital costs of these neurostimulator 
pulse generators, because commenters stated that multiple procedure 
claims resulted from the most typical spinal neurostimulator 
implantation procedures. Furthermore, we would not expect there to be 
significant packaged costs associated with the neurostimulator pulse 
generators described by these device HCPCS codes. Therefore, we would 
expect the line-item median costs to accurately reflect the 
differential costs of non-rechargeable and rechargeable neurostimulator 
technology. We note that the APC Panel members are well-acquainted with 
the OPPS ratesetting methodology, including the use of single procedure 
claims and not line-item median costs for individual items, to 
calculate the median costs upon which OPPS payment rates are based.

    Table 7--CY 2010 APC Configuration for Payment of Neurostimulator Pulse Generator Implantation Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                  CY 2010    CY 2010    CY 2010
                                 Revised APC     CY 2010     CY 2010 CPT Code     CPT Code   CPT Code     APC
         CY 2010 APC             Title for CY    CPT Code       Descriptor         Median     Single     Median
                                     2010                                           Cost      Claims      Cost
----------------------------------------------------------------------------------------------------------------
0039.........................  Level I              61885  Insertion or            $14,141      1,260    $13,766
                                Implantation                replacement of
                                of Neuro                    cranial
                                stimulator                  neurostimulator
                                Generator.                  pulse generator or
                                                            receiver, direct or
                                                            inductive coupling;
                                                            with connection to
                                                            a single electrode
                                                            array.
                                                    63685  Insertion or             15,802      1,262     13,766
                                                            replacement of
                                                            spinal
                                                            neurostimulator
                                                            pulse generator or
                                                            receiver, direct or
                                                            inductive coupling.
                                                    64590  Insertion or             12,726      1,978     13,766
                                                            replacement of
                                                            peripheral or
                                                            gastric
                                                            neurostimulator
                                                            pulse generator or
                                                            receiver, direct or
                                                            inductive coupling.
----------------------------------------------------------------------------------------------------------------
0315.........................  Level II             61886  Insertion or             18,350      1,004     18,350
                                Implantation                replacement of
                                of Neuro                    cranial
                                stimulator                  neurostimulator
                                Generator.                  pulse generator or
                                                            receiver, direct or
                                                            inductive coupling;
                                                            with connection to
                                                            two or more
                                                            electrode arrays.
----------------------------------------------------------------------------------------------------------------

    Comment: Several commenters expressed support for the proposed CY 
2010 payment rate for the implantation of auditory osseointegrated 
devices, described by CPT codes 69714 (Implantation, osseointegrated 
implant, temporal bone, with percutaneous attachment to external speech 
processor/cochlear stimulator; without mastoidectomy); 69715 
(Implantation, osseointegrated implant, temporal bone, with 
percutaneous attachment to external speech processor/cochlear 
stimulator; with mastoidectomy); 69717 (Replacement (including removal 
of existing device), osseointegrated implant, temporal bone, with 
percutaneous attachment to external speech processor/cochlear 
stimulator; without mastoidectomy); and 69718 (Replacement (including 
removal of existing device), osseointegrated implant, temporal bone, 
with percutaneous attachment to external speech processor/cochlear 
stimulator; with mastoidectomy) and assigned to APC 0425. Other 
commenters, however, stated that the proposed payment rate for APC 0425 
is less than hospitals' device and service-related costs associated 
with the procedures described by these CPT codes and urged CMS to 
consider a slight increase in the payment for APC 0425.
    Response: We agree with the commenters that the payment rate for 
APC 0425, calculated from the standard device-dependent APC ratesetting 
methodology, appropriately reflects hospitals' relative costs for 
providing the procedures assigned to APC 0425 as reported to us in the 
claims and cost report data. We used 1,410 single claims from CY 2008 
to calculate the median cost upon which the final CY 2010 payment rate 
for APC 0425 is based. The final CY 2010 median cost for APC 0425 is 
approximately $7,932, slightly higher than the final CY 2009 median 
cost for APC 0425 of $7,863. We note that we were able to use 
significantly more single claims in ratesetting for APC 0425 for CY 
2010 compared to CY 2009 (1,410 single claims from CY 2008 compared to 
668 single claims from CY 2007). We disagree with the commenters who 
requested an additional increase in the payment rate for APC 0425, 
because this would artificially and inaccurately inflate payment rates. 
A fundamental principle of the OPPS is that it is based on relative 
weights, and as we have stated in the past (73 FR 68541), it is the 
relativity of the costs to one another, rather than absolute cost, that 
is important in setting payment rates. To deviate from our standard 
OPPS ratesetting methodology and increase the payment rates for certain 
procedures beyond their relatives costs as derived from claims and cost 
report data would skew this relativity.
    Comment: Some commenters supported CMS' proposal to reassign CPT 
code 27446 to APC 0425 and to delete APC 0681. Other commenters, 
however, opposed the consolidation of these two APCs, arguing that the 
procedure described by CPT code 27446 is clinically dissimilar from the 
arthroplasty procedures currently assigned to APC 0425. The commenters 
recommended that CMS continue to maintain APC 0681 for CY 2010 and to 
add other total knee arthroplasty procedures to this APC, along with 
the procedure described by CPT code 27446.
    Response: We disagree with the commenters who argued that it is 
necessary to maintain APC 0681 specifically for knee arthroplasty 
procedures because we do not believe it is appropriate to maintain an 
APC that is not necessary to classify services into groups that are 
similar clinically and in terms of resource utilization. We continue to 
believe that CPT code 27446 is most appropriately assigned to APC 0425 
for CY 2010, as we proposed, based on consideration of the procedure's 
clinical and resource characteristics. As described in section XI.B. of 
this final rule with comment

[[Page 60371]]

period, we are not removing any total knee arthroplasty procedures from 
the inpatient list.
    Comment: Several commenters supported the proposed payment rate for 
the implantation of cochlear implants, described by CPT code 69930 
(Cochlear device implantation, with or without mastoidectomy) and 
assigned to APC 0259 (Level VII ENT Procedures). These commenters 
stated that while hospitals' device and service-related costs for these 
procedures likely still exceed the proposed payment rate for APC 0259, 
they represent an improvement in payment relative to CY 2009 that may 
lead to better access to care for Medicare beneficiaries.
    Response: We appreciate the commenters' support of the proposed 
payment rate for APC 0259. We believe that the standard device-
dependent APC ratesetting methodology results in a payment rate that 
reflects hospitals' relative costs for providing the procedure assigned 
to this APC as reported to us in the claims and cost report data.
    Comment: One commenter concurred with CMS' proposal that APC 0385 
(Level I Prosthetic Urological Procedures) and APC 0386 (Level II 
Prosthetic Urological Procedures) continue to be recognized as device-
dependent APCs. The commenter supported CMS' continued application of 
procedure-to-device edits for procedures assigned to these APCs.
    Response: We appreciate the commenter's support of the continued 
recognition of APC 0385 and 0386 as device-dependent APCs. We agree 
that claims processing edits for devices that are integral to the 
performance of procedures assigned to device-dependent APCs are an 
important element of the standard device-dependent APC ratesetting 
methodology.
    Comment: One commenter urged CMS not to reduce the payment for the 
procedure described by CPT code 62361 (Implantation or replacement of 
device for intrathecal or epidural drug infusion; nonprogrammable 
pump), which is assigned to APC 0227 (Implantation of Drug Infusion 
Device). The commenter stated that patient access to this procedure is 
limited due to recent payment cuts.
    Response: The final CY 2010 median cost for APC 0227 of 
approximately $13,268 is approximately 10 percent higher than the 
median cost of $12,006, upon which the final CY 2009 payment rate was 
based, and approximately 13 percent higher than the median cost of 
$11,569, upon which the final CY 2008 payment rate was based. We 
believe that the final CY 2010 median cost for APC 0227 of $13,268, 
which is calculated using the standard device-dependent APC 
methodology, results in a final CY 2010 payment rate that accurately 
and appropriately reflects hospitals'' costs for providing the service 
described by CPT code 62361 and will not result in any barriers to 
patient care.
    In summary, after consideration of the public comments we received, 
we are finalizing our proposed CY 2010 payment policies for device-
dependent APCs, without modification. The CY 2010 OPPS payment rates 
for device-dependent APCs are based on their median costs calculated 
from CY 2008 claims and the most recent cost report data, using only 
claims that pass the device edits, do not contain token charges for 
devices, and do not have a modifier signifying that the device was 
furnished without cost or with full or partial credit. We continue to 
believe that the median costs calculated from the single claims that 
meet these criteria represent the most valid estimated relative costs 
of these services to hospitals when they incur the full cost of the 
devices required to perform the procedures. The CY 2010 device-
dependent APCs are listed in Table 8 below.

                 Table 8--CY 2010 Device-Dependent APCs
------------------------------------------------------------------------
                                  CY 2010 Status
          CY 2010 APC               indicator        CY 2010 APC 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

[[Page 60372]]

 
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 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.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35269), we proposed 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 proposed 
to continue to simulate blood CCRs for each hospital that does not 
report a blood cost center by calculating the ratio of the blood-
specific CCRs to hospitals' overall CCRs for those hospitals that do 
report costs and charges for blood cost centers. We would then apply 
this mean ratio to the overall CCRs of hospitals not reporting costs 
and charges for blood cost centers on their cost reports in order to 
simulate blood-specific CCRs for those hospitals. We calculated the 
median costs upon which the proposed CY 2010 payment rates for blood 
and blood products were based using the actual blood-specific CCR for 
hospitals that reported costs and charges for a blood cost center and a 
hospital-specific simulated blood-specific CCR for hospitals that did 
not report costs and charges for a blood cost center.
    We stated in the CY 2010 OPPS/ASC proposed rule (74 FR 35269) that 
we continue to believe 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 
indicated that we believe 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 
blood products in general.
    Comment: One commenter expressed appreciation for CMS' recognition 
of the complexities of calculating payment rates for blood and blood 
products and the accommodations CMS has made through the blood and 
blood product ratesetting methodology to ensure the calculated rates 
are as fair as possible. However, several commenters stated that the 
proposed payment rates for many blood and blood products are less than 
the costs hospitals incur acquiring, managing, and processing them, and 
that the claims-based cost data for blood and blood products are error-
prone and subject to significant and unexplained fluctuations. They 
noted that the payment decreases for several blood and blood products 
seem inexplicable because prices for blood have been increasing due to 
new technologies and tests required to ensure the continued safety of 
the blood supply and increasingly expensive donor recruitment and 
retention efforts. According to the commenters, a comparison of the 
proposed APC payment changes for blood and blood products to the 
producer price index (PPI) for blood and organ banks, which increased 
3.1 percent from July 2008 to July 2009, indicates that the blood 
product payment rates in the CY 2010 OPPS/ASC proposed rule do not 
reflect overall pricing trends in the blood banking industry. The 
commenters asked CMS to adjust the CY 2010 payment rates for blood and 
blood products by increasing all of the CY 2009 payment rates by 3.1 
percent, or by implementing a 3.1 percent payment floor for CY 2010 
payment rates compared to CY 2009 payment rates for blood and blood 
products. One commenter particularly urged CMS to apply a 3 percent 
minimum increase in payment for the highest volume blood product, 
described by HCPCS code P9016 (Red blood cells, leukocytes reduced, 
each unit). The commenters asserted that the use of the PPI for blood 
and organ banks in calculating hospital payment is not unprecedented. 
They stated that in the CY 2005 OPPS final rule, CMS used the PPI for 
blood and derivatives for human use in calculating the payment rates 
for low-volume blood products. They also pointed out that CMS 
recognized the value of the PPI for blood and organ banks by using it 
to update blood and blood product prices in the market basket under the 
IPPS for CY 2010.
    Response: We continue to believe that using blood-specific CCRs 
applied to hospital claims data results in payments that appropriately 
reflect hospitals' relative costs of providing blood and blood products 
as reported to us by hospitals. We do not believe it is necessary or 
appropriate to use the PPI for blood and organ banks as a benchmark for 
updating the payment rates for blood and blood products from year to 
year, because it is not our standard process under the OPPS for any 
item or service to update payment rates by implementing across-the-
board, product-specific inflation updates to the payment rates that 
were in place the year before. Rather, we annually update

[[Page 60373]]

payment groups and payment weights using the most recently available 
hospital claims and cost report data. This process allows us to 
recalibrate the payment groups and payment weights in response to 
changes in hospitals' costs from year to year. A fundamental principle 
of the OPPS is that it is based on relative weights, and as we have 
stated in the past (73 FR 68541), it is the relativity of the costs to 
one another, rather than absolute cost, that is important in setting 
payment rates. To deviate from our standard OPPS ratesetting 
methodology and update the payment rates for blood and blood products 
by the PPI would skew this relativity.
    We also note that, as discussed in section II.B. of this final rule 
with comment period, we are required by law to update the conversion 
factor used to determine payment rates under the OPPS. For CY 2010, the 
update is equal to the hospital inpatient market basket increase. The 
PPI for blood and organ banks is one of several price proxies used to 
calculate the hospital inpatient market basket (74 FR 43847), which 
represents the change in price over time of the same mix (quantity and 
intensity) of goods and services purchased to provide hospital 
services. In this way, the PPI for blood and blood products is already 
incorporated in the CY 2010 payment rates for blood and blood products.
    Comment: One commenter noted that the proposed CY 2010 median costs 
for several blood and blood products fluctuated significantly relative 
to CY 2009. The commenter expressed concern about potentially large 
payment decreases and noted that, in the past, CMS dampened payment 
decreases for blood and blood products to limit product losses. The 
commenter requested that CMS disclose the source of the fluctuations in 
CY 2010 median costs for blood and blood products and implement a 
dampening policy to mitigate significant payment fluctuations, not only 
for blood and blood products but for all other services.
    Response: As stated previously, we continue to believe that using 
blood-specific CCRs applied to hospital claims data results in payments 
that appropriately reflect hospitals' relative costs of providing blood 
and blood products as reported to us by hospitals. We do not believe it 
is necessary or appropriate to implement a dampening policy to mitigate 
significant payment fluctuations, for blood and blood products or for 
any other items and services payable under the OPPS, as described in 
section II.A.2.c. of this final rule with comment period. As we have 
stated in the past (73 FR 68541), it is our common practice to review 
significant changes in median costs from year to year and from the 
proposed rule to the final rule for a given calendar year. The final CY 
2010 median costs for more than two-thirds of all blood and blood 
products changed by a margin of less than 10 percent compared to the CY 
2009 median costs. Of the remaining blood and blood products, 8 
demonstrated decreases in median costs of greater than 10 percent, and 
5 demonstrated increases in median costs of greater than 10 percent. We 
determined that the fluctuations in median costs for these 13 blood and 
blood products were due to contributions of additional claims, the 
addition or removal of individual hospitals furnishing particular blood 
and blood products, and revised cost report data. For all APCs whose 
payment rates are based upon relative payment weights, we note that the 
quality and accuracy of reported units and charges significantly 
influence the median costs that are the basis for our payment rates, 
especially for low volume items and services. Beyond our standard OPPS 
trimming methodology (described in section II.A.2. of this final rule 
with comment period) that we apply to those claims that have passed 
various types of claims processing edits, it is not our general policy 
to judge the accuracy of hospital coding and charging for purposes of 
ratesetting.
    Comment: One commenter recommended that CMS recognize plasma 
protein fraction (PPF) products as drugs under the OPPS and assign 
status indicator ``K'' (Nonpass-Through Drugs and Nonimplantable 
Biologicals, Including Therapeutic Radiopharmaceuticals) to HCPCS codes 
P9043 (Infusion, plasma protein fraction (human), 5%, 50 ml) and P9048 
(Infusion, plasma protein fraction (human), 5%, 250 ml), rather than 
assigning them status indicator ``R'' (Blood and Blood Products). The 
commenter also requested that CMS instruct providers to use the 
appropriate infusion CPT codes for administration of PPF, rather than 
blood transfusion codes. According to the commenter, PPF is similar 
clinically to albumin in terms of how it is derived and the patients 
for whom it is indicated. The commenter also stated that, according to 
the AABB, both albumin and PPF are blood derivatives that should be 
billed with pharmacy revenue codes. According to the commenter, the 
AABB also indicates that the administration of blood derivatives, 
including PPF, should be billed with injection or infusion CPT codes 
rather than blood transfusion CPT codes.
    Response: We did not propose to change the status indicators for 
the PPF products described by HCPCS codes P9043 and P9048 from ``R'' to 
``K'' for CY 2010. Because changing the status indicators for these 
products as the commenter recommended could have significant payment 
implications, we believe we should not consider such a potential change 
in policy without seeking input from all interested stakeholders 
through our annual rulemaking cycle. Specifically, changing the status 
indicator from ``R'' to ``K'' would require us to calculate the payment 
rates for PPF using mean unit cost from hospital claims, as we 
currently do for albumin products, rather than using our standard 
blood-specific CCR methodology for blood and blood products.
    We last addressed the issue of whether plasma-derived therapies and 
their recombinant analogs should be considered blood and blood products 
for purposes of payment under the OPPS in the CY 2003 OPPS final rule 
with comment period (67 FR 66774) and the CY 2004 OPPS final rule with 
comment period (68 FR 63455). We stated that, because these products 
are highly processed and not manufactured by local blood banks, they do 
not have the same access and safety concerns as other blood and blood 
products. Therefore, we did not consider any plasma-derived products 
and their recombinant analogs, including albumin and immune globulins, 
to fall under the category of blood and blood products (67 FR 66774).
    We are requesting comments on this final rule with comment period 
that address whether PPF should be recognized as a blood and blood 
product, designated with status indicator ``R,'' or as a nonpass-
through drug and biological, designated with status indicator ``K.'' 
Specifically, we are interested in how PPF is derived and manufactured, 
and whether the same access and safety concerns that apply to the blood 
and blood products recognized under the OPPS for payment purposes also 
apply to PPF. Finally, we are interested in the relationship between 
albumin and PPF, from clinical, manufacturing, and safety perspectives, 
and whether there would be a rationale for treating these products 
similarly for payment purposes under the OPPS. We will consider these 
comments as we prepare for the CY 2011 annual rulemaking cycle.
    Comment: One commenter asked if the product ``prepooled 
cryoprecipitate''

[[Page 60374]]

would be added to the list of blood and blood products.
    Response: The existing HCPCS code that describes cryoprecipitate 
products, P9012 (Cryoprecipitate, each unit), is recognized under the 
OPPS for payment purposes as a blood and blood product. We note there 
is an established process in place for requesting a revision to the 
Level II HCPCS codes if stakeholders believe the current codes cannot 
adequately address all clinical circumstances. The Level II HCPCS 
coding system is a comprehensive and standardized system that 
classifies similar products that are medical in nature into categories 
for the purpose of efficient claims processing. The process and 
criteria for revising Level II HCPCS codes is available on the CMS Web 
site at: http://www.cms.hhs.gov/MedHCPCSGenInfo/02_HCPCSCODINGPROCESS.asp#TopOfPage.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to calculate the median 
costs upon which the CY 2010 payment rates for blood and blood products 
are based using the blood-specific CCR methodology that we have 
utilized since CY 2005. We believe that continuing this methodology in 
CY 2010 results 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 final rule with comment 
period for the final CY 2010 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
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35269), we proposed to 
continue with our methodology of differentiating single allergy tests 
(``per test'') from multiple allergy tests (``per visit'') by assigning 
these services to two different APCs to provide accurate payments for 
these tests in CY 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. However, as noted in the 
CY 2010 OPPS/ASC proposed rule (74 FR 35269), our CY 2008 claims data 
available for that proposed rule for APC 0381 did not reflect improved 
and more consistent hospital billing practices of ``per test'' for 
single allergy tests. The median cost of APC 0381, calculated for the 
proposed rule according to the standard single claims OPPS methodology, 
was approximately $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 proposed 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 
proposed CY 2010 median cost for APC 0381 using the ``per unit'' 
methodology was 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).
    We did not receive any public comments on our CY 2010 proposal for 
payment of single allergy tests. Therefore, we are finalizing our CY 
2010 proposal, without modification, to calculate a ``per unit'' median 
cost for APC 0381 as described above in this section. The final CY 2010 
median cost of APC 0381 is approximately $29.
(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 to 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 
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

[[Page 60375]]

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; 93320 (Doppler echocardiography, pulsed wave and/or 
continuous wave with spectral display; complete); and 93325 (Doppler 
echocardiography color flow velocity mapping). Therefore, the service 
described in CY 2009 by new CPT code 93306 was reported in the CY 2008 
data with three CPT codes, specifically CPT codes 93307, 93320, and 
93325. In 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 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 
(73 FR 68542 through 68544), 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 with comment 
period, to signify that they were new codes whose interim final OPPS 
treatment was open to comment on that final rule with comment period.
    The CY 2010 OPPS/ASC proposed rule was the first opportunity to 
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, in the CY 2010 OPPS/ASC proposed rule (74 FR 
35271), we proposed 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 proposed 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 
were 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 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

[[Page 60376]]

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, in the CY 2010 
OPPS/ASC proposed rule (74 FR 35271), we proposed for CY 2010 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 proposed 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 
proposed 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. For our proposed rule analysis, 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 the proposed rule 
(74 FR 35240 through 35241). We treated these modified claims 
containing both CPT codes 93350 and 93017 as a single service and we 
calculated a proposed median cost of approximately $604. Therefore, for 
CY 2010, we proposed to reassign CPT code 93351 to revised APC 0270 
(Level III Echocardiogram without Contrast), which had a proposed APC 
median cost of approximately $596. We proposed to continue to assign 
CPT code 93350 to APC 0269, which had a proposed APC median cost of 
approximately $456, based on its proposed HCPCS code-specific median 
cost of approximately $406 based on approximately 11,000 single claims. 
Furthermore, we proposed 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 in 
the proposed rule data 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 the proposed rule (74 FR 35240 
through 35241), that we modified to treat HCPCS code C8930 and CPT code 
93017 as a single service. We calculated a HCPCS code-specific proposed 
median cost of approximately $706. Therefore, we proposed to continue 
to assign HCPCS code C8930 to APC 0128 with a proposed APC median cost 
of approximately $660. We also proposed to continue to assign HCPCS 
code C8928 to APC 0128, based on its HCPCS code-specific proposed 
median cost of approximately $595 based on approximately 1,000 single 
claims.
    Comment: One commenter on the CY 2009 OPPS/ASC final rule with 
comment period addressed the interim final treatment of new CPT code 
93306 for CY 2009. The commenter requested that CMS not recognize CPT 
code 93306 under the OPPS because this code represents the combination 
of three services already described by existing CPT codes 93307, 93320, 
and 93325. Alternatively, the commenter recommended that CMS could 
instruct hospitals to continue billing CPT codes 93320 and 93325 in 
association with CPT code 93306 in order to encourage consistent 
reporting of services described by CPT codes 93320 and 93325 when they 
are furnished with any echocardiography service. The commenter believed 
that requiring the use of CPT code 93306 may confuse hospitals, as 
other echocardiography services require the separate reporting of CPT 
codes 93320 and 93325 when these additional procedures are performed. 
Because there are already existing codes for the services described by 
CPT code 93306 and hospitals could inappropriately stop reporting CPT 
codes 93320 and 93325 in association with other echocardiography 
services, the commenter requested that CMS not recognize CPT code 93306 
for payment under the OPPS. According to the commenter, under all 
circumstances, hospitals would continue to report CPT code 93320 or CPT 
code 93325 when they are performed with any echocardiography procedure, 
a practice preferred by the commenter. Similarly, the commenter 
recommended that CMS not recognize the corresponding HCPCS code C8929 
that describes CPT code 93306 when furnished with contrast because the 
contrast echocardiography procedure could also be reported using 
existing HCPCS code C8921 and CPT codes 93320 and 93325.
    Response: As is our standard methodology, we review new CPT codes 
annually and assign status indicators to all new codes and provide APC 
assignments, if applicable, for codes that describe services that may 
be performed in the hospital outpatient department (which includes 
provider-based clinics located on and off campus). We consider CPT code 
93306 to be part of the standard CPT code set hospitals use for 
reporting services under the OPPS, and the service described by the 
code is one that we believe could be furnished to a hospital outpatient 
and potentially covered and, therefore, paid by Medicare under the 
OPPS. We incorporated CPT code 93306 in the CY 2009 OPPS/ASC final rule 
with comment period, assigning it a separately payable status indicator 
and APC, consistent with our belief that the service described by this 
code could be appropriately reported by hospitals when they furnish the 
service in the HOPD. Furthermore, as described in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68543), we used a special cost 
estimation methodology to estimate the expected cost of CPT code 93306 
based on hospital claims data for the individual predecessor codes in 
order to inform our interim final assignment of CPT code 93306 to a 
clinical APC for CY 2009.

[[Page 60377]]

    Regarding the commenter's alternative suggestion that we instruct 
hospitals to continue to report CPT codes 93320 and 93325 when 
performed in association with the procedure described by CPT code 
93306, we will not instruct hospitals to continue to report CPT codes 
93320 and 93325 when billing for CPT code 93306 because CPT code 93306 
incorporates the services described by CPT codes 93320 and 93325 in its 
code descriptor. Billing separately for these services when reporting 
CPT 93306 would not be consistent with correct coding principles and 
could create greater confusion and unnecessary burden for hospitals. 
Whenever possible, hospitals have repeatedly encouraged us to follow 
standard coding guidelines in order to reduce their administrative 
burden in reporting services differently for Medicare, and our 
recognition of CPT code 93306 for payment under the OPPS is consistent 
with hospitals' general request to us.
    Finally, as we are continuing to instruct hospitals to use CPT code 
93306 for CY 2010, it continues to be appropriate for hospitals to bill 
using HCPCS code C8929 when furnishing the service described by CPT 
code 93306 with contrast. In the case of CPT code 93306 and other CPT 
codes for echocardiography services, we have developed parallel HCPCS 
C-codes to report each procedure when furnished with contrast in order 
to provide payment through separate APCs for those echocardiography 
services furnished with and without contrast.
    Comment: Several commenters on the CY 2010 OPPS/ASC proposed rule 
expressed support for the revisions to the echocardiography APCs 
included in the CY 2010 OPPS/ASC proposed rule. One commenter noted 
appreciation for the proposed reassignment of CPT code 93351 from APC 
0269 to APC 0270. However, one commenter on the CY 2009 OPPS/ASC final 
rule with comment period suggested that the new CY 2009 CPT code 93351 
should not be recognized for payment under the OPPS. The commenter 
reasoned that the comprehensive service described by CPT code 93351 is 
comprised of two services previously reported with CPT codes 93350 and 
93015: CPT code 93015 includes physician supervision and 
interpretation, which are not hospital outpatient services; and CPT 
code 93015 is reported by nonhospital practitioners and is not 
recognized for payment under the OPPS.
    In addition, a commenter on the CY 2010 OPPS/ASC proposed rule 
stated that a more appropriate treatment of CPT code 93351 under the 
OPPS would be to not recognize this code for payment under the OPPS 
but, rather, to continue to recognize for payment several existing CPT 
codes which, when reported in combination, would describe the service 
that would otherwise be reported with CPT code 93351 alone. The 
commenter believed that CPT code 93351 was created specifically for 
services performed in nonfacility settings and that the intent of the 
CPT Editorial Committee was to limit the use of the code to nonfacility 
settings only. The commenter stated that correspondence from CMS 
indicated that CPT code 93351 would be billable only when provided in a 
physician's office or independent laboratory settings.
    Response: As is our standard methodology, we review new CPT codes 
annually and assign status indicators to all new codes and provide APC 
assignments, if applicable, for codes that describe services that may 
be performed in the HOPD (which includes provider-based clinics located 
on and off campus). The CPT code descriptor for CPT code 93351 makes no 
mention that the code is restricted from use in the HOPD, or that its 
use is limited to nonfacility settings. Further, there are no 
additional CPT instructions that would limit the reporting of CPT code 
93351 to nonfacility or nonhospital settings. We consider this CPT code 
to be part of the standard CPT code set hospitals use for reporting 
services under the OPPS, and the service described by the code is one 
that we believe could be furnished to a hospital outpatient and 
potentially covered and, therefore, paid by Medicare under the OPPS. 
CPT code 93351 describes a service that would previously have been 
reported with CPT codes 93350 and 93017 under the OPPS. While the 
commenter was correct that we do not recognize CPT code 93015 for 
payment under the OPPS, a code that describes a cardiovascular stress 
test with interpretation and report, we do recognize CPT code 93017, 
which describes the tracing only for the cardiovascular stress test. We 
incorporated CPT code 93351 in the CY 2009 OPPS/ASC final rule with 
comment period, assigning it a separately payable status indicator and 
APC, consistent with our belief that the service described by this code 
could be appropriately reported by hospitals when they furnish the 
service in the HOPD. Furthermore, we established professional component 
(PC) and technical component (TC) payments under the MPFS for CPT code 
93351, also consistent with our belief that the CPT code may be 
reported for services in facility settings, such as independent 
laboratory settings. We have communicated no information to the public 
that states that Medicare hospital outpatient payment would not be made 
if this CPT code were reported by a hospital for services furnished to 
hospital outpatients.
    We proposed a methodology for identifying the hospital outpatient 
claims and isolating the hospital charges that would be associated with 
this procedure for CY 2010 in order to develop an appropriate hospital 
outpatient payment for the associated facility resources for the 
existing services that would be reported and paid under the new CPT 
code. Specifically, we proposed to use claims that contain both CPT 
codes 93350 and 93017 to simulate the median cost for CPT code 93351 
and proposed to reassign CPT code 93351 from APC 0269 to revised APC 
0270 for CY 2010 based on its simulated median cost. We continue to 
believe that this CPT code may be reported for OPPS services described 
by the code, and that our proposed CY 2010 cost estimation methodology 
accurately simulates a median cost for this new code that reflects the 
associated hospital resources for the component services that are newly 
described by this single CPT code.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to reassign CPT 
code 93351 to APC 0270 based on a simulated CPT-specific median cost 
identified from over 80,000 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, as discussed above. We calculated a final CPT-
specific median cost of approximately $605 for CPT code 93351 and a 
final CY 2010 APC median cost for APC 0270 of approximately $591.
    Comment: One commenter on the CY 2009 OPPS/ASC final rule with 
comment period requested that CMS delete 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) as the services

[[Page 60378]]

described by this code could be reported using CPT code 93017 
(Cardiovascular stress test using maximal or submaximal treadmill or 
bicycle exercise, continuous electrocardiographic monitoring, and/or 
pharmacological stress; tracing only, without interpretation and 
report) and 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).
    Response: As described above, we are continuing to recognize the 
service described by CPT code 99351, which is the noncontrast 
echocardiography procedure that is parallel to HCPCS code C8930 for the 
same procedures provided with contrast. As previously noted, we have 
developed parallel HCPCS C-codes to report each echocardiography 
procedure when furnished with contrast in order to provide payment 
through separate APCs for those echocardiography services furnished 
with and without contrast. While we understand that the service 
reported under HCPCS code C8930 may be reported using a combination of 
a CPT code and a HCPCS C-code, we do not believe that this would be 
appropriate because the noncontrast echocardiography service is 
reported with a single CPT code. Hospitals are generally instructed to 
use the HCPCS code that most appropriately and specifically describes 
the service that was provided, including not unbundling component 
services that could otherwise be separately reported. In this instance, 
HCPCS code C8930 would be the most specific code that describes the 
full service provided when the component services that would otherwise 
be reported by CPT code 93017 and HCPCS code C8928 are provided 
together. Our CY 2010 ratesetting methodology for HCPCS code C8928 is 
based on claims data and specifically excludes those cases when the 
service was furnished along with the procedure described by CPT code 
93017. On the other hand, our CY 2010 ratesetting methodology for HCPCS 
code C8930 specifically includes cases where the services described by 
HCPCS code C8928 and CPT code 93017 were provided together. In that 
way, we are able to base CY 2010 payment for all of these services on 
their actual or simulated hospital costs in the context of the CPT and 
HCPCS C-codes that will be reported in CY 2010.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
recognize HCPCS code C8930 for OPPS payment. For CY 2010, HCPCS code 
C8930 continues to be assigned to APC 0128, with a final CY 2010 APC 
median cost of approximately $645.
    Comment: One commenter on the CY 2009 OPPS/ASC final rule with 
comment period requested that CMS not recognize CPT code 93352 (Use of 
echocardiographic contrast agent during stress echocardiography), as 
the OPPS has already developed Level II HCPCS C-codes to identify 
echocardiography procedures performed with contrast.
    Response: During our review of CPT code 93352 for the CY 2009 OPPS/
ASC final rule with comment period, we assigned an interim final status 
indicator ``M'' (Not paid under the OPPS) to CPT code 93352 for CY 
2009. In our CY 2010 OPPS/ASC proposed rule, we proposed to continue 
this status indicator assignment for CY 2010.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to assign status 
indicator ``M'' to CPT code 93352.
    Comment: A few commenters requested that CPT code 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) not be reassigned to APC 0269 as 
proposed for CY 2010. Instead, these commenters requested that CPT code 
93318 continue to be assigned to APC 0270 for CY 2010. Commenters 
stated that CPT code 93318 is clinically similar to CPT code 93312 
(Echocardiography, transesophageal, real time with image documentation 
(2D) (with or without M-mode recording); including probe placement, 
image acquisition, interpretation and report), and because CPT code 
93312 is assigned to APC 0270, CPT code 93318 should be assigned to APC 
0270 as well. While these commenters noted that the reassignment of CPT 
code 93318 to APC 0269 would be most consistent with its CPT-specific 
median cost presented in the proposed rule, they stated that the 
unexplained volatility in the cost of CPT code 93318 suggests that 
clinical homogeneity should be the deciding factor when assigning this 
service to an APC.
    Response: As is our standard process, for the CY 2010 proposed 
rule, we reviewed each APC for clinical cohesiveness and resource 
homogeneity. As the commenters noted, we proposed to reassign CPT code 
93318 to APC 0269 as we believed that the proposed CPT-specific median 
cost more closely matched the median cost of APC 0269. While we 
continue to believe that the CPT-specific median cost of CPT 93318 
(approximately $472) closely resembles the median cost of APC 0269 
(approximately $447), upon further review, we agree with the commenter 
that the clinical characteristics of the procedure described by CPT 
code 93318 are similar to the procedure described by CPT code 93312. We 
also note that we have only 344 single and 593 total claims for CPT 
code 93318 from only 188 providers in comparison to 29,987 single and 
52,342 total claims for CPT code 93312 from 2,093 providers. We believe 
the limited claims data from relatively few providers contribute to the 
variability in cost observed for CPT code 93318 and agree with the 
commenters that this procedure should remain assigned to APC 0270 for 
CY 2010.
    After consideration of the public comments we received, we are not 
finalizing our proposal to reassign CPT code 93318 to APC 0269. 
Instead, for CY 2010, we are continuing to assign CPT code 93318 to APC 
0270, with a final CY 2010 APC median cost of approximately $591.
    Comment: Several commenters supported the continuation of separate 
APCs for payment of echocardiography procedures with contrast and 
without contrast. While these commenters were generally supportive of 
the proposed ratesetting methodology, they were concerned that the 
proposed payment rate for APC 0128 of approximately $683 was 
insufficient to cover the costs associated with providing the 
echocardiogram and the related contrast materials and services for 
HCPCS codes C8921 (Transthoracic echocardiography with contrast, or 
without contrast followed by with contrast, for congenital cardiac 
anomalies; complete); C8925 (Transesophageal echocardiography (TEE) 
with contrast, or without contrast followed by with contrast, real time 
with image documentation (2D) (with or without M-mode recording); 
including probe placement, image acquisition, interpretation and 
report); C8926 (Transesophageal echocardiography (TEE) with contrast, 
or without contrast followed by with contrast, for congenital cardiac 
anomalies; including probe

[[Page 60379]]

placement, image acquisition, interpretation and report); and 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). Specifically, the commenters noted that 
the noncontrast equivalent procedures (described by CPT codes 93303, 
93312, 93315, and 93351) were all proposed for assignment to APC 0270, 
with a proposed payment rate of approximately $600. The commenters 
believed that the difference between the proposed payment rate for 
these procedures with contrast and without contrast is too small to 
cover the cost of the contrast material used in these procedures. The 
commenters suggested that CMS reassign HCPCS codes C8921, C8925, C8926, 
and C8930 to a new APC for echocardiography procedures performed with 
contrast or that CMS provide separate payment for the contrast material 
used in these procedures.
    Response: The final payment differential between APC 0270, where 
CPT codes 99303, 99312, 99315, and 99351 are assigned, and APC 0128, 
where the corresponding HCPCS codes for the same procedures with 
contrast (HCPCS codes C8921, C8925, C8926, and C8930) are assigned, is 
the difference between approximately $645 and approximately $591 of 
$54. We believe this differential provides an appropriate higher 
payment to those hospitals that furnish these procedures with contrast 
and appropriately accounts for the cost of the contrast material, which 
is required for all of the services assigned to APC 0128. HCPCS codes 
C8921, C8925, C8926, and C8930 have median costs that range from a low 
of approximately $178 to a high of approximately $712. Each of these 
HCPCS codes was reported by fewer than 170 providers in CY 2008. The 
median costs of these services span most of the range of median costs 
of HCPCS codes assigned to APC 0128, and they do not form a cluster of 
high cost procedures in the APC such that they would warrant assignment 
to a new clinical APC. In contrast, the median costs of CPT codes 
99303, 99312, 99315, and 99351 span a much narrower range, from a low 
of approximately $505 to a high of approximately $605. Two of these CPT 
codes were reported by more than 1,500 providers in CY 2008. Clearly, 
fewer providers are reporting the echocardiogram procedures with 
contrast, and we expect that the hospital cost distribution for that 
subset of hospitals could be different than the cost distribution of 
the large number of providers reporting the procedures without 
contrast. Therefore, no conclusions can be drawn about the aggregate 
OPPS payment to that subset of hospitals for all of their 
echocardiogram services in comparison to the aggregate echocardiogram 
costs of the subset of hospitals specifically based on the payment 
rates for APCs 0128 and 0270. The OPPS is a prospective payment system 
that relies on hospital charge and cost report data from the hospitals 
that furnish the services in order to determine relative costs. 
Therefore, we believe that our prospective payment rates calculated 
based on the costs of those providers furnishing the procedures in CY 
2008 provide appropriate payment to the providers that will furnish the 
services in CY 2010.
    In summary, after consideration of the public comments we received, 
we are finalizing our CY 2010 proposals for payment of echocardiography 
procedures with and without contrast, with modifications. We are 
finalizing our proposed methodologies for simulating the median costs 
of CPT codes 93306, 93307, 93351, and 93350 for which there are no CY 
2008 hospital claims data for these specific CPT codes, as discussed 
above. In addition, we are finalizing our proposed methodologies for 
simulating the median costs of HCPCS codes C8929, C8923, C8930, and 
C8928 for which there are no CY 2008 hospital claims data for these 
specific HCPCS codes, as discussed above. We are not finalizing our 
proposal to reassign CPT code 93318 to APC 0269; instead, we are 
maintaining the assignment of CPT code 93318 to APC 0270 for CY 2010. 
Finally, we are finalizing our proposal to assign HCPCS codes C8921, 
C8925, C8926, and C8930 to APC 0128 for CY 2010.
    Table 9 below shows CY 2010 CPT codes for billing echocardiography 
services without contrast, their final 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 final APC assignments for CY 2010.
BILLING CODE 4120-01-P

[[Page 60380]]

[GRAPHIC] [TIFF OMITTED] TR20NO09.022


[[Page 60381]]


[GRAPHIC] [TIFF OMITTED] TR20NO09.023


[[Page 60382]]


[GRAPHIC] [TIFF OMITTED] TR20NO09.024


[[Page 60383]]


[GRAPHIC] [TIFF OMITTED] TR20NO09.025

BILLING CODE 4120-01-C
    Finally, in the CY 2010 OPPS/ASC proposed rule (74 FR 35275), for 
CY 2010, based upon our proposed APC configurations, we also proposed 
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 proposed to rename APCs 0269, 0270, and 0697 
as described in Table 7 of the proposed rule.
    Comment: One commenter supported the proposed revisions to the 
echocardiography APC titles and configurations.
    Response: We appreciate the support for our proposal.
    We are finalizing our proposal to rename APCs 0269, 0270, and 0697 
without modification. Therefore, we are adopting as final the titles of 
these APCs as reflected in Table 10 below:

                 Table 10--CY 2010 Echocardiography APCs
------------------------------------------------------------------------
                                                         Final CY 2010
     Final CY 2010 APC          CY 2010 APC title       approximate APC
                                                          median cost
------------------------------------------------------------------------
0128......................  Echocardiogram With                     $645
                             Contrast.
0269......................  Level II Echocardiogram                  447
                             Without Contrast.

[[Page 60384]]

 
0270......................  Level III Echocardiogram                 591
                             Without Contrast.
0697......................  Level I Echocardiogram                   262
                             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 the proposed rule (74 FR 
35287) and this final rule with comment period, 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 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 CY 2008, 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 final rule with 
comment period.
    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 
radiopharmaceuticals appearing with

[[Page 60385]]

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 stated in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35277) that we are accepting the APC Panel's 
recommendation and would provide additional data to the APC Panel at an 
upcoming meeting. We did not share additional data related to 
diagnostic radiopharmaceuticals with the APC Panel at the most recent 
August 2009 meeting because we believe the APC Panel's discussions 
would benefit from analyses of an additional year of claims data after 
CY 2008. Therefore, we plan to incorporate analysis of CY 2009 claims 
into the information we will present to the APC Panel for its review at 
the winter 2010 meeting.
    At the February 2009 meeting of the APC Panel, the Panel commended 
CMS for its effort to date to tailor the resource-based APC system to 
facilitate appropriate payment for diagnostic and therapeutic 
radiopharmaceuticals. The APC Panel recommended that CMS continue its 
dialogue with professional societies, vendors, and other stakeholders 
to improve the accuracy of APC payments for these complex items and 
services, including consideration of developing composite APCs. We 
appreciate the support of the APC Panel, and we are accepting the APC 
Panel's recommendation to continue to communicate with interested 
stakeholders regarding payment for radiopharmaceuticals and the 
associated procedures. We regularly accept meetings from interested 
parties throughout the year, and we encourage stakeholders to continue 
a dialogue with us during the rulemaking cycle and throughout the year. 
Our response to the APC Panel's recommendation regarding composite APCs 
is included in our response to the public comments summarized below.
    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 data 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.
    Comment: A number of commenters opposed CMS' proposed policy to 
package payment for all diagnostic radiopharmaceuticals into payment 
for their associated nuclear medicine procedures. They noted that the 
majority of diagnostic radiopharmaceuticals are not interchangeable 
and, for that reason, CMS' policy of packaging payment for all 
diagnostic radiopharmaceuticals into their associated nuclear medicine 
procedures does not foster hospital efficiencies. Some commenters 
expressed concern that packaging diagnostic radiopharmaceuticals into 
payment for associated nuclear medicine procedures results in 
overpayment of many procedures, especially those using existing low-
cost radiopharmaceuticals, while the bundled payment would be 
insufficient for newer, and likely more expensive, 
radiopharmaceuticals.
    In addition, the commenters requested that, if CMS continues to

[[Page 60386]]

package payment for diagnostic radiopharmaceuticals into payment for 
their associated nuclear medicine procedures, CMS revise the nuclear 
medicine APCs to provide differential payments for nuclear medicine 
procedures when used with different radiopharmaceuticals. Several 
commenters identified the series of tumor/infection imaging APCs, 
including APCs 0406 (Level I Tumor/Infection Imaging), 0408 (Level III 
Tumor/Infection Imaging), and 0414 (Level II Tumor/Infection Imaging), 
for CMS' attention to ensure appropriate payment for low volume, high 
cost radiopharmaceuticals. One commenter specifically suggested a 
composite APC for certain combinations of a tumor imaging scan and 
specific diagnostic radiopharmaceuticals.
    Several commenters noted that there is wide variation in the costs 
of diagnostic radiopharmaceuticals, and that composite APCs for 
specific combinations of procedures and diagnostic radiopharmaceuticals 
would be necessary to ensure adequate payment to hospitals using 
expensive diagnostic radiopharmaceuticals. Other commenters suggested 
that the significant clinical and resource diversity of 
radiopharmaceuticals packaged into nuclear imaging procedures amounted 
to a violation of the 2 times rule. The commenters explained that, just 
as diagnostic radiopharmaceuticals are not interchangeable, certain 
radiopharmaceuticals are indicated for particular types of diseases, 
such as cancer, and are not clinically similar to other 
radiopharmaceuticals used for other purposes, such as tumor imaging.
    Response: As we discussed in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68547), we understand that the selection of a 
diagnostic radiopharmaceutical for a particular nuclear medicine 
procedure is a complex decision based on many factors, including 
patient-specific factors, and that not every diagnostic 
radiopharmaceutical is fully interchangeable with others. However, as 
stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66617) and in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68546), we believe that nonspecific packaging (as opposed to 
selected code packaging) based on combinations of items and services 
observed on hospital claims is fully appropriate because of the myriad 
combinations of items and services that can be appropriately provided 
together. Under the OPPS, we package payment for ancillary, supportive, 
and interrelated items and services into payment for the independent 
services they accompany. As we discuss in section II.A.4. of this final 
rule with comment period, packaging promotes hospital efficiencies 
through numerous means, not only just through the choice of which 
radiopharmaceutical to use for a specific nuclear medicine scan. While 
all diagnostic radiopharmaceuticals may not be interchangeable, we 
believe that packaging the costs of diagnostic radiopharmaceuticals, 
however differential those costs may be, into the payment for nuclear 
medicine services that use these products is appropriate, whether there 
is one product or multiple products that could be used to furnish the 
particular service provided to an individual patient. The OPPS has a 
history of packaging items that are not necessarily interchangeable. It 
is our longstanding practice to package payment for nonpass-through 
implantable medical devices into payment for the procedure in which 
they are used, notwithstanding that there may be different devices or 
combinations of devices that could be used to furnish a service. (For a 
more complete discussion of the history of packaging items, we refer 
readers to the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66639).) Therefore, in accordance with our understanding that a 
diagnostic radiopharmaceutical is never provided without an 
accompanying nuclear medicine scan, we believe that it is appropriate 
to package the payment for all diagnostic radiopharmaceuticals into the 
payment for the associated nuclear medicine procedure.
    With regard to suggested composites or other revisions designed to 
isolate specific nuclear medicine scans with a subset of diagnostic 
radiopharmaceuticals, as we discussed in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68546), we do not believe that the 
inability to substitute one diagnostic radiopharmaceutical for another 
is a compelling reason for creating composite APCs, as explained below. 
We developed composite APCs to provide a single payment for two or more 
services that are typically performed together during a single clinical 
encounter and that result in the provision of a complete service. 
Composite APCs differ from packaging. Composite APCs provide a single 
payment for specific combinations of independent services that would 
otherwise be separately payable if they were not provided together, 
while packaging entails associating the cost of ancillary, supportive, 
and interrelated services and supplies with a distinct service or 
composite service. Composite APCs are intended to expand the OPPS 
payment bundles to encourage hospital efficiencies. Providing a single 
payment for a specific combination of a diagnostic radiopharmaceutical 
with a particular nuclear medicine procedure would not constitute a 
composite APC and would provide no incentives for hospital efficiency. 
Specifically, a diagnostic radiopharmaceutical would never be 
separately payable under the OPPS when furnished alone, so the 
combination of a diagnostic radiopharmaceutical and a nuclear medicine 
procedure would not meet the definition of a composite APC as described 
above. From the perspective of value-based purchasing, we see no 
benefit to paying for many individual diagnostic radiopharmaceutical 
and nuclear medicine procedure combinations over paying separately for 
both the item and service, beyond an appearance of bundling. Such an 
approach would add complexity to ratesetting and would create 
challenges and cost instability because payments would be based on data 
from small numbers of claims for certain HCPCS code pairs. As noted 
above, there are many items and services that we package under the OPPS 
that are similarly not interchangeable with other related items and 
services. Therefore, we are not accepting the APC Panel's 
recommendation to explore developing composite APCs for diagnostic 
radiopharmaceuticals and nuclear medicine procedures.
    We understand that, by packaging payment for a range of products 
such as diagnostic radiopharmaceuticals, payment for the associated 
nuclear medicine procedure may be more or less than the hospital's cost 
for these services in a given case. As stated in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66639) and the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68546), we note that a 
fundamental characteristic of a prospective payment system is that 
payment is to be set at an average for the service which, by 
definition, means that some services are paid more or less than the 
average.
    We discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66640) and the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68546) the issue of variability in radiopharmaceutical costs or 
other packaged costs creating potential 2 times violations. We note 
that 2 times violations are specific to the total cost of the primary 
service, nuclear medicine

[[Page 60387]]

scans in this case, including packaged costs. We have performed our 
standard review of the APCs using updated CY 2008 claims data for this 
final rule with comment period and, as a result, have not identified 
any 2 times violations in the APCs containing nuclear medicine 
procedures, when calculated as described above. (For more information 
on the 2 times rule, we refer readers to sections III.B.2. and III.B.3. 
of this final rule with comment period.)
    Comment: Several commenters expressed concern that CMS was relying 
on edits in the claims processing system in order to identify those 
claims that would be used for CY 2010 ratesetting purposes. These 
commenters suggested that CMS continue to require a diagnostic 
radiopharmaceutical in order to use a nuclear medicine claim for 
ratesetting purposes for at least another 2 years in order to ensure 
that the claims editing process is working properly and that all 
hospital costs are reflected in the median costs of nuclear medicine 
procedures.
    One commenter noted that CMS' methodology for setting payment rates 
for nuclear medicine services may be flawed. This commenter contended 
that CMS should not solely rely on the claims processing edits in order 
to determine which claims are to be used for ratesetting purposes. The 
commenter suggested that, even though CMS is using claims that have 
passed the nuclear medicine-to-radiolabeled product edits, CMS' 
ratesetting methodology may exclude the cost of diagnostic 
radiopharmaceuticals when calculating median costs for associated 
nuclear medicine procedures. Specifically, the commenter stated that 
the program logic that creates ``pseudo'' single procedure claims may 
separate a nuclear medicine scan and the associated diagnostic 
radiopharmaceutical when the diagnostic radiopharmaceutical appears on 
a different day and, therefore, CMS would not package the cost of the 
diagnostic radiopharmaceutical when setting the median cost for the 
nuclear medicine procedure. The commenter added that CMS' ratesetting 
methodology for ``pseudo'' single procedure claims relies on the date 
of service to identify associated packaged costs. Therefore, the 
commenter requested that CMS use only single and ``pseudo'' single 
nuclear medicine procedure claims that also contain a diagnostic 
radiopharmaceutical in order to set payment rates for nuclear medicine 
procedures. More specifically, several commenters requested that CMS 
not reassign CPT code 78803 (Radiopharmaceutical localization of tumor 
or distribution of radiopharmaceutical agent(s); tomographic (SPECT)) 
to APC 0414 (Level II Tumor/Infection Imaging) as proposed, but instead 
assign CPT code 78803 to APC 0408 (Level III Tumor/Infection Imaging). 
One commenter believed that the use of ``pseudo'' single procedure 
claims to calculate payment rates may have neglected to include the 
cost of the radiopharmaceutical or other scans that may have been 
performed on other dates of service and reported on other claims.
    Response: As we indicated in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 42669), we are aware that several diagnostic 
radiopharmaceuticals may be used for multiple day studies; that is, a 
particular diagnostic radiopharmaceutical may be administered on one 
day and a related diagnostic nuclear medicine procedure may be 
performed on a subsequent day. While we understand that multiple-day 
episodes for diagnostic radiopharmaceuticals and the related diagnostic 
nuclear medicine procedures occur, we found the occurrence of nuclear 
medicine scans on a different date of service to be a small proportion 
of all diagnostic nuclear medicine imaging procedures appearing with 
the radiopharmaceutical. Specifically, our analysis at that time 
indicated that, roughly, 15 diagnostic radiopharmaceuticals have a 
half-life longer than one day such that they could support diagnostic 
nuclear medicine scans on different days. Excluding the 5 percent of 
diagnostic radiopharmaceutical claims that had no matching diagnostic 
nuclear medicine scan for the same beneficiary, we found that a 
diagnostic nuclear medicine scan was reported on the same day as a 
coded diagnostic radiopharmaceutical 90 percent or more of the time for 
10 of these 15 diagnostic radiopharmaceuticals. Further, we found that 
between 80 and 90 percent of single bills for each of the remaining 5 
diagnostic radiopharmaceuticals had a diagnostic nuclear medicine scan 
on the same day.
    Moreover, as the commenter noted, the potential separation of a 
diagnostic radiopharmaceutical and the associated nuclear medicine 
procedure would only be relevant to the ``pseudo'' single procedure 
claims. In the ``natural'' single bills we use for ratesetting, we 
package costs across dates of service. Overall, in examining the CY 
2008 claims data available for this final rule with comment period, we 
observed that ``natural'' single claims constituted a majority of all 
single procedure claims used to calculate median costs for APCs with 
nuclear medicine procedures. Further, we acknowledge that we expect to 
lose packaged costs on a small proportion of claims when we create 
``pseudo'' single procedure claims by splitting claims based on dates 
of service. This is an inevitable consequence of the ``pseudo'' single 
procedure claim creation process. We believe that the tradeoff is a 
minor one given the significant benefit of additional claims data, and 
the vast majority of commenters generally supported our ``pseudo'' 
single procedure claim methodology. Finally, we note that the nuclear 
medicine procedure-to-radiolabeled product I/OCE claims processing 
edits (http://www.cms.hhs.gov/HospitalOutpatientPPS/02_device_procedure.asp) to which the commenters referred include therapeutic 
radiopharmaceuticals and brachytherapy sources. Claims that pass these 
claims processing edits and enter into the ratesetting methodology 
without a diagnostic radiopharmaceutical reported on the claim are 
factored into ratesetting for nuclear medicine procedures as we do not 
expect that every nuclear medicine procedure would be billed with a 
diagnostic radiopharmaceutical, although we do expect each to be billed 
with a radiolabeled product. We note that the only time that we would 
not expect a nuclear medicine procedure to be billed with a 
radiolabeled product on an outpatient claim would be in the rare 
circumstance where a therapeutic radiopharmaceutical is provided in an 
inpatient setting and a nuclear medicine procedure associated with this 
radiopharmaceutical is subsequently furnished in the HOPD. In this 
specific circumstance, we would expect that hospitals would bill HCPCS 
code C9898 (Radiolabeled product provided during a hospital inpatient 
stay) in place of the radiolabeled product. Nuclear medicine scans are 
sometimes performed after the application of brachytherapy sources or 
the provision of a therapeutic radiopharmaceutical and in these cases 
the administration of an additional source of radioactivity (a 
diagnostic radiopharmaceutical) may not be required. While 
brachytherapy sources and therapeutic radiopharmaceuticals would be 
paid separately under the OPPS, we believe it is appropriate for us to 
include the costs of the scans that include a brachytherapy source or 
therapeutic radiopharmaceutical (or where a therapeutic 
radiopharmaceutical used for the scan was furnished to an inpatient) 
but lack a diagnostic radiopharmaceutical in

[[Page 60388]]

calculating the median cost of the nuclear medicine procedure because 
these claims represent the hospital costs for the scans furnished under 
these circumstances. We previously discussed this issue in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68647 through 68648).
    We believe that the single and ``pseudo'' single procedure claims 
resulting from our standard ratesetting methodology accurately capture 
the cost of providing nuclear medicine scans under a variety of 
clinical scenarios for several reasons discussed above and summarized 
again here. First, previous analyses demonstrated that a significant 
percentage of nuclear medicine procedures are reported on the same day 
as diagnostic radiopharmaceuticals with an extended half-life and, in 
these cases, our ratesetting methodology would capture these diagnostic 
radiopharmaceutical costs. We acknowledge that diagnostic 
radiopharmaceuticals with an extended half-life may be administered on 
a different day than the performance of the accompanying nuclear 
medicine scan. However, administration of the diagnostic 
radiopharmaceutical on a different day does not mean that these costs 
are not captured in our APC median costs for nuclear medicine 
procedures. The majority of the single procedure claims that we use to 
estimate APC median cost for APCs with nuclear medicine scans are 
``natural'' single procedure claims that package all identified 
packaged costs (including diagnostic radiopharmaceuticals) into the 
nuclear medicine procedures, irrespective of the dates of service. 
While our standard ratesetting methodology also relies on ``pseudo'' 
single procedure claims that, by definition, represent only a single 
service date and potentially eliminate the cost of a packaged 
diagnostic radiopharmaceutical with an extended half-life billed on a 
different date of service than the nuclear medicine scan, the potential 
to ignore packaged costs on other dates of service is true for all 
procedures for which we use ``pseudo'' single procedure claims in 
ratesetting. This small loss of packaging is a tradeoff in adopting our 
methodology for breaking down multiple procedure claims through the 
bypass process, as discussed in section II.A.1.b. of this final rule 
with comment period. Finally, not all claims for nuclear medicine 
procedures should include a diagnostic radiopharmaceutical because they 
may include another type of radiolabeled product (such as a 
brachytherapy source or therapeutic radiopharmaceutical), and these 
additional radiolabeled products are not packaged. In short, we believe 
that, overall, the single procedure claims for nuclear medicine scans, 
both ``natural'' and ``pseudo'' single procedure claims, together 
appropriately represent the full cost of providing various nuclear 
medicine procedures and result in accurate APC median costs. Therefore, 
our standard OPPS ratesetting methodology of using median costs 
calculated from claims data according to our standard methodology from 
those claims that passed the I/OCE claims processing edits adequately 
captures the costs of diagnostic radiopharmaceuticals associated with 
diagnostic nuclear medicine procedures that are not provided on the 
same date of service.
    Specifically with regard to our proposed reassignment of CPT code 
78803, with a CPT code-specific median cost of approximately $561, to 
APC 0414, with an APC median cost of approximately $506, we note that 
we have almost 3,000 single claims upon with the median cost of CPT 
code 78803 is based. This CPT code-specific median cost is 
significantly lower than the median cost of APC 0408 of approximately 
$954, the APC assignment requested by the commenters and the highest 
level APC in the tumor/infection imaging series. Therefore, we believe 
the most appropriate CY 2010 APC assignment for CPT code 78803 is APC 
0414, as we proposed for CY 2010. As stated above, we believe that our 
standard ratesetting methodology adequately incorporates the packaged 
diagnostic radiopharmaceutical costs associated with nuclear medicine 
procedures, including the procedure described by CPT code 78803.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to package the 
costs of all diagnostic radiopharmaceuticals into payment for the 
associated nuclear medicine procedures utilizing our standard OPPS 
ratesetting methodology that is applied to claims that passed the 
nuclear medicine procedure-to-radiolabeled product I/OCE claims 
processing edits in CY 2008. We also are finalizing our CY 2010 
proposal, without modification, to reassign CPT code 78003 to APC 0414, 
with an APC median cost of approximately $506.
    Comment: A number of commenters cited concerns regarding the 
proposed APC assignments and proposed payment rates for a number of 
nuclear medicine procedures. These commenters believed that the 
proposed APC assignments of certain nuclear medicine procedures led to 
clinically diverse procedures being grouped together for payment 
purposes.
    Specifically, one commenter requested that: (1) CPT code 78645 
(Cerebrospinal fluid flow, imaging (not including introduction of 
material); shunt evaluation) be reassigned from APC 0403 (Level I 
Nervous System Imaging) to APC 0402 (Level II Nervous System Imaging); 
(2) CPT code 78608 (Brain imaging, positron emission tomography (PET); 
metabolic evaluation) be reassigned from APC 0308 (Non-Myocardial 
Positron Emission Tomography (PET) Imaging) to a more appropriate APC; 
and (3) CPT codes 78000 (Thyroid uptake; single determination) and 
78001 (Thyroid uptake; multiple determinations) be reassigned from APC 
0389 (Level I Non-imaging Nuclear Medicine) to APC 0392 (Level II Non-
Imaging Nuclear Medicine).
    Response: We have performed our annual review of all the procedures 
and APC groupings for this final rule with comment period based on 
updated CY 2008 claims data. The CPT code-specific median cost of CPT 
code 78645 is approximately $246 based on 434 single claims, which is 
reasonably close to the median cost of APC 0403 of approximately $195, 
where we proposed to assign the service. The commenter recommended 
assignment of CPT code 78645 to APC 0402, in the same nervous system 
imaging series, with a significantly higher APC median cost of 
approximately $573. Based on this review of the costs and clinical 
characteristics of other services assigned to these nervous system 
imaging APCs, we continue to believe CPT code 78645 is most 
appropriately assigned to APC 0403 as we proposed.
    There is a single APC for nonmyocardial PET scans, APC 0308, with 
an APC median cost of approximately $1,028. The median costs of all CPT 
codes assigned to that APC, including CPT codes for positron emission 
tomography (PET) scans and PET/computed tomography (CT) scans and CPT 
code 78608 for a metabolic evaluation of the brain using PET range from 
approximately $849 to $1,093, demonstrating very significant resource 
similarity across all of these procedures. Therefore, we do not agree 
with the commenter that the proposed configuration of APC 0308 should 
be modified because all of these nonmyocardial services that use PET 
technology demonstrate very similar costs and share clinical similarity 
as well.

[[Page 60389]]

    With regard to the thyroid scans described by CPT codes 78000 and 
78001, these procedures have CPT code-specific median costs of 
approximately $91 and $121 based on 1,167 and 982 single claims, 
respectively. The CPT code-specific median costs of these two 
procedures are very close to the median cost of APC 0389 of 
approximately $112, where we proposed to assign them for CY 2010. CPT 
codes 78000 and 78001 are the only services assigned to this APC with 
significant volume, and the APC median cost is mostly a reflection of 
the costs of procedures reported with two codes. In contrast, the 
median cost of APC 0392, their recommended placement according to the 
commenter, is approximately $179, substantially greater than the median 
costs of the two thyroid studies. Furthermore, if we were to reassign 
CPT codes 78000 and 78001 to APC 0392 as the commenter suggested, the 
median cost of APC 0392 would decrease to reflect the costs of these 
two procedures because, based on number of single claims for CPT codes 
78000 and 78001, their costs would significantly affect the median cost 
of the APC. Therefore, we do not believe any changes to the proposed 
APC assignments of CPT codes 78000 or 78001 are justified.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposals, without modification, to assign CPT 
code 78645 to APC 0403, CPT code 79608 to APC 0308, CPT code 78000 to 
APC 0389, and CPT code 78001 to APC 0389. The approximate APC median 
costs of these APCs are as follows: APC 0403 at $195; APC 0308 at 
$1,028; and APC 0389 at $112.
    Comment: A few commenters requested that CMS not reassign CPT code 
78807 (Radiopharmaceutical localization of inflammatory process; 
tomographic (SPECT)) to APC 0406 (Level I Tumor/Infection Imaging) as 
proposed. These commenters noted that CPT code 78807 is more clinically 
similar to CPT codes 78805 (Radiopharmaceutical localization of 
inflammatory process; limited area) and 78806 (Radiopharmaceutical 
localization of inflammatory process; whole body) that are assigned to 
APC 0414. Therefore, the commenters requested that CMS continue to 
assign CPT code 78807 to APC 0414 for CY 2010.
    Response: We proposed to assign CPT code 78807, with a CPT code-
specific median cost of approximately $371 based on 251 single claims, 
to APC 0406, with an APC median cost of approximately $287. The 
significant individual services included in APC 0406 have a range of 
median costs, from approximately $232 to approximately $371. APC 0406 
includes a number of tumor or infection imaging nuclear medicine 
procedures. Comparatively, APC 0414, where the commenters requested 
that we assign CPT code 78807, has an APC median cost of approximately 
$506 and includes significant services with CPT code-specific median 
costs from approximately $382 to approximately $561. CPT codes 78805 
and 78806 are both assigned to APC 0414 and have CPT code-specific 
median costs of approximately $477 and $538, respectively, 
significantly higher than the median cost of CPT code 78807. Therefore, 
we do not believe that there is a reason to assign CPT code 78807 to 
APC 0414, which principally includes services with significantly higher 
median costs than CPT code 78807. We note that CPT code 78807 is a 
SPECT scan to localize an inflammatory process, while the other two 
codes do not describe services that use SPECT technology. Therefore, we 
do not believe that CPT code 78807 is sufficiently similar to CPT codes 
78805 and 78806 from clinical or resource perspectives to warrant 
assignment to the mid-level tumor/infection imaging APC along with the 
other two services.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to assign CPT 
code 78807 to APC 0406, with an APC median cost of approximately $287.
    Comment: Several commenters requested that CMS: (1) Not reassign 
CPT code 78610 (Brain imaging, vascular flow only) to APC 0403 as 
proposed but instead assign CPT code 78610 to APC 0402; (2) not 
reassign CPT code 78601 (Brain imaging, less than 4 static views; with 
vascular flow) to APC 0402 as proposed but instead assign CPT code 
78601 to APC 0403; and (3) not reassign CPT code 78003 
(Radiopharmaceutical localization of tumor or distribution of 
radiopharmaceutical agent(s); tomographic (SPECT)) to APC 0389 as 
proposed but instead assign CPT code 78003 to APC 0392.
    Response: We proposed to assign CPT code 78610, with a CPT-specific 
median cost of approximately $211, to APC 0403, with an APC median cost 
of approximately $195. The significant services included in APC 0403 
have a range of median costs, from approximately $156 to approximately 
$246. Comparatively, APC 0402, where the commenters requested that we 
assign CPT code 78610, has an APC median cost of approximately $573 and 
includes significant services with CPT code-specific median costs from 
approximately $540 to approximately $587. We do not believe that 
reassignment of CPT code 78610 to APC 0402 would be appropriate, given 
the procedure's relatively low median cost, although we recognize that 
we have few claims for the procedures. We continue to believe that 
payment for the resources required to provide CPT code 78610 is 
appropriately reflected through the procedure's assignment to APC 0403.
    We proposed to assign CPT code 78601, with a CPT code-specific 
median cost of approximately $436, to APC 0402 with an APC median cost 
of approximately $573. The significant services included in APC 0402 
have a range of median costs from approximately $540 to approximately 
$587. Comparatively, APC 0403, where the commenters requested that we 
assign CPT code 78601, has an APC median cost of approximately $195 and 
includes significant services with CPT code-specific median costs 
ranging from approximately $156 to approximately $246. Although we have 
few claims for CPT code 78601, we continue to believe it is most 
appropriately assigned to APC 0402 for CY 2010.
    We proposed to assign CPT code 78003, with a CPT code-specific 
median cost of approximately $82, to APC 0389 with an APC median cost 
of approximately $112. There are two services included in APC 0389 that 
have a significant volume, CPT codes 78000 and 78001. These two CPT 
codes both have higher CPT code-specific median costs than CPT code 
78003, approximately $91 and $121, respectively. Comparatively, APC 
0392, where the commenters requested that we assign CPT code 78003, has 
an APC median cost of approximately $179. Based on its median cost, we 
continue to believe that the resources required for CPT code 78003 are 
appropriately reflected through its assignment to APC 0389.
    Comment: A few commenters expressed their appreciation that the CY 
2010 OPPS/ASC proposed rule included a proposed increase in payment for 
PET services compared to CY 2009 payment rates. These commenters also 
noted their concerns that hospital claims data for PET services are not 
predictable and that volatile data over the last several years may 
limit access to PET services. Some commenters urged CMS to use external 
data when setting payment rates for these services, while others 
suggested that CMS continue to monitor data to ensure that payment for 
these services is sufficient to cover the hospital costs for these 
resources.

[[Page 60390]]

    Response: As we stated in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68547), while we utilized external data in the 
early years of the OPPS for ratesetting for a few services, we now rely 
on the cost data from claims as the system has matured and we have 
gained additional experience in ratesetting for HOPD services. The 
foundation of a system of relative weights like the OPPS is the 
relativity of the costs of all services to one another, as derived from 
a standardized system that uses standardized inputs and a consistent 
methodology. Further, the OPPS is a prospective payment system that 
relies on hospital charges and cost report data from the hospitals that 
furnish the services in order to determine relative costs. Therefore, 
we believe that our prospective payment rates, calculated based on the 
costs of those providers furnishing the procedures in CY 2008, provide 
appropriate payment to the providers who will furnish the services in 
CY 2010. We continue to believe that this standard ratesetting 
methodology accurately provides payment for PET services provided to 
hospital outpatients.
    In summary, after consideration of the public comments we received, 
we are finalizing our CY 2010 proposals, without modification, for the 
configuration of nuclear medicine APCs. The final CY 2010 median costs 
for these APCs, as proposed, are calculated according to the standard 
OPPS ratesetting methodology as applied to claims for nuclear medicine 
procedures that passed the CY 2008 nuclear medicine procedure-to-
radiolabeled product I/OCE claims processing edits. These edits ensure 
that the claims that are taken through our standard ratesetting 
process, as described in section II.A.2.b. of this final rule with 
comment period, that incorporates the creation of ``natural'' single 
and ``pseudo'' single claims, include the radiolabeled product 
necessary for the performance of the associated nuclear medicine 
procedure.
(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. In the CY 2010 OPPS/ASC proposed rule (74 FR 35277), we proposed 
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.
    We did not receive any public comments on our proposal to continue 
to use our established ratesetting methodology for calculating the 
median cost of APC 0659 for payment of HBOT. Therefore, we are 
finalizing, without modification, our CY 2010 proposal to continue to 
use our established ratesetting methodology for calculating the median 
cost of APC 0659 for payment of HBOT, with a final CY 2010 median cost 
of approximately $106.
    (7) Payment for Ancillary Outpatient Services When Patient Expires 
(-CA Modifier)
    In the November 1, 2002 final rule with comment period (67 FR 
66798), we discussed the creation of the new HCPCS CA modifier to 
address situations where a procedure on the OPPS inpatient list must be 
performed to resuscitate or stabilize a patient (whose status is that 
of an outpatient) with an emergent, life-threatening condition, and the 
patient dies before being admitted as an inpatient. In Transmittal A-
02-129, issued on January 3, 2003, we instructed hospitals on the use 
of this modifier. For a complete description of the history of the 
policy and 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).
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35277 through 35278), 
we proposed 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 proposed to calculate the relative payment 
weight for APC 0375 by using all claims reporting a status indicator 
``C'' procedure appended with the -CA modifier, using estimated costs 
from claims data for line-items with a HCPCS code assigned status 
indicator ``G,'' ``H,'' ``K,'' ``N,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' 
``S,'' ``T,'' ``U,'' ``V,'' and ``X'' and charges for packaged revenue 
codes without a HCPCS code. We continue to believe that this 
methodology results in the most appropriate aggregate median cost for 
the ancillary services provided in these unusual clinical situations.
    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 relatively stable over the past few 
years. Although the median cost for APC 0375 has increased, the median 
in the CY 2008 data used for development of rates for CY 2010 was only 
slightly higher than that 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 of 
the proposed rule (74 FR 35278) showed the number of claims and the 
proposed median costs for APC 0375 for CYs 2007, 2008, and 2009. For CY 
2010, we proposed a median cost for APC 0375 of approximately $5,784.
    We did not receive any public comments regarding this proposal. 
Therefore, we are finalizing our CY 2010 proposal, without 
modification, to continue to use our established ratesetting 
methodology for calculating the median cost of APC 0375, which has a 
final CY 2010 APC median cost of approximately $5,911.

[[Page 60391]]

    Table 11 below shows the number of claims and the final median cost 
for APC 0375 from CY 2007 to CY 2010.

 Table 11--Claims for Ancillary Outpatient Services When Patient Expires
                   (-CA Modifier) for CYs 2007 to 2010
------------------------------------------------------------------------
                                             Number of      APC median
        Prospective payment year              claims           cost
------------------------------------------------------------------------
CY 2007.................................             260          $3,549
CY 2008.................................             183           4,945
CY 2009.................................             168           5,545
CY 2010.................................             182           5,911
------------------------------------------------------------------------

e. Calculation of Composite APC Criteria-Based Median Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide only necessary, high quality care 
and to provide that care as efficiently as possible. For CY 2008, we 
developed composite APCs to provide a single payment for groups of 
services that are typically performed together during a single clinical 
encounter and that result in the provision of a complete service. 
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, in the CY 2010 OPPS/ASC proposed rule, 
we did not propose 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, in the CY 2010 OPPS proposed rule (74 FR 35278 through 35279) 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 noted that the proposed median 
costs for these composite APCs for CY 2010 were higher than the median 
costs upon which the CY 2009 payments were based. We believe that, in 
part, this is because we used more claims data for common clinical 
scenarios to calculate the median costs of these APCs than we were able 
to use 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 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.
    At its February 2009 meeting, the APC Panel recommended that CMS 
evaluate the implications of creating composite APCs for cardiac 
resynchronization therapy (CRT) services with a defibrillator or 
pacemaker and report its findings to the APC Panel. The APC Panel also 
recommended at its August 2009 meeting that CMS reconsider creating a 
new composite APC or group of composite APCs for CRT procedures. While 
we did not propose any new composite APCs for CY 2010, we are accepting 
both of these APC Panel recommendations. We will reconsider creating 
composite APCs for CRT services and evaluate the implications of such a 
potential policy change, 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.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35279), we proposed to 
continue for CY 2010 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

[[Page 60392]]

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 final rule with comment period.
    Comment: Several commenters supported the development and 
implementation of the composite APC methodology, remarking that it is 
consistent with the principles of a prospective payment system and 
provides more appropriate payment rates through the use of multiple 
procedure claims for certain services. Many of these commenters also 
supported CMS' decision to monitor the existing composite APCs' effects 
on beneficiary access, utilization, and payment for at least another 
year before implementing additional composite APCs.
    Other commenters, however, expressed disappointment that CMS did 
not propose additional composite APCs for CY 2010 in order to improve 
OPPS payment accuracy and include more correctly coded, multiple 
procedure claims in ratesetting. Some commenters recommended the 
development of composite APCs for nuclear medicine tumor or infection 
imaging services that encompass multiple days and multiple procedures, 
with separate payment for the associated diagnostic 
radiopharmaceuticals.
    In addition, many commenters supported the development of composite 
APCs for CRT with defibrillator (CRT-D) or pacemaker (CRT-P) 
implantation. They indicated that the procedures involved in the 
implantation of CRT-D and CRT-P are separately payable services that, 
if coded correctly, are always represented by the submission of two CPT 
codes. According to the commenters, the number of single procedure CRT 
claims available for CY 2010 ratesetting is very low compared to the 
total number of claims submitted for CRT-D and CRT-P procedures. They 
argued that the establishment of a composite APC methodology for CRT-D 
and CRT-P would greatly increase the number of claims used in 
ratesetting, thereby lessening the year-to-year fluctuations in payment 
rates for CRT. The commenters also stated that the APC Panel advised 
CMS to use its discretion in forming one or a group of composite APCs 
for CRT without the need to report back to the APC Panel. They urged 
CMS to take this advice and move forward with the composite APC 
methodology for CRT-D and CRT-P for CY 2010.
    Response: We appreciate the commenters' support of the composite 
APC methodology. As stated in the CY 2010 OPPS/ASC proposed rule (74 FR 
35279), 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 or implementing new composite APCs. We recognize the concerns 
expressed with respect to our CY 2009 proposal 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 claims 
for common clinical scenarios 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 continue to believe that it is in the best interest 
of hospitals and the continuing refinement of the OPPS that we not 
implement any new composite APC policies for at least one year.
    As previously stated, we are accepting the recommendation made by 
the APC Panel at its August 2009 meeting that we reconsider creating a 
new composite APC or group of composite APCs for CRT-D and CRT-P 
procedures. We will evaluate the implications of such a potential 
policy change and report our findings to the APC Panel at a future 
meeting. We note that, while the APC Panel did recommend we reconsider 
creating a new composite APC or group of composite APCs for CRT-D and 
CRT-P, the Panel did not specify that we should move forward with the 
composite APC methodology for CRT-D and CRT-P for CY 2010 without first 
reporting back to the APC Panel, as some commenters indicated. We do 
not believe it would be appropriate to implement new composite APCs for 
CRT-D and CRT-P procedures for CY 2010 because neither we nor the 
public have had the opportunity to evaluate fully all of the 
implications of such a potential policy change, which may require 
complex claims processing logic or new claims processing edits and may 
have significant, unanticipated effects on the payment rates of other 
services. We also note that the total volume of claims that would 
qualify for a CRT-P composite APC in particular would be very low; in 
the past, we have explored composite APCs only for combinations of 
services that are commonly performed together (73 FR 68551). Because of 
the complex issues for these procedures with significant device costs, 
we believe that it is particularly important that the APC Panel and the 
public, through the annual rulemaking cycle, have the opportunity to 
comment on the development of composite APCs for CRT-D and CRT-P 
procedures.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, 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 
final rule with comment period.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
    In the CY 2010 OPPS/SC proposed rule (74 FR 35279 through 35280), 
we proposed to continue to include composite APC 8002 (Level I Extended 
Assessment and Management Composite) and composite APC 8003 (Level II 
Extended Assessment and Management Composite) in the OPPS. For CY 2008, 
we created these two 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 for observation services 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 through 66649), 
the Integrated Outpatient Code Editor

[[Page 60393]]

(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 did not propose 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 did not propose 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 accepted this 
recommendation and issued clarifying guidance in the Claims Processing 
Manual through Transmittal 1745, Change Request 6492, issued May 22, 
2009 and implemented July 6, 2009.
    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 CY 2008 OPPS/ASC final rule with comment period (72 FR 66648), 
we expect to carefully monitor any changes in billing practices on a 
service-specific and hospital-specific level to determine whether there 
is reason to request that Quality Improvement Organizations (QIOs) 
review the quality of care furnished, or to request that Benefit 
Integrity contractors or other contractors review the claims against 
the medical record.
    When we compared total payments for all visits appearing with 
observation services in CY 2007 to payments in CY 2008, using claims 
processed through September 30 in CY 2007 and CY 2008, we observed a 37 
percent increase in total payments. 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 
concluded that, although the volume of visits billed with HCPCS code 
G0378 increased between CY 2007 and CY 2008, the overall pattern of 
billing visit levels did not change significantly. We stated that we 
will continue to carefully monitor any changes in billing practices on 
a service-specific and hospital-specific level.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35280), we proposed to 
continue for CY 2010 the extended assessment and management composite 
APC payment methodology for APCs 8002 and 8003. As stated earlier, we 
also proposed to continue the general reporting requirements for 
observation services reported with HCPCS code G0378. We continue to 
believe that the composite APCs 8002 and 8003 and related policies 
provide the most appropriate means of paying for these services. We 
proposed to calculate the median costs for APCs 8002 and 8003 using all 
single and ``pseudo'' single procedure claims for CY 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.E. of the CY 2010 OPPS/ASC 
proposed rule (74 FR 35370 through 35371) and section XII.E. of this 
final rule with comment period for a full discussion of our proposed 
revision of the code descriptor for HCPCS code G0379 and the final 
policy 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

[[Page 60394]]

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 CY 2009 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 CY 2010 median costs. The proposed CY 
2010 median cost resulting from this process for composite APC 8002 was 
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 was 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 section IX. of the CY 2010 OPPS/ASC 
proposed rule (74 FR 35350) and this final rule with comment period, 
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 0630), we utilize our 
methodology that excludes those claims for visits that are eligible for 
payment through the two extended assessment and management composite 
APCs, that is APC 8002 or APC 8003. We believe that this approach 
results in the most accurate cost estimates for APCs 0604 through 0617 
and 0626 through 0630 for CY 2010.
    At the August 2009 meeting of the APC Panel, the APC Panel 
recommended that CMS provide the Visits and Observation Subcommittee 
with an analysis of calendar year 2009 claims data for clinic, ED (Type 
A and B), and extended assessment and management composite APCs at the 
next meeting of the APC Panel. The APC Panel also recommended that CMS 
provide the Visits and Observation Subcommittee with continued analyses 
of observation services, as previously provided to the APC Panel, 
including data on frequency, length of stay, and common diagnoses, as 
well as recovery audit contractor (RAC) data on these subjects if 
available. Furthermore, the APC Panel recommended that CMS provide the 
Visits and Observation Subcommittee with analyses of the most common 
diagnoses and services associated with Type A and Type B ED visits at 
the next meeting of the APC Panel, including analysis by hospital-
specific characteristics. Finally, the APC Panel recommended that the 
work of the Visits and Observation Subcommittee continue. We accept all 
of these recommendations and will present the available requested data 
at the winter 2010 meeting of the APC Panel.
    In summary, in the CY 2010 OPPS/ASC proposed rule (74 FR 35279 
through 35280), we proposed to continue to include for CY 2010 
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 proposed to continue the extended 
assessment and management composite APC payment methodology and 
criteria that we finalized for CY 2009. We also proposed 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 did not propose to change the reporting 
requirements for observation services for the CY 2010 OPPS. However, in 
CY 2009 we did issue further clarifying guidance in the Medicare Claims 
Processing Manual related to observation start time.
    Comment: Several commenters expressed appreciation for CMS' 
issuance of clarifying guidance for reporting the beginning and ending 
times of observation services.
    Response: We appreciate these comments and note again that the 
guidance was issued in the Claims Processing Manual through Transmittal 
1745, Change Request 6492, issued May 22, 2009, and implemented July 6, 
2009.
    Comment: Several commenters requested clarification of the 
reporting of observation services in relation to maternity care paid 
under another payer's policies and in relation to changes in patient 
status from inpatient to outpatient using Condition Code 44. One 
commenter pointed out that references to ``observation status'' versus 
``inpatient admission'' are potentially confusing for beneficiaries and 
physicians.
    Response: Each of these comments/questions is outside of the scope 
of the proposals in the CY 2010 OPPS/ASC proposed rule. However, we 
will consider the possibility of addressing these concerns through 
other available mechanisms, as appropriate. We note that we have 
continued to emphasize that observation care is a hospital outpatient 
service, ordered by a physician and reported with a HCPCS code, like 
any other outpatient service. It is not a patient status for Medicare 
purposes.
    After consideration of the public comments we received, we are 
finalizing, without modification, our CY 2010 proposal to continue to 
include composite APC 8002 and composite APC 8003 in the OPPS and to 
continue the extended assessment and management composite APC payment 
methodology and criteria that we finalized for CY 2009. We also are 
calculating 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. The final CY 2010 median 
cost resulting from this methodology for composite APC 8002 is 
approximately $378, which was calculated from 17,074 single and 
``pseudo'' single bills that met the required criteria. The final CY 
2010 median cost for composite APC 8003 is approximately $699, which 
was calculated from 176,226 single and ``pseudo'' single bills that met 
the required criteria.
(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

[[Page 60395]]

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.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35281), we proposed 
for CY 2010 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 proposed 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 proposed not to 
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 the CY 2010 
OPPS/ASC 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 was based. The 
proposed median cost for composite APC 8001 for CY 2010 was 
approximately $3,106. This was 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 $2,967 based on a 
full year of CY 2007 claims data. The CY 2010 proposed median cost for 
this composite APC was 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 stated in the CY 2010 OPPS/ASC proposed rule (74 
FR 35281) that 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, would result in a reasonable and 
appropriate payment rate for this service in CY 2010.
    Comment: Several commenters requested changes to the bypass list 
that could potentially affect the number of claims used to calculate 
the median costs upon which payments for several APCs involving 
radiation oncology services, including APC 8001, are based. In 
particular, some commenters requested CMS add CPT code 77470 (Special 
treatment procedure (eg, total body irradiation, hemibody radiation, 
per oral, endocavitary or intraoperative cone irradiation)), CPT code 
77328 (Brachytherapy isodose plan; complex (multiplane isodose plan, 
volume implant calculations, over 10 sources/ribbons used, special 
spatial reconstruction, remote afterloading brachytherapy, over 12 
sources), and CPT code 77295 (Therapeutic radiology simulation-aided 
field setting; 3-dimensional) to the bypass list in order to utilize 
more single claims in calculating the median costs of APC 8001 and 
other APCs for radiation oncology services. According to one 
commenter's analysis, the addition of these CPT codes to the bypass 
list would result in a 17 percent increase in the median cost for APC 
8001.
    Response: As discussed in detail in section II.A.1.b. of this final 
rule with comment period, we are not adding CPT codes 77470, 77328, and 
77295 to the list of bypass codes for CY 2010 ratesetting, but we are 
adding several other CPT codes for radiation oncology services. The 
addition of these codes to the bypass list results in a modest increase 
in the number of single claims used to calculate the median cost upon 
which the final payment rate for CY 2010 for APC 8001 is based, but 
does not result in a significant increase or decrease in the median 
cost itself.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to continue 
paying for LDR prostate brachytherapy services using the composite APC 
methodology implemented in CY 2008. We were able to use 906 claims that 
contained both CPT codes 77778 and 55875 to calculate the median cost 
upon which the CY 2010 final payment for composite APC 8001 is based. 
The final median cost for composite APC 8001 for CY 2010 is 
approximately $3,084. We note that this is slightly less than $3,303, 
the approximate sum of the median costs for APC 0163 and APC 0651 
($2,418 + $885), the APCs to which CPT codes 55875 and 77778 map if one 
service is billed on a claim without the other. These CPT codes are 
assigned status indicator ``Q3'' in Addendum B to this final rule with 
comment period to identify their status as potentially payable through 
a composite APC. Their composite APC assignment is identified in 
Addendum M to this final rule with comment period.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 
(APC 8000)
    Cardiac electrophysiologic evaluation and ablation services 
frequently are performed in varying combinations with one another 
during a single episode-of-care in the hospital outpatient setting. 
Therefore, correctly coded claims for these services often include 
multiple codes for component services that are reported with different 
CPT codes and that, prior to CY 2008, were always paid separately 
through different APCs (specifically, APC 0085 (Level II 
Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm 
Focus),

[[Page 60396]]

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 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.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35282), we proposed to 
continue for CY 2010 to pay 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 proposed not to 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 would 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 the 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 was 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 
stated in the CY 2010 OPPS/ASC proposed rule (74 FR 35282) that we 
believe the proposed median cost of $10,105 calculated from a high 
volume of correctly coded multiple procedure claims would result 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 of the CY 2010 OPPS/ASC proposed 
rule (74 FR 35282) listed the groups of procedures upon which we 
proposed to base composite APC 8000 for CY 2010.
    Comment: Several commenters supported CMS' proposal to continue 
using the composite APCs created in CY 2008, in particular the 
composite APC for cardiac electrophysiologic evaluation and ablation 
services. One commenter also supported the modest increase in payment 
for this APC, stating that it is reflective of the increased costs of 
providing these important services to patients.
    Response: We appreciate commenters' support for the composite 
payment methodology in general and the composite APC for cardiac 
electrophysiologic evaluation and ablation in particular.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to continue 
paying for cardiac electrophysiologic evaluation and ablation services 
using the composite APC methodology implemented for CY 2008. For this 
final rule with comment period, we were able to use 7,599 claims from 
CY 2008 containing a combination of group A and group B codes and 
calculated a final median cost of approximately $10,026 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 of 
approximately $9,206 based a full year of CY 2007 claims data. We 
believe that the final median cost of $10,026 calculated from a high 
volume of correctly coded multiple procedure claims results in an 
accurate and appropriate final payment for cardiac electrophysiologic 
evaluation and ablation services when at least one evaluation service 
is furnished during the same clinical encounter as at least one 
ablation service. Table 12 below lists the groups of procedures upon 
which we are basing composite APC 8000 for CY 2010. These CPT codes are 
assigned status indicated ``Q3'' in Addendum B to this final rule with 
comment period to identify their status as potentially payable through 
a composite APC. Their composite APC assignment is identified in 
Addendum M to this final rule with comment period.

[[Page 60397]]



 Table 12--Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which Composite APC 8000
                                                    is Based
----------------------------------------------------------------------------------------------------------------
                                                                                  Final single
 Codes used in combinations: At least one in Group A and one in   CY 2010  CPT    code CY 2010    Final CY 2010
                            Group B                                   code             APC        SI (composite)
----------------------------------------------------------------------------------------------------------------
Group A:
    Comprehensive electrophysiologic evaluation with right                93619            0085              Q3
     atrial 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                 93620            0085              Q3
     insertion and repositioning of multiple electrode
     catheters with induction or attempted induction of
     arrhythmia; with right atrial pacing and recording, right
     ventricular pacing and recording, His bundle recording....
 Group B:
    Intracardiac catheter ablation of atrioventricular node               93650            0085              Q3
     function, atrioventricular conduction for creation of
     complete heart block, with or without temporary pacemaker
     placement.................................................
    Intracardiac catheter ablation of arrhythmogenic focus; for           93651            0086              Q3
     treatment of supraventricular tachycardia by ablation of
     fast or slow atrioventricular pathways, accessory
     atrioventricular connections or other atrial foci, singly
     or in combination.........................................
    Intracardiac catheter ablation of arrhythmogenic focus; for           93652            0086              Q3
     treatment of ventricular tachycardia......................
----------------------------------------------------------------------------------------------------------------

 (4) Mental Health Services Composite APC (APC 0034)
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35282 through 35283), 
we proposed 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 stated in the CY 
2010 OPPS/ASC proposed rule that 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.
    As discussed in the CY 2010 OPPS/ASC proposed rule (74 FR 35356 
through 35357), for CY 2010 we proposed 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)) (74 FR 35282 through 35283). When a CMHC or 
hospital provides three units of partial hospitalization services and 
meets all other partial hospitalization payment criteria, we proposed 
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 
proposed that the CMHC or hospital be paid through APC 0173. We 
proposed to set the CY 2010 payment rate for mental health services 
composite APC 0034 (Mental Health Services Composite) at the same rate 
as we proposed for APC 0173, which is the maximum partial 
hospitalization per diem payment. We stated in the CY 2010 OPPS/ASC 
proposed rule that 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 
proposed that those specified mental health services would be assigned 
to APC 0034. We proposed 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 
proposed 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.
    We also proposed 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, and to continue 
assigning status indicator ``S'' (Significant Procedure, Not Discounted 
when Multiple), as adopted for CY 2009, to APC 0034 for CY 2010 (74 FR 
35283).
    Comment: One commenter expressed concern that using claims data 
from CMHCs and hospitals to calculate the payment rate for APC 0173 
would result in reduced access not only for hospital-based partial 
hospitalization services but also for other less intensive mental 
health services provided in hospital outpatient departments. The 
commenter stated that CMS should use hospital data to calculate the 
payment rates for hospital services.
    Response: As discussed in section X. of this final rule with 
comment period, the final CY 2010 payment rates for APCs 0172 and 0173 
are calculated using hospital-only cost data for CY 2010, rather than 
using both hospital and CMHC cost data. This final policy results in an 
increase in the median cost for APC 0173 from approximately $200 in CY 
2009 to approximately $209. As noted in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66739), we continue to believe that the 
costs associated with administering a partial hospitalization program

[[Page 60398]]

represent the most resource intensive of all outpatient mental health 
treatment, and we do not believe that we should pay more for a day of 
individual mental health services under the OPPS. The mental health 
payment limitation will rise and fall in the same manner as payment for 
partial hospitalization services.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to limit the 
aggregate payment for specified less intensive outpatient mental health 
services furnished on the same date by a hospital to the payment for a 
day of partial hospitalization, specifically APC 0173. For CY 2010, we 
also are finalizing our proposal, without modification, to assign 
status indicator ``Q3'' to those HCPCS codes that describe the 
specified mental health services to which APC 0034 applies in Addendum 
B to this final rule with comment period. Lastly, we are finalizing our 
proposal to continue assigning status indicator ``S'' (Significant 
Procedure, Not Discounted When Multiple) to APC 0034.
(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 recommendations 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 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).
    As we discussed in the CY 2010 OPPS/ASC proposed rule (74 FR 
35283), 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 accepted 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. However, as we stated 
in the CY 2010 OPPS/ASC proposed rule (74 FR 35283 through 35284), we 
do not believe it is appropriate to make modifications to the multiple 
imaging composite policy for CY 2010. We indicated that 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 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, in the CY 2010 OPPS/ASC proposed rule (74 FR 35284), 
for CY 2010 we proposed 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, and 
we proposed no changes from the final CY 2009 policy. The proposed CY 
2010 payment rates for the five multiple imaging composite APCs (APC 
8004, APC 8005, APC 8006, APC 8007, and APC 8008) were 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

[[Page 60399]]

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 appeared in Table 
11 of the CY 2010 OPPS/ASC proposed rule (74 FR 35286). 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 were listed in 
Table 10 of the proposed rule (74 FR 35284 through 35285).
    Comment: Many commenters asserted that a single composite APC 
payment is not appropriate when multiple imaging services of the same 
modality are provided on the same date of service but at different 
times. They argued that the same efficiencies that may be gained when 
multiple imaging procedures are performed during the same sitting may 
not be realized if a significant amount of time passes between the 
first and subsequent imaging procedures, when the patient may have to 
be repositioned or may have to leave not only the scanner, but also the 
radiology department or hospital. The commenters stated that, in such 
cases, facilities must expend equivalent facility resources in each 
sitting as if the sittings occurred on different dates of service. They 
noted that not all of these costs are reflected in claims data and, 
therefore, would not be reflected in the multiple imaging composite APC 
payment rates. The commenters requested that CMS allow hospitals to 
report modifier -59 when multiple imaging services of the same modality 
are provided at different times on the same date of service, and that 
such cases be excluded from the multiple imaging composite payment 
methodology. They stated that such an approach is necessary to 
recognize the provider costs when imaging services must be provided at 
different sittings due to clinical need or safety requirements. One 
commenter also asked CMS to work with the AMA to create new CPT codes 
that describe combined procedures so that providers could use those 
codes when they provide multiple imaging services in a single session. 
The commenter argued that utilization of such codes would be easier for 
providers and would facilitate the capturing of charge data that could 
be used to create new APCs or payment policies that reflect economies 
of scale for combined procedures reported through claims data.
    Response: We do not agree with the commenters that multiple imaging 
procedures of the same modality provided on the same date of service 
but at different times should be exempt from the multiple imaging 
composite payment methodology. As we indicated in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35283 through 35284) and the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68565), we believe that composite 
payment is appropriate even when procedures are provided on the same 
date of service but at different times because hospitals do not expend 
the same facility resources each and every time a patient is seen for a 
distinct imaging service in a separate imaging session. In most cases, 
we expect that patients in these circumstances would receive imaging 
procedures at different times during a single prolonged hospital 
outpatient encounter. The efficiencies that may be gained from 
providing multiple imaging procedures during a single session are 
achieved in ways other than merely not having to reposition the 
patient. For example, a patient who has two MRI procedures 3 hours 
apart during a single hospital outpatient encounter would not have to 
be registered again, and hospital staff might not have to explain the 
procedure in detail prior to the second scan. In the case of multiple 
procedures involving contrast that are provided at different times 
during a single hospital outpatient encounter, establishment of new 
intravenous access for the second study would not be necessary. Even if 
the same level of efficiencies could not be gained for multiple imaging 
procedures performed on the same date of service but at different 
times, we expect that any higher costs associated with these cases 
would be reflected in the claims data and cost reports we use to 
calculate the median costs for the multiple imaging composite APCs and, 
therefore, in the payment rates for the multiple imaging composite 
APCs. We do not believe it is necessary or appropriate for hospitals to 
report imaging procedures provided on the same date of service but 
during different sittings any differently than they would report 
imaging procedures performed consecutively in one sitting with no time 
in between the imaging services.
    We also do not agree with the commenter that it is necessary to 
create new CPT codes that describe combined services to ease the burden 
of hospital billing and improve claims data for ratesetting. As we 
stated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68565), certain combination CPT codes, specifically those single codes 
that describe imaging procedures without contrast and then followed by 
contrast, already allow for hospitals to report commonly performed 
combinations of imaging procedures in one anatomic area using a single 
CPT code. Hospitals can continue to use existing codes to report 
multiple imaging services by reporting multiple HCPCS codes, and for 
ratesetting, we use the charges reported to us by hospitals on claims 
for those multiple imaging services to calculate composite APC payment 
rates. The I/OCE determines whether composite APC payment applies to a 
claim, so the composite payment policy creates no additional 
administrative burden for hospitals.
    Comment: Several commenters asserted that the multiple imaging 
composite payment methodology could have a disproportionately negative 
effect on cancer centers and trauma units, where patients frequently 
require more than two imaging services during a

[[Page 60400]]

hospital encounter. They argued that the use of a single composite APC 
payment for an imaging modality regardless of the number of services 
provided is only appropriate if the underlying claims data used to set 
the ``average'' payment rate reflect an average number of services 
furnished by all providers. According to the commenters, certain 
providers, such as cancer centers and trauma hospitals, face systematic 
underpayment of multiple imaging services due to their unique patient 
population because they routinely provide a greater than average number 
of imaging services in one sitting or multiple sittings on the same 
date of service. The commenters stated that, at the same time, all 
other hospitals experience systematic overpayment.
    Response: We do not agree with the commenters that the underlying 
claims data used to calculate the median costs upon which the payment 
rates for the multiple imaging composite APCs are inappropriate for 
payment of all hospitals, or that the multiple imaging composite 
payment methodology is likely to have a disproportionately negative 
effect on cancer centers and trauma units. In the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68562 through 68563), we explored 
data from CY 2007 claims in response to similar concerns from 
commenters and a recommendation by the APC Panel at its August 2008 
meeting. An analysis of diagnosis codes present on the CY 2007 multiple 
imaging ``single session'' claims did show more variability in the 
number of scans for cancer patients compared to patients with noncancer 
diagnoses, consistent with commenters' concerns. We observed that, for 
several of the more commonly reported cancer diagnoses, more than half 
of the patients received more than two imaging procedures on the same 
day, while generally lower proportions of patients with noncancer 
diagnoses received more than two imaging procedures on a single date of 
service. We did not observe the same pattern for trauma diagnoses. As 
we stated in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68562), we do not believe that the higher rate of variability that we 
observed in the number of scans cancer patients receive was so extreme, 
however, that the mix of services hospitals provide to patients with 
diagnoses other than cancer would not balance out higher numbers of 
scans for cancer patients.
    We continue to believe that OPPS hospitals demonstrate sufficient 
variability in the number of imaging procedures they provide to a 
single patient on the same day that it is unlikely any particular class 
of hospital would experience disproportionate financial effects from 
the multiple imaging composite payment methodology. For CY 2009, the 
first year of implementation of the multiple imaging composite APC 
methodology, the modeled impacts of payment changes by class of 
hospital due to APC recalibration (where the effects of the multiple 
imaging composite payment methodology and other APC recalibration would 
be observed), were very modest across classes of hospital, ranging from 
-2.5 percent to +1.9 percent (73 FR 68799 through 68800).
    The goal of the multiple imaging composite payment methodology is 
to establish incentives for efficiency through larger payment bundles 
based on the practice patterns of OPPS hospitals as a whole. We 
acknowledge that there may be a small number of dedicated cancer 
centers that, relative to other hospitals paid under the OPPS, may 
provide a higher proportion of imaging services to cancer patients that 
involve three or more scans. However, as discussed above, our prior 
analyses do not lead us to believe that any class of hospitals would 
experience significantly negative effects from the multiple imaging 
composite payment methodology. We note that we establish national 
payment policies for the OPPS and, while certain policies may have 
greater or lesser impact on individual hospitals, on average we believe 
that the total OPPS payment to a hospital for all of its services is 
appropriate. Our modeled estimates of changes in total payment for 
classes of hospitals between CY 2008 and CY 2009 support this 
conclusion. We do not believe it would be appropriate to establish 
national policy based on considerations of the service mix of 
individual hospitals, or to exclude individual hospitals from national 
policy because of the impact a specific policy may have on one 
component of a hospital's operations as a result of a particular 
hospital's service mix. Furthermore, we note that several cancer 
centers are held permanently harmless under section 1833(t)(7)(D)(ii) 
of the Act in order to account for the fact that they may be more 
costly and have different practice patterns than other hospitals paid 
under the OPPS.
    Comment: Some commenters questioned the adequacy of the proposed 
multiple imaging composite APC payment rates for sessions involving 
three or more imaging procedures, and expressed general concern that 
multiple imaging composite payment methodology would limit beneficiary 
access to imaging services. For example, these commenters asserted that 
the multiple imaging composite payment methodology could create 
incentives for hospitals to require patients who need more than two 
imaging procedures to return for additional sittings on other days if 
the costs for sessions in which more than two procedures are performed 
far exceed the multiple imaging composite APC payment rates.
    Response: As we stated in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68562), we do not believe that, in aggregate, 
OPPS payment for multiple imaging services will be inadequate under the 
multiple imaging composite payment methodology so as to limit 
beneficiary access, even considering the minority of cases in which 
hospitals provide more than two imaging procedures on a single date of 
service. The median costs upon which the payment rates for the multiple 
imaging composite APCs are based are calculated using CY 2008 claims 
that would have qualified for composite payment, including those with 
only two imaging procedures and those with substantially higher numbers 
of imaging procedures. Payment based on a measure of central tendency 
is a principle of any prospective payment system. In some individual 
cases payment exceeds the average cost and in other cases payment is 
less than the average cost. On balance, however, payment should 
approximate the relative cost of the average case, recognizing that, as 
a prospective payment system, the OPPS is a system of averages.
    We also do not agree with the commenters that the multiple imaging 
composite payment methodology will result in hospitals requiring 
patients who need more than two imaging procedures to return for 
additional sittings on other days. As we stated in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68562), we do not believe that, 
in general, hospitals would routinely and for purposes of financial 
gain put patients at unnecessary risk of harm from radiation or 
contrast exposure, or inconvenience them or risk lack of timely 
followup to the point of making them return to the hospital on separate 
days to receive medically necessary diagnostic studies. However, we 
again note that we do have the capacity to examine our claims data for 
patterns of fragmented care. If we were to find a pattern in which a 
hospital appears to be fragmenting imaging services across multiple 
days for individual beneficiaries, we could refer it for review by the 
Quality Improvement Organizations (QIOs) with

[[Page 60401]]

respect to the quality of care furnished, or for review by the Program 
Safeguard Contractors of claims against the medical record, as 
appropriate to the circumstances we found.
    Comment: Several commenters urged CMS to standardize cost reporting 
for both advanced imaging procedures and other problematic cost centers 
before it makes any methodological changes to OPPS payment 
methodologies, including a composite policy for multiple imaging 
procedures. One commenter was concerned that observed efficiencies in 
the multiple imaging composite APC median costs are the result of 
inaccurate cost report data only and do not reflect true efficiencies 
from multiple imaging services provided during a single session. 
According to the commenter, CMS should implement separate cost centers 
for CT and MRI procedures and the revised revenue code-to-cost center 
crosswalk, as recommended in the July 2008 report by RTI International 
(RTI) entitled, ``Refining Cost to Charge Ratios for Calculating APC 
and DRG Relative Payment Weights.'' The commenter stated that the 
creation of the new standard cost centers and the adoption of the 
revised revenue code-to-cost center crosswalk would provide much more 
accurate charge and cost data for these imaging modalities, and that 
the true efficiencies associated with providing multiple imaging 
procedures in a single session may only be discernable once these data 
are available. The commenter also remarked that the adoption of these 
changes would result in significant shifts in the underlying CCRs for 
all APCs, thereby impacting all relative weights and payment rates 
across all services over time.
    Response: We published information regarding the proposed draft 
hospital cost report CMS-2552-10 in the Federal Register on July 2, 
2009 and the proposed agency information collection activities were 
open for a 60-day review and comment period (74 FR 31738). The comment 
period ended August 31, 2009. The proposed cost report can be viewed 
at: http://www.cms.hhs.gov/PaperworkReductionActof1995/PRAL/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=2&sortOrder=descending&itemID=CMS1224069&intNumPerPage=10. 
We will consider all comments received during the comment period in our 
determination of whether to create new modality-specific standard 
diagnostic radiology cost centers.
    As noted in our response to a comment regarding the recommendations 
included in RTI's July 2008 report entitled, ``Refining Cost to Charge 
Ratios for Calculating APC and DRG Relative Payment Weights'' (73 FR 
68526), the current cost report form already includes nonstandard cost 
centers for CT Scanning and MRI. We also explained that under the 
principle of departmental apportionment of costs at Sec.  413.53 
hospitals are required to report separately the costs and charges for 
each ancillary department for which charges are customarily billed if 
the corresponding cost and charge information is accumulated separately 
in the provider's accounting system. We believe the nonstandard cost 
center information for CT Scanning and MRI that we currently collect 
reflects costs and charges for CT Scanning and MRI and we use these 
data to estimate median costs for ratesetting.
    In the meantime, we believe it is fully appropriate to continue the 
multiple imaging composite payment methodology, which we believe 
improves the accuracy of OPPS payment rates and promotes efficiency 
among hospitals. As we stated in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68563), the most recent hospital cost report data 
are the best and most consistent estimate of relative costs that we 
have available to us for all hospitals for all hospital services. We 
will continue to use these data to estimate APC median costs. Should 
revised cost report data become available for CT and MRI procedures, 
our composite methodology would automatically incorporate that 
additional precision into the multiple imaging composite APC median 
cost estimates.
    Comment: One commenter stated that the differential in the CY 2010 
proposed payment rates for APC 8007 and APC 8008 appears adequate to 
account for the substantial differences in costs between magnetic 
resonance procedures when performed with and without contrast. The 
commenter asked CMS to evaluate the claims available for the CY 2010 
OPPS/ASC final rule with comment period to ensure that payment rates 
for the two APCs reflect the incremental costs for the contrast agent 
and contrast administration included in APC 8008.
    Response: We agree with the commenter regarding the appropriateness 
of the proposed differential in payment rates for APC 8007 and APC 8008 
for CY 2010. The median costs upon which the CY 2010 final payment 
rates for APC 8007 and APC 8008 are based ($706 and $986, respectively) 
also appropriately reflect differences in costs for MRI and MRA imaging 
sessions with and without the administration of contrast.
    Comment: One commenter stated that there was a discrepancy in CMS' 
estimated volume of APC 8005 single claims for the CY 2010 OPPS/ASC 
proposed rule. The commenter indicated that CMS' estimated volume of 
APC 8005 single claims increased by approximately one-third from the CY 
2007 claims used in CY 2009 ratesetting to the CY 2008 claims available 
for the CY 2010 OPPS/ASC proposed rule. The commenter noted that this 
increase was inconsistent with the commenter's data analysis, which 
indicated that the total volume of single claims for APC 8005 did not 
increase significantly over this same time period.
    Response: We reviewed the CY 2007 ``single session'' claims data 
used in ratesetting for APC 8005 for the CY 2009 OPPS/ASC final rule 
with comment period, and the CY 2008 ``single session'' claims data 
used in ratesetting for APC 8005 for the CY 2010 OPPS/ASC proposed 
rule. For the CY 2009 final rule, we identified 429,525 ``single 
session'' claims out of 809,483 potential composite cases to calculate 
the median cost for APC 8005. For the CY 2010 OPPS/ASC proposed rule, 
we identified 423,890 ``single session'' claims out of 810,469 
potential composite cases to calculate the median cost for APC 8005. 
These published data do not demonstrate an increase of approximately 
one-third in the volume of ``single session'' claims from the CY 2007 
claims used to calculate the median costs upon which the CY 2009 final 
payment rates are based compared to the CY 2008 claims used to 
calculate the median costs upon which the CY 2010 proposed payment 
rates are based, as the commenter indicated. For this final rule with 
comment period, we identified 455,191 ``single session'' claims (an 
increase of approximately 6 percent compared to CY 2009) out of 882,581 
potential composite cases (an increase of approximately 9 percent 
compared to CY 2009) to calculate the median cost of APC 8005.
    Comment: Many commenters requested that CMS thoroughly evaluate the 
impact of the multiple imaging composite payment methodology and 
commended CMS for not proposing to expand the multiple imaging 
composite payment methodology for CY 2010. Commenters asked CMS to 
review claims data to ensure that hospitals are being adequately paid 
for providing multiple imaging services, that patients are not being 
required by hospitals to return to the hospital on multiple days for 
imaging services, and that certain types or classes of hospitals are 
not being negatively affected before moving forward with any additional 
imaging

[[Page 60402]]

composite policies. One commenter noted that while CMS will have data 
available from CY 2009 to analyze for the winter 2010 APC Panel 
meeting, the commenter believed that such analyses would be more 
meaningful if claims data through CY 2012 are use to show impacts and a 
change in hospital behavior under the composite payment policy. 
Commenters also stated that any expansion of the multiple imaging 
composite payment methodology should be subject to full public comment.
    Response: We appreciate the commenters' support of our proposal not 
to implement any significant changes to the composite APC methodology 
for CY 2010 so that we may monitor the effects of the existing 
composite APCs on utilization and payment. We also appreciate the 
commenters' thoughtful suggestions for data analysis that can be 
performed toward that end once CY 2009 claims data become available and 
in the longer term. We will take commenters' suggestions into 
consideration as we review the CY 2009 claims data for the impact of 
the multiple imaging composite APCs on payments to hospitals and on 
services to beneficiaries.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, 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. The 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 CY 
2008 claims 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). Using the same 
ratesetting methodology described in the CY 2010 OPPS/ASC proposed rule 
(74 FR 35284), we were able to identify 1.8 million ``single session'' 
claims out of an estimated 2.7 million potential composite cases from 
our ratesetting claims data, or well over half of all eligible claims, 
to calculate the final CY 2010 median costs for the multiple imaging 
composite APCs.
    Table 13 below lists the HCPCS codes subject to the final multiple 
imaging composite policy and their respective families for CY 2010. We 
note that we have updated Table 13 to reflect HCPCS coding changes for 
CY 2010. Specifically, we added CPT code 74261 (Computed tomographic 
(CT) colonography, diagnostic, including image postprocessing; without 
contrast material) and CPT code 74262 (Computed tomographic (CT) 
colonography, diagnostic, including image postprocessing, with contrast 
materials(s) including non-contrast images, if performed) to the CT and 
CTA family, and removed CPT code 0067T (Computed tomographic (CT) 
colonography (ie, virtual colonoscopy); diagnostic), which was replaced 
by these CPT codes. The HCPCS codes listed in Table 13 are assigned 
status indicated ``Q3'' in Addendum B to this final rule with comment 
period to identify their status as potentially payable through a 
composite APC. Their composite APC assignment is identified in Addendum 
M to this final rule with comment period. Table 14 below lists the 
imaging services subject to the composite methodology that overlap with 
HCPCS codes on the CY 2010 bypass list.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR20NO09.030

BILLING CODE 4120-01-C
3. Calculation of OPPS Scaled Payment Weights
    Using the APC median costs discussed in sections II.A.1. and 
II.A.2. of this final rule with comment period, we calculated the final 
relative payment weights for each APC for CY 2010 shown in Addenda A 
and B to this final rule with comment period. In years prior to CY 
2007, we standardized all the relative payment weights to APC 0601 (Mid 
Level Clinic Visit) because mid-level clinic visits were among the most 
frequently performed services in the hospital outpatient setting. We 
assigned APC 0601 a relative payment weight of 1.00 and divided the 
median cost for each APC by the median cost for APC 0601 to derive the 
relative payment weight for each APC.
    Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all 
of the relative payment weights to APC 0606 (Level 3 Clinic Visits) 
because we deleted APC 0601 as part of the reconfiguration of the 
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

[[Page 60408]]

for calculating unscaled weights representing the median cost of some 
of the most frequently provided services, we proposed to continue to 
use the median cost of the mid-level clinic visit APC, APC 0606, to 
calculate unscaled weights. Following our standard methodology, but 
using the proposed CY 2010 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 did 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 the 
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 proposed to compare the estimated 
aggregate weight using the CY 2009 scaled relative weights to the 
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/. 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. In our 
proposal for CY 2010, the proposed 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.
    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.B.3. of the proposed rule (74 FR 35324 through 35333) and this final 
rule with comment period) was included in the proposed budget 
neutrality calculations for the CY 2010 OPPS.
    We did not receive any public comments on the proposed methodology 
for calculating scaled weights from the median costs for the CY 2010 
OPPS. Therefore, we are finalizing our proposed methodology, without 
modification, including updating of the budget neutrality scaler for 
this final rule with comment period. Under this methodology, the final 
unscaled payment weights were adjusted by a weight scaler of 1.3222 for 
this final rule with comment period. The final scaled relative payment 
weights listed in Addenda A and B to this final rule with comment 
period incorporate the recalibration adjustments discussed in sections 
II.A.1. and II.A.2. of this final rule with comment period.
4. Changes to Packaged Services
a. Background
    The OPPS, like other prospective payment systems, relies on the 
concept of averaging, where the payment may be more or less than the 
estimated 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/ASC final rule with 
comment period (72 FR 66610 through 66659), we adopted the packaging of 
payment for items and services in the seven categories listed below 
into the payment for the primary diagnostic or therapeutic modality to 
which we believe these items and services are typically ancillary and 
supportive. The seven categories are guidance services, image 
processing services, intraoperative services, imaging supervision and 
interpretation services, diagnostic radiopharmaceuticals, contrast 
media, and observation services. We specifically chose these categories 
of HCPCS codes for packaging because we believe that the items and 
services described by the codes in these categories are the HCPCS codes 
that are typically ancillary and supportive to a primary diagnostic or 
therapeutic modality and, in those cases, are an integral part of the 
primary service they support.
    We 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

[[Page 60409]]

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 final rule with comment period 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 final rule with comment period.
    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 provide other guidance. If a HCPCS code is not reported 
when a packaged service is provided, it can be challenging to track 
utilization patterns and resource costs.
b. Packaging Issues
(1) Packaged Services Addressed by the February 2009 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 final rule with comment period regarding our 
packaging approach for CY 2008, we established packaging criteria that 
apply to seven categories of codes whose payments are packaged.
    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 final 
rule with comment period. 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 
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

[[Page 60410]]

million for nuclear medicine procedures and diagnostic 
radiopharmaceuticals during the first 9 months of CY 2008, when payment 
for diagnostic radiopharmaceuticals was packaged. This represented 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 represented 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 were very small and indicated 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 represented each instance where a radiation 
oncology service or a radiation oncology guidance service was billed. 
Our analysis indicated 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 included packaged payment 
for radiation oncology guidance services and represented 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 final rule 
with comment period. In that analysis, we demonstrated 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 did 
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 represented 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 represented an increase of 15 percent in 
average payment per item or service from CY 2007 to CY 2008.
    We could not 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 
final rule with comment period), contrast agents, image processing 
services, and imaging supervision and interpretation services, showed 
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 showed similar numbers of hospitals reporting these services in CY 
2007, when these services were separately payable, and CY 2008, when 
they were packaged. Specifically, the percentage change in the number 
of reporting hospitals for these categories between CY 2007 and CY 2008 
ranged from 0 percent to a decrease of 1 percent.
    In summary, these preliminary data indicated that hospitals in 
aggregate did 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

[[Page 60411]]

its findings to the APC Panel at its February 2009 meeting. The full 
report of the February 18 and 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)
    In the proposed rule, we addressed each of these recommendations in 
turn in the discussion that follows.
Recommendation 1
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35289), we did not 
propose to pay separately for radiation therapy guidance services 
provided in the treatment room for CY 2010, which would have been 
consistent with the APC Panel's recommendation. Instead, we proposed to 
maintain the packaged status of radiation therapy guidance services 
performed in the treatment room for CY 2010.
    As discussed below 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 
indicated that the CY 2010 APC median costs applicable to most 
radiation oncology services experienced increases of approximately 2 to 
15 percent when compared to their CY 2009 final rule median costs. 
Although a small number of other lower volume radiation oncology APCs, 
most notably the brachytherapy and stereotactic radiosurgery APCs, 
experienced 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 
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

[[Page 60412]]

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, in the CY 2010 OPPS/ASC proposed rule (74 FR 35289), we 
did not propose 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 proposed to maintain the packaged 
status of all radiation therapy guidance services, including those 
radiation therapy guidance services performed in the treatment room.
    A summary of the public comments and our response on the CY 2010 
proposal to package payment for radiation therapy guidance services are 
included in section II.A.4.b.(2) of this final rule with comment 
period.
Recommendation 2
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35290), we stated that 
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 noted that we would carefully consider 
which additional data would be most informative for the APC Panel and 
would discuss these data with the APC Panel at the next CY 2009 APC 
Panel meeting and/or the first CY 2010 APC Panel meeting. We did not 
share additional packaging data with the APC Panel at the most recent 
August 2009 meeting because we believe the APC Panel's discussions 
would benefit from analyses of an additional year of claims data after 
CY 2008. Therefore, we plan to incorporate analysis of CY 2009 claims 
into the information we will bring to the APC Panel for its review at 
the winter 2010 meeting. Similarly, in the proposed rule, we noted that 
we would determine what additional detailed data related to radiation 
oncology services would be helpful to the APC Panel and would share 
these data at the next CY 2009 APC Panel meeting and/or the first CY 
2010 APC Panel meeting. We did not share additional data related to 
radiation oncology services with the APC Panel at the most recent 
August 2009 meeting because we believe the APC Panel's discussions 
would benefit from analyses of an additional year of claims data after 
CY 2008. Therefore, we plan to incorporate analysis of CY 2009 claims 
into the information we will bring to the APC Panel for its review at 
the winter 2010 meeting.
    A summary of the public comments and our response regarding the 
impact of the CY 2010 packaging proposal are included in section 
II.A.4.b.(2) of this final rule with comment period.
Recommendation 3
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35290), we stated that 
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 final rule with comment period. In the proposed rule, we noted 
that we are accepting the APC Panel's recommendation and would provide 
additional data to the APC Panel at an upcoming meeting. We did not 
share additional data related to diagnostic radiopharmaceuticals and 
nuclear medicine scans with the APC Panel at the most recent August 
2009 meeting because we believe the APC Panel's discussions would 
benefit from analyses of an additional year of claims data after CY 
2008. Therefore, we plan to incorporate analysis of CY 2009 claims into 
the information we will bring to the APC Panel for its review at the 
winter 2010 meeting.
    A summary of the public comments and our response on the CY 2010 
proposal to package payment for diagnostic radiopharmaceuticals into 
payment for the associated nuclear medicine procedures are included in 
sections II.A.2.d.(5) and V.B.2.d. of this final rule with comment 
period.
Recommendation 4
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35290), we proposed to 
continue for CY 2010 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, in the CY 2010 OPPS/ASC proposed rule (74 FR 35290), we 
proposed to maintain the assignment of CPT code 36592 to APC 0624 for 
CY 2010, consistent with the APC Panel recommendation, and we proposed 
to continue to treat CPT code 36592 as an ``STVX packaged code'' and 
assign it to APC 0624. We noted that we expect hospitals to follow the 
CPT guidance related to CPT codes 36591 and 36592 regarding when these 
services should be appropriately reported.
    We received no public comments on the CY 2010 proposal to maintain 
the assignment of CPT code 36592 to APC 0624 and treat it as an ``STVX 
packaged code,'' so we are finalizing our proposal, without 
modification.
Recommendation 5
    In response to the APC Panel's recommendation for the Packaging 
Subcommittee to remain active until the next APC Panel meeting, in the 
CY 2010 OPPS/ASC proposed rule (74 FR 35290) we noted that we have 
accepted this recommendation and the APC Panel Packaging Subcommittee 
remains active. We stated that additional issues and new data 
concerning the packaging status of codes would 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

[[Page 60413]]

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.
    The Packaging Subcommitee has remained active; the Subcommittee's 
last meeting to discuss packaging issues was the August 2009 meeting.

(2) Packaged Services Addressed by the August 2009 APC Panel 
Recommendations

    The APC Panel met again on August 5 and 6, 2009 to hear public 
presentations on the proposals set forth in the CY 2010 OPPS/ASC 
proposed rule. The APC Panel's Packaging Subcommittee reviewed the 
packaging status of several CPT codes and reported its findings to the 
APC Panel. The full report of the August 5 and 6, 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 submit to the Packaging Subcommittee, for its ongoing 
review, common clinical scenarios involving currently packaged HCPCS 
codes and recommendations of specific services or procedures for which 
payment would be most appropriately packaged under the OPPS. 
(Recommendation 6)
    2. When CMS changes the dollar amount of the drug packaging 
threshold and determines that some drugs within a single therapeutic 
class fall on either side of the packaging threshold, CMS consider 
packaging all of the drugs within that class on the basis of feedback 
from providers, the APC Panel, and stakeholders. (Recommendation 7)
    3. CMS continue to study the impact of increased packaging on 
beneficiaries. (Recommendation 8)
    4. The work of the APC Packaging Subcommittee continue. 
(Recommendation 9)
    With respect to these August 2009 APC Panel recommendations, we are 
accepting recommendations 6, 8, and 9. We are continuing the work of 
the APC Panel Packaging Subcommitee, and we appreciate the Packaging 
Subcommitee's expertise and experience regarding packaging under the 
OPPS and the valuable advice the Subcommittee continues to provide to 
us. We will continue to bring to the Subcommittee's attention clinical 
scenarios identified by us or the public regarding services that are 
currently packaged or are candidates for future packaging under the 
OPPS. As discussed above, we also will continue to study the impact of 
increased packaging on Medicare beneficiaries, as the APC Panel has 
previously recommended to us. We did not share additional packaging 
data with the APC Panel at the most recent August 2009 meeting because 
we believe the APC Panel's discussions would benefit from analyses of 
an additional year of claims data after CY 2008. Therefore, we plan to 
incorporate analysis of CY 2009 claims into the information we will 
bring to the APC Panel for its review at the winter 2010 meeting. 
Finally, our response to recommendation 7 regarding the packaging of 
payment for all drugs in the same therapeutic class is discussed in 
section V.B.2.c. of this final rule with public comment.
    Comment: Many commenters expressed a wide range of views on the 
existing policies for packaging payment for categories of services that 
CMS proposed to continue for CY 2010. One commenter claimed that while 
packaging provides an incentive for providers to deliver services in 
the most efficient, cost-effective manner possible, payment bundles 
that are too small do not enhance efficiencies, while payment bundles 
that are too large may carry excessive copayments for patients who need 
only a small proportion of services in the bundle. Another commenter 
suggested that CMS' packaging policy is likely to lead to less 
efficient use of resources, limited access to innovative treatment 
options, and greater instability in payments because, unlike the 
incentives from packaging under the IPPS, under the OPPS, the hospital 
would receive greater payment by bringing the outpatient back for a 
second visit or admitting the patient for inpatient care than by 
utilizing a more costly approach to providing an outpatient service 
that would be paid the same, regardless of the approach. The commenter 
also stated that when an APC's payment rate is significantly less than 
the cost of a technology, hospitals have a strong disincentive to use 
that technology, even if it could reduce the costs of care at a later 
date and provide better care to the patient.
    Several commenters asserted that the implications of OPPS packaging 
policies are unknown due to a lack of transparency in the OPPS 
ratesetting process and methodology used to determine payment for 
packaged services, potentially leading to inappropriate payment and 
underutilization of image-guidance services. The commenters believed 
that packaging payment for image-guidance leads to hospitals 
discouraging physicians from using guidance services and that, 
therefore, CMS should not package payment for image-guidance services. 
Several commenters urged CMS to consider establishing a 2 to 3 year 
data collection period during which separate payment would be made for 
new technology or new applications of existing technology. The 
commenters further suggested that the data could then be used to 
evaluate the impact of packaging on clinical utilization and payment 
and could also be used to determine whether to package or maintain 
separate payment for the services in the future. Another commenter 
recommended that CMS adopt a threshold policy that would be similar to 
the existing policy used to identify packaged drugs, under which 
separate payment would be made for all services with a median cost in 
excess of a nominal threshold amount.
    Response: We continue to believe that packaging creates incentives 
for hospitals and their physician partners to work together to 
establish appropriate protocols that eliminate unnecessary services 
where they exist and institutionalize approaches to providing necessary 
services more efficiently. With respect to new services or new 
applications of existing technology, we believe that packaging payment 
for ancillary and dependent services creates appropriate incentives for 
hospitals to seriously consider whether a new service or a new 
technology offers a benefit that is sufficient to justify the cost of 
the new service or technology. Where this review results in reductions 
in services that are only marginally beneficial or hospitals' choices 
not to utilize certain technologies, we believe that this could 
improve, rather than harm, the quality of care for Medicare 
beneficiaries because every service furnished in a hospital carries 
some level of risk to the patient. Moreover, we believe that hospitals 
strive to provide the best care they can to the patients they serve so 
that when new technologies are proven to improve the quality of care, 
their utilization will increase appropriately, whether the payment for 
them is packaged or not.
    However, we are aware that there are financial pressures on 
hospitals that might motivate some providers to split services among 
different hospital encounters in such a way as to maximize payments. 
While we do not expect that hospitals would routinely change the way 
they furnish services or the way they bill for services in order

[[Page 60414]]

to maximize payment, we recognize that it would be possible and we 
consider that possibility as we annually review hospital claims data. 
We will to continue examine claims data for patterns of fragmented 
care, and if we find a pattern in which a hospital appears to be 
dividing care across multiple days, we will refer it for investigation 
to the QIO or to the program safeguard contractor, as appropriate to 
the circumstances we find.
    In section II.A.1. of this final rule with comment period, we 
discuss the established methodology we use to incorporate the costs of 
packaged services into payment for the associated independent 
procedures. In response to those commenters with concerns about 
transparency of the ratesetting process that incorporates packaged 
costs, in general, we package the costs of services into the payment 
for the major separately paid procedure on the same claim on which the 
packaged service appears. Hence, it is the practice of hospitals with 
regard to reporting and charging for packaged services that determines 
the separately paid service into which the cost of a packaged service 
is incorporated and the amount of packaged cost included the payment 
for that separately paid procedure.
    Regarding the recommendation that we establish a cost threshold 
that would guide the packaging of services, we do not agree that this 
approach would result in appropriate packaging of costs for dependent 
ancillary services. A threshold policy could create incentives for 
hospitals to increase charges to ensure that payment for certain 
services was made separately, and the result would be contrary to the 
creation of incentives for prudent assessment of the costs and benefits 
of these services. Furthermore, as we stated in the CY 2009 OPPS/ASC 
final with comment period (73 FR 68572), it is not clear whether one 
set of packaging principles or one threshold could apply to the wide 
variety of services under the OPPS. Finally, to adopt a policy that 
would only package services that are low cost ancillary and supportive 
services would essentially negate the concept of averaging that is an 
underlying premise of a prospective payment system because hospitals 
would not have a particular incentive to provide care more efficiently.
    We believe it is important to continue to advance value-based 
purchasing by Medicare in the hospital outpatient setting by furthering 
the focus on value of care rather than volume. While we acknowledge the 
concerns of the commenters and, as discussed below, are committed to 
considering the impact of packaging payment on Medicare beneficiaries 
further in the future, we must balance the concerns of the commenters 
with our goal of continuing to encourage efficient use of hospital 
resources. As we noted in the CY 2009 OPPS/ASC final rule with comment 
period in our response to comments on the CY 2009 OPPS/ASC proposed 
rule (73 FR 68572) and as we note in our responses to public comments 
on the CY 2010 OPPS/ASC proposed rule, the suggestions and packaging 
criteria recommended by most commenters are focused almost exclusively 
on preventing packaging, rather than on determining when packaging 
would be appropriate. We also welcome suggestions from the public on 
approaches to packaging that would encourage efficient use of hospital 
resources.
    Comment: Several commenters commended CMS for reviewing and 
accepting the APC Panel's February 2009 recommendation that CMS 
continue to analyze the impact of increased packaging on Medicare 
beneficiaries. The commenters expressed concern about CMS' current 
packaging policy and urged CMS to conduct a more detailed review of the 
hospital claims data in order to verify that current OPPS packaging 
policies and methodologies are accomplishing CMS' goals. A few 
commenters offered recommendations for additional data analyses for CMS 
to consider in the ongoing efforts to study the impact of increased 
packaging under the OPPS. The commenters recommended that CMS compare 
utilization of currently packaged services billed and paid separately 
under the OPPS in CY 2007, before the packaging of additional 
categories of services went into effect, to the frequency of those same 
services that were packaged in CY 2008 and later, after the packaging 
of additional categories of services went into effect. The commenters 
requested that CMS conduct these studies at the CPT code level. The 
commenters also recommended that CMS conduct a hospital-level review of 
the data, in addition to an overall review, and compare overall 
utilization by packaged HCPCS code for CYs 2005 and 2006 to CYs 2007, 
2008, and 2009. Another commenter, in support of a provider-level 
review of the data, asserted that reviewing the data for packaged 
services at a national aggregate level can easily mask the behavioral 
changes of classes of hospitals and, therefore, concluded that more 
detailed analysis is needed to determine the impact of the policy. 
Several commenters requested that CMS present its analyses in the final 
rule with comment period and at upcoming APC Panel meetings and consult 
with relevant stakeholders before proposing any additional packaging 
changes. The commenters also recommended that CMS make the data 
underlying payments for packaged services, including utilization rates 
and median costs, publicly available to enhance the transparency of its 
decision making so that stakeholders could assess whether the payment 
rates truly reflect the costs of providing the bundle of services.
    Response: We agree that it is important to examine our claims data 
to assess the impact of packaging to the extent we can do so. During 
the September 2007 APC Panel meeting, the APC Panel requested that CMS 
evaluate the impact of expanded packaging on Medicare beneficiaries. At 
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 the first available CY 2008 claims data with 
the APC Panel at the February 2009 APC Panel meeting. In that analysis, 
we compared the frequency of specific categories of services we newly 
packaged for CY 2008 as they were billed under the OPPS in CY 2007, 
before 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 final rule 
with comment period. 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, and represented about 60 percent of the full year data. 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. A summary of these data analyses was included in the CY 
2010 OPPS/ASC proposed rule (74 FR 35287 through 35289) and is 
reiterated above.
    We note that we plan to present subsequent analyses that compare CY 
2007 claims processed through September 30, 2007, to CY 2008 claims 
processed through September 30, 2008, and to CY 2009 claims processed

[[Page 60415]]

through September 30, 2009, to the APC panel at the APC Panel's winter 
2010 meeting. We do not anticipate providing analyses using claims for 
services furnished during CY 2005 or CY 2006 because the packaging of 
the seven categories of services was effective for services furnished 
on and after January 1, 2008, and, therefore, we view CY 2007, the year 
immediately preceding the year that the packaging expansion went into 
effect, to be the base year for our comparisons. In addition, we do not 
anticipate providing the analyses at a provider-specific level or at a 
HCPCS code level. It is not clear to us how we would be able to use an 
analysis at the provider-specific level or the HCPCS code level or what 
value such an analysis would have in the context of national packaging 
policies for the OPPS.
    We note that we make available a considerable amount of data for 
public analysis each year through the supporting data files that are 
posted on the CMS Web site in association with the display of the 
proposed and final rules. In addition, we make available the public use 
files of claims and a detailed narrative description of our data 
process for the annual OPPS/ASC proposed and final rules that the 
public can use to perform any desired analyses. Therefore, commenters 
are able to examine and analyze these data to develop specific 
information to support their requests for changes to payments under the 
OPPS, whether with regard to separate payment for a packaged service or 
other issues. We understand that the OPPS is a complex payment system 
and that it may be difficult to determine the quantitative amount of 
packaged cost included in the median cost for every independent 
service. However, based on the complex and detailed public comments on 
prior proposed rules that we have received, some commenters have 
performed meaningful analyses at a detailed and service-specific level 
based on the public claims data available.
    With regard to the commenters' request that we not expand OPPS 
packaging until after we have produced data on the impact of packaging 
policy changes and consulted with stakeholders, we note that we 
establish all significant OPPS payment policies, including the 
packaging status of each HCPCS code, through the annual rulemaking 
process. Integral to this process is a detailed explanation of the 
claims data on which we base our proposals and the availability of the 
claims from which we develop those data for the use of the public to 
perform any level of analysis they choose. Moreover, the OPPS/ASC 
annual rulemaking process provides a 60-day public comment period, as 
well as public presentations and discussion of the proposals at the 
summer APC Panel meeting. We also reply to all public comments that are 
within the scope of the OPPS/ASC proposed rule when we issue the OPPS/
ASC final rule with comment period. In addition, we regularly meet with 
parties throughout the year who want to share their views on topics of 
interest to them. All of these activities and discussions provide 
significant information and opportunities for the public to influence 
and inform policy changes that we may be considering.
    Comment: Some commenters expressed concern about the impact that 
packaging payment for services described by separate HCPCS codes could 
have on the submission of claims data by hospitals for those packaged 
codes and, therefore, with the validity of conclusions that could be 
drawn from impact analyses performed by CMS. One commenter questioned 
CMS' assumption that the OPPS packaging policies would allow continued 
collection of the data necessary to set appropriate, stable payment 
rates in the future. The commenter believed that greater packaging may 
eliminate hospitals' incentive to code for items and services for which 
separate payment is not made. The commenter further argued that CMS' 
past experiences with packaging payment for ancillary items and 
services indicate that hospitals do not report HCPCS codes for items 
and services that do not directly affect hospital payment. Similarly, 
the commenter explained that, under the IPPS, hospitals report only the 
data required to assign a case to the highest paying appropriate 
diagnosis-related group (DRG), even though other data might affect 
payment in the long term. The commenter saw no reason to believe that 
the current OPPS packaging approach would have a different outcome 
unless CMS gives clear instructions that hospitals should continue 
coding for all items and services used in the care of patients and 
provides an incentive to report packaged items and services.
    Several commenters argued that the costs of new services are not 
reflected in the historical claims data CMS uses to set payment rates. 
The commenters believed that if CMS were to package payment for a new 
imaging service under the same criteria proposed for many existing 
imaging services, not only would CMS have no basis for determining how 
much the new service costs in its first 2 years of availability, but 
also CMS would provide no incentive to hospitals to report codes and 
charges for the new service for use in future OPPS ratesetting. The 
commenters further asserted that the resulting incomplete data would 
lead to inappropriate payments for independent services that, in turn, 
would limit access to care and would discourage continued innovation to 
improve patient care.
    Response: We do not believe that there will be a significant change 
in what hospitals report and charge for the outpatient services they 
furnish to Medicare beneficiaries and other patients as a result of our 
current packaging methodology. Medicare cost reporting standards 
specify that hospitals must impose the same charges for Medicare 
patients as for other patients. We are often told by hospitals that 
many private payers pay based on a percentage of charges and that, in 
accordance with Medicare cost reporting rules and generally accepted 
accounting principles, hospital chargemasters do not differentiate 
between the charges to Medicare patients and other patients. Therefore, 
we have no reason to believe that hospitals will stop reporting HCPCS 
codes and charges for packaged services they provide to Medicare 
beneficiaries. As we stated in the CY 2009 OPPS/ASC final rule with 
comment period (74 FR 68575), we strongly encourage hospitals to report 
a charge for each packaged service they furnish, either by billing the 
packaged HCPCS code and a charge for that service if separate reporting 
is consistent with CPT and CMS instructions, by increasing the charge 
for the separately paid associated service to include the charge for 
the packaged service, or by reporting the charge for the packaged 
service with an appropriate revenue code but without a HCPCS code. Any 
of these means of charging for the packaged service will result in the 
cost of the packaged service being incorporated into the cost we 
estimate for the separately paid service. If a HCPCS code is not 
reported when a packaged service is provided, we acknowledge that it 
can be challenging to specifically track the utilization patterns and 
resource cost of the packaged service itself. However, we have no 
reason to believe that hospitals have not considered the cost of the 
packaged service in reporting charges for the independent, separately 
paid service.
    We expect that hospitals, as other prudent businesses, have a 
quality review process that ensures that they accurately and completely 
report the services they furnish, with appropriate charges for those 
services to Medicare

[[Page 60416]]

and all other payers. We encourage hospitals to report all HCPCS codes 
that describe packaged services that were furnished, unless the CPT 
Editorial Panel or CMS provides other guidance. To the extent that 
hospitals include separate charges for packaged services on their 
claims, the estimated costs of those packaged services are then added 
to the costs of separately paid procedures on the same claims and used 
in establishing payment rates for the separately paid services.
    Comment: One commenter argued that CMS' packaging methodology for 
guidance services used in radiation oncology procedures is not 
transparent. Specifically, the commenter claimed that CMS packaged 
payment for the radiation oncology image-guidance services (shown in 
Table 15) into the payment for independent radiation therapy services 
(shown in Table 16) without publishing its packaging methodology. The 
commenter further stated that the lack of transparency regarding CMS' 
packaging methodology is of concern to the radiation oncology 
community, and that it would be helpful if CMS published the 
information used in the APC Panel's determination of packaging and 
payment rates.

         Table 15--Packaged Radiation Oncology Guidance Services
------------------------------------------------------------------------
         CY 2010 CPT code                  CY 2010 Long descriptor
------------------------------------------------------------------------
77421.............................  Stereoscopic X ray guidance for
                                     localization of target volume for
                                     the delivery of radiation therapy.
77014.............................  Computed tomography guidance for
                                     placement of radiation fields.
77417.............................  Therapeutic radiology port film(s).
76950.............................  Ultrasonic guidance for aspiration
                                     of ova, imaging supervision and
                                     interpretation.
------------------------------------------------------------------------


          Table 16--Separately Paid Radiation Therapy Services
------------------------------------------------------------------------
       CY 2010 CPT code                 CY 2010 Long descriptor
------------------------------------------------------------------------
77402........................  Radiation treatment delivery, single
                                treatment area, single port or parallel
                                opposed ports, simple blocks or no
                                blocks; up to 5MeV.
77403........................  Radiation treatment delivery, single
                                treatment area, single port or parallel
                                opposed ports, simple blocks or no
                                blocks; 6-10MeV.
77404........................  Radiation treatment delivery, single
                                treatment area, single port or parallel
                                opposed ports, simple blocks or no
                                blocks; 11-19 MeV.
77406........................  Radiation treatment delivery, single
                                treatment area, single port or parallel
                                opposed ports, simple blocks or no
                                blocks; 20 MeV or greater.
77407........................  Radiation treatment delivery, 2 separate
                                treatment areas, 3 or more ports on a
                                single treatment area, use of multiple
                                blocks; up to 5 MeV.
77408........................  Radiation treatment delivery, 2 separate
                                treatment areas, 3 or more ports on a
                                single treatment area, use of multiple
                                blocks; 6-10 MeV.
77409........................  Radiation treatment delivery, 2 separate
                                treatment areas, 3 or more ports on a
                                single treatment area, use of multiple
                                blocks; 11-19 MeV.
77411........................  Radiation treatment delivery, 2 separate
                                treatment areas, 3 or more ports on a
                                single treatment area, use of multiple
                                blocks; 20 MeV or greater.
77412........................  Radiation treatment delivery, 3 or more
                                separate treatment areas, custom
                                blocking, tangential ports, wedges,
                                rotational beam, compensators, electron
                                beam; up to 5 MeV.
77413........................  Radiation treatment delivery, 3 or more
                                separate treatment areas, custom
                                blocking, tangential ports, wedges,
                                rotational beam, compensators, electron
                                beam; 6-10 MeV.
77414........................  Radiation treatment delivery, 3 or more
                                separate treatment areas, custom
                                blocking, tangential ports, wedges,
                                rotational beam, compensators, electron
                                beam; 11-19 MeV.
77416........................  Radiation treatment delivery, 3 or more
                                separate treatment areas, custom
                                blocking, tangential ports, wedges,
                                rotational beam, compensators, electron
                                beam; 20 MeV or greater.
77417........................  Therapeutic radiology port film(s).
77418........................  Intensity modulated treatment delivery,
                                single or multiple fields/arcs, via
                                narrow spatially and temporally
                                modulated beams, binary, dynamic MLC,
                                per treatment session.
------------------------------------------------------------------------

    Response: Although the APC Panel provides valuable advice with 
regard to the establishment of OPPS payment policies and payment rates, 
the APC Panel does not, as the commenter suggested, determine what 
services are packaged under the OPPS or establish OPPS payment rates. 
We adopt the OPPS payment policies regarding packaging and other issues 
and establish payment rates through the annual rulemaking cycle.
    In general, payment for a packaged HCPCS code is included in the 
payment for the independent service with which it is associated, to the 
extent that the cost of the packaged service is reflected on the single 
procedure claims that are used to calculate the median cost for the 
independent, separately paid service. We intend to further examine the 
packaging of image-guidance for radiation therapy in the analyses of 
the impact of packaging that we plan to discuss with the APC Panel at 
the winter 2010 meeting. However, as we describe earlier in this 
section, we make available a considerable amount of data for public 
analysis each year, provide the claims we use to calculate median 
costs, and provide a detailed narrative description of our data process 
that the public can use to analyze any topic of interest to them.
    Comment: One commenter supported CMS' goal of increased efficiency 
in hospital outpatient care. However, the commenter was concerned that 
packaging payment for services too soon could create access problems 
for technologies that would otherwise improve patient outcomes and 
reduce costs. The commenter urged CMS to reinstate separate payment in 
CY 2010 for ICE, FFR, and IVUS until a thorough analysis has been 
performed on the impact of packaging payment for these services, 
including the rate of change in their utilization over time and market 
penetration.

[[Page 60417]]

    Response: As discussed earlier in this section, in response to the 
request from the APC Panel that CMS evaluate the impact of expanded 
packaging on Medicare beneficiaries, we analyzed 9 months of CY 2007 
and CY 2008 data related to all services that were packaged during CY 
2008. Analysis of the intraoperative category (which includes IVUS, 
ICE, and FFR) showed minimal changes in the frequency and the number of 
hospitals reporting these packaged services between CY 2007 and CY 
2008. The IVUS, ICE, and FFR services studied specifically included CPT 
codes 37250 (Intravascular ultrasound (non-coronary vessel) during 
diagnostic evaluation and/or therapeutic intervention; initial vessel); 
37251 (Intravascular ultrasound (non-coronary vessel) during diagnostic 
evaluation and/or therapeutic intervention; each additional vessel); 
92978 (Intravascular ultrasound (coronary vessel or graft) during 
diagnostic evaluation and/or therapeutic intervention including imaging 
supervision, interpretation and report; initial vessel); 92979 
(Intravascular ultrasound (coronary vessel or graft) during diagnostic 
evaluation and/or therapeutic intervention including imaging 
supervision, interpretation and report; each additional vessel); 93662 
(Intracardiac echocardiography during therapeutic/diagnostic 
intervention, including imaging supervision and interpretation); 93571 
(Intravascular Doppler velocity and/or pressure derived coronary flow 
reserve measurement (coronary vessel or graft) during coronary 
angiography including pharmacologically induced stress, initial 
vessel); and 93572 (Intravascular Doppler velocity and/or pressure 
derived coronary flow reserve measurement (coronary vessel or graft) 
during coronary angiography including pharmacologically induced stress, 
each additional vessel).
    As discussed previously, in February 2009 we presented an analysis 
to the APC Panel that showed an increase of 8 percent in the number of 
services billed and an increase in aggregate payment of 25 percent in 
CY 2008, when IVUS, ICE and FFR were packaged, in comparison to CY 2007 
when IVUS, ICE and FFR were paid separately. Additionally, we intend to 
continue our analysis of the impact of greater packaging on Medicare 
beneficiaries and to present additional data to the APC Panel at the 
winter 2010 meeting.
    We note that IVUS, ICE, and FFR services are existing, established 
technologies and that hospitals have provided some of these services in 
the HOPD since the implementation of the OPPS in CY 2000. IVUS, FFR, 
and ICE are all dependent services that are always provided in 
association with independent services. Given the increase in the number 
of services furnished and the associated payment between CY 2007 and CY 
2008, we have seen no evidence from our claims data that beneficiary 
access to care is being harmed by packaging payment for IVUS, ICE, and 
FFR services. We believe that packaging creates appropriate incentives 
for hospitals and their physician partners to carefully consider the 
technologies that are used in the care of patients, in order to ensure 
that technologies are selected for use in each case based on their 
expected benefit to a particular Medicare beneficiary.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposals, without modification, to packaged 
payment for the seven categories of services, including guidance 
services, image processing services, intraoperative services, imaging 
supervision and interpretation services, diagnostic 
radiopharmaceuticals, contrast media, and observation services. We 
refer readers to section V.B.2.d. of this final rule with comment 
period for further discussion of our final policy to package payment 
for contrast agents and diagnostic radiopharmaceuticals. We refer 
readers to section II.A.2.e.(1) for further discussion of our final 
policy to pay for observation services through extended assessment and 
management composite APCs under certain circumstances. We plan to 
discuss with the APC Panel additional analyses of the impact of 
packaging these categories of services at the winter 2010 APC Panel 
meeting.
(3) 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, in the CY 2010 OPPS/ASC proposed rule (74 FR 
35241), we proposed 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 
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 the proposal is included in section 
II.A.1.b. of this final rule with comment period.
    Comment: One commenter requested that CPT code 76098 remain 
separately payable instead of conditionally packaged. The commenter 
acknowledged that radiological examination of a surgical specimen is 
performed in conjunction with a surgical procedure most of the time but 
asserted that when the service is conditionally packaged, surgical 
procedure payment would not cover the cost of the radiological 
examination of a surgical specimen.
    Response: We continue to believe that when CPT code 76098 is 
furnished on the same date of service as a major separately payable 
procedure, CPT code 76098 is a dependent service that is ancillary and 
supportive to the independent service with which it is performed and 
that, therefore, it is most appropriate to package the cost of CPT code 
76098 into the payment for the independent, separately paid procedure. 
The full cost of CPT code 76098 is packaged into the cost of the 
independent, separately paid procedure to the extent that the 
hospital's charge for the packaged service, when reduced to cost by the 
hospital's applicable CCR, results in an accurate reflection of the 
cost of the packaged service. As we stated in the CY 2009 OPPS/ASC 
final rule with comment period (74 FR 68575), we strongly encourage 
hospitals to report a charge for each packaged service they furnish, 
either by billing the packaged HCPCS code and a charge for that service 
if separate reporting is consistent with CPT and CMS instructions, by 
increasing the charge for the separately paid associated service to 
include the charge for the packaged service, or by reporting the charge 
for the packaged service with an appropriate revenue code but without a 
HCPCS code. Any of these means of charging for the packaged service 
will result in the costs of the packaged service being incorporated 
into the cost we estimate for the separately paid

[[Page 60418]]

service. We note that further discussion of CPT code 76098 as it 
relates to the commenters' requests to add this code to the bypass list 
is included in section II.A.1.b. of this final rule with comment 
period.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to assign CPT 
code 76098 status indicator ``Q2'' to signify that the service is 
packaged when it is reported with a separately paid procedure that has 
a status indicator of ``T'' on the same date of service and separately 
paid under APC 0317 when it is not reported on the same date of service 
with a separately paid surgical procedure that has a status indicator 
of ``T.'' The final CY 2010 APC median cost of APC 0317 is 
approximately $374.
    Comment: A number of commenters disagreed with CMS' proposal to 
package electrodiagnostic guidance for chemodenervation procedures. The 
commenters asserted that paying chemodenervation procedures at the same 
rate, regardless of the use of electrodiagnostic guidance, may 
discourage providers from using guidance to place a needle filled with 
a potentially fatal substance like botulinum toxin. They urged CMS to 
consider providing a separate payment for electrodiagnostic needle 
guidance to ensure that quality of care is not compromised.
    Response: While the commenters did not identify specific 
chemodenervation guidance CPT codes, we note that the costs of 
chemodenervation guidance services, specifically CPT codes 95873 
(Electrical stimulation for guidance in conjunction with 
chemodenervation (List separately in addition to code for primary 
procedure)) and 95874 (Needle electromyography for guidance in 
conjunction with chemodenervation (list separately in addition to code 
for primary procedure)) are reflected in the median costs of the 
independent, separately paid chemodenervation procedures as a function 
of the frequency that chemodenervation services are reported with a 
particular guidance CPT code. We recognize that, in some cases, 
supportive and ancillary dependent services are furnished at a high 
frequency with independent services, and in other cases, they are 
furnished with independent services at a low frequency. Nonetheless, we 
believe that packaging should reflect the reality of how these services 
are furnished. Moreover, we believe that hospitals make prudent and 
appropriate patient care decisions with regard to when they furnish 
packaged services.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to 
unconditionally package payment for chemodenervation guidance services 
described by CPT codes 95873 and 95874. These CPT codes are, therefore, 
assigned status indicator ``N'' in Addendum B to this final rule with 
comment period.
    Comment: One commenter objected to the assignment of status 
indicator ``N'' to a number of guidance procedures and requested that 
CMS conditionally packaged these services so that they could be paid 
separately if they are the only services furnished in a hospital 
encounter. The commenter believed that it is not appropriate that the 
hospital receives no payment when these services are furnished in 
preparation for a surgical procedure that is canceled after the 
services have been furnished but before the patient is taken to the 
operating room. The procedures of concern to the commenter include CPT 
codes 19290 (Preoperative placement of needle localization wire, 
breast;); 19291 (Preoperative placement of needle localization wire, 
breast; each additional lesion (List separately in addition to code for 
primary procedure)); 19295 (Image guided placement, metallic 
localization clip, percutaneous, during breast biopsy (List separately 
in addition to code for primary procedure)); 77031 (Stereotactic 
localization guidance for breast biopsy or needle placement (e.g., for 
wire localization or for injection), each lesion, radiological 
supervision and interpretation)); 77032 (Mammographic guidance for 
needle placement, breast (e.g., for wire localization or for 
injection), each lesion, radiological supervision and interpretation); 
and 76942 (Ultrasonic guidance for needle placement (e.g., biopsy, 
aspiration, injection, localization device), imaging supervision and 
interpretation).
    Response: We appreciate the commenter's submission of this clinical 
scenario for our review. The APC Panel Packaging Subcommittee provides 
substantive advice to us on the packaging of services, either 
conditionally or unconditionally under the OPPS, and the Subcommittee 
members bring broad and deep expertise and experience to their review 
of clinical scenarios. Therefore, we will review these services and the 
scenario described by the commenter with the APC Panel's Packaging 
Subcommittee at the winter 2010 APC Panel meeting.
    After review of the public comment we received, we are finalizing 
our CY 2010 proposal, without modification, to unconditionally package 
payment for CPT codes 19290, 19291, 19295, 77031, 77032, and 76942. 
These CPT codes are assigned status indicator ``N'' in Addendum B to 
this final rule with comment period. We will review the OPPS treatment 
of these CPT codes with the APC Panel Packaging Subcommittee at the 
winter 2010 APC Panel meeting.
    Comment: One commenter suggested that it is very challenging for 
hospitals to determine they were paid correctly for services furnished 
because of CMS' ``Q'' status indicators and the complexity of 
determining which HCPCS codes should be separately paid. The commenter 
asked that CMS make the claims processing system more transparent.
    Response: We acknowledge that the OPPS is a complex payment system 
and that it is difficult to determine the correct payment for a service 
that is subject to conditional packaging. Addendum D1 to this final 
rule with comment period describes how services that appear in Addendum 
B with status indicators ``Q1,'' ``Q2,'' and ``Q3'' are treated in 
claims processing. In the case of conditionally packaged codes with 
status indicators ``Q1'' or ``Q2,'' where the criteria for separate 
payment are not met, these codes are treated as packaged services. We 
assign status indicators ``Q1'' and ``Q2'' to conditionally packaged 
services to indicate that they are usually packaged, except for special 
circumstances when they are separately payable. Through the I/OCE 
claims processing logic, the status indicator of a conditionally 
packaged service reported on a claim is changed either to ``N'' or the 
status indicator of the APC to which the code is assigned for separate 
payment, depending upon the presence or absence of other OPPS services 
also reported on the claim with the same date of service. Status 
indicator ``Q3'' indicates that the code is a member of a composite 
APC. Addendum M includes the HCPCS codes for all services that are paid 
either through single code APCs or composite APCs when the criteria for 
composite APC payment are met. A full discussion of the composite 
criteria for each composite APC (to which status indicator ``Q3'' 
applies) is included in section II.A.2.e. of this final rule with 
comment period.
    In addition to the availability of these resources that describe 
whether a service is separately payable or packaged (in the case of 
services with status indicators ``Q1'' or ``Q2'') or a member of a 
composite APC (in the case of services with status indicator ``Q3''), 
the quarterly I/OCE and the OPPS Pricer that are used by the Fiscal 
Intermediary

[[Page 60419]]

Standard System (FISS) to process claims paid under the OPPS are both 
available to the public each calendar quarter. The I/OCE instructions 
and specifications that are utilized for OPPS and non-OPPS payment for 
hospital outpatient services are available quarterly for download on 
the CMS Web site at: http://www.cms.hhs.gov/OutpatientCodeEdit/02_OCEQtrReleaseSpecs.asp#TopOfPage. Providers interested in purchasing 
the I/OCE software should visit the authorized distributor's Web site 
at http://www.ntis.gov/products/oceapc.aspx for more information on how 
to obtain the software. There is no OPPS Pricer application for 
personal computers at this time. However, providers can download the 
files that contain the logic, rates, wage indices, and off-set amounts 
used by the OPPS Pricer program to calculate APC rates, copayments, and 
deductibles from the CMS Web site at: http://www.cms.hhs.gov/PCPricer/08_OPPS.asp.

B. Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires us to update the 
conversion factor used to determine payment rates under the OPPS on an 
annual basis. Under the authority in section 1833(t)(3)(C)(iv) of the 
Act, 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 final hospital market basket 
increase for FY 2010 published in the FY 2010 IPPS/LTCH PPS final rule 
(74 FR 44002) is 2.1 percent. To set the 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 final rule with comment 
period.
    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 made 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 0.9997 for wage index changes by comparing total 
payments from our simulation model using the FY 2010 IPPS final wage 
index values to those payments using the current (FY 2009) IPPS wage 
index values. For CY 2010, we did not propose a change to our rural 
adjustment policy. Therefore, the budget neutrality factor for the 
rural adjustment is 1.0000.
    For this final rule with comment period, we estimated that pass-
through spending for both drugs and biologicals and devices for CY 2010 
will equal approximately $45.5 million, which represents 0.14 percent 
of total projected CY 2010 OPPS spending. Therefore, the conversion 
factor was also adjusted by the difference between the 0.11 percent 
estimate of pass-through spending set aside for CY 2009 and the 0.14 
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 market basket increase update factor of 2.1 percent for CY 
2010, the required wage index budget neutrality adjustment of 
approximately 0.9997, and the adjustment of 0.03 percent of projected 
OPPS spending for the difference in the pass-through spending set aside 
resulted in a full market basket conversion factor for CY 2010 of 
$67.406. To calculate the 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 reduced market basket increase 
update factor of 0.1 percent. This resulted in a reduced market basket 
conversion factor for CY 2010 of $66.086 for those hospitals that fail 
to meet the HOP QDRP requirements.
    We did not receive any public comments on the calculation of the 
conversion factor. Therefore, we are finalizing our CY 2010 proposal, 
without modification, to update the OPPS conversion factor by the FY 
2010 IPPS market basket increase update factor of 2.1 percent, 
resulting in a final full conversion factor of $67.406 and in a reduced 
conversion factor of $66.086 for those hospitals that fail to meet the 
HOP QDRP reporting requirements for the full CY 2010 payment update.

C. Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to adjust, for geographic wage 
differences, the portion of the OPPS payment rate, which includes the 
copayment standardized amount, that is attributable to labor and labor-
related cost. This adjustment must be made in a budget neutral manner 
and budget neutrality is discussed in section II.B. of this final rule 
with comment period.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that approximately 60 percent of the costs of services 
paid under the OPPS were attributable to wage costs. We confirmed that 
this labor-related share for outpatient services is still appropriate 
during our regression analysis for the payment adjustment for rural 
hospitals in the CY 2006 OPPS final rule with comment period (70 FR 
68553). Therefore, in the CY 2010 OPPS/ASC proposed rule (74 FR 35291), 
we did not propose to revise this policy for the CY 2010 OPPS. We refer 
readers to section II.G. of this final rule with comment period for a 
description and example of how the wage index for a particular hospital 
is used to determine the payment for the hospital.
    As discussed in section II.A.2.c. of this final rule with comment 
period, for estimating national median APC costs, we standardize 60 
percent of estimated claims costs for geographic area wage variation 
using the same FY 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 also applies to that hospital under the OPPS. As initially 
explained in the September 8, 1998 OPPS proposed rule, we believed and 
continue to believe that using the IPPS wage index as the source of an 
adjustment factor for the OPPS is reasonable and logical, given the 
inseparable, subordinate status of the HOPD within the hospital 
overall. In accordance with section 1886(d)(3)(E) of the Act, the IPPS 
wage index is updated annually. Therefore, in accordance with our 
established policy, we proposed to use the final FY 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

[[Page 60420]]

OPPS, including providers that are not paid under the IPPS (referred to 
in this section as ``non-IPPS'' providers).
    We note that the final FY 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 final rule (74 FR 43823) for a 
detailed discussion of all final 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 
rules for a detailed discussion of the history of these wage index 
adjustments as applied under the OPPS.
    The IPPS wage indices that we proposed to adopt in the CY 2010 
OPPS/ASC proposed rule (74 FR 35291) include all reclassifications that 
are approved by the Medicare Geographic Classification Review Board 
(MGCRB) for FY 2010.
    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, or a current MGCRB 
reclassification, 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 did not make any proposals related to 
those provisions for the OPPS wage indices for CY 2010.
    For purposes of the OPPS, we proposed 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 FY 2010 IPPS final rule (74 FR 44118 through 44125), as 
subsequently corrected at 74 FR 51506, 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 corrected, 
as Addendum L to this final rule with comment period, with the addition 
of non-IPPS hospitals that will receive the section 505 out-migration 
adjustment under the CY 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 proposed 
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 final rule with comment period), 
which includes non-IPPS hospitals paid under the OPPS, we are not 
reprinting the FY 2010 IPPS final 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/HospitalOutpatientPPS/. At this 
link, readers will find a link to the FY 2010 IPPS final wage index 
tables.
    Comment: Several commenters expressed support for the CMS proposal 
to extend the IPPS wage indices to the OPPS in CY 2010, consistent with 
prior year policies under the OPPS.
    Response: We appreciate the support expressed by commenters for our 
proposed CY 2010 wage index policies.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to use the final 
FY 2010 IPPS wage indices to adjust the OPPS standard payment amounts 
for labor market differences.

D. Statewide Average Default CCRs

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, CMS uses overall hospital-specific CCRs calculated 
from the hospital's most recent cost report 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). In the CY 2010 OPPS/ASC proposed rule (74 FR 35292), we 
proposed 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

[[Page 60421]]

use to adjust charges to costs on claims data for setting the CY 2010 
proposed OPPS relative weights. Table 12 that was published in the CY 
2010 OPPS/ASC proposed rule (74 FR 35293 through 35294) listed the 
proposed CY 2010 default urban and rural CCRs by State and compared 
them to last year's default CCRs. These CCRs are the ratio of total 
costs to total charges from each hospital's most recently submitted 
cost report, for those cost centers relevant to outpatient services 
weighted by Medicare Part B charges. We also adjusted ratios from 
submitted cost reports to reflect final settled status by applying the 
differential between settled to submitted overall CCR for the cost 
centers relevant to outpatient services 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 CY 2010 OPPS/ASC final rule with comment period, 
approximately 44 percent of the submitted cost reports utilized in the 
default ratio calculations represented data for cost reporting periods 
ending in CY 2008 and 55 percent were for cost reporting periods ending 
in CY 2007. 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 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.
    We did not receive any public comments concerning our CY 2010 
proposal to apply our standard methodology of calculating the statewide 
average default CCRs using the same hospital overall CCRs that we use 
to adjust charges to costs on claims data for setting the CY 2010 
proposed OPPS relative weights. Therefore, we are finalizing the 
statewide average default CCRs as shown in Table 17 below for OPPS 
services furnished on or after January 1, 2010.
BILLING CODE 4120-01-P

[[Page 60422]]

[GRAPHIC] [TIFF OMITTED] TR20NO09.031


[[Page 60423]]


[GRAPHIC] [TIFF OMITTED] TR20NO09.032


[[Page 60424]]


[GRAPHIC] [TIFF OMITTED] TR20NO09.033

BILLING CODE 4120-01-C

E. OPPS Payment to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes Made by Public Law 110-
275 (MIPPA)
    When the OPPS was implemented, every provider was eligible to 
receive an additional payment adjustment (called either transitional 
corridor payments or transitional outpatient payment (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

[[Page 60425]]

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.
    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 our regulations at 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. In the CY 2010 OPPS/ASC proposed 
rule (74 FR 35295), for CY 2010, we proposed 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. 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 areas 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.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35295), for the CY 
2010 OPPS, we proposed 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,

[[Page 60426]]

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 reports, and provider information.
    Comment: A number of commenters generally supported the proposal to 
continue the rural SCH (including EACHs) adjustment for CY 2010 OPPS. 
Several commenters also asked that CMS extend for CY 2010 the TOPs 
payment policies that were in effect for CY 2009. The commenters 
recommended that CMS evaluate the differences in cost between urban and 
rural hospitals over an extended 3-year period using updated claims, 
cost reports, and provider information. They further suggested that, 
during the 3-year period in which CMS would be gathering data, CMS pay 
SCHs and rural hospitals with less than 100 beds that are not SCHs the 
greater of the TOPs payment in effect for CY 2009 or the OPPS payment 
for the applicable calendar year plus the 7.1 percent rural adjustment, 
whichever is greater. The commenters claimed that CMS' reversal of the 
TOPs allowance after only 1 year of reimplementation for certain rural 
hospitals was unreasonable and could irreparably harm those rural 
hospitals absent a safety net mechanism in place.
    Response: We agree that it is appropriate to continue the 7.1 
percent adjustment for rural SCHs (including EACHs) as we proposed for 
CY 2010. However, we are not extending the CY 2009 TOPs payment 
policies for rural hospitals with 100 beds or less and for SCHs 
(including EACHs) with 100 or fewer beds for CY 2010. Section 
1833(t)(7)(D)(i)(II) of the Act provides that, in the case of a 
hospital located in a rural area with 100 beds or fewer and that is not 
a sole community hospital, for covered OPD services furnished on or 
after January 1, 2006 and before January 1, 2010, for which the PPS 
amount is less than the pre-BBA amount, the amount of payment should be 
increased by the applicable percentage of the amount of such 
difference. Section 1833(t)(7)(D)(i)(III) of the Act also extends 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, under the specific circumstances outlined in the statute. 
Therefore, sections 1833(t)(D)(i)(II) and (III) of the Act specifically 
expire TOPs payment to these categories of hospitals for services 
furnished on and after January 1, 2010. Accordingly, in CY 2010, 
neither rural SCHs nor rural hospitals with less than 100 beds will 
receive payment at whichever is greater, the TOPs payment in place for 
CY 2009 or payment for CY 2010, which includes the rural adjustment for 
rural SCHs, because sections 1833(t)(7)(D)(i)(II) and (III) of the Act 
expire TOPS payments as explained above. As we indicate above, we 
intend to reassess the 7.1 percent rural adjustment in the near future 
by examining differences between urban and rural hospitals' costs using 
updated claims, cost reports, and provider information.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to apply the 7.1 
percent payment adjustment to rural SCHs for most services paid under 
the CY 2010 OPPS, excluding drugs, biologicals, and devices paid under 
the pass-through payment policy, and items paid at charges adjusted to 
cost. We also are making a technical correction to the heading of Sec.  
419.70(d)(5) to correctly identify the policy described in the 
regulation text of Sec.  419.70(d)(5). The paragraph heading indicates 
that the adjustment applies to small SCHs, rather than to rural SCHs.

F. 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 CY 2008 claims processed through June 30, 2009, and the revised 
OPPS expenditure estimate for the 2009 Trustees Report, 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.
    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 the total 
aggregated payments under the OPPS. Using our final rule CY 2008 claims 
data and CY 2009 payment rates, we currently estimate that the 
aggregate outlier payments for CY 2009 would be approximately 1.03 
percent of the total CY 2009 OPPS payments. The difference between 1.0 
percent and 1.03 percent is reflected in the regulatory impact analysis 
in section XXI.B. of this final rule with comment period. 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. Outlier Calculation
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35296), we proposed to 
continue our policy of estimating outlier payments to be 1.0 percent of 
the estimated aggregate total payments under the OPPS in CY 2010. We 
proposed 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 final rule with 
comment period, for CMHCs, we proposed that if a CMHC's cost for 
partial hospitalization services, paid under either APC 0172 (Level I 
Partial

[[Page 60427]]

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 final rule with comment period.
    To ensure that the estimated CY 2010 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we proposed that the hospital outlier threshold be set so that 
outlier payments would be triggered when the cost of furnishing a 
service or procedure by a hospital exceeds 1.75 times the APC payment 
amount and exceeds the APC payment rate plus a $2,225 fixed-dollar 
threshold. This proposed threshold reflected the methodology discussed 
below in this section, as well as the proposed APC recalibration for CY 
2010.
    We calculated the fixed-dollar threshold for the CY 2010 OPPS/ASC 
proposed rule using largely the same methodology as we did in CY 2009 
(73 FR 41462). For purposes of estimating outlier payments for the CY 
2010 OPPS/ASC proposed rule, we used the hospital-specific overall 
ancillary 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 the CY 
2010 OPPS/ASC proposed rule, we used CY 2008 claims to model the CY 
2010 OPPS. In order to estimate the CY 2010 hospital outlier payments 
for the CY 2010 OPPS/ASC 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 was 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 proposed 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 proposed 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) and the FY 2010 IPPS/LTCH PPS final rule (74 FR 44007 
through 44011).
    Therefore, to model hospital outlier payments for the CY 2010 OPPS/
ASC 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 estimated 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 proposed to continue to make an 
outlier payment that equals 50 percent of the amount by which the cost 
of furnishing the service exceeds 1.75 times the APC payment amount 
when both the 1.75 multiple threshold and the 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 proposed 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 final rule with comment period.
    Comment: Several commenters supported the proposal to increase the 
outlier fixed-dollar threshold to maintain a target outlier spending 
percentage of 1.0 percent. One commenter requested that CMS not 
overestimate the fixed-dollar outlier threshold by decreasing the CY 
2010 proposed threshold proportionally to only account for the amount 
Medicare paid in excess of the 1 percent target outlier percentage in 
CY 2009. A few commenters suggested that the target outlier spending 
percentage be raised. One commenter recommended that the target outlier 
spending percentage be raised to maintain the $1,800 fixed-dollar 
threshold that is in effect for CY 2009. Another commenter requested 
that CMS increase the amount of outlier payment from 50 percent to 80 
percent of the difference between the OPPS payment and the estimated 
provider cost for the service to make OPPS outlier policy more 
consistent with IPPS outlier policy. One commenter expressed concern 
that changes in outlier payments disproportionately affected the safety 
net hospitals. One commenter supported the proposal to use the same 
assumptions regarding charge inflation and CCR inflation as under the 
IPPS.
    Response: We appreciate the commenters' support regarding the 
development of the OPPS outlier policy. We are not raising the 
threshold to recover the 0.03 percent of OPPS payment that we estimate 
was paid in

[[Page 60428]]

addition to the target outlier percent of 1 percent for CY 2009 because 
we do not adjust the fixed-dollar threshold in future years for either 
paying too much or too little in outlier payments in past years. We are 
not increasing the percent of total OPPS payment that we attribute to 
outlier payments, either for general purposes or to maintain the $1,800 
threshold for CY 2010, because we continue to believe that it is 
appropriate to maintain the target outlier percentage of 1 percent of 
total payment under the OPPS and to have a fixed-dollar threshold so 
that OPPS outlier payments are made only where the hospital would 
experience a significant loss for supplying a particular service. 
Similarly, we are not increasing the outlier payment percentage from 50 
percent to 80 percent of the difference between the amount by which the 
cost of furnishing the service exceeds 1.75 times the APC payment rate 
because we do not believe that hospitals carry the same level of risk 
when they furnish outpatient hospital services as when they furnish 
inpatient hospital services. OPPS outlier payments are intended to 
protect hospitals from excessive losses when providing an 
extraordinarily costly service, and we believe that the potential for 
loss when furnishing OPPS services is limited. Payment bundles under 
the OPPS are small relative to those under the IPPS, and the OPPS pays 
separately for many services. The OPPS would pay hospitals for many 
individual services provided to a very costly patient reducing their 
financial risk. Patients for whom a hospital may incur extraordinary 
costs for providing individual OPPS services would usually require 
hospital admission. As described above, outlier payments are designed 
to protect hospitals from financial risk in providing services to 
costly patients, and are not designed to affect any specific hospital 
classes, such as safety net hospitals. With regard to the application 
of charge inflation factors, we agree that the charge inflation factors 
that apply to inpatient hospitals services are equally applicable to 
services provided under the OPPS. Therefore, as specified below, we are 
applying the charge inflation factors that were used to calculate the 
outlier fixed-dollar threshold for the IPPS in the calculation of the 
fixed-dollar threshold for the CY 2010 OPPS.
    Comment: Several commenters asked that CMS eliminate outlier 
payments for CMHCs and use the funds allocated to outlier payments for 
CMHCs to increase payments for services provided by CMHCs.
    Response: Outlier payments to CMHCs are discussed in section X.C. 
of this final rule with public comment. We respond to this comment as 
part of that discussion.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal for the outlier calculation, without 
modification, as outlined below.
3. Final Outlier Calculation
    For CY 2010, we are applying the overall CCRs from the July 2009 
OPSF file with a CCR adjustment factor of 0.988 to approximate CY 2010 
CCRs to charges on the final CY 2008 claims that were adjusted to 
approximate CY 2010 charges (using the final 2-year charge inflation 
factor of 1.1418). 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 fixed-dollar threshold of $2,175, combined with the 
multiple threshold of 1.75 times the APC payment rate, will allocate 
1.0 percent of aggregated total OPPS payments to outlier payments.
    In summary, for CY 2010, we will continue to make an outlier 
payment that equals 50 percent of the amount by which the cost of 
furnishing the service exceeds 1.75 times the APC payment amount when 
both the 1.75 multiple threshold and the final fixed-dollar $2,175 
threshold are met. For CMHCs, if a CMHC's cost for PHP services, paid 
under either APC 0172 or APC 0173, exceeds 3.40 times the payment for 
APC 0173, the outlier payment is calculated as 50 percent of the amount 
by which the cost exceeds 3.40 times the APC 0173 payment rate. We 
estimate that this threshold will allocate 0.03 percent of outlier 
payments to CMHCs for PHP outlier payments.
4. 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 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 the Medicare 
Claims Processing Manual (Pub. 100-4), Chapter 4, Section 10.7.2.1, 
reevaluated annually, and modified if necessary. When the cost report 
is settled, reconciliation of outlier payments will be based on the 
hospital-specific overall ancillary 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 final 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 a hospital's or CMHC's overall CCR on the 
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 overall ancillary 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 OPPS 
fixed-dollar outlier threshold.
    Comment: A number of commenters asked that CMS report the amount of 
outlier reconciliation activity, including aggregate amounts recovered 
by provider type and region. They suggested that, if the reconciled 
amounts are significant, these amounts

[[Page 60429]]

should be factored into the annual fixed-dollar outlier threshold. 
Several commenters supported the current reconciliation thresholds 
identified in the CMS manual (Medicare Claims Processing Manual (Pub. 
100-04), Chapter 4, Section 10.7.2.1). One commenter asked that CMS 
apply the outlier reconciliation thresholds established in manual 
instructions to the claims used for estimating outlier payment and the 
fixed-dollar threshold to achieve the most accurate estimates possible.
    Response: We revised Worksheet E, Part B, of the Medicare hospital 
cost report form CMS 2552-10 to collect OPPS outlier reconciliation 
information for cost reports beginning on or after January 1, 2009. 
This information will be available to the public through the Hospital 
Cost Report Information System (HCRIS). We do not expect to take 
outlier reconciliation amounts into account in our projections of 
future outlier payments. We believe that the reconciliation CCR and 
outlier payment thresholds implemented in the final rule (73 CFR 68599) 
are generous and that most hospitals will not be subject to outlier 
reconciliation upon cost report settlement. Further, it is difficult to 
predict the specific hospitals that will have CCRs and outlier payments 
reconciled in any given year. We also note that reconciliation occurs 
because hospitals' actual CCRs for the cost reporting period are 
different than the interim CCRs used to calculate outlier payment when 
a bill is processed. Our fixed-dollar threshold calculation assumes 
that CCRs accurately estimate hospital costs based on information 
available to us at the time we set the prospective fixed-dollar outlier 
threshold. We do not believe that estimating the fixed-dollar threshold 
to estimate the amount of payment that may be recovered as a result of 
outlier reconciliation in any given year would necessarily result in a 
more accurate estimate of outlier payments or a more accurate 
calculation of the fixed-dollar threshold for outlier payment for the 
prospective payment year. For these reasons, we will not make any 
assumptions about the amount of anticipated reconciliation of outlier 
payments on the outlier threshold calculation.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, for an OPPS 
outlier reconciliation policy. We are implementing the outlier 
reconciliation policy for each hospital and CMHC for services furnished 
during cost reporting periods beginning in CY 2010, and we are 
including an adjustment for the time value of money.

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 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 final rule with comment period and the relative weight determined 
under section II.A. of this final rule with comment period. Therefore, 
the final national unadjusted payment rate for most APCs contained in 
Addendum A to this final rule with comment period and for most HCPCS 
codes to which separate payment under the OPPS has been assigned in 
Addendum B to this final rule with comment period was calculated by 
multiplying the final CY 2010 scaled weight for the APC by the final 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 payment 
reduction for hospitals that fail to meet the requirements of the HOP 
QDRP, we refer readers to section XVI.D. of this final rule with 
comment period.
    We demonstrate in the steps below how to determine the APC 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 
final rule with comment period), in a circumstance in which the 
multiple procedure discount does not apply, the procedure is not 
bilateral, and conditionally packaged services (status indicator of 
``Q1'' and ``Q2'') qualify for separate payment. We note that blood and 
blood products with status indicator ``R'' are not subject to wage 
adjustment but are subject to reduced payments when a hospital fails to 
meet the HOP QDRP requirements, as outlined in the steps and examples 
below.
    Individual providers interested in calculating the payment amount 
that they would receive for a specific service from the national 
unadjusted payment rates presented in Addenda A and B to this final 
rule with comment period should follow the formulas presented in the 
following steps. For purposes of the payment calculations below, we 
refer to the national unadjusted payment rate for hospitals that meet 
the requirements of the HOP QDRP as the ``full'' national unadjusted 
payment rate. We refer to the national unadjusted payment rate for 
hospitals that fail to meet the requirements of the HOP QDRP as the 
``reduced'' national unadjusted payment rate. The reduced national 
unadjusted payment rate is calculated by multiplying the reporting 
ratio of 0.98 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 
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)


[[Page 60430]]


    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) ``Lugar'' 
hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as 
defined in Sec.  412.103 of the regulations and hospitals designated as 
urban under section 601(g) of Public Law 98-21. 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, expired 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 changes to the FY 2010 IPPS wage indices, 
as applied to the CY 2010 OPPS, we refer readers to section II.C. of 
this final rule with comment period. The wage index values include the 
occupational mix adjustment described in section II.C. of this final 
rule with comment period that was developed for the FY 2010 IPPS final 
payment rates published in the Federal Register on August 27, 2009 (74 
FR 43827).
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this final rule with comment period contains the 
qualifying counties and the final wage index increase developed for the 
FY 2010 IPPS and published as Table 4J in the FY 2010 IPPS final rule 
(74 FR 44118 through 44125), as corrected in the Federal Register on 
October 2, 2009 (74 FR 51506) This step is to be followed only if the 
hospital is not reclassified or redesignated under section 1886(d)(8) 
or section 1886(d)(10) of the Act.
    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 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 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 CY 2010 full national unadjusted payment rate for 
APC 0019 is $294.06. The reduced national unadjusted payment rate for a 
hospital that fails to meet the HOP QDRP requirements is $288.17. This 
reduced rate is calculated by multiplying the reporting ratio of 0.98 
by the full unadjusted payment rate for APC 0019.
    The FY 2010 wage index for a provider located in CBSA 35644 in New 
Jersey is 1.3005. The labor-related portion of the full national 
unadjusted payment is $229.45 (.60 * $294.06 * 1.3005). The labor-
related portion of the reduced national unadjusted payment is $224.85 
(.60 * $288.17 * 1.3005). The nonlabor-related portion of the full 
national unadjusted payment is $117.62 (.40 * $294.06). The nonlabor-
related portion of the reduced national unadjusted payment is $115.26 
(.40 * $288.17). The sum of the labor-related and nonlabor-related 
portions of the full national adjusted payment is $347.07 ($229.45 + 
$117.62). The sum of the reduced national adjusted payment is $340.11 
($224.85 + $115.26).
    We did not receive any public comments concerning our proposed 
methodology for calculating an adjusted payment from the national 
unadjusted Medicare payment amount for CY 2010. Therefore, we are 
finalizing our proposed CY 2010 methodology, without modification.

H. 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. Copayment Policy
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35298), for CY 2010, 
we proposed 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,

[[Page 60431]]

2003 OPPS final rule with comment period (68 FR 63458)). In addition, 
we proposed 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 
will be effective January 1, 2010, are shown in Addenda A and B to this 
final rule with comment period. As discussed in section XVI.D. of this 
final rule with comment period, as we proposed, we are providing 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 will 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.
    Comment: One commenter recommended that CMS continue its 
educational outreach and keep Medicare beneficiaries informed about the 
benefits of supplemental/secondary insurance in reducing their out-of-
pocket costs for orthopedic procedures.
    Response: We appreciate the commenter's support for our educational 
efforts on the availability of supplemental/secondary insurance and 
refer beneficiaries seeking information about their Medicare benefits 
and supplemental/secondary insurance coverage to the Web site at: 
http://www.medicare.gov.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, for determining 
APC copayment amounts.
3. Calculation of an Adjusted Copayment Amount for an APC Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its HOP QDRP requirements should 
follow the formulas presented in the following steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using APC 0019, $64.51 is 22 percent of the full national 
unadjusted payment rate of $294.06. For APCs with only a minimum 
unadjusted copayment in Addendum A and B of this final rule with 
comment period, identify a beneficiary payment percentage of 20 
percent.
    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 Steps 2 through 4 
under section II.G. of this final rule with comment period. Calculate 
the rural adjustment for eligible providers as indicated in Step 6 
under section II.G. of this final rule with comment period.
    Step 3. Multiply the percentage calculated in Step 1 by the payment 
rate calculated in Step 2. The result is the wage-adjusted copayment 
amount for the APC.
    The formula below is a mathematical representation of Step 3 and 
applies the beneficiary percentage to the adjusted payment rate for a 
service calculated under section II.G. of this final rule with comment 
period, with and without the rural adjustment, to calculate the 
adjusted beneficiary copayment for a given service.

Wage-adjusted copayment amount for the APC = Adjusted Medicare Payment 
* B
Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted 
Medicare Payment * 1.071) * B

    Step 4. For a hospital that failed to meet its HOP QDRP 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.98.
    The unadjusted copayments for services payable under the OPPS that 
will be effective January 1, 2010, are shown in Addenda A and B to this 
final rule with comment period. We note that the national unadjusted 
payment rates and copayment rates shown in Addenda A and B to this 
final rule with comment period reflect the full market basket 
conversion factor increase, as discussed in section XVI.D. of this 
final rule with comment period.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

A. OPPS Treatment of New 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 timelier 
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.
    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. We also sought public comments in 
the CY 2009 OPPS/ASC final rule with comment period on the new Level II 
HCPCS codes effective October 1, 2008. These new codes with an 
effective date 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 CY 2009 OPPS/ASC final rule with 
comment period. Summaries of public comments on the codes flagged with 
comment indicator ``NI'' in the CY 2009 OPPS/ASC final rule with 
comment period and our responses are included in the sections of this 
final rule with

[[Page 60432]]

comment period that are relevant to the services described by those 
codes.
    In Table 13 of the CY 2010 OPPS/ASC proposed rule (74 FR 35299), 
which is reproduced as Table 18 in this final rule with comment period, 
we summarized our process for updating codes through our OPPS quarterly 
update CRs, seeking public comment, and finalizing their treatment 
under the OPPS.

                           Table 18--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                                                  comment period.
                                   Category III 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      January 1, 2010...  CY 2010 OPPS/ASC    CY 2011 OPPS/ASC
                                   Category III CPT                        final rule with     final rule with
                                   Codes.                                  comment period.     comment period.
----------------------------------------------------------------------------------------------------------------

1. Treatment of New Level II HCPCS Codes and Category I CPT Vaccine 
Codes and Category III CPT Codes
    In the April 1 and July 1 CRs for CY 2009, we made effective a 
total of 13 new Level II HCPCS codes that were not addressed in the CY 
2009 OPPS/ASC final rule with comment period that updated the OPPS and 
we allowed separate payment for 12 of these new codes. Through the 
April 1, 2009 CR, we also 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 to a 
status indicator that allowed separate pass-through payment for this 
code. In addition to the changes for Level II HCPCS codes, we made 
effective 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 and we allowed separate payment for 3 of these 
new codes.
    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, HCPCS code C9247 was packaged under the OPPS and 
assigned status indicator ``N'' (Items and Services Packaged into APC 
Rates). We note that between January 1, 2009 through March 31, 2009, 
HCPCS code C9247 was recognized as a nonpass-through diagnostic 
radiopharmaceutical. Because nonpass-through diagnostic 
radiopharmaceuticals are packaged under the OPPS, there was no separate 
APC payment for HCPCS code C9247 from January 1, 2009 through March 31, 
2009. However, effective April 1, 2009, HCPCS code C9247 was allowed 
separate pass-through payment and its status indicator was revised from 
``N'' to ``G'' (Pass-Through Drugs and Biologicals).
    In the CY 2010 OPPS/ASC proposed rule, we solicited public comments 
on the status indicators and APC assignments of HCPCS codes C9247 and 
C9249, which were listed in Table 14 of that proposed rule (74 FR 
35301) and now appear in Table 19 of this final rule with comment 
period.
    We did not receive any public comments on the proposed APC 
assignments and status indicators for HCPCS codes C9247 and C9249. 
However, for CY 2010, the HCPCS Workgroup replaced both HCPCS C-codes 
with permanent HCPCS codes. Specifically, C9247 was replaced with A9582 
(Iodine I-123 iobenguane, diagnostic, per study dose, up to 15 
millicuries) and C9249 was replaced with J0718 (Injection, certolizumab 
pegol, 1 mg). Consistent with our general policy of using permanent 
HCPCS codes if appropriate rather than HCPCS C-codes for the reporting 
of drugs under the OPPS in order to streamline coding, we are showing 
the replacement HCPCS codes in Table 19 that will replace the HCPCS C-
codes effective January 1, 2010. Both HCPCS C-codes will be deleted 
December 31, 2009. Because HCPCS code J0718 describes the same drug and 
the same dosage currently designated by HCPCS code C9249 and this drug 
will continue on pass-through status in CY 2010, we are assigning HCPCS 
code J0718 the same status indicator and APC as its predecessor C-code, 
as shown in Table 19. Although the dosage descriptor of HCPCS code 
A9582 indicates ``per study dose, up to 15 millicuries'' and the 
descriptor of its predecessor C-code designates ``per study dose, up to 
10 millicuries,'' because we believe that the reporting of one unit for 
a study dose would be the same in almost all cases under either HCPCS 
code, we are assigning HCPCS code A9582 to the same APC as its 
predecessor C-code, as shown in Table 19. The recommended dose of I-123 
iobenguane is 10 millicuries for adult patients, so we expect that 
hospitals would report 1 unit of new HCPCS code A9582 for the typical 
dose in CY 2010, just as they would have reported one unit of HCPCS 
code C9247 previously for the typical dose. We also note this 
diagnostic radiopharmaceutical will continue on

[[Page 60433]]

pass-through status in CY 2010; therefore, its CY 2010 status indicator 
remains as ``G.'' Because we did not receive any public comments on the 
new Level II HCPCS codes that were implemented in April 2009, we are 
adopting as final, without modification, our proposal to assign the 
Level II HCPCS codes listed in Table 19 to the APCs and status 
indicators as proposed for CY 2010.
    Table 19 below shows the final APC and status indicator assignments 
for both HCPCS codes A9582 and J0718.

    Table 19--Level II HCPCS Codes WITH A Change in OPPS Status Indicator or Newly Implemented in April 2009
----------------------------------------------------------------------------------------------------------------
                                                       CY 2010 long        Final CY 2010 status    Final CY 2010
   CY 2010 HCPCS code       CY 2009 HCPCS code          descriptor               indicator              APC
----------------------------------------------------------------------------------------------------------------
A9582..................  C9247..................  Iodine I-123            G.....................            9247
                                                   iobenguane,
                                                   diagnostic, per study
                                                   dose, up to 15
                                                   millicuries.
J0718..................  C9249..................  Injection,              G.....................            9249
                                                   certolizumab pegol, 1
                                                   mg.
----------------------------------------------------------------------------------------------------------------

    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 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 made effective July 1, 2009, because ASP pricing 
information was not available at the time the code was made effective, 
the HCPCS code was not paid separately and it was assigned status 
indicator ``M'' (Items and Services Not Billable to the Fiscal 
Intermediary/MAC) in the CY 2010 OPPS/ASC proposed rule (74 FR 35300 
through 35301). For the October 2009 OPPS quarterly update, the status 
indicator for HCPCS code Q4115 was revised from ``M'' to K'' (Nonpass-
Through Drugs and Biologicals) effective October 1, 2009 because 
pricing information was available, and this product was paid separately 
as a new biological HCPCS code based on the ASP methodology, consistent 
with the final CY 2009 policy and the final CY 2010 policy for payment 
of new drug and biological HCPCS codes without pass-through status. The 
change in status indicator assignment was announced through the October 
2009 OPPS quarterly update CR (Transmittal 1803, Change Request 6626, 
dated August 28, 2009).
    In the CY 2010 OPPS/ASC proposed rule, we solicited public comments 
on the status indicators, APC assignments, and payment rates of these 
codes, which were listed in Table 15 of that proposed rule (74 FR 
35301) and now appear in Table 20 of this final rule with comment 
period. Because of the timing of the proposed rule, the codes 
implemented in the July 2009 OPPS update were not included in Addendum 
B of that proposed rule, while those codes based upon the April 2009 
OPPS update were included in Addendum B. In the CY 2009 OPPS/ASC 
proposed rule, we proposed to assign the new HCPCS codes for CY 2010 to 
the designated APCs listed in Table 15 for each HCPCS code and 
incorporate them into our final rule with comment period for CY 2010, 
which is consistent with our annual APC updating policy.
    We did not receive any public comments on the proposed APC 
assignments, payment rates, and status indicators designated for the 
codes listed in Table 15 of the proposed rule. However, for CY 2010, 
the HCPCS Workgroup created permanent HCPCS J-codes for 4 of the 11 
separately payable drug codes. Consistent with our general policy of 
using permanent HCPCS codes if appropriate rather than HCPCS C-codes 
for the reporting of drugs under the OPPS in order to streamline 
coding, we are showing the HCPCS J-codes in Table 20 of this final rule 
with comment period that will replace the HCPCS C-codes effective 
January 1, 2010. HCPCS code C9251 is replaced with J0598 (Injection, C1 
esterase inhibitor (human), 10 units); C9252 with J2562 (Injection, 
plerixafor, 1 mg); C9253 is replaced with J9328 (Injection, 
temozolomide, 1 mg); and Q2023 is replaced with J7185 (Injection, 
factor viii (antihemophilic factor, recombinant) (Xyntha), per i.u.). 
The HCPCS J-codes describe the same drugs and the same dosages as the 
HCPCS C-codes that will be deleted December 31, 2009. We note that 
HCPCS C-codes are temporary national HCPCS codes. To avoid duplication, 
temporary national HCPCS codes, such as ``C,'' ``G,'' ``K,'' and ``Q'' 
codes, are generally deleted once permanent national HCPCS codes are 
created that describe the same item, service, or procedure. Because 
three of the four new HCPCS J-codes describe the same drugs and the 
same dosages that are currently designated by HCPCS codes C9251, C9252, 
and C9253 and all three of these drugs will continue on pass-through 
status in CY 2010, we are assigning the HCPCS J-codes to the same APCs 
and status indicators as their predecessor HCPCS C-codes, as shown in 
Table 20. That is, HCPCS code J0598 is assigned to the same APC and 
status indicator as HCPCS code C9251 (APC 9251); HCPCS code J2562 is 
assigned to APC 9252; and HCPCS J9328 is assigned to APC 9253. Also, we 
note that, effective January 1, 2010, HCPCS code Q2023 will be replaced 
with HCPCS code J7185, which has the same descriptor and is assigned to 
the same APC and status indicator as HCPCS code Q2023.
    Because we did not receive any public comments on the new Level II 
HCPCS codes that were implemented in July 2009, we are adopting as 
final, without modification, our proposal to assign the Level II HCPCS 
codes listed in Table 20 to the APCs and status indicators as proposed 
for CY 2010.

[[Page 60434]]



                           Table 20--New Level II HCPCS Codes Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
                                                                                            Final CY
         CY 2010 HCPCS code            CY 2009 HCPCS code      CY 2010 Long descriptor    2010 status   Final CY
                                                                                           indicator    2010 APC
----------------------------------------------------------------------------------------------------------------
C9250..............................  C9250.................  Human plasma fibrin                   G        9250
                                                              sealant, vapor-heated,
                                                              solvent-detergent
                                                              (Artiss), 2ml.
J0598..............................  C9251.................  Injection, C1 esterase                G        9251
                                                              inhibitor (human), 10
                                                              units.
J2562..............................  C9252.................  Injection, plerixafor, 1 mg           G        9252
J9328..............................  C9253.................  Injection, temozolomide, 1            G        9253
                                                              mg.
C9360..............................  C9360.................  Dermal substitute, native,            G        9360
                                                              non-denatured collagen,
                                                              neonatal bovine origin
                                                              (SurgiMend Collagen
                                                              Matrix), per 0.5 square
                                                              centimeters.
C9361..............................  C9361.................  Collagen matrix nerve wrap            G        9361
                                                              (NeuroMend Collagen Nerve
                                                              Wrap), per 0.5 centimeter
                                                              length.
C9362..............................  C9362.................  Porous purified collagen              G        9362
                                                              matrix bone void filler
                                                              (Integra Mozaik
                                                              Osteoconductive Scaffold
                                                              Strip), per 0.5 cc.
C9363..............................  C9363.................  Skin substitute, Integra              G        9363
                                                              Meshed Bilayer Wound
                                                              Matrix, per square
                                                              centimeter.
C9364..............................  C9364.................  Porcine implant, Permacol,            G        9364
                                                              per square centimeter.
J7185..............................  Q2023.................  Injection, factor viii                K        1268
                                                              (antihemophilic factor,
                                                              recombinant) (Xyntha), per
                                                              i.u..
Q4115..............................  Q4115.................  Skin substitute, Alloskin,            K        1287
                                                              per square centimeter.
Q4116..............................  Q4116.................  Skin substitute, Alloderm,            K        1270
                                                              per square centimeter.
----------------------------------------------------------------------------------------------------------------

    In the CY 2010 OPPS/ASC proposed rule (74 FR 35300), we proposed 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 of the CY 2010 OPPS/ASC proposed 
rule (74 FR 35301) and reproduced in this final rule with comment 
period as Table 21, 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) 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.
    Because the July 2009 OPPS quarterly update CR was issued close to 
the publication of the CY 2010 OPPS/ASC proposed rule, the Category I 
vaccine and Category III CPT codes implemented through the July 2009 
OPPS quarterly update CR were not be included in Addendum B to the 
proposed rule, but these codes were listed in Table 16 of the proposed 
rule. Additionally, we proposed to incorporate them into Addendum B to 
this CY 2010 OPPS/ASC final rule with comment period, which is 
consistent with our annual OPPS update policy.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35301), we solicited 
public comments on the proposed status indicators, APC assignments, and 
payment rates for the new Category I and III CPT codes. We did not 
receive any public comments on our proposals for CPT codes 0199T, 
0200T, 0201T, 0202T, and 90670. Therefore, we are finalizing our CY 
2010 proposals for these codes, without modification. The final CY 2010 
status indicators and APC assignments for CPT codes 0199T, 0200T, 
0201T, 0202T, and 90670 are listed in Table 21 below, as well as in 
Addendum B to this final rule with comment period.

                Table 21--Category I Vaccine and Category III CPT Codes Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
                                                                                   Final CY
        CY 2010 HCPCS code                    CY 2010 long descriptor            2010 status   Final CY 2010 APC
                                                                                  indicator
----------------------------------------------------------------------------------------------------------------
0199T............................  Physiologic recording of tremor using                  S   0215
                                    accelerometer(s) and gyroscope(s),
                                    (including frequency and amplitude)
                                    including interpretation and report.
0200T............................  Percutaneous sacral augmentation                       T   0049
                                    (sacroplasty), unilateral injection(s),
                                    including the use of a balloon or
                                    mechanical device (if utilized), one or
                                    more needles.

[[Page 60435]]

 
0201T............................  Percutaneous sacral augmentation                       T   0050
                                    (sacroplasty), bilateral injections,
                                    including the use of a balloon or
                                    mechanical device (if utilized), two or
                                    more needles.
0202T............................  Posterior vertebral joint(s) arthroplasty               C  Not
                                    (e.g., facet joint[s] replacement)                        applicable.
                                    including facetectomy, laminectomy,
                                    foraminotomy and vertebral column fixation,
                                    with or without injection of bone cement,
                                    including fluoroscopy, single level, lumbar
                                    spine.
90670............................  Pneumococcal conjugate vaccine, 13 valent,             E   Not
                                    for intramuscular use.                                    applicable.
----------------------------------------------------------------------------------------------------------------

2. Process for New Level II HCPCS Codes and Category I and Category III 
CPT Codes for Which We Are Soliciting Public Comments on 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 this 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. In the CY 2010 
OPPS/ASC proposed rule (74 FR 35302), we proposed to continue this 
process for CY 2010. Specifically, for CY 2010, we proposed 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. Excluding those Category I vaccine and Category III CPT 
codes that were released by the AMA in July 2009 which were subject to 
comment in the CY 2010 OPPS/ASC proposed rule as described above, these 
codes would be flagged with comment indicator ``NI'' in Addendum B to 
this CY 2010 OPPS/ASC final rule with comment period to indicate that 
we have assigned them an interim OPPS payment status. We proposed that 
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.
    Comment: One commenter requested that CMS solicit public comments 
on APC assignments for the newly implemented CPT codes that go into 
effect January 1 and, when necessary, revise their APC assignments and 
implement the changes in the next quarterly OPPS update to promote 
payment accuracy.
    Response: For new HCPCS codes with an interim final APC and/or 
status indicator designation in a final rule, we are only able to 
finalize their assignments in another OPPS final rule in order to allow 
for the necessary public notice and comment period and to allow for CMS 
to respond to such comments. Therefore, we only assign HCPCS codes 
permanently for the year through the annual regulatory process. Because 
we are not able to revise APC and/or status indicator assignments for 
the newly implemented HCPCS codes in CY 2010 that are assigned an 
interim final status in this CY 2010 OPPS/ASC final rule with comment 
period outside of the rulemaking process, the next available 
opportunity to update an APC or status indicator for these codes is in 
the CY 2011 OPPS update. These HCPCS codes retain their interim final 
APC and status indicator assignments for all of CY 2010. Therefore, 
only in the CY 2011 OPPS/ASC final rule with comment period will we be 
able to finalize the APC and/or status indicator assignments of the new 
CY 2010 HCPCS codes and respond to all public comments received on 
their interim designations.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to provide interim final 
status indicators and APC assignments and payment rates, if applicable, 
for all CPT codes newly implemented in January 2010 and all HCPCS codes 
newly implemented in October 2009 or January 2010 in Addendum B to this 
final rule with comment period. The interim final OPPS treatment of 
these codes is open to public comment in the CY 2010 OPPS/ASC final 
rule with comment period and will be finalized in the CY 2011 OPPS/ASC 
final rule with comment period.

B. OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered 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

[[Page 60436]]

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.3. of this final 
rule with comment period); (7) incidental services such as 
venipuncture; and (8) guidance services, image processing services, 
intraoperative services, imaging supervision and interpretation 
services, diagnostic radiopharmaceuticals, and contrast media. Further 
discussion of packaged services is included in section II.A.4. of this 
final rule with comment period.
    In CY 2008 (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 2010 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 final rule with 
comment period.
    Under the OPPS, we generally pay for hospital outpatient services 
on a rate-per-service basis, where the service may be reported with one 
or more HCPCS codes. Payment varies according to the APC group to which 
the independent service or combination of services is assigned. Each 
APC weight represents the hospital median cost of the services included 
in that APC relative to the hospital median cost of the services 
included in APC 0606 (Level 3 Hospital Clinic Visits). The APC weights 
are scaled to APC 0606 because it is the middle level clinic visit APC 
(that is, where the Level 3 clinic visit CPT code of five levels of 
clinic visits is assigned), and because middle level clinic visits are 
among the most frequently furnished services in the hospital outpatient 
setting.
    Section 1833(t)(9)(A) of the Act requires the Secretary to review 
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 final rule with comment 
period).
    Finally, section 1833(t)(2) of the Act provides that, subject to 
certain exceptions, the items and services within an APC group cannot 
be considered comparable with respect to the use of resources if the 
highest median cost (or mean cost as elected by the Secretary) for an 
item or service in the group is more than 2 times greater than the 
lowest median cost (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 of the item or service in implementing this provision. In 
performing this analysis, we examine data from the significant services 
assigned to an APC, specifically those HCPCS codes with a single claim 
frequency of greater than 1,000 or a frequency of greater than 99 and a 
percentage of all single claims that is equal to or greater than 2 
percent. Because, as a matter of policy, HCPCS codes that are unlisted 
procedures, not otherwise classified, or not otherwise specified codes 
are assigned to the lowest level APC that is appropriate to the 
clinical nature of the service (69 FR 65724 through 65725), we do not 
consider the costs of these services in assessing APCs for 2 times 
violations. 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. In the CY 2010 
OPPS/ASC proposed rule (74 FR 35303), we proposed to make exceptions to 
this limit on the variation of costs within each APC group in unusual 
cases, such as low-volume items and services for CY 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, because we had concerns or 
the public had raised concerns regarding their APC assignments, status 
indicator assignments, or payment rates. In addition to the assignment 
of specific services to APCs that we discussed with the APC Panel, we 
also identified APCs with 2 times violations that were not specifically 
discussed with the APC Panel but for which we proposed changes to their 
HCPCS codes' APC assignments in Addendum B to the CY 2010 OPPS/ASC 
proposed rule. In these cases, to eliminate a 2 times violation or to 
improve clinical and resource homogeneity, we proposed to reassign the 
codes to APCs that contain services that are similar with regard to 
both their clinical and resource characteristics. We also proposed 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 the proposed rule were 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 proposed changes to the status 
indicators for some codes that were not specifically and separately 
discussed in the proposed rule. In these cases, we proposed to change 
the status indicators for some codes because we believed that another 
status indicator would more accurately describe their payment status 
from an OPPS perspective based on the policies that we proposed for CY 
2010.
    Addendum B to the CY 2010 OPPS/ASC proposed rule identified, with 
comment indicator ``CH,'' those HCPCS codes for which we proposed a 
change to the APC assignment or status

[[Page 60437]]

indicator that were initially assigned in the April 2009 Addendum B 
update (Transmittal 1702, Change Request 6416, dated March 13, 2009).
    Comment: One commenter generally supported CMS' adherence to the 2 
times rule to ensure appropriate payment for OPPS services and to 
provide incentives for patients to be treated in the most suitable 
clinical setting. In particular, the commenter supported the proposed 
reassignments of the following CPT codes: CPT code 20103 (Exploration 
of penetrating wound (separate procedure); extremity) from APC 0136 
(Level IV Skin Repair) to APC 0007 (Level II Incision & Drainage); and 
CPT code 29888 (Arthroscopically aided anterior cruciate ligament 
repair/augmentation or reconstruction) and CPT code 29889 
(Arthroscopically aided posterior cruciate ligament repair/augmentation 
or reconstruction) from APC 0042 (Level II Arthroscopy) to APC 0052 
(Level IV Musculoskeletal Procedures Except Hand and Foot).
    Response: We appreciate the commenter's support for the 2 times 
rule in general and for the proposed APC reassignments of CPT codes 
20103, 29888, and 29889 in particular. We agree with the commenter that 
the 2 times rule is an important mechanism for ensuring appropriate 
payment for OPPS services. Based on the CY 2008 claims and cost report 
data available for this final rule with comment period, we also agree 
with the commenter that we should adopt the proposed reassignments of 
CPT codes 20103, 29888, and 29889 in order to improve clinical and 
resource homogeneity.
    Therefore, after consideration of the public comment we received, 
we are finalizing, without modification, our CY 2010 proposals to 
reassign CPT code 20103 to APC 0007, with a final CY 2010 APC median 
cost of approximately $843 and CPT codes 29888 and 29889 to APC 0052, 
with a final CY 2010 APC median cost of approximately $5,921.
3. Exceptions to the 2 Times Rule
    As discussed earlier, we may make exceptions to the 2 times limit 
on the variation of costs within each APC group in unusual cases such 
as low-volume items and services. We stated in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35303) that we took into account the APC changes 
that we proposed for CY 2010 based on the APC Panel recommendations, 
the other proposed changes to status indicators and APC assignments as 
identified in Addendum B to the proposed rule, and the use of CY 2008 
claims data available for the proposed rule to calculate the median 
costs of procedures classified in the APCs. We then reviewed all of 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); and
     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 the CY 2010 OPPS/ASC proposed rule (74 FR 35303) listed 
14 APCs that we proposed 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 proposed for CY 2010. The median costs for hospital 
outpatient services for these and all other APCs that were used in the 
development of the CY 2010 OPPS/ASC proposed rule and this final rule 
with comment period can be found on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/01_overview.asp.
    For the CY 2010 OPPS/ASC proposed rule, we based the listed 
exceptions to the 2 times rule on claims data for dates of service 
between January 1, 2008, and December 31, 2008, that were processed 
before January 1, 2009. For this final rule with comment period, we 
used claims data for dates of service between January 1, 2008, and 
December 31, 2008, that were processed on or before June 30, 2008, and 
updated CCRs, if available. Thus, after responding to all of the public 
comments on the CY 2010 OPPS/ASC proposed rule and making changes to 
APC assignments based on those comments, we analyzed the CY 2008 claims 
data used for this final rule with comment period to identify the APCs 
with 2 times violations. Based on the final CY 2008 claims data, we 
found that there are 15 APCs with 2 times rule violations, a cumulative 
increase of 1 APC from the proposed rule. We applied the criteria as 
described earlier to identify the APCs that are exceptions to the 2 
times rule for CY 2010, and identified 4 additional APCs that meet the 
criteria for exception to the 2 times rule for this final rule with 
comment period: APC 0057 (Bunion Procedures); APC 0060 (Manipulation 
Therapy); APC 0341 (Skin Tests); and APC 0409 (Red Blood Cell Tests). 
These APC exceptions are listed in Table 22 below. We also determined 
that there are 3 APCs that no longer violate the 2 times rule: APC 0237 
(Level II Posterior Segment Eye Procedures); APC 0325 (Group 
Psychotherapy); and APC 0436 (Level I Drug Administration). We have not 
included in this count those APCs where a 2 times violation is not a 
relevant concept, such as APC 0375 (Ancillary Outpatient Services when 
Patient Expires), with an APC median cost set based on multiple 
procedure claims, so that we have identified only final APCs, including 
those with criteria-based median costs, such as device-dependent APCs, 
with 2 times violations.
    Comment: One commenter requested that CMS not exempt any imaging 
and radiation therapy APCs from the 2 times rule. According to the 
commenter, violations of the 2 times rule should demonstrate to CMS 
that a particular APC is incorrectly constructed. The commenter 
recommended that, rather than exempting these APCs from the 2 times 
rule, CMS review the configurations of the APCs and make any necessary 
revisions.
    Response: We do not agree with the commenter that we should not 
exempt any imaging and radiation therapy APCs from the 2 times rule. As 
stated earlier in this section, 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. In the CY 2010 OPPS/ASC proposed 
rule (74 FR 35303), we proposed to exempt one imaging APC and one 
radiation therapy APC from the 2 times rule, specifically APC 0128 
(Echocardiogram with Contrast) and APC 0664 (Level I Proton Beam 
Radiation Therapy), respectively. As discussed in greater detail in 
section II.A.2.d.(4) of this final rule with comment period, we believe 
that the median costs of the echocardiography procedures assigned to 
APC 0128 do not warrant assignment of any of those procedures to a new 
clinical APC. APC 0664 includes CPT code 77520 (Proton treatment 
delivery; simple, without compensation), with a median cost of 
approximately $396 (based on 243 single claims of 251 total claims), 
and CPT code 77522 (Proton treatment delivery; simple, with 
compensation),

[[Page 60438]]

with a median cost of approximately $934 (based on 11,012 single claims 
of 12,252 total claims). We continue to believe that the resources and 
clinical characteristics of the low-volume procedure described by CPT 
code 77520 are sufficiently similar to the procedure described by CPT 
code 77522 to warrant continued assignment of both CPT codes to APC 
0664. Therefore, we are finalizing our proposal to exempt APC 0128 and 
APC 0664 from the 2 times rule for CY 2010. Consistent with our 
standard policy, we will continue to review, on an annual basis, the 
APC assignments for all OPPS services to ensure appropriate placement.
    We also received a number of specific public comments regarding 
some of the procedures assigned to APCs that we proposed to exempt from 
the 2 times rule for CY 2010. Discussions of those public comments are 
included elsewhere in this final rule with comment period in the 
specific sections related to the types of procedures that were the 
subjects of the comments.
    After consideration of the public comments we received and our 
review of the CY 2008 costs from claims available for this final rule 
with comment period, we are exempting 15 APCs from the 2 times rule for 
CY 2010, as described previously in this section. Our final list of 15 
APCs exempted from the 2 times rule is displayed in Table 22 below.

                         Table 22--Final APC Exceptions to the 2 Times Rule for CY 2010
----------------------------------------------------------------------------------------------------------------
           Final CY 2010 APC                                     Final CY 2010 APC Title
----------------------------------------------------------------------------------------------------------------
0057...................................  Bunion Procedures.
0060...................................  Manipulation Therapy.
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.
0245...................................  Level I Cataract Procedures without IOL Insert.
0303...................................  Treatment Device Construction.
0341...................................  Skin Tests.
0381...................................  Single Allergy Tests.
0409...................................  Red Blood Cell Tests.
0432...................................  Health and Behavior Services.
0604...................................  Level 1 Hospital Clinic Visits.
0664...................................  Level I Proton Beam Radiation Therapy.
----------------------------------------------------------------------------------------------------------------

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-
$10,000). 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. 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 the CY 2010 OPPS/ASC 
proposed rule (74 FR 35304), for CY 2010, we proposed to retain 
services within New Technology APC groups until we gather sufficient 
claims data to enable us to assign the service to a clinically 
appropriate APC. The flexibility associated with this policy allows us 
to move a service from a New Technology APC in less than 2 years if 
sufficient data are available. It also allows us to retain a service in 
a New Technology APC for more than 2 years if sufficient

[[Page 60439]]

hospital claims data upon which to base a decision for reassignment 
have not been collected.
    Table 18 of the proposed rule (74 FR 35304) listed the HCPCS code 
and its associated status indicator that we proposed to reassign from a 
New Technology APC to a clinically appropriate APC for CY 2010. Based 
on the CY 2008 OPPS claims data available for the proposed rule, we 
believe we had sufficient claims data to propose reassignment of CPT 
code 0182T to a clinically appropriate APC. Specifically, we proposed 
to reassign this electronic brachytherapy service from APC 1519 (New 
Technology--Level IXX ($1,700-$1,800)) 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.
    The proposed CY 2010 APC reassignment of CPT code 0182T was 
discussed with the APC Panel at its August 2009 meeting. One public 
presenter indicated that CPT code 0182T describes both single-fraction 
and multiple-fraction electronic brachytherapy, and that most of the 
claims on which CMS based its CY 2010 proposal were from hospitals 
reporting multi-fraction electronic brachytherapy. The presenter 
believed that the hospital resources required for these two types of 
brachytherapy were significantly different from one another. The 
presenter also stated that, unlike the conventional brachytherapy 
procedures that are assigned to APC 0313 and for which the associated 
brachytherapy sources are all paid separately under the OPPS, payment 
for the brachytherapy source associated with CPT code 0182T is packaged 
into the procedure payment. The APC Panel noted that the problem of 
distinguishing single-fraction from multiple-fraction electronic 
brachytherapy is a coding issue that would not be resolved by 
additional claims data because the two types of procedures are reported 
with the same CPT code. After discussion of the median cost of CPT code 
0182T observed in claims data and the potential contribution of the 
brachytherapy source cost to the overall procedure cost, the APC Panel 
made no recommendation on the CY 2010 APC assignment for CPT code 
0182T.
    Comment: Several commenters disagreed with the CMS proposal to 
reassign CPT code 0182T to APC 0313 for CY 2010. Commenters responding 
regarding both single-fraction and multiple-fraction electronic 
brachytherapy procedures reported with CPT code 0182T asserted that the 
proposed payment of approximately $747 does not cover the full costs of 
providing these services. They indicated that the current payment rate 
of $1,750 that is associated with APC 1519, where CPT code 0182T is 
assigned, includes the cost of the electronic brachytherapy source, 
whereas the payment rate for APC 0313 does not. Several commenters 
noted that the claims data used in determining the reassignment for CPT 
code 0182T are very limited and pointed out that the claims data for 
this service came from only a few hospitals that were early adopters of 
the multiple-source electronic brachytherapy technology. They argued 
that data from these hospitals represented pre-commercial clinical site 
data and that, therefore, these hospitals had received equipment and 
sources at reduced cost. One commenter suggested that CMS should 
develop coding that would distinguish between single-fraction and 
multiple-fraction electronic brachytherapy procedures in order to pay 
appropriately for each type of service because the current single 
payment for both technologies provides a financial incentive for the 
use of multiple-fraction electronic brachytherapy. Most commenters 
urged CMS to continue to assign CPT code 0182T to APC 1519 for at least 
another year to enable CMS to gather sufficient claims data from more 
hospitals in order to appropriately reassign CPT code 0182T to a 
clinical APC based on the clinical and resource costs of the procedure.
    Response: CPT code 0182T was initially assigned to New Technology 
APC 1519 with a payment rate of $1,750 when the code was implemented in 
July 2007, and it has been assigned to that same APC through CY 2009. 
For CY 2010, we proposed to reassign CPT code 0182T from New Technology 
APC 1519 to APC 0313, which had a proposed payment rate of 
approximately $747 and a proposed median cost of approximately $753 
(and now has a final rule median cost of $770). Analysis of hospital 
claims data from CY 2007 and CY 2008 revealed that the procedure 
described by CPT code 0182T is not commonly performed on Medicare 
patients. For CY 2008, claims data show 223 total claims with a median 
cost of about $506 for this procedure. For CY 2007, claims data (6 
months due to implementation of the code in July 2007) show only 21 
total claims with a median cost of about $495. Therefore, we believe 
that the hospital resources required for CPT code 0182T are consistent 
with the costs of other services assigned to APC 0313 and payment for 
CPT code 0182T would be appropriately made through that clinical APC.
    We are not creating a new Level II HCPCS code for single-fraction 
electronic brachytherapy at this time because we believe that the two 
forms of electronic brachytherapy, whether provided in a single-
fraction or multiple-fraction regimen, depending on the technology, are 
both described by CPT code 0182T, which is appropriately assigned to a 
single APC. We note that the payment is per-fraction according to the 
code descriptor for CPT code 0182T, and that would include a single-
fraction treatment as well. While we recognize that CPT code 0182T 
describes both single- and multiple-fraction electronic brachytherapy, 
we commonly pay for different technologies under the OPPS that are 
reported in a single CPT code and we expect the hospital claims data to 
reflect the resources required for all of the different technologies 
reported under the one code. To the extent that one technology is 
predominantly used by hospitals, then the costs of that technology will 
have a greater effect on the procedure's median cost, but we do not 
believe payment through such groupings inappropriately encourages the 
use of certain technologies, such as the provision of multiple-fraction 
electronic brachytherapy in the case of CPT code 0182T. Our standard 
OPPS ratesetting methodology provides a single payment based on 
historical hospital costs that reflect utilization patterns of the 
various technologies, consistent with prospective payment for groups of 
similar services in order to encourage hospital efficiencies. The 
hospital cost information for services always reflects the discounts 
available to hospitals in the claims year, such as the commenters 
indicate was the case for multiple-fraction electronic brachytherapy in 
CY 2008, that may not be available in the payment year for those 
services, and those discounts may vary from year to year for different 
HOPD services. Nevertheless, we rely on the relativity of median costs 
as reflected in claims data to be appropriate. Payment based on a 
measure of central tendency is a principle of any prospective payment 
system like the OPPS. In some individual cases payment exceeds the 
average cost and in other cases payment is less than the average cost. 
On balance, however, payment should approximate the relative cost of 
the average case, recognizing that, as a prospective payment system, 
the OPPS is a system of averages. In the case of CPT code 0182T, we 
believe that its assignment to

[[Page 60440]]

APC 0313 for CY 2010 is fully consistent with our standard ratesetting 
methodology that provides appropriate incentives for efficiency.
    As of January 2010, CPT code 0182T will have been assigned to New 
Technology APC 1519 for 2\1/2\ years. While we have relatively few 
claims data from CY 2007 and CY 2008 for electronic brachytherapy, a 
commenter on a prior rule has indicated that this service may only be 
used to treat a small number of patients (72 FR 66691). To the extent 
that more hospitals furnish electronic brachytherapy in future years 
and that hospital costs from commercialization of the technology 
change, we expect to see those costs reflected in our claims data for 
those future years, which we will annually review for electronic 
brachytherapy, just as we do for all OPPS services. Moreover, while we 
acknowledge that, in the case of conventional brachytherapy procedures 
where distinct radioactive sources are implanted, the statute requires 
separate payment of the associated radioactive brachytherapy source so 
that APC 0313 only pays for the application of those sources, we have 
no reason to believe that reported hospital costs for CPT code 0182T do 
not include the cost of the source. As we stated in the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68113), we do not consider 
specific devices, beams of radiation, or equipment that do not 
constitute separate sources that utilize radioactive isotopes to 
deliver radiation to be brachytherapy sources for separate payment, as 
such items do not meet the statutory requirements provided in section 
1833(t)(2)(H) of the Act. Electronic brachytherapy, described by CPT 
code 0182T, utilizes such devices, beams of radiation, or equipment to 
generate the radiation for the treatment, rather than distinct 
radioactive sources. Therefore, in CY 2008, hospitals would have 
included the costs of the devices or equipment that are necessary to 
generate the radiation in their charges for the electronic 
brachytherapy procedures, in contrast to the conventional brachytherapy 
procedures also assigned to APC 0313 where the sources would have been 
separately reported and paid. Therefore, just as in the case of other 
OPPS services, our ratesetting methodology relies upon hospitals' 
consideration of all costs associated with furnishing services, 
including the costs of those items and services for which payment is 
packaged, in setting hospital charges for separately payable procedures 
such as electronic brachytherapy. Although the hospital median costs 
for other HCPCS codes assigned to APC 0313 do not include the cost of 
radioactive brachytherapy sources that are separately paid, we believe 
the hospital cost of CPT code 0182T includes the cost of the devices or 
equipment used to generate the radiation for the treatment. This 
difference in packaging source payment between conventional and 
electronic brachytherapy procedures alone does not lead us to conclude 
that these procedures do not share sufficient cost and clinical 
similarity to be assigned to the same clinical APC. The overall 
hospital costs for conventional and electronic brachytherapy 
procedures, including the associated packaged costs, that are paid 
through the procedure codes for electronic and conventional 
brachytherapy are comparable and the procedures are clinically similar 
so we believe that their assignment to the same APC is appropriate, 
regardless of the differences in their packaged costs.
    Therefore, we continue to believe that APC 0313 is an appropriate 
APC for assignment of CPT code 0182T based on our consideration of the 
clinical characteristics of electronic brachytherapy and hospital costs 
from claims data. Maintaining CPT code 0182T in APC 0313 for another 
year would pay at a rate that is three times the cost of this service 
as reflected in the hospital outpatient claims data, and we do not 
believe continued payment at $1,750 is appropriate. To the extent that 
hospitals' costs change over time if the procedure is more broadly 
furnished, consistent with our current policy to annually assess the 
appropriateness of the APC assignments for all services under the 
hospital OPPS, we will continue to monitor our claims data for CPT code 
0182T in the future.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to assign CPT code 0182T 
to APC 0313, which has a final CY 2010 APC median cost of approximately 
$770. Table 23 below lists the HCPCS code and its associated status 
indicator for CY 2010.

                 Table 23.--CY 2010 Reassignment of a New Technology Procedure to a Clinical APC
----------------------------------------------------------------------------------------------------------------
                                                                                 CY 2009    Final CY    Final CY
         CY 2010 HCPCS code                 Short descriptor        CY 2009 SI     APC       2010 SI    2010 APC
----------------------------------------------------------------------------------------------------------------
0182T...............................  Hdr elect brachytherapy.....          S        1519          S        0313
----------------------------------------------------------------------------------------------------------------

D. OPPS APC-Specific Policies

    In this section, we discuss HCPCS codes and their proposed status 
indicators and APC reassignments for which we provided explicit 
discussion in section III.D. of the CY 2010 OPPS/ASC proposed rule or 
for which we received public comments on their proposed CY 2010 OPPS 
treatment. Certain HCPCS codes are discussed in other sections of this 
final rule with comment period, as appropriate to the items or services 
they describe. The final CY 2010 OPPS/ASC treatment of all other HCPCS 
not explicitly discussed in this final rule with comment period is 
displayed in Addendum B to this final rule with comment period.
1. Cardiovascular Services
a. Cardiovascular Telemetry (APC 0209)
    For CY 2010, we proposed to continue to assign CPT code 93229 
(Wearable mobile cardiovascular telemetry with electrocardiographic 
recording, concurrent computerized real time data analysis and greater 
than 24 hours of accessible ECG data storage (retrievable with query) 
with ECG-triggered and patient-selected events transmitted to a remote 
attended surveillance center for up to 30 days; technical support for 
connection and patient instructions for use, attended surveillance, 
analysis and physician prescribed transmission of daily and emergent 
data reports) to APC 0209 (Level II Extended EEG, Sleep, and 
Cardiovascular Studies), with a proposed payment rate of approximately 
$774. Because CPT code 93229 was a new code for CY 2009, in the CY 2009 
OPPS/ASC final rule with comment period, we finalized an interim final 
APC assignment for this code of APC 0209, with a payment rate of 
approximately $754.
    Comment: Some commenters recommended that CMS assign status 
indicator ``A'' (Services furnished to a hospital outpatient that are 
paid under a fee schedule or payment system other

[[Page 60441]]

than OPPS) to CPT code 93229 in order to make this service nonpayable 
under the OPPS for CY 2010. The commenters argued that there are 
currently no hospitals that can provide the type of constant monitoring 
the service described by CPT code 93229 requires. For this reason, 
according to the commenters, any claims submitted for CPT code 93229 by 
hospitals are incorrectly coded. The commenters stated that, if CMS 
chose not to adopt their recommendation and instead chose to continue 
recognizing CPT code 93229 as payable under the OPPS, CMS should 
reconsider the proposed assignment of the service to APC 0209. 
According to the commenters, the service described by CPT code 93229 is 
not similar clinically or in terms of resource utilization to the other 
procedures assigned to APC 0209, in particular, the polysomnography 
procedures described by CPT codes 95810 (Polysomnography; sleep staging 
with 4 or more additional parameters of sleep, attended by a 
technologist) and 95811 (Polysomnography; sleep staging with 4 or more 
additional parameters of sleep, with initiation of continuous positive 
airway pressure therapy or bilevel ventilation, attended by a 
technologist), which are the most commonly reported procedures in APC 
0209 with the highest number of single claims contributing to the APC's 
median cost. The commenters urged CMS to assign CPT code 93229 to New 
Technology APC 1513 (New Technology--Level XIII ($1,100-$1,200)) with a 
payment rate of $1,150, or New Technology APC 1514 (New Technology--
Level XIV ($1,200-$1,300)) with a payment rate of $1,250. The 
commenters argued that, if any hospitals were to provide the remote 
cardiac monitoring service described by CPT code 93229, the proposed 
payment rate for APC 0209 would be less than hospitals' costs for 
providing this service.
    Response: We do not agree with the commenters that we should assign 
status indicator ``A'' to CPT code 93229 in order to make the service 
nonpayable under the OPPS for CY 2010. For each new calendar year, we 
typically recognize for OPPS payment purposes new HCPCS codes 
describing services that could be covered by Medicare when provided to 
hospital outpatients, regardless of whether those services are actually 
being provided by hospitals at the time the OPPS/ASC final rule with 
comment period for the upcoming year is issued. We believe that CPT 
code 93229 describes a diagnostic study that could be provided to 
Medicare beneficiaries in the hospital outpatient setting and, 
therefore, could be covered by Medicare. We also do not agree that the 
service described by CPT code 93229 is not similar clinically and in 
terms of resource utilization to the other procedures assigned to APC 
0209 for CY 2010. For example, similar to the remote cardiac monitoring 
service described by CPT code 93229, the polysomnography procedures 
described by CPT codes 95810 and 95811 involve continuous and 
simultaneous monitoring and recording of various physiological and 
pathophysiological parameters, with attendance by a technologist.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to assign CPT 
code 93229 to APC 0209, with a final CY 2010 APC median cost of 
approximately $764.
b. Implantable Loop Recorder Monitoring (APC 0689)
    For CY 2010, we proposed to reassign CPT code 93299 (Interrogation 
device evaluation(s), (remote) up to 30 days; implantable 
cardiovascular monitor system or implantable loop recorder system, 
remote data acquisition(s), receipt of transmissions and technician 
review, technical support and distribution of results) to APC 0689 
(Level II Electronic Analysis of Devices), with a proposed payment rate 
of approximately $40. In CY 2009, this CPT code was assigned to APC 
0209 (Level II Extended EEG, Sleep, and Cardiovascular Studies), with a 
payment rate of approximately $754.
    Comment: One commenter supported the proposed reassignment of CPT 
code 93299 to APC 0689 for CY 2010. According to the commenter, the 
procedure described by CPT code 93299 is similar clinically and in 
terms of resource utilization to other procedures assigned to APC 0689.
    Response: We appreciate the commenter's support of our proposal to 
reassign CPT code 93299 to APC 0689 for CY 2010. We agree that the 
procedure described by CPT code 93299 is similar clinically and in 
terms of resource utilization to other procedures assigned to APC 0689.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to reassign CPT 
code 93299 to APC 0689, which has a final CY 2010 APC median cost of 
approximately $38.
c. Transluminal Balloon Angioplasty (APC 0279)
    For CY 2010, we proposed to reassign CPT code 75978 (Transluminal 
balloon angioplasty, venous (eg, subclavian stenosis), radiological 
supervision and interpretation) from APC 0083 (Coronary or Non-Coronary 
Angioplasty and Percutaneous Valvuloplasty) to APC 0279 (Level II 
Angiography and Venography), with a proposed payment rate of 
approximately $2,000.
    Comment: Some commenters disagreed with the proposed APC 
reassignment of CPT code 75978. The commenters noted that CPT code 
75978 is a therapeutic interventional procedure that is not similar to 
the other diagnostic procedures assigned to APC 0279. The commenters 
requested that CMS continue to assign CPT code 75978 to APC 0083 where 
they believe the service is most appropriately placed based on 
considerations of clinical coherence and resource costs.
    Response: The proposed CY 2010 median cost for APC 0083 of 
approximately $3,380 is significantly higher than the proposed CY 2010 
median cost of CPT code 75978 of approximately $2,597. Given the 
difference in median costs, we do not believe that we should continue 
to assign this procedure to APC 0083. After further analysis and review 
by CMS medical advisors, we believe that CPT code 75978 would be most 
appropriately assigned to APC 0093 (Vascular Reconstruction/Fistula 
Repair without Device) for CY 2010 because it is a therapeutic 
procedure performed on veins, similar to other therapeutic blood vessel 
procedures that are currently assigned to APC 0093. Further, the CY 
2010 final median cost of CPT code 75978 of approximately $2,597 is 
very similar to the CY 2010 final median cost of APC 0093 of 
approximately $2,378.
    After consideration of the public comments we received, we are 
modifying our proposed CY 2010 reassignment of CPT code 75978 from APC 
0083 to APC 0279. In this final rule with comment period, for CY 2010, 
we are reassigning CPT code 75978 from APC 0083 to APC 0093, which has 
a final CY 2010 APC median cost of approximately $2,378.
2. Gastrointestinal Services
a. Change of Gastrostomy Tube (APC 0676)
    For CY 2010, we proposed to reassign CPT code 43760 (Change of 
gastrostomy tube, percutaneous, without imaging or endoscopic guidance) 
from APC 0121 (Level I Tube or Catheter Changes or Repositioning) to 
APC 0676

[[Page 60442]]

(Thrombolysis and Other Device Revisions), with a proposed CY 2010 
payment rate of approximately $160.
    Comment: Some commenters disagreed with the proposed APC 
reassignment and requested that CMS continue to assign CPT code 43760 
to APC 0121 because they believe the gastrostomy tube change procedure 
shares significant clinical and resource characteristics with other 
procedures assigned to APC 0121.
    Response: Prior to CY 2008, OPPS payment for CPT code 43760 
captured both the procedure and the imaging or endoscopic guidance, if 
used, that was associated with percutaneously changing a gastrostomy 
tube because its descriptor read, ``Change of gastrostomy tube,'' and 
the OPPS packages payment for all guidance into payment for the 
associated procedures. However, effective January 1, 2008, the CPT 
Editorial Panel revised the code descriptor by adding the words 
``without imaging or endoscopic guidance'' to further clarify that the 
code should be reported for tube change procedures that do not require 
imaging or endoscopic guidance. The CPT Editorial Panel further 
determined that gastrostomy tube placement requiring fluoroscopic or 
endoscopic guidance should be reported with either CPT code 49450 
(Replacement of gastrostomy or cecostomy (or other colonic) tube, 
percutaneous, under fluoroscopic guidance including contrast 
injection(s), image documentation and report) or CPT code 43246 (Upper 
gastrointestinal endoscopy including esophagus, stomach, and either the 
duodenum and/or jejunum as appropriate; with directed placement of 
percutaneous gastrostomy tube). Based on the median cost from CY 2008 
claims data that reflects the new service reported under CPT code 
43760, we believe a reassignment of the CPT code for CY 2010 is 
necessary.
    We disagree with the commenters that CPT code 43760 would be 
appropriately assigned to APC 0121, which has a median cost of 
approximately $426 for CY 2010. We note that the median cost for CPT 
code 43760 from CY 2007, when the code represented services provided 
with and without guidance, was higher at approximately $216, compared 
with the CY 2008 median cost of the revised procedure code. Claims data 
from CY 2008 reveal that we have 21,178 single claims (out of 38,246 
total claims) for CPT code 43760, with a lower median cost of 
approximately $160. The median cost for CPT code 43760 closely aligns 
with the median cost of approximately $160 for APC 0676. We note that 
the procedure for gastrostomy tube placement using fluoroscopic 
guidance, specifically CPT code 49450, is assigned to APC 0121, and the 
procedure for gastrostomy tube placement using endoscopic guidance, 
specifically CPT code 43246, is assigned to APC 0141 (Level I Upper GI 
Procedures). We believe that both of these other procedures are 
appropriately assigned to APCs 0121 and 0141, respectively, based on 
considerations of clinical and resource homogeneity. As expected, their 
CPT code-specific median costs that include the cost of fluoroscopy or 
endoscopic guidance are significantly higher than the median cost of 
CPT code 43760, which is provided without guidance.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to reassign CPT 
code 43760 from APC 0121 to APC 0676, which has a final CY 2010 APC 
median cost of approximately $160.
b. Laparoscopic Liver Cryoablation (APC 0131)
    For CY 2010, we proposed to continue to assign CPT code 47371 
(Laparoscopy, surgical, ablation of one or more liver tumor(s); 
cryosurgical) to APC 0131 (Level II Laparoscopy), with a proposed 
payment rate of approximately $3,181.
    Comment: One commenter requested that CMS reassign CPT code 47371 
from APC 0131 to APC 0174 (Level IV Laparoscopy), which had a proposed 
payment rate of approximately $7,766, to better reflect the actual 
costs of the procedure. The commenter stated that CPT code 47371 is 
neither similar in resource costs nor clinical characteristics to the 
other procedures assigned to APC 0131, and that the four single claims 
for procedure available for ratesetting are not reflective of the costs 
of the procedure. In addition, the commenter indicated that most of the 
procedures assigned to APC 0131 describe abdominal biopsy or repair 
procedures, in contrast to CPT code 47371, which describes cryosurgical 
ablation of a liver tumor. The commenter noted that there are other 
similar laparoscopic liver tumor ablation procedures already assigned 
to APC 0174.
    Response: We agree with the commenter's argument that CPT code 
47371 would be more appropriately assigned to APC 0174, where other 
laparoscopic liver and renal ablation procedures are assigned. Although 
we have few CY 2008 claims for CPT code 47371, our claims data show a 
higher median cost of approximately $4,229 for CPT code 47371 based on 
four single claims out of seven total claims, compared to the APC 
median cost of approximately $3,128 for APC 0131.
    We also note that since CPT code 47371 was made effective in CY 
2002, the procedure for the code is rarely performed on Medicare 
beneficiaries in the HOPD based on analysis of our hospital outpatient 
claims data. Based upon OPPS claims submitted from CY 2002 through CY 
2008, the median cost for this code has varied widely, perhaps due to 
the small volume of claims annually. Specifically, the historical 
median cost for CPT code 47371 has ranged from $1,850 based on two 
single claims to $6,839 based on one single claim. Although this 
procedure is not commonly performed on Medicare beneficiaries in the 
HOPD, because we believe CPT code 47371 is similar in clinical 
characteristics and resource costs to the other procedures currently 
assigned to APC 0174, we agree with the commenter's recommendation.
    After consideration of the public comment we received, we are 
modifying our CY 2010 proposal and assigning CPT code 47371 to APC 
0174, which has a final CY 2010 APC median cost of approximately 
$7,342.
c. Cholangioscopy (APC 0151)
    The CPT Editorial Panel created a new add-on code for 
cholangioscopy, CPT code 43273 (Endoscopic cannulation of papilla with 
direct visualization of common bile duct(s) and/or pancreatic ducts 
(List separately in addition to code(s) for primary procedure), 
effective January 1, 2009. We assigned CPT code 43273 to APC 0151 
(Endoscopic Retrograde Cholangio-Pancreatography (ERCP)) on an interim 
final basis in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 69030), and the CPT code was flagged with comment indicator ``NI'' 
to indicate that its OPPS treatment was open to comment on that final 
rule with comment period. For CY 2010, we proposed to continue the 
assignment of CPT code 43273 to APC 0151, with a proposed payment rate 
of approximately $1,527.
    At the August 2009 APC Panel meeting, the APC Panel heard a public 
presentation recommending that CPT code 43273 be reassigned to APC 0152 
(Level I Percutaneous Abdominal and Biliary Procedures). However, the 
APC Panel recommended that CPT code 43273 continue to be assigned to 
APC 0151.
    Comment: One commenter on the CY 2009 OPPS/ASC final rule with 
comment period and again on the CY 2010 OPPS/ASC proposed rule 
recommended that CPT code 43273 be reassigned to APC 0152 and that CMS

[[Page 60443]]

rename APCs 0151 and 0152 to accommodate the reassignment. The 
commenter provided cost information for CPT code 43273 in a New 
Technology APC application previously filed with CMS, estimating that 
the cost of the cholangioscopy procedure is approximately $2,958. 
Because the procedure is always performed with an ERCP procedure, the 
commenter estimated that the combined cost of ERCP and cholangioscopy 
is approximately $4,484 by adding the CY 2008 median cost of APC 0151 
to the estimated cost of the cholangioscopy procedure. The commenter 
pointed out that, because all ERCP CPT codes, which are assigned to APC 
0151, have a status indicator of ``T'' (Significant Procedure, Multiple 
Reduction Applies), under CMS' proposal, CPT code 43273 would be paid 
at 50 percent of the CY 2010 proposed payment rate for APC 0151, or 
$757, a rate that is approximately $2,200 less than the reported cost 
of $2,958 for the cholangioscopy procedure alone. The commenter further 
estimated the cost of disposable devices alone for cholangioscopy in 
combination with ERCP to be approximately $2,064. The commenter argued 
that the proposed CY 2010 payment hospitals would receive for the two 
procedures of approximately $2,271 would barely cover the device costs 
of $2,064, and not the additional procedure costs. The commenter 
maintained that if CMS reassigned CPT code 43273 to APC 0152, payment 
for the combination of the two procedures would be approximately 
$2,821, partially closing the gap between OPPS payment and the 
commenter's estimated combined cost of the two procedures of $4,484.
    The commenter explained that cholangioscopy is a complex, resource-
intensive procedure requiring additional physician training, which adds 
45 minutes to the ERCP procedure, for a total of approximately 112 
minutes for the two procedures. The commenter also asserted that the 
clinical intensity of cholangioscopy is closer to the non-draining 
percutaneous procedures assigned to APC 0152 than to the ERCP 
procedures assigned to APC 0151. Further, the commenter explained that 
the primary clinical difference between non-draining percutaneous 
procedures and CPT code 43273 is the method of access to the biliary 
and pancreatic area, noting that a small incision is required for the 
percutaneous procedures and the use of an additional endoscope for 
cholangioscopy.
    The commenter also recommended that APC 0151 be renamed ``Level I 
Hepatobiliary Procedures'' and APC 0152 be renamed ``Level II 
Hepatobiliary Procedures,'' and that lower complexity hepatobiliary 
procedures be assigned to APC 0151 and higher complexity hepatobiliary 
procedures, including percutaneous procedures and cholangioscopy, be 
assigned to APC 0152. The commenter believed that renaming and 
reconfiguring APCs 0151 and 0152 would improve the clinical homogeneity 
of the APCs and appropriately account for differences in the resource 
costs of biliary procedures. The commenter argued that CMS has 
previously renamed existing APCs, created multilevel APCs for specific 
clinical areas, and configured APCs to incorporate surgical procedures 
that include a variety of access types.
    Response: Because CPT code 43273 was new for CY 2009, we do not yet 
have cost information for the procedure based upon hospital claims for 
CY 2010 ratesetting. According to our established policy, a New 
Technology APC applicant's cost estimate is only one source of 
information we consider in determining the cost of a new service for 
purposes of its initial APC assignment under the OPPS (66 FR 59900; 73 
FR 68614). We generally assign new CPT codes to an APC based on input 
from a variety of sources, including, but not limited to, review of the 
resource costs and clinical similarity of the service to existing 
procedures; input from CMS medical advisors; information from 
interested specialty societies; and review of all other information 
available to us. We note that, while CPT code 43273 is new for CY 2009, 
cholangioscopy in association with ERCP procedures has been performed, 
using a variety of technologies, for many years. We expect that its 
costs have already been incorporated into the OPPS, either packaged 
into payment for the associated ERCP procedures or under an unlisted 
CPT procedure code.
    We continue to believe that APC 0151 is an appropriate APC 
assignment for CPT code 43273 for CY 2010, based on consideration of 
the procedure's clinical and resource characteristics. CPT code 43273, 
which is an add-on code to ERCP procedures, clinically resembles the 
ERCP procedures that also are assigned to APC 0151 because they all use 
an endoscope to examine various components of the hepatobiliary system. 
While cholangioscopy extends ERCP procedures to visualize the common 
bile duct(s) and/or pancreatic duct(s) through use of an additional 
endoscope, many of the other ERCP procedures assigned to APC 0151 also 
have additional procedures associated with them that require the use of 
other devices or equipment as well. We do not agree with the commenter 
that percutaneous biliary procedures that require incisions and, in 
some cases drainage tubes, are more clinically similar to 
cholangioscopy than ERCP procedures that also examine the hepatobiliary 
system with an endoscope.
    Furthermore, we understand that there are a variety of technologies 
that can be used to perform cholangioscopy with variable resource 
costs. Therefore, we do not believe that the commenter's estimate based 
on one type of new cholangioscopy technology is necessarily an 
appropriate representation of the cost of the procedure described by 
CPT code 43273 to hospitals. We believe that the cost of cholangioscopy 
is similar to the cost of ERCP procedures that require similar 
procedure time and devices, and that CPT code 43273 is appropriately 
assigned to APC 0151 along with these ERCP procedures. Moreover, we 
believe that applying the multiple procedure discount to payment for 
cholangioscopy as a result of its status indicator ``T'' and its 
routine performance with ERCP procedures that also are assigned status 
indicator ``T'' is appropriate because cholangioscopy is performed 
directly after ERCP and much of the preparatory procedure work is 
performed during the ERCP.
    Finally, because we are not reassigning CPT code 43273 to APC 0152, 
no renaming of APCs 0151 and 0152 is warranted because we are 
maintaining the endoscopic and percutaneous biliary procedures in 
separate APCs.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to maintain the 
assignment of CPT code 43273 to APC 0151, which has a final CY 2010 APC 
median cost of approximately $1,510.
d. Laparoscopic Hernia Repair (APC 0131)
    For CY 2010, we proposed to reassign the following six laparoscopic 
hernia repair CPT codes that were new for CY 2009 from APC 0130 (Level 
I Laparoscopy), with a proposed payment rate of approximately $2,538, 
to APC 0131 (Level II Laparoscopy), with a proposed payment rate of 
approximately $3,181: CPT code 49652 (Laparoscopy, surgical, repair, 
ventral, umbilical, spigelian or epigastric hernia (includes mesh 
insertion, when performed); reducible); CPT code 49653 (Laparoscopy, 
surgical, repair, ventral, umbilical, spigelian or epigastric hernia 
(includes mesh insertion, when performed); incarcerated or

[[Page 60444]]

strangulated); CPT code 49654 (Laparoscopy, surgical, repair, 
incisional hernia (includes mesh insertion, when performed); 
reducible); CPT code 49655 (Laparoscopy, surgical, repair, incisional 
hernia (includes mesh insertion, when performed); incarcerated or 
strangulated); CPT code 49656 (Laparoscopy, surgical, repair, recurrent 
incisional hernia (includes mesh insertion, when performed); 
reducible); and CPT code 49657 (Laparoscopy, surgical, repair, 
recurrent incisional hernia (includes mesh insertion, when performed); 
incarcerated or strangulated).
    Comment: One commenter indicated that the resource costs associated 
with the six laparoscopic hernia repair CPT codes are significantly 
greater than the proposed payment rate of approximately $3,181 for APC 
0131 and suggested that the procedures in APC 0132 (Level III 
Laparoscopy) are more similar to the six laparoscopic hernia repair 
codes because they have similar resource costs. The commenter requested 
that CMS review the clinical characteristics and resource costs 
associated with the six CPT codes and consider reassigning these codes 
to APC 0132, which had a CY 2010 proposed payment rate of approximately 
$4,903. In addition, the commenter provided an analysis of CY 2008 
claims data for cases reported under the unlisted CPT code that would 
previously have been reported for these procedures (CPT code 49659 
(Unlisted laparoscopy procedure, hernioplasty, herniorrhaphy, 
herniotomy)), combined with the ICD-9 diagnoses codes specific to 
hernia of the abdominal cavity. Because these codes were new for CY 
2009, they were assigned comment indicator ``NI'' in the CY 2009 OPPS/
ASC final rule with comment period to indicate that they were subject 
to comment. For the CY 2009 OPPS/ASC final rule with comment period, 
the same commenter submitted a similar comment and data analysis of CY 
2007 OPPS claims. The commenter found 3,456 claims that met the same 
case criteria in the analysis, with a median cost of approximately 
$4,261. The commenter believed that this cost from historical hospital 
claims data represented the hospital cost of procedures that would be 
reported with one of the laparoscopic hernia repair CPT codes in CY 
2010.
    Response: We have no hospital claims data for CPT codes 49652 
through 49657 because these CPT codes were new for CY 2009. However, we 
agree with the commenter that procedures described by these CPT codes 
were likely commonly furnished in the HOPD in CY 2008 and reported 
under CPT code 49659. Taking into consideration the commenter's 
analyses of CY 2007 and CY 2008 claims and performing a detailed 
clinical review, we agree with the commenter that the resource costs 
for the six laparoscopic hernia repair CPT codes, specifically CPT 
codes 49652 through 49657, more closely align with other services 
assigned to APC 0132. In addition, from a clinical perspective, we also 
believe that APC 0132 is an appropriate APC assignment for these codes 
because APC 0132 most accurately recognizes the complexity of the 
laparoscopic hernia repair codes.
    After consideration of the public comments we received, we are 
modifying our CY 2010 proposals and reassigning CPT codes 49652, 49653, 
49654, 49655, 49656, and 49657 from APC 0130 to APC 0132, which has a 
final CY 2010 APC median cost of approximately $4,873.
3. Genitourinary Services
a. Percutaneous Renal Cryoablation (APC 0423)
    For CY 2010, we proposed to continue to assign CPT code 50593 
(Ablation, renal tumor(s), unilateral, percutaneous, cryotherapy) to 
APC 0423 (Level II Percutaneous Abdominal and Biliary Procedures), with 
a proposed payment rate of approximately $3,329. This CPT code was new 
in CY 2008. However, the same service was previously described by CPT 
code 0135T (Ablation renal tumor(s), unilateral, percutaneous, 
cryotherapy). We note that, for CY 2007, based upon the APC Panel's 
recommendation made at its March 2006 meeting, we reassigned CPT code 
50593 (then CPT code 0135T) from APC 0163 (Level IV Cystourethroscopy 
and other Genitourinary Procedures) to APC 0423, effective January 1, 
2007.
    Comment: One commenter expressed concern that the proposed payment 
rate of approximately $3,329 for CPT code 50593 is inadequate because 
the payment does not accurately account for the costs incurred by 
hospitals in performing this procedure. The commenter argued that the 
low proposed payment rate for CPT code 50593 is attributable to claims 
data that do not accurately capture the full costs of CPT code 50593 
because almost half of the single claims do not contain the HCPCS code 
and associated charge for the required device, specifically HCPCS code 
C2618 (Probe, cryoablation). The commenter requested that CMS designate 
CPT code 50593 as a device-dependent procedure, which would require 
hospitals to submit claims with the appropriate device HCPCS code, 
assign the procedure to its own APC, and set the payment rate for that 
APC based on claims for CPT code 50593 reported with HCPCS code C2618. 
The commenter's analysis concluded that the median cost on which 
payment for CPT code 50593 would be based if these recommendations were 
adopted would be approximately $5,469, resulting in more accurate 
payment for the procedure and continued Medicare beneficiary access to 
percutaneous renal cryoablation in the HOPD.
    Response: We believe that CPT code 50593 is appropriately assigned 
to APC 0423 based on clinical and resource considerations when compared 
to other procedures also proposed for assignment to APC 0423 for CY 
2010. As we stated in the CY 2007 OPPS final rule with comment period 
(71 FR 68049 through 68050), the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66709), and the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68611), we initially revised the APC assignment 
for the percutaneous renal cryoablation procedure from APC 0163 to APC 
0423 in CY 2007 based on the APC Panel's recommendation to reassign the 
procedure to APC 0423. The median costs of the four HCPCS codes 
assigned to APC 0423 for CY 2010 range from approximately $3,159 to 
$4,670, well within the 2 times rule for the OPPS payment groups. Even 
if we were to calculate the median cost for CPT code 50593 using only 
claims that also contain HCPCS code C2618, estimated by the commenter 
to be approximately $5,469 using proposed rule data, the grouping of 
these procedures in the same APC would not violate the 2 times rule. 
Further, we note that all four of these procedures are relatively low 
volume, with fewer than 1,100 total claims each for CY 2008 and fewer 
than 700 single claims each for ratesetting. We believe that grouping 
these clinically similar, low volume procedures for the percutaneous 
ablation of renal, liver, or pulmonary tumors in the same payment group 
helps to promote payment stability for these low volume services.
    We also do not agree that CPT code 50593 should be designated as a 
device-dependent procedure and assigned to its own separate APC. We 
have only 226 single claims (out of 513 total claims) for CPT code 
50593 from CY 2008 and, as such, the procedure has the second lowest 
frequency of the four procedures assigned to APC 0423. We believe this 
relatively low volume procedure should be assigned to a payment group 
with similar services, as we have proposed, in order to promote payment 
stability and encourage hospital efficiency. In addition, we do not 
identify individual

[[Page 60445]]

HCPCS codes as device-dependent HCPCS codes under the OPPS. Rather, we 
first consider the clinical and resource characteristics of a procedure 
and determine the most appropriate APC assignment. When we determine 
that we should assign a procedure to an APC that is device-dependent, 
based on whether that APC has been historically identified under the 
OPPS as having very high device costs, we then consider the 
implementation of device edits, as appropriate. We note that the 
identification of device-dependent APCs was particularly important in 
the early years of the OPPS when separate pass-through payment for many 
implantable devices expired. At that time, a variety of methodologies 
to package the costs of those devices into procedural APCs was utilized 
over several years to ensure appropriate incorporation of the device 
costs into the procedure payments. At this point in time, hospitals 
have significantly more experience reporting HCPCS codes for packaged 
and separately payable items and services under the OPPS and the 
payment groups are more mature. We believe our standard ratesetting 
methodology typically results in appropriate payment rates for new 
procedures that utilize devices, as well as those that do not use high 
cost devices. In recent years, we have not encountered circumstances 
whereby we have had to establish new device-dependent APCs because we 
were not able to accommodate the clinical and resource characteristics 
of a procedure by assigning it to an existing APC (whether device-
dependent or non-device-dependent), and the procedure described by CPT 
code 50593 is no exception.
    While all of the procedures assigned to APC 0423 require the use of 
implantable devices, for many of the procedures, there are no Level II 
HCPCS codes that describe all of the technologies that may be used in 
the procedures. Therefore, it would not be possible for us to develop 
procedure-to-device edits for all of the CPT codes assigned to APC 
0423. Under the OPPS, there are many other procedures that require the 
use of implantable devices that, because they are assigned to OPPS APCs 
that are not device-dependent, do not have procedure-to-device edits 
applied, even if those claims processing edits would be feasible. We 
believe that our payments for procedures that utilize high cost devices 
are appropriate for those services, even when those services are 
grouped with other procedures that either do not require the use of 
implantable devices or that utilize devices that are not described by 
specific Level II HCPCS codes.
    When reporting CPT code 50593, we expect hospitals to also report 
the device HCPCS code C2618, which is associated with this procedure. 
We also remind hospitals that they must report all of the HCPCS codes 
that appropriately describe the items used to provide services, 
regardless of whether the HCPCS codes are packaged or paid separately. 
If hospitals use more than one probe in performing CPT code 50593, we 
expect hospitals to report this information on the claim and adjust 
their charges accordingly. Hospitals should report the number of 
cryoablation probes used to perform CPT code 50593 as the units of 
HCPCS code C2618 which describes these devices, with their charges for 
the probes. Since CY 2005, we have required hospitals to report device 
HCPCS codes for all devices used in procedures if there are appropriate 
HCPCS codes available. In this way, we can be confident that hospitals 
have included charges on their claims for costly devices used in 
procedures when they submit claims for those procedures.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
assign CPT code 50593 to APC 0423, which has a final CY 2010 APC median 
cost of approximately $3,430.
b. Hemodialysis (APC 0170)
    Currently, APC 0170 (Dialysis) contains two HCPCS codes: CPT code 
90935 (Hemodialysis procedure with single physician evaluation) and 
HCPCS code G0257 (Unscheduled or emergency dialysis treatment for an 
ESRD patient in an HOPD that is not certified as an ESRD facility). 
Hospital outpatient and emergency departments sometimes must furnish 
hemodialysis to patients who do not have ESRD and, in these cases, they 
would report CPT code 90935 for the service. Under the Medicare ESRD 
benefit, to be covered by Medicare, routine dialysis required by a 
Medicare ESRD beneficiary must be furnished in a certified ESRD 
facility. Most HOPDs and emergency departments are not certified by 
Medicare to furnish routine dialysis to Medicare ESRD patients and, 
therefore, are not paid under the ESRD benefit. However, there are a 
limited number of specific cases in which Medicare pays under the OPPS 
for an ESRD patient to receive unscheduled dialysis in an outpatient 
department of a hospital that does not have an ESRD-certified facility. 
These provisions were established in the CY 2003 OPPS final rule with 
comment period (67 FR 66803 through 66805). Specifically, Medicare pays 
hospitals under the OPPS for dialysis for ESRD patients under the 
following limited circumstances as specified in the Medicare Claims 
Processing Manual, Pub. 100-04, Chapter 4, Section 200.2:
     Dialysis is performed following or in connection with a 
dialysis-related procedure such as a vascular access procedure or a 
blood transfusion;
     Dialysis is performed following treatment for an unrelated 
medical emergency; or
     Emergency dialysis is performed for ESRD patients who 
would otherwise have to be admitted as inpatients in order for the 
hospital to receive payment.
    When these criteria are met, the hospital reports HCPCS code G0257, 
which we proposed to assign to APC 0170 for CY 2010, with a proposed 
payment of approximately $442.
    Comment: One commenter, who recognized that Medicare pays under the 
OPPS for hemodialysis for ESRD patients under very specific, limited 
circumstances, asked whether hospitals are permitted to bill and be 
paid under the OPPS for routine hemodialysis for ESRD patients who are 
unable to arrange for routine hemodialysis at a Medicare-certified ESRD 
facility.
    Response: As the commenter noted, Medicare pays under OPPS for 
dialysis for a beneficiary with ESRD only under the exceptional 
circumstances specified in the Medicare Claims Processing Manual, Pub. 
100-04, Chapter 4, Section 200.2 that are listed above. Routine 
treatments in hospitals that do not have an ESRD facility are not 
payable under the OPPS. A hospital that would like to provide routine 
hemodialysis to ESRD patients should contact the State survey and 
certification agency to pursue ESRD certification of an outpatient 
dialysis unit.
    After consideration of the public comment we received, we continue 
to believe that our policy governing the payment of dialysis services 
in HOPDs and emergency departments is appropriate. We are not making 
any change to this policy for CY 2010. The final CY 2010 median cost of 
APC 0170 for hemodialysis is approximately $456.
c. Radiofrequency Remodeling of Bladder Neck (APC 0165)
    For CY 2010, we proposed to continue to assign Category III CPT 
code 0193T (Transurethral, radiofrequency micro-remodeling of the 
female bladder neck and proximal urethra for stress urinary 
incontinence) to APC 0165 (Level IV Urinary and Anal Procedures) with a

[[Page 60446]]

proposed payment rate of approximately $1,353. This CPT code was new 
for CY 2009 and was assigned to APC 0165 on an interim final basis in 
the CY 2009 OPPS/ASC final rule with comment period.
    At the August 2009 APC Panel meeting, a presenter requested that 
the APC Panel recommend that CMS reassign CPT code 0193T to either APC 
0202 (Level VII Female Reproductive Procedures) or APC 0168 (Level II 
Urethral Procedures) for CY 2010 based on resource intensity and 
therapeutic benefit. The presenter claimed that the device cost 
associated with CPT code 0193T is comparable to the single-use devices 
that are used with certain procedures assigned to APC 0202, 
specifically those procedures described by CPT codes 58356 (Endometrial 
cryoablation with ultrasonic guidance, including endometrial curettage, 
when performed); 58565 (Hysteroscopy, surgical; with bilateral 
fallopian tube cannulation to induce occlusion by placement of 
permanent implants); and 57288 (Sling operation for stress incontinence 
(e.g., fascia or synthetic)). The presenter indicated that, unlike 
procedures assigned to APC 0202 that require costly medical devices, 
the costs of single-use medical devices for procedures assigned to APC 
0165 are very minimal. After a discussion, the APC Panel recommended 
that CMS maintain the APC assignment of CPT code 0193T to APC 0165, as 
proposed, for CY 2010.
    Comment: Some commenters disagreed with CMS' proposal to continue 
to assign CPT code 0193T to APC 0165. The commenters believed that the 
proposed payment for the procedure would not pay appropriately for the 
costs incurred by hospitals to perform the procedure, especially 
because the procedure utilizes a costly, single-use, disposable medical 
device. The commenters argued that APC 0202, which had a proposed CY 
2010 proposed payment rate of approximately $2,991, contains procedures 
that are very similar to CPT code 0193T. Specifically, the commenters 
indicated that CPT code 0193T is similar in clinical characteristics 
and resource costs to CPT codes 58356, 58565, and 57288. The commenters 
added that the probe used in the procedure reported with CPT code 0193T 
costs $1,095 and, overall, the total procedure cost that includes the 
cost of the probe is approximately $2,473, which is comparable to the 
proposed CY 2010 payment rate for APC 0202.
    Another commenter was concerned that, at the August 2009 APC Panel 
meeting, the APC Panel members may have been confused about the 
surgical nature of CPT code 0193T. Specifically, the commenter believed 
that the APC Panel concluded that all of the procedures assigned to APC 
0202 are surgical in nature, whereas the procedure described by CPT 
code 0193T is not, which resulted in the APC Panel's recommendation to 
continue to assign this code to APC 0165. The commenter clarified that 
CPT code 0193T is similar to surgical CPT codes 58565 and 58356, which 
are both assigned to APC 0202 based on their resource use and clinical 
characteristics. The commenter further noted that, although CPT code 
0193T may be performed in the physician's office, in the Medicare 
population, this procedure is more likely to be performed in the 
hospital outpatient setting because of medical conditions and 
comorbidities experienced by Medicare patients.
    Response: As a new Category III CPT code for CY 2009, we do not yet 
have hospital claims data for the procedure. Category III CPT codes are 
temporary codes that describe emerging technology, procedures, and 
services, and they are created by the AMA to allow for data collection 
for new services or procedures. Under the OPPS, we generally assign a 
payment rate to a new Category III CPT code based on input from a 
variety of sources, including but not limited to, review of resource 
costs and clinical homogeneity of the service to existing procedures, 
information from specialty societies, input from CMS medical advisors, 
and other information available to us. Based on our review of the 
clinical characteristics of CPT code 0193T, as well as the other 
procedures assigned to APC 0165 and APC 0202 that was recommended by 
the commenters, and the APC Panel discussion and recommendation 
regarding the procedure, we continue to believe that APC 0165 is the 
most appropriate APC assignment for CPT code 0193T for CY 2010. We 
understand that CPT code 0193T is a minimally invasive procedure for 
female stress urinary incontinence that requires a relative brief time 
in the procedure room. We do not agree with the commenters that the 
procedures assigned to APC 0202 that involve fallopian tube 
cannulation, endometrial ablation, or implantation of a sling for 
stress urinary incontinence are sufficiently similar to the procedure 
described by CPT code 0193T based on procedure duration, device 
utilization, use of guidance, or other characteristics to warrant 
reassignment of CPT code 0193T to APC 0202 based on considerations of 
clinical homogeneity. Rather, we believe that assignment to APC 0165 
will appropriately account for the device and procedure costs of CPT 
code 0193T.
    After consideration of the public comments we received and the APC 
Panel recommendation from the August 2009 meeting, we are finalizing 
our CY 2010 proposal, without modification, to continue to assign CPT 
code 0193T to APC 0165, which has a final CY 2010 APC median cost of 
approximately $1,337.
d. Change of Bladder Tube (APC 0121)
    For CY 2010, we proposed to reassign CPT code 51710 (Change of 
cystostomy tube; complicated) from APC 0427 (Level II Tube or Catheter 
Changes or Repositioning) to APC 0121 (Level I Tube or Catheter Changes 
or Repositioning), with a proposed CY 2010 payment rate of 
approximately $428.
    Comment: One commenter supported the proposed APC reassignment of 
CPT code 51710 from APC 0427 to APC 0121.
    Response: We appreciate the commenter's support. Hospital 
outpatient claims data revealed that we have approximately 267 single 
claims (out of 431 total claims) for CPT code 51710, with a final CY 
2010 median cost of approximately $446. The final CY 2010 median cost 
for CPT code 51710 closely aligns with the final CY 2010 median cost of 
approximately $426 for APC 0121. We believe that CPT code 51710 is 
appropriately reassigned to APC 0121 based on clinical and resource 
considerations.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to reassign CPT 
code 51710 from APC 0427 to APC 0121, which has a final CY 2010 APC 
median cost of approximately $426.
4. Nervous System Services
a. Pain-Related Procedures (APCs 0203, 0204, 0206, 0207, 0221, 0224, 
and 0388)
    We proposed to set the CY 2010 payment rates for APCs 0203 (Level 
IV Nerve Injections), 0204 (Level I Nerve Injections), 0206 (Level II 
Nerve Injections), 0207 (Level III Nerve Injections), 0221 (Level II 
Nerve Procedures), 0224 (Implantation of Catheter/Reservoir/Shunt) and 
0388 (Discography) based on the median costs determined under the OPPS 
standard ratesetting. Among the CPT codes included in these APCs are: 
62350 (Implantation, revision, or repositioning of tunneled intrathecal 
or epidural catheter for long-term medication

[[Page 60447]]

administration via an external pump or implantable reservoir/infusion 
pump; with laminectomy); 62355 (Removal of previously implanted 
intrathecal or epidural catheter); 62365 (Removal of subcutaneous 
reservoir or pump, previously implanted for intrathecal or epidural 
infusion); 64472 (Injection, anesthetic agent and/or steroid, 
paravertebral facet joint or facet joint nerve; cervical or thoracic, 
each additional level (list separately in addition to code for primary 
procedure)); 64476 (Injection, anesthetic agent and/or steroid, 
paravertebral facet joint or facet joint nerve; lumbar or sacral, each 
additional level (list separately in addition to code for primary 
procedure)); 64480 (Injection, anesthetic agent and/or steroid, 
transforminal epidural; cervical or thoracic, each additional level 
(list separately in addition to code for primary procedure)); 64623, 
(Destruction by neurolytic agent, paravertebral facet joint nerve; 
lumbar or sacral, each additional level, (list separately in addition 
to code for primary procedure)); 64627 (Destruction by neurolytic 
agent, paravertebral facet joint nerve; cervical or thoracic, each 
additional level, (list separately in addition to code for primary 
procedure)); 72285 (Discography, cervical or thoracic, radiological 
supervision and interpretation); and 72295 (Discography, lumbar, 
radiological supervision and interpretation).
    Comment: One commenter objected to the proposed CY 2010 payment 
rates for CPT codes 64472, 64476, 64480, 64623, and 64627, which the 
commenter believed have declined 28 percent to 48 percent since CY 
2007. The commenter also objected to the proposed CY 2010 increase in 
payments for CPT codes 72285 and 72295 on the basis that their proposed 
payment rates are unreasonable because they are not procedures. The 
commenter added that CPT codes 62290 (Injection procedure for 
discography, each level, lumbar) and 62291 (Injection procedure for 
discography, each level, cervical or thoracic) are the related 
procedures, which are paid at an unreasonably low rate.
    Response: OPPS payment rates fluctuate based on a variety of 
factors, including, but not limited to, changes in the mix of hospitals 
billing the services, differential changes in hospital charges and 
costs for the services, and changes in the volumes of services 
reported. Therefore, the median costs on which the OPPS payment rates 
are based vary from one year to another. We note that the median costs 
of all of the APCs to which CPT codes 64472, 64476, 64480, 64623, and 
64627 are assigned increased between CY 2009 and CY 2010. For CPT codes 
64472 and 64480, the median cost of APC 0206 to which they are assigned 
increased from approximately $236 in CY 2009 to approximately $249 in 
CY 2010. In the case of CPT codes 64476 and 64627, the median cost of 
APC 0204 to which they are assigned increased from approximately $161 
in CY 2009 to approximately $171 in CY 2010. Lastly, for CPT code 
64623, the median cost of APC 0207 to which the code is assigned 
increased from approximately $463 in CY 2009 to approximately $481 in 
CY 2010.
    CPT codes 72285 and 72295, both of which are assigned to APC 0388, 
are ``T'' packaged codes and, as such, are paid separately only if 
there is no separately paid surgical procedure with a status indicator 
of ``T'' on the same claim. When there is a separate payment made for 
these codes, the payment is not only payment for the code itself but 
also includes payment for all services reported on the claim that are 
always packaged (that is, those with a status indicator of ``N''). The 
median cost of APC 0388 to which CPT codes 72285 and 72295 are assigned 
for payment when separate payment can be made increased from 
approximately $1,470 in CY 2009 to approximately $1,727 in CY 2010, 
reflecting the cost of all conditionally and unconditionally packaged 
services on the claim. Payment for CPT codes 62290 and 62291 is always 
packaged into payment for the independent, separately paid procedures 
with which these codes are reported because we believe that these codes 
are ancillary and supportive to other major separately paid procedures 
and that they are furnished only as an ancillary and dependent part of 
an independent separately paid procedure.
    Comment: One commenter disagreed with the proposed CY 2010 payment 
rates for CPT codes 62355, 62350, 62363 (we note that this code did not 
exist in CY 2008 and does not exist in CY 2009; the commenter did not 
provide a description of the procedure that would enable us to identify 
the code and respond to the comment), and 62365. The commenter believed 
that access to these services is very limited as a result of payment 
reductions for these procedures.
    Response: The final median costs for the APCs to which CPT codes 
62350 and 62365 are assigned for CY 2010 increased from CY 2009 to CY 
2010, while the final median cost for APC 0203 to which CPT code 62355 
is assigned declined over that same time period. Specifically, CPT code 
62350 is assigned to APC 0224, which has a CY 2009 median cost of 
approximately $2,715 and a final CY 2010 median cost of approximately 
$2,740. Similarly, CPT code 62365 is assigned to APC 0221, which has a 
CY 2009 median cost of approximately $2,322 and a final CY 2010 median 
cost of approximately $2,490. In contrast, CPT code 62355 is assigned 
to APC 0203, which has a CY 2009 median cost of approximately $928 that 
declined to approximately $885 in CY 2010. The increased median costs 
of APCs 0221 and 0224 do not create barriers to care for these 
procedures. Moreover, we do not believe that the modest reduction in 
median cost for APC 0203 would cause hospitals to cease to furnish the 
service.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposals, without modification, to pay for CPT 
codes 62350, 62355, 62365, 64472, 64476, 64480, 64623, 64627, 72285, 
and 72295 through APCs 0203, 0204, 0206, 0207, 0221, 0224, and 0388. 
The final CY 2010 median costs of the relevant APCs are displayed in 
Table 24 below. For comparative purposes, we also are showing in the 
table the median costs on which the CY 2009 OPPS payments are based.

          Table 24--Median Costs for Selected APCs for Pain-Related Procedures Mentioned by Commenters
----------------------------------------------------------------------------------------------------------------
                                                                                       Proposed CY    Final CY
                                                                           CY 2009        2010          2010
                  APC                              APC title             approximate   approximate   approximate
                                                                         median cost   median cost   median cost
----------------------------------------------------------------------------------------------------------------
0203..................................  Level IV Nerve Injections.....          $929        $1,066          $885
0204..................................  Level I Nerve Injections......           161           181           171
0206..................................  Level IV Nerve Injections.....           236           254           249
0207..................................  Level III Nerve Injections....           463           504           481

[[Page 60448]]

 
0221..................................  Level II Nerve Procedures.....         2,322         2,521         2,490
0224..................................  Implantation of Catheter/              2,715         2,769         2,740
                                         Reservoir/Shunt.
0388..................................  Discography...................         1,470         1,769         1,727
----------------------------------------------------------------------------------------------------------------

b. Magnetoencephalography (APCs 0065 and 0067)
    Three CPT codes describe magnetoencephalography services: 95965 
(Magnetoencephalography (MEG), recording and analysis; for spontaneous 
brain magnetic activity (e.g. epileptic cerebral cortex localization)); 
95966 (Magnetoencephalography (MEG), recording and analysis; for 
spontaneous brain magnetic activity (e.g. epileptic cerebral cortex 
localization) for evoked magnetic fields, single modality (e.g. 
sensory, motor, language or visual cortex localization)); and 95967 
(Magnetoencephalography (MEG), recording and analysis; for spontaneous 
brain magnetic activity (e.g. epileptic cerebral cortex localization), 
for evoked magnetic fields, each additional modality (e.g. sensory, 
motor language, or visual cortex localization (List separately in 
addition to code for primary procedure)). These CPT codes were 
originally assigned to New Technology APCs but, beginning in CY 2006 
and for every year thereafter, these codes have been assigned to 
clinical APCs on the basis of the clinical and resource characteristics 
of the services. For CY 2010, we proposed to continue to assign CPT 
code 95965 to APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS and 
MEG) with a proposed payment rate of approximately $3,507, and we 
proposed to continue to assign CPT codes 95966 and 96967 to APC 0065 
(Level II Stereotactic Radiosurgery, MRgFUS and MEG), with a proposed 
payment rate of approximately $894.
    Comment: Several commenters requested that CMS restore the payment 
rates for CPT codes 95965, 95966, and 95967 to the levels at which they 
were paid under New Technology APCs in CY 2005 of $5,250, $1,450, and 
$950, respectively. They believed the payment rates for CYs 2006, 2007, 
2008, and 2009 and the proposed rate for CY 2010 were based on median 
cost calculations that understated the full costs of the services. The 
commenters asked CMS to create a cost center on the Medicare cost 
report that would be used solely to house hospitals' costs of MEG and 
indicated that the NUBC had approved a request for a dedicated revenue 
code for the reporting of charges for MEG. The commenters argued that 
if CMS would create a cost center for the costs of MEG from which a 
specific CCR could be developed for application to MEG charges, the 
resulting median cost would be a more accurate reflection of the cost 
of MEG and would, therefore, result in more appropriate payment. One 
commenter submitted eight claims for MEG, stating that its Medicare 
contractor had approved use of a subscript for a specific cost center 
on the cost report to house the costs of MEG. The commenter asked if 
these claims were used in ratesetting, provided the CCR the commenter 
calculated using the costs and charges for MEG that would be reported 
on the cost report line that contained only MEG costs, and asked if CMS 
calculated the costs of these claims using the specific CCR for MEG 
services.
    Response: We assign new services to New Technology APCs only until 
we believe that we have sufficient historical hospital claims data 
reflecting hospital costs to reassign them to appropriate clinical 
APCs. We initially assigned MEG services to New Technology APCs based 
on the information available to us at the time about the expected 
hospital costs. For CY 2006, we believed that we had sufficient claims 
data to enable us to make informed decisions regarding the proper 
clinical APCs for assignment of MEG services. We note that the volumes 
of claims for MEG services have remained stable since we moved them to 
clinical APCs in CY 2006. We have no reason to believe that the costs 
that we have derived from our standard cost estimation process for the 
CY 2010 OPPS fail to appropriately reflect the relative costs of MEG 
services in relation to the costs of other services paid under the 
OPPS, nor do we have reason to believe that payment at the rates under 
which these services were paid under the New Technology APCs in CY 2005 
are justified.
    With regard to whether individual claims that were submitted by one 
commenter were used to set the median costs on which the CY 2010 MEG 
payment rates are based, we note that the claims we use to set the 
payment rates under the OPPS are available for purchase and a provider 
that wishes to see if particular claims were used can attain the claims 
file and perform any analysis they choose. We are not able to create 
provider-specific revenue code-to-cost center crosswalks that would use 
unique cost report subscripts that hospitals choose to create for 
particular services. In the case of a hospital reporting MEG costs on a 
subscripted line 54.01, the costs would be included as costs in cost 
center 5400 (the cost center to which 54.01 is a subscripted line), the 
standard cost center for electroencephalography. In accordance with our 
standard revenue code-to-cost center crosswalk, we would apply the CCR 
for this cost center to the charges reported under revenue code 0740 
(EEG (Electroencephalogram); General Classification)) if there is no 
CCR available for nonstandard cost center 3280 (EKG and EEG).
    We recognize that the NUBC created a new revenue code for MEG on 
August 11, 2009, to be effective for services reported on or after 
April 1, 2010, if a hospital chooses to use it. We anticipate that we 
will propose to use claims for services furnished in CY 2010 to 
calculate OPPS payment rates for CY 2012. Therefore, for the CY 2012 
OPPS, we expect that we will propose to determine the primary, 
secondary and tertiary (if any) CCRs to be applied to the new revenue 
code as part of our standard ratesetting process for the CY 2012 OPPS. 
With regard to requests for a dedicated cost center for MEG services, 
the revised draft hospital cost report Form CMS-2552-10 went on public 
display through the Federal Register (74 FR 31738), with a comment 
period that ended on August 31, 2009. We will consider whether creation 
of such a cost center is appropriate in our review of all public 
comments on the proposed revisions to the cost report.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposals, without modification, to continue to

[[Page 60449]]

assign CPT code 95965 to APC 0067, with a final CY 2010 median cost of 
approximately $3,539, and to continue to assign CPT codes 95966 and 
96967 to APC 0065, with a final CY 2010 median cost of approximately 
$954.
5. Ocular Services
a. Insertion of Anterior Segment Aqueous Drainage Device (APC 0234)
    The CPT Editorial Panel created Category III CPT code 0191T 
(Insertion of anterior segment aqueous drainage device, without 
extraocular reservoir; internal approach), effective on July 1, 2008. 
We assigned CPT code 0191T to APC 0234 (Level III Anterior Segment Eye 
Procedures), effective July 1, 2008, and maintained this APC assignment 
for CY 2009. For CY 2010, we proposed to continue the assignment of CPT 
code 0191T to APC 0234, with a proposed payment rate of approximately 
$1,639.
    Comment: One commenter asserted that the assignment of CPT code 
0191T to APC 0234 for CY 2010 would not provide sufficient payment to 
hospitals and ASCs to cover the cost of the procedure and, therefore, 
is inappropriate. The commenter indicated that the manufacturer of the 
device system inserted in the procedure reported by CPT code 0191T 
currently has an Investigational Device Exemption (IDE) from the FDA 
and has filed a premarket approval (PMA) application with the FDA with 
the expectation that the device will be available for use in the United 
States as early as the first quarter of CY 2010. The commenter noted 
that the CY 2010 proposed median cost of CPT code 0191T of 
approximately $2,380, based on only three single claims, was much 
higher than the CY 2010 proposed median cost of APC 0234 of 
approximately $1,639 and the CY 2010 proposed ASC payment of 
approximately $962. The commenter explained that the relatively low 
number of Medicare hospital outpatient claims for CPT code 0191T 
resulted from the limited use of the procedure in IDE studies and its 
predominant performance in ASCs in association with cataract surgery. 
The commenter also noted that none of the other procedures assigned to 
APC 0234 involve the placement of an implantable device, while CPT code 
0191T requires the insertion of a device that costs about $2,500.
    Response: CPT code 0191T is a new CPT code with very few Medicare 
claims from CY 2008, possibly because this procedure has been limited 
to IDE studies, as noted by the commenter. Furthermore, because this 
CPT code was effective on July 1, 2008, CY 2008 claims reflect only 6 
months of hospital data, rather than a full year. We note that there 
are a number of other surgical eye procedures to treat glaucoma that 
are also assigned to APC 0234 for CY 2010. Moreover, the final CY 2010 
median cost of CPT code 0191T based on a small number of CY 2008 claims 
is approximately $1,962, close to the final CY 2010 median cost of APC 
0234 of approximately $1,630. Therefore, based on considerations of 
clinical and resource homogeneity, we continue to believe that APC 0234 
is the most appropriate APC assignment for CPT code 0191T for CY 2010.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
assign CPT code 0191T to APC 0234, with a final CY 2010 APC median cost 
of approximately $1,630.
b. Backbench Preparation of Corneal Allograft
    For CY 2010, we proposed to continue to assign CPT code 65757 
(Backbench preparation of corneal endothelial allograft prior to 
transplantation) status indicator ``N'' (Items and Services Packaged 
into APC Rates). In the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 69076), we assigned CPT code 65757 status indicator ``N'' and 
flagged the code with comment indicator ``NI'' to indicate that, as a 
new CPT code for CY 2009, its interim final CY 2009 OPPS treatment was 
subject to comment on that final rule with comment period.
    Comment: One commenter requested that CMS pay separately for CPT 
code 65757 under the OPPS through an APC. According to the commenter, 
this service represents the preparation process for corneal 
transplants. The commenter argued that because this service is time-
consuming and requires specialized skills and equipment, CPT code 65757 
should not be packaged under the OPPS but, instead, should be paid 
separately.
    Response: We packaged CPT code 65757 because we consider it to be 
an intraoperative service that is ancillary and supportive to another 
service that is paid separately under the OPPS, specifically the 
corneal transplant. Our general packaging policies for certain 
categories of services are discussed in section II.A.4. of this final 
rule with comment period. Although OPPS payment for CPT code 65757 is 
packaged, we will consider its costs in setting the payment rates for 
the associated surgical procedures under the OPPS, according to the 
standard OPPS cost estimation methodology that is discussed in section 
II.A.2. of this final rule with comment period.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
assign CPT code 65757 status indicator ``N.''
6. Orthopedic and Musculoskeletal Services
a. Arthroscopic Procedures (APCs 0041 and 0042)
    For CY 2010, we proposed to continue the assignment of various 
arthroscopy procedures to APCs 0041 (Level I Arthroscopy) and APC 0042 
(Level II Arthroscopy), with proposed payment rates of approximately 
$2,014 and $3,279, respectively.
    Comment: One commenter expressed concern about the variety of 
procedures assigned to APC 0041, whose HCPCS code-specific median costs 
ranged from $50 to $22,000, and to APC 0042, whose HCPCS code-specific 
median costs ranged from $143 to $20,000. In particular, the commenter 
indicated that the current designation of only two APCs for the more 
than 60 distinct arthroscopic procedures assigned to these APCs does 
not appropriately reflect the unique clinical and resource 
characteristics associated with arthroscopic procedures that are 
provided to Medicare beneficiaries. The commenter urged CMS to create 
several new APCs to ensure clinical homogeneity and similar resource 
utilization for the arthroscopy procedures assigned to them and 
provided recommended APC configurations.
    To pay appropriately for arthroscopic procedures under the OPPS, 
the commenter recommended that CMS restructure the arthroscopy 
procedures into 11 new APCs based on the following three clinical 
categories: (1) Diagnostic arthroscopies; (2) lower extremity versus 
upper extremity arthroscopies; and (3) arthroscopies with implants. The 
commenter further recommended specific payment rates associated with 
each of the 11 recommended APCs, ranging from $1,400 to $5,400. 
According to the commenter, the recommended clinical distinctions 
parallel the distinctions CMS has created for other classes of 
procedures, including other orthopedic procedures, and would more 
accurately reflect the clinical characteristics and resource 
utilization of the services provided.
    Alternatively, the commenter provided, in the event a 
reconfiguration of APCs 0041 and 0042 is not possible at this time, two 
more limited

[[Page 60450]]

suggestions: Finalize the proposal to reassign CPT codes 29888 
(Arthroscopically aided anterior cruciate ligament repair/augmentation 
or reconstruction) and 29889 (Arthroscopically aided posterior cruciate 
ligament repair/augmentation or reconstruction) from APC 0042 to APC 
0052 (Level IV Musculoskeletal Procedures Except Hand and Foot) and 
reassign CPT code 29892 (Arthroscopically aided repair of large 
osteochondritis dissecans lesion, talar dome fracture, or tibial 
plafond fracture, with or without internal fixation (includes 
arthroscopy)) from APC 0042 to APC 0052.
    Response: We believe the existing clinical APCs 0041 and 0042 
sufficiently account for the different clinical and resource 
characteristics of the procedures assigned to them. To reduce the size 
of the APC payment groups and establish new APC payment groups to pay 
more precisely would be inconsistent with our overall strategy to 
encourage hospitals to use resources more efficiently by increasing the 
size of the payment bundles. Moreover, many of the services that are 
assigned to APCs 0041 and 0042 are low volume services, with even fewer 
single claims available for ratesetting. Including low volume services 
in APCs with clinically similar higher volume services and similar 
median costs generates more stability in the payment rates that are set 
for these low volume services.
    For APC 0041, based on significant services with a total claim 
frequency of greater than 1,000 or a frequency of greater than 99 and 
percentage of single claims equal to or greater than 2 percent, CY 2008 
hospital outpatient claims data showed that the median cost of the 
lowest cost service is approximately $1,463 and the median cost of the 
highest cost service is approximately $2,086. Likewise, for APC 0042, 
claims data showed that the median cost of the lowest cost significant 
procedure is approximately $2,730 and the median cost of the highest 
cost significant procedure is approximately $4,592. Based on the CY 
2008 claims data, there is no 2 times violation in either APC 0041 or 
APC 0042. Therefore, we see no reason for a reconfiguration into many 
more APCs in light of our interest in promoting hospital efficiency, as 
discussed earlier.
    With respect to the reassignment of CPT code 29892 from APC 0042 to 
APC 0052 as recommended by the commenter, we agree that this 
reassignment would be appropriate for CY 2010. While we have very few 
claims for this procedure upon which to accurately estimate its cost, 
we reviewed the clinical characteristics associated with CPT code 29892 
and agree that, based on the complexity of this procedure, it would be 
more appropriately assigned to APC 0052 based on its clinical 
characteristics and expected resource utilization. Furthermore, we 
appreciate the commenter's support for our proposed reassignment of CPT 
codes 29888 and 29889 from APC 0042 to APC 0052 for CY 2010.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposals to reassign CPT codes 29888 and 29889 
from APC 0042 to APC 0052, with a final CY 2010 APC median cost of 
approximately $5,921. In addition, we are also finalizing the 
reassignment of CPT code 29892 from APC 0042 to APC 0052 for CY 2010. 
We are making no other changes to the proposed configurations of APC 
0041 and 0042 for CY 2010. The final CY 2010 APC median cost for APC 
0041 is approximately $1,998 and approximately $3,261 for APC 0042.
b. Knee Arthroscopy (APCs 0041 and 0042)
    For CY 2010, we proposed to continue to assign CPT codes 29882 
(Arthroscopy, knee, surgical; with meniscus repair (medial or lateral)) 
and 29883 (Arthroscopy, knee, surgical; with meniscus repair (medial 
and lateral)) to APC 0041 (Level I Arthroscopy), with a proposed 
payment rate of approximately $2,014. In addition, we proposed to 
continue to assign CPT code 29867 (Arthroscopy, knee, surgical; 
osteochondral allograft (eg, mosaicplasty)) to APC 0042 (Level II 
Arthroscopy), with a proposed payment rate of approximately $3,279.
    Comment: One commenter recommended that CMS reassign CPT code 29882 
and 29883 from APC 0041 to APC 0042 because of their similarity to 
procedures assigned to APC 0042. The commenter also requested that CMS 
reassign CPT code 29867 from APC 0042 to APC 0052 (Level IV 
Musculoskeletal Procedures Except Hand and Foot), with a proposed 
payment rate of approximately $5,889. The commenter believed that CPT 
code 29867 is clinically comparable to the other procedures assigned to 
APC 0052.
    Response: We reviewed the clinical and resource characteristics of 
CPT codes 29882 and 29883 and continue to believe these CPT codes are 
appropriately assigned to APC 0041 for CY 2010. Analysis of CY 2008 
claims data showed that the median cost for CPT code 29882, based on 
165 single claims (out of 334 total claims), is approximately $2,224 
and for CPT code 29883, based on 116 claims (out of 182 total claims), 
is approximately $2,075. These median costs are consistent with the 
final CY 2010 median cost of APC 0041, which is approximately $1,998. 
Furthermore, these procedures are clinically similar to the majority of 
other knee arthroscopy procedures that are also assigned to APC 0041.
    In addition, we do not agree with the commenter's assertion that 
CPT code 29867 is similar to the other procedures in APC 0052. Our 
claims data show that CPT code 29867 has a median cost of approximately 
$3,652, which is significantly lower than the median cost of 
approximately $5,921 for APC 0052, but close to the median cost of 
approximately $3,261 for APC 0042, where we proposed to assign the code 
for CY 2010. Furthermore, the knee arthroscopy procedure described by 
CPT code 29867 is not clinically similar to other procedures assigned 
to APC 0052, which are generally not performed arthoscopically.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposals, without modification, to continue to 
assign CPT codes 29882 and 29883 to APC 0041, which has a final CY 2010 
APC median cost of approximately $1,998, and to continue to assign CPT 
code 29867 to APC 0042, which has a final CY 2010 APC median cost of 
approximately $3,261.
c. Shoulder Arthroscopy (APC 0042)
    For CY 2010, we proposed to continue to assign CPT codes 29806 
(Arthroscopy, shoulder, surgical; capsulorrhaphy) and 29807 
(Arthroscopy, shoulder, surgical; repair of slap lesion) to APC 0042 
(Level II Arthroscopy), with a proposed payment rate of approximately 
$3,279.
    Comment: One commenter recommended that CMS reassign CPT codes 
29806 and 29807 to APC 0052 (Level IV Musculoskeletal Procedures Except 
Hand and Foot), which had a proposed payment rate of approximately 
$5,889. The commenter believed that these procedures are clinically 
similar to the other procedures in APC 0052.
    Response: We continue to believe that CPT codes 29806 and 29807 are 
appropriately assigned to APC 0042 based on clinical and resource 
considerations. We note that most other shoulder arthroscopy procedures 
that are similar to CPT codes 29806 and 29807 are assigned to APC 0042, 
while most procedures assigned to APC 0052 are bone procedures that are 
not performed arthroscopically. Analysis of our claims data revealed 
that the median cost of CPT code 29806, based

[[Page 60451]]

on 161 single claims (out of 759 total claims), is approximately 
$4,003, which is significantly lower than the median cost of 
approximately $5,921 for APC 0052. Likewise, our claims data showed 
that the median cost of CPT code 29807, based on 199 single claims (out 
of 3,802 total claims), is approximately $4,202, which is also 
significantly lower than the median cost for APC 0052. The CPT code-
specific median costs of these two procedure codes fall within the 
range of median costs (approximately $2,730 to $4,592) of significant 
procedures that are also assigned to APC 0042 for CY 2010. Therefore, 
we believe that CPT codes 29806 and 29807 are most similar clinically 
and with respect to resource costs to other procedures assigned to APC 
0042.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
assign CPT codes 29806 and 29807 to APC 0042, which has a final CY 2010 
APC median cost of approximately $3,261.
d. Fasciotomy Procedures (APC 0049)
    For CY 2010, we proposed to continue to assign the following seven 
CPT codes for fasciotomy procedures to APC 0049 (Level I 
Musculoskeletal Procedures Except Hand and Foot): CPT code 25020 
(Decompression fasciotomy, forearm and/or wrist, flexor or extensor 
compartment; without debridement of nonviable muscle and/or nerve); CPT 
code 27496 (Decompression fasciotomy, thigh and/or knee, one 
compartment (flexor or extensor or adductor)); CPT code 27498 
(Decompression fasciotomy, thigh and/or knee, multiple compartments); 
CPT code 27499 (Decompression fasciotomy, thigh and/or knee, multiple 
compartments; with debridement of nonviable muscle and/or nerve); CPT 
code 27892 (Decompression fasciotomy, leg; anterior and/or lateral 
compartments only, with debridement of nonviable muscle and/or nerve); 
CPT code 27893 ('Decompression fasciotomy, leg; posterior 
compartment(s) only, with debridement of nonviable muscle and/or 
nerve); and CPT code 27894 (Decompression fasciotomy, leg; anterior 
and/or lateral, and posterior compartment(s), with debridement of 
nonviable muscle and/or nerve). The CY 2010 proposed payment rate for 
APC 0049 was approximately $1,490.
    Comment: One commenter recommended that CMS reassign CPT codes 
25020, 27496, 27498, 27599, 27892, 27893, and 27894 from APC 0049 to 
APC 0050 (Level II Musculoskeletal Procedures Except Hand and Foot) 
based on their clinical and resource similarity to the other fasciotomy 
procedures proposed for assignment to APC 0050. Although the commenter 
recommended assignment of CPT code 27599 (Unlisted procedure, femur or 
knee) among its list of codes for assignment to APC 0050, we believe 
that the commenter may have intended to reference CPT code 27499 
instead. CPT code 27499 describes a decompression fasciotomy on the 
thigh and/or knee and was proposed for assignment to APC 0049. CPT code 
27599 was proposed for assignment to APC 0129 (Level I Closed Treatment 
Fracture Finger/Toe/Trunk) and does not describe a fasciotomy 
procedure.
    Response: We reviewed the clinical characteristics associated with 
each of the seven fasciotomy procedures, and based on our analysis, we 
agree with the commenter's recommendation. We note that, while we have 
no or very limited hospital claims data for these services that reflect 
hospital costs, a number of other similar fasciotomy procedures are 
already assigned to APC 0050. Based on further analysis, we believe 
that CPT codes 25020, 27496, 27498, 27499, 27892, 27893, and 27894 are 
sufficiently similar to those other fasciotomy procedures to warrant 
reassignment to APC 0050.
    After consideration of the public comment we received, for CY 2010, 
we are reassigning CPT codes 25020, 27496, 27498, 27499, 27892, 27893, 
and 27894 from APC 0049 to APC 0050, which has a final CY 2010 APC 
median cost of approximately $2,122.
e. Fibula Repair (APC 0062)
    For CY 2010, we proposed to continue to assign CPT code 27726 
(Repair of fibula nonunion and/or malunion with internal fixation) to 
APC 0062 (Level I Treatment Fracture/Dislocation), with a proposed 
payment rate of approximately $1,735.
    Comment: One commenter recommended that CMS reassign CPT code 27726 
from APC 0062 to APC 0063 (Level II Treatment Fracture/Dislocation) 
because the procedure is comparable in clinical and resource 
characteristics to CPT code 27760 (Closed treatment of medial malleolus 
fracture; without manipulation), which was proposed for assignment to 
APC 0063, with a proposed payment rate of approximately $3,023. In 
particular, the commenter argued that repair of a fibular nonunion is 
similar clinically and with respect to resource costs to repair of a 
tibial nonunion and, therefore, the two procedures should be assigned 
to the same clinical APC. Although the commenter compared CPT code 
27726 to CPT code 27760, we believe that the commenter may have 
intended to reference CPT code 27720 (Repair of nonunion or malunion, 
tibia; without graft, (eg, compression technique)), which describes a 
repair of a tibial nonunion and was proposed for assignment to APC 
0063, instead of CPT code 27760. CPT code 27760 describes a closed 
treatment of an ankle fracture and was proposed for assignment to APC 
0129 (Level I closed Treatment Fracture Finger/Toe/Trunk).
    Response: We reviewed the clinical characteristics and resource use 
associated with CPT code 27726, and based on our analysis, we agree 
with the commenter's recommendation. For CY 2010, our claims data 
showed a median cost of approximately $3,486 for CPT code 27726, based 
on 59 single claims (of 121 total claims), which is significantly 
higher than the median cost of approximately $1,726 for APC 0062. 
Further, our claims data showed that the median cost of CPT code 27726 
is similar to that of APC 0063, which has an APC median cost of 
approximately $3,037. In addition, CPT code 27726 clinically resembles 
CPT code 27720, which is also assigned to APC 0063.
    After consideration of the public comment we received, for CY 2010, 
we are modifying our CY 2010 proposal and reassigning CPT code 27726 to 
APC 0063 for CY 2010, which has a final CY 2010 APC median cost of 
approximately $3,037.
f. Forearm Orthopedic Procedures (APCs 0050, 0051, and 0052)
    For CY 2010, we proposed to assign the 14 forearm fracture 
procedures listed in Table 25 below to APC 0050 (Level II 
Musculoskeletal Procedures Except Hand and Foot), APC 0051, (Level III 
Musculoskeletal Procedures Except Hand and Foot), or APC 0052 (Level IV 
Musculoskeletal Procedures Except Hand and Foot). The CY 2010 proposed 
payment rate for APCs 0050 was approximately $2,135; for APC 0051, 
approximately $3,156; and for APC 0052, approximately $5,889.
    Comment: One commenter recommended that CMS reassign six forearm 
fracture procedures to APC 0051. In particular, the commenter stated 
that CPT codes 25350, 25355, 25360, 25370, 25390, and 25400 describe 
forearm surgical procedures involving only one bone and the hospital 
resource costs for the procedures are similar to those of procedures 
assigned to APC 0051. In addition, the commenter suggested that CMS 
reassign both CPT codes 24400 and 24410 to APC 0051 because these 
procedures are similar in clinical

[[Page 60452]]

characteristics and resource costs to other procedures in APC 0051. 
Further, the commenter recommended that CPT codes 25365, 25375, 25393, 
25405, 25415, and 25420 be reassigned to APC 0052 based on 
considerations of clinical and resource homogeneity.
    Response: We reviewed the clinical characteristics and resource 
costs associated with each surgical procedure discussed by the 
commenter. Based on our analysis of hospital claims data and clinical 
review, we agree with the commenter's recommendation that CPT codes 
24400, 24410, 25350, 25355, 25360, 25370, 25390, and 25400 should be 
assigned to APC 0051. We have very few hospital outpatient claims for 
these procedures upon which to estimate their hospital costs. We note 
that these procedures are all performed on only one forearm bone, 
either the radius or the ulna, and we believe they share significant 
clinical and resource characteristics with other procedures assigned to 
APC 0051. Therefore, we are reassigning CPT codes 24400, 24410, 25350, 
25360, and 25390 to APC 0051 for CY 2010. As we proposed, we are 
continuing to assign CPT codes 25355, 25370, and 25400 to APC 0051 for 
CY 2010.
    With regard to the procedures that were recommended for 
reassignment to APC 0052, we agree with the commenter's argument that 
CPT codes 25405, 25415, and 25420 have similar resource costs to other 
procedures already assigned to APC 0052. These procedures were assigned 
to APC 0052 for CY 2009 and, as we proposed, for CY 2010, we are 
continuing their assignment to APC 0052.
    However, we do not agree with the commenter's recommendation to 
reassign CPT codes 25365, 25375, and 25393 to APC 0052. We have very 
few claims for these procedures from CY 2008, but we believe their 
clinical and resource characteristics are sufficiently similar to other 
procedures assigned to APC 0051 that they should all be assigned to APC 
0051 for CY 2010. While we proposed to assign CPT codes 25375 and 25393 
to APC 0051 for CY 2010, we proposed to assign CPT code 25365 to APC 
0050. In this final rule with comment period, we are modifying the 
assignment of CPT code 25365 to APC 0051, where it will reside along 
with CPT codes 25375 and 25393.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposals, without modification, to continue to 
assign CPT codes 25355, 25370, 25375, and 25393, and 25400 to APC 0051, 
which has a final CY 2010 APC median cost of approximately $3,111, and 
CPT codes 25405, 25415, and 25420 to APC 0052, which has a final CY 
2010 APC median cost of approximately $5,921. We are modifying our CY 
2010 proposals and assigning CPT codes 24400, 24410, 25350, 25360, 
25365, and 25390 to APC 0051, which has a final CY 2010 APC median cost 
of approximately $3,111. Table 25 below lists the final APC assignments 
for the 14 forearm fracture procedures discussed in this section.

Table 25--CY 2010 APC Assignment for Certain Forearm Fracture Procedures
------------------------------------------------------------------------
                                                     Proposed
     CY 2010 HCPCS code           CY 2010 Long       CY 2010    Final CY
                                   descriptor          APC      2010 APC
------------------------------------------------------------------------
24400.......................  Osteotomy, humerus,        0050       0051
                               with or without
                               internal fixation.
24410.......................  Multiple osteotomies       0050       0051
                               with realignment on
                               intramedullary rod,
                               humeral shaft
                               (sofield type
                               procedure).
25350.......................  Osteotomy, radius;         0052       0051
                               distal third.
25355.......................  Osteotomy, radius;         0051       0051
                               middle or proximal
                               third.
25360.......................  Osteotomy; ulna.....       0050       0051
25365.......................  Osteotomy; radius          0050       0051
                               and ulna.
25370.......................  Multiple                   0051       0051
                               osteotomies, with
                               realignment on
                               intramedullary rod
                               (sofield type
                               procedure); radius
                               or ulna.
25375.......................  Multiple                   0051       0051
                               osteotomies, with
                               realignment on
                               intramedullary rod
                               (sofield type
                               procedure); radius
                               and ulna.
25390.......................  Osteoplasty, radius        0050       0051
                               or ulna; shortening.
25393.......................  Osteoplasty, radius        0051       0051
                               and ulna;
                               lengthening with
                               autograft.
25400.......................  Repair of nonunion         0051       0051
                               or malunion, radius
                               or ulna; without
                               graft (eg,
                               compression
                               technique.
25405.......................  Repair of nonunion         0052       0052
                               or malunion, radius
                               or ulna; with
                               autograft (includes
                               obtaining graft).
25415.......................  Repair of nonunion         0052       0052
                               or malunion, radius
                               and ulna; without
                               graft (eg,
                               compression
                               technique).
25420.......................  Repair of nonunion         0052       0052
                               or malunion, radius
                               and ulna; with
                               autograft (includes
                               obtaining graft).
------------------------------------------------------------------------

g. Low Energy Extracorporeal Shock Wave Therapy (Low Energy ESWT)
    For CY 2010, we proposed to continue to assign CPT code 0019T 
(Extracorporeal shock wave involving musculoskeletal system, not 
otherwise specified, low energy) status indicator ``A'' (Services 
furnished to a hospital outpatient that are paid under a fee schedule 
or payment system other than OPPS).
    Comment: One commenter urged CMS to assign CPT code 0019T status 
indicator ``T'' (Significant Procedure: Multiple Reduction Applies), 
and to place the CPT code in an APC that pays appropriately. The 
commenter indicated that high energy ESWT, specifically CPT code 0101T 
(Extracorporeal shock wave involving musculoskeletal system, not 
otherwise specified, high energy), is assigned to APC 0050 (Level II 
Musculoskeletal Procedures Except Hand and Foot), with a proposed CY 
2010 payment rate of approximately $2,135. The commenter argued that 
both the low energy and high energy ESWT treat similar conditions and 
both use Class III medical devices that are subject to the most 
stringent FDA approval process that restricts the sale of the device to 
by or on the order of a physician. Because of this similarity, the 
commenter urged CMS to be consistent in its payment policy and 
recommended that both CPT codes 0101T and 0019T be assigned the same 
status indicator to specify their separate payment under the OPPS.
    Response: We do not agree that low energy ESWT is similar to high 
energy ESWT. High energy ESWT requires the

[[Page 60453]]

use of anesthesia during the procedure and usually involves only one 
treatment session. Alternatively, low energy ESWT does not require 
anesthesia and usually is furnished over several sessions. Because of 
the complexity of high energy ESWT, we believe that it is appropriate 
to pay for CPT code 0101T as a hospital outpatient service under the 
OPPS through APC 0050. However, CPT code 0019T is assigned status 
indicator ``A'' because it is designated as a ``sometimes therapy'' 
service to indicate that it is a therapy service when furnished by a 
therapist. When performed in the HOPD, we believe CPT code 0019T would 
be furnished as a therapy service paid under the MPFS and, therefore, 
the service is appropriately assigned status indicator ``A'' for 
hospital outpatient payment purposes. Regulation of the device by the 
FDA as a Class III medical device for sale by or on the order of a 
physician and the need for special training to use the technology for 
its approved use are not inconsistent with our considering CPT code 
0019T to be a ``sometimes therapy'' service, that is, a therapy service 
when furnished by a therapist.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
assign CPT code 0019T to status indicator ``A'' for CY 2010.
h. 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 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.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35305), we stated that 
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. We noted in the CY 2009 OPPS/ASC 
final rule with comment period regarding APC 0052 (73 FR 68621) that 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 the CY 2010 
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 showed 
that the CY 2010 proposed rule median cost for CPT code 0171T was 
approximately $7,717 based on over 800 single claims. The CY 2010 
proposed rule claims data for CPT code 0171T revealed 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 approximately 
300 single claims without HCPCS code C1821. Therefore, we concluded 
that 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 stated in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35305) that we have no reason to believe that 
those hospitals not reporting the device HCPCS code had failed to 
consider the cost of the device in charging for the procedure. 
Furthermore, claims for CPT code 0171T reported with HCPCS code C1821 
accounted for about two-thirds of the single claims available for 
ratesetting. For the CY 2010 OPPS/ASC proposed rule, we concluded that 
the overall median cost of CPT code 0171T fell within an appropriate 
range of HCPCS code-specific median costs for those services proposed 
for CY 2010 assignment to APC 0052, which had a proposed APC median 
cost of approximately $5,939 and no 2 times violation. Moreover, in the 
CY 2010 OPPS/ASC proposed rule (74 FR 35305), we indicated that we do 
not believe that procedure-to-device claims processing

[[Page 60454]]

edits are necessary to ensure accurate cost estimation for CPT code 
0171T.
    The CY 2010 OPPS/ASC proposed rule line-item median cost for HCPCS 
code C1821 was approximately $4,625, while the CY 2010 OPPS/ASC 
proposed rule median cost of APC 0052 was approximately $1,300 more 
than this device cost. We stated in the proposed rule (74 FR 35305) 
that 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 (eg, 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 (eg, kyphoplasty); lumbar), which are also 
assigned to APC 0052.
    Because we reasoned that APC 0052 pays appropriately for the 
procedure cost of CPT codes 0171T and 0172T, we proposed to maintain 
the assignment of CPT codes 0171T and 0172T to APC 0052 for CY 2010 and 
not to implement device edits for these procedures. We proposed to 
accept one part of the APC Panel's recommendation regarding the 
continued assignment of CPT codes 0171T and 0172T to APC 0052, but we 
proposed to not accept 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 stated that we would 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 (74 FR 
35305).
    Comment: Some commenters recommended that CMS reassign CPT codes 
0171T and 0172T from APC 0052 to APC 0425 for CY 2010, arguing that the 
resource costs associated with these procedures are more similar to the 
resource costs of procedures assigned to APC 0425 than to procedures 
assigned to APC 0052. One commenter noted, for example, that the median 
cost for CPT code 0171T is approximately 30 percent higher than the 
median cost for APC 0052, but only two percent lower than the median 
cost for APC 0425. In response to CMS' observation in the CY 2010 OPPS/
ASC proposed rule that the proposed median cost of APC 0052 was 
approximately $1,300 more than the line-item median cost for HCPCS code 
C1821 of approximately $4,625, the commenter pointed out that device 
costs are but one element of the overall procedure costs. The commenter 
presented data to demonstrate that the service costs associated with 
CPT code 0171T are greater than this $1,300 difference. The commenter 
agreed that the 30 to 60 minute procedure time associated with CPT code 
0171T that CMS noted in the proposed rule is reasonable, but argued 
that intraservice time should not be used as a sole basis for judging 
resource homogeneity because there is not a direct correlation between 
intraservice time and hospital costs.
    The commenters also disagreed with CMS' assertion that the 
procedures described by CPT codes 0171T and 0172T are more similar 
clinically to procedures assigned to APC 0052 than to procedures 
assigned to APC 0425. One commenter argued that kyphoplasty is the only 
spine procedure assigned to APC 0052, and that, like all of the other 
procedures assigned to APC 0052, it does not involve the implantation 
of a device. The commenter acknowledged that, while CMS' statement of 
clinical similarity for APC 0052 is true to some extent, the procedure 
described by CPT code 0171T is more similar to procedures assigned to 
APC 0425 because it is orthopedic in nature and requires the use of a 
device that is classified as a prosthesis by the FDA.
    Moreover, the commenter claimed that there are relevant precedents 
for reassignment of CPT codes 0171T and 0172T to APC 0425, such as CMS' 
proposed reassignment of CPT code 27446 (Arthroplasty, knee, condyle 
and plateau; medial OR lateral compartment) to APC 0425 for CY 2010. 
The commenter also argued that reassigning CPT 0171T and 0172T to 
device-dependent APC 0425, to which procedure-to-device edits apply, 
would help ensure that only correctly coded claims are used in 
ratesetting.
    Response: We continue to believe that APC 0052 is an appropriate 
APC assignment for CPT codes 0171T and 0172T based on consideration of 
the procedures' clinical and resource characteristics. We do not agree 
with the commenters that the resource costs of providing the procedures 
described by CPT codes 0171T and 0172T are substantially different from 
the resource costs of providing other procedures assigned to APC 0052 
and that they should not be assigned to APC 0052, which has a final CY 
2010 APC median cost of approximately $5,921. Based on the CY 2008 
claims data reviewed for this final rule with comment period, the final 
median costs of CPT codes 0171T and 0172T are approximately $7,522 
(based on 939 single claims) and approximately $14,617 (based on 6 
single claims), respectively. As we have noted previously (73 FR 
68620), we recognize that our single claims for CPT code 0172T may not 
be correctly coded and, therefore, our cost estimation for CPT code 
0172T may not be accurate. CPT code 0171T has the highest median cost 
of the significant procedures (defined as those procedures with a 
frequency of greater than 1,000 single claims or a frequency of greater 
than 99 and more than 2 percent of the single claims in the APC) 
assigned to APC 0052, while the lowest cost significant procedure has a 
median cost of approximately $5,072. Therefore, the configuration of 
APC 0052 does not violate the 2 times rule. We continue to believe 
that, based on resource considerations, assignment to APC 0052 would 
provide appropriate payment for CPT codes 0171T and 0172T. We agree 
with the commenters that we should consider factors such as line-item 
median costs for devices and intraservice times as two data elements 
among several when we evaluate the clinical and resource homogeneity of 
APCs. In this case, we continue to believe that, as described in the 
proposed rule, both the line-item median cost for HCPCS code C1821 and 
the intraservice time for the procedure described by CPT code 0171T 
support our assessment that this procedure is similar in terms of 
resource utilization to other procedures assigned to APC 0052, 
consistent with the fact there is no 2 times violation within this APC.
    We continue to believe the posterior spinous process distraction 
device procedures described by CPT codes 0171T and 0172T are clinically 
similar to other procedures, such as the kyphoplasty procedures, that 
are assigned to APC 0052. We disagree with the commenter that the 
kyphoplasty procedures described by CPT codes 22523 and 22524 do not 
involve the implantation of a device. Our definition of an implantable 
device includes surgically inserted or implanted devices that may not 
remain with the patient following the procedure, and thus may include 
expensive devices used in kyphoplasty such as expanders and

[[Page 60455]]

other single-use disposal devices used to create a cavity in the 
vertebral body. We note the code descriptor of kyphoplasty CPT code 
22523 states, ``using mechanical device.'' Based on a kyphoplasty New 
Technology APC application we received in CY 2004, the prices for these 
implantable devices are approximately $3,000. Moreover, the kyphoplasty 
procedures are clinical substitutes for vertebroplasty procedures, such 
as the procedure described by CPT code 22520 (Percutaneous 
vertebroplasty, one vertebral body, unilateral or bilateral injection; 
thoracic) and are assigned to APC 0050 (Level II Musculoskeletal 
Procedures Except Hand and Foot). CPT code 22520 has a CY 2010 final 
rule median cost of approximately $2,181, which is nearly $3,800 less 
than the final rule median cost of approximately $5,976 calculated for 
the kyphoplasty procedure described by CPT code 22523. This 
differential appears to be largely attributable to implantable device 
costs in kyphoplasty procedures. Therefore, we continue to believe that 
kyphoplasty and posterior spinous process distraction device procedures 
are clinically similar in that they are spinal procedures involving 
implantable devices. We note that there are no procedures involving the 
spine assigned to APC 0425.
    We do not agree with the commenter that our reassignment of the 
knee arthroplasty procedure described by CPT code 27446 to APC 0425 
serves as a precedent for the reassignment of CPT codes 0171T and 0172T 
to APC 0425. As discussed in section II.A.2.d.(1) of this final rule 
with comment period, we reassigned CPT code 27446 from APC 0681 (Knee 
Arthroplasty) to APC 0425 for CY 2010 in order to consolidate APC 0425 
with APC 0681, in which CPT code 27446 was the only code. As noted in 
section II.A.2.d.(1) of this final rule with comment period, 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 in the HOPD, and to a single provider performing the majority 
of services. 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 CPT code 27446. Therefore, we do not 
believe this is a similar situation to that of CPT codes 0171T and 
0172T, as the commenter argued. Furthermore, we do not believe that 
implantation of an interspinous process distraction device, a minimally 
invasive procedure, is clinically comparable to a knee replacement 
procedure that is performed on the majority of Medicare beneficiaries 
on a hospital inpatient basis. We also do not agree that we should 
reassign CPT codes 0171T and 0172T to APC 0425 in order to implement 
device edits for these procedures. As we described in the proposed rule 
(74 FR 35305), based upon analysis of CY 2010 proposed rule claims data 
for CPT code 0171T, we have no reason to believe that the minority of 
hospitals that do not bill HCPCS code C1821 along with CPT code 0171T 
are not already considering the costs of the interspinous process 
distraction device in charging for the procedure.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposals, without modification, to continue to 
assign CPT codes 0171T and 0172T to APC 0052, which has a final CY 2010 
APC median cost of approximately $5,921.
7. Radiation Therapy Services
a. Proton Beam Therapy (APCs 0664 and 0667)
    For CY 2010, we proposed to continue to assign CPT codes 77520 
(Proton treatment delivery; simple, without compensation) and 77522 
(Proton treatment delivery; simple, with compensation) to APC 0664 
(Level I Proton Beam Radiation Therapy), which had a proposed payment 
rate of approximately $713. We also proposed to continue to assign CPT 
codes 77523 (Proton treatment delivery; intermediate) and 77525 (Proton 
treatment delivery; complex) to APC 0667 (Level II Proton Beam 
Radiation Therapy), which had a proposed payment rate of approximately 
$933.
    Comment: Several commenters supported the proposed payment 
increases for the proton beam treatment CPT codes. The commenters cited 
a payment increase of 1.43 percent for CPT codes 77520 and 77522, and a 
payment increase of 11.02 percent for CPT codes 77523 and 77525.
    Response: We appreciate the commenters' support for our proposals. 
The CY 2010 OPPS payment rates for CPT codes 77520, 77522, 77523, and 
77525 are based on the APC median costs calculated from CY 2008 
hospital claims data and the most current cost reports, according to 
the standard OPPS ratesetting methodology. We are confident that the 
observed costs in the claims data are representative of the costs of 
the proton beam therapy services provided in CY 2008 because almost all 
of the claims are single claims that can be used for ratesetting.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposals, without modification, to assign CPT 
codes 77520 and 77522 to APC 0664, with a final CY 2010 APC median cost 
of approximately $934, and CPT codes 77523 and 77525 to APC 0667, with 
a final CY 2010 APC median cost of approximately $1,221.
b. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 
0065, 0066, 0067, and 0127)
    For CY 2010, we proposed to continue to assign CPT code 77371 
(Radiation treatment delivery, stereotactic radiosurgery (SRS), 
complete course of treatment of cranial lesion(s) consisting of 1 
session; multi-source Cobalt 60 based) to APC 0127 (Level IV 
Stereotactic Radiosurgery, MRgFUS, and MEG), with a proposed payment 
rate of approximately $7,714.
    We also proposed to continue to recognize for separate payment in 
CY 2010 four existing HCPCS G-codes that describe linear accelerator-
based SRS treatment delivery services. Specifically, we proposed the 
following: to assign HCPCS code G0173 (Linear accelerator based 
stereotactic radiosurgery, complete course of therapy in one session) 
to APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS, and MEG), 
with a proposed payment rate of approximately $3,507; to assign HCPCS 
code G0251 (Linear accelerator-based stereotactic radiosurgery, 
delivery including collimator changes and custom plugging, fractionated 
treatment, all lesions, per session, maximum five sessions per course 
of treatment) to APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, 
and MEG), with a proposed payment rate of approximately $894; to assign 
HCPCS code G0339 (Image-guided robotic linear accelerator-based 
stereotactic radiosurgery, complete course of therapy in one session or 
first session of fractionated treatment) to APC 0067, with a proposed 
payment rate of approximately $3,507; and to assign HCPCS code G0340 
(Image-guided robotic linear accelerator-based stereotactic 
radiosurgery, delivery including collimator changes and custom 
plugging, fractionated treatment, all lesions, per session, second 
through fifth sessions, maximum five sessions per course of treatment) 
to APC 0066 (Level II Stereotactic Radiosurgery, MRgFUS, and MEG), with 
a proposed payment rate of approximately $2,505.
    Further, we proposed to continue to assign CPT codes 77372 
(Radiation treatment delivery, stereotactic

[[Page 60456]]

radiosurgery (SRS) (complete course of treatment of cerebral lesion(s) 
consisting of 1 session); linear accelerator based) and 77373 
(Stereotactic body radiation therapy, treatment delivery, per fraction 
to 1 or more lesions, including image guidance, entire course not to 
exceed 5 fractions) status indicator ``B'' (Codes that are not 
recognized by OPPS when submitted on an outpatient hospital Part B bill 
type (12x and 13x)) under the OPPS, to indicate that these CPT codes 
are not payable under the OPPS.
    Comment: Several commenters expressed concern about their belief 
that payment for HCPCS code G0173 and CPT code 77371 is based on the 
utilization of specific SRS equipment. The commenters stated that no 
clinical data exist to support the need for differential payment for 
linear accelerator-based and Cobalt-60 SRS procedures. The commenters 
further explained that current medical literature cites no difference 
in clinical effectiveness for the systems associated with linear 
accelerator-based and Cobalt-60 SRS procedures. One commenter provided 
an extensive bibliography of relevant peer-reviewed articles supporting 
this finding. The commenters recommended that CMS assign HCPCS code 
G0173 and CPT code 77371 to the same APC so that payment for both 
services would be the same. Specifically, the commenters suggested 
capping the payment rate for CPT code 77371 at the payment rate for 
HCPCS code G0173. One commenter added that, based on an internal 
analysis of CY 2007 claims data using the CY 2009 OPPS payment rates 
for CPT code 77371 and HCPCS code G0173, paying both procedures at the 
payment rate for HCPCS code G0173 would lead to Medicare savings of at 
least $272 million over 10 years and about $104 million over 5 years. 
The commenters encouraged CMS to consider this payment methodology and, 
thereby, pay for services appropriately regardless of the specific 
equipment used to deliver SRS treatment, especially as Medicare moves 
towards a value-based purchasing system.
    Response: Analysis of our claims data shows that the median costs 
for linear accelerator-based and Cobalt-60 SRS procedures vary 
significantly. Since the creation of CPT code 77371, which was made 
effective January 1, 2007, our claims data has shown a median cost of 
more than approximately $7,000 for this procedure. Based on data 
available for CY 2010 ratesetting, our claims data showed a median cost 
of approximately $7,277 for CPT code 77371 that is derived from 483 
single claims (of 4,142 total claims), which is significantly higher 
than the median cost of approximately $2,877 for HCPCS code G0173 that 
is based on 459 single claims (of 1,471 total claims). Likewise, for 
claims submitted for CY 2007, the data year used for CY 2009 
ratesetting, our claims data showed a median cost of approximately 
$7,470 based on 518 single claims (of 4,208 total claims) for CPT code 
77371, which is much higher than the median cost of approximately 
$3,523 for HCPCS code G0173, based on 528 single claims (of 1,616 total 
claims).
    The OPPS is a prospective payment system, where APC payment rates 
are based on the relative costs of services as reported to us by 
hospitals according to the most recent claims and cost report data as 
described in section II.A. of this final rule with comment period. The 
2 times rule specifies that the median cost of the highest cost item or 
service within a payment group may be no more than 2 times greater than 
the median cost of the lowest cost item or service within the same 
group. Based on application of the 2 times rule, we cannot assign HCPCS 
code G0173 and CPT code 77371 to the same APC. In addition, because 
hospitals continue to report very different costs for these services, 
we believe it is appropriate to maintain the assignment of these two 
codes to different payment groups for CY 2010. As a matter of payment 
policy, the OPPS does not set payment rates for services based on 
considerations of clinical effectiveness. Furthermore, in accordance 
with the statute, we budget neutralize payments under the OPPS each 
year in the annual update so that projected changes in spending for 
certain services are redistributed to payment for other services.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposals, without modification, to continue to 
assign CPT code 77371 to APC 0127, which has a final CY 2010 APC median 
cost of approximately $7,277, and to continue to assign HCPCS code 
G0173 to APC 0067, which has a final CY 2010 APC median cost of 
approximately $3,539.
    Comment: One commenter requested that CMS finalize the proposed APC 
and status indicator assignments for HCPCS codes G0173, G0251, G0339, 
G0340, 77372, and 77373 for CY 2010. The commenter also recommended 
that CMS revise code descriptors of HCPCS code G0173, G0251, G0339, and 
G0340 for SRS, to distinguish between non-gantry and gantry-based SRS 
systems. Based on internal analysis, the commenter stated that, within 
the past year, there has been an increase in the OPPS volume of 
incorrectly coded claims. The commenter suggested specific code 
descriptor changes for the four revised HCPCS G-codes, as well as 
specific language changes to the SRS billing instructions in Chapter 4 
of the Medicare Claims Processing Manual.
    Response: These HCPCS G-codes for SRS have been in effect for 
several years and, based on questions brought to our attention by 
hospitals, we have no reason to believe that hospitals are confused 
about the reporting of these codes. Further, we see resource 
differences reflected in the median costs of the four HCPCS G-codes 
that are reasonably consistent with our expectations for different 
median costs for the services based on the current code descriptors. We 
believe it would be confusing to hospitals if we were to revise the 
code descriptors for HCPCS codes G0173, G0251, G0339, and G0340. 
Moreover, such a change could lead to instability in our median costs 
and inaccurate payments for some services. Therefore, we believe that 
modifying the G-code descriptors is not necessary for us to continue to 
provide appropriate payment for the services they describe. We also do 
not believe changes to our current billing instructions for SRS 
services in the Medicare Claims Processing Manual are necessary.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposals, without modification, to maintain the 
existing code descriptors for HCPCS codes G0173, G0251, G0339, and 
G0340 for linear accelerator-based SRS. In addition, we are finalizing 
our proposals, without modification, to continue to assign CPT codes 
77372 and 77373 to status indicator ``B'' under the OPPS, and to 
continue to assign the four linear accelerator-based SRS HCPCS codes to 
the same APCs for CY 2010 as CY 2009, specifically APCs 0065, 0066, and 
0067, with final CY 2010 APC median costs of approximately $954, 
$2,465, and $3,539, respectively. Table 26 displays the final APC 
median costs for the SRS treatment delivery HCPCS codes and CPT code 
77371.

[[Page 60457]]



                 Table 26--Final CY 2010 APC Assignments for All SRS Treatment Delivery Services
----------------------------------------------------------------------------------------------------------------
                                                                                                      Final CY
                                                                                                        2010
            CY 2010 HCPCS code                 CY 2010 Short descriptor       Final CY    Final CY   approximate
                                                                               2010 SI    2010 APC   APC median
                                                                                                        cost
----------------------------------------------------------------------------------------------------------------
G0173....................................  Linear acc stereo radsur com....          S        0067        $3,539
G0251....................................  Linear acc based stero radio....          S        0065           954
G0339....................................  Robot lin-radsurg com, first....          S        0067         3,539
G0340....................................  Robt lin-radsurg fractx 2-5.....          S        0066         2,465
77371....................................  SRS, multisource................          S        0127         7,277
----------------------------------------------------------------------------------------------------------------

c. Clinical Brachytherapy (APCs 0312 and 0651)
    For CY 2010, we did not propose any change to the HCPCS codes for 
assignment to APC 0312 (Radioelement Applications) or APC 0651 (Complex 
Interstitial Radiation Source Application). The proposed CY 2010 
payment rates for these APCs were approximately $298 and $808, 
respectively.
    Comment: Several commenters objected to the proposed reduction in 
the payment rate for brachytherapy services assigned to APC 0312 from 
approximately $421 in CY 2009 to approximately $298 in CY 2010, and the 
proposed reduction in the payment rate for APC 0651 from approximately 
$847 in CY 2009 to approximately $808 in CY 2010. The commenters 
believed these reductions in payment rates are the result of reduced 
numbers of single claims for the services assigned to the APCs, caused 
by the trimming of lines for which no payment was made on the claim. 
They objected to the use of only 2 percent of total claims or a 30 
percent reduction in single claims for CPT code 77778 (Interstitial 
radiation source application; complex) that is assigned to APC 0651, 
and to the use of only 9 percent of total claims for CPT code 77776 
(Interstitial radiation source application; simple) and 19 percent of 
total claims for CPT code 77777 (Interstitial radiation source 
application; intermediate) that are both assigned to APC 0312. The 
commenters speculated that the problem could be associated with changes 
to the bypass list, trimming of unpaid lines, or other general problems 
with CMS' cost estimation methodology. They believed that, regardless 
of the source of the problem, CMS must establish appropriate and stable 
payment rates for these services to allow Medicare beneficiaries 
consistent access to brachytherapy procedures.
    Response: The median cost for APC 0312 for CY 2010, calculated 
using final rule data, is approximately $300. Our review of final rule 
claims data indicates that the reduction in median cost for APC 0312 
from CY 2009 to CY 2010 appears to be caused by changes in the median 
costs for the HCPCS codes assigned to the APC that drive the median 
cost for the APC.

                           Table 27--Median Cost and Frequency Data for Services Assigned to APC 0312* in CY 2009 and CY 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                            CY 2009     CY 2009     CY 2009                 CY 2010                 CY 2010
                                                          approximate  frequency  percentages   CY 2009   approximate   CY 2010   percentages   CY 2010
      HCPCS code in APC 0312          Short descriptor       median    of single   of single     total       median      single    of single     total
                                                              cost       claims      claims      claims       cost       claims      claims      claims
--------------------------------------------------------------------------------------------------------------------------------------------------------
77776.............................  Apply interstit             $119          23           6         149        $522           9           4         104
                                     radiat simpl.
77762.............................  Apply intrcav radiat         180          70          18         161         345          25          11          69
                                     interm.
77763.............................  Apply intrcav radiat         507         131          34         352         345         112          48         250
                                     compl.
77777.............................  Apply interstit              608           7           2          51         300          11           5          54
                                     radiat inter.
77761.............................  Apply intrcav radiat         681         158          41         247          85          78          33         124
                                     simple.
                                   ---------------------------------------------------------------------------------------------------------------------
    Totals........................  ....................  ...........        389          41         960  ...........        235          39         601
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Data exclude claims for CPT code 77799, which were not used in setting the APC median cost.

    Specifically, in CY 2009, CPT codes 77761 and 77763 dominated APC 
0312 and the APC median cost was approximately $420. For CY 2010, CPT 
codes 77761 and 77763 continue to dominate APC 0312 but their HCPCS-
specific median costs declined. Hence, the median cost for APC 0312 
decreased to approximately $300. We do not believe that the exclusion 
of the lines for which no payment was made was the controlling factor 
in the decline of the APC median cost. We excluded 97 lines (including 
one unlisted line that is not relevant) from the claims containing CPT 
codes assigned to APC 0312 before we split the claims into single 
claims. Therefore, it is not possible to know how many of the line-
items we trimmed were on claims that might have become single claims 
that could be used for ratesetting purposes. The total frequency of 
HCPCS codes reported on claims used for CY 2010 ratesetting declined to 
601 from 960 (before the line-item trim). Therefore, a reduction in the 
number of single claims that are available for calculation of the 
median cost for the APC is to be expected because the universe of 
claims assigned to APC 0312 declined by more than one third. However, 
we note that the single claims used in the APC median calculation, as a 
percent of the total frequency, was 41 percent in CY 2009 and declined 
only minimally to 39 percent in CY 2010, notwithstanding the decrease 
in total frequency from CY 2009 to CY 2010 and the trim of 96

[[Page 60458]]

relevant lines of the 601 total claims for the codes used to set the 
APC median cost for APC 0312. We agree that the decline in the median 
costs for CPT codes 77761 and 77763 is notable. However, we know that, 
for CY 2007 (the year of the claims used for the CY 2009 OPPS), there 
were no CPT codes for the insertion of the needles and catheters used 
to apply brachytherapy sources interstitially to body areas other than 
the prostate. We believe it is possible that the costs of the needles 
and catheters may have been incorporated into the CY 2009 payment for 
some of the CPT codes assigned to APC 0312.
    For CY 2008, the AMA's CPT Editorial Panel created 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)), and payment has been made for that CPT 
code through APC 0050 (Level II Musculoskeletal Procedures Except Hand 
and Foot) in CY 2008 and CY 2009. In the updated claims data used for 
this CY 2010 final rule with comment period, for services furnished in 
CY 2008, CPT code 20555 has a total frequency of 67 and a single claim 
frequency of 25. CPT code 20555 is assigned to APC 0050, which has a 
final CY 2010 median cost of approximately $2,122. Because the needles 
and catheters must be placed before services reported by certain CPT 
codes assigned to APC 0312 can be performed, the hospital would receive 
not only the payment for APC 0312, but would also be paid for the 
placement of the needles and catheters or other devices, whether 
reported under CPT code 20555 or another code for placement of needles 
and catheters or other brachytherapy source delivery devices. 
Therefore, although the payment rate for APC 0312 has declined between 
CY 2009 and CY 2010, hospitals will commonly receive a separate payment 
for the placement of the needles and catheters or other devices that, 
when added to the payment for the application of the sources, will 
provide a robust payment for the service in its entirety.
    The final CY 2010 median cost of APC 0651 is approximately $885, 
compared to the median cost of approximately $847 for CY 2009. We note 
that most claims that report CPT code 77778 are for low dose rate 
prostate brachytherapy that is paid through APC 8001 (LDR Prostate 
Brachytherapy Composite) rather than through APC 0651. Therefore, the 
total claim frequency for APC 0651 of 9,649 includes both the 7,742 
claims that meet the criteria for payment through APC 8001 and the 
1,907 claims that meet the criteria for payment through APC 0651. For 
this final rule with comment period, we were able to use approximately 
11 percent of the claims (206 of 1,907 total claims) that meet the 
criteria for payment through APC 0651 in the calculation of the median 
cost for APC 0651. Not only does the CY 2010 median cost for APC 0651 
increase over the CY 2009 median cost, but when the separate payment 
for the placement of brachytherapy insertion devices is made, the full 
payment for the comprehensive service is substantial. For example, if 
CPT code 20555 was reported for placement of needles and catheters, the 
hospital would be paid for both one unit of APC 0651 (based on a CY 
2010 median cost of approximately $885) and one unit of APC 0050 (based 
on a CY 2010 median cost of approximately $2,122).
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposals, without modification, to calculate 
the median costs for APCs 0312 and 0651 according to the standard OPPS 
ratesetting methodology, applying the final bypass list and line-item 
trim as discussed in sections II.A.1. and II.A.2. of this final rule 
with comment period. The final CY 2010 median costs of APCs 0312 and 
0651 are approximately $300 and $885, respectively. We believe that 
when hospitals fully report the services required for brachytherapy 
treatment, the combined OPPS payment for insertion of the source 
application devices and application of the sources themselves provides 
appropriate payment for the comprehensive service.
8. Other Services
a. Low Frequency, Non-Contact, Non-Thermal Ultrasound (APC 0013)
    The CPT Editorial Panel created CPT code 0183T (Low frequency, non-
contact, non-thermal ultrasound, including topical application(s), when 
performed, wound assessment, and instruction(s) for ongoing care, per 
day), effective January 1, 2008. Under the OPPS, we assigned CPT code 
0183T to APC 0015 (Level III Debridement & Destruction) for CY 2008 and 
CY 2009. For CY 2009, APC 0015 has a payment rate of approximately 
$100. Based upon our review of the first year of hospital claims data 
for CPT 0183T, for CY 2010 we proposed to reassign CPT code 0183T to 
APC 0013 (Level II Debridement & Destruction), with a proposed payment 
rate of approximately $59.
    Comment: Several commenters recommended that CMS continue to assign 
CPT code 0183T to APC 0015. The commenters asserted that the proposed 
payment for APC 0013 would not cover hospitals' costs for performing 
the procedure. One commenter stated that the single-use kit for the 
service costs $55. Another commenter reported that the majority of 
hospitals with the highest utilization of CPT code 0183T either failed 
to report or underreported the packaged supply costs associated with 
CPT code 0183T. The commenter analyzed CMS' claims data according to 
hospitals' reporting of ``packaged'' supplies with CPT code 0183T and 
found that 52 percent of all single claims were from 5 hospitals, and 
that 4 of these 5 hospitals, representing 39 percent of single claims 
for CPT code 0183T used in ratesetting, reported $0 or an insignificant 
(less than $5) packaged supply cost. Moreover, the commenter stated 
that the analysis indicated that, overall, only one-third of the single 
claims for CPT code 0183T included any packaged costs, although costly 
supplies are required for hospitals to furnish the service. In 
addition, the commenter reported that it surveyed hospitals that 
provided the service and learned that those hospitals reported a median 
procedure cost of approximately $153.
    One commenter offered several reasons why hospitals might not 
report packaged supply costs with CPT code 0183T, including the fact 
that CPT code 0183T was a new CPT code in CY 2008, the year of claims 
data for the CY 2010 OPPS rates; hospitals' historical failure to 
consider supply costs in setting their procedure charges; the fact that 
relatively low cost supplies are often overlooked when hospitals charge 
for services; and the lack of a specific Level II HCPCS code to report 
a charge for the applicator kit. The commenter estimated that 32,000 
procedures were furnished to Medicare beneficiaries in the HOPD in CY 
2008, yet there were far fewer CY 2008 OPPS claims for the service. The 
commenter cited several examples of contractors providing instructions 
to report other CPT codes, such as CPT code 97602 (Removal of 
devitalized tissue from wound(s), non-selective debridement, without 
anesthesia (eg wet-to-moist dressings, enzymatic, abrasion), including 
topical application(s), wound assessment, and instruction(s) for 
ongoing care, per session), when providing the low frequency, non-
contact, non-thermal ultrasound procedure. Another commenter argued 
that APC 0015 is the most clinically appropriate APC for CPT

[[Page 60459]]

code 0183T, and stated that if the service were reassigned to APC 0013 
as proposed, it would be the only wound healing procedure and the only 
procedure requiring a single use disposable supply in APC 0013.
    Response: We proposed to reassign CPT code 0183T to APC 0013 for CY 
2010 based on clinical and resource considerations. The final CY 2010 
median cost of CPT code 0183T is approximately $77, based on 9,335 
single claims. The final CY 2010 median cost of APC 0013 is 
approximately $59, and the final CY 2010 final cost of APC 0015 is 
approximately $103. The final CY 2010 HCPCS code-specific median costs 
of other significant services assigned to APC 0013 range from 
approximately $46 to $82; therefore, the $77 final median cost of CPT 
code 0183T for CY 2010 is well within that range. While CY 2008 is the 
first year we have cost information from hospitals for the service, the 
large number of single claims provides a robust estimate of the 
service's cost based on claims from those hospitals that furnished the 
service in CY 2008. While the commenters were concerned that many 
claims did not include separate charges for the associated supplies, we 
have found that it is common for hospitals to consider the cost of 
necessary supplies when setting the procedure charge, rather than 
reporting a separate line-item charge for the associated supplies. Many 
supplies where payment is always packaged into procedure payments do 
not have specific Level II HCPCS codes under which to report the 
associated charges. Hospitals incorporate the charge for such supplies 
in the procedure charge or provide a charge on a separate line under an 
appropriate revenue code without a HCPCS code, and we package the costs 
from these uncoded line-items into payment for the associated 
procedure. Therefore, we have no reason to believe that our estimated 
cost for CPT code 0183T from CY 2008 claims data does not include the 
cost of the necessary supplies. The final CY 2010 median cost of CPT 
code 0183T is closer to the final CY 2010 median cost of APC 0013 than 
APC 0015. In fact, if we were to continue to assign CPT code 0183T to 
APC 0015 for CY 2010, APC 0015 would violate the 2 times rule. That is, 
if we maintained CPT code 0183T in APC 0015 for CY 2010 as requested by 
the commenters, it would be the significant procedure with the lowest 
median cost assigned to APC 0015. In turn, the median cost of 
approximately $158 for the highest cost significant procedure, CPT code 
11000 (Debridement of extensive eczematous or infected skin; up to 1 of 
body surface), would be more than 2 times the median cost of CPT code 
0183T, resulting in a 2 times violation in APC 0015. We note that the 
APC Panel heard several public presentations that addressed the 
proposed CY 2010 APC assignment of CPT code 0183T at the August 2009 
meeting but made no recommendation regarding the CY 2010 assignment of 
the code. In particular, the APC Panel did not make a recommendation to 
us to maintain an APC configuration that would violate the 2 times rule 
and require that we except APC 0015 from the 2 times rule for CY 2010.
    We also believe that APC 0013 is an appropriate APC assignment for 
CPT code 0183T based on clinical considerations. Other wound care 
services with similar median costs are assigned to APC 0013 for CY 
2010, specifically CPT codes 97602 and 97605 (Negative pressure wound 
therapy (eg, vacuum assisted drainage collection), including topical 
application(s), wound assessment, and instruction(s) for ongoing care, 
per session; total wound(s) surface area less than 50 square 
centimeters).
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to reassign CPT 
0183T from APC 0015 to APC 0013, with a final CY 2010 APC median cost 
of approximately $59.
b. Skin Repair (APCs 0134 and 0135)
    For CY 2010, we proposed to continue to assign the CPT skin repair 
codes for the application of Apligraf, Oasis, and Dermagraft skin 
substitutes to the same procedural APCs for CY 2010 as their CY 2009 
assignments. Specifically, we proposed to continue to assign the 
Apligraf application CPT codes 15340 (Tissue cultured allogeneic skin 
substitute; first 25 sq cm or less) and 15341 (Tissue cultured 
allogeneic skin substitute; each additional 25 sq cm, or part thereof) 
to APC 0134 (Level II Skin Repair), with a proposed payment rate of 
approximately $214. Likewise, we proposed to continue to assign the 
Dermagraft application CPT codes 15365 (Tissue cultured allogeneic 
dermal substitute, face, scalp, eyelids, mouth, neck, ears, orbits, 
genitalia, hands, feet, and/or multiple digits; first 100 sq cm or 
less, or 1% of body area of infants and children) and 15366 (Tissue 
cultured allogeneic dermal substitute, face, scalp, eyelids, mouth, 
neck, ears, orbits, genitalia, hands, feet, and/or multiple digits; 
each additional 100 sq cm, or each additional 1% of body area of 
infants and children, or part thereof) to APC 0134. We proposed to 
continue to assign the Oasis application CPT codes 15430 (Acellular 
xenograft implant; first 100 sq cm or less, or 1% of body area of 
infants and children) and 15431 (Acellular xenograft implant; each 
additional 100 sq cm, or each additional 1% of body area of infants and 
children, or part thereof) to APC 0135 (Level III Skin Repair), with a 
proposed payment rate of approximately $297.
    At the August 2009 meeting of the APC Panel, one public presenter 
requested that the APC Panel recommend that CMS reassign CPT codes 
15340 and 15341 from APC 0134 to APC 0135. The presenter stated that 
the CY 2010 proposal to continue to assign both codes to APC 0134 would 
create a financial incentive favoring Dermagraft application. 
Specifically, the presenter explained that CPT instructions allow the 
separate reporting of the CPT codes for site preparation when 
Dermagraft is applied, while the CPT instructions for Apligraf 
application codes specify that site preparation cannot be separately 
reported. The presenter believed that this reporting difference and the 
resulting expected differences in the associated application procedure 
costs could be addressed by assigning the Apligraf application CPT 
codes to a higher paying APC than the Dermagraft application codes, 
instead of the same APC as CMS proposed for CY 2010. After discussion, 
the APC Panel requested that CMS provide data at the next APC Panel 
meeting on the frequency of primary and add-on CPT codes billed for 
Apligraf, Oasis, and Dermagraft application in order to assess the 
apparent variability in billing for the application of these products. 
In addition, the APC Panel requested median cost data for site 
preparation and debridement that may be separately reported in 
preparation for application of Dermagraft.
    Comment: Several commenters supported the CY 2010 proposal to 
continue the CY 2009 APC assignments for the Apligraf, Dermagraft, and 
Oasis application CPT codes. One commenter argued that reassignment of 
the Apligraf application codes from APC 0134 to APC 0135 would create a 
financial incentive for hospitals to choose Apligraf instead of other 
products. Another commenter stated that the current APC assignments for 
all three sets of skin repair codes are appropriate based on an 
assessment of clinical homogeneity and resource costs.
    Another commenter requested that CMS reassign the Apligraf 
application CPT codes 15340 and 15341 from APC

[[Page 60460]]

0134 to APC 0135 because of their similarity, from clinical and 
resource perspectives, to the Oasis application CPT codes 15430 and 
15431 that are currently assigned to APC 0135. The commenter noted that 
none of these procedures allow separate reporting and payment of site 
preparation when performed. The commenter expressed concern that the 
variable APC assignments for similar procedures would create an unlevel 
playing field that would lead to financial incentives for hospitals to 
use one product rather than the other, as opposed to the most 
clinically appropriate product. Further, the commenter indicated that 
site preparation and debridement procedures are not paid separately 
when associated with Apligraf application, yet these site preparation 
services are paid separately when reported with Dermagraft application 
procedures that are assigned to the same APC as Apligraf application 
procedures. The commenter also requested that CMS not reassign the 
Oasis application CPT codes 15430 and 15431 from APC 0135 to APC 0134 
because such a reassignment would inappropriately group skin repair 
procedures that incorporate site preparation with those that allow 
separate reporting and payment of that preparation.
    Response: The current Apligraf, Oasis, and Dermagraft application 
CPT codes were made effective January 1, 2006. In the CY 2006 OPPS 
final rule with comment period (70 FR 68762), we assigned the Apligraf 
application CPT codes 15340 and 15341 and the Dermagraft application 
CPT codes 15365 and 15366 to the Level I Skin Repair APC (then 
designated as APC 0024 with a payment rate of approximately $92). We 
assigned the Oasis application CPT codes 15430 and 15431 to the Level 
II Skin Repair APC (then designated as APC 0025 with a payment rate of 
approximately $315) based on consideration of clinical and resource 
homogeneity.
    For CY 2007 (71 FR 68054 through 68056), we assigned the three sets 
of skin repair CPT codes to the Level II Skin Repair APC (then 
designated as APC 0025) in response to comments received from the 
public regarding their clinical and expected resource similarity. 
However, for CY 2008, because of a 2 times violation in two of the four 
skin repair APCs that resulted from hospital claims data that were 
first available for these codes, we reconfigured the APC assignments 
for the Apligraf, Dermagraft, and Oasis application procedures. This 
reconfiguration resulted in our again differentiating the APC 
assignments for the Oasis application CPT codes from the APC 
assignments for the Apligraf and Dermagraft application procedures, 
similar to the initial CY 2006 APC configuration. We also renumbered 
the Skin Repair APCs. We note that, for CY 2008, we made no change to 
the APC assignments for the Apligraf and Dermagraft application CPT 
codes, maintaining them in APC 0134, but we reassigned the Oasis 
application codes to APC 0135.
    We retained these configurations for CY 2009 and, for CY 2010, we 
proposed to continue to assign these procedures to their CY 2009 APCs. 
We also proposed to pay separately for the Apligraf, Dermagraft, and 
Oasis products themselves in CY 2010. Analysis of our claims data for 
the application procedures revealed that the hospital resource costs 
associated with the Apligraf and Oasis application procedures are 
different. The median cost of the Apligraf application CPT code 15340 
is approximately $234, based on 13,551 single claims (of 17,534 total 
claims), and approximately $186 for CPT code 15341, based on 1,789 
single claims (of 4,424 total claims). For the Oasis application CPT 
code 15430, the median cost is approximately $276 based on 12,807 
single claims (of 14,723 total claims), and approximately $261 for CPT 
code 15431 based on 150 single claims (of 293 total claims). These CPT 
code-specific median costs are consistent with the APC 0134 and APC 
0135 median costs of approximately $210 and $296, respectively, where 
the different two sets of procedure codes are assigned.
    The OPPS is a payment system that is based on the relativity of 
costs of procedures as reported to us by hospitals. Hospital costs, 
based on significant numbers of single claims, have been and continue 
to be consistently higher for the Oasis application procedures than for 
Apligraf or Dermagraft application procedures, despite the differences 
in CPT reporting instructions for Apligraf and Oasis application 
procedures in comparison with Dermagraft application procedures. We 
also note that the coverage areas for the Apligraf application codes 
are based on 25 square centimeter increments, whereas the Oasis and 
Dermagraft application codes are based on 100 square centimeter 
increments. While we are not sure of the contribution application of 
different products to different size wounds may have on hospital costs, 
we have no reason to believe that our high volume and consistent 
hospital claims data for these services do not accurately represent the 
costs of the procedures that have been reported in accordance with 
their specific code descriptors since CY 2006.
    Further, we do not agree that different APC assignments for similar 
skin repair procedures would create an unlevel playing field that would 
lead to financial incentives for hospitals to use one product rather 
than the other, as opposed to the most clinically appropriate product. 
Payments under the OPPS are based on the relative costs of services as 
reported to us by hospitals in claims and cost report data. In part, we 
assign services to APCs based on considerations of resource 
homogeneity, and hospital resources are reflected in the costs reported 
to us by hospitals. The skin repair CPT codes differ significantly from 
one another in terms of the other services that are bundled into them 
(such as site preparation) and in the coverage areas they describe. The 
specific Apligraf, Dermagraft, and Oasis application procedures have 
different median costs based on CY 2008 hospital claims that have led 
us to continue to assign them to different APCs for CY 2010, and we do 
not believe that appropriate payment for hospitals' costs for 
procedures provides incentives for hospitals to use one product instead 
of another. Instead, accurate payment based on the relative costs of 
services is an important principle of the OPPS, specifically intended 
to minimize any financial incentives for use of one product rather than 
the other in the case of similar procedures. We agree with the 
commenter that the choice of a patient's treatment should be based on 
clinical considerations, not financial incentives due to OPPS payment 
rates. We believe our final CY 2010 APC assignments for the Apligraf, 
Dermagraft, and Oasis application CPT codes are fully consistent with 
our interest in hospitals providing the most clinically appropriate 
treatments in an efficient manner.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposals, without modification, to continue to 
assign the Apligraf and Dermagraft application CPT codes to APC 0134, 
which has a final CY 2010 APC median cost of approximately $210, and to 
continue to assign the Oasis application CPY codes to APC 0135, which 
has a final CY 2010 APC median cost of approximately $296. We note that 
when hospitals are performing these procedures, they also would report 
the Level II HCPCS codes that describe the biological products that are 
used with the Apligraf, Dermagraft, and Oasis application CPT codes, 
which are paid separately in CY 2010. Further, we are accepting the 
August 2009

[[Page 60461]]

recommendation of the APC Panel and will provide information at the 
winter 2010 APC Panel meeting on the frequency of primary and add-on 
CPT codes billed for Apligraf, Oasis, and Dermagraft application 
procedures, in addition to providing median cost data for site 
preparation and debridement that may be separately reported in 
preparation for application of Dermagraft.
c. Group Psychotherapy (APC 0325)
    For CY 2010, we proposed to continue to assign CPT codes 90849 
(Multiple-family group psychotherapy), 90853 (Group psychotherapy 
(other than of a multiple-family group)), and 90857 (Interactive group 
psychotherapy) to APC 0325 (Group Psychotherapy), with a proposed 
payment rate of approximately $61, calculated according to the standard 
OPPS ratesetting methodology. In CY 2009, these three CPT codes also 
were the only codes assigned to APC 0325, with a payment rate of 
approximately $65.
    Comment: Several commenters expressed concern that the CY 2010 
proposed payment rate for APC 0325 of approximately $61 is 21 percent 
less than the CY 2006 payment rate for this APC, and 24 percent less 
than the CY 2004 payment rate for this APC. The commenters stated that 
the proposed payment rate would be insufficient to cover hospitals' 
costs for providing group mental health services and, as a result, 
would threaten beneficiary access to these services. Some commenters 
recommended that CMS increase the final CY 2010 payment rate for APC 
0325 by approximately 17 percent, which the commenters calculated is 
the average increase from CY 2006 to CY 2010 for the other 
psychotherapy APCs, specifically APC 0322 (Brief Individual 
Psychotherapy), APC 0323 (Extended Individual Psychotherapy), and APC 
0324 (Family Psychotherapy).
    Response: As we have stated in the past regarding APC 0325 (72 FR 
66739 and 73 FR 68627), we cannot speculate as to why the median cost 
of group psychotherapy services has decreased significantly since CY 
2004. We again note that we have robust claims data for the CPT codes 
that map to APC 0325. Specifically, we were able to use more than 99 
percent of the approximately 1.6 million claims submitted by hospitals 
to report group psychotherapy services. We set the payment rates for 
APC 0325 using our standard OPPS methodology based on relative costs 
from hospital outpatient claims. We have no reason to believe that our 
claims data, as reported by hospitals, do not accurately reflect the 
hospital costs of group psychotherapy services. It would appear that 
the relative cost of providing these mental health services, in 
comparison with other HOPD services has decreased in recent years.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to calculate the 
payment rate for APC 0325 by applying our standard OPPS ratesetting 
methodology that relies on all single claims for all procedures 
assigned to the APC. The final CY 2010 APC median cost of APC 0325 is 
approximately $59.
d. Portable X-Ray Services
    Consistent with applicable requirements, hospitals may bill and be 
paid under the OPPS for diagnostic x-ray tests performed in locations 
other than HOPDs, such as a skilled nursing facility (SNF), if the 
patient is receiving the x-ray as a covered outpatient department 
service and not in the course of a Medicare-covered SNF stay. The 
charge for the x-ray (but not the transportation and set-up charges) is 
billed on a hospital outpatient claim. Medicare does not pay under the 
OPPS for transportation or set-up when the x-ray equipment is 
transported to another location where the x-ray is taken.
    Comment: One commenter objected to the assignment of status 
indicator ``B'' (Codes that are not recognized by OPPS when submitted 
on an outpatient hospital Part B bill type (12X or 13X)) to HCPCS codes 
R0070 (Transportation of portable x-ray equipment and personnel to home 
or nursing home, per trip to facility or location, one patient seen); 
R0075 (Transportation of portable x-ray equipment and personnel to home 
or nursing home, per trip to facility or location, more than one 
patient seen); and Q0092 (Set up portable x-ray equipment) under the 
OPPS when a hospital transports and sets up a portable x-ray machine in 
a SNF or other nonhospital site of service to furnish an x-ray to a 
patient who is not in the course of a SNF stay that is covered by 
Medicare. The commenter indicated that to be paid for the 
transportation and set-up of the portable x-ray, the hospital must 
enroll as a supplier and bill the Medicare carrier or MAC on a HCFA 
1500 claim for the transportation and set-up services, although the 
hospital may bill the fiscal intermediary or MAC on a UB-04 claim for 
the x-ray service itself. The commenter requested that CMS revise its 
billing instructions so that the transportation and set-up charges for 
portable x-ray services could be reported on the same claim as the 
hospital's charge for the x-ray.
    Response: In the case in which a patient receiving the portable x-
ray service is not in a Medicare-covered SNF stay but a hospital 
furnishes the portable x-ray service in the SNF as a covered outpatient 
department service consistent with all applicable requirements, the 
HCPCS code and charge for the x-ray service (but not transportation and 
set-up charges) are billed to the fiscal intermediary or MAC. Payment 
is made under the OPPS for the x-ray service under such circumstances. 
The transportation and set-up of the portable x-ray are also covered 
services which are currently reported on the HCFA 1500 claim and are 
carrier-priced. We assign status indicator ``B'' to HCPCS codes R0070, 
R0075, and Q0092 because these services (transportation and set-up of 
the portable x-ray) are not paid under the OPPS and are rejected by the 
I/OCE if they are billed in an outpatient hospital bill type. We will 
explore whether it is feasible to revise the billing instructions to 
enable hospitals to bill for these transportation and set-up services 
on the same claim on which they report the charge for the x-ray service 
to which the transportation and set-up charges are ancillary. If we 
determine that it would be feasible and desirable to propose this 
change, we would propose to change the status indicators of these codes 
accordingly.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposals, without modification, to continue to 
assign the status indicator of ``B'' to HCPCS codes R0070, R0075, and 
Q0092. We will explore the feasibility of alternatives for billing and 
payment of these services that could reduce the hospital administrative 
burden associated with billing for the services.
e. Home Sleep Study Tests (APC 0213)
    For CY 2010, we proposed to continue to assign Level II HCPCS codes 
G0398 (Home sleep study test (HST) with type II portable monitor, 
unattended; minimum of 7 channels: EEG, EOG, EMG, ECG/heart rate, 
airflow, respiratory effort and oxygen saturation), G0399 (Home sleep 
test (HST) with type III portable monitor, unattended; minimum of 4 
channels: 2 respiratory movement/airflow, 1 ECG/heart rate and 1 oxygen 
saturation), and G0400 (Home sleep test (HST) with type IV portable 
monitor, unattended; minimum of 3 channels) to APC 0213 (Level I 
Extended EEG, Sleep, and Cardiovascular Studies), with a

[[Page 60462]]

proposed payment rate of approximately $160.
    Comment: One commenter urged CMS to pay appropriately for Level II 
HCPCS codes G0398, G0399, and G0400 to adequately cover the cost of 
devices used in performing these procedures. Specifically, the 
commenter stated that the acquisition costs for the devices used with 
these procedures are significant and vary between $4,400 and $16,500. 
The commenter argued that it was unreasonable for CMS to assign all 
three HCPCS G-codes to the same APC because the devices used for the 
procedures vary significantly in their costs and, therefore, payment at 
the same rate for all three services would violate the 2 times rule. 
The commenter urged CMS to review the proposed payment rates for HCPCS 
G-codes G0398, G0399, and G0400.
    Response: As we explained in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68602), we created these three HCPCS G-codes to 
describe the various types of home sleep tests that Medicare determined 
could be used to allow for coverage of continuous positive airway 
pressure (CPAP) therapy based upon a diagnosis of obstructive sleep 
apnea (OSA) according to a home sleep study. We further explained that 
we decided to assign these HCPCS G-codes to an APC under the OPPS 
because we believe these diagnostic services may be provided by HOPDs 
to Medicare beneficiaries.
    HCPCS codes G0398, G0399, and G0400 were made effective in March 
2008. Analysis of our claims data from CY 2008 reveals that these 
services are not commonly performed in the hospital outpatient setting 
for Medicare beneficiaries. Our claims data show no single claims and 
only three total claims for HCPCS code G0398. The median cost of HCPCS 
code G0399 is approximately $236 based on 12 single claims (of 13 total 
claims), and the median cost of HCPCS code G0400 is approximately $80 
based on 11 single claims (of 12 total claims). We believe it would be 
difficult to draw any conclusions about the resource differences among 
these three services based upon such limited claims data from a single 
year.
    With regard to the commenter's concern about a violation of the 2 
times rule, there is no 2 times violation in APC 0213 because none of 
the sleep study HCPCS G-codes are significant procedures in the APC. 
Generally, we review, on an annual basis, 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 cost 
of the lowest cost item or service within that same group, thereby 
assessing for 2 times rule violations. We make exceptions to the 2 
times rule in unusual cases, such as low-volume items and services, and 
we only consider significant procedures for purposes of the 2 times 
assessment. We define significant procedures as those with a single 
claim frequency of greater than 1,000 or those with a frequency of 
greater than 99 and that constitute at least 2 percent of single claims 
in the APC. For APC 0213, our CY 2008 hospital outpatient claims used 
for CY 2010 ratesetting show that the median cost of the lowest cost 
significant service is approximately $150 compared to approximately 
$241 for the highest cost service. Based on our claims data, there is 
no 2 times violation in APC 0213.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
assign HCPCS codes G0398, G0399, and G0400 to APC 0213, which has a 
final CY 2010 APC median cost of approximately $161.

IV. 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 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 proposed 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. 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

[[Page 60463]]

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. Final Policy
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35306), for CY 2010, 
we proposed 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 proposed to continue to review each 
new device category on a case-by-case basis to determine whether device 
costs associated with the new category are already packaged into the 
existing APC structure. If device costs packaged into the existing APC 
structure are associated with the new category, we proposed to 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)).
    In section V.A.4. of the CY 2010 OPPS/ASC proposed rule (74 FR 
35311 through 35314), we proposed 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) and 
that are newly approved for pass-through status beginning on or after 
January 1, 2010, would be the device pass-through process and payment 
methodology only. As a result of that proposal, we then proposed 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 proposed 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 proposed to 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 proposed 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 proposed 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 CY 2010 device 
pass-through payment applications and by CMS in reviewing those 
applications.
    Comment: One commenter noted that a significant consequence of 
paying for new implantable biologicals under the device pass-through 
payment methodology would be that the payment for the implantable 
biological would be reduced by the estimated cost of any predecessor 
devices included in the APC payment rate. The commenter believed that 
it is reasonable for CMS to reduce the payment for the pass-through 
implantable biological when the biological is used in lieu of a 
predecessor device whose cost is already incorporated into payment for 
the associated procedure. However, the commenter also stated that if 
the hospital implanted the predecessor device during the procedure in 
addition to the pass-through implantable biological, a reduction in the 
pass-through payment for the implantable biological by the predecessor 
device cost should not be taken.
    Response: Concerning the commenter's request that we not take a 
reduction (that is, device APC offset) when both a predecessor device 
and an implantable biological that is on pass-through status are used 
in a procedure in the case of medical necessity, we note that our 
standard policy when establishing a new device category for pass-
through payment is to determine whether device costs associated with 
the new category are already packaged into the relevant existing 
clinical APC. If device costs packaged into the existing clinical APC 
are associated with the new pass-through device category and these 
predecessor devices would generally not be used when a device described 
by the new device category was implanted, we identify the device APC 
offset that would be deducted from the pass-through payment amount each 
time the new category is reported with the related clinical APC. We 
make determinations about the applicability of a device APC offset 
based on our overall clinical understanding of the device category and 
its associated procedures, rather than on a claim-by-claim basis for 
each different scenario. In the rare case where an implantable 
biological that is described by a device category with pass-through 
status was used in addition to a predecessor device in the performance 
of a procedure for which we had determined that a device APC offset was 
applicable, we would still apply the device APC offset to the pass-
through payment for the implantable biological. With respect to a 
prospective payment system such as the OPPS, in some individual cases, 
payment exceeds the average cost; in other cases, payment is less than 
the average cost of an individual case. On balance, however, payment 
should approximate the relative cost of the average case, recognizing 
that, as a prospective payment system, the OPPS is a system of 
averages. We would not expect the scenario of implanting both a new 
implantable biological and the predecessor device described by the 
commenter to be common. If such a clinical scenario were common, we 
would determine that no device APC offset would apply to the new device 
category because the implantable biological was typically used in 
addition to the predecessor device in performing the associated 
procedure.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to reduce device 
pass-through payments based on device costs already included in the 
associated procedural APCs, when we determine that device costs 
associated with the new category are already packaged into the existing 
APC structure.

[[Page 60464]]

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

1. Background
    In recent years, there have been several field actions on and 
recalls of medical devices as a result of implantable device failures. 
In many of these cases, the manufacturers have offered devices without 
cost to the hospital or with credit for the device being replaced if 
the patient required a more expensive device. In order to ensure that 
payment rates for procedures involving devices reflect only the full 
costs of those devices, our standard ratesetting methodology for 
device-dependent APCs uses only claims that contain the correct device 
code for the procedure, do not contain token charges, and do 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 the CY 2010 OPPS/ASC proposed rule (74 FR 35267) and 
this final rule with comment period, we are further refining 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 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. APCs and Devices Subject to the Adjustment Policy
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35307), we proposed 
for CY 2010 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 stated in the CY 2010 OPPS/
ASC proposed rule (74 FR 35307) that we continue to believe 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 final rule with comment period 
for a description of our standard ratesetting methodology for device-
dependent APCs.) Moreover, the payment for these devices comprises a 
large part of the APC payment on which the beneficiary copayment is 
based, and we continue to believe it is equitable that the beneficiary 
cost sharing reflects the reduced costs in these cases.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35307), we also 
proposed to continue using the three criteria established in the CY 
2007 OPPS/ASC final rule with comment period for determining the APCs 
to which this policy applies (71 FR 68072 through 68077). Specifically, 
(1) all procedures assigned to the selected APCs must involve 
implantable devices that would be reported if device insertion 
procedures were performed; (2) the required devices must be surgically 
inserted or implanted devices that remain in the patient's body after 
the conclusion of the 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 proposed 
to continue to restrict the devices to which the APC payment adjustment 
would apply to a specific set of costly devices to ensure that the 
adjustment would not be triggered by the implantation of an inexpensive 
device whose cost would not constitute a significant proportion of the 
total payment rate for an APC. We stated in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35307) that we continue to believe 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.
    As indicated in the CY 2010 OPPS/ASC proposed rule (74 FR 35307), 
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 the CY 2010 proposed rule, we did not 
propose any changes to the APCs and devices to which this policy 
applies. Table 19 of the CY 2010 OPPS/ASC proposed rule (74 FR 35307 
through 35308) listed the proposed APCs to which the payment adjustment 
policy for no cost/full credit and partial credit devices would apply 
in CY 2010 and displayed the proposed payment adjustment percentages 
for both no cost/full credit and partial credit circumstances. Table 20 
of the CY 2010 OPPS/ASC proposed rule (74 FR

[[Page 60465]]

35308) listed the proposed devices to which this policy would apply in 
CY 2010. We stated in the CY 2010 OPPS/ASC proposed rule (74 FR 35307) 
that we would update the lists of APCs and devices to which the no 
cost/full credit and partial credit device adjustment policy would 
apply in CY 2010, consistent with the three selection criteria 
discussed earlier in this section and based on the final CY 2008 claims 
data available for this CY 2010 OPPS/ASC final rule with comment 
period.
    We did not receive any public comments on our CY 2010 proposal 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. We also did not receive any public comments on our CY 2010 
proposal 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). Therefore, we 
are finalizing our CY 2010 proposals, without modification, to continue 
the established no cost/full credit and partial credit device 
adjustment policy. For CY 2010, OPPS payments for implantation 
procedures to which the ``FB'' modifier is appended are reduced by 100 
percent of the device offset for no cost/full credit cases when both a 
device code listed in Table 29, below, is present on the claim and the 
procedure code maps to an APC listed in Table 28 below. OPPS payments 
for implantation procedures to which the ``FC'' modifier is appended 
are reduced by 50 percent of the device offset when both a device code 
listed in Table 29 is present on the claim and the procedure code maps 
to an APC listed in Table 28. Beneficiary copayment is based on the 
reduced amount when either the ``FB'' or ``FC'' modifier is billed and 
the procedure and device codes appear on the lists of procedures and 
devices to which this policy applies.
    We are adding device HCPCS code L8680 (Implantable neurostimulator 
electrode, each) to the list of devices in Table 29 because we are 
changing the status indicator for this code from ``B'' (Codes that are 
not recognized by OPPS when submitted on an outpatient hospital Part B 
bill type (12x and13x)) to ``N'' (Items and Services Packaged into APC 
Rates) for CY 2010, as reflected in Addendum B to this final rule with 
comment period. We are recognizing HCPCS code L8680 for payment 
purposes under the OPPS because it appropriately describes 
neurostimulator electrodes, and we typically try to recognize all valid 
HCPCS codes that hospitals may use to report items and services 
provided to hospital outpatients that are packaged or otherwise payable 
under the OPPS. This change in status indicator for HCPCS code L8680 
for CY 2010 does not require hospitals to change their current billing 
practices in any way, but it does provide them with the flexibility to 
use this code if they choose to do so.

     Table 28--APCs to Which the No Cost/Full Credit and Partial Credit Device Adjustment Policy Will Apply
----------------------------------------------------------------------------------------------------------------
                                                                                          Final CY
                                                                                        2010 device    Final CY
                                                                                           offset    2010 device
               Final CY 2010 APC                           CY 2010 APC title             percentage     offset
                                                                                        for no cost/  percentage
                                                                                            full     for partial
                                                                                        credit case  credit case
----------------------------------------------------------------------------------------------------------------
0039..........................................  Level I Implantation of                          85           43
                                                 Neurostimulator Generator.
0040..........................................  Percutaneous Implantation of                     58           29
                                                 Neurostimulator Electrodes.
0061..........................................  Laminectomy, Laparoscopy, or Incision            64           32
                                                 for Implantation of Neurostimulator
                                                 Electrodes.
0089..........................................  Insertion/Replacement of Permanent               72           36
                                                 Pacemaker and Electrodes.
0090..........................................  Insertion/Replacement of Pacemaker               74           37
                                                 Pulse Generator.
0106..........................................  Insertion/Replacement of Pacemaker               44           22
                                                 Leads and/or Electrodes.
0107..........................................  Insertion of Cardioverter-                       89           44
                                                 Defibrillator.
0108..........................................  Insertion/Replacement/Repair of                  88           44
                                                 Cardioverter-Defibrillator Leads.
0225..........................................  Implantation of Neurostimulator                  73           37
                                                 Electrodes, Cranial Nerve.
0227..........................................  Implantation of Drug Infusion Device..           83           41
0259..........................................  Level VII ENT Procedures..............           85           42
0315..........................................  Level II Implantation of                         88           44
                                                 Neurostimulator Generator.
0385..........................................  Level I Prosthetic Urological                    59           30
                                                 Procedures.
0386..........................................  Level II Prosthetic Urological                   71           35
                                                 Procedures.
0418..........................................  Insertion of Left Ventricular Pacing             81           41
                                                 Elect..
0425..........................................  Level II Arthroplasty or Implantation            58           29
                                                 with Prosthesis.
0648..........................................  Level IV Breast Surgery...............           48           24
0654..........................................  Insertion/Replacement of a permanent             75           37
                                                 dual chamber pacemaker.
0655..........................................  Insertion/Replacement/Conversion of a            75           37
                                                 permanent dual chamber pacemaker.
0680..........................................  Insertion of Patient Activated Event             73           36
                                                 Recorders.
----------------------------------------------------------------------------------------------------------------


[[Page 60466]]


  Table 29--Devices to Which the No Cost/Full Credit and Partial Credit
                   Device Adjustment Policy Will Apply
------------------------------------------------------------------------
       CY 2010 device HCPCS code             CY 2010 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.
L8680..................................  Implt neurostim elctr each.
L8685..................................  Implt nrostm pls gen sng rec.
L8686..................................  Implt nrostm pls gen sng non.
L8687..................................  Implt nrostm pls gen dua rec.
L8688..................................  Implt nrostm pls gen dua non.
L8690..................................  Aud osseo dev, int/ext comp.
------------------------------------------------------------------------

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

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biological agents. As 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 final rule with comment period. CY 2010 pass-through 
drugs and biologicals and their designated APCs are assigned status 
indicator ``G'' in Addenda A and B to this final rule with comment 
period.
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act (or, if 
the drug or biological is covered under a competitive acquisition 
contract under section 1847B of the Act, an amount determined by the 
Secretary to be equal to the average price for the drug or biological 
for all competitive acquisition areas and 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 final rule with comment period, the term ``ASP methodology'' and 
``ASP-based'' are inclusive of all data sources and methodologies 
described therein. Additional information on the ASP methodology can be 
found on the CMS Web site at: http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice.
    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 indicated in the CY 2010 OPPS/
ASC proposed rule (74 FR 35309), 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 CY 
2010 MPFS proposed rule (74 FR 33623 through 33633) included proposed 
changes to the operation of the Part B drug CAP program, including a 
proposed change in the frequency of CAP drug pricing updates. A 
discussion of the final CAP policies is available in the CY 2010 MPFS 
final rule with comment period.
    For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through

[[Page 60467]]

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 final OPPS pass-through payment estimate for drugs 
and biologicals in CY 2010 is $35.5 million, which is discussed in 
section VI.B. of this final rule with comment period.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.
2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2009
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35309), we proposed 
that the pass-through status of 6 drugs and biologicals would expire on 
December 31, 2009, as listed in Table 21 of the proposed rule (74 FR 
35309 through 35310). These items were approved for pass-through status 
on or before January 1, 2008 and, therefore, 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.
    Two of the products with proposed expiring pass-through status for 
CY 2010 are biologicals that are solely surgically implanted according 
to their Food and Drug Administration approved indications. As 
discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68634), we package payment for those implantable biologicals that have 
expiring pass-through status into payment for the associated surgical 
procedure. In the CY 2010 OPPS/ASC proposed rule, we proposed to 
package payment for two products 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).
    To date, for other nonpass-through biologicals paid under the OPPS 
that may sometimes be used as implantable devices, we have instructed 
hospitals, via Transmittal 1336, Change Request 5718, dated September 
14, 2007, to not separately bill for the HCPCS codes for the products 
when using these items as implantable devices (including as a scaffold 
or an alternative to human or nonhuman connective tissue or mesh used 
in a graft) during surgical procedures. In such cases, we consider 
payment for the biological used as an implantable device in a specific 
clinical case to be included in payment for the surgical procedure.
    As we established in the CY 2003 OPPS final rule with comment 
period (67 FR 66763), when the pass-through payment period for an 
implantable device ends, it is standard OPPS policy to package payment 
for the implantable device into payment for its associated surgical 
procedure. We consider nonpass-through implantable devices to be 
integral and supportive items and services for which packaged payment 
is most appropriate. According to our regulations at Sec.  419.2(b), as 
a prospective payment system, the OPPS establishes a national payment 
rate that includes operating and capital-related costs that are 
directly related and integral to performing a procedure or furnishing a 
service on an outpatient basis including, but not limited to, 
implantable prosthetics, implantable durable medical equipment, and 
medical and surgical supplies. Therefore, when the period of 
nonbiological device pass-through payment ends, we package the costs of 
the devices no longer eligible for pass-through payment into the costs 
of the procedures with which the devices were reported in the claims 
data used to set the payment rates for the upcoming calendar year. As 
described in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68634), we believed that this policy to package payment for implantable 
devices that are integral to the performance of separately paid 
procedures should also apply to payment for implantable biologicals 
without pass-through status, when those biologicals function as 
implantable devices. As stated above, implantable biologicals may be 
used in place of other implantable nonbiological devices whose costs 
are already accounted for in the associated procedural APC payments for 
surgical procedures. If we were to provide separate payment for these 
implantable biologicals without pass-through status, we would 
potentially be providing duplicate device payment, both through the 
packaged nonbiological device cost included in the surgical procedure's 
payment and separate biological payment. We indicated in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68634) 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.
    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 of 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 $65 for CY 2010), as discussed further in 
section V.B.2. of this final rule with comment period. 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 of the drug 
or biological is greater than the OPPS drug packaging threshold, we 
would provide separate payment at the applicable relative ASP-based 
payment amount (which is at ASP+4 percent for CY 2010, as discussed 
further in section V.B.3. of this final rule with comment period). 
Section V.B.2.d. of this final rule with comment period discusses the 
packaging of all nonpass-through contrast agents, diagnostic 
radiopharmaceuticals, and implantable biologicals.
    We did not receive any public comments on our proposal to expire 
certain drugs and biologicals from pass-through status, effective 
December 31, 2009. Therefore, we are finalizing our proposal, without 
modification, to expire the pass-through status of the six drugs and 
biologicals listed in Table 30 below, effective December 31, 2009.

[[Page 60468]]



             Table 30--Drugs and Biologicals for Which Pass-Through Status Expires December 31, 2009
----------------------------------------------------------------------------------------------------------------
                                                                                            Final CY    Final CY
         CY 2009 HCPCS code             CY 2010 HCPCS code      CY 2010 long descriptor      2010 SI    2010 APC
----------------------------------------------------------------------------------------------------------------
C9354...............................  C9354.................  Acellular pericardial                N         N/A
                                                               tissue matrix of non-human
                                                               origin (Veritas), per
                                                               square centimeter.
C9355...............................  C9355.................  Collagen nerve cuff                  N         N/A
                                                               (NeuroMatrix), per 0.5
                                                               centimeter length.
J1300...............................  J1300.................  Injection, eculizumab, 10            K        9236
                                                               mg.
J3488...............................  J3488.................  Injection, zoledronic acid           K        0951
                                                               (Reclast), 1 mg.
J9261...............................  J9261.................  Injection, nelarabine, 50            K        0825
                                                               mg.
J9330...............................  J9330.................  Injection, temsirolimus, 1           K        1168
                                                               mg.
----------------------------------------------------------------------------------------------------------------

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Status in CY 2010
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35310), we proposed to 
continue pass-through status in CY 2010 for 31 drugs and biologicals. 
These items, which were approved for pass-through status between April 
1, 2008 and July 1, 2009, were listed in Table 22 of the proposed rule 
(74 FR 35310 through 35311). 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. The APCs and HCPCS codes for these drugs and 
biologicals were assigned status indicator ``G'' in Addenda A and B to 
the proposed rule.
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a CAP under section 1847B of the Act, an amount determined by the 
Secretary equal to the average price for the drug or biological for all 
competitive acquisition areas and 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 proposed 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 
proposed 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.
    As discussed in more detail in section V.B.2.d. of this final rule 
with comment period, 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 proposed 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 proposed to consider to be a device 
for all payment purposes beginning in CY 2010 as discussed in sections 
V.A.4. and V.B.2.d. of the CY 2010 OPPS/ASC proposed rule (74 FR 35311 
through 35314 and 74 FR 35323 through 35324) and this final rule with 
comment period) 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 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 device APC offset amounts are described in more detail in sections 
V.A.6.b. and IV.A.2. of this final rule with comment period, 
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 those 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 proposed 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 did not publish a copayment 
amount for these items in Addendum A and B to the proposed rule.

[[Page 60469]]

    We also proposed 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 proposed 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.
    As is our standard methodology, we annually review new permanent 
HCPCS codes and delete temporary HCPCS C-codes if an alternate 
permanent HCPCS code is available for purposes of OPPS billing and 
payment. For our CY 2010 review, we have determined that HCPCS code 
J2796 (Injection, romiplostim, 10 micrograms) describes the product 
reported under HCPCS code C9245 (Injection, romiplostim, 10 mcg); HCPCS 
code A9581 (Injection, gadoxetate disodium, 1 ml) describes the product 
reported under HCPCS code C9246 (Injection, gadoxetate disodium, per 
ml); HCPCS code A9582 (Iodine I-123 iobenguane, diagnostic, per study 
dose, up to 15 millicuries) describes the product reported under HCPCS 
code C9247 (Iobenguane, I-123, diagnostic, per study dose, up to 10 
millicuries); HCPCS code J0718 (Injection, certolizumab pegol, 1 mg) 
describes the product reported under HCPCS code C9249 (Injection, 
certolizumab pegol, 1 mg); HCPCS code J0598 (Injection, C1 esterase 
inhibitor (human), 10 units) describes the product reported under HCPCS 
code C9251 (Injection, C1 esterase inhibitor (human), 10 units); HCPCS 
code J2562 (Injection, plerixafor, 1 mg) describes the product reported 
under HCPCS code C9252 (Injection, plerixafor, 1 mg); and HCPCS code 
J9328 (Injection, temozolomide, 1 mg) describes the product reported 
under HCPCS code C9253 (Injection, temozolomide, 1 mg). These new CY 
2010 HCPCS codes are included in Table 31 below.
    Comment: Several commenters supported CMS' proposal to provide 
payment at ASP+6 percent for drugs, biologicals, contrast agents, and 
radiopharmaceuticals that are granted pass-through status. Further, the 
commenters approved of the proposal to use the ASP methodology that 
would provide payment based on WAC if ASP information is not available, 
and payment at 95 percent of AWP if WAC information is not available. 
Some commenters requested that CMS provide an additional payment for 
radiopharmaceuticals that are granted pass-through status because 
radiopharmaceuticals typically have higher overhead and pharmacy 
handling costs associated with their preparation than the overhead 
costs of other drugs and biologicals.
    Response: As discussed above, the statutorily mandated 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. Therefore, the pass-through payment is 
determined by subtracting the otherwise applicable payment amount under 
the OPPS (determined to be ASP+4 percent for CY 2010) from the amount 
determined under section 1842(o) (ASP+6 percent).
    For CY 2010, consistent with our CY 2009 policy for diagnostic 
radiopharmaceuticals, we proposed to provide payment for both 
diagnostic and therapeutic radiopharmaceuticals with pass-through 
status based on the ASP methodology. As stated above, the ASP 
methodology, as applied under the OPPS, uses several sources of data as 
a basis for payment, including the ASP, WAC if ASP is unavailable, and 
AWP if ASP and WAC are unavailable. 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 proposed to follow the 
standard ASP methodology to determine its pass-through payment rate 
under the OPPS. We have routinely provided a single payment for drugs, 
biologicals, and radiopharmaceuticals under the OPPS to account for the 
acquisition and pharmacy overhead costs, including compounding costs. 
We continue to believe that a single payment is appropriate for 
diagnostic radiopharmaceuticals with pass-through status in CY 2009, 
and that the payment rate of ASP+6 (or payment based on the ASP 
methodology) is appropriate to provide payment for both the 
radiopharmaceutical acquisition cost and any associated nuclear 
medicine handling and compounding costs. We refer readers to section 
V.B.5.b. of this final rule with comment period for further discussion 
of payment for radiopharmaceuticals based on ASP information submitted 
by manufacturers.
    Comment: Several commenters expressed concern that a pass-through 
payment period of possibly only 2 years discourages new product 
development, especially for radiopharmaceutical products. One commenter 
recommended providing pass-through payment for approved 
radiopharmaceuticals for a full 3-year time period to allow hospitals 
time to incorporate new products into their chargemasters and billing 
practices.
    Response: The pass-through statute specifically allows for pass-
through payment of drugs and biologicals to be made for at least 2 
years, but no more than 3 years. We believe this period of payment 
facilitates dissemination of these new products into clinical practice 
and collection of hospital claims data reflective of their costs for 
future OPPS ratesetting. Our longstanding practice has been to provide 
pass-through payment for a period of 2 to 3 years, with expiration of 
pass-through status proposed and finalized through the annual 
rulemaking process. Each year when proposing to expire the pass-through 
status of certain drugs and biologicals, we examine our claims data for 
these products and we have generally seen no evidence that hospitals 
have not fully incorporated these items into their chargemasters based 
on the utilization and costs observed in our claims data. As discussed 
further in section V.A.5. of this final rule with comment period, we 
are making no operational changes to the drug and biological pass-
through program for CY 2010 and plan to continue to expire pass-through 
status on an annual basis through rulemaking. Under this existing 
operational policy, which was generally supported by the commenters, 
because we begin pass-through payment on a quarterly basis that depends 
on when applications are submitted to us for consideration and we 
expire pass-through status only on an annual basis, there is no way to 
ensure that all pass-through drugs and biologicals receive pass-through 
payment for a full 3 years, while also providing pass-through payment 
for no more than 3 years as the statute requires. Therefore, we will 
continue to provide drug and biological pass-through payment for at 
least 2 years, but no more than 3 years, as required by the statute. We 
continue to receive numerous pass-through applications for drugs and 
biologicals for consideration each quarter, and we have no evidence 
that our current pass-through payment policies discourage new product 
development.
    There is currently one diagnostic radiopharmaceutical, HCPCS code 
C9247 (Iodine I-123 iobenguane, diagnostic, per study dose, up to 15

[[Page 60470]]

millicuries), that has been granted pass-through status at the time of 
this final rule with comment period. We proposed to continue pass-
through status for this diagnostic radiopharmaceutical as it would not 
have received at least 2 but not more than 3 years of pass-through 
payment by December 31, 2009. This is consistent with the OPPS 
provision that provides for at least 2 but not more than 3 years of 
pass-through payment for drugs and biologicals that are approved for 
pass-through payments.
    We provide an opportunity through the annual OPPS/ASC rulemaking 
cycle for public comment on those drugs and biologicals that are 
proposed for expiration of pass-through payment at the end of the next 
calendar year. We have often received public comments related to our 
proposed expiration of pass-through status for particular drugs and 
biologicals, and we expect to continue to receive public comments 
regarding the proposed expiration of pass-through status for drugs and 
biologicals in the future. In this manner, we would address specific 
concerns about the pass-through payment period for individual drugs and 
biologicals in the future, including radiopharmaceuticals.
    Comment: A few commenters supported the CY 2010 proposal to set the 
associated copayment amounts for pass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals that 
would otherwise be packaged if the product did not have pass-through 
status to zero. The commenters noted increased beneficiary savings by 
setting the copayment amount to zero.
    Response: We appreciate the commenters' support. As discussed in 
the CY 2010 OPPS/ASC proposed rule (74 FR 35311), we believe that for 
drugs and biologicals that are ``policy-packaged,'' the copayment for 
the nonpass-through payment portion of the total OPPS payment for this 
subset of drugs and biologicals is 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, it is our belief that the amount should be zero for 
drugs and biologicals that are ``policy-packaged,'' including 
diagnostic radiopharmaceuticals.
    We did not receive any public comments on our proposal to update 
pass-through payment rates on a quarterly basis 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 and biologicals are necessary.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 pass-through payment proposals, without 
modification. Specifically, we will provide pass-through payment in CY 
2010 for those drugs, biologicals and radiopharmaceuticals listed in 
Table 31 below. Pass-through payment for drugs, biologicals, and 
radiopharmaceuticals granted pass-through status will be made at the 
payment rate indicated in section 1842(o) of the Act, that is, ASP+6 
percent. If ASP data are not available, pass-through payment will be 
based on the OPPS ASP methodology--that is, payment at WAC+6 percent if 
ASP data are not available and payment at 95 percent of the pass-
through radiopharmaceutical's most recent AWP if WAC information is not 
available. We will update pass-through payment rates on a quarterly 
basis during CY 2010 if later ASP submissions (or more recent WAC or 
AWP information, as applicable) indicate that adjustments to the 
payment rates for pass-through drugs and biologicals are necessary. We 
will 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. Finally, if a drug or biological that has been granted 
pass-through status for CY 2010 becomes covered under the Part B drug 
CAP if the program is reinstituted, we will provide payment for Part B 
drugs that are granted pass-through status and are covered under the 
Part B drug CAP at the Part B drug CAP rate.
    The drugs and biologicals that are continuing pass-through status 
for CY 2010 or that have been granted pass-through status as of January 
2010 are displayed in Table 31 below.

                       Table 31--Drugs and Biologicals With Pass-Through Status in CY 2010
----------------------------------------------------------------------------------------------------------------
                                                                                            Final CY    Final CY
         CY 2009 HCPCS code             CY 2010 HCPCS code      CY 2010 long descriptor      2010 SI    2010 APC
----------------------------------------------------------------------------------------------------------------
C9245...............................  J2796.................  Injection, romiplostim, 10           G        9245
                                                               micrograms.
C9246...............................  A9581.................  Injection, gadoxetate                G        9246
                                                               disodium, 1 ml.
C9247...............................  A9582.................  Iodine I-123 iobenguane,             G        9247
                                                               diagnostic, per study
                                                               dose, up to 15 millicuries.
                                      A9583.................  Injection, gadofosveset              G        1299
                                                               trisodium, 1 ml.
C9248...............................  C9248.................  Injection, clevidipien               G        9248
                                                               butyrate, 1 mg.
C9249...............................  J0718.................  Injection, certolizumab              G        9249
                                                               pegol, 1 mg.
C9250...............................  C9250.................  Human plasma fibrin                  G        9250
                                                               sealant, vapor-heated,
                                                               solvent-detergent
                                                               (Artiss), 2ml.
C9251...............................  J0598.................  Injection, C1 esterase               G        9251
                                                               inhibitor (human), 10
                                                               units.
C9252...............................  J2562.................  Injection, plerixafor, 1 mg          G        9252
C9253...............................  J9328.................  Injection, temozolomide, 1           G        9253
                                                               mg.
                                      C9255.................  Injection, paliperidone              G        1300
                                                               palmitate, 1 mg.
                                      C9256.................  Injection, dexamethasone             G        9256
                                                               intravitreal implant, 0.1
                                                               mg.
C9356...............................  C9356.................  Tendon, porous matrix of             G        9356
                                                               cross-linked collagen and
                                                               glycosaminoglycan matrix
                                                               (TenoGlide Tendon
                                                               Protector Sheet), per
                                                               square centimeter.
C9358...............................  C9358.................  Dermal substitute, native,           G        9358
                                                               non-denatured collagen,
                                                               fetal bovine origin
                                                               (SurgiMend Collagen
                                                               Matrix), per 0.5 square
                                                               centimeters.
C9359...............................  C9359.................  Porous purified collagen             G        9359
                                                               matrix bone void filler
                                                               (Integra Mozaik
                                                               Osteoconductive Scaffold
                                                               Putty, Integra OS
                                                               Osteoconductive Scaffold
                                                               Putty), per 0.5 cc.

[[Page 60471]]

 
C9360...............................  C9360.................  Dermal substitute, native,           G        9360
                                                               non-denatured collagen,
                                                               neonatal bovine origin
                                                               (SurgiMend Collagen
                                                               Matrix), per 0.5 square
                                                               centimeters.
C9361...............................  C9361.................  Collagen matrix nerve wrap           G        9361
                                                               (NeuroMend Collagen Nerve
                                                               Wrap), per 0.5 centimeter
                                                               length.
C9362...............................  C9362.................  Porous purified collagen             G        9362
                                                               matrix bone void filler
                                                               (Integra Mozaik
                                                               Osteoconductive Scaffold
                                                               Strip), per 0.5 cc.
C9363...............................  C9363.................  Skin substitute, Integra             G        9363
                                                               Meshed Bilayer Wound
                                                               Matrix, per square
                                                               centimeter.
C9364...............................  C9364.................  Porcine implant, Permacol,           G        9364
                                                               per square centimeter.
J0641...............................  J0641.................  Injection, levoleucovorin            G        1236
                                                               calcium, 0.5 mg.
J1267...............................  J1267.................  Injection, doripenem, 10 mg          G        9241
J1453...............................  J1453.................  Injection, fosaprepitant, 1          G        9242
                                                               mg.
J1459...............................  J1459.................  Injection, immune globulin           G        1214
                                                               (privigen), intravenous,
                                                               non-lyophilized (e.g.
                                                               liquid), 500 mg.
J1571...............................  J1571.................  Injection, hepatitis b               G        0946
                                                               immune globulin (hepagam
                                                               b), intramuscular, 0.5 ml.
J1573...............................  J1573.................  Injection, hepatitis B               G        1138
                                                               immune globulin (Hepagam
                                                               B), intravenous, 0.5ml.
                                      J1680.................  Injection, human fibrinogen          G        1290
                                                               concentrate, 100 mg.
J1953...............................  J1953.................  Injection, levetiracetam,            G        9238
                                                               10 mg.
J2785...............................  J2785.................  Injection, regadenoson, 0.1          G        9244
                                                               mg.
J8705...............................  J8705.................  Topotecan, oral, 0.25 mg...          G        1238
J9033...............................  J9033.................  Injection, bendamustine              G        9243
                                                               hcl, 1 mg.
                                      J9155.................  Injection, degarelix, 1 mg.          G        1296
J9207...............................  J9207.................  Injection, ixabepilone, 1            G        9240
                                                               mg.
J9225...............................  J9225.................  Histrelin implant (vantas),          G        1711
                                                               50 mg.
J9226...............................  J9226.................  Histrelin implant                    G        1142
                                                               (supprelin la), 50 mg.
                                      Q0138.................  Injection, ferumoxytol, for          G        1297
                                                               treatment of iron
                                                               deficiency anemia, 1 mg
                                                               (non-esrd use).
Q4114...............................  Q4114.................  Dermal substitute,                   G        1251
                                                               granulated cross-linked
                                                               collagen and
                                                               glycosaminoglycan matrix
                                                               (Flowable Wound Matrix), 1
                                                               cc.
----------------------------------------------------------------------------------------------------------------

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 for a period of no less than 2 and no more than 3 years from the 
date pass-through payment is first made as discussed in section V.A.5. 
of this final rule with comment period, 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. 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#TopOfPage. 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. In the CY 2010 OPPS/ASC proposed rule 
(74 FR 35318),

[[Page 60472]]

we proposed a similar payment offset policy for contrast agents 
beginning in CY 2010, as discussed in section V.A.6.c. of the proposed 
rule, and we are finalizing this policy for CY 2010, as discussed in 
section V.A.6.c. of this final rule with comment period. 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 the proposed rule (74 FR 35306) and this final rule with comment 
period.
    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 CY 2009 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 who responded 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 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 the CY 2010 OPPS/ASC proposed rule (74 FR 35254 through 
35267) and this final rule with comment period. 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. 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 implantable devices 
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

[[Page 60473]]

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, 
if we determine that an offset applies for a given APC, 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 also have 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, in the CY 2010 OPPS/ASC proposed 
rule (74 FR 35313), we proposed 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 implantable 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 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 
applications 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 with 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 evaluation of pass-through payment eligibility and payment 
would result in their consistent treatment with respect to coding and 
payment during their pass-through and nonpass-through periods of

[[Page 60474]]

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 proposed 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 proposed to revise our regulations at 
Sec. Sec.  419.64 and 419.66 to conform to this new policy. 
Specifically, we proposed 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, under proposed new 
paragraph (a)(4)(iv) of Sec.  419.64, we proposed to 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 for pass-through status beginning on or after 
January 1, 2010, would be considered only for device pass-through 
evaluation and payment, we stated in the proposed rule (74 FR 35314) 
that 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 proposed to more precisely state this in the 
regulations. Therefore, we proposed 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 proposed 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.
    Comment: A few commenters requested that CMS continue to pay for 
all pass-through biologicals under the ASP methodology for drugs and 
nonimplantable biologicals, and not pay for new implantable biologicals 
eligible for pass-through payment based on charges adjusted to cost. 
One commenter believed that the ASP methodology is well understood by 
hospitals and Medicare contractors and asserted that some new 
implantable biologicals under development will cost several thousand 
dollars per procedure. Therefore, the commenter stated, many hospitals 
will be reluctant to mark up charges for these new implantable 
biologicals, thereby resulting in charge compression and an 
underestimate of the costs of biologicals. Furthermore, the commenter 
claimed that continued payment for pass-through implantable biologicals 
based on the ASP methodology would ensure consistent payment for new 
biologicals rather than variable payment based on hospitals' charging 
practices.
    Response: Under our CY 2010 proposal to evaluate and pay for 
implantable biologicals under the device pass-through methodology, we 
would use the charges adjusted to cost payment methodology and apply a 
reduction to payment (that is, the device APC offset) for implantable 
biologicals eligible for pass-through payment beginning on or after 
January 1, 2010. Regarding the commenters' request that we continue the 
ASP payment methodology for pass-through implantable biologicals, we do 
not agree that payment under this methodology would be appropriate. 
Payment based on ASP for pass-through implantable biologicals would not 
provide the similar OPPS payment treatment of biological and 
nonbiological implantable devices that is our goal for new devices. 
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 generally 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 and pay 
for all such devices, both biological and nonbiological, only under the 
device pass-through process and payment methodology. As we stated in 
the CY 2010 OPPS/ASC proposed rule (74 FR 35313), we believe that 
implantable 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 note that we will continue pass-through payment under the ASP 
methodology for any implantable biological for which pass-through 
payment as a biological begins on or before December 31, 2009.
    Comment: A few commenters supported the proposal to treat 
implantable biologicals and implanted devices the same regarding the 
pass-through eligibility criteria and payment methodology. Some 
commenters stated that payment for both implantable biological and 
nonbiological devices should be made on the same basis for items with 
both pass-through and nonpass-through status. One commenter asserted 
that the proposed treatment of implantable biologicals is consistent 
with CMS' policy to package the costs of implantable devices and would 
reinforce previous CMS instructions regarding the billing of 
biologicals when used as implanted devices. Furthermore, another 
commenter also agreed with CMS' policy that separately payable HCPCS 
codes not be reported when biologicals that are sometimes implanted are 
surgically inserted during a procedure. The commenter urged CMS to 
continue educating providers about when HCPCS codes that describe 
biologicals that are sometimes implanted should be reported, including 
publishing a list of procedures with which the HCPCS codes for 
implantable biologicals would not typically be reported. The commenter 
encouraged CMS to publish ``reverse'' device-to-procedure edits for 
such procedures.
    Response: We appreciate the commenters' support for our proposal. 
We agree that payment for both implantable biological and

[[Page 60475]]

nonbiological devices that may be substitutes for one another should be 
made on the same basis for items with both pass-through and nonpass-
through status, that is, based on charges adjusted to cost while on 
pass-through status and packaged when not on pass-through status. 
Concerning the suggestion to publish a list of procedure codes with 
which the HCPCS codes for biologicals that are implanted would not 
typically be reported, we believe that creating and maintaining such a 
list would not be feasible because implantable biologicals may be used 
in a wide variety of surgical procedures. Moreover, creating and 
maintaining device-to-procedure edits for implantable biologicals also 
would not be feasible, given the broad array of surgical procedures in 
which such biologicals may be implanted.
    Comment: One commenter requested that CMS delay the CY 2010 
proposal to include implantable biologicals in the calculation of the 
device APC offset amounts. The commenter also recommended that CMS 
grandfather all implantable biological applications submitted under the 
drug and biological pass-through application process prior to the 
September 1, 2009 application filing deadline. The commenter noted that 
implantable biological applications submitted prior to September 1, 
2009, could have received biological pass-through status if CMS had not 
proposed and finalized the policy to treat them as devices for pass-
through purposes, beginning in CY 2010.
    The commenter explained that two implantable biological products 
that are competitors to the product manufactured by the commenter 
currently have pass-through status as biologicals, and their pass-
through status is proposed to continue for CY 2010. The commenter 
believed that treating implantable biologicals differently based on the 
date of their pass-through application would result in a competitive 
disadvantage for the product manufactured by the commenter.
    Response: The commenter recommended delaying the packaging of 
implantable biologicals in calculating the device offset. As a 
practical matter, the packaging of nonpass-through implantable 
biologicals was proposed and finalized for CY 2009 (73 FR 68635) and 
was implemented beginning in CY 2009. Given our proposal to treat 
implantable biologicals as devices for pass-through purposes beginning 
in CY 2010 and our longstanding device APC offset policy for pass-
through devices, we believe it is appropriate to consider the costs of 
implantable biologicals that are packaged in establishing the device 
APC offset amounts under a policy that considers implantable 
biologicals to be devices for pass-through evaluation and payment 
purposes. We rely on the device APC offset amounts to account for the 
costs of all predecessor devices to a new device category when those 
predecessor devices are implanted in procedures assigned to an APC to 
which procedures associated with the new device category would be 
assigned, and the predecessor devices may now include implantable 
biologicals.
    Concerning the commenter's request to grandfather all implantable 
biological applications submitted under the drug and biological pass-
through application process prior to the September 1, 2009 application 
filing deadline, we believe it is important to adopt a consistent 
implantable biological pass-through policy for a full calendar year to 
provide appropriate payment under a single payment policy for that year 
and allow consistent use of our CY 2010 claims data for ratesetting in 
the future. The earliest an application filed for the September 1 
deadline (applications are received and processed on a continual basis) 
could be considered for pass-through status is January 1 of the 
following year, in this case, CY 2010, as we have established and 
posted on the CMS Web site for pass-through applications at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp#TopOfPage. We do not believe it would be appropriate to 
implement pass-through evaluation and payment of implantable 
biologicals as devices later than the quarter beginning January 1, 
2010. In order to meet the timeframes required by our claims processing 
systems, applications for drug and biological pass-through status 
received by the September 1, 2009 deadline for January 2010 payment 
have been evaluated based on the policy established in this final rule 
with comment period to evaluate implantable biologicals for device 
pass-through payment. We also note that when adopting any significant 
policy change under the OPPS with a specific effective date, we 
recognize that similar products or services may be treated differently 
because of the timing of their FDA approval, pass-through application 
submission, or other characteristics. Nevertheless, the rulemaking 
process provides significant opportunity for public notice and comment 
prior to such policy changes in order to ensure that we give full 
consideration to all issues and information related to proposals of new 
policy.
    Comment: Several commenters recommended that both implantable and 
nonimplantable biologicals approved by the FDA under a biologics 
license application (BLA) be evaluated for pass-through payment status 
under the drug pass-through evaluation process, and indicated their 
belief that Congress intended biologicals approved under BLAs to be 
paid under the specific OPPS statutory provisions that apply to 
specified covered outpatient drugs (SCODs), including the pass-through 
provisions. One commenter agreed that CMS should have similar payment 
methodologies for biological, nonbiological, and composite devices for 
fairness and consistency and recommended that CMS implement the 
proposed policy based on FDA approval status, specifically treating as 
devices for pass-through purposes only those implantable biologicals 
approved by the FDA as devices. The commenter claimed that CMS 
determined that several implantable devices that are currently treated 
as drugs or biologicals must be paid based on their product-specific 
ASP submissions because the requirement for combining drugs for the 
purpose of ASP is that the reference materials report them as clinical 
equivalents. The commenter reasoned that devices do not have 
equivalents identified in reference materials; therefore, those devices 
paid as drugs must always receive separate payment. The commenter also 
requested that CMS clarify when it will treat an implantable device as 
a biological for ASP payment.
    One commenter suggested that CMS not use the device pass-through 
process for evaluating drugs or biologicals that are implanted using a 
device as merely a delivery vehicle, simply because the drug is 
administered through a device. The commenter recommended that CMS base 
its pass-through payment decision on the identity of the component that 
exerts the therapeutic effect of the combined product, either the 
biological component or the delivery vehicle, and provided as an 
example the practice of FDA's Office of Combination Products to assess 
combination products in development and assign their FDA regulation 
based on which component exerts the therapeutic effect claimed by the 
manufacturer. The commenter believed that there are clinical problems 
with using implantation to define whether a biological should be 
treated as a device because, for some drugs, implantation may always be 
the clinically superior route of administration. Another commenter 
claimed that some implantable biologicals meet the Act's definition of 
a biological under section 1861(t)(1) of

[[Page 60476]]

the Act even though they are approved by the FDA as devices.
    Response: We proposed to evaluate implantable biologicals that 
function as and are substitutes for implantable devices, regardless of 
their category of FDA approval, as devices for OPPS payment purposes. 
We do not believe it is necessary to make our OPPS payment policies 
regarding implantable biologicals dependent on categories of FDA 
approval, the intent of which is to ensure the safety and effectiveness 
of medical products.
    We do not agree with the commenters who asserted that Congress 
intended biologicals approved under BLAs to be paid under the specific 
OPPS statutory provisions that apply to SCODs, including the pass-
through provisions. Moreover, Congress did not specify that we must pay 
for implantable biologicals as biologicals rather than devices, if they 
also meet our criteria for payment as a device. We believe that 
implantable biologicals meet the definitions of a device and a 
biological and that, for payment purposes, it is appropriate for us to 
consider implantable biologicals as implantable devices in all cases, 
not as biologicals. For example, beginning in CY 2009, we package the 
costs of implantable biologicals into the costs of the procedures in 
which they are used, as we do for implantable devices. Therefore, we do 
not believe that we must pay for implantable biologicals under our OPPS 
biological payment methodologies, rather than our device payment 
methodologies. Furthermore, because we consider implantable biologicals 
to be devices for payment purposes, any interpretation that a 
biological is unique in the context of the ASP payment methodology for 
biologicals would not apply. Thus, we disagree with the commenter's 
conclusion that implantable biologicals treated as devices must receive 
separate payment because devices do not have equivalents in reference 
materials, a concept applicable only to the requirements for combining 
biologicals for payment under the ASP methodology, because we consider 
these implantable biologicals to be devices under the OPPS, to which 
packaged payment outside of the pass-through payment period applies.
    It is not our intention to consider biologicals under the device 
pass-through evaluation process and payment methodology when these 
products are merely administered through the implantation of a delivery 
system for the biological. Each implantable biological pass-through 
application for a combination product would be initially evaluated in 
such a case to determine if the biological or device is the key 
therapeutic or diagnostic component, after which we would then 
determine whether to evaluate the item under the device or drug and 
biological pass-through process. If the key component of the candidate 
pass-through product is the biological and that biological is only 
implanted because it is administered through an implanted delivery 
system for the biological (that is, the biological itself is not 
functioning as an implantable device), we would evaluate the product 
under the drug and biological pass-through process. Conversely, if the 
key component of the candidate pass-through product is the biological 
and that biological is functioning as an implantable device or the key 
component of the product is the implantable delivery system for the 
biological, we would evaluate the product under the device pass-through 
process.
    As we stated in the CY 2010 OPPS/ASC proposed rule (74 FR 35313) 
and this final rule with comment period, 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 do not believe 
that those implantable biologicals that meet the Act's definition of 
biological under section 1861(t)(1) necessarily must be evaluated and 
paid for under the OPPS drug and biological pass-through payment 
methodology, when they also meet the definition of a device for 
purposes of pass-through evaluation and payment.
    Comment: One commenter requested that CMS clarify certain points 
regarding the proposal to evaluate and pay for implantable biologicals 
with pass-through status similarly to pass-through devices. The 
commenter requested that CMS designate that the types of biologicals 
that would be affected by the proposal would be connective tissue 
replacements that function as devices. The commenter also requested 
that CMS clarify that the proposed changes would apply to pass-through 
implantable biologicals and not to implantable drugs, and that CMS 
recognize that it would be inappropriate to treat implantable drugs as 
devices for pass-through purposes in the future.
    Response: Our CY 2010 proposal was not limited to implantable 
biological connective tissue replacements, but instead it applies to 
all implantable biologicals. For example, in the proposed rule (74 FR 
35313), we cited expired device category HCPCS code C1781 (Mesh 
(implantable)) as describing implantable biologicals as well as 
implantable nonbiological devices, yet mesh need not necessarily 
function as a connective tissue replacement. We did not propose to 
treat implantable drugs as devices and, therefore, would not treat 
implantable drugs as devices for pass-through payment program purposes 
in CY 2010.
    Comment: One commenter suggested that implantable biologicals 
should not be treated as devices, and observed that stakeholders have 
not had adequate time to consider the long-term implications of the CMS 
proposal. The commenter recommended that CMS not finalize the proposal 
at this time and hold a public meeting regarding the proposal.
    Response: We believe that all stakeholders have had sufficient time 
to consider this proposal through the routine notice and comment 
rulemaking process. We received numerous public comments on our CY 2010 
proposal and, while we are always open to meeting with stakeholders who 
would like to share their views with us, we do not believe a public 
meeting on this issue is needed.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, that the pass-
through evaluation process and 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. 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 to be considered pass-through biologicals for the duration of 
their period of pass-through payment. As proposed, in conducting our 
pass-through review of implantable biologicals as devices beginning 
with CY 2010 pass-through payment, we will 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. Furthermore, we are finalizing 
our proposal to revise our regulations at Sec. Sec.  419.64 and 419.66 
to conform to this new policy.

[[Page 60477]]

    Specifically, we are finalizing our proposal to amend Sec.  419.64 
by adding a new paragraph (a)(4)(iii) to exclude implantable 
biologicals from consideration for drug and biological pass-through 
payment. However, we note that, as discussed in section V.A.5. of this 
final rule with comment period, we are not finalizing our proposed 
addition of a new paragraph (c)(3) to Sec.  419.64 and, therefore, we 
are not adopting our related proposed change to proposed paragraph 
(c)(3) that would have excluded implantable biologicals from 
consideration for drug and biological pass-through payment. 
Furthermore, we are adopting our proposed new paragraph (a)(4)(iv) of 
Sec.  419.64, which specifies 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. Finally, we are adopting our proposal stated above that 
clarifies 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.
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.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35314), we noted that 
it had come to our attention that our pass-through payment eligibility 
period for ``new'' drugs and biologicals in Sec.  419.64(c)(2) of the 
regulations might not most accurately reflect the statutory 
requirements of section 1833(t)(6)(C)(i)(II) of the Act. While 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, in the CY 
2010 OPPS/ASC proposed rule (74 FR 35314), we proposed to revise 
paragraph (c)(2) of Sec.  419.64 and add a new paragraph (c)(3) to 
Sec.  419.64.
    In order to conform the regulations to the statutory provisions, we 
proposed to change the start date of the pass-through payment 
eligibility period 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 needed 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 had not established a start 
date for the eligibility period distinct from the beginning of pass-
through payment because our current policy is to begin the pass-through 
payment eligibility period at the same time as we begin pass-through 
payment for the drug or biological.)
    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 result in a very short period of pass-through 
payment for the new drug or biological. Consequently, in the proposed 
rule, we stated our belief that 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 
proposed the date of first sale for a drug or biological in the United 
States following FDA approval as an appropriate proxy, as explained 
below, for the date on which the pass-through payment eligibility 
period would begin. We also noted that, in light of our CY 2010 
proposal to treat implantable biologicals as medical devices for 
purposes of pass-through eligibility and payment under section 
1833(t)(6) of the Act, described in section V.A.4. of the proposed rule 
(74 FR 35311 through 35314), 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 explained that the date of first sale of the drug or 
nonimplantable biological in the United States following FDA approval 
was 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, including our expectation that Medicare 
beneficiaries would be among the first to use these drugs and 
nonimplantable biologicals. In addition, we currently rely on the date 
of first sale of a drug or biological in the United States following 
FDA approval under the ASP methodology and in the existing OPPS pass-
through payment eligibility determination. We stated that we did 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 than the date of first sale of the drug or 
nonimplantable biological in the United States following FDA approval 
and that it was an accepted and available indicator of initial payment 
for the Medicare program.
    For these reasons, we proposed that the date of first sale of a 
drug or nonimplantable biological in the United States 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 
specified that our current policy--that the pass-through payment 
eligibility period of 2 to 3 years begins on the first date that

[[Page 60478]]

pass-through payment is made for the drug or biological--would apply 
only to drugs and biologicals approved for and receiving pass-through 
payment on or before December 31, 2009.
    We currently implement new approvals of pass-through status for 
drugs and biologicals on a quarterly basis, and under our proposal for 
CY 2010, we stated that 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 have been identical under our proposed policy. For 
our proposed policy, we identified both the pass-through payment 
eligibility period, as well as the period during which pass-through 
payment would be made, including the respective start and expiration 
dates of the pass-through payment eligibility period and the period of 
pass-through payment. We stated that 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 a CMS determination 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. We proposed 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 the 
first sale of the drug or nonimplantable biological in the United 
States after FDA approval.'' Next, we proposed that pass-through 
payment itself would start on the first day of the calendar quarter 
following the calendar quarter during which the completed application 
was approved. We proposed to 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 following the 
update period during which the drug or nonimplantable biological was 
approved for pass-through status.'' We noted that this 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.
    Because the proposed revised definition of the pass-through payment 
eligibility period could have resulted in the eligibility period 
beginning well before application is made for pass-through payment for 
the drug or nonimplantable biological and could have resulted in a 
shorter period of pass-through payment for some drugs and biologicals 
than would be the case under our current policy, we also proposed to 
expire pass-through status for ``new'' drugs and biologicals on a 
quarterly basis. This proposal to expire the pass-through status of 
drugs and nonimplantable biologicals on a quarterly basis was 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. 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.
    In addition to proposing to expire the pass-through status of 
``new'' drugs and nonimplantable biologicals described by proposed new 
Sec.  419.64(c)(3) on a quarterly basis, we also proposed to 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 the proposed rule (74 FR 35319 through 35321) and 
this final rule with comment period. Therefore, after the expiration of 
pass-through status of a ``new'' drug or biological in a given year's 
calendar quarter, we proposed to 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 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. (This proposal would exclude contrast agents and diagnostic 
radiopharmaceuticals for CY 2010, which would always be packaged when 
not on pass-through status.)
    Comment: Several commenters disagreed with CMS' proposal to change 
the pass-through payment eligibility period policy for new drugs and 
nonimplantable biologicals in CY 2010. Most of the commenters expressed 
concerns about separating the pass-through payment eligibility period 
from the period of pass-through payment, noting that delays that may 
occur between the date of the first sale of a drug in the United States 
and the date on which payment is first made under Part B would 
inevitably and inappropriately reduce the period of pass-through 
payment for new drugs. The commenters cited several examples, including 
a manufacturer's delay in submitting a pass-through application after 
receiving FDA approval, the length of CMS' pass-through review and 
approval process, delays in claim submissions and challenges associated 
with hospital billing for new services, and lags due to the resale 
process of a drug from a manufacturer to a wholesaler before the drug 
is available to the beneficiary. In addition, many commenters argued 
that non-Medicare beneficiaries, as opposed to Medicare beneficiaries, 
may be the first to receive a drug or biological, making the date of a 
drug's first sale in the United States

[[Page 60479]]

after FDA approval irrelevant to the Medicare population.
    One commenter acknowledged CMS' need to align the pass-through 
payment eligibility period policy with the statutory provisions. 
However, the commenter disagreed with CMS' proposal to use the date of 
the first sale in the United States following FDA approval as a proxy 
for the date on which payment is made under Part B. The commenter 
suggested that, considering all of the potential delays between the 
date of the first sale in the United States after FDA approval and the 
first date of payment under Part B as an outpatient hospital service, 
the date of the first sale in the United States after FDA approval is 
not a sufficiently precise proxy. The commenter suggested that CMS 
continue to use the current pass-through payment policy as a proxy for 
the first date on which payment is made under Part B, specifically the 
date that CMS first makes pass-through payment for a drug or 
biological, because it is the most accurate proxy. The commenter 
reasoned that establishing the date that CMS first makes pass-through 
payment for a drug or biological as a proxy for the first date on which 
payment is made under Part B as an outpatient hospital service is 
appropriate because the date of first pass-through payment would never 
predate the first payment under Part B as an outpatient hospital 
service, nor would it likely be made later than the date of first OPPS 
payment by an appreciable period of time. The commenter noted that, in 
general, manufacturers have an incentive to submit pass-through 
applications as quickly as possible and will do whatever they can to 
minimize any lag time between the date of first outpatient hospital 
payment and the availability of pass-through payments because pass-
through status facilitates the product's introduction into the hospital 
outpatient setting.
    Response: The commenter who urges us to adopt a different proxy 
than the one we proposed for the date of first payment under part B as 
an outpatient hospital service makes some very persuasive and 
compelling points. We have considered the merits and advantages of 
adopting the commenter's suggested proxy rather than the one we 
proposed, and we find that we agree with the commenter that the most 
appropriate policy is one that establishes the date that CMS makes its 
first pass-through payment for a drug or biological as the proxy for 
the first date on which payment is made under Part B as an outpatient 
hospital service. We believe that the date on which pass-through 
payment is first made for a drug or nonimplantable biological is a more 
accurate proxy for the date on which payment is first made under Part B 
as an outpatient hospital service for several reasons. First, we agree 
with the commenter's points concerning the significant delays that may 
occur between the date of first sale of a drug or nonimplantable 
biological in the United States after FDA approval and the first date 
on which outpatient hospital payment is made under Part B. Such delays 
may result from numerous transactions in the drug distribution chain, 
initial use for non-Medicare patients with later diffusion to treatment 
of Medicare patients, delays in claims submission for new products 
without specific HCPCS codes, and established timeframes for Medicare 
processing payment of claims. All of these lags between the date of 
first sale and the date of first payment under Part B as an outpatient 
hospital service are cumulative and potentially significant. Therefore, 
adoption of the proposed proxy could, in some cases, lead to the start 
of the pass-through payment eligibility period substantially earlier 
than the start of the period of pass-through payment, thereby resulting 
in a reduction in the period of pass-through payment.
    Second, we believe that utilizing the commenter's recommended proxy 
would eliminate the potential for delays between the proxy and the 
actual first date of payment under Part B as an outpatient hospital 
service, since the date of first pass-through payment would never 
predate the first payment under Part B as an outpatient hospital 
service. Although the first date of payment under Part B as an 
outpatient hospital service potentially could predate the date of first 
pass-through payment, it is also true that manufacturers have a 
significant incentive to submit pass-through applications as quickly as 
possible to minimize any lag between the date of first payment under 
the OPPS and the availability of pass-through payment. Pass-through 
payment can facilitate the availability of a product-specific HCPCS 
code for reporting its use and additional pass-through payment for the 
drug may allow beneficiaries access to the new drug in the HOPD. 
Therefore, in the rare circumstance that the date of first pass-through 
payment under the OPPS lags behind the first payment for the product 
under Part B as an outpatient hospital service, the delay is likely to 
be minimal. As a result, adopting this alternative date as a proxy 
would be unlikely to extend the pass-through payment eligibility period 
beyond 2 to 3 years from the date of first payment under Part B as an 
outpatient hospital service as specified in the statute.
    In addition, utilizing the date of first pass-through payment under 
the OPPS as a proxy for the date payment is first made for a product 
under Part B as an outpatient hospital service would afford drugs and 
nonimplantable biologicals at least a full 2 years of pass-through 
payment, whereas the proposed proxy might not have allowed for a full 2 
years of pass-through payment in every case. Finally, using the date of 
first pass-through payment under the OPPS as the proxy for the date of 
first payment under Part B as an outpatient hospital service would not 
present an administrative burden to CMS or the public nor would it 
disrupt or change CMS' current operational practices. This 
administratively simple proxy would result in a continuation of the 
same smoothly functioning operational practices that CMS currently 
utilizes in determining pass-through payment for drugs and biologicals. 
Therefore, we are finalizing the date on which CMS makes its first 
pass-through payment as the proxy for the first date on which payment 
is made under Part B as an outpatient hospital service.
    We note that, in the CY 2010 OPPS/ASC proposed rule (74 FR 35315 
through 35317), we outlined CMS' pass-through payment policies for 
approving and expiring pass-through payment status for drugs and 
nonimplantable biologicals under the OPPS. In adopting the date on 
which CMS makes its first pass-through payment as a proxy for the first 
date on which payment is made under Part B as an outpatient hospital 
service and, therefore, as the start date for pass-through payment 
eligibility, we are not changing our current practices concerning 
application, approval, payment, and expiration of pass-through status 
for drugs and nonimplantable biologicals. In this regard, we will 
continue to accept applications as is currently described on the CMS 
Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp. We will continue to begin pass-through 
payment on a quarterly basis through the next available OPPS quarterly 
update after the approval of a product's pass-through status. In 
addition, we will continue to expire pass-through status for drugs and 
nonimplantable biologicals on an annual basis through notice and 
comment rulemaking. Furthermore, our policy regarding the determination 
of packaging status after the pass-through status ends for a drug or 
biological, as discussed in section V.B.2. of this final

[[Page 60480]]

rule with comment period, remains the same. For those drugs with 
expiring pass-through status that are always packaged when they do not 
have pass-through status (``policy-packaged''), specifically diagnostic 
radiopharmaceuticals and contrast agents for CY 2010, we will package 
payment for these drugs once their pass-through status has expired. We 
discuss this policy in detail in section V.B.2.d. of this final rule 
with comment period.
    Comment: One commenter argued that CMS' proposed proxy of the date 
of the first sale of a drug or biological in the United States 
following FDA approval was contradictory to section 
1833(t)(6)(C)(i)(II) of the Act because that section references section 
1833(t)(6)(A)(iv) of the Act, which defines a ``new'' drug or 
biological eligible for pass-through payment as being new after 
December 31, 1996, and as meeting the cost significance criteria. The 
commenter argued that a drug cannot be considered a pass-through drug 
until cost significance has been determined and that CMS would not 
determine cost significance until it qualifies a drug for pass-through 
status. Based on this assessment, the commenter argued that CMS should 
begin the pass-through payment period on the date CMS begins to treat 
the product as a pass-through drug, the first date of the pass-through 
payment period.
    Response: We continue to believe that section 1833(t)(6)(C)(i)(II) 
of the Act requires the start date of the pass-through payment 
eligibility period for a drug or nonimplantable biological to begin on 
the date on which payment is first made for a drug or biological as an 
outpatient hospital service under Part B. As noted in the previous 
response, however, we are convinced by a commenter to adopt as the 
proxy for this date, the date on which CMS makes its first pass-through 
payment for the drug or nonimplantable biological.
    Comment: Several commenters recommended that CMS continue to end 
pass-through status for drugs and nonimplantable biologicals on an 
annual basis, instead of ending pass-through status on a quarterly 
basis as CMS proposed. In the context of the specific proposal for the 
pass-through payment eligibility period, another commenter agreed with 
CMS' proposal to end pass-through status on a quarterly basis. Several 
other commenters argued that, because the proposal creates a delay 
between the beginning of the pass-through payment eligibility period 
and the period of pass-through payment, drugs and nonimplantable 
biologicals that are approved for pass-through status should be given 
pass-through payment for the extent of the full 3-year pass-through 
eligibility period.
    Response: Because we are adopting the date of first pass-through 
payment as the start of the pass-through payment eligibility period in 
this final rule with comment period, we will not change, as we 
proposed, the current operation of our drug and biological pass-through 
program. As is our current practice, we will continue to expire pass-
through status for drugs and biologicals on an annual basis through 
notice and comment rulemaking. For example, if CMS receives a complete 
application for pass-through status for a drug on August 1, 2009, and 
approves the application for pass-through status for the January 1, 
2010 OPPS quarterly update, the pass-through payment eligibility period 
would start on January 1, 2010. The pass-through payment period would 
extend for 2 but not more than 3 years, as is mandated by the statute, 
and we would propose to expire pass-through status for the drug on 
December 31, 2011 in the CY 2012 OPPS/ASC rulemaking process for 
January 1, 2012.
    After consideration of the public comments we received, we are 
modifying our CY 2010 proposal and adopting the date of first pass-
through payment for the drug or nonimplantable biological as the proxy 
for the first date on which payment for the product is made under Part 
B as an outpatient hospital service. Therefore, the 2- to 3-year pass-
through payment eligibility period will start on the date of first 
pass-through payment and, consistent with our current policy, the pass-
through payment eligibility period and the period of pass-through 
payment coincide. Finally, we will continue to expire the pass-through 
status of drugs and nonimplantable biologicals annually through the 
notice and comment rulemaking process.
    Because our final policy reflects our current practice for 
implementing the pass-through eligibility and payment periods defined 
in section 1833(t)(6)(C)(i)(II) of the Act, we are not making any 
changes to Sec.  419.64(c)(2), and we are not adding proposed new Sec.  
419.64(c)(3) to our regulations.
6. 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 CY 2008, 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. In the CY 2010 OPPS/ASC proposed rule 
(74 FR 35323), we proposed to continue to package payment for all 
nonpass-through diagnostic radiopharmaceuticals and contrast agents for 
CY 2010 as discussed in section V.B.2.d. of the proposed rule (74 FR 
35323 through 35324).
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 on pass-
through status in CY 2010 under permanent HCPCS code A9582 (Iodine I-
123 iobenguane, diagnostic, per study dose, up to 15 millicuries). 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 final rule with comment period, new pass-
through diagnostic radiopharmaceuticals will be paid at ASP+6 percent, 
while those without ASP information will be paid at WAC+6 percent or, 
if WAC is not available, payment will be based on 95 percent of the 
product's most recently published AWP.
    As a payment offset is necessary in order to provide an appropriate

[[Page 60481]]

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 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). 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). In the CY 2010 OPPS/ASC proposed rule (74 FR 35323), we 
proposed 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 the proposed rule (74 FR 35311 through 35314 and 74 FR 
35323 through 35324) that would treat nonpass-through implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural 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 of the proposed rule (74 FR 35318) displayed the proposed 
APCs to which nuclear medicine procedures would be assigned in CY 2010 
and for which we expected that an APC offset could be applicable in the 
case of new diagnostic radiopharmaceuticals with pass-through status.
    Comment: A few commenters supported the continuation of the pass-
through diagnostic radiopharmaceutical offset policy for CY 2010.
    Response: We continue to believe that a diagnostic 
radiopharmaceutical offset policy is necessary in order to ensure that 
duplicate payment is not made for diagnostic radiopharmaceuticals with 
pass-through status. We believe it is appropriate to remove the 
radiopharmaceutical payment amount that is already packaged into the 
payment for the associated nuclear medicine procedure when we provide 
pass-through payment for a diagnostic radiopharmaceutical with pass-
through status.
    Therefore, after consideration of the public comments we received, 
we are finalizing our CY 2010 proposal, without modification, to apply 
the diagnostic radiopharmaceutical offset policy to payment for pass-
through diagnostic radiopharmaceuticals, as described above. Table 32 
below displays the APCs to which nuclear medicine procedures are 
assigned in CY 2010 and for which we expect that an APC offset could be 
applicable in the case of diagnostic radiopharmaceuticals with pass-
through status.

                  Table 32--APCs to Which Nuclear Medicine Procedures Are Assigned for CY 2010
----------------------------------------------------------------------------------------------------------------
                CY 2010 APC                                           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.
----------------------------------------------------------------------------------------------------------------


[[Page 60482]]

c. 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 with 
pass-through status in CY 2010 under HCPCS code A9581 (Injection, 
gadoxetate disodium, 1 ml). As described earlier in section V.A.3. of 
this final rule with comment period, new pass-through contrast agents 
will be paid at ASP+6 percent, while those without ASP information 
would be paid at WAC+6 percent or, if WAC is not available, payment 
would be based on 95 percent of the product's most recently published 
AWP.
    As discussed in the CY 2010 OPPS/ASC proposed rule (74 FR 35318), 
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, in the CY 2010 OPPS/ASC proposed rule (74 
FR 35318), we proposed 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 proposed to apply this same policy to 
contrast agents. Specifically, we proposed 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 proposed 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 the proposed rule 
(74 FR 35311 through 35314 and 74 FR 35323 through 35324) 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 proposed 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 proposed 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.
    Comment: One commenter objected to the proposed offset policy for 
contrast agents, stating that an offset for new contrast agents granted 
pass-through status, combined with the packaging policy for all 
nonpass-through contrast agents, would discourage hospitals from 
providing contrast agents for financial reasons. The commenter argued 
that an offset policy is not necessary to avoid duplicate payment for 
pass-through contrast agents as the majority of older contrast agents 
have costs that are well below the $65 OPPS drug packaging threshold 
and more expensive contrast agents would be eligible for pass-through 
status. Finally, the commenter believed that CMS does not have the 
appropriate contrast agent data available in order to calculate an 
offset amount for these products. Another commenter objected to CMS' 
proposed offset methodology for contrast agents and urged CMS to 
specify the APCs that would be subject to an offset. Further, the 
commenter requested that CMS implement a contrast offset methodology 
that would be more similar to the offset methodology currently in place 
for pass-through devices and diagnostic radiopharmaceuticals.
    Response: We have consistently implemented an offset policy for 
products receiving pass-through payment that would otherwise receive 
significant packaged payment if not for their pass-through status. An 
offset methodology ensures that we do not pay twice, first through a 
packaged payment included in the associated procedure payment and 
second through an individual separate payment, for the item with pass-
through status. The potential for duplicate payment is higher for items 
such as contrast agents, diagnostic radiopharmaceuticals, and devices 
where the pass-through item typically substitutes for items that are 
otherwise always packaged. Furthermore, the potential magnitude of 
duplicate payment also is higher for these items because they are 
always packaged when they do not have pass-through status.
    As discussed above, this offset policy appropriately provides for 
pass-through payment for the new product that represents the difference 
between the physician's office payment amount and the otherwise 
applicable OPD fee schedule amount, in the case of packaged contrast 
agents the ``policy-packaged'' drug APC offset amount, as specified by 
the statute. We note that the proposed contrast agent offset policy is 
virtually identical to the offset methodology currently in place for 
pass-through devices and diagnostic radiopharmaceuticals, consistent 
with the recommendation by one commenter that we adopt a similar policy 
for contrast agents. We believe that this methodology would pay 
appropriately for the cost of pass-through contrast agents and that 
hospitals should have no payment concerns when determining which 
contrast agent would be most clinically appropriate and efficient for a 
particular patient's study. Therefore, we do not believe that the 
application of a contrast agent offset methodology would discourage 
hospitals from using pass-through contrast agents insofar as providers 
determine they are necessary in the care of the patient.
    As discussed above, we proposed 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. As

[[Page 60483]]

discussed above, we identified the ``policy-packaged'' drug APC offset 
amount as applicable to our offset policy because we have identified 
contrast agents as ``policy- packaged'' drugs in our claims data. To 
the extent that hospitals reported the HCPCS code for contrast agents 
when those drugs were administered during procedures, the contrast 
agent costs are included in our calculation of the ``policy-packaged'' 
drug APC offset amounts, and we believe that we have sufficient 
information regarding the costs of predecessor contrast agents to apply 
the resulting offset amounts to payment for pass-through contrast 
agents. To the extent hospitals did not report the use of contrast 
agents under specific HCPCS codes in CY 2008, we could not fully total 
the cost of contrast for a given imaging APC and we would underestimate 
an accurate ``policy-packaged'' drug APC offset amount. This unknown 
but potential bias would generally result in higher overall pass-
through payment for a new contrast agent so any limitations of our 
current data on contrast agents for purposes of the offset would not 
inappropriately reduce pass-through payment for a new contrast agent.
    We disagree with the commenter that an offset is unnecessary to 
avoid duplicate payment for contrast material. All nonpass-through 
contrast agents, regardless of their per day costs, are packaged into 
payments for the associated procedures. Therefore, OPPS payment for 
imaging and other procedures that currently utilize contrast agents 
already includes packaged payment for the necessary contrast agent. The 
observation that most contrast agents have per day costs below the $65 
threshold does not obviate the need for an offset policy for contrast 
agents with pass-through status. First, while the CY 2010 drug 
packaging threshold is low, $65 as the per day cost, this cost may 
constitute a sizable percentage of a procedural APC's median cost. 
Paying the full procedural APC amount plus the pass-through contrast 
agent payment of ASP+6 for an imaging scan with high volume could 
result in significant overpayment of the new contrast agent. 
Furthermore, a few contrast agents have per day costs above the $65 
drug packaging threshold, so that the amount of contrast agent cost 
represented in the ``policy-packaged'' drug amount of an APC median 
cost could be fairly substantial. Finally, unlike ``threshold-
packaged'' drugs that are packaged based on the relationship of their 
per day cost to the $65 drug packaging threshold, where the packaged 
drug cost in a procedural APC may or may not represent predecessor drug 
costs and where multiple drugs may be administered in a single session 
paid under one procedural APC, contrast agents typically substitute for 
one another and hospitals rarely administer multiple contrast agents in 
the same session. Pass-through contrast agents are paid separately and 
are billed with procedures that already have costs of predecessor 
contrast agents packaged into the procedural APC payment, so duplicate 
contrast agent payment would result in the absence of an offset 
methodology.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35318), we proposed to 
utilize the ``policy-packaged'' drug offset fraction for procedural 
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). To determine the 
actual APC offset amount for pass-through contrast agents that takes 
into consideration the otherwise applicable OPPS payment amount, we 
proposed 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.
    In response to the commenters' concerns regarding our proposed 
methodology and request that we specify the APCs subject to the 
contrast agent offset policy, we reviewed the methodology and 
specifically examined the amount of contrast agent offsets associated 
with procedural APCs to determine which APCs, other than nuclear 
medicine APCs that contained the costs of diagnostic 
radiopharmaceuticals, included a significant ``policy-packaged'' drug 
amount in the APC payment. First, we excluded all APCs to which nuclear 
medicine procedures were assigned for CY 2010 from the APCs that would 
be subject to a contrast agent offset policy, reasoning that the 
``policy-packaged'' drug costs associated with these APCs were for 
diagnostic radiopharmaceuticals. From a clinical perspective, there is 
very little overlap in the procedures that use contrast agents or 
diagnostic radiopharmaceuticals. Next, we reviewed the per day costs 
for all contrast agents with CY 2008 claims data and compared their 
aggregate, average per day cost to the ``policy-packaged'' drug amounts 
listed in the CY 2010 proposed rule APC offset file that was posted on 
the CMS Web site in association with the CY 2010 OPPS/ASC proposed 
rule. When examining those APCs with ``policy-packaged'' drug amounts 
equal to or less than the 25th percentile of per day contrast agent 
cost (approximately $22), we found that the majority of APCs with a 
``policy- packaged'' drug offset amount other than zero but less than 
$20 (our $22 estimate rounded to the nearest $5 increment) were 
generally APCs that were not likely to include procedures requiring 
significant use of contrast agents. We selected the 25th percentile of 
per day contrast agent cost to identify the majority of APCs with 
significant contrast agent cost because we believe that the 25th 
percentile is an appropriate threshold for representing significant 
contrast agent cost as it captures the lower bound of significant 
variation around the per day contrast agent cost. The interquartile 
range, the 25th to 75th percentile, is a typical descriptive statistic 
used to describe the variation in the center of a distribution. 
Further, the dollar value of the 25th percentile, $22 was sufficiently 
high that we believed it would be worth establishing and implementing 
offset logic in our claims processing Pricer module. This allowed us to 
establish a meaningful threshold cost for application of a contrast 
agent offset policy that would identify APCs in which there is 
significant packaged contrast agent cost. Unlike the case of diagnostic 
radiopharmaceuticals, which are always administered during a limited 
number of nuclear medicine procedures so we are able to identify all 
APCs to which nuclear medicine procedures are assigned as those for 
which the diagnostic radiopharmaceutical offset policy would apply, 
contrast agents are utilized much more widely among procedures assigned 
to many OPPS APCs.
    The APCs that we identified as below the threshold of $20 included 
APC 0384 (GI Procedures with Stents) and APC 0427 (Level II Tube or 
Catheter Changes or Repositioning). As we would not expect contrast 
agents to generally be used in the procedures assigned to these APCs, 
we believe that implementing a threshold that would exclude these APCs 
from a contrast agent offset policy would be appropriate for 
administrative simplification of claims processing, while continuing to 
ensure no duplicate payment is made for pass-through contrast agents. 
Therefore, we have identified the APCs that would be subject to the 
contrast offset policy in CY 2010, within the scope of the criteria 
discussed above.
    After consideration of the public comments we received, we are

[[Page 60484]]

finalizing a pass through contrast agent offset policy for CY 2010, 
with modification to specify the procedural APCs to which offsets for 
pass-through contrast agents would apply. Procedural APCs for which we 
expect a contrast agent offset could be applicable in the case of a 
pass-through contrast agent have been identified as any procedural APC 
with a ``policy-packaged'' drug amount greater than $20 that is not a 
nuclear medicine APC identified in Table 32 above, and these APCs are 
displayed in Table 33. For CY 2010, when a contrast agent with pass-
through status is billed with any procedural APC listed in Table 33, a 
specific offset based on the procedural APC will be applied to payment 
for the contrast agent to ensure that duplicate payment is not made for 
the contrast agent.

                  Table 33--APCs to Which a Contrast Agent Offset May Be Applicable for CY 2010
----------------------------------------------------------------------------------------------------------------
             CY 2010  APC                                          CY 2010 APC title
----------------------------------------------------------------------------------------------------------------
0080.................................  Diagnostic Cardiac Catheterization.
0082.................................  Coronary or Non-Coronary Atherectomy.
0083.................................  Coronary or Non-Coronary Angioplasty and Percutaneous Valvuloplasty.
0093.................................  Vascular Reconstruction/Fistula Repair without Device.
0104.................................  Transcatheter Placement of Intracoronary Stents.
0128.................................  Echocardiogram with Contrast.
0152.................................  Level I Percutaneous Abdominal and Biliary Procedures.
0229.................................  Transcatheter Placement of Intravascular Shunts.
0278.................................  Diagnostic Urography.
0279.................................  Level II Angiography and Venography.
0280.................................  Level III Angiography and Venography.
0283.................................  Computed Tomography with Contrast.
0284.................................  Magnetic Resonance Imaging and Magnetic Resonance Angiography with
                                        Contrast.
0333.................................  Computed Tomography without Contrast followed by Contrast.
0337.................................  Magnetic Resonance Imaging and Magnetic Resonance Angiography without
                                        Contrast followed by Contrast.
0375.................................  Ancillary Outpatient Services When Patient Expires.
0383.................................  Cardiac Computed Tomographic Imaging.
0388.................................  Discography.
0418.................................  Insertion of Left Ventricular Pacing Elect.
0442.................................  Dosimetric Drug Administration.
0653.................................  Vascular Reconstruction/Fistula Repair with Device.
0656.................................  Transcatheter Placement of Intracoronary Drug-Eluting Stents.
0662.................................  CT Angiography.
0668.................................  Level I Angiography and Venography.
8006.................................  CT and CTA with Contrast Composite.
8008.................................  MRI and MRA with Contrast Composite.
----------------------------------------------------------------------------------------------------------------

B. 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 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 were 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 approach for CY 2010 are discussed in more detail in section

[[Page 60485]]

V.B.2.b. of this final rule with comment period.
2. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Background
    As indicated in section V.B.1. of this final rule with comment 
period, 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 the CY 2010 OPPS/ASC 
proposed rule 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 were incorporated into our calculation. Based on 
the calculations described above, we proposed 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. 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 the CY 
2010 OPPS/ASC 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 the CY 2010 OPPS/ASC proposed rule (74 
FR 35321) and excluding diagnostic radiopharmaceuticals, contrast 
agents, and implantable biologicals that we proposed to continue to 
package in CY 2010 as discussed in section V.B.2.d. of the CY 2010 
OPPS/ASC proposed rule (74 FR 35323 through 35324) and this final rule 
with comment period), 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 was the payment rate we proposed for 
separately payable drugs and nonimplantable biologicals in CY 2010, as 
discussed in more detail in section V.B.3.b. of the CY 2010 OPPS/ASC 
proposed rule (74 FR 35324 through 35326)). 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 proposed 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 the proposed rule 
because these were the most recent data available for use at the time 
of development of the proposed rule. These data were also the basis for 
drug payments in the physician's office setting, effective April 1, 
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 
historical OPPS claims data from the CY 2008 HCPCS codes that were 
reported to the CY 2009 HCPCS codes that we displayed in Addendum B to 
the proposed rule for payment in CY 2010.
    Comment: Several commenters supported CMS' proposal to increase the 
packaging threshold to $65 for CY 2010. However, the majority of 
commenters objected to the proposed increase to the OPPS packaging 
threshold.
    A few commenters recommended that CMS consider either eliminating 
the drug packaging threshold and providing separate payment for all 
drugs with HCPCS codes or freezing the packaging threshold at $60 for 
CY 2010. Some commenters objected to the use of a packaging threshold 
under the OPPS when one is not used for physician's office payment and 
believed that eliminating the drug packaging threshold would allow for 
parity in drug payment between the HOPD setting and the physician's 
office setting. These commenters expressed concern that the packaging 
threshold may impede beneficiary access to lower-cost packaged drugs in 
the HOPD setting. In addition, some commenters believed that 
eliminating the packaging threshold and paying separately for all drugs 
in the HOPD setting would allow a more accurate calculation of the 
separately payable payment amount for drugs (otherwise referred to as 
the ASP+X percent amount). Other commenters stated that CMS should not 
increase the drug packaging threshold because other changes in the drug 
payment ratesetting methodology were proposed. These commenters 
requested that CMS only change one aspect of the drug payment 
methodology at a time to allow for greater understanding of the impact 
of proposed changes to drug payment.
    Response: As fully discussed in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66757 through 66758) and the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68643), we continue to 
believe that unpackaging payment for all drugs,

[[Page 60486]]

biologicals, and radiopharmaceuticals is inconsistent with the concept 
of a prospective payment system and that such a change could create an 
additional reporting burden for hospitals. The OPPS and the MPFS that 
applies to physician's office services are fundamentally different 
payment systems with essential differences in their payment policies 
and structures. Specifically, the OPPS is a prospective payment system, 
based on the concept of payment for groups of services that share 
clinical and resource characteristics. Payment is made under the OPPS 
according to prospectively established payment rates that are related 
to the relative costs of hospital resources for services. The MPFS is a 
fee schedule based on the relative value of each individual component 
of a service. Consistent with the MPFS approach, separate payment is 
made for each drug provided in the physician's office, but the OPPS 
packages payment for certain drugs into the associated procedure 
payments for the APC group. Given the fundamental differences between 
the MPFS payment mechanism and the OPPS payment mechanism, differences 
in the degrees of packaged payment and separate payment between these 
two systems are only to be expected. In general, we do not believe that 
our packaging methodology under the OPPS results in limited beneficiary 
access to drugs because packaging is a fundamental component of a 
prospective payment system that accounts for the cost of certain items 
and services in larger payment bundles, recognizing that some clinical 
cases may be more costly and others less costly but that, on average, 
OPPS payment is appropriate for the services provided.
    We note that, in CYs 2005 and 2006, the statutorily mandated drug 
packaging threshold was set at $50, and we continue to believe that it 
is appropriate to continue a modest drug packaging threshold for the CY 
2010 OPPS for the reasons set forth below. As stated in the CY 2007 
OPPS/ASC final rule with comment period (71 FR 68086), we believe that 
packaging certain items is a fundamental component of a prospective 
payment system, that packaging these items does not lead to beneficiary 
access issues and does not create a problematic site of service 
differential, that the packaging threshold is reasonable based on the 
initial establishment in law of a $50 threshold for the CY 2005 OPPS, 
that updating the $50 threshold is consistent with industry and 
government practices, and that the PPI for prescription preparations is 
an appropriate mechanism to gauge Part B drug inflation. Therefore, 
because of our continued belief that packaging is a fundamental 
component of a prospective payment system that contributes to important 
flexibility and efficiency in the delivery of high quality hospital 
outpatient services, we are not adopting the commenters' 
recommendations to pay separately for all drugs, biologicals, and 
radiopharmaceuticals for CY 2010 or to eliminate or to freeze the 
packaging threshold at $60.
    Finally, we believe that our continued application of the 
methodology initially adopted in CY 2007 to update the drug packaging 
threshold does not inhibit our ability to propose additional changes to 
the nonpass-through drug payment methodology under the OPPS. We note 
that for the past several years, we have made a number of proposals to 
revise our drug payment methodology, while continuing to implement our 
established methodology for annually updating the drug packaging 
threshold. While we have not finalized any of these previous proposals, 
we have consistently applied the methodology described above to update 
the drug packaging threshold while examining a variety of alternatives 
for determining payment for separately payable drugs without pass-
through status.
    Comment: One commenter to the CY 2009 OPPS/ASC final rule with 
comment period noted that HCPCS code J3300 (Injection, triamcinolone 
acetonide, preservative free, 1 mg) should not be packaged as 
established in the final rule with comment period because the per day 
cost of this drug is over the CY 2009 OPPS drug packaging threshold of 
$60 per day.
    Response: While the payment for HCPCS code J3300 was adopted on an 
interim final basis as packaged for CY 2009 (status indicator ``N''), 
upon receipt of this public comment we reviewed our calculation and 
released a correction notice changing the status indicator to ``K'' for 
CY 2009 (74 FR 4343). In addition, we discussed this status indicator 
change in the April 2009 OPPS quarterly update CR (Transmittal 1702, CR 
6416, dated March 13, 2009).
    Comment: One commenter stated that HCPCS code J3473 (Injection, 
hyaluronidase, recombinant, 1 USP unit) was incorrectly assigned status 
indicator ``N'' in the CY 2010 OPPS/ASC proposed rule. The commenter 
argued that coding errors resulted in hospital claims data indicating 
that per day costs of HCPCS code J3473 is below the drug packaging 
threshold for CY 2010. The commenter explained that a variety of HCPCS 
codes and various dosage descriptors for similar products contributed 
to hospital coding errors, and that the product described by HCPCS code 
J3473 is only sold in a single use vial of 150 units, with an ASP that 
exceeds the CY 2010 packaging threshold. The commenter noted that this 
concern had been raised with the CMS HCPCS Workgroup but a request for 
a new HCPCS code descriptor was denied.
    Response: HCPCS code J3473 expired from pass-through status on 
December 31, 2008, and was paid separately in CY 2009 because the 
estimated per day cost, using updated final rule claims data from CY 
2007, showed that the per day cost of this drug exceeded the CY 2009 
drug packaging threshold. For CY 2010, we proposed to package HCPCS 
code J3473 as the estimated per day cost did not exceed the proposed CY 
2010 drug packaging threshold. The OPPS relies on hospital claims data 
in order to determine payment rates. For drugs and biologicals, we rely 
upon hospital claims data, in part, to determine the estimated per day 
cost we use in our annual packaging determination. In addition, the 
concern about discrepancies between HCPCS code descriptors for similar 
products is under the purview of the CMS HCPCS Workgroup, the sole 
creator and maintainer of HCPCS codes and their descriptors. We remind 
hospitals through each OPPS quarterly update CR that when billing for 
drugs, biologicals, and radiopharmaceuticals, they should make certain 
that the reported units of service of the reported HCPCS code are 
consistent with the quantity of the drug, biological, or 
radiopharmaceutical that was used in the care of the patient. 
Therefore, we expect that the data that we receive on hospital claims 
accurately reflect the services that were provided to the beneficiary.
    As is our standard methodology, we used updated claims data and ASP 
rates to make final packaging determinations for CY 2010. For HCPCS 
code J3473, our CY 2008 claims data showed approximately 2,100 days and 
226,800 units from 37 providers. While this drug was not commonly used 
in CY 2008, we have no reason to believe that the estimated per day 
cost of HCPCS code J3473 of approximately $57, based on our methodology 
described above as applied to claims from a modest number of providers, 
is not reflective of the per day cost to hospitals for furnishing the 
drug. Therefore, we have determined that the per day cost of HCPCS code 
J3473 does not exceed the $65 packaging threshold for drugs and

[[Page 60487]]

biologicals and payment for HCPCS code J3473 is packaged in CY 2010.
    For purposes of this final rule with comment period, we again 
followed the CY 2007 methodology for CY 2010 and used updated fourth 
quarter moving average PPI levels to trend the $50 threshold forward 
from the third quarter of CY 2005 to the third quarter of CY 2010 and 
again rounded the resulting dollar amount ($66.55) 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' OACT.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to continue use 
of the established methodology for annually updating the OPPS packaging 
threshold for drugs and biologicals by the PPI for prescription drugs. 
The final CY 2010 drug packaging threshold is $65, calculated according 
to the threshold update methodology that we have applied since CY 2007.
    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[dash]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 ondansetron hydrochloride and granisetron 
hydrochloride were available in generic versions. We have now paid 
separately for all 5[dash]HT3 antiemetics for 5 years under a policy 
that exempts these products from the drug packaging methodology. 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, 
in the CY 2010 OPPS/ASC proposed rule (74 FR 35320), we indicated that 
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[dash]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[dash]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[dash]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[dash]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[dash]HT3 antiemetics in the CY 2008 OPPS claims 
data. Using April 2009 ASP information for the CY 2010 proposed rule, 
we estimated a per day cost of only approximately $1 for HCPCS code 
J2405. For the five modestly priced 5[dash]HT3 antiemetics, we 
estimated CY 2010 per day costs between approximately $7 and $50, while 
we estimated a per day cost for the most costly 5[dash]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[dash]HT3 antiemetics are not very sensitive to changes in 
price, we did not believe that continuing to exempt these drugs from 
our standard OPPS drug packaging methodology was appropriate for CY 
2010. Therefore, for CY 2010, because we proposed to no longer exempt 
the 5[dash]HT3 antiemetic products from our standard packaging 
methodology, we proposed to package payment for all of the 5[dash]HT3 
antiemetics except palonosetron hydrochloride, consistent with their 
estimated per day costs from CY 2008 claims data.
    At the August 2009 meeting of the APC Panel, the APC Panel 
recommended that when CMS changes the dollar amount of the drug 
packaging threshold and determines that some drugs within a single 
therapeutic class fall on either side of the packaging threshold, CMS 
consider packaging all of the drugs within that class on the basis of 
feedback from providers, the APC Panel, and stakeholders. Our response 
to this recommendation is included in our response to comments below.
    Comment: The majority of commenters opposed the proposal to no 
longer continue to exempt the oral and injectable forms of 5-HT3 
antiemetics from packaging, thereby packaging all but one 5-HT3 
antiemetic. Many commenters requested that CMS continue to exempt all 
5-HT3 antiemetics from the packaging methodology in order to preserve 
access to these products. The commenters expressed concern that 
hospitals may choose to only provide the separately payable antiemetic 
instead of the antiemetic that is most beneficial for the beneficiary. 
One commenter requested that CMS not finalize the CY 2010 proposal to 
apply the packaging threshold to 5-HT3 antiemetics until more 
information is available on the impact of packaging these products and 
to avoid unintended consequences, such as changes in prescribing 
practices, which may result from this policy.
    However, several commenters expressed support for the proposed 
payment for 5-HT3 antiemetic products in the HOPD for CY 2010. These 
commenters stated that the majority of the products would be packaged 
under the proposal, and that would lead to reduced beneficiary 
copayments. The commenters offered their support due to the 
availability of lower-cost generic versions of some of the products and 
CMS' data analysis. The commenters also noted that the single product 
that would be paid separately under the proposal, HCPCS code J2469 
(Injection, palonosetron hcl, 25 mcg), has unique properties that 
indicate separate payment would be appropriate.
    Response: 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. As discussed above, our analysis for the CY 2010 OPPS/ASC 
proposed rule (74 FR 35320 through 35321) found that the most 
frequently used 5-HT3 antiemetic constituted 88 percent of all 
treatment days, and had an estimated per day cost of approximately $1 
in CY 2008. The per day costs of other 5-HT3 antiemetics with per day 
costs below the CY 2010 drug packaging threshold of $65 (as discussed 
above) ranged from $8 to $51 per day. The single 5-HT3 antiemetic with 
a per day cost that exceeded the

[[Page 60488]]

CY 2010 drug packaging threshold is HCPCS code J2469.
    As stated in the proposed rule (74 FR 35320), 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 believe that our 
analysis, along with the historical stability in prescribing patterns 
and the availability of generic alternatives for several of these 
products, allows us to discontinue our policy of specifically exempting 
these products from the OPPS drug packaging threshold.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to apply the CY 
2010 drug packaging threshold to all 5-HT3 antiemetics. We expect that 
packaging will encourage hospitals to use the most cost-efficient 5-HT3 
antiemetic that is clinically appropriate. We also anticipate that 
hospitals will continue to provide care that is aligned with the best 
interests of the patient. We do not believe that our CY 2010 policy to 
apply the drug packaging threshold to 5-HT3 antiemetics will limit 
beneficiaries' ability to receive clinically appropriate drugs and 
biologicals. The final CY 2010 OPPS status indicators for 5-HT3 
antiemetics are listed in Table 34 below.

                         Table 34--Final CY 2010 Status Indicators for 5-HT3 Antiemetics
----------------------------------------------------------------------------------------------------------------
             CY 2010 HCPCS code                              CY 2010 long descriptor                  CY 2010 SI
----------------------------------------------------------------------------------------------------------------
J1260......................................  Injection, dolasetron mesylate, 10 mg..................          N
J1626......................................  Injection, granisetron hydrochloride, 100 mcg..........          N
J2405......................................  Injection, ondansetron hydrochloride, per 1 mg.........          N
J2469......................................  Injection, palonosetron hcl, 25 mcg....................          K
Q0166......................................  Granisetron HCL, 1 mg, oral, FDA approved prescription           N
                                              antiemetic, for use as a complete therapeutic
                                              substitute for an IV antiemetic at the time of
                                              chemotherapy treatment, not to exceed a 24-hour dosage
                                              regimen
Q0179......................................  Ondansetron HCL 8 mg, oral, FDA approved prescription            N
                                              antiemetic, for use as a complete therapeutic
                                              substitute for an IV antiemetic at the time of
                                              chemotherapy treatment, not to exceed a 48-hour dosage
                                              regimen
Q0180......................................  Dolasetron mesylate, 100 mg, oral, FDA approved                  N
                                              prescription antiemetic, for use as a complete
                                              therapeutic substitute for an IV antiemetic at the
                                              time of chemotherapy treatment, not to exceed a 24-
                                              hour dosage regimen
----------------------------------------------------------------------------------------------------------------

    Comment: One commenter suggested that CMS institute a packaging 
threshold exemption for antineoplastic agents and other anticancer 
therapeutic agents. The commenter believed that anticancer agents, as a 
class, are not appropriate for packaging because of the toxicity, side 
effects, interactions with other drugs, and level of patient 
specificity associated with these therapies. The commenter requested 
that CMS not apply the drug packaging threshold for anticancer agent