[Federal Register Volume 74, Number 223 (Friday, November 20, 2009)]
[Rules and Regulations]
[Pages 60316-60983]
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 agents 
and any product that is typically used in chemotherapy supportive care 
regimens. Instead, the commenter requested that CMS provide separate 
payment for all of these products in CY 2009.
    In addition, several commenters requested that CMS apply the same 
principle to other groups of drugs in order to equalize payment 
methodologies across drugs in the same clinical category. One commenter 
suggested that CMS institute a similar policy for anticoagulant 
therapies provided in the HOPD. The commenter noted that in the group 
of anticoagulant therapies, the majority are packaged while one drug is 
paid separately. The commenter was concerned that these different 
payment methodologies provide hospitals an incentive to use the 
separately payable drug, although the commenter noted that treatments 
are not interchangeable and that benefits vary by patient.
    Response: As we discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66757) and the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68643), as we continue to explore the possibility 
of additional encounter-based or episode-based payment in future years, 
we may consider additional options for packaging drug payment in the 
future. For example, a higher drug packaging threshold could eliminate 
existing disparities in payment methodologies for other drug groups and 
provide similar methods of payment across items in a group. 
Nevertheless, as discussed in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68643), while we may be interested in alternative 
threshold methodologies for future ratesetting purposes, we realize 
that there are existing situations where drugs in a particular category 
vary in their payment treatment under the OPPS, with some drugs 
packaged and others separately paid.
    We continue to believe the challenges associated with categorizing 
drugs to assess them for differences in their OPPS payment 
methodologies are significant, and we are not convinced that ensuring 
the same payment treatment for all drugs in any particular drug 
category is essential at this time. Therefore, we do not believe that 
it would be appropriate at this time to take any additional steps to 
ensure that all drugs in a specific category, including anticoagulants 
and antineoplastic agents, are all separately paid (or, alternatively, 
all packaged), as requested by some commenters.
    While some commenters requested that we seek feedback from 
interested stakeholders when the packaging threshold creates a payment 
methodology disparity between drugs within a single therapeutic class, 
we note that we provide an opportunity through the annual OPPS/ASC 
rulemaking cycle for public comment on the proposed packaging status of 
drugs and biologicals for the next calendar year. Further, we regularly 
accept meeting requests from interested providers and stakeholders on a 
variety of issues, and we address APC Panel recommendations in our 
annual proposed and final rules. We have often received public comments 
related to our proposed packaging status for particular drugs and 
biologicals, and we expect to continue to receive public comments 
regarding the proposed packaging status for drugs and biologicals in 
the future. In this manner, we would address specific concerns about 
the proposed packaging status for individual drugs and biologicals in 
the future, including those within a single therapeutic class where 
some drugs may be proposed to be packaged while others are proposed to 
be separately payable. While we have not defined classes of drugs that 
may or

[[Page 60489]]

may not be affected by the packaging threshold, we are accepting the 
APC Panel recommendation to continue to seek feedback on the proposed 
packaging status of all drugs under the OPPS through the annual 
rulemaking process. However, implicit in the APC Panel's recommendation 
is that we consider packaging all drugs within a therapeutic class and, 
as described above, we have not defined classes of drugs for 
consideration in the context of proposed changes to the annual drug 
packaging threshold.
    In summary, after consideration of the public comments we received, 
we are finalizing our proposed CY 2010 treatment of 5-HT3 antiemetics 
as follows. We are finalizing, without modification, our proposal to 
apply the drug packaging methodology to all 5-HT3 antiemetics for CY 
2010. In addition, we are not providing any exceptions to the standard 
drug packaging methodology for any class of drugs, including 
anticoagulants and anticancer therapies, for CY 2010. Finally, we are 
accepting the APC Panel recommendation to continue to consider feedback 
from providers, the APC Panel, and stakeholders when finalizing the 
packaging status of drugs and biologicals.
    Having specified our standard drug packaging methodology for all 
drugs and biologicals makes no exceptions for different drugs and 
biologicals in the same therapeutic class for CY 2010, we must adopt 
final packaging determinations for CY 2010 for each drug and biological 
for this final rule with comment period. Our policy during previous 
cycles of the OPPS has been to use updated ASP and claims data to make 
final determinations of the packaging status of HCPCS codes for drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals for 
the final rule with comment period. We note that it is also our policy 
to make an annual packaging determination for a HCPCS code only when we 
develop the OPPS/ASC final rule for the update year. Only HCPCS codes 
that are identified as separately payable in the final rule with 
comment period are subject to quarterly updates. For our calculation of 
per day costs of HCPCS codes for drugs and nonimplantable biologicals 
in the CY 2010 OPPS/ASC final rule with comment period, we proposed to 
use ASP data from the first quarter of CY 2009, which is the basis for 
calculating payment rates for drugs and biologicals in the physician's 
office setting using the ASP methodology, effective July 1, 2009, along 
with updated hospital claims data from CY 2008. We note that we also 
used these data for budget neutrality estimates and impact analyses for 
this CY 2010 OPPS/ASC final rule with comment period. Payment rates for 
HCPCS codes for separately payable drugs and nonimplantable biologicals 
included in Addenda A and B to this final rule with comment period are 
based on ASP data from the second quarter of CY 2009, which are the 
basis for calculating payment rates for drugs and biologicals in the 
physician's office setting using the ASP methodology, effective October 
1, 2009. These rates would then be updated in the January 2010 OPPS 
update, based on the most recent ASP data to be used for physician's 
office and OPPS payment as of January 1, 2010. For items that do not 
currently have an ASP-based payment rate, we recalculated their mean 
unit cost from all of the CY 2008 claims data and updated cost report 
information available for the CY 2010 final rule with comment period to 
determine their final per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals in 
this CY 2010 OPPS/ASC final rule with comment period using the updated 
data may be different from the same drug HCPCS code's packaging status 
determined based on the data used for the proposed rule. Under such 
circumstances, in the CY 2010 OPPS/ASC proposed rule (74 FR 35320), we 
proposed to continue the established policies initially adopted for the 
CY 2005 OPPS (69 FR 65780) in order to more equitably pay for those 
drugs whose median cost fluctuates relative to the CY 2010 OPPS drug 
packaging threshold and the drug's payment status (packaged or 
separately payable) in CY 2009. Specifically, we proposed for CY 2010 
to apply the following policies to these HCPCS codes for drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals whose 
relationship to the $65 drug packaging threshold changes based on the 
final updated data:
     HCPCS codes for drugs and nonimplantable biologicals that 
were paid separately in CY 2009 and that were proposed for separate 
payment in CY 2010, and then have per day costs equal to or less than 
$65, based on the updated ASPs and hospital claims data used for the CY 
2010 final rule with comment period, would continue to receive separate 
payment in CY 2010.
     HCPCS codes for drugs and nonimplantable biologicals that 
were packaged in CY 2009 and that were proposed for separate payment in 
CY 2010, and then have per day costs equal to or less than $65, based 
on the updated ASPs and hospital claims data used for the CY 2010 final 
rule with comment period, would remain packaged in CY 2010.
     HCPCS codes for drugs and nonimplantable biologicals for 
which we proposed packaged payment in CY 2010 but then have per day 
costs greater than $65, based on the updated ASPs and hospital claims 
data used for the CY 2010 final rule with comment period, would receive 
separate payment in CY 2010.
    We did not receive any public comments on our proposal to apply the 
established policies initially adopted for the CY 2005 OPPS (69 FR 
65780) in order to more equitably pay for those drugs whose median cost 
fluctuates relative to the CY 2010 OPPS drug packaging threshold and 
the drug's payment status (packaged or separately payable) in CY 2009. 
Therefore, we are finalizing our proposal, without modification, for CY 
2010.
    We note that HCPCS codes J1652 (Injection, fondaparinux sodium, 0.5 
mg), J2430(Injection, pamidronate disodium, per 30 mg); J7191 (Factor 
viii (antihemophilic factor (porcine)), per i.u.), J9165 (Injection, 
diethylstilbestrol diphosphate, 250 mg), and J9209 (Injection, mesna, 
200 mg) were all paid separately in CY 2009 and were proposed for 
separate payment in CY 2010 but had final per day costs of less than 
the $65 drug packaging threshold, based on the updated ASPs and the CY 
2008 hospital claims data available for this CY 2010 final rule with 
comment period. Therefore, HCPCS codes J1652, J2430, J7191, J9165 and 
J9209 will continue to be paid separately in CY 2010 according to the 
established methodology set forth above.
    In addition, we proposed to provide separate payment for HCPCS 
codes J2670 (Injection, tolazoline HCL, up to 25 mg) and J3320 
(Injection, spectinomycin dihydrochloride, up to 2 gm) in CY 2010, 
although their payment was packaged in CY 2009. Using updated ASPs and 
the CY 2008 hospital claims data available for this final rule with 
comment period, HCPCS codes J2670 and J3320 now have per day costs less 
than $65. In accordance with our established policy for such cases, for 
CY 2010 we will package payment for HCPCS codes J2670 and J3320.
    Finally, we proposed to package HCPCS code Q2004 (Irrigation 
solution for treatment of bladder calculi, for example renacidin, per 
500 ml) for CY 2010. Using updated ASPs and the CY 2008 hospital claims 
data available for this final rule with comment period, HCPCS code 
Q2004 now has a per day

[[Page 60490]]

cost greater than $65. In accordance with our established policy for 
such cases, for CY 2010 we will pay for HCPCS code Q2004 separately.
c. Packaging Determination for HCPCS Codes That Describe the Same Drug 
or Biological But Different Dosages
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS 
codes reporting different dosages for the same covered Part B drugs or 
biologicals in order to reduce hospitals' administrative burden by 
permitting them to report all HCPCS codes for drugs and biologicals. In 
general, prior to CY 2008, the OPPS recognized for payment only the 
HCPCS code that described the lowest dosage of a drug or biological. We 
extended this recognition to multiple HCPCS codes for several other 
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, 
we applied a policy that assigned the status indicator of the 
previously recognized HCPCS code to the associated newly recognized 
code(s), reflecting the new code(s)' packaged or separately payable 
status. In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66775), we explained that once claims data were available for these 
previously unrecognized HCPCS codes, we would determine the packaging 
status and resulting status indicator for each HCPCS code according to 
the general, established HCPCS code-specific methodology for 
determining a code's packaging status for a given update year. However, 
we also stated that we planned to closely follow our claims data to 
ensure that our annual packaging determinations for the different HCPCS 
codes describing the same drug or biological did not create 
inappropriate payment incentives for hospitals to report certain HCPCS 
codes instead of others.
    CY 2008 is the first year of claims data for the HCPCS codes 
describing different dosages of the same drug or biological that were 
newly recognized in CY 2008. Applying our standard HCPCS code-specific 
packaging determination methodology as described in the CY 2010 OPPS/
ASC proposed rule (74 FR 35321 through 35323), we found that our CY 
2008 claims data would result in several different packaging 
determinations for different codes describing the same drug or 
biological. Furthermore, our claims data included few units and days 
for a number of these newly recognized HCPCS codes, resulting in our 
concern that these data reflected claims from only a small number of 
hospitals, even though the drug or biological itself may be reported by 
many other hospitals under the most common HCPCS code. We were 
concerned about proposing different packaging determinations for 
multiple HCPCS codes for the same drug or biological driven by 
different costs associated with the varying dosages of the same drug or 
biological and a small number of claims for the less common dosages 
that are not representative of the costs of all hospitals billing for 
the drug or biological. This is especially true when the general policy 
of the current CMS HCPCS Workgroup is to establish a single HCPCS code 
for a drug or biological, with a dosage that would allow accurate 
reporting of a patient dose for all anticipated clinical uses of the 
drug or biological.
    Based on these findings from our first available claims data for 
the newly recognized HCPCS codes, in the CY 2010 OPPS/ASC proposed rule 
(74 FR 35321 through 35323) we explained that we believe that adopting 
our standard HCPCS code-specific packaging determinations for these 
codes could lead to payment incentives for hospitals to report certain 
HCPCS codes instead of others, particularly because we do not currently 
require hospitals to report all drug and biological HCPCS codes under 
the OPPS in consideration of our previous policy that generally 
recognized only the lowest dosage HCPCS code for a drug or biological 
for OPPS payment. Therefore, for CY 2010 we proposed to make packaging 
determinations on a drug-specific basis, rather than a HCPCS code-
specific basis, for those HCPCS codes that describe the same drug or 
biological but different dosages. To identify all HCPCS codes for drugs 
and biologicals to which this proposed policy would apply, we first 
included the drugs and biologicals with multiple HCPCS codes that we 
newly recognized for payment in CY 2008 and CY 2009. We then reviewed 
all of the remaining drug and biological HCPCS codes to identify other 
drugs and biologicals for which longstanding OPPS policy recognized for 
payment multiple HCPCS codes for different dosages of the same drug or 
biological, so that our CY 2010 proposal would apply to the packaging 
determinations for these drugs and biologicals and their associated 
HCPCS codes. All of the drug and biological HCPCS codes that we 
proposed to be subject to this drug-specific packaging determination 
methodology were listed in Table 24 of the proposed rule (74 FR 35321 
through 35323).
    In order to propose a packaging determination that is consistent 
across all HCPCS codes that describe different dosages of the same drug 
or biological, we aggregated both our CY 2008 claims data and our 
pricing information at ASP+4 percent across all of the HCPCS codes that 
describe each distinct drug or biological in order to determine the 
mean units per day of the drug or biological in terms of the HCPCS code 
with the lowest dosage descriptor. We then multiplied the weighted 
average ASP+4 percent payment amount across all dosage levels of a 
specific drug or biological by the estimated units per day for all 
HCPCS codes that describe each drug or biological from our claims data 
to determine the estimated per day cost of each drug or biological at 
less than or equal to $65 (whereupon all HCPCS codes for the same drug 
or biological would be packaged) or greater than $65 (whereupon all 
HCPCS codes for the same drug or biological would be separately 
payable). The proposed packaging status of each drug and biological 
HCPCS code to which this methodology would apply was displayed in Table 
24 of the proposed rule (74 FR 35321 through 35323).
    Comment: Several commenters supported the proposal to make 
packaging determinations on a drug-specific basis rather than a HCPCS 
code-specific basis for drugs with multiple HCPCS codes describing 
different dosages.
    Response: We continue to believe that adopting the standard HCPCS 
code-specific packaging determinations for these codes could lead to 
payment incentives for hospitals to report certain HCPCS codes for 
drugs instead of others. Making packaging determinations on a drug-
specific basis eliminates these incentives and allows hospitals 
flexibility in choosing to report all HCPCS codes for different dosages 
of the same drug or only the lowest dosage HCPCS code.
    Therefore, after consideration of the public comments we received, 
we are finalizing our CY 2010 proposal, without modification, to make a 
single packaging determination for a drug, rather than an individual 
HCPCS code, when a drug has multiple HCPCS codes describing different 
dosages. For CY 2010, we have aggregated both our CY 2008 claims data 
and our pricing information at ASP+4 percent across all of the HCPCS 
codes that describe each distinct drug or biological in order to 
determine the mean units per day of the drug or biological in terms of 
the HCPCS code with the lowest dosage descriptor. We then multiplied 
the weighted average ASP+4 percent payment amount across all dosage 
levels of a specific drug or biological by the estimated units per day 
for all HCPCS codes that

[[Page 60491]]

describe each drug or biological from our claims data to determine the 
estimated per day cost of each drug or biological at less than or equal 
to $65 (whereupon all HCPCS codes for the same drug or biological would 
be packaged) or greater than $65 (whereupon all HCPCS codes for the 
same drug or biological would be separately payable). The final CY 2010 
packaging status of each drug and biological HCPCS code to which this 
methodology applies is displayed in Table 35 below.
    We note that new HCPCS code Q2024 (Injection, bevacizumab, 0.25 mg) 
was implemented effective in October 2009 and represents a different 
dosage descriptor for the same drug described by HCPCS code J9035 
(injection, bevacizumab, 10 mg). Further, HCPCS code Q2024 has been 
replaced with HCPCS code C9257 (Injection, bevacizumab, 0.25 mg), 
effective January 1, 2010. In accordance with our CY 2010 policy to 
make a single packaging determination for a single drug, we are 
applying the methodology described above to bevacizumab and are 
assigning the applicable bevacizumab HCPCS codes the same packaging 
status for CY 2010. HCPCS codes C9257 and J9035 are included in Table 
35 below.
    In addition, HCPCS codes J0530 (Injection, penicillin g benzathine 
and penicillin g procaine, up to 600,000 units); J0540 (Injection, 
penicillin g benzathine and penicillin g procaine, up to 1,200,000 
units); and J0550 (Injection, penicillin g benzathine and penicillin g 
procaine, up to 2,400,000 units), have been replaced with HCPCS code 
J0559 (injection, penicillin G benzathine and penicillin G procaine, 
2500 units) for CY 2010. While we had proposed to treat HCPCS codes 
J0530, J0540 and J0550 as drugs with multiple HCPCS codes and multiple 
dosage descriptors via the methodology finalized above, this is no 
longer necessary as there is a single code for this product in CY 2010. 
In order to make a packaging determination for new HCPCS code J0559, we 
used updated hospital claims data from HCPCS codes J0530, J0540 and 
J0550 and ASP pricing information to determine the estimated per day 
cost for the drug as described above. Because the estimated per day 
cost was less than our CY 2010 packaging threshold of $65, we assigned 
status indicator ``N'' to HCPCS code J0559 for CY 2010. We note that 
HCPCS codes J0530, J0540, and J0550 are not displayed in Table 35 below 
because there is only a single HCPCS code for the drug in CY 2010.
    Finally, HCPCS codes J7502 (Cyclosporine, oral, 100 mg) and J7515 
(Cyclosporine, oral, 25 mg) were proposed to be packaged in CY 2010 
based on the methodology discussed above for drugs with multiple HCPCS 
codes with different dosage descriptors. As is our standard 
methodology, we use updated final rule data and updated ASP rates for 
purposes of this final rule with comment period to calculate per day 
estimates for final packaging determinations. Using this updated data 
and the multiple HCPCS code methodology discussed above, the per day 
cost of the drug described by HCPCS codes J7502 and J7515 would exceed 
the packaging threshold for CY 2010. Therefore, in accordance with the 
policy that was finalized in section V.B.2.b. above for HCPCS codes for 
drugs and nonimplantable biologicals for which we proposed packaged 
payment in CY 2010 but then have per day costs greater than $65, based 
on the updated ASPs and hospital claims data available for the CY 2010 
final rule with comment period, HCPCS codes J7502 and J7515 are 
separately payable in CY 2010.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
d. Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast 
Agents, and Implantable Biologicals (``Policy-Packaged'' Drugs and 
Devices)
    Prior to CY 2008, the methodology of calculating a product's 
estimated per day cost and comparing it to the annual OPPS drug 
packaging threshold was used to determine the packaging status of 
drugs, biologicals, and radiopharmaceuticals under the OPPS (except for 
our CYs 2005 through 2009 exemption for 5-HT3 antiemetics). However, as 
established in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66766 through 66768), we began packaging payment for all diagnostic 
radiopharmaceuticals and contrast agents into the payment for the 
associated procedure, regardless of their per day costs. In addition, 
in CY 2009 we adopted a policy that packaged the payment for nonpass-
through implantable biologicals into payment for the associated 
surgical procedure on the claim (73 FR 68633 through 68636). We refer 
to diagnostic radiopharmaceuticals and contrast agents collectively as 
``policy-packaged'' drugs and to implantable biologicals as devices 
because we proposed to treat

[[Page 60496]]

implantable biologicals as devices for all OPPS payment purposes 
beginning in CY 2010.
    According to our regulations at Sec.  419.2(b), as a prospective 
payment system, the OPPS establishes a national payment rate that 
includes operating and capital-related costs that are directly related 
and integral to performing a procedure or furnishing a service on an 
outpatient basis including, but not limited to, implantable 
prosthetics, implantable durable medical equipment, and medical and 
surgical supplies. Packaging costs into a single aggregate payment for 
a service, encounter, or episode-of-care is a fundamental principle 
that distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
    Prior to CY 2008, we noted that the proportion of drugs, 
biologicals, and radiopharmaceuticals that were separately paid under 
the OPPS had increased in recent years, a pattern that we also observed 
for procedural services under the OPPS. Our final CY 2008 policy that 
packaged payment for all nonpass-through diagnostic 
radiopharmaceuticals and contrast agents, regardless of their per day 
costs, contributed significantly to expanding the size of the OPPS 
payment bundles and is consistent with the principles of a prospective 
payment system.
    We believe that packaging the payment for diagnostic 
radiopharmaceuticals and contrast agents into the payment for their 
associated procedures continues to be appropriate for CY 2010. As 
discussed in more detail in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645 through 68649), we presented several 
reasons supporting our initial policy to package payment of diagnostic 
radiopharmaceuticals and contrast agents into their associated 
procedures on a claim. Specifically, we stated that we believed 
packaging was appropriate because: (1) The statutory requirement that 
we must pay separately for drugs and biologicals for which the per day 
cost exceeds $50 under section 1833(t)(16)(B) of the Act has expired; 
(2) we believe that diagnostic radiopharmaceuticals and contrast agents 
function effectively as supplies that enable the provision of an 
independent service; and (3) section 1833(t)(14)(A)(iii) of the Act 
requires that payment for specified covered outpatient drugs (SCODs) be 
set prospectively based on a measure of average hospital acquisition 
cost. For these reasons, we believed that our proposal to continue to 
treat diagnostic radiopharmaceuticals and contrast agents differently 
from other SCODs was appropriate for CY 2010. Therefore, in the CY 2010 
OPPS/ASC proposed rule (74 FR 35323), we proposed to continue packaging 
payment for all contrast agents and diagnostic radiopharmaceuticals, 
collectively referred to as ``policy-packaged'' drugs, regardless of 
their per day costs, for CY 2010.
    For more information on how we proposed to set CY 2010 payment 
rates for nuclear medicine procedures in which diagnostic 
radiopharmaceuticals are used and echocardiography services provided 
with and without contrast agents, we refer readers to sections 
II.A.2.d.(5) (74 FR 35276) and (4) (74 FR 35269), respectively, of the 
proposed rule and this final rule with comment period.
    In CY 2009 (73 FR 68634), we began packaging the payment for all 
nonpass-through implantable biologicals into payment for the associated 
surgical procedure. Because implantable biologicals may sometimes 
substitute for nonbiological devices, we noted that if we were to 
provide separate payment for implantable biologicals without pass-
through status, we would potentially be providing duplicate device 
payment, both through the packaged nonbiological device cost already 
included in the surgical procedure's payment and separate biological 
payment. We concluded that we saw no basis for treating implantable 
biological and nonbiological devices without pass-through status 
differently for OPPS payment purposes because both are integral to and 
supportive of the separately paid surgical procedures in which either 
may be used. Therefore, in CY 2009, we adopted a final policy to 
package payment for all nonpass-through implantable biologicals that 
are surgically inserted or implanted (through a surgical incision or a 
natural orifice), like our longstanding policy that packages payment 
for all implantable nonbiological devices without pass-through status.
    For CY 2010, we continue to believe that the policy to package 
payment for implantable devices that are integral to the performance of 
separately paid procedures should also apply to payment for all 
implantable biologicals without pass-through status, when those 
biologicals function as implantable devices. Therefore, in the CY 2010 
OPPS/ASC proposed rule (74 FR 35323), we proposed to continue to 
package payment for nonpass-through implantable biologicals that are 
surgically inserted or implanted (through a surgical incision or a 
natural orifice) into the body, referred to as devices, in CY 2010. In 
accordance with this proposal, two of the products with expiring pass-
through status for CY 2010 are biologicals that are solely surgically 
implanted according to their FDA-approved indications. These products 
are described by HCPCS codes C9354 (Acellular pericardial tissue matrix 
of non-human origin (Veritas), per square centimeter) and C9355 
(Collagen nerve cuff (NeuroMatrix), per 0.5 centimeter length). Like 
the three implantable biologicals with expiring pass-through status in 
CY 2009 that were discussed in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68633 through 68634), we believe that the two 
biologicals specified above with expiring pass-through status for CY 
2010 differ from other biologicals paid under the OPPS in that they 
specifically function as surgically implanted devices. As a result of 
the proposed CY 2010 packaged payment methodology for all nonpass-
through implantable biologicals, we proposed to package payment for 
HCPCS codes C9354 and C9355 and assign them status indicator ``N'' for 
CY 2010. In addition, any new biologicals without pass-through status 
that are surgically inserted or implanted (through a surgical incision 
or a natural orifice) would be packaged in CY 2010. Moreover, for 
nonpass-through biologicals that may sometimes be used as implantable 
devices, we 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.
    Comment: Several commenters objected to CMS' proposal to package 
payment for all diagnostic radiopharmaceuticals and contrast agents in 
CY 2010. A number of commenters stated that diagnostic 
radiopharmaceuticals and contrast agents with per day costs over the 
proposed OPPS drug packaging threshold are defined as SCODs and, 
therefore, should be assigned separate APC payments. In particular, the 
commenters questioned CMS' authority to classify groups of drugs, such 
as diagnostic radiopharmaceuticals and contrast agents, and implement 
packaging and payment policies that do

[[Page 60497]]

not reflect their status as SCODs. Some commenters stressed that 
hospitals consider radiopharmaceuticals to be drugs, rather than 
supplies, and that these products are not interchangeable for patients 
receiving specific nuclear medicine scans. The commenters recommended 
that diagnostic radiopharmaceuticals should be subject to the same per 
day cost drug packaging threshold that applies to other drugs, in order 
to determine whether their payment would be packaged or made 
separately.
    In addition, the commenters objected to the proposal to package 
payment for diagnostic radiopharmaceuticals and contrast agents 
because, as SCODs, the commenters believed these products were required 
by statute to be paid at average acquisition cost. The commenters 
explained that, when several different diagnostic radiopharmaceuticals 
or contrast agents may be used for a particular procedure, the costs of 
those diagnostic radiopharmaceuticals or contrast agents are averaged 
together and added to the cost for the procedure in order to determine 
the payment rate for the associated procedural APC. Therefore, the 
commenters argued that the amount added to the procedure cost through 
packaging, representing the cost of the diagnostic radiopharmaceutical 
or contrast agent, did not reflect the average acquisition cost of any 
one particular item but, rather, reflected the average cost of whatever 
items may have been used with that particular procedure.
    Finally, one commenter requested clarification on when CMS treats 
an implantable device as a biological for payment purposes.
    Response: As discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66766), the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645) and the CY 2010 OPPS/ASC proposed rule (74 
FR 35323), we continue to believe diagnostic radiopharmaceuticals and 
contrast agents are different from other drugs and biologicals for 
several reasons. We note that the statutorily required OPPS drug 
packaging threshold has expired, and we continue to believe that 
diagnostic radiopharmaceuticals and contrast agents are always 
ancillary and supportive to an independent service, rather than serving 
themselves as the therapeutic modality. We packaged their payment in 
CYs 2008 and 2009 as ancillary and supportive services in order to 
provide incentives for greater efficiency and to provide hospitals with 
additional flexibility in managing their resources. In order for 
payment to be packaged, it is not necessary that all products be 
interchangeable in every case, and we recognize that in some cases 
hospitals may utilize higher cost products and in some cases lower cost 
products, taking into consideration the clinical needs of the patient 
and efficiency incentives. While we recognize this variability from 
case to case, on average under a prospective payment system we expect 
payment to pay appropriately for the services furnished. In the past, 
we have classified different groups of drugs for specific payment 
purposes, as evidenced by our CY 2005 through CY 2009 policy regarding 
5-HT3 anti-emetics and their exemption from the drug packaging 
threshold. We note that we treat diagnostic radiopharmaceuticals and 
contrast agents as ``policy-packaged'' drugs because our policy is to 
package payment for all of the products in the category.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68634), we also began packaging the payment for all nonpass-through 
implantable biologicals into payment for the associated surgical 
procedure because we consider these products to always be ancillary and 
supportive to independent services, just like implantable nonbiological 
devices that are always packaged. Therefore, we currently package 
payment for nonpass-through implantable biologicals, also known as 
devices, that are surgically inserted or implanted (through a surgical 
incision or a natural orifice) into the body. As we stated in the CY 
2010 OPPS/ASC proposed rule (74 FR 35324), we continue to believe that 
payment should be packaged for nonpass-through implantable biologicals 
for CY 2010.
    Although our final CY 2009 policy that we are continuing for CY 
2010, as discussed below, packages payment for all diagnostic 
radiopharmaceuticals, contrast agents, and nonpass-through implantable 
biologicals into the payment for their associated procedures, we are 
continuing to provide payment for these items in CY 2010 based on a 
proxy for average acquisition cost just as we did in CY 2009. We 
continue to believe that the line-item estimated cost for a diagnostic 
radiopharmaceutical, contrast agent, or nonpass-through implantable 
biological in our claims data is a reasonable approximation of average 
acquisition and preparation and handling costs for diagnostic 
radiopharmaceuticals, contrast agents, and nonpass-through implantable 
biologicals, respectively. As we discussed in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68645), we believe that hospitals 
have adapted to the CY 2006 coding changes for radiopharmaceuticals and 
responded to our instructions to include charges for 
radiopharmaceutical handling in their charges for the 
radiopharmaceutical products. Further, because the standard OPPS 
packaging methodology packages the total estimated cost of each 
radiopharmaceutical, contrast agent, or nonimplantable biological on 
each claim (including the full range of costs observed on the claims) 
with the cost of associated procedures for ratesetting, this packaging 
approach is consistent with considering the average cost for 
radiopharmaceuticals, contrast agents, or nonpass-through implantable 
biologicals, rather than the median cost. In addition, as we noted in 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68646), 
these drugs, biologicals, or radiopharmaceuticals for which we have not 
established a separate APC and, therefore, for which payment would be 
packaged rather than separately provided under the OPPS, could be 
considered to not be SCODs. Similarly, drugs and biologicals with per 
day costs of less than $65 in CY 2010 that are packaged and for which a 
separate APC has not been established also would not be SCODs. This 
reading is consistent with our final payment policy whereby we package 
payment for diagnostic radiopharmaceuticals, contrast agents, and 
nonpass-through implantable biologicals and provide payment for these 
products through payment for their associated procedures.
    Comment: Several commenters disagreed with the proposal to 
distinguish between diagnostic and therapeutic radiopharmaceuticals for 
payment purposes under the OPPS. The commenters noted that CMS' 
identification of HCPCS codes A9542 (Indium In-111 ibritumomabituxetan, 
diagnostic, per study dose, up to 5 millicuries) and A9544 (Iodine I-
131 tositumomab, diagnostic, per study dose) as diagnostic 
radiopharmaceuticals was inappropriate because these 
radiopharmaceuticals function as dosimetric radiopharmaceuticals, and 
they both have higher than average costs associated with their 
acquisition and significant compounding costs in comparison with other 
nuclear medicine imaging agents. A few commenters explained that these 
radiopharmaceutical products are used as part of a therapeutic regimen 
and, therefore, should be considered therapeutic for OPPS payment 
purposes.

[[Page 60498]]

    Response: As discussed above, and in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66641), the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68645) and the CY 2010 OPPS/ASC proposed 
rule (74 FR 35323), we classified each radiopharmaceutical into one of 
two groups according to whether its long descriptor contained the term 
``diagnostic'' or ``therapeutic.'' HCPCS codes A9542 and A9544 both 
contain the term ``diagnostic'' in their long code descriptors. 
Therefore, according to our established methodology, we continue to 
classify them as diagnostic for the purposes of CY 2010 OPPS payment. 
While we understand that these items are provided in conjunction with 
additional supplies, imaging tests, and therapeutic 
radiopharmaceuticals for patients already diagnosed with cancer, we 
continue to believe that the purpose of administering the products 
described by HCPCS codes A9542 and A9544 is diagnostic in nature. As we 
first stated in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66641), we continue to believe that HCPCS codes A9542 and A9544 are 
diagnostic radiopharmaceuticals. While they are not used to diagnose 
disease, they are used to determine whether future therapeutic services 
would be beneficial to the patient and to determine how to proceed with 
therapy. While a group of associated services may be considered a 
therapeutic regimen by some commenters, HCPCS codes A9542 and A9544 are 
provided in conjunction with a series of nuclear medicine imaging 
scans. Many nuclear medicine studies using diagnostic 
radiopharmaceuticals are provided to patients who already have an 
established diagnosis. We continue to consider HCPCS codes A9542 and 
A9544 to be diagnostic because these items are provided for the purpose 
of a diagnostic imaging procedure and are used to identify the proper 
dose of the therapeutic agent to be provided at a later time.
    Comment: Some commenters recommended using the ASP methodology to 
package payment for nonpass-through diagnostic radiopharmaceuticals, 
noting that it would be inconsistent for CMS to provide payment for 
diagnostic radiopharmaceuticals that have pass-through status based on 
the ASP methodology, and then, after the diagnostic 
radiopharmaceutical's pass-through payment status expires, package the 
costs included in historical hospital claims data, rather than using 
the ASP methodology to pay for the product. The commenters believed 
that the ASP methodology would be more reflective of actual diagnostic 
radiopharmaceutical costs and would not be subject to the billing 
inconsistencies that are present in hospital claims data. Therefore, 
the commenters concluded that it would be illogical to transition from 
an accurate methodology to estimate hospital costs (such as the ASP 
methodology) to a less accurate methodology (based on hospital claims 
data) once a product is packaged after its pass-through payment 
expires.
    Response: While we understand the commenters' request for the 
continued use of ASP data for purposes of packaging costs after a 
diagnostic radiopharmaceutical's pass-through payment period has ended, 
based on their belief that ASP data are more accurate than hospital 
claims data, we continue to believe that hospitals have the ability to 
identify and set charges for any new diagnostic radiopharmaceutical 
product accurately during its 2 to 3 year pass-through time period 
while the product has the potential to be paid based on ASP. Packaging 
hospital costs based on hospital claims data is how the costs of all 
packaged items are factored into payment rates for associated 
procedures under the OPPS. We believe that the costs reported on 
claims, as determined by hospitals, are the most appropriate 
representation of the costs of diagnostic radiopharmaceuticals that 
should be packaged into payment for the associated nuclear medicine 
procedures.
    We recognize that radiopharmaceuticals are specialized products 
that have unique costs associated with them. However, we believe that 
the costs are reflected in the charges that hospitals set for them and 
in the Medicare cost report where the full costs and charges associated 
with the services are reported. Therefore, the packaged costs of 
diagnostic radiopharmaceuticals are calculated like any other OPPS 
costs and packaged into the cost of the nuclear medicine service to 
which they are ancillary and supportive. This methodology is the basis 
for the payment of nuclear medicine procedures in the same way that 
other packaged costs contribute to the payment rates for the services 
to which they are an integral part.
    Comment: Some commenters believed that packaging payment for 
diagnostic radiopharmaceuticals and nonpass-through implantable 
biologicals would undermine the clinical and resource homogeneity in 
the various procedural APCs, resulting in 2 times violations.
    Response: As we stated in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68647), we agree that packaging the costs of 
ancillary and supportive services into the cost of an independent 
service can change the median cost for that service and could result in 
2 times violations. However, we disagree that we should refrain from 
packaging payment for ancillary and supportive items into the payment 
for the service in which they are used in order to prevent the 
occurrence of 2 times violations. Instead, we believe that we should 
reconfigure APCs when necessary to resolve 2 times violations where 
they occur. As we discussed in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68647), because we have traditionally paid for a 
service package under the OPPS as represented by a HCPCS code for the 
major procedure that is assigned to an APC group for payment, we assess 
the applicability of the 2 times rule to services at the HCPCS code 
level, not at a more specific level based on the individual diagnostic 
radiopharmaceuticals or nonpass-through implantable biologicals that 
may be utilized in a service reported with a single HCPCS code. 
Furthermore, if the use of a very expensive diagnostic 
radiopharmaceutical in a clinical scenario causes a specific procedure 
to be much more expensive for the hospital than the APC payment, we 
consider such a case to be the natural consequence of a prospective 
payment system that anticipates that some cases will be more costly and 
others less costly than the procedure payment. This same logic would 
apply to situations in which a nonpass-through implantable biological 
is implanted in a surgical procedure and results in an increase in a 
procedure's cost to the hospital for an individual case. In addition, 
very high cost cases could be eligible for outlier payment. As we note 
elsewhere in this final rule with comment period, decisions about 
packaging and bundling payment involve a balance between ensuring some 
separate payment for individual services and establishing incentives 
for efficiency through larger units of payment. In the case of 
diagnostic radiopharmaceuticals and nonpass-through implantable 
biologicals, these products are part of the OPPS payment package for 
the procedures in which they are used. We refer readers to section 
II.A.d.(5) of this final rule with comment period for a discussion of 
payment for nuclear medicine procedures.
    Comment: One commenter recommended that CMS provide separate 
payment for all diagnostic radiopharmaceuticals with a median per

[[Page 60499]]

day cost greater than $200. The commenter believes that this 
recommendation is most consistent with the APC Panel's recommendation 
to CMS at the September 2007 APC Advisory Panel meeting.
    Response: At the September 2007 APC Panel meeting, the APC Panel 
recommended that CMS package radiopharmaceuticals with a median per day 
cost of less than $200 but pay separately for radiopharmaceuticals with 
a per day cost of $200 or more. In the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66638), we did not accept the APC Panel's 
recommendation, citing an inability to determine an empirical basis for 
paying separately for radiopharmaceuticals with a per day cost in 
excess of $200. Instead, as proposed, for CY 2008 we finalized the 
packaging of payment for all diagnostic radiopharmaceuticals. We 
continue to believe that diagnostic radiopharmaceuticals are ancillary 
and supportive to the nuclear medicine procedures in which they are 
used and that their costs should be packaged into the primary 
procedures with which they are associated. We do not believe it would 
be appropriate to set a cost threshold for packaging diagnostic 
radiopharmaceuticals because, regardless of their per day cost, they 
are always supportive of an independent procedure that is the basis for 
administration of the diagnostic radiopharmaceutical.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposals, without modification, to continue to 
package payment for all nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals that 
are surgically inserted or implanted into the body, regardless of their 
per day costs. Given the inherent function of contrast agents and 
diagnostic radiopharmaceuticals as ancillary and supportive to the 
performance of an independent procedure and the similar functions of 
implantable biological and nonbiological devices, we continue to view 
the packaging of payment for contrast agents, diagnostic 
radiopharmaceuticals, and implantable biologicals as a logical 
expansion of packaging payment for drugs and biologicals. In addition, 
as we initially established in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66768), we are finalizing our proposal to 
continue to identify diagnostic radiopharmaceuticals specifically as 
those Level II HCPCS codes that include the term ``diagnostic'' along 
with a radiopharmaceutical in their long code descriptors, and 
therapeutic radiopharmaceuticals as those Level II HCPCS codes that 
include the terms ``therapeutic'' along with a radiopharmaceutical in 
their long code descriptors. For more information on how we set CY 2010 
payment rates for nuclear medicine procedures in which diagnostic 
radiopharmaceuticals are used and echocardiography services provided 
with and without contrast agents, we refer readers to section II.A.2.d 
(5) and (4), respectively, of this final rule with comment period.
3. Payment for Drugs and Biologicals Without Pass-Through Status That 
Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other 
Separately Payable and Packaged Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' is a covered outpatient drug, as 
defined in section 1927(k)(2) of the Act, for which a separate APC has 
been established and that either is a radiopharmaceutical agent or is a 
drug or biological for which payment was made on a pass-through basis 
on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of ``specified covered outpatient drugs,'' known as SCODs. 
These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug for that year as determined by the 
Secretary, subject to any adjustment for overhead costs and taking into 
account the hospital acquisition cost survey data collected by the 
Government Accountability Office (GAO) in CYs 2004 and 2005. If 
hospital acquisition cost data are not available, the law requires that 
payment be equal to payment rates established under the methodology 
described in section 1842(o), section 1847A, or section 1847B of the 
Act, as calculated and adjusted by the Secretary as necessary.
    Section 1833(t)(14)(E) of the Act provides for an adjustment in 
OPPS payment rates for overhead and related expenses, such as pharmacy 
services and handling costs. Section 1833(t)(14)(E)(i) of the Act 
required MedPAC to study pharmacy overhead and to make recommendations 
to the Secretary regarding whether, and if so how, a payment adjustment 
should be made to compensate hospitals for them. Section 
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the 
weights for ambulatory procedure classifications for SCODs to take into 
account the findings of the MedPAC study.
    In the CY 2006 OPPS proposed rule (70 FR 42728), we discussed the 
June 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs 
and summarized the findings of that study:
     Handling costs for drugs, biologicals, and 
radiopharmaceuticals administered in the HOPD are not insignificant;
     Little information is available about the magnitude of 
pharmacy overhead costs;
     Hospitals set charges for drugs, biologicals, and 
radiopharmaceuticals at levels that reflect their respective handling 
costs; and
     Hospitals vary considerably in their likelihood of 
providing services which utilize drugs, biologicals, or 
radiopharmaceuticals with different handling costs.
    As a result of these findings, MedPAC developed seven drug 
categories for pharmacy and nuclear medicine handling costs based on 
the estimated level of hospital resources used to prepare the products 
(70 FR 42729). Associated with these categories were two 
recommendations for accurate payment of pharmacy overhead under the 
OPPS.
    1. CMS should establish separate, budget neutral payments to cover 
the costs hospitals incur for handling separately payable drugs, 
biologicals, and radiopharmaceuticals.
    2. CMS should define a set of handling fee APCs that group drugs, 
biologicals, and radiopharmaceuticals based on attributes of the 
products that affect handling costs; CMS should instruct hospitals to 
submit charges for these APCs and base payment rates for the handling 
fee APCs on submitted charges reduced to costs.
    In response to the MedPAC findings, in the CY 2006 OPPS proposed 
rule (70 FR 42729), we discussed our belief that, because of the varied 
handling resources

[[Page 60500]]

required to prepare different forms of drugs, it would be impossible to 
exclusively and appropriately assign a drug to a certain overhead 
category that would apply to all hospital outpatient uses of the drug. 
Therefore, our CY 2006 OPPS proposal included a proposal to establish 
three distinct Level II HCPCS C-codes and three corresponding APCs for 
drug handling categories to differentiate overhead costs for drugs and 
biologicals (70 FR 42730). We also proposed: (1) To combine several 
overhead categories recommended by MedPAC; (2) to establish three drug 
handling categories, as we believed that larger groups would minimize 
the number of drugs that may fit into more than one category and would 
lessen any undesirable payment policy incentives to utilize particular 
forms of drugs or specific preparation methods; (3) to collect hospital 
charges for these HCPCS C-codes for 2 years; and (4) to ultimately base 
payment for the corresponding drug handling APCs on CY 2006 claims data 
available for the CY 2008 OPPS.
    In the CY 2006 OPPS final rule with comment period (70 FR 68659 
through 68665), we discussed the public comments we received on our 
proposal regarding pharmacy overhead. The overwhelming majority of 
commenters did not support our proposal and urged us not to finalize 
this policy, as it would be administratively burdensome for hospitals 
to establish charges for HCPCS codes for pharmacy overhead and to 
report them. Therefore, we did not finalize this proposal for CY 2006. 
Instead, we established payment for separately payable drugs and 
biologicals at ASP+6 percent, which we calculated by comparing the 
estimated aggregate cost of separately payable drugs and biologicals in 
our claims data to the estimated aggregate ASP dollars for separately 
payable drugs and biologicals, using the ASP as a proxy for average 
acquisition cost (70 FR 68642). Hereinafter, we refer to this 
methodology as our standard drug payment methodology. We concluded that 
payment for drugs and biologicals and pharmacy overhead at a combined 
ASP+6 percent rate would serve as the best proxy for the combined 
acquisition and overhead costs of each of these products.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68091), we finalized our proposed policy to provide a single payment of 
ASP+6 percent for the hospital's acquisition cost for the drug or 
biological and all associated pharmacy overhead and handling costs. The 
ASP+6 percent rate that we finalized was higher than the equivalent 
average ASP-based amount calculated from claims of ASP+4 percent 
according to our standard drug payment methodology, but we adopted 
payment at ASP+6 percent for stability while we continued to examine 
the issue of the costs of pharmacy overhead in the HOPD.
    In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to 
ongoing discussions with interested parties, we proposed to continue 
our methodology of providing a combined payment rate for drug and 
biological acquisition and pharmacy overhead costs. We also proposed to 
instruct hospitals to remove the pharmacy overhead charge for both 
packaged and separately payable drugs and biologicals from the charge 
for the drug or biological and report the pharmacy overhead charge on 
an uncoded revenue code line on the claim. We believed that this would 
provide us with an avenue for collecting pharmacy handling cost data 
specific to drugs in order to package the overhead costs of these items 
into the associated procedures, most likely drug administration 
services. Similar to the public response to our CY 2006 pharmacy 
overhead proposal, the overwhelming majority of commenters did not 
support our CY 2008 proposal and urged us to not finalize this policy 
(72 FR 66761). At its September 2007 meeting, the APC Panel recommended 
that hospitals not be required to separately report charges for 
pharmacy overhead and handling and that payment for overhead be 
included as part of drug payment. The APC Panel also recommended that 
CMS continue to evaluate alternative methods to standardize the capture 
of pharmacy overhead costs in a manner that is simple to implement at 
the organizational level (72 FR 66761). Because of concerns expressed 
by the APC Panel and public commenters, we did not finalize the 
proposal to instruct hospitals to separately report pharmacy overhead 
charges for CY 2008. Instead, in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66763), we finalized a policy of providing 
payment for separately payable drugs and biologicals and their pharmacy 
overhead at ASP+5 percent as a transition from their CY 2007 payment of 
ASP+6 percent to payment based on the equivalent average ASP-based 
payment rate calculated from hospital claims according to our standard 
drug payment methodology, which was ASP+3 percent for the CY 2008 OPPS/
ASC final rule with comment period. Hospitals continued to include 
charges for pharmacy overhead costs in the line-item charges for the 
associated drugs reported on claims.
    For CY 2009, we proposed to pay separately payable drugs and 
biologicals at ASP+4 percent, including both SCODs and other drugs 
without CY 2009 OPPS pass-through status, based on our standard drug 
payment methodology, and we also proposed to split the ``Drugs Charged 
to Patients'' cost center into two cost centers: One for drugs with 
high pharmacy overhead costs and one for drugs with low pharmacy 
overhead costs (73 FR 41492). We noted that we expected that CCRs from 
the proposed new cost centers would be available in 2 to 3 years to 
refine OPPS drug cost estimates by accounting for differential hospital 
markup practices for drugs with high and low overhead costs. After 
consideration of the public comments received and the APC Panel 
recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide 
payment for separately payable nonpass-through drugs and biologicals 
based on costs calculated from hospital claims at a 1-year transitional 
rate of ASP+4 percent, in the context of an equivalent average ASP-
based payment rate of ASP+2 percent calculated according to our 
standard drug payment methodology from the final rule claims and cost 
report data. We did not finalize our proposal to split the single 
standard ``Drugs Charged to Patients'' cost center into two cost 
centers largely due to concerns raised to us by hospitals about the 
associated administrative burden. Instead, we indicated in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68659) that we would 
continue to explore other potential approaches to improve our drug cost 
estimation methodology, thereby increasing payment accuracy for 
separately payable drugs and biologicals.
    In response to the CMS proposals for the CY 2008 and CY 2009 OPPS, 
a group of pharmacy stakeholders (hereinafter referred to as the 
pharmacy stakeholders), including some cancer hospitals, some 
pharmaceutical manufacturers, and some hospital and professional 
associations, commented that CMS should pay an acquisition cost of 
ASP+6 percent for separately payable drugs, should substitute ASP+6 
percent for the packaged cost of all packaged drugs and biologicals on 
procedure claims, and should redistribute the difference between the 
aggregate estimated packaged drug cost in claims and payment for all 
drugs, including packaged drugs at ASP+6 percent, as separate pharmacy 
overhead payments for separately payable drugs. They

[[Page 60501]]

indicated that this approach would preserve the aggregate drug cost 
observed in the claims data, while significantly increasing payment 
accuracy for individual drugs and procedures using packaged drugs. 
Their suggested approach would provide a separate overhead payment for 
each separately payable drug or biological at one of three different 
levels, depending on the pharmacy stakeholders' assessment of the 
complexity of pharmacy handling associated with each specific drug or 
biological (73 FR 68651 through 68652). Each separately payable drug or 
biological HCPCS code would be assigned to one of the three overhead 
categories, and the separate pharmacy overhead payment applicable to 
the category would be made when each of the separately payable drugs or 
biologicals was paid.
    At the February 2009 APC Panel meeting, the APC Panel recommended 
that CMS pay for the acquisition cost of all separately payable drugs 
at no less than ASP+6 percent. The APC Panel also recommended that CMS 
package payment at ASP+6 percent on claims for all drugs that are not 
separately payable and use the difference between these rates and CMS' 
cost derived from charges to create a pool to provide more appropriate 
payment for pharmacy service costs and that CMS pay for pharmacy 
services costs using this pool, applying a tiered approach to payments 
based on some objective criteria related to the pharmacy resources 
required for groups of drugs. The APC Panel further recommended that, 
if CMS does not implement the drug payment recommendations specified 
above, CMS should exclude data from hospitals that participate in the 
340B Federal drug pricing program from its ratesetting calculations for 
drugs and CMS should pay 340B hospitals in the same manner as it pays 
non-340B hospitals. Hospitals that participate in the 340B program are 
generally hospitals that serve a disproportionate share of low-income 
patients and receive disproportionate share payments under the IPPS. 
These facilities may acquire outpatient drugs and biologicals at prices 
that are substantially below ASP because the 340B program requires drug 
manufacturers to provide outpatient drugs to eligible entities at a 
reduced price and these reduced price sales are not included in the ASP 
submissions of manufacturers to Medicare. Public presenters at the 
February 2009 APC Panel meeting emphasized that the purpose of the 340B 
Federal drug pricing program is to ensure access to drugs for low-
income patients by supplementing the higher cost of providing care to 
low-income patients born by hospitals serving a disproportionate share 
of these patients. The agenda, recommendations, and report from the 
February 2009 APC Panel meeting are posted on the CMS Web site at: 
http://www.cms.hhs.gov/FACA. We respond to these APC Panel 
recommendations in our discussion of the proposed CY 2010 policy that 
follows.
b. Payment Policy
    Section 1833(t)(14)(A)(iii) of the Act, as described above, 
continues to be applicable to determining payments for SCODs for CY 
2010. This provision requires that payment for SCODs be equal to the 
average acquisition cost for the drug for that year as determined by 
the Secretary, subject to any adjustment for overhead costs and taking 
into account the hospital acquisition cost survey data collected by the 
GAO in CYs 2004 and 2005. If hospital acquisition cost data are not 
available, the law requires that payment be equal to payment rates 
established under the methodology described in section 1842(o), section 
1847A, or section 1847B of the Act, as calculated and adjusted by the 
Secretary as necessary. In addition, section 1833(t)(14)(E)(ii) of the 
Act authorizes the Secretary to adjust APC weights to take into account 
the 2005 MedPAC report relating to overhead and related expenses, such 
as pharmacy services and handling costs. Since CY 2006, when we first 
adopted our standard methodology of paying for separately payable drugs 
and biologicals based on the equivalent average ASP-based payment rate 
calculated from claims and cost report data, we have applied this 
methodology to payment for all separately payable drugs and biologicals 
without pass-through status, both SCODs and other drugs and biologicals 
that do not meet the statutory definition of SCODs. We have seen no 
reason to distinguish SCODs from these other separately payable drugs 
and biologicals, and under our standard drug payment methodology, we 
have used ASP data and costs estimated from charges on hospital claims 
data as a proxy for the average hospital acquisition cost that the 
statute requires for payment of SCODs and to provide payment for the 
associated pharmacy overhead cost.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we proposed to 
redistribute between one-third and one-half of the difference between 
the aggregate claims cost for coded packaged drugs and biologicals with 
an ASP and ASP dollars for those products, which resulted in our 
proposal to pay for the acquisition and pharmacy overhead costs of 
separately payable drugs and biologicals that did not have pass-through 
payment status at ASP+4 percent. Based on the rationale described in 
the CY 2010 OPPS/ASC proposed rule (74 FR 35326 through 35333), we 
believed that approximately $150 million of the estimated $395 million 
total in pharmacy overhead cost included in our claims data for coded 
packaged drugs and biologicals with an ASP above the aggregate ASP 
dollars of these packaged products should be attributed to separately 
payable drugs and biologicals to provide an adjustment for the pharmacy 
overhead costs of these separately payable products. As a result, we 
also proposed to reduce the cost of these packaged drugs and 
biologicals that is included in the payment for procedural APCs to 
offset the $150 million adjustment to payment for separately payable 
drugs and biologicals. In addition, we proposed that any redistribution 
of pharmacy overhead cost that may arise from CY 2010 final rule data 
would occur only from coded packaged drugs and biologicals with an ASP 
to separately payable drugs and biologicals, thereby maintaining the 
estimated total cost of drugs and biologicals.
    Using our CY 2010 proposed rule data, and applying our longstanding 
methodology for calculating the total cost of separately payable drugs 
and biologicals in our claims compared to the ASP dollars for the same 
drugs and biologicals, without applying the proposed overhead cost 
redistribution, we determined that the estimated aggregate cost of 
separately payable drugs and biologicals (status indicators ``K'' and 
``G''), including acquisition and pharmacy overhead costs, was 
equivalent to ASP-2 percent. Therefore, under our standard drug payment 
methodology, we would pay for separately payable drugs and biologicals 
at ASP-2 percent for CY 2010, their equivalent average ASP-based 
payment rate. We also determined that the estimated aggregate cost of 
coded packaged drugs and biologicals with an ASP (status indicator 
``N''), including acquisition and pharmacy overhead costs, was 
equivalent to ASP+247 percent. We found that the estimated aggregate 
cost for all coded drugs and biologicals (status indicators ``N,'' 
``K,'' and ``G), including acquisition and pharmacy overhead costs, was 
equivalent to ASP+13 percent. For a detailed explanation of our 
standard process for these calculations, we refer

[[Page 60502]]

readers to the CY 2006 OPPS proposed rule (70 FR 42725).

      Table 36--Standard Drug Payment Methodology Using CY 2010 OPPS Proposed Rule Data: ASP+X Calculation
----------------------------------------------------------------------------------------------------------------
                                                     Total ASP     Total cost of
                                                    dollars for      drugs and
                                                     drugs and    biologicals in   Ratio of cost
                                                  biologicals in    claims data       to ASP      ASP+X  percent
                                                    claims data         (in
                                                  (in millions)*    millions)**
----------------------------------------------------------------------------------------------------------------
Coded Packaged Drugs and Biologicals with an ASP            $160            $555            3.47         ASP+247
Separately Payable Drugs and Biologicals........           2,589           2,539            0.98           ASP-2
All Coded Drugs and Biologicals.................           2,749           3,094            1.13          ASP+13
----------------------------------------------------------------------------------------------------------------
*Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and
  biologicals with a HCPCS code and ASP information.
**Total cost in the CY 2008 claims data for drugs and biologicals with a HCPCS code and April 2009 ASP
  information.

    In the proposed rule, we recognized that there may be concern over 
whether the actual full cost (acquisition and pharmacy overhead) of 
separately payable drugs and biologicals could be 2 percent less than 
ASP for these products (74 FR 35327), although we did not have ASP 
information specifically for their sales to hospitals. Similarly, we 
acknowledged that a full cost (acquisition and pharmacy overhead) of 
ASP+247 percent for coded packaged drugs and biologicals with an ASP 
seemed relatively high. When we subtracted the total ASP dollars for 
packaged drugs and biologicals with a reported ASP amount in the CY 
2008 claims data ($160 million), our proxy for their acquisition cost, 
from the total cost of packaged drugs and biologicals in the same 
claims ($555 million), we found that the difference, which we viewed as 
the pharmacy overhead cost currently attributed to packaged drugs and 
biologicals was $395 million. While we had no way of assessing whether 
this current distribution of overhead cost to coded packaged drugs and 
biologicals with an ASP was appropriate, we acknowledged that the 
established method of converting billed charges to costs had the 
potential to ``compress'' the calculated costs to some degree. Further, 
we recognized that the attribution of pharmacy overhead costs to 
packaged or separately payable drugs and biologicals through our 
standard drug payment methodology of a combined payment for acquisition 
and pharmacy overhead costs depends, in part, on the treatment of all 
drugs and biologicals each year under our annual drug packaging 
threshold. Changes to the packaging threshold may result in changes to 
payment for the overhead cost of drugs and biologicals that do not 
reflect actual changes in hospital pharmacy overhead cost for those 
products. For these reasons, we believed that some portion, but not 
all, of the $395 million in total overhead cost that is associated with 
coded packaged drugs and biologicals with an ASP based on our standard 
drug payment methodology should, at least for CY 2010, be attributed to 
separately payable drugs and biologicals. Although we believed that for 
CY 2010 it would be prudent to redistribute some pharmacy overhead cost 
between coded packaged drugs and biologicals with an ASP at ASP+247 
percent and separately payable drugs and biologicals at ASP-2 percent 
that would result from our standard drug payment methodology, the 
amount of overhead cost redistribution that would be appropriate 
between the packaged and separately payable drugs and biologicals in a 
payment system that is fundamentally based on averages was not fully 
evident. Pharmacy overhead cost includes, but is not limited to, some 
costs of indirect overhead that are shared by all hospital items and 
services, such as administrative and general costs, capital costs, 
staff benefits, and other facility costs. With regard to these indirect 
overhead costs, the amount of indirect overhead cost that is 
attributable to an inexpensive (typically packaged) drug is the same in 
dollar value as the amount of indirect overhead cost that is 
attributable to an extremely costly drug (typically separately 
payable). Hence, the indirect overhead costs that are common to all 
drugs and biologicals have no relationship to the cost of an individual 
drug or biological, or to the complexity of the handling, preparation, 
or storage of that individual drug or biological. Therefore, we 
believed that the indirect overhead cost alone for an inexpensive drug 
or biological could be far in excess of the ASP for that inexpensive 
product.
    Layered on these indirect overhead costs are the pharmacy overhead 
direct costs of staff, supplies, and equipment that are directly 
attributable only to the storage, handling, preparation, and 
distribution of drugs and biologicals and which do vary, sometimes 
considerably, depending upon the drug being furnished. As we describe 
above, in its June 2005 Report to Congress, MedPAC found that drugs can 
be categorized into seven different categories based on the handling 
costs (that is, the direct costs) incurred (70 FR 42729). Similarly, 
the pharmacy stakeholders, whose suggested approach the APC Panel 
recommended that we accept for CY 2010, identified three categories of 
pharmacy overhead complexity with variable costs, to which they 
assigned individual drugs and biologicals for purposes of implementing 
their recommended redistribution of the difference between aggregate 
dollars for all drugs and biologicals at ASP+6 percent and aggregate 
cost for all drugs and biologicals in the claims data as additional 
pharmacy overhead payments.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35328), we 
acknowledged that the observed combined payment for acquisition and 
pharmacy overhead costs of ASP-2 percent for separately payable drugs 
and biologicals may be too low and ASP+247 percent for coded packaged 
drugs and biologicals with an ASP in the CY 2010 claims data may be too 
high. However, we stated our belief that the pharmacy stakeholders' 
recommendation to set packaged drug and biologicals dollars to ASP+6 
percent was inappropriate given our understanding that an equal 
allocation of indirect overhead costs among packaged and separately 
payable drugs and biologicals would lead to a higher observed ASP+X 
percent than ASP+6 percent for packaged drugs and biologicals. As 
discussed above, the indirect overhead costs that are common to all 
drugs and biologicals have no relationship to the cost of an individual 
drug or biological, or to the complexity

[[Page 60503]]

of the handling, preparation, or storage of that individual drug or 
biological. Therefore, we stated our belief that the indirect overhead 
cost alone for an inexpensive drug or biological which would be 
packaged could be far in excess of the ASP for that inexpensive 
product. In contrast, we would expect that the indirect overhead cost 
alone for an expensive drug or biological which would be separately 
paid could be far less than the ASP for that expensive product.
    Therefore, as discussed in the proposed rule, we believed that some 
middle ground would represent the most accurate redistribution of 
pharmacy overhead cost. We stated that the assumption that 
approximately one-third to one-half of the total pharmacy overhead cost 
currently associated with coded packaged drugs and biologicals with an 
ASP was a function of both charge compression and our choice of an 
annual drug packaging threshold offered a more appropriate allocation 
of drug and biological cost to separately payable drugs and 
biologicals. One-third of the $395 million of pharmacy overhead cost 
associated with coded packaged drugs and biologicals with an ASP was 
$132 million, whereas one-half was $198 million. Within the one-third 
to one-half parameters, we proposed that reallocating $150 million in 
drug and biological cost observed in the claims data from coded 
packaged drugs and biologicals with an ASP to separately payable drugs 
and biologicals for CY 2010 would more appropriately distribute 
pharmacy overhead cost among packaged and separately payable drugs and 
biologicals than either of the two other options, that is, paying for 
separately payable drugs and biologicals at ASP-2 percent according to 
our standard drug payment methodology or adopting the pharmacy 
stakeholders' recommendation. We stated that if we attributed $150 
million in additional cost to the payment for the drugs and biologicals 
for which we proposed to pay separately for the CY 2010 OPPS, we 
determined a payment rate for separately payable drugs and biologicals 
of ASP+4 percent as displayed in Table 26 of the proposed rule (74 FR 
35328) that is reprinted below as Table 37. Thus, we proposed a 
pharmacy overhead adjustment for separately payable drugs and 
biologicals in CY 2010 that would result in their payment at ASP+4 
percent. We proposed to accomplish this adjustment by redistributing 
one-third to one-half of the pharmacy overhead cost of coded packaged 
drugs and biologicals with an ASP ($150 million), which represented a 
reduction in cost of coded packaged drug and biologicals with an ASP in 
the CY 2010 proposed rule claims data of 27 percent.

 Table 37--CY 2010 Proposed Pharmacy Overhead Adjustment Payment Methodology for Separately Payable and Packaged
                                              Drugs and Biologicals
----------------------------------------------------------------------------------------------------------------
                                                                   Total cost of
                                                     Total ASP       drugs and
                                                    dollars for   biologicals in   Ratio of cost
                                                     drugs and      claims Data       to ASP      ASP+X  percent
                                                  biologicals in       After        (column C/
                                                    claims data   Adjustment (in     column B)
                                                  (in millions)*    millions)**
----------------------------------------------------------------------------------------------------------------
Coded Packaged Drugs and Biologicals with an ASP            $160            $405            2.53         ASP+153
Separately Payable Drugs and Biologicals........           2,589           2,689            1.04           ASP+4
All Coded Drugs and Biologicals.................           2,749           3,094            1.13          ASP+13
----------------------------------------------------------------------------------------------------------------
*Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and
  biologicals with a HCPCS code and ASP information.
**Total cost in the CY 2008 claims data for drugs and biologicals with a HCPCS code and April 2009 ASP
  information.

    Comment: Many commenters agreed with CMS that it was unlikely that 
the full cost (acquisition and pharmacy overhead) of separately payable 
drugs and biologicals could be 2 percent less than ASP for these 
products, and that the full cost (acquisition and pharmacy overhead) of 
packaged drugs could be 247 percent of ASP.
    Response: We continue to find that the results of our standard drug 
payment methodology are unlikely to accurately reflect the full cost of 
acquisition and pharmacy overhead for separately payable drugs and 
biologicals and packaged drugs and biologicals due to hospital charging 
practices and our use of an annual drug packaging threshold. Using our 
CY 2010 final rule data, and applying our longstanding methodology for 
calculating the total cost of separately payable drugs and biologicals 
in our claims compared to the ASP dollars for the same drugs and 
biologicals and without applying the proposed overhead cost 
redistribution, we determined that the estimated aggregate cost of 
separately payable drugs and biologicals (status indicators ``K'' and 
``G''), including acquisition and pharmacy overhead costs, is 
equivalent to ASP-3 percent (compared to ASP-2 percent as presented in 
the proposed rule). Therefore, under our standard drug payment 
methodology, we would pay for separately payable drugs and biologicals 
at ASP-3 percent for CY 2010, their equivalent average ASP-based 
payment rate. We also determined that the estimated aggregate cost of 
coded packaged drugs and biologicals with an ASP (status indicator 
``N''), including acquisition and pharmacy overhead costs, is 
equivalent to ASP+259 percent (compared to ASP+247 percent as presented 
in the proposed rule). We found that the estimated aggregate cost for 
all coded drugs and biologicals (status indicators ``N,'' ``K,'' and 
``G), including acquisition and pharmacy overhead costs, is equivalent 
to ASP+11 percent (compared to ASP+13 percent as presented in the 
proposed rule). These values are shown in Table 38 below.

[[Page 60504]]



 Table 38--Proposed and Final Asp+X Values for All Coded Drugs and Biologicals With an ASP, Coded Packaged Drugs
                    and Biologicals With an ASP, and Separately Payable Drugs and Biologicals
----------------------------------------------------------------------------------------------------------------
                                                                   ASP+X for all     ASP+X for       ASP+X for
                                                                    coded drugs   coded packaged    separately
                                                                        and          drugs and     payable drugs
                                                                    biologicals     biologicals         and
                                                                    with an ASP     with an ASP     biologicals
----------------------------------------------------------------------------------------------------------------
CY 2010 Proposed Rule*..........................................          ASP+13         ASP+247           ASP-2
CY 2010 Final Rule**............................................          ASP+11         ASP+258           ASP-3
----------------------------------------------------------------------------------------------------------------
*Based on CY 2010 proposed rule claims data and April 2009 ASPs.
**Based on CY 2010 final rule claims data and July 2009 ASPs.

    Comment: Some commenters agreed with CMS' assertion that packaged 
drugs and biologicals typically have an aggregate absolute pharmacy 
overhead cost that exceeds the acquisition cost of the packaged drugs 
and biologicals. One commenter claimed that ASP+6 percent would be 
insufficient to accurately account for the acquisition and pharmacy 
overhead costs of packaged drugs. In addition, a few commenters 
recommended that CMS modify the pharmacy stakeholders' approach by 
packaging the cost of drugs and biologicals at ASP plus 100 percent, 
rather than the stakeholder's recommended amount of ASP+6 percent.
    Response: We continue to be concerned with a methodology that would 
package the cost of all packaged drugs and biologicals at ASP+6 
percent. As stated in our proposal, we have no data specific to the 
overhead costs of these drugs and biologicals and, therefore, we cannot 
determine with any certainty an ASP+X value relating specifically to 
their costs for acquisition and pharmacy overhead. While we appreciate 
the recommendation of the commenters to package payment for the 
acquisition and pharmacy overhead costs of inexpensive drugs below the 
drug packaging threshold at ASP plus 100 percent, we cannot verify that 
using ASP plus 100 percent would result in an accurate estimate of 
acquisition and pharmacy overhead costs of packaged drugs and 
biologicals.
    Comment: One commenter noted that a key CMS assumption behind the 
standard methodology for calculating the ASP+X percent payment rate, 
and the redistribution methodology by implication, is that the average 
overhead cost for drugs and biologicals ultimately must appear in the 
revenue producing cost center 5600 ``Drugs Charged to Patients,'' along 
with the acquisition cost of drugs and biologicals. The commenter 
acknowledged that CMS' standard drug payment methodology relies on 
appropriate allocation of pharmacy overhead cost in order to derive an 
accurate payment amount for separately payable versus packaged drugs 
and biologicals. The commenter specifically cited weak cost reporting 
instructions for the ``Drugs Charged to Patients'' cost center and cost 
center 1600 ``Pharmacy'' and questioned whether pharmacy overhead cost 
adequately and appropriately appears in the ``Drugs Charged to 
Patients'' cost center. Specifically, the commenter noted that costs 
accumulated in the ``Drugs Charged to Patients'' cost center remain in 
that cost center, but asserted that costs accumulated in the 1600 
``Pharmacy'' cost center would be allocated across revenue producing 
cost centers on the basis of costed requisitions. The commenter asked a 
series of specific questions about how costs are accumulated in both 
the ``Pharmacy'' and ``Drugs Charged to Patients'' cost centers, 
including (1) what costs hospitals actually report in the ``Pharmacy'' 
cost center versus the ``Drugs Charged to Patients'' cost center; (2) 
which revenue producing cost centers have costed requisitions that 
would receive ``Pharmacy'' cost center overhead costs, that is, do 
hospitals account for contrast agent costs under radiology revenue 
producing cost centers; (3) how much of ``Pharmacy'' cost center 
overhead costs is allocated to ``Drugs Charged to Patients;'' and (4) 
when would hospitals not account for the cost of a drug in the ``Drugs 
Charged to Patients'' cost center.
    Response: We acknowledge that the CCR for the ``Drugs Charged to 
Patients'' cost center reflects the average acquisition cost for drugs 
and biologicals reported in that cost center, as well as the average 
pharmacy overhead cost for those drugs and biologicals. In addition, 
use of this CCR to estimate costs from charges on claims has the 
potential to ``compress'' the pharmacy overhead costs for expensive 
drugs and biologicals, where hospitals differentially distribute 
pharmacy overhead among their charges for drugs and biologicals by 
marking up the charges for expensive drugs and biologicals 
proportionally less than inexpensive drugs and biologicals. We have 
stated that combining this compression with a packaging threshold may 
lead us to underestimate the pharmacy overhead costs of separately 
payable drugs and biologicals and overestimate the overhead costs of 
packaged drugs and biologicals.
    At a minimum, the CCR for the cost center ``Drugs Charged to 
Patients'' that CMS uses to estimate costs from charges for drugs and 
biologicals in our claims data should consist of charges for all drugs 
and biologicals separately charged to patients and the related costs 
for those separately chargeable drugs and biologicals. A hospital would 
not include the charge and cost for a drug or biological in the ``Drugs 
Charged to Patients'' cost center if the hospital did not separately 
charge the drug or biological to a patient. The identification of costs 
for the ``Drugs Charged to Patients'' cost center can occur in several 
ways.
    First, we generally believe that the indirect costs that are common 
to all drugs and biologicals, including administrative and general 
costs, capital costs, staff benefits, and other facility costs, and the 
more direct costs of handling, preparation, and storage are accumulated 
as total pharmacy operation costs in cost center 1600 ``Pharmacy.'' 
Second, hospitals can choose to treat the acquisition cost of their 
drugs and biologicals in several ways. Frequently, hospitals accumulate 
and report the acquisition costs of drugs and biologicals (costed 
requisitions) directly in the most appropriate revenue producing cost 
center on Worksheet A of the cost report. We expect that, the majority 
of the time, hospitals accrue the largest acquisition cost of drugs and 
biologicals in the ``Drugs Charged to Patients'' cost center, which is 
specific to these items. However, hospitals may also account for the 
acquisition cost of unique drugs and biologicals, such as contrast 
agents, in other revenue producing cost centers such as the radiology 
cost centers, when the

[[Page 60505]]

contrast agents are not separately charged to the patient. Assignment 
of acquisition cost to a different revenue producing cost center can 
only occur if the drug or biological was not separately charged to a 
patient. Although the commenter suggested that contrast agents may 
appear in other cost centers, our claims data demonstrate a significant 
volume of contrast agents reported under a pharmacy revenue code. 
Therefore, we believe that hospitals largely are charging patients 
specifically for contrast agents and accounting for these costs and 
charges in the ``Drugs Charged to Patients'' cost center. The hospital 
would then allocate the total overhead costs from the ``Pharmacy'' 
general services cost center to all revenue producing cost centers that 
have costed requisitions for drugs and biologicals on Worksheet B-1. In 
this circumstance, a large proportion of the total cost of the 
``Pharmacy'' cost center would be allocated to the ``Drugs Charged to 
Patients'' cost center, assuming a concentration of costed requisitions 
for drugs and biologicals in the ``Drugs Charged to Patients'' cost 
center. The total pharmacy cost being allocated is an aggregation that 
commingles the overhead costs of a variety of drugs and biologicals. 
The resulting CCR for the ``Drugs Charged to Patients'' cost center 
should reflect both the average acquisition cost of drugs and 
biologicals, including those that are expensive and inexpensive, in 
that cost center and the average pharmacy overhead cost apportioned to 
that cost center.
    Hospitals also may include the acquisition cost of drugs and 
biologicals directly in the ``Pharmacy'' general services cost center 
and reclassify this cost to revenue producing cost centers, including 
``Drugs Charged to Patients,'' before allocating the total cost of the 
``Pharmacy'' cost center, which would have an effect similar to 
directly reporting the cost of drugs in the revenue producing cost 
centers on Worksheet A, as discussed above. In this situation, overhead 
cost from the ``Pharmacy'' cost center would be allocated to each of 
the revenue producing cost centers on the basis of costed requisitions. 
Some hospitals include the acquisition cost of drugs and biologicals 
directly in the ``Pharmacy'' cost center but do not reclassify this 
cost to the appropriate revenue producing cost center on Worksheet A, 
and instead allocate those costs on Worksheet B-1 together with the 
overhead cost of the pharmacy using costed requisitions. Regardless of 
which method described above that the provider uses, the resulting CCR 
for the ``Drugs Charged to Patients'' cost center should reflect the 
average acquisition cost for drugs and biologicals in that cost center 
and the average pharmacy overhead apportioned to that cost center. Our 
redistribution methodology acknowledges that relying on a single CCR 
has the potential to ``compress'' overhead costs and that combining 
this compression with a packaging threshold leads us to underestimate 
the overhead costs of separately payable drugs and biologicals and 
overestimate the overhead costs of packaged drugs and biologicals.
    As we discussed in our proposal, we did not propose to redistribute 
pharmacy overhead cost from packaged to separately payable drugs and 
biologicals utilizing a methodology that would provide a separate 
pharmacy overhead payment for each separately payable drug and 
biological based on its pharmacy complexity. The OPPS is a prospective 
payment system that provides payment for groups of services and we 
believe that it is important, at a minimum, to maintain the current 
size of the OPPS payment bundles, in order to encourage efficiency in 
the hospital outpatient setting. As we stated in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66613), we believe it is 
important that the OPPS create incentives for hospitals to provide only 
necessary, high quality care and to provide that care as efficiently as 
possible. We have considered in recent years how we could increase 
packaging under the OPPS in a manner that would create incentives for 
efficiency while providing hospitals with flexibility to provide care 
in the most appropriate way for each Medicare beneficiary. Hospitals 
have repeatedly explained that they consider the acquisition and 
pharmacy overhead costs of drugs in setting their charges for drugs, 
and we have continued to provide a single payment for the acquisition 
and pharmacy overhead costs of separately payable drugs and biologicals 
under the OPPS consistent with this hospital charging practice. While 
we have worked to develop, and are now implementing, a refined payment 
methodology for drugs and biologicals for the CY 2010 OPPS that we 
believe will pay more accurately for the pharmacy overhead cost of 
packaged and separately payable drugs and biologicals, we do not 
believe it would be appropriate to unbundle the current single combined 
payment for the acquisition and overhead costs of a separately payable 
drug into two distinct payments, a drug payment and a pharmacy overhead 
payment. Furthermore, we note that section 1833(t)(14)(E)(ii) of the 
Act specifically authorizes the Secretary to adjust the APC payment 
weights for SCODs to take into account the recommendations of MedPAC on 
pharmacy overhead costs. We believe our CY 2010 approach that will 
adjust the APC payment for separately payable drugs and biologicals to 
more accurately pay for their associated pharmacy overhead cost, rather 
than provide a separate payment for a drug's pharmacy overhead cost 
each time the product is separately paid, is consistent with this 
statutory provision. Therefore, as we proposed, we are continuing to 
make a single bundled payment for the acquisition and pharmacy overhead 
costs of separately payable drugs and biologicals under the CY 2010 
OPPS, an approach we believe both continues to encourage hospital 
efficiencies in the provision of drugs and biologicals to Medicare 
beneficiaries in the hospital outpatient setting and improves payment 
accuracy for the acquisition and pharmacy overhead costs of drugs and 
biologicals.
    To confirm the portion of the $395 million in estimated pharmacy 
overhead cost associated with coded packaged drugs and biologicals with 
an ASP that should be attributable to separately payable drugs and 
biologicals for the proposed rule, we used information from a variety 
of sources in order to corroborate the appropriateness of our policy to 
redistribute between one-third and one-half of the difference ($150 
million) between the aggregate claims cost for packaged drugs and 
biologicals and ASP dollars for the same drugs and biologicals to 
separately payable drugs and biologicals. In the CY 2010 OPPS/ASC 
proposed rule (74 FR 35330 through 35331), we presented two separate 
analyses which confirmed that our proposed redistribution of $150 
million in pharmacy overhead cost associated with the cost of packaged 
drugs and biologicals was appropriate.
    We began the analytic exercise with three fundamental assumptions. 
The first assumption was that the hospital acquisition cost of 
separately payable drugs and biologicals, on average, is not less than 
100 percent of ASP. We believed that this assumption was valid because 
we have been told that hospitals pay a range of prices for the same 
drug or biological. Some hospitals may be able to take advantage of 
volume and group purchasing to achieve significant discounts for 
certain drugs and biologicals, but other hospitals may pay more than 
average for drugs and biologicals because of their low volume

[[Page 60506]]

usage or a hospital's remote geographic location. Further, hospitals 
often serve as community care resources so they must provide drugs and 
biologicals to meet the needs of all of the patients who present to 
their facilities for care. The amounts and nature of those drugs and 
biologicals may vary significantly and unpredictably over time, 
particularly for smaller hospitals, due to changing availability of 
other care settings in their communities, such as physicians' offices, 
or due to emergencies, and this variability may constrain hospitals' 
ability to purchase all necessary quantities of certain drugs and 
biologicals based on best price contractual agreements negotiated in 
advance. Hence, we believed that the ASP was likely a fair estimate of 
hospitals' average acquisition cost of drugs and biologicals in 
general, excluding direct and indirect overhead costs.
    The second assumption was that coded packaged drugs and biologicals 
with an ASP, as a group, typically have an aggregate absolute pharmacy 
overhead cost (direct and indirect) that exceeds the acquisition cost 
of the packaged drugs and biologicals, as measured by ASP. We believed 
that this assumption was appropriate because packaged drugs and 
biologicals carry the same absolute amount of indirect overhead cost 
per drug or biological administered as separately payable drugs and 
biologicals and because many packaged drugs and biologicals have 
extremely low ASPs but some of the same direct costs (for example, 
recordkeeping, storage, safety precautions, and disposal requirements) 
as separately payable drugs and biologicals. Our proposed rule claims 
data showed that the weighted average ASP for the coded drugs and 
biologicals with an ASP that we proposed to package for CY 2010 was 
approximately $7 per day per packaged drug or biological, and we 
believed that it was a reasonable assumption that the full pharmacy 
overhead cost for a drug or biological (direct and indirect) equals or 
exceeds that amount.
    Our final assumption was that, on average, the pharmacy overhead 
cost of separately payable drugs and biologicals, as a group, was not 
greater than the acquisition cost of the separately payable drugs and 
biologicals. We believed that this assumption is appropriate because 
separately payable drugs and biologicals carry the same absolute amount 
of indirect pharmacy overhead cost per drug or biological administered 
as packaged drugs and biologicals. While we have been told by MedPAC 
and the pharmacy stakeholders that separately payable drugs and 
biologicals generally have direct pharmacy overhead costs that are 
significantly higher than the direct overhead costs of packaged drugs 
and biologicals, we do not believe that they exceed the acquisition 
cost of separately payable drugs and biologicals. The weighted average 
ASP for the drugs and biologicals in our proposed rule claims data that 
we proposed for separate payment for CY 2010 was approximately $954 per 
day per separately payable drug or biological. We believed that the 
full pharmacy overhead cost for a separately payable drug or biological 
would not, on average, exceed the weighted average per day ASP. Hence, 
we believed these last two assumptions about the relationship of ASP to 
full pharmacy overhead cost (direct and indirect) for packaged and 
separately payable drugs and biologicals were appropriate for purposes 
of these analyses.
    Having made these assumptions, for the proposed rule, we reduced 
the $395 million in estimated pharmacy overhead cost that exceeded the 
ASP dollars for coded packaged drugs and biologicals with an ASP (their 
average acquisition cost) by $50 million. Fifty million dollars in 
additional cost was necessary to raise the estimated cost calculated 
for separately payable drugs and biologicals from hospital claims data 
from 98 percent of ASP to 100 percent of ASP, in order to reach our 
estimate of the average hospital acquisition cost of separately payable 
drugs and biologicals of ASP. This left $345 million in estimated 
residual pharmacy overhead cost that continued to be associated with 
packaged drugs and biologicals. We stated our belief that a portion of 
this cost was associated with coded packaged drugs and biologicals with 
an ASP in our claims data, both due to charge compression and our 
choice of an annual drug packaging threshold, and would continue to be 
less accurately associated with packaged drugs and biologicals were we 
not to engage in further redistribution of that portion of this 
residual pharmacy overhead cost of packaged drugs and biologicals.
    We then performed two analyses using information provided by the 
MedPAC Report (June 2005 Report to Congress) and by the pharmacy 
stakeholders (February 2009 presentation to the APC Panel and other 
meetings with CMS) that we applied to our proposed rule claims data to 
estimate the amount of residual pharmacy overhead cost associated with 
packaged drugs and biologicals that should more accurately be 
attributed to separately payable drugs and biologicals. To perform 
these analyses, we used proposed rule claims data only for those drugs 
and biologicals described by HCPCS codes that met the following 
criteria:
     The proposed CY 2010 OPPS status indicator for the HCPCS 
code was ``G'' for pass-through drugs and biologicals (excluding pass-
through radiopharmaceuticals), ``K'' for separately payable drugs and 
biologicals that do not have pass-through status, or ``N'' for packaged 
drugs and biologicals, where the packaged status of these nonpass-
through drugs and biologicals was determined by an estimate of cost per 
day based on ASP+4 percent;
     April 2009 pricing information based on the ASP 
methodology (other than mean cost from claims data) was available for 
the HCPCS code, and we would use the ASP methodology to pay for the 
HCPCS code if it had a status indicator of ``K'' or ``G''; and
     CY 2008 OPPS claims data included claims for the HCPCS 
code or an equivalent predecessor code.
    We first converted six of the seven categories that MedPAC 
recommended for reporting pharmacy overhead costs to three CMS 
categories (low, medium, and high), as we had proposed for the CY 2006 
OPPS (70 FR 42729 through 42730); the seventh MedPAC category was not 
pertinent for this exercise because it is for the overhead cost 
attributable to radiopharmaceuticals. The CMS categories are defined 
as: Low (Orals); medium (Injection/Sterile Preparation; Single IV 
Solution/Sterile Preparation; Compounded Reconstituted IV 
Preparations); and high (Specialty IV or Agents requiring special 
handling in order to preserve their therapeutic value; Cytotoxic Agents 
in all formulations requiring personal protective equipment). We then 
derived a relative overhead weight for each of the three CMS categories 
by averaging the overhead weights for the six pertinent MedPAC 
categories. These averages were not weighted. The derived relative 
overhead weights for the CMS categories were as follows: Low = 1.00 
(corresponding to MedPAC Category 1); medium = 3.61 (corresponding to 
MedPAC Categories 1, 2, and 3); and high = 11.11 (corresponding to 
MedPAC categories 5 and 6).
    We also calculated a relative overhead weight for each of the three 
categories of pharmacy overhead complexity that were provided by the 
pharmacy stakeholders, using the different fixed dollar amounts that 
these stakeholders recommended that CMS pay for pharmacy overhead costs 
if we were to

[[Page 60507]]

make such payments for ``all drugs'' (packaged and separately payable). 
The pharmacy stakeholders' categories are defined as: Low (Dispense 
without manipulation: e.g., oral drugs, pre-filled syringes); medium 
(Injectable drug with one step manipulation: e.g., simple injections); 
and high (Multiple step injectable products and chemotherapy that 
require safety considerations). The pharmacy stakeholders' relative 
overhead weights were as follows: Low = 1; medium = 2.67; and high = 
5.50.
    Using the pharmacy stakeholders' overhead categories (low, medium, 
and high) and incorporating the pharmacy stakeholders' assignments of 
specific drugs and biologicals to levels of pharmacy complexity that 
they previously provided to CMS, we then assigned the remaining HCPCS 
codes for drugs and biologicals (approximately 50 percent of all drug 
and biological HCPCS codes with an associated ASP) based on our 
understanding of the characteristics of the categories. Similarly, we 
assigned all drug and biological HCPCS codes to the CMS categories 
created from the MedPAC groups for the derived relative overhead 
weights based on the definitions of those categories. Although the 
subsequent analytic processes were identical, we performed these 
analyses separately using the derived CMS overhead category weights 
(results are in Table 39) and using the pharmacy stakeholders' overhead 
category weights (results are in Table 40).
    Specifically, for the proposed rule we assigned the overhead 
weights to each drug and biological in the set of drugs and biologicals 
qualifying for this exercise. We then calculated a per unit overhead 
cost by dividing the total relative weight for all drugs and 
biologicals in this exercise (low, medium, and high) into the residual 
pharmacy overhead cost from packaged drugs and biologicals of $345 
million. Using the relative weights for each scenario, we estimated the 
exact per unit pharmacy overhead cost reallocation for each low, 
medium, and high pharmacy overhead category. We then added this payment 
amount to ASP for each drug and biological and reassessed the amount of 
total claims cost for separately payable and packaged drugs and 
biologicals and calculated our standard ratio of aggregate claims cost 
to aggregate ASP dollars for separately payable and packaged drugs and 
biologicals. The results of these analyses are reprinted in Tables 39 
and 40 below.

    Table 39--Estimated Redistribution of Pharmacy Overhead Costs Using Relative Weights Derived From MedPAC
                        Pharmacy Overhead Categories and CY 2010 Opps Proposed Rule Data
----------------------------------------------------------------------------------------------------------------
                                                                   Total cost of
                                                     Total ASP       drugs and
                                                    dollars for     biologicals    Ratio of cost
                                                     drugs and       in claims        to ASP
                                                  biologicals in    data after      (column C/     ASP+X Percent
                                                    claims data     adjustment       column B)
                                                  (in millions)*        (in
                                                                    millions)**
----------------------------------------------------------------------------------------------------------------
Coded Packaged Drugs and Biologicals with an ASP            $160            $390            2.44         ASP+144
Separately Payable Drugs and Biologicals........           2,589           2,704            1.04           ASP+4
All Coded Drugs and Biologicals.................           2,749           3,094            1.13          ASP+13
----------------------------------------------------------------------------------------------------------------
* Total April 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and
  biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2008 claims data after adjustment for drugs and biologicals with a HCPCS code and April
  2009 ASP information.


  Table 40--Estimated Redistribution of Pharmacy Overhead Cost Using Relative Weights Calculated From Pharmacy
            Stakeholders Recommended Pharmacy Overhead Payment Levels and CY 2010 Proposed Rule Data
----------------------------------------------------------------------------------------------------------------
                                                                   Total cost of
                                                     Total ASP       drugs and
                                                    dollars for     biologicals    Ratio of cost
                                                     drugs and       in claims        to ASP
                                                  biologicals in    data after      (column C/    ASP+X  Percent
                                                    claims data     adjustment       column B)
                                                  (in millions)*        (in
                                                                    millions)**
----------------------------------------------------------------------------------------------------------------
Coded Packaged Drugs and Biologicals with an ASP            $160            $402            2.51         ASP+151
Separately Payable Drugs and Biologicals........           2,589           2,692            1.04           ASP+4
All Coded Drugs and Biologicals.................           2,749           3,094            1.13          ASP+13
----------------------------------------------------------------------------------------------------------------
* Total April 2009 ASP dollars (ASP multiplied by drug units in CY 2008 claims) for drugs with a HCPCS code and
  ASP information.
** Total cost in the CY 2008 claims data after adjustment for drugs with a HCPCS code and April 2009 ASP
  information.

    As shown in Tables 39 and 40, the ratio of adjusted cost in the 
claims data for separately payable drugs and biologicals to ASP 
increased compared to the value derived from our standard methodology 
and declined for packaged drugs and biologicals with an associated ASP 
compared to the value calculated according to our standard drug payment 
methodology as shown in Table 41. Specifically, for the proposed rule 
under our standard methodology without adjustment of the pharmacy 
overhead cost currently attributed to packaged drugs and biologicals 
with an associated ASP, we would have made packaged payment at ASP+247 
percent. Using the CMS overhead weights, this value declined to ASP+144 
percent and using the pharmacy stakeholders' overhead weights, it 
declined to ASP+151 percent.
    Under our standard drug payment methodology, without adjustment of 
the pharmacy overhead cost currently attributed to separately payable 
drugs and biologicals, we estimated for the proposed rule that 
separately payable drugs and biologicals would be paid at ASP-2 
percent. Assuming a base average acquisition cost for all drugs and 
biologicals of ASP and using the CMS overhead weights to redistribute

[[Page 60508]]

the residual $345 million in pharmacy overhead cost associated with 
coded packaged drugs and biologicals with an ASP in the claims data, 
this value increased to ASP+4 percent, and using the pharmacy 
stakeholders' overhead weights to redistribute the residual $345 
million in pharmacy overhead cost, this value also increased to ASP+4 
percent.
    Based on these analyses, for the proposed rule, we estimated that 
we would redistribute $165 million in pharmacy overhead cost from coded 
packaged drugs and biologicals with an ASP to separately payable drugs 
and biologicals by setting the average acquisition cost for all drugs 
and biologicals to ASP and using the CMS overhead weights, and we would 
redistribute $153 million in pharmacy overhead cost from coded packaged 
drugs and biologicals with an ASP to separately payable drugs and 
biologicals by setting the average acquisition cost for all drugs and 
biologicals to ASP and using the pharmacy stakeholders' overhead 
weights. These observed outcomes were consistent with our CY 2010 
proposal to redistribute between one-third and one-half of the $395 
million of pharmacy overhead cost currently associated with packaged 
drugs and biologicals with an ASP to separately payable drugs and 
biologicals. These values were also consistent with the $150 million we 
proposed to redistribute from the cost of coded packaged drugs and 
biologicals with an ASP to separately payable drugs and biologicals for 
CY 2010, which would represent a reduction in the cost of packaged 
drugs and biologicals of 27 percent.
    After we performed these analyses but prior to display of the CY 
2010 OPPS/ASC proposed rule, the pharmacy stakeholders provided us with 
updated assignments of CY 2009 drug HCPCS codes to their recommended 
levels of pharmacy complexity. We then assigned the remaining HCPCS 
codes for drugs and biologicals that the pharmacy stakeholders had not 
assigned based on our understanding of the characteristics of their 
categories. We recalibrated our model to incorporate the updated 
information. We observed no substantive changes in our findings, with 
the revised overhead category assignments redistributing $159 million 
from packaged to separately payable drugs and biologicals and resulting 
in an ASP+X percentage of ASP+4 percent for separately payable drugs 
and biologicals and ASP+148 percent for packaged drugs and biologicals 
with an ASP.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35331), we indicated 
that these analyses based on our synthesis of existing data and 
information from a variety of sources supported the appropriateness of 
a redistribution of the magnitude we proposed for CY 2010. We believed 
that our analyses of the claims data using the CMS relative overhead 
weights derived from the 2005 MedPAC pharmacy overhead study and using 
the pharmacy overhead category payments, levels of complexity, and 
assignments of drugs provided by the pharmacy stakeholders (where 
available), confirmed that payment for separately payable drugs and 
biologicals at ASP+4 percent would represent a reasonable aggregate 
adjustment for the pharmacy overhead cost of these separately payable 
drugs and biologicals, compared to the payment that would result from 
the standard drug payment methodology. We stated our belief that 
payment for separately payable drugs at ASP+4 percent would ensure that 
hospitals are paid appropriately for the average hospital acquisition 
cost and the pharmacy overhead cost that our analyses show would be 
appropriately redistributed from the estimated cost of overhead 
associated with drugs and biologicals with an ASP that we proposed to 
package for CY 2010.
    Our proposal for CY 2010 relied upon the premise of providing a 
pharmacy overhead adjustment to payment for separately payable drugs by 
redistributing calculated pharmacy overhead cost from coded packaged 
drugs and biologicals with an ASP to separately payable drugs and 
biologicals. Therefore, regardless of the payment level that the CY 
2010 OPPS/ASC final rule with comment period claims and cost report 
data and July 2009 ASP data ultimately suggested, we believed that any 
redistributed amount of pharmacy overhead cost should be removed from 
the estimated cost of pharmacy overhead associated with coded packaged 
drugs and biologicals with an ASP. We proposed to redistribute pharmacy 
overhead cost within the estimated total amount of acquisition and 
overhead cost for all drugs and biologicals with an ASP that has been 
reported to us by hospitals by making a pharmacy overhead adjustment to 
payment for separately payable drugs and biologicals that is based upon 
a partial redistribution of the pharmacy overhead cost of coded 
packaged drugs and biologicals with an ASP. As described previously in 
this section, we proposed that any redistribution of pharmacy overhead 
cost that may arise from CY 2010 final rule data would occur only from 
some drugs and biologicals to other drugs and biologicals, thereby 
maintaining the estimated total cost of drugs and biologicals in our 
claims data (no redistribution of cost would occur from other services 
to drugs and biologicals or vice versa). While there is some evidence 
that relatively more pharmacy overhead cost should be associated with 
separately payable drugs and biologicals and less pharmacy overhead 
cost should be associated with packaged drugs and biologicals in order 
to improve payment accuracy, we concluded that the recent RTI report on 
the OPPS' hospital-specific CCR methodology (``Refining Cost to Charge 
Ratios for Calculating APC and DRG Relative Payment Weights,'' July 
2008 final report), the June 2005 MedPAC study of hospital outpatient 
pharmacy overhead costs, and our claims analyses discussed in the 
proposed rule presented no evidence that the total cost of drugs and 
biologicals (including acquisition and overhead costs) is understated 
in the claims data that we use to model the upcoming prospective 
payment year in relation to the costs of other services paid under the 
OPPS. Therefore, to improve the distribution of pharmacy overhead cost 
within the total estimated cost for all drugs and biologicals, without 
adversely affecting the relativity of payment weights for all services 
paid under the OPPS, we reasoned that it would be most appropriate to 
redistribute pharmacy overhead cost only within the total estimated 
cost of coded packaged and separately payable drugs and biologicals. By 
redistributing pharmacy overhead cost only within the total estimated 
cost of packaged and separately payable drugs and biologicals, we would 
maintain a constant total cost of drugs and biologicals under the OPPS 
as reported to us by hospitals, without redistributing cost from other 
OPPS services to the cost of drugs and biologicals under the budget 
neutral OPPS.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we indicated 
that while we agree conceptually with the APC Panel that a 
redistribution of pharmacy overhead cost in our claims data from coded 
packaged drugs and biologicals with an ASP to separately payable drugs 
and biologicals is appropriate, we did not accept the APC Panel's 
February 2009 recommendation that CMS pay for the acquisition cost of 
all separately payable drugs at no less than ASP+6 percent because, as 
we discussed previously in this section, our analyses of claims data 
indicated that appropriate payment for the acquisition

[[Page 60509]]

and pharmacy overhead costs of separately payable drugs would be ASP+4 
percent. We also did not accept the APC Panel's February 2009 
recommendation that CMS package the cost of packaged drugs at ASP+6 
percent, use the difference between this cost and CMS' cost derived 
from charges to provide more appropriate payment for pharmacy services 
costs, and pay for pharmacy services using this amount by applying a 
tiered approach to payments based on criteria related to the pharmacy 
resources required for groups of drugs. We believed that the 
recommendation to package the cost of packaged drugs at ASP+6 percent 
would underpay for the pharmacy overhead cost of packaged drugs, which 
we expected would be higher in relation to ASP than the pharmacy 
overhead cost of separately payable drugs. Further, as discussed 
earlier in this section, because the OPPS is a prospective payment 
system that relies on payment for groups of services to encourage 
hospital efficiencies, we did not believe payment for pharmacy overhead 
costs that is separate from the OPPS payment for the acquisition costs 
of drugs would be appropriate.
    The APC Panel further recommended that, if CMS did not adopt a 
methodology consistent with their recommendations summarized above, CMS 
should exclude data from hospitals that participate in the 340B program 
from its ratesetting calculations for drugs and that CMS should pay 
340B hospitals in the same manner as it pays non-340B hospitals. In the 
proposed rule, we did not accept the APC Panel's recommendation that 
CMS propose to exclude data from hospitals that participate in the 340B 
program from its ratesetting calculations for drugs. For CY 2010, we 
note that we proposed a drug payment methodology that partially 
resembled the methodology recommended by the APC Panel because the 
proposal incorporated a redistribution of pharmacy overhead cost from 
coded packaged drugs and biologicals with an ASP to separately payable 
drugs and biologicals. However, excluding data from hospitals that 
participate in the 340B program from our ASP+X calculation, but paying 
those hospitals at that derived payment amount, would effectively 
redistribute payment to drugs and biologicals from payment for other 
services under the OPPS, and we did not believe this redistribution 
would be appropriate. In our CY 2010 proposal, we did accept the APC 
Panel's February 2009 recommendation that CMS propose to pay 340B 
hospitals in the same manner as non-340B hospitals are paid. Commenters 
on the CY 2009 OPPS/ASC final rule with comment period were generally 
opposed to differential payment for hospitals based on their 340B 
participation status, and we did not believe it would be appropriate to 
exclude claims from this subset of hospitals in the context of our CY 
2010 proposal to pay all hospitals at the same rate for separately 
payable drugs and biologicals.
    Moreover, as discussed above, while we did not propose to adopt the 
APC Panel's specific recommended methodology to redistribute pharmacy 
overhead cost that would otherwise be paid through payment for packaged 
drugs and biologicals, our proposed CY 2010 pharmacy adjustment 
methodology that would result in the payment of separately payable 
drugs and biologicals at ASP+4 percent incorporated a more limited 
redistribution of pharmacy overhead cost for coded packaged drugs and 
biologicals with an ASP (ASP is necessary to calculate an overhead 
amount) that would preserve the aggregate drug cost in the claims, a 
result consistent with the APC Panel's recommendations. Therefore, we 
believed that it would be appropriate to propose to pay 340B hospitals 
at the same rates that we are proposing to pay non-340B hospitals, and 
we proposed to include the claims and cost report data for 340B 
hospitals in the data we had used for our analyses in order to 
calculate the payment rates for drugs and biologicals and other 
services for the CY 2010 OPPS.
    In conclusion, we proposed for CY 2010 to redistribute between one-
third and one-half of the difference between the aggregate claims cost 
for coded packaged drugs and biologicals with an ASP and ASP dollars 
for those products, which resulted in proposed payment for the 
acquisition and pharmacy overhead costs of separately payable drugs and 
biologicals that do not have pass-through payment status of ASP+4 
percent. This payment amount reflected an APC drug payment adjustment 
for pharmacy overhead cost. To accomplish this payment adjustment, we 
also proposed to reduce the cost of coded packaged drugs and 
biologicals with an ASP that was incorporated into the payment for 
procedural APCs by the amount of pharmacy overhead cost that was 
redistributed from these packaged drugs and biologicals to the payment 
for separately payable drugs and biologicals. The proposal was based on 
the proposed redistribution of $150 million (through a 27 percent 
reduction in the cost of coded packaged drug and biologicals with an 
ASP), between one-third and one-half of the pharmacy overhead cost (the 
cost above ASP) of coded packaged drugs and biologicals with an ASP in 
hospital outpatient claims, to the cost of separately payable drugs and 
biologicals, preserving the aggregate cost of all drugs and biologicals 
observed in the most recent claims and cost report data available for 
the proposed rule. We further proposed that the claims data for 340B 
hospitals be included in the calculation of payment for drugs and 
biologicals under the CY 2010 OPPS, and that 340B hospitals would be 
paid the same amounts for separately payable drugs and biologicals as 
hospitals that do not participate in the 340B program. Finally, we 
proposed that, in accordance with our standard drug payment 
methodology, the estimated payments for separately payable drugs and 
biologicals would be taken into account in the calculation of the 
weight scaler that would apply to the relative weights for all 
procedural services (but would not apply to separately payable drugs 
and biologicals) paid under the OPPS, as required by section 
1833(t)(14)(H) of the Act.
    At the August 2009 meeting of the APC Panel, the APC Panel 
recommended that CMS pay for all separately payable drugs at a rate of 
ASP+6 percent. The APC Panel recommended that CMS redistribute costs 
from packaged drugs to separately payable drugs as outlined in the CY 
2010 OPPS/ASC proposed rule. Further, the APC Panel recommended that 
CMS analyze the impact on different classes of hospitals of payment at 
ASP+6 percent for separately payable drugs compared with CY 2009 
payment at ASP+4 percent. In addition, the APC Panel requested that CMS 
provide an impact analysis of payment for separately payable drugs at 
ASP+6 percent on payment rates for other services that use packaged 
drugs compared with CY 2009 payment at ASP+4 percent. Finally, the APC 
Panel recommended that CMS and stakeholders continue to refine their 
analysis of payment for drugs, biologicals, and radiopharmaceuticals to 
assess the infrastructure costs associated with the preparation and 
handling of these products. Our responses to these recommendations are 
included in our responses to comments below.
    Comment: Several commenters, including MedPAC, generally agreed 
with CMS' proposal to redistribute pharmacy overhead cost from packaged 
to separately payable drugs and biologicals. The commenters appreciated 
that the proposed

[[Page 60510]]

methodology would not pose an administrative burden to hospitals.
    However, many commenters disagreed with CMS' calculation of the 
total estimated pharmacy overhead cost of $395 million in the claims 
data associated with packaged drugs that resulted in the proposed 
redistribution of $150 million, which was between one-half and one-
third of this overhead cost. The commenters stated that CMS' estimate 
of $395 million was too low to represent the aggregate pharmacy 
overhead cost of all packaged drugs and biologicals, resulting in an 
underestimate of how much overhead cost should be redistributed to 
separately payable drugs and biologicals and, therefore, a proposed 
payment rate for separately payable drugs and biologicals that was too 
low. They explained that, although CMS allows flexibility in hospital 
charging practices to account for drug and biological cost on hospital 
claims, CMS' proposed rule calculation did not take hospital charging 
practices for packaged drugs and biologicals into account. 
Specifically, in CMS' estimation of the cost of packaged drugs and 
biologicals, the commenters pointed out that CMS omitted costs from 
claims data for drugs and biologicals that either do not have a HCPCS 
code or do not have a reported ASP, including those costs reported 
under a pharmacy revenue code line without a drug or biological HCPCS 
code due to hospital choice or claims processing requirements. The 
commenters argued that these uncoded packaged drug and biological costs 
represent a substantial portion of aggregate packaged drug and 
biological cost under the OPPS.
    Some commenters estimated the additional packaged pharmacy overhead 
cost attributable to these uncoded drugs and biologicals to be nearly 
$560 million. The commenters asserted that hospitals mark up the costs 
of drugs and biologicals reported on claims under pharmacy revenue code 
lines without HCPCS codes similarly to packaged drugs and biologicals 
reported with HCPCS codes. Several commenters provided analyses to 
support their contention that the costs of uncoded pharmacy revenue 
code lines reflect mostly packaged drug and biological costs, and that 
when hospitals do not report packaged drugs and biologicals with HCPCS 
codes, they report uncoded pharmacy revenue code lines instead for 
those drugs and biologicals. The commenters concluded that a 
significant percentage of the uncoded costs reported under pharmacy 
revenue code lines is pharmacy overhead cost disproportionately 
attributed to packaged drugs and biologicals due to the tendency of our 
established methodology of converting billed charges to costs to 
``compress'' the calculated costs to some degree and recognizing that 
our choice of an annual drug packaging threshold contributes to the 
magnitude of the ASP+X percent payment rate resulting from our standard 
drug payment methodology.
    In order to address these concerns, the commenters recommended that 
CMS redistribute the pharmacy overhead cost attributed to uncoded cost 
reported under pharmacy revenue code lines to the cost of separately 
payable drugs and biologicals. Some commenters argued that, because 
they believe the costs on these uncoded pharmacy revenue code lines 
largely are for packaged drugs and biologicals with HCPCS codes, CMS 
could accurately assume the same proportional amount of ASP and mark up 
as for packaged drugs and biologicals with a HCPCS code and derive a 
simulated pharmacy overhead amount. Therefore, they suggested that one-
third to one-half of residual pharmacy overhead cost associated with 
these uncoded pharmacy revenue code lines, which they estimate to total 
approximately $560 million, should be redistributed to the cost of 
separately payable drugs and biologicals.
    In addition, several commenters expressed concern that hospitals 
may not be billing packaged drugs and biologicals with HCPCS codes 
appropriately, resulting in uncoded costs reported under pharmacy 
revenue code lines, and that this contributed to the low estimate of 
pharmacy overhead costs included in the proposed rule. The commenters 
stated that a review of the OPPS claims data found variations in how 
hospitals are reporting drugs and biologicals with HCPCS codes under 
pharmacy revenue codes. The commenters stated that some hospitals are 
inappropriately assigning costs for drugs and biologicals with HCPCS 
codes to revenue code 0250 (Pharmacy (also see 063x, an extension of 
025x); General Classification), rather than revenue code 0636 
(Pharmacy--Extension of 025x; Drugs Requiring Detailed coding (a)). 
They speculated about a variety of reasons why more HCPCS-coding for 
packaged drug and biological cost was not available to CMS for proposed 
rule estimate purposes: (1) Hospitals may have reported their packaged 
drugs with revenue code 0250 and the associated charges and units with 
no HCPCS codes because HCPCS codes are not required to be reported for 
packaged drugs and biologicals; (2) the associated HCPCS code may not 
have printed on the claim because of provider billing system settings; 
or (3) Medicare contractors may have instructed hospitals not to report 
HCPCS codes under revenue code 0250. As a result, the commenters 
believed that CMS' derived pharmacy overhead cost estimate for packaged 
drugs and biologicals based only on the cost of packaged drugs and 
biologicals with a HCPCS code and an ASP in the proposed rule were 
inaccurately low. In order to provide complete drug information for 
future years, they requested that CMS instruct hospitals to bill for 
drugs and biologicals with HCPCS codes under revenue code 0636.
    Finally, some commenters expressed frustration that CMS did not 
provide information on the assignment of every drug and biological 
HCPCS code with a status indicator of ``K,'' ``G,'' or ``N'' to one of 
three categories of pharmacy overhead complexity in the analyses that 
CMS presented to validate the proposed redistribution of pharmacy 
overhead cost from packaged drugs and biologicals with an ASP to 
separately payable drugs and biologicals. In light of this omission, 
the commenters recommended that CMS redistribute the larger one-half 
portion of the one-third to one-half of the proposed pharmacy overhead 
cost to accurately account for all pharmacy costs represented in the 
HOPD.
    Response: We proposed to reallocate approximately $150 million in 
pharmacy overhead cost from coded packaged drugs and biologicals with 
an ASP to separately payable drugs and biologicals, representing a 
middle ground between the one-third to one-half of the total pharmacy 
overhead cost associated with this set of packaged drugs and 
biologicals. We agree with the commenters that we did not include 
uncoded drug and biological costs reported under pharmacy revenue code 
lines in our proposed rule estimate of the pharmacy overhead costs of 
packaged drugs and biologicals. We also agree with the commenters that 
costs on uncoded pharmacy revenue code lines represent OPPS drug and 
biological cost. The commenters suggested that we assume the same 
relationship between total claim cost and ASP for the uncoded drug and 
biological costs in our claims data as we observe for coded packaged 
drugs and biologicals with an ASP, and then redistribute one-third of 
the assumed, associated pharmacy overhead cost to the cost of 
separately payable drugs and biologicals. We were interested to review 
the analyses provided by some commenters that used statistical 
techniques to compare the uncoded drug and biological costs to the 
costs of packaged drugs and biologicals with HCPCS codes but, at this 
time, we

[[Page 60511]]

cannot be certain that the assumptions suggested by the commenters 
would represent an accurate portion of the uncoded drug and biological 
cost attributable to acquisition cost versus pharmacy overhead cost. In 
the proposed rule, we stated that a premise of our redistribution model 
was our assumption that the associated aggregate ASP for packaged drugs 
and biologicals was a proxy for acquisition cost for this group of 
drugs and biologicals (74 FR 35327). Our proposed methodology 
identified the difference between this proxy for acquisition cost and 
the cost of the same coded packaged drugs and biologicals with an ASP 
in our claims data as pharmacy overhead cost, and it was one-third to 
one-half of that pharmacy overhead cost ($150 million) that we 
specifically proposed to redistribute from coded packaged drugs and 
biologicals with an ASP to the cost of separately payable drugs and 
biologicals.
    As shown in Table 41, we determined that the estimated aggregate 
cost of separately payable drugs and biologicals, including acquisition 
and pharmacy overhead costs, is equivalent to ASP-3 percent for this 
final rule with comment period. A redistribution of $150 million from 
the pharmacy overhead cost of coded packaged drugs and biologicals with 
an ASP (one-third of that pharmacy overhead cost from final rule data) 
to the cost of separately payable drugs and biologicals would result in 
payment for separately payable drugs and biologicals at ASP+2 percent 
for CY 2010. If we were to assume the same relationship between total 
claim cost and ASP for the uncoded drug and biological cost in our 
claims data as we observe for coded packaged drugs and biologicals with 
an ASP as recommended by some commenters, and if we were then to 
redistribute one-third of the assumed, associated pharmacy overhead 
cost ($150 million) of uncoded drug and biological cost to the cost of 
separately payable drugs and biologicals, the result would be payment 
for separately payable drugs and biologicals at ASP+7 percent. The 
total cost redistribution to separately payable drugs and biologicals 
in this case would be $300 million, $150 million from the cost of coded 
packaged drugs and biologicals with an ASP and $150 million from the 
cost of uncoded packaged drugs and biologicals.
    We understand that our proposal for a redistribution of any drug 
and biological cost from packaged to separately payable drugs and 
biologicals already is not our usual OPPS cost estimation methodology, 
which uses the estimated cost from claims and cost report data as 
reported to us by hospitals for an item or service to calculate a 
relative weight for that service, or in the case of drugs and 
biologicals, an ASP+X percent under our standard drug payment 
methodology. We made this redistribution proposal because we were 
concerned that by not redistributing pharmacy overhead cost from 
packaged to separately payable drugs and biologicals, an underpayment 
of separately payable drugs and biologicals at ASP-2 percent (ASP-3 
percent based on final rule claims data) could result. We remain 
concerned that the redistribution of $150 million from the pharmacy 
overhead cost of coded packaged drugs and biologicals with an ASP to 
payment for separately payable drugs and biologicals, which would 
provide payment at ASP+2 percent, also could result in underpayment of 
separately payable drugs and biologicals. We are also troubled, 
however, that payment for separately payable drug and biologicals at 
ASP+7 percent resulting from an assumption that the uncoded drug and 
biological cost resembles the coded packaged cost of drugs and 
biologicals with an ASP could result in a potential payment 
overestimation. As noted above, we cannot be certain that we know what 
portion of the uncoded drug and biological cost is acquisition cost 
versus pharmacy overhead cost. Therefore, we are not willing to make 
even broader assumptions about the magnitude of ASP for uncoded drug 
and biological cost in claims or layer any other assumptions on the 
proposed methodology that would further significantly redistribute 
costs as reported to us by hospitals within the framework of the OPPS 
ratesetting methodology.
    While we are not making sweeping assumptions that this uncoded 
packaged drug and biological cost includes a pharmacy overhead amount 
comparable to that of coded packaged drugs and biologicals with an ASP, 
we do acknowledge that there must be some pharmacy overhead cost 
associated with these uncoded packaged drugs and biologicals that was 
not accounted for in our initial estimate of the pharmacy overhead cost 
of packaged drugs and biologicals because we expect that hospitals 
would have attributed some pharmacy overhead cost to these products 
through their mark-up practices. Therefore, while we further examine 
the issue of pharmacy overhead costs and while hospitals examine 
administrative changes that could result in their submission of more 
accurate data to us as described below, we believe that the adoption of 
a transitional payment rate of ASP+4 percent based on a pharmacy 
overhead adjustment methodology for CY 2010 would base OPPS payment 
upon the best available proxy for the average acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals. We note 
that payment for separately payable drugs and biologicals at ASP+4 
percent falls within the range of ASP-3 percent, that would result from 
no pharmacy overhead cost redistribution from packaged to separately 
payable drugs and biologicals, to ASP+7 percent, that would result from 
redistribution of pharmacy overhead cost based on expansive assumptions 
about the nature of uncoded packaged drug and biological cost. We 
proposed payment for separately payable drugs and biologicals at ASP+4 
percent for CY 2010, and our final CY 2010 transitional payment rate is 
consistent with this amount. We are confident that ASP+4 percent will 
provide appropriate payment for separately payable drugs and 
biologicals in CY 2010, noting that this payment is consistent with our 
payment in CY 2009. We are not aware of any current access problems for 
Medicare beneficiaries to drugs and biologicals in the HOPD based on 
our CY 2009 OPPS payment for separately payable drugs and biologicals 
at this rate.
    Specifically, for CY 2010, to acknowledge the uncoded drug and 
biological cost without making significant further assumptions about 
the amount of pharmacy overhead cost associated with the drugs and 
biologicals captured by this cost and to pay separately payable drugs 
and biologicals at ASP+4 percent, we believe it currently would be 
appropriate to reallocate $50 million of the total uncoded drug and 
biological cost in order to represent the pharmacy overhead cost of 
uncoded packaged drugs and biologicals that should be appropriately 
associated with the cost of separately payable drugs and biologicals. 
We believe that our proposal to reallocate $150 million of cost from 
coded packaged drugs and biologicals with an ASP, or one-third of the 
pharmacy overhead cost of these products based upon the claims data 
available for this CY 2010 final rule, to separately payable drugs and 
biologicals continues to be appropriate. The commenters generally 
supported the one-third to one-half redistribution estimate. While some 
commenters requested a reallocation of one-half of

[[Page 60512]]

the pharmacy overhead cost of packaged drugs and biologicals to 
separately payable drugs and biologicals, as already discussed, we do 
not believe there is a compelling reason to reallocate that amount. We 
note that the reallocation of $50 million or 8 percent of the total 
cost of uncoded packaged drugs and biologicals assumes that whatever 
pharmacy overhead cost is not accurately associated with uncoded 
packaged drugs and biologicals, it would not be less than 8 percent of 
total uncoded drug and biological cost. This is intentionally a 
conservative estimate, as compared with the case of coded packaged 
drugs and biologicals with an ASP and for which we have a specific 
pharmacy overhead cost estimate in relationship to their known ASPs 
where the reallocation of $150 million constitutes 24 percent of the 
total cost of the coded packaged drugs and biologicals with an ASP. As 
stated earlier, we are unwilling to make sweeping assumptions that 
uncoded packaged drug and biological cost includes a pharmacy overhead 
amount comparable to that of coded packaged drugs and biologicals with 
an ASP. We are confident that this conservative estimate of $50 million 
for redistribution from the cost of uncoded packaged drugs and 
biologicals to separately payable drugs and biologicals, as opposed to 
the $150 million redistribution that could result from broad 
assumptions about the ASPs of these uncoded drugs and biologicals, is 
an appropriate amount for CY 2010 in light of our uncertainty about the 
relationship between ASP and pharmacy overhead cost for the uncoded 
drugs and biologicals.
    In summary, with a redistribution of a total of $200 million, $150 
million from the pharmacy overhead cost of coded packaged drugs and 
biologicals with an ASP as we proposed and $50 million from the cost of 
uncoded packaged drugs and biologicals for which we cannot estimate a 
more specific pharmacy overhead cost at this time, to separately 
payable drugs and biologicals, the final CY 2010 transitional payment 
rate for separately payable drugs and biologicals is ASP+4 percent 
based on the final pharmacy overhead adjustment methodology.
    In response to commenters' frustration that we did not provide 
information on our assignment of every drug or biological HCPCS code to 
one of three categories of pharmacy overhead complexity in the analyses 
that we presented to validate the proposed redistribution methodology, 
we did not base our proposed redistribution amount on these analyses. 
We explicitly made a proposal to redistribute $150 million in estimated 
pharmacy overhead cost associated with coded packaged drugs and 
biologicals with an ASP, between one-third and one-half of the 
estimated pharmacy overhead cost. Although we did not provide the 
precise assignment of drugs and biologicals to the various categories, 
we did describe each set of pharmacy overhead complexity categories in 
the proposed rule and our methodology for redistributing pharmacy 
overhead cost under each scenario. In addition, we posted a 
clarification to this discussion for the public replicating our models 
on August 6, 2009 during the comment period.
    Table 41 displays the final pharmacy overhead adjustment 
methodology for separately payable and packaged drugs and biologicals 
under the CY 2010 OPPS.

    Table 41--CY 2010 Final Rule--Pharmacy Overhead Adjustment Payment Methodology for Separately Payable and
                                         Packaged Drugs and Biologicals
----------------------------------------------------------------------------------------------------------------
                                                                   Total cost of
                                                     Total ASP       drugs and
                                                    dollars for   biologicals in   Ratio of cost
                                                     drugs and      claims data       to ASP
                                                  biologicals in       after        (column C/    ASP+X  Percent
                                                    claims data     adjustment       column B)
                                                  (in millions)*        (in
                                                                    millions)**
----------------------------------------------------------------------------------------------------------------
Uncoded Packaged Drugs and Biologicals..........         Unknown            $606             N/A             N/A
Coded Packaged Drugs and Biologicals with an ASP             172             466            2.71         ASP+171
Separately Payable Drugs and Biologicals with an           2,972           3,039            1.04           ASP+4
 ASP............................................
All Coded Drugs and Biologicals with an ASP.....           3,144           3,505            1.11          ASP+11
----------------------------------------------------------------------------------------------------------------
* Total July 2009 ASP dollars (ASP multiplied by drug or biological units in CY 2008 claims) for drugs and
  biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2008 claims data for drugs and biologicals.

    We note that hospitals currently have a variety of ways to bill for 
drugs and biologicals that are not separately paid. They may report the 
charges for the HCPCS code separately on a line, and if the HCPCS code 
has a status indicator of ``N,'' no separate payment is made for the 
drug or biological, but the reported charge information is available to 
use for future ratesetting. Provided that information for the ASP 
pricing methodology was available for the drug or biological HCPCS 
code, we included drug or biological cost estimated from charges for 
claims described by this scenario in our estimation of total pharmacy 
overhead costs of coded packaged drugs and biologicals with an ASP for 
CY 2010 because we could identify these drugs and biologicals, estimate 
their cost from charges in CY 2008 claims data, and use their ASP 
pricing information. Another option available to hospitals billing for 
packaged drugs and biologicals is to incorporate the charge for the 
drug or biological in the charge for the procedure. We are unable to 
identify the cost estimated from charges as drug or biological cost 
because the procedures are not reported under a pharmacy revenue code 
line and, therefore, these packaged drug and biological costs were not 
included in our estimate of the total pharmacy overhead cost of 
packaged drugs and biologicals. The final way for hospitals to bill for 
packaged drugs and biologicals is to include charges for these items 
under a pharmacy revenue code line, specifically revenue code 0250, 
without a HCPCS code, and it is an additional $50 million from this 
uncoded cost of packaged drugs and biologicals that we have 
redistributed to the cost of separately payable drugs and biologicals 
in our final CY 2010 pharmacy overhead adjustment payment methodology 
for drugs and biologicals.
    We have adopted this pharmacy overhead adjustment payment 
methodology for CY 2010 only after 3 distinct attempts over the 4 prior 
years to garner more accuracy in both the

[[Page 60513]]

claim drug or biological charge and Medicare hospital cost report data 
as submitted to us by hospitals in an effort to show consideration for 
the significant hospital administrative burden that the commenters 
cited in response to each proposal that, in turn, precluded further 
refinement of our data collection efforts. In light of our commitment 
to using hospital data as reported to us by hospitals to set OPPS 
payment rates, we believe that it would be inappropriate to assume that 
the costs reported under uncoded pharmacy revenue code lines are for 
the same drugs and biologicals, with the same ASPs, as the costs of 
packaged drugs and biologicals reported with HCPCS codes. We 
acknowledge that the pharmacy overhead cost associated with drug and 
biological costs reported under uncoded pharmacy revenue code lines 
were not included in the proposed rule estimate of total pharmacy 
overhead cost of coded packaged drugs and biologicals with an ASP. In 
response to the concerns of commenters, we have considered only a small 
percentage of this uncoded drug and biological cost to be misallocated 
pharmacy overhead cost that is appropriate for redistribution in our 
final CY 2010 methodology. We cannot be certain that the amount of 
uncoded pharmacy overhead cost is as high as some commenters suggested, 
that hospitals mark up these uncoded drugs and biologicals in the same 
way as packaged drugs and biologicals with HCPCS codes, or that 
significant volume for these uncoded drugs and biologicals might not 
warrant allocating a greater percentage of fixed pharmacy overhead cost 
to these drugs and biologicals. If hospitals truly desire significantly 
greater OPPS payment accuracy for separately payable drugs and 
biologicals, it is clear that hospitals will need to assume some burden 
in submitting more accurate data to us. In addition, we will continue 
to examine the issue of pharmacy overhead costs as we work to refine 
our transitional payment methodology for separately payable drugs and 
biologicals for future years.
    CMS' longstanding policy is to refrain from instructing hospitals 
on charging practices for services under most revenue codes. We believe 
that this allows hospital flexibility in billing systems and provides 
the necessary autonomy for hospitals to manage the many variations that 
are possible when creating a hospital chargemaster for multiple payers. 
While we do not require hospitals to use revenue code 0636 (Pharmacy-
Extension of 025x; Drugs Requiring Detailed coding (a)) when billing 
for drugs and biologicals that have HCPCS codes, whether they are 
separately payable or packaged, we believe that a practice of billing 
all drugs and biologicals with HCPCS codes under revenue code 0636 
would be consistent with NUBC billing guidelines and would provide us 
with the most complete and detailed information for ratesetting. We 
note that we make packaging determinations for drugs annually based on 
cost information reported under HCPCS codes, so the OPPS ratesetting is 
best served when hospitals report charges for all items and services 
that have HCPCS codes under those HCPCS codes, whether or not payment 
for the items and services is packaged or not. As already discussed, it 
is our standard ratesetting methodology to rely on hospital cost and 
charge information as it is reported to us through the claims data. 
More complete data from hospitals on which drugs were provided for a 
specific episode would help improve payment accuracy for separately 
payable drugs in the future, and we encourage hospitals to change their 
reporting practices if they are not already reporting HCPCS codes for 
all drugs furnished, if specific codes are available.
    Comment: Several commenters objected to the proposed redistribution 
methodology as it decreased payments for procedural APCs with high 
packaged drug costs included in their payment rates.
    One commenter disagreed with the proposed redistribution 
methodology and its effect on the imaging procedure APCs. The commenter 
argued that because all contrast agents without pass-through status are 
packaged, regardless of an individual agent's relationship to the 
annual drug packaging threshold, imaging procedure APCs should be 
exempt from the proposed pharmacy cost redistribution methodology. If 
imaging procedures are not exempted from the redistribution, the 
commenter contended that these procedures would be disproportionately 
affected because the spectrum of contrast costs are currently 
represented as packaged costs within the imaging procedure APCs.
    Similarly, another commenter requested that CMS exempt nuclear 
medicine procedures from the redistribution methodology. Again, the 
commenter stated that as all diagnostic radiopharmaceuticals are 
packaged, regardless of their estimated per day costs, their overhead 
costs are all represented in the nuclear medicine APCs and a 
redistribution would disproportionately affect these services.
    Response: We agree that packaging all contrast agents into 
associated imaging procedures results in the inclusion of payment for 
both expensive and relatively inexpensive contrast agents in the 
payment for the associated imaging procedures. While the commenters 
contended that this policy thereby incorporates all contrast agents 
with different hospital mark up practices in a single packaged payment 
methodology and, therefore, should not be subject to the cost 
redistribution, we believe that contrast agents are contributing to the 
overall charge compression for all drugs and biologicals that is the 
specific target of our redistribution methodology. When examining CY 
2008 claims data for the final rule, we observed that hospitals 
typically billed costs for contrast agents under a pharmacy revenue 
code (025X (Pharmacy), 026X (IV Therapy), or 063X (Pharmacy--Extension 
of 025X)). We believe that in almost all cases, hospitals capture the 
costs and charges for pharmacy revenue codes in the cost center 5600 
``Drugs Charged to Patients,'' and this is the cost center that we use 
to estimate costs from charges for the pharmacy revenue codes in our 
claims data each year. 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 at: http://www.cms.hhs.gov/HospitalOutpatientPPS. The proposed methodology of redistributing 
pharmacy overhead cost from packaged drugs and biologicals to 
separately payable drugs and biologicals was a proposal to address 
charge compression observed within this specific cost center that 
captures the vast majority of costs and charges for drugs and 
biologicals billed on hospital outpatient claims. Therefore, as most 
hospitals billing contrast agents with pharmacy revenue codes are 
associating the contrast agent costs with the cost center 5600 ``Drugs 
Charged to Patients,'' we believe it is appropriate to redistribute 
cost from contrast agents to separately payable drugs and biologicals 
under our final CY 2010 pharmacy overhead cost redistribution 
methodology.
    The commenter also suggested that it would be inappropriate to 
redistribute cost from contrast agents because, as discussed in 
V.B.2.d. of this final rule with comment period, it has been OPPS 
policy to package payment for all contrast agents since CY 2008. The 
proposed methodology for redistributing pharmacy overhead cost from 
packaged drugs and biologicals to separately payable drugs and 
biologicals was not only a proposal to address charge

[[Page 60514]]

compression, but specifically a proposal to address charge compression 
in light of our adoption of a specific drug packaging threshold, which 
is $65 for CY 2010. The argument that it would, therefore, be 
inappropriate to redistribute cost from contrast agents could have 
merit if there was a sizable amount of aggregate cost for contrast 
agents with per day costs greater than the drug packaging threshold of 
$65. In that case, it could be argued that the compression in cost 
estimates for expensive contrast agents (those with per day costs 
greater than the $65 packaging threshold) created by estimating costs 
for those agents by applying the CCR for the single cost center 5600 
``Drugs Charged to Patients'' to expensive contrast agents' charges 
would be offset by the overestimation of costs for inexpensive contrast 
agents (those with per day costs less than the $65 packaging threshold) 
created by application of the same single CCR to inexpensive contrast 
agents' charges, assuming that hospitals apply a lower markup to 
expensive contrast agents and a higher markup to inexpensive contrast 
agents. If the mix of expensive and inexpensive contrast agents 
resembled the mix of expensive and inexpensive drugs generally captured 
in the cost center 5600 ``Drugs Charged to Patients,'' the use of a 
single CCR would accurately estimate total cost of contrast agents in 
aggregate. Because all contrast agents not receiving pass-through 
payment are packaged, packaging an accurate aggregate cost estimate for 
contrast agents could argue against redistributing cost from packaged 
contrast agents to separately payable drugs and biologicals. However, 
in our CY 2010 final rule claims data, we observed only 3 percent of 
total contrast agent cost associated with those contrast agents that 
have per day costs above $65.
    In conclusion, both because contrast agents are billed under 
pharmacy revenue codes and accounted for in the cost center 5600 
``Drugs Charged to Patients'' and because the per day cost of almost 
all contrast agents falls under the CY 2010 packaging threshold of $65, 
we believe the estimated cost of contrast agents contains a 
disproportionate amount of pharmacy overhead cost and that it is 
appropriate to include them in our final CY 2010 redistribution 
methodology.
    While we believe that contrast agents are commonly billed under 
pharmacy revenue codes and that hospitals largely account for the cost 
of contrast agents under the cost center 5600 on their Medicare 
hospital cost report, we did not observe that hospitals apply the same 
practice for diagnostic radiopharmaceuticals. After reviewing our 
claims data, we found that the majority of diagnostic 
radiopharmaceuticals are billed under revenue code 0343 (Nuclear 
Medicine; Diagnostic Radiopharmaceuticals). As specified in our revenue 
code-to-cost center crosswalk, we believe hospitals largely account for 
the costs and charges associated with revenue code 0343 in a 
nonstandard cost center for Diagnostic Nuclear Medicine or the cost 
center 4100 ``Radiology-Diagnostic.'' Because the redistribution of 
pharmacy overhead cost from packaged drugs and biologicals to 
separately payable drugs and biologicals is intended to specifically 
address charge compression in the pharmacy cost center, in light of the 
above information, we excluded the costs of both diagnostic and 
therapeutic radiopharmaceuticals from our estimate of total drug and 
biological cost in the claims data for the final CY 2010 redistribution 
methodology. As a result, the final payment rates for nuclear medicine 
procedures that incorporate the costs of packaged diagnostic 
radiopharmaceuticals are not impacted by the final redistribution 
methodology.
    Comment: Several commenters cited methodological concerns about the 
approach CMS used to calculate the proposed equivalent average ASP-
based payment amount for separately payable drugs and biologicals. In 
addition, the commenters expressed concern that CMS' cost estimation 
methodology is very sensitive to changes in the underlying data and 
assumptions. Citing these concerns, some commenters requested payment 
at ASP+6 percent for parity with physician's office payment rates for 
drugs, arguing that hospital costs for acquisition and associated 
pharmacy overhead would be at least as high, if not significantly 
greater, than the physician's office costs.
    Some commenters noted that the statute requires drug cost surveys 
for payment purposes for SCODs under the OPPS, and that the most recent 
survey available is outdated as it was performed in CY 2004 by the GAO. 
The commenters stated that the statute specifically requires survey 
data as the basis for hospital acquisition costs in order to provide a 
more appropriate payment methodology for drugs and biologicals, instead 
of costs calculated from claims data. They concluded that, by not 
performing a survey and by not paying for drugs and biologicals at the 
physician's office rate, CMS is not in compliance with the statute. The 
commenters acknowledged that drug cost surveys are difficult to 
perform. However, they asserted that, in order to comply with the 
requirements of the statute, either a survey should be performed or 
payment should be made at ASP+6 percent. Other commenters cited the 
methodological concerns that are described below regarding the proposed 
proxy for average acquisition cost based upon claims data, and stated 
that until CMS is able to adequately address these concerns, CMS should 
implement payment at ASP+6 percent pursuant to section 
1833(t)(14)(A)(iii)(I).
    The commenters' first methodological concern is that CMS compared 
cost estimates from different points in time to develop payment rates 
for drugs and biologicals. Specifically, several commenters noted that 
for the proposed rule, CMS used ASP data from the fourth quarter of CY 
2008, which is the basis for calculating payment rates for drugs and 
biologicals in the physician's office setting using the ASP methodology 
effective April 1, 2009, along with hospital claims data from CY 2008 
to determine the relative ASP amount for CY 2010 under CMS' proposed 
drug payment methodology. The commenters requested that CMS use an 
alternative ASP file for the final rule calculation of ASP+X to better 
align ASP data with hospital claims and cost report data. The 
commenters stated that CMS compared hospital claims data from 
throughout CY 2008 with costs estimated from charges that include 
pharmacy overhead cost, with ASP data as a proxy for acquisition cost 
representing drug sales in the fourth quarter of CY 2008, well after 
the time hospitals would have purchased most of their drugs for 
administration in CY 2008. As an alternative, the commenters requested 
that CMS use an earlier ASP file that is more representative of the 
costs to hospitals when they purchase drugs for the claims year. 
Specifically, some commenters requested that CMS use the July 1, 2008 
ASP file that represents sales from the first quarter of CY 2008 when 
comparing CY 2008 hospital claims data to ASP data to determine an 
ASP+X amount.
    Second, many commenters reiterated concerns that when CMS applies a 
single CCR to adjust charges to costs for these drugs and biologicals, 
charge compression leads to misallocation of the pharmacy overhead 
costs associated with high and low cost drugs and biologicals during 
ratesetting. The commenters noted that hospitals disproportionately 
mark up their charges for low cost drugs and biologicals to account for 
pharmacy overhead costs. They indicated that while the aggregate 
charges for inexpensive and expensive drugs may include the total 
pharmacy overhead

[[Page 60515]]

costs of the hospital, the charges for individual drugs and biologicals 
do not represent the specific acquisition and pharmacy overhead costs 
of that particular drug or biological. The commenters explained that 
hospitals apply proportionately smaller markups to higher cost items 
and proportionately larger markups to lower cost items. The commenters 
argued that by using only separately payable drugs in the calculation 
of the equivalent average ASP-based amount, the pharmacy overhead costs 
associated with these separately payable drugs that are 
disproportionately included in the charges for packaged drugs are not 
factored into the calculation, resulting in an artificially low ASP 
add-on percentage. Therefore, some commenters suggested using the costs 
of both packaged drugs and separately payable drugs when calculating 
the equivalent average ASP-based payment amount for separately payable 
drugs, as they argued that this would provide a more accurate ASP-based 
payment amount for separately payable drugs. As an alternative, the 
commenters recommended that CMS eliminate the drug packaging threshold 
and provide separate payment for all Part B drugs under the OPPS at an 
ASP+X percent amount calculated from the cost of all drugs with HCPCS 
codes.
    Finally, several commenters noted that CMS included, in the 
calculation of the costs of separately payable drugs and biologicals, 
OPPS claims data from hospitals that receive Federal discounts on drug 
prices under the 340B drug pricing program. The commenters pointed out 
that hospital participation in the 340B program had grown substantially 
over the past few years, and they believed that the costs from these 
hospitals now constituted a significant proportion of hospital drug 
costs on CY 2008 OPPS claims. The commenters stated that including 340B 
hospital claims data when comparing aggregate hospital costs based on 
claims data to ASP rates contributed to an artificially low equivalent 
average ASP-based payment rate because ASP data specifically exclude 
drugs sales under the 340B program.
    Response: As discussed above, the provision in section 
1833(t)(14)(A)(iii) of the Act continues to be applicable to 
determining payments for SCODs for CY 2010. This provision requires 
that payment for SCODs be equal to the average acquisition cost for the 
drug for that year (which, at the option of the Secretary, may vary by 
hospital group) as determined by the Secretary, subject to any 
adjustment for overhead costs and taking into account the hospital 
acquisition cost survey data under section 1833(t)(14)(D) of the Act, 
or if hospital acquisition cost data are not available, then the 
average price for the drug in the year established under section 
1842(o), 1847A, or 1847B of the Act, as the case may be, as calculated 
and adjusted by the Secretary as necessary for purposes of section 
1833(t)(14)of the Act. In the CY 2006 OPPS final rule with comment 
period (70 FR 68640), we compared hospital drug cost data that were 
available to us at the time, specifically: (1) data from the GAO 
survey; (2) hospital claims data from CY 2004; and (3) ASP information. 
In addition, we discussed our methodology for comparing these data that 
represented different timeframes from 2004 to 2006. As a result of our 
analysis comparing these three sources, we concluded that, on average, 
the costs from hospital claims data representing SCODs were roughly 
equivalent to payment at ASP+6 percent. Therefore, we finalized a 
policy that used our hospital claims data as a proxy for average 
hospital acquisition cost and provided payment for separately payable 
drugs that do not have pass-through status at ASP+6 percent for CY 2006 
(70 FR 68639 through 68642). While the commenters are correct that the 
statute allows for the use of the methodology described in section 
1842(o), section 1847A or section 1847B of the Act, as calculated and 
adjusted by the Secretary as necessary, this is only when hospital 
acquisition cost data are not available. We believe that we have 
established both our hospital claims data and ASP data as an 
appropriate proxy for average hospital acquisition cost, taking the GAO 
survey information into account for the base year (70 FR 68641). Many 
of the drugs and biologicals covered under the OPPS are provided a 
majority of the time in the hospitals setting, and the ASP information 
we collect would be an adequate proxy for hospital acquisition cost. 
Further, as already discussed, the commenters have not disputed the 
accuracy of the total drug and biological cost estimated in our claims 
data, only the estimated cost of separately payable drugs and 
biologicals. While we have not yet performed hospital drug acquisition 
cost surveys similar to the GAO survey, we note that the statute only 
calls for ``periodic'' surveys. Therefore, we disagree that we are not 
complying with the statute by not performing a survey and not paying at 
the physician's office rate. We note, however, that we are considering 
the possibility of such a survey at some point in the future. 
Therefore, we do not believe that it is appropriate at this time to 
provide payment at anything other than average acquisition cost, with a 
redistribution for pharmacy overhead, based on the drug and biological 
costs observed in hospital claims data and pricing information observed 
in ASP data. We disagree with the commenters who believe that our 
redistribution methodology is not an appropriate proxy for average 
hospital acquisition cost, with an adjustment for pharmacy overhead 
cost. We have no basis for providing payment for separately payable 
drugs at the physician's office rate in the face of an appropriate 
proxy for average hospital acquisition cost, as described in detail 
below.
    In response to the commenters who claimed that hospital costs for 
drug acquisition and associated pharmacy overhead would be at least as 
high, if not significantly greater, than the physician's office costs, 
we have no information that would confirm this statement. ASP 
information is only available for all sales of drugs and biologicals, 
so we cannot compare hospital and physician's office acquisition costs 
for individual drugs and biologicals or in aggregate. While our final 
CY 2010 pharmacy overhead adjustment methodology for payment of 
separately payable drugs and biologicals relies on the assumption that 
ASP is a fair estimate of hospitals' average acquisition cost of drugs 
and biologicals in general, we expect that drug acquisition costs could 
vary across settings and clinical cases. In some cases hospital drug 
acquisition costs could be lower than the costs to physicians' offices, 
based on high volume purchasing agreements, and in other cases hospital 
acquisition costs could be greater, based on their need for emergency 
purchases outside of negotiated contracts with preestablished best 
rates. We also expect that pharmacy overhead costs could vary across 
hospital and physician's office settings, based on the drugs and 
biologicals administered in those settings. Many hospitals provide a 
range of drugs and biologicals, including those with high and low 
pharmacy overhead costs, whereas physicians' offices may be more likely 
to provide drugs and biologicals with typically high (or low) pharmacy 
overhead costs. This unknown variability in drug acquisition and 
pharmacy overhead costs across settings means that we cannot conclude 
that the acquisition and pharmacy overhead costs of drugs and 
biologicals in the HOPD are greater or less than the physician's office 
costs. Finally, the ASP-based payment rate for drugs

[[Page 60516]]

furnished in physicians' offices is specified in the statute as ASP+6 
percent, whereas the OPPS payment is based on average hospital 
acquisition cost and associated pharmacy overhead cost. Therefore, we 
do not believe that comparisons of OPPS drug payment rates with 
physician's office payment rates suggesting that parity is necessary 
are applicable to determining appropriate payment rates for separately 
payable drugs and biologicals under the OPPS.
    For our calculation of per day costs of HCPCS codes for drugs and 
nonimplantable biologicals in the CY 2010 OPPS/ASC final rule with 
comment period, we proposed to use ASP data from the first quarter of 
CY 2009, which is the basis for calculating payment rates for drugs and 
biologicals in the physician's office setting using the ASP methodology 
effective July 1, 2009, along with updated hospital claims data from CY 
2008 (74 FR 35320). We also proposed to use these data for budget 
neutrality estimates and impact analyses for this CY 2010 OPPS/ASC 
final rule with comment period. Payment rates for HCPCS codes for 
separately payable drugs and nonimplantable biologicals included in 
Addenda A and B to this final rule with comment period are based on ASP 
data from the second quarter of CY 2009, which are the basis for 
calculating payment rates for drugs and biologicals in the physician's 
office setting using the ASP methodology effective October 1, 2009.
    Since implementing the ASP+X methodology in CY 2006, we have used 
the most recently available data to establish our relative ASP payment 
rate for the upcoming year, consistent with our overall policy of 
updating the OPPS of using the most recent claims and cost report data. 
For the CY 2010 final rule, this results in using July 2009 ASP payment 
rates (based on first quarter CY 2009 sales), CY 2008 hospital claims 
data, and the most recently available hospital cost reports (in the 
majority of cases cost reports beginning in CY 2007). As we have noted 
in previous years, the relative ASP+X amount is likely to change from 
the proposed rule to the final rule as a result of updated ASP data, 
hospital claims data, and updated hospital cost reports. If we were to 
introduce significant error into our ASP+X percent calculation by not 
aligning all pricing and cost data to a single period of time, we would 
consider changing the ASP data that we use. However, we believe that if 
we were to use an ASP file from CY 2008, which commenters claim would 
more accurately represent hospital costs associated with procuring 
drugs and biologicals for that claims year, we would need to offset any 
increases in the relative ASP amount resulting from the use of a 
different ASP file with a deflation adjustment for each hospital's CCRs 
for cost center 5600 ``Drugs Charged to Patients'' in order to simulate 
costs from claim charges in the claim year. We make comparable CCR 
deflation estimates when we set our fixed dollar eligibility threshold 
for outlier payments described in section II.F. of this final rule with 
comment period. Because over recent years hospital charges have 
typically grown faster than costs, we would expect such an adjustment 
to reduce estimated costs in our claims data. Therefore, we are 
continuing our current policy of using the most recently available 
claims, cost report, and ASP data when performing our ASP+X calculation 
under the final CY 2010 redistribution methodology in order to set 
payment rates for separately payable drugs and biologicals.
    For CY 2010, we again attempted to address the issue of charge 
compression by proposing a methodology that reallocates pharmacy 
overhead costs from packaged drugs and biologicals to separately 
payable drugs and biologicals. We have made several proposals in the 
past to identify pharmacy overhead costs and address charge compression 
in the pharmacy revenue center. For the CY 2006 OPPS, we proposed to 
establish three distinct Level II HCPCS C-codes and three corresponding 
APCs for drug handling categories to differentiate overhead costs for 
drugs and biologicals (70 FR 42730). In the CY 2008 OPPS/ASC proposed 
rule (72 FR 42735), we proposed to instruct hospitals to remove the 
pharmacy overhead charge for both packaged and separately payable drugs 
and biologicals from the charge for the drug or biological and report 
the pharmacy overhead charge on an uncoded revenue code line on the 
claim. We believed that this would provide us with an avenue for 
collecting pharmacy handling cost data specific to drugs in order to 
package the overhead costs of these items into the associated 
procedures, most likely drug administration services. For CY 2009, we 
proposed to split the ``Drugs Charged to Patients'' cost center into 
two cost centers: one for drugs with high pharmacy overhead costs and 
one for drugs with low pharmacy overhead costs (73 FR 41492). We noted 
that we expected that CCRs from the proposed new cost centers would be 
available in 2 to 3 years to refine OPPS drug cost estimates by 
accounting for differential hospital markup practices for drugs with 
high and low overhead costs. However, we did not finalize any of these 
proposals due to concerns from the hospital community that these 
proposals would create an overwhelming burden on hospitals and staff. 
We have once again proposed to address the issue of charge compression, 
in this case without requiring any changes to current hospital 
reporting practices.
    It has been our policy, since CY 2006, to only use separately 
payable drugs and biologicals in the calculation of the equivalent 
average ASP-based payment amount under the OPPS. We do not include 
packaged drugs and biologicals in this standard analysis because cost 
data for these items are already accounted for within the APC 
ratesetting process through the median cost calculation methodology 
discussed in section II.A.2. of this final rule with comment period. To 
include the costs of coded packaged drugs and biologicals in both our 
APC ratesetting process (for associated procedures present on the same 
claim) and in our ratesetting process to establish an equivalent 
average ASP-based payment amount for separately payable drugs and 
biologicals would give these data disproportionate emphasis in the OPPS 
system by skewing our analyses, as the costs of these packaged items 
would be, in effect, counted twice. Accordingly, we are not adopting 
the suggestion from commenters that we include all packaged and 
separately payable drugs and biologicals when establishing an 
equivalent average ASP-based rate to provide payment for the hospital 
acquisition and pharmacy handling costs of drugs and biologicals. 
However, we remind commenters that because the costs of packaged drugs 
and biologicals, including their pharmacy overhead costs, are packaged 
into the payments for the procedures in which they are administered, 
the OPPS provides payment for both the drugs and the associated 
pharmacy overhead costs through the applicable procedural APC payments. 
Furthermore, we disagree with the commenters who recommend that we 
should pay separately for all drugs and biologicals with HCPCS codes. 
We continue to believe 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 and, therefore, we believe it is appropriate to maintain a 
modest drug packaging threshold that packages the costs of

[[Page 60517]]

inexpensive drugs into payment for the associated procedures.
    Moreover, we continue to believe that excluding data from hospitals 
that participate in the 340B program from our ASP+X calculation, and 
paying those hospitals at that derived payment amount, would 
inappropriately redistribute payment to drugs and biologicals from 
payment for other services under the OPPS. The ASP-equivalent cost of 
drugs under the OPPS that would be calculated only from claims data for 
non-340B hospitals would likely be higher than the cost of all drugs 
from our aggregate claims for all hospitals. To set drug payment rates 
for all hospitals based on a subset of hospital cost data, determined 
only from claims data for non-340B hospitals would increase the final 
APC payment weights for drugs in a manner that does not reflect the 
drug costs of all hospitals, although all hospitals, including 340B 
hospitals, would be paid at these rates for drugs. Furthermore, as a 
consequence of the statutory requirement for budget neutrality, 
increasing the payment weights for drugs by excluding 340B hospital 
claims would reduce the relative payment weights for other services in 
a manner that does not reflect the procedural costs of all hospitals 
relative to the drug costs of all hospitals, thereby distorting the 
relativity of payment weights for services based on hospital costs. 
Many commenters on the CY 2009 OPPS/ASC final rule with comment period 
were generally opposed to differential payment for hospitals based on 
their 340B participation status, and we do not believe it would be 
appropriate to exclude claims from this subset of hospitals in the 
context of a CY 2010 drug and biological payment policy that pays all 
hospitals at the same rate for separately payable drugs and 
biologicals.
    Therefore, for CY 2010, we are finalizing our proposed payment for 
separately payable drugs and biologicals, with modification. We are 
redistributing $200 million from the cost of packaged drugs and 
biologicals to separately payable drugs and biologicals. The $200 
million consists of $150 million (one-third of the pharmacy overhead 
cost) from the coded packaged drug and biological cost for drugs and 
biologicals with an ASP and $50 million from the packaged drug and 
biological cost for drugs and biologicals without an ASP. To model this 
policy for the CY 2010 final rule with comment period, we reduced the 
cost of coded packaged drugs and biologicals with an ASP by 24 percent 
(based on final rule data; reduction was 27 percent based on proposed 
rule data) and the cost of packaged drugs and biologicals without a 
HCPCS code or an ASP by 8 percent when we calculated the median cost of 
the CY 2010 procedural APCs. This redistribution results in payment for 
separately payable drugs and biologicals at a transitional rate of 
ASP+4 percent for CY 2010 under a pharmacy overhead adjustment 
methodology. We are, therefore, not accepting the August 2009 
recommendation of the APC Panel to pay for separately payable drugs and 
biologicals at ASP+6 percent. Furthermore, because we are finalizing 
payment of separately payable drugs at APS+4 percent, we are not 
accepting the August 2009 APC Panel recommendations to analyze the 
impact of ASP+6 percent payment on different classes or for services 
that use packaged drugs compared with payment at ASP+4 percent. We are 
accepting the recommendation of the APC Panel to continue to refine our 
analyses of payment for drugs, biologicals, and radiopharmaceuticals 
and continue to welcome information and analyses from the public 
regarding pharmacy overhead costs.
    Comment: One commenter requested that CMS create a HCPCS J-code for 
tositumomab, currently provided under a radioimmunotherapy regimen and 
billed as part of HCPCS code G3001 (Administration and supply of 
tositumomab, 450 mg). The commenter argued that because tositumomab is 
listed in compendia, is approved by the FDA as part of the BEXXAR[reg] 
regimen, and has its own National Drug Code (NDC) number, it should be 
recognized as a drug and, therefore, be paid as other drugs are paid 
under the OPPS methodology, instead of having a payment rate determined 
by hospital claims data. The commenter suggested that a payment rate 
could be established using the ASP methodology.
    Response: We have consistently noted that unlabeled tositumomab is 
not approved as either a drug or a radiopharmaceutical, but it is a 
supply that is required as part of the radioimmunotherapy treatment 
regimen (November 18, 2008 OPPS/ASC final rule with comment period (73 
FR 68658); November 27, 2007 OPPS/ASC final rule with comment period 
for CY 2008 (72 FR 66765); November 10, 2005 OPPS final rule with 
comment period for CY 2006 (70 FR 68654); November 7, 2003 OPPS final 
rule with comment period for CY 2004 (68 FR 63443)). We do not make 
separate payment for supplies used in services provided under the OPPS. 
Payments for necessary supplies are packaged into payments for the 
separately payable services provided by the hospital. Specifically, 
administration of unlabeled tositumomab is a complete service that 
qualifies for separate payment under its own clinical APC. This 
complete service is currently described by HCPCS code G3001. Therefore, 
we do not agree with the commenter's recommendation that we should 
assign a separate HCPCS code to the supply of unlabeled tositumomab. 
Rather, we will continue to make separate payment for the 
administration of tositumomab, and payment for the supply of unlabeled 
tositumomab is packaged into the administration payment.
    We note that separately payable drug and biological payment rates 
listed in Addenda A and B to this final rule with comment period, which 
illustrate the final CY 2010 payment of ASP+4 percent for separately 
payable nonpass-through drugs and nonimplantable biologicals and ASP+6 
percent for pass-through drugs and biologicals, reflect either ASP 
information that is the basis for calculating payment rates for drugs 
and biologicals in the physician's office setting effective October 1, 
2009 or mean unit cost from CY 2008 claims data and updated cost report 
information available for this final rule with comment period. In 
general, these published payment rates are not reflective of actual 
January 2010 payment rates. This is because payment rates for drugs and 
biologicals with ASP information for January 2010 will be determined 
through the standard quarterly process where ASP data submitted by 
manufacturers for the third quarter of 2009 (July 1, 2009 through 
September 30, 2009) are used to set the payment rates that are released 
for the quarter beginning in January 2010 near the end of December 
2009. In addition, payment rates for drugs and biologicals for which 
there was no ASP information available for October 2009 payment and, 
therefore, these products would be paid based on mean unit cost in CY 
2010 based on available information at the time of this final rule with 
comment period, may have ASP information available for payment for the 
quarter beginning in January 2010. These drugs and biologicals would 
then be priced based on their newly available ASP information. Finally, 
there may be drugs and biologicals that have ASP information available 
for this final rule with comment period (reflecting October 2009 ASP 
data) that do not have ASP information available for the quarter 
beginning in January 2010. These drugs and biologicals would then be 
paid based on mean unit cost data derived from CY 2008 hospital claims.

[[Page 60518]]

Therefore, the payment rates listed in Addenda A and B to this final 
rule with comment period are not for January 2010 payment purposes and 
are only illustrative of the CY 2010 OPPS payment methodology using the 
most recently available information at the time of this final rule with 
comment period.
4. Payment for Blood Clotting Factors
    For CY 2009, we are providing payment for blood clotting factors 
under the OPPS at ASP+4 percent, plus an additional payment for the 
furnishing fee. We note that when blood clotting factors are provided 
in physicians' offices under Medicare Part B and in other Medicare 
settings, a furnishing fee is also applied to the payment. The CY 2009 
updated furnishing fee is $0.164 per unit.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35333), for CY 2010, 
we proposed to pay for blood clotting factors at ASP+4 percent, 
consistent with our proposed payment policy for other nonpass-through 
separately payable drugs and biologicals, and to continue our policy 
for payment of the furnishing fee using an updated amount. Because the 
furnishing fee update is based on the percentage increase in the 
Consumer Price Index (CPI) for medical care for the 12-month period 
ending with June of the previous year and the Bureau of Labor 
Statistics releases the applicable CPI data after the MPFS and OPPS/ASC 
proposed rules are published, we were not able to include the actual 
updated furnishing fee in this proposed rule and we also are not able 
to include the actual updated furnishing fee in this final rule with 
comment period. Therefore, in accordance with our policy as finalized 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), 
we will announce the actual figure for the percent change in the 
applicable CPI and the updated furnishing fee calculated based on that 
figure through applicable program instructions and posting on the CMS 
Web site at: http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/.
    Comment: One commenter expressed support for CMS' proposal to 
continue to apply the furnishing fee for blood clotting factors 
provided in the OPD. The commenter stated that the furnishing fee helps 
ensure patient access to blood clotting factors by increasing the 
payment rate for these items. Another commenter disagreed with CMS' 
proposed payment rate of ASP+4 percent for blood clotting factors in CY 
2010, even with the furnishing fee add-on. The commenters stated that 
ASP+4 percent was inadequate for all drugs and biologicals, and is 
especially inappropriate for blood clotting factors. Finally, one 
commenter supported the payment of blood clotting factors at the same 
rate that applies to other nonpass-through separately payable drugs and 
biologicals in the HOPD.
    Response: We continue to believe that applying the furnishing fee 
for blood clotting factors is appropriate for CY 2010. However, we see 
no compelling reason to provide payment for blood clotting factors 
under a different methodology for OPPS purposes at this time. We 
believe that the payment rate of ASP+4 percent that we are finalizing 
for payment of all nonpass-through separately payable drugs and 
biologicals in CY 2010 is appropriate. In addition, we believe that it 
continues to be appropriate to pay a furnishing fee for blood clotting 
factors under the OPPS, as is done in the physician's office setting 
and the inpatient hospital setting.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to provide 
payment for blood clotting factors under the same methodology as other 
separately payable drugs and biologicals under the OPPS and to continue 
paying an updated furnishing fee.
5. Payment for Therapeutic Radiopharmaceuticals
a. Background
    Section 303(h) of Public Law 108-173 exempted radiopharmaceuticals 
from ASP pricing in the physician's office setting. Beginning in the CY 
2005 OPPS final rule with comment period, we have exempted 
radiopharmaceutical manufacturers from reporting ASP data for payment 
purposes under the OPPS. (For more information, we refer readers to the 
CY 2005 OPPS final rule with comment period (69 FR 65811) and the CY 
2006 OPPS final rule with comment period (70 FR 68655).) Consequently, 
we did not have ASP data for radiopharmaceuticals for consideration for 
previous years' OPPS ratesetting. In accordance with section 
1833(t)(14)(B)(i)(I) of the Act, we have classified 
radiopharmaceuticals under the OPPS as SCODs. As such, we have paid for 
radiopharmaceuticals at average acquisition cost as determined by the 
Secretary and subject to any adjustment for overhead costs. 
Radiopharmaceuticals also are subject to the policies affecting all 
similarly classified OPPS drugs and biologicals, such as pass-through 
payment for diagnostic and therapeutic radiopharmaceuticals and 
individual packaging determinations for therapeutic 
radiopharmaceuticals, discussed earlier in this proposed rule.
    For CYs 2006 and 2007, we used mean unit cost data from hospital 
claims to determine each radiopharmaceutical's packaging status and 
implemented a temporary policy to pay for separately payable 
radiopharmaceuticals based on the hospital's charge for each 
radiopharmaceutical adjusted to cost using the hospital's overall CCR. 
In addition, in the CY 2006 OPPS final rule with comment period (70 FR 
68654), we instructed hospitals to include charges for 
radiopharmaceutical handling in their charges for the 
radiopharmaceutical products so these costs would be reflected in the 
CY 2008 ratesetting process. The methodology of providing separate 
radiopharmaceutical payment based on charges adjusted to cost through 
application of an individual hospital's overall CCR for CYs 2006 and 
2007 was finalized as an interim proxy for average acquisition cost 
because of the unique circumstances associated with providing 
radiopharmaceutical products to Medicare beneficiaries. The single OPPS 
payment represented Medicare payment for both the acquisition cost of 
the radiopharmaceutical and its associated handling costs.
    During the CY 2006 and CY 2007 rulemaking processes, we encouraged 
hospitals and radiopharmaceutical stakeholders to assist us in 
developing a viable long-term prospective payment methodology for these 
products under the OPPS. As reiterated in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66766), we were pleased to note that we 
had many discussions with interested parties regarding the availability 
and limitations of radiopharmaceutical cost data.
    In considering payment options for therapeutic radiopharmaceuticals 
for CY 2008, we examined several alternatives that we discussed in the 
CY 2008 OPPS/ASC proposed rule (72 FR 42738 through 42739) and CY 2008 
OPPS/ASC final rule with comment period (72 FR 66769 through 66770). 
After considering the options and the public comments received, we 
finalized a CY 2008 methodology to provide prospective payment for 
therapeutic radiopharmaceuticals (defined as those Level II HCPCS codes 
that include the term ``therapeutic'' along with a radiopharmaceutical 
in their long code descriptors) using mean costs derived from the CY 
2006 claims data, where the costs were determined using our standard 
methodology of applying hospital-specific departmental CCRs to

[[Page 60519]]

radiopharmaceutical charges, defaulting to hospital-specific overall 
CCRs only if appropriate departmental CCRs were unavailable (72 FR 
66772). In addition, we finalized a policy to package payment for all 
diagnostic radiopharmaceuticals (defined as those Level II HCPCS codes 
that include the term ``diagnostic'' along with a radiopharmaceutical 
in their long code descriptors) for CY 2008. As discussed in the CY 
2008 OPPS/ASC proposed rule (72 FR 42739), we believed that adopting 
prospective payment for therapeutic radiopharmaceuticals based on 
historical hospital claims data was appropriate because it served as 
our most accurate available proxy for the average hospital acquisition 
cost of separately payable therapeutic radiopharmaceuticals. In 
addition, we noted that we have found that our general prospective 
payment methodology based on historical hospital claims data results in 
more consistent, predictable, and equitable payment amounts across 
hospitals and likely provides incentives to hospitals for efficiently 
and economically providing these outpatient services.
    Prior to the implementation of the final CY 2008 methodology of 
providing a prospective payment for therapeutic radiopharmaceuticals, 
section 106(b) of Public Law 110-173 was enacted on December 29, 2007 
specifying payment for therapeutic radiopharmaceuticals based on 
individual hospital charges adjusted to cost. Therefore, hospitals 
continued to receive payment for therapeutic radiopharmaceuticals by 
applying the hospital-specific overall CCR to each hospital's charge 
for a therapeutic radiopharmaceutical from January 1, 2008, through 
June 30, 2008. As we stated in the CY 2009 OPPS/ASC proposed rule (73 
FR 41493), thereafter, the OPPS would provide payment for separately 
payable therapeutic radiopharmaceuticals on a prospective basis, with 
payment rates based upon mean costs from hospital claims data as set 
forth in the CY 2008 OPPS/ASC final rule with comment period, unless 
otherwise required by law.
    Following issuance of the CY 2009 OPPS/ASC proposed rule, section 
142 of Public Law 110-275 amended section 1833(t)(16)(C) of the Act, as 
amended by section 106(a) of Public Law 110-173, to further extend the 
payment period for therapeutic radiopharmaceuticals based on hospital's 
charges adjusted to cost through December 31, 2009. Therefore, we are 
continuing to pay hospitals for therapeutic radiopharmaceuticals at 
charges adjusted to cost through the end of CY 2009.
b. Payment Policy
    Since the start of the temporary cost-based payment methodology for 
radiopharmaceuticals in CY 2006, we have met with several interested 
parties on a number of occasions regarding payment under the OPPS for 
radiopharmaceuticals and have received numerous different suggestions 
from these stakeholders regarding payment methodologies that we could 
employ for future use under the OPPS.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66771), we solicited comments requesting interested parties to provide 
information related to whether the existing ASP methodology could be 
used to establish payment for specific therapeutic radiopharmaceuticals 
under the OPPS. Similar to the recommendations we received during the 
CY 2008 OPPS/ASC proposed rule comment period (72 FR 66770), we 
received several suggestions regarding the establishment of an OPPS-
specific methodology for radiopharmaceutical payment that would be 
similar to the ASP methodology, without following the established ASP 
procedures referenced at section 1847A of the Act and implemented 
through rulemaking. Some commenters recommended using external data 
submitted by a variety of sources other than manufacturers. Along this 
line, commenters suggested gathering information from nuclear 
pharmacies using methodologies with a variety of names such as Nuclear 
Pharmacy Calculated Invoiced Price (Averaged) (CIP) and Calculated 
Pharmacy Sales Price (CPSP). Other commenters recommended that CMS base 
payment for certain radiopharmaceuticals on manufacturer-reported ASP.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66771), a ratesetting approach based on external data would be 
administratively burdensome for us because we would be required to 
collect, process, and review external information to ensure that it was 
valid, reliable, and representative of a diverse group of hospitals so 
that it could be used to establish rates for all hospitals. However, we 
specifically requested additional comments regarding the use of the 
existing ASP reporting structure for therapeutic radiopharmaceuticals 
as this established methodology was already used for payment of other 
drugs provided in the hospital outpatient setting (72 FR 66771). While 
we received several recommendations from commenters on the CY 2008 
OPPS/ASC final rule with comment period regarding payment of 
therapeutic radiopharmaceuticals based on estimated costs provided by 
manufacturers or other parties, we believe that the use of external 
data for payment of therapeutic radiopharmaceuticals should only be 
adopted if those external data are subject to the same well-established 
regulatory framework as the ASP data currently used for payment of 
separately payable drugs and biologicals under the OPPS. We have 
previously indicated that nondevice external data used for setting 
payment rates should be representative of a diverse group of hospitals 
both by location and type, and should also identify the relevant data 
sources. We do not believe that external therapeutic 
radiopharmaceutical cost data voluntarily provided outside of the 
established ASP methodology, either by manufacturers or nuclear 
pharmacies, would generally satisfy these criteria that are minimum 
standards for setting OPPS payment rates.
    We received public comments on the CY 2008 OPPS/ASC final rule with 
comment period from certain radiopharmaceutical manufacturers who 
indicated that the standard ASP methodology could be used for payment 
of certain therapeutic radiopharmaceutical products. Specifically, 
these manufacturers expressed interest in providing ASP data for their 
therapeutic radiopharmaceutical products as a basis for payment under 
the OPPS.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41495), we proposed to 
allow manufacturers to submit ASP information for any separately 
payable therapeutic radiopharmaceutical for payment purposes under the 
OPPS. If ASP information was not submitted or appropriately certified 
by the manufacturer for a given calendar year quarter, then for that 
quarter we proposed to provide prospective payment based on the 
therapeutic radiopharmaceuticals mean cost from hospital claims data. 
However, as stated above, section 142 of Public Law 110-275 amended 
section 1833(t)(16)(C) of the Act, as amended by section 106(a) of 
Public Law 110-173, to further extend the payment period for 
therapeutic radiopharmaceuticals based on hospital's charges adjusted 
to cost through December 31, 2009, so we did not finalize this 
proposal. We note that, in response to our proposed therapeutic 
radiopharmaceutical payment methodology for CY 2009, we received a 
number of public comments that were supportive of the proposal for 
future years.
    At the February 2009 meeting of the APC Panel, the APC Panel

[[Page 60520]]

recommended that CMS use the ASP methodology to pay for therapeutic 
radiopharmaceuticals and, where ASP data are not available, to pay 
based on mean costs from claims data for CY 2010. We accepted this 
recommendation, and for CY 2010, we proposed to allow manufacturers to 
submit ASP information for any separately payable therapeutic 
radiopharmaceutical in order for therapeutic radiopharmaceuticals to be 
paid based on ASP beginning in CY 2010 under the OPPS (74 FR 35334 
through 35336). Similar to our CY 2009 proposal, for CY 2010, we did 
not propose to compel manufacturers to submit ASP information. 
Furthermore, as discussed in the CY 2009 OPPS/ASC proposed rule (73 FR 
41495), we stated that the ASP data submitted would need to be provided 
for a patient-specific dose, or patient-ready form, of the therapeutic 
radiopharmaceutical in order to properly calculate the ASP amount for a 
given HCPCS code. In addition, in those instances where there is more 
than one manufacturer of a particular therapeutic radiopharmaceutical, 
we noted that all manufacturers would need to submit ASP information in 
order for payment to be made on an ASP basis. We specifically requested 
public comment on the development of a crosswalk, similar to the NDC/
HCPCS crosswalk for separately payable drugs and biologicals posted on 
the CMS Web site at: http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/01a1_2009aspfiles.asp#TopOfPage, for use for therapeutic 
radiopharmaceuticals.
    Comment: Several commenters requested guidance on how costs 
associated with the manufacturing, compounding, and preparation of 
therapeutic radiopharmaceuticals should be reported when submitting 
ASP. The commenters stated that there are several activities that may 
take place at a variety of locations in order to prepare a 
radiopharmaceutical for patient administration. These services range in 
complexity from activities typical to any hospital pharmacy, such as 
drawing up a therapeutic radiopharmaceutical into a syringe and 
ensuring proper disposal of wasted product, to more complex processing 
such as preparing the therapeutic radiopharmaceutical itself by 
radiolabeling a cold kit (nonradioactive compound or complex that is 
combined with a radioisotope and results in a radiopharmaceutical) 
supplied by the manufacturer using a radioisotope supplied by the 
manufacturer or another source. As CMS requested ASP information from 
separately payable radiopharmaceutical manufacturers in the form of a 
patient-specific dose, or patient-ready form, several commenters argued 
that the ASP amount reported to CMS should reflect all costs associated 
with these additional activities or items, such as the radioisotope and 
radiolabeling processes, needed to provide a patient-ready dose of a 
radiopharmaceutical. Several commenters pointed out that, based on 
current business practices, a single manufacturer might be unable to 
report ASP data for a therapeutic radiopharmaceutical described by a 
HCPCS code that incorporated all of these costs, and others were 
concerned that CMS intended for the manufacturer to collect and report 
the costs of the activities of other entities, such as freestanding 
radiopharmacies, that would not typically be reflected in the 
radiopharmaceutical manufacturer's sales price.
    Response: In the following response, we discuss our expectations 
for manufacturer submission of ASP data to CMS to set OPPS payment 
rates for separately payable therapeutic radiopharmaceuticals. This 
methodology also would apply to manufacturers submitting ASP data for 
diagnostic and therapeutic radiopharmaceuticals with pass-through 
status. As discussed in section V.A. of this final rule with comment 
period, we would use any submitted ASP information for separately 
payable diagnostic and therapeutic radiopharmaceuticals with pass-
through status to establish a payment rate of ASP+6 percent, consistent 
with our policy for pass-through payment of drugs and biologicals. We 
note that ASP submissions for radiopharmaceutical payment under the 
OPPS would need to meet all of the existing regulatory and 
subregulatory requirements of the ASP reporting process under sections 
1847A and 1927(b)(3) of the Act, except as otherwise specified in this 
final rule with comment period.
    For CY 2010, when reporting an ASP for a separately payable 
radiopharmaceutical, we expect that the ASP data reported by a 
manufacturer would be representative of the item(s) sold by the 
manufacturer. We used the term ``patient-ready'' in our proposed rule 
to ensure that ASP data submitted for OPPS payment purposes for 
separately payable radiopharmaceuticals reflect the costs of all the 
component materials of the finished radiopharmaceutical product. We 
expect that the ASP data would represent the sales price of all of the 
component materials of the finished radiopharmaceutical product sold by 
the manufacturer in terms that reflect the applicable HCPCS code 
descriptor, such as ``treatment dose'' or ``millicurie.'' We understand 
that manufacturers of separately payable radiopharmaceuticals produce 
radiopharmaceuticals that require a variety of processing steps in 
order to finalize the product for administration to a beneficiary. For 
example, some radiopharmaceuticals are the combined product of a cold 
kit produced by one manufacturer, which is then radiolabeled with a 
radioisotope provided by a freestanding or hospital nuclear pharmacy. 
At a minimum, to be used for separate OPPS radiopharmaceutical payment, 
the ASP data reported by a manufacturer must represent sales of all of 
the component materials associated with the radiopharmaceutical. In the 
context of radiopharmaceuticals used in the HOPD, we would expect that 
the component materials would include at least the cold kit and the 
radioisotope needed to radiolabel the cold kit in order to make the 
radiopharmaceutical.
    With regard to additional processing steps, we believe 
manufacturers of radiopharmaceuticals could include in their 
calculations of ASP for OPPS payment purposes in addition to the prices 
for the component materials, the portion of the sales price 
attributable to the production of the manufactured product as it is 
sold by the manufacturer reporting ASP data. Radiopharmaceuticals are 
unique in that they require a radioisotope in addition to the cold kit 
and, at a minimum, they require radiolabeling the cold kit in order to 
produce a final radiopharmaceutical product. We note that manufacturers 
have the discretion to determine the form of the final product that is 
sold, and that the manufacturing process may include processing of the 
component materials in a variety of ways. To the extent that the price 
includes processing steps that are a service performed by the 
manufacturer to produce a radiopharmaceutical, we believe that ASP data 
submitted for purposes of calculating OPPS payment for 
radiopharmaceuticals can appropriately capture those additional 
processing costs.
    However, we do not believe that all processing steps that may be 
needed to prepare the separately payable radiopharmaceutical for 
administration to the beneficiary must be included in the submitted ASP 
data in order for the OPPS to use manufacturer-reported ASP data as the 
basis for

[[Page 60521]]

radiopharmaceutical payment. We expect that the costs of any further 
processing of the radiopharmaceutical component materials after the 
manufacturer's sales, which could include radiolabeling when a 
manufacturer only sells the component materials or could consist of 
additional preparation besides radiolabeling, would not be included in 
the ASP data submitted by the manufacturer. However, these processing 
costs would be paid under the OPPS through the single ASP+4 percent 
payment rate for nonpass-through, separately payable therapeutic 
radiopharmaceuticals, in the same way that the OPPS currently pays for 
the acquisition and pharmacy overhead costs of separately payable drugs 
and biologicals through this single payment. We do not believe that it 
would be appropriate to include in the ASP for OPPS purposes the 
radiopharmaceutical processing services performed in a freestanding 
radiopharmacy or hospital pharmacy to prepare a final product or its 
component materials for patient administration after the manufactured 
product is sold by the manufacturer reporting ASP. In this case, the 
combined OPPS ASP+4 percent CY 2010 payment for the acquisition and 
pharmacy overhead and handling costs of the separately payable 
therapeutic radiopharmaceuticals would pay for these additional 
processing activities.
    To be sufficient for purposes of calculating the OPPS payment, all 
radiopharmaceutical ASP submissions must meet the existing regulatory 
and subregulatory requirements of the ASP submission process under 
sections 1847A and 1927(b)(3) of the Act, except as otherwise specified 
in this final rule with comment period. In particular, we believe the 
``bona fide service fee'' test in the ASP regulations is instructive 
here, and we would expect manufacturers to apply the ``bona fide 
service fee'' test to determine whether service fees it pays to another 
entity are ``bona fide service fees.'' We believe the ``bona fide 
service fee'' test can be used in the OPPS ASP context to determine 
whether a fee that the manufacturer pays to a radiopharmacy for 
performing a service on behalf of the radiopharmaceutical manufacturer 
could be excluded from the ASP calculation--that is, it would not be 
considered a price concession that otherwise would reduce the ASP. The 
definition of a ``bona fide service fee'' is included in the ASP 
regulations (Sec.  414.802), which defines these fees as ``fees paid by 
a manufacturer to an entity, that represent fair market value for a 
bona fide, itemized service actually performed on behalf of the 
manufacturer that the manufacturer would otherwise perform (or contract 
for) in the absence of the service arrangement, and that are not passed 
on in whole or in part to a client or customer of an entity whether or 
not the entity takes title to the drug.'' In the context of the ASP 
calculation under section 1847A of the Act and its implementing 
regulations, ``bona fide service fees'' are not considered price 
concessions that must be deducted from the ASP. Similarly, we believe 
that for OPPS purposes, fees that are paid by the manufacturer that 
meet the ``bona fide service fee'' test would not reduce the ASP. Thus, 
a radiopharmaceutical manufacturer could contract with an entity, 
consistent with these regulations, to perform certain steps in the 
radiopharmaceutical manufacturing process that the manufacturer would 
otherwise perform itself in order to make the final radiopharmaceutical 
product, and the fees paid to the entity could qualify as a ``bona fide 
service fee'' that would be included in the ASP calculation for OPPS 
purposes. In light of the necessity of radiolabeling to the production 
of radiopharmaceuticals, we further believe that for OPPS purposes, the 
manufacturer's purchase of the radioisotope and payment for 
radiolabeling the cold kit could be factored into the manufacturer's 
price for the finished product, and if the fees the manufacturer paid 
meet the ``bona fide service fee'' test, they would not need to be 
netted against the price for purposes of calculating the manufacturer's 
ASP for the therapeutic radiopharmaceutical. Thus, in effect, for OPPS 
purposes, if a manufacturer chooses to contract for or purchase these 
items or services, fees for these bona fide services could be included 
in the manufacturer-reported ASP. We fully expect that the manufacturer 
would comply with the ASP regulations and, in particular, would factor 
these fees into the ASP only if the prices of the services performed by 
the radiopharmacy are fair market value, and the fees are not passed on 
to any purchasers of the separately payable radiopharmaceutical.
    In summary, a patient-specific dose or patient-ready form in the 
context of OPPS ASP submission for radiopharmaceutical payment means 
that the ASP reflecting manufacturer sales must represent sales of all 
of the component materials for the radiopharmaceutical, including a 
minimum of a cold kit and a radioisotope, and be reported in terms that 
reflect the applicable HCPCS code descriptor, such as ``treatment 
dose'' or ``millicurie.'' The ASP would not necessarily take into 
account the preparation of the final form of the therapeutic 
radiopharmaceutical for patient administration, including 
radiolabeling, which may be conducted by the manufacturer, freestanding 
radiopharmacy, hospital pharmacy, or other entity. With respect to the 
latter, fees paid by the manufacturer for these services would be 
excluded from the ASP calculation (that is, would not be considered 
price concessions that reduce the ASP), only if they are ``bona fide 
service fees'' as defined in the regulations governing ASP. Thus, if 
the manufacturer pays a ``bona fide service'' fee for the services of 
the freestanding radiopharmacy, hospital pharmacy, or other entity, and 
reflects that fee in its price for the radiopharmaceutical, the amount 
of the ``bona fide service fee'' would be taken into account in the 
reported ASP data. However, manufacturers are not required to pay for 
the preparation of a radiopharmaceutical (including radiolabeling) in a 
freestanding radiopharmacy, hospital pharmacy, or other entity after 
sale of all of the component materials, and in that case, the cost of 
those services would not be reflected in the ASP data submitted to CMS. 
Manufacturers should submit ASP data for a separately payable 
radiopharmaceutical that incorporates prices for sales of all of the 
component materials by the manufacturer. Any additional costs 
associated with the preparation of the radiopharmaceutical for 
administration to a beneficiary after the manufacturer's sale of the 
component materials and any processing that the manufacturer conducts 
would be paid through the single OPPS ASP+4 percent payment for the 
acquisition and pharmacy overhead and handling costs of the nonpass-
through, separately payable therapeutic radiopharmaceutical.
    Comment: Several commenters expressed support for CMS's proposal to 
make prospective payment for therapeutic radiopharmaceuticals using the 
ASP methodology in CY 2010 to pay the same ASP+4 percent payment rate 
that CMS proposed for separately payable nonpass-through drugs and 
nonimplantable biologicals. A few commenters suggested that CMS 
consider alternatives to the percentage-based add-on to ASP inherent in 
the single combined payment for acquisition and handling costs of ASP+4 
percent to better account for the more intensive handling that 
radiopharmaceuticals require. The

[[Page 60522]]

commenters recommended a variety of options, including a fixed add-on 
payment comparable to the complexity of handling involved, a 
consignment ASP method that would account for the costs associated with 
the handling of a radiopharmaceutical, the preparation of an invoice 
that would give a standard drug percentage for handling charges, or the 
establishment of some other separate payment mechanism to capture the 
costs of radiolabeling. One commenter suggested that CMS could create a 
Level II HCPCS code for hospitals to report their charges for 
radiolabeling conducted by a radiopharmacy, and hospital cost 
information developed from these charges could be used to establish a 
separate payment for radiolabeling services.
    Response: We appreciate the commenters' support for our proposal to 
make prospective payment for nonpass-through, separately payable 
therapeutic radiopharmaceuticals at the same ASP+4 percent payment rate 
for a ``patient-ready'' dose of a radiopharmaceutical that we establish 
for separately payable drugs and nonimplantable biologicals. In our 
response to the previous comment, we established our interpretation of 
``patient-ready'' for purposes of the OPPS to mean the ASP, reported in 
terms that reflect the applicable HCPCS code descriptor, for all 
component materials of the radiopharmaceutical and any additional 
processing, including radiolabeling, that is reflected in the price the 
manufacturer charges for the radiopharmaceutical so long as the fees 
paid for such additional processing meet the ``bona fide service fee'' 
test under the regulations implementing section 1847A of the Act. We 
explicitly note that because radiopharmaceuticals uniquely require 
radiolabeling of their component materials, we believe that for 
purposes of OPPS ASP reporting, radiolabeling could constitute a bona 
fide service on behalf of the manufacturer, and the fees for which 
could meet the ``bona fide service fee'' test. Given our position on 
radiolabeling, we similarly believe that significant processing costs 
associated with handling a radiopharmaceutical may be reflected in the 
prices used to calculate the manufacturer's ASP data for OPPS purposes. 
As noted above, the combined single payment for nonpass-through, 
separately payable therapeutic radiopharmaceutical acquisition and 
overhead costs embodied in the ASP+4 percent payment rate for CY 2010 
would address any other processing after the sale by the manufacturer, 
and we believe this payment is sufficient for these additional handling 
costs borne by the hospital. Under this interpretation of ``patient-
ready'' dose, we do not believe that making an additional payment for 
more intensive handling costs is necessary.
    We also do not believe that establishing a separate Level II HCPCS 
code to exclusively capture radiopharmaceutical handling costs is an 
appropriate approach when we have not adopted such an approach to 
capture the pharmacy overhead costs of other drugs and biologicals, 
which also may be substantial in some cases. We have heard from 
hospitals previously on the issue of separately reporting charges for 
pharmacy handling costs of drugs. In the CY 2007 OPPS/ASC final rule 
with comment period (71 FR 68090), we discussed our efforts to create a 
set of Level II HCPCS codes that hospitals would be able to use to 
indicate the relative resource levels of pharmacy handling involved in 
preparing a reported drug, biological, or radiopharmaceutical for 
administration. This methodology would have allowed us to begin 
collecting data on pharmacy overhead costs for possible use in future 
ratesetting calculations, yet we did not finalize this proposal due to 
the overwhelming response from the hospital community citing the 
tremendous administrative burden separately reporting these pharmacy 
handling codes and charges would have placed on hospital resources. We 
continue to believe that hospitals would likely view such an approach 
for radiopharmaceuticals alone as burdensome.
    Comment: Several commenters responded to CMS' request for public 
comments on the development of a crosswalk similar to the NDC/HCPCS 
crosswalk for separately payable drugs and biologicals. These 
commenters support a NDC/HCPCS ``crosswalk'' to allow ASP to be 
utilized.
    Response: We appreciate the commenter's support for implementing a 
``crosswalk'' for use for separately payable radiopharmaceuticals. We 
believe that an NDC/HCPCS crosswalk for nonpass-through, separately 
payable therapeutic radiopharmaceuticals and pass-through diagnostic 
and therapeutic radiopharmaceuticals that is similar to the crosswalk 
for separately payable drugs and biologicals is appropriate, and we 
will, therefore, work to develop and implement the appropriate NDC/
HCPCS crosswalk for separately payable radiopharmaceuticals.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35335), we stated that 
we continue to believe that the use of ASP information for OPPS payment 
would provide an opportunity to improve payment accuracy for separately 
payable radiopharmaceuticals by applying an established methodology 
that has already been successfully implemented under the OPPS for other 
separately payable drugs and biologicals. As is the case with other 
drugs and biologicals subject to ASP reporting under section 1847A of 
the Act, we stated that in order for a separately payable 
radiopharmaceutical to receive OPPS payment based on ASP beginning 
January 1, 2010, we would need to receive ASP information from the 
manufacturer no later than November 2, 2009 that would reflect 
separately payable radiopharmaceutical sales in the third quarter of CY 
2009 (July 1, 2009 through September 30, 2009). Our normal deadline for 
January submission is November 1, but because November 1 falls on a 
Sunday, the ASP submission deadline for January 2010 payment is 
November 2, 2009. We stated that these data would not be available for 
publication in the CY 2010 OPPS/ASC final rule with comment period but 
would be included in the January 2010 OPPS quarterly release that would 
update the payment rates for separately payable drugs, biologicals, and 
therapeutic radiopharmaceuticals based on the most recent ASP data, 
consistent with our customary practice over the past 4 years when we 
have used the ASP methodology for payment of separately payable drugs 
and biologicals under the OPPS. In addition, we proposed to receive 
information from radiopharmaceutical manufacturers that would allow us 
to calculate a unit dose cost estimate based on the applicable HCPCS 
code for the separately payable radiopharmaceutical.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35335), we 
acknowledged that we realized that not all therapeutic 
radiopharmaceutical manufacturers may be willing or able to submit ASP 
information for a variety of reasons. We proposed to provide payment at 
the OPPS ASP rate if ASP information is available for a given calendar 
year quarter or, if ASP information is not available, we proposed to 
provide payment based on the most recent hospital mean unit cost data 
that we have available. We indicated our belief that both methodologies 
represent an appropriate and adequate proxy for average hospital 
acquisition cost and associated handling costs for these products. 
Therefore, if ASP information for the appropriate period of sales 
related to payment in any CY 2010 quarter was not available, we 
proposed to rely on the CY 2008 mean unit cost

[[Page 60523]]

data derived from hospital claims to set the payment rates for 
therapeutic radiopharmaceuticals. We noted that this is not the usual 
OPPS process that relies on alternative data sources, such as WAC or 
AWP, when ASP information is temporarily unavailable, prior to 
defaulting to the mean unit cost from hospital claims data. We proposed 
a methodology specific to nonpass-through, separately payable 
therapeutic radiopharmaceuticals where we would immediately default to 
the mean unit cost from hospital claims data if sufficient ASP data 
were not available because we did not propose to require therapeutic 
radiopharmaceutical manufacturers to report ASP data at this time. We 
indicated that we did not believe that WAC or AWP is an appropriate 
proxy to provide OPPS payment for average therapeutic 
radiopharmaceutical acquisition cost and associated handling costs when 
manufacturers are not required to submit ASP data. Payment based on WAC 
or AWP under the established OPPS ASP methodology for payment of 
separately payable drugs and biologicals is usually temporary for a 
calendar quarter until a manufacturer is able to submit the required 
ASP data in accordance with the quarterly ASP submission timeframes for 
reporting under section 1847A of the Act. However, we were concerned 
that because ASP reporting for OPPS payment of separately payable 
therapeutic radiopharmaceuticals would not be required for CY 2010, a 
manufacturer's choice to not submit ASP could result in payment for a 
separately payable therapeutic radiopharmaceutical based on WAC or AWP 
for a full year, a result which we believed would be inappropriate. 
Therefore, for separately payable therapeutic radiopharmaceutical 
payment under the OPPS, we proposed that the OPPS ASP methodology would 
pay based on ASP, with payment based on mean unit cost from OPPS claims 
data if ASP data were not available for a calendar quarter.
    Recognizing that we may need to utilize mean unit cost data to pay 
for nonpass-through, separately payable therapeutic 
radiopharmaceuticals in CY 2010 if ASP data are not submitted, for the 
CY 2010 proposed rule we evaluated the mean unit cost information in 
the CY 2010 claims data for all therapeutic radiopharmaceuticals. We 
noticed that we had numerous claims with service units greater than one 
for HCPCS code A9543 (Yttrium Y-90 ibritumomab tiuxetan, therapeutic, 
per treatment dose, up to 40 millicuries) and A9545 (Iodine I-131 
tositumomab, therapeutic, per treatment dose), when the long 
descriptors for these therapeutic radiopharmaceuticals clearly indicate 
``per treatment dose'' and, therefore, we expected the service units on 
every claim to be one. In contrast, the other six therapeutic 
radiopharmaceuticals that would be separately payable in CY 2010 all 
include ``per millicurie'' in their HCPCS code descriptors, so 
reporting multiple service units for those items could be appropriate. 
We did not believe that hospitals billing more than one unit of HCPCS 
code A9543 or A9545 on a claim were correctly reporting these products 
and, therefore, we believed that these claims were incorrectly coded. 
Although we do not normally examine hospital reporting patterns for 
individual services, pricing an individual item, such as a therapeutic 
radiopharmaceutical with low volume, may argue for more aggressive 
trimming to remove inaccurate claims. Therefore, we removed all claims 
with units greater than one for these two therapeutic 
radiopharmaceuticals before estimating their mean unit costs. Because 
we did not have ASP data for therapeutic radiopharmaceuticals that were 
used for payment in April 2009, the proposed payment rates included in 
Addenda A and B to the proposed rule were based on mean costs from 
historical hospital claims data available for the proposed rule, 
subject to the additional trimming of incorrectly coded claims for 
HCPCS codes A9543 and A9545 as described above.
    Similar to the ASP process already in place for separately payable 
drugs and biologicals under the OPPS, we proposed to update ASP data 
for therapeutic radiopharmaceuticals through our quarterly process as 
updates become available. In addition, we proposed to assess the 
availability of ASP data for therapeutic radiopharmaceuticals 
quarterly, and if ASP data become available midyear, we proposed to 
transition at the next available quarter to ASP-based payment. For 
example, if ASP data are not available for the quarter beginning 
January 2010 (that is, ASP information reflective of third quarter CY 
2009 sales are not submitted in November 2009), then the next 
opportunity to begin payment based on ASP data for a therapeutic 
radiopharmaceutical would be April 2010 if ASP data reflective of 
fourth quarter CY 2009 sales were submitted in February 2010.
    Comment: Many commenters agreed with CMS' proposal to permit, but 
not require, radiopharmaceutical manufacturers to submit ASP data. One 
commenter encouraged CMS to obtain data from all therapeutic 
radiopharmaceutical manufacturers across all therapeutic 
radiopharmaceuticals, not just a few. Several commenters expressed 
concern over the proposed immediate collection of ASP data from 
manufacturers for the January 2010 OPPS quarterly update. They stated 
that manufacturers would need an adequate amount of time to submit ASP 
data for the third quarter of CY 2009 (July 1, 2009 through September 
30, 2009).
    A few commenters recommended that CMS establish a transition period 
of 6 months or longer to provide more time for manufacturers to compile 
and submit ASP data. Another commenter recommended that CMS accept 
therapeutic radiopharmaceutical ASP data 30 days after finalizing and 
publishing CMS' CY 2010 OPPS/ASC final rule. This would extend the 
deadline for which ASP data would be submitted for the January 2010 
OPPS quarterly update from the usual November 2, 2009 ASP submission 
deadline to November 30, 2009.
    During a transition period, several commenters recommended that CMS 
continue its current policy of paying for therapeutic 
radiopharmaceuticals at charges adjusted to cost, as opposed to the 
proposed default of mean unit cost derived from claims data. A number 
of commenters requested open dialogue with CMS on what a manufacturer 
would need to submit to accurately report ASP for a ``patient-ready'' 
radiopharmaceutical dose.
    Response: We appreciate the commenters' support for our proposal to 
pay for nonpass-through, separately payable therapeutic 
radiopharmaceuticals in CY 2010 using the ASP methodology. We proposed 
to allow manufacturers to submit ASP information for any nonpass-
through, separately payable therapeutic radiopharmaceutical in order to 
establish an ASP+4 percent payment rate under the OPPS for the 
therapeutic radiopharmaceutical beginning in CY 2010. Consistent with 
our authority to collect data in order to determine payment amounts, we 
intend to collect ASP data for separately payable nonpass-through and 
pass-through therapeutic radiopharmaceuticals (and diagnostic 
radiopharmaceuticals with pass-through status), adopting the same 
submission requirements as we do for drugs and biologicals under 
section 1847A of the Act and the corresponding regulations, except as 
otherwise specified in this final rule with comment period for specific 
OPPS purposes. As we stated in the CY 2010

[[Page 60524]]

OPPS/ASC proposed rule (74 CR 35335), we continue to believe that the 
use of ASP information for OPPS payment would provide an opportunity to 
improve payment accuracy for separately payable radiopharmaceuticals by 
applying an established methodology that has already been successfully 
implemented under the OPPS to set prospective payment rates for other 
separately payable drugs and biologicals.
    In recognizing the potential burden involved in reporting ASP data 
and our belief in the accuracy of prospective payment rates based on 
claims data, we did not propose to require manufacturers to submit ASP 
information. Although one commenter suggested that we collect ASP from 
all manufacturers of therapeutic radiopharmaceuticals, we continue to 
believe that the challenges involved in reporting ASP for 
radiopharmaceuticals, given the variety of manufacturing processes, are 
significant in some cases and, therefore, that payment based on mean 
unit cost from historical hospital claims data offers the best proxy 
for average hospital acquisition cost and associated handling costs for 
a radiopharmaceutical in the absence of ASP. We continue to believe 
that we should allow, but not require, manufacturers to submit ASP 
information for therapeutic radiopharmaceuticals. If ASP information is 
unavailable for a therapeutic radiopharmaceutical, meaning if a 
manufacturer is not willing or not able to submit ASP information, we 
will provide payment based on the mean unit cost of the product that is 
applicable to payment rates for the year the nonpass-through 
therapeutic radiopharmaceutical is administered. We continue to believe 
that both methodologies represent an appropriate proxy for average 
hospital acquisition cost and associated handling costs for nonpass-
through, separately payable therapeutic radiopharmaceuticals. We expect 
manufacturers to submit ASP data for all component materials and any 
``bona fide service fees'' that are reflected in the price for 
additional processing to produce the separately payable 
radiopharmaceutical, in an aggregated form in per millicurie or per 
dosage unit that matches the HCPCS code descriptor for that 
radiopharmaceutical. We note that the separately payable, nonpass-
through therapeutic radiopharmaceutical payment rates listed in Addenda 
A and B to this final rule with comment period are the mean unit costs 
from CY 2008 hospital claims data, subject to the additional trimming 
of incorrectly coded claims for HCPCS codes A9543 and A9545 as proposed 
and described above, that we would use for payment of a separately 
payable radiopharmaceutical if ASP information from the manufacturer 
were not submitted for the product for the applicable OPPS payment 
quarter.
    For CY 2010, we are not implementing a transition period of payment 
at charges adjusted to cost for therapeutic radiopharmaceuticals. We 
note that section 1833(t)(16)(C) of the Act continues the payment 
period for therapeutic radiopharmaceuticals based on a hospital's 
charges adjusted to cost through December 31, 2009, and this 
requirement expires beginning CY 2010. We believe it would not be 
consistent with the statutory expiration of the charges-adjusted-to-
cost payment methodology to continue payment using this approach for 
any portion of CY 2010. For manufacturers that cannot initially submit 
ASP data, we believe that mean cost payment for a nonpass-through, 
separately payable therapeutic radiopharmaceutical provides our best 
proxy estimate of average hospital acquisition cost and associated 
handling costs and implements prospective payment. In examining the CY 
2008 claims data, aggregate therapeutic radiopharmaceutical payment at 
mean unit cost would be comparable to payment at charges adjusted to 
cost in CY 2010 assuming no charge inflation between CY 2008 and CY 
2010, and we observe deflation in per unit charges for some therapeutic 
radiopharmaceuticals between CY 2007 and CY 2008 claims. Finally, 
because we proposed to update payment based on ASP submissions on a 
quarterly basis, manufacturers would not need to wait one year to be 
paid based on ASP but could work toward submitting ASP data for April 
2010 payment if they were unable to provide data for January 2010 
payment.
    We recognize that the timeframe for submitting ASP information by 
November 2, 2009, to begin ASP-based payment on January 1, 2010 is 
extremely close to the display date of this final rule with comment 
period. While we expect that most manufacturers interested in reporting 
ASP for their therapeutic radiopharmaceutical already have begun the 
process of compiling that data given that we have proposed ASP-based 
payment under the OPPS for nonpass-through, separately payable 
therapeutic radiopharmaceuticals for 2 years in a row, we understand 
that manufacturers will not have had the opportunity to consider our 
discussion in this final rule with comment period that clarifies the 
term ``patient-ready'' in their preparation of ASP data for OPPS 
purposes. As suggested by the commenters, we recognize that some 
manufacturers may need to discuss with us how to report ASP for a 
``patient-ready'' dose of their particular radiopharmaceutical. We 
encourage manufacturers with questions regarding their submissions to 
contact us, especially if they intend to submit by November 2, 2009. 
Manufacturers can contact us immediately by sending an email to the 
OPPS mailbox: [email protected]. We will be monitoring this 
mailbox closely. We will provide any assistance that we can within the 
confines of the ASP quarterly production schedule to facilitate 
accurate and timely reporting of ASP and payment based on ASP as early 
as possible. To further our commitment to helping manufacturers submit 
ASP data in a timely fashion, we also intend to post guidance on the 
definition of ``patient-ready'' dose for reporting radiopharmaceutical 
ASP for OPPS use, and on how manufacturers should compile and submit 
ASP data for that dose on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/05_OPPSGuidance.asp#TopOfPage, at about the time 
that this final rule with comment period goes in display at the Federal 
Register.
    Comment: One commenter expressed concern over CMS proposal to pay 
for therapeutic radiopharmaceuticals using the ASP methodology for CY 
2010. The commenter stated that the methodology established in the 
proposal, to pay for therapeutic radiopharmaceuticals under the ASP 
methodology and if ASP is unavailable to make payment based upon the 
most recent hospital mean unit cost data that CMS has available, would 
not provide accurate data and, therefore, would not pay accurately for 
therapeutic radiopharmaceuticals. The commenter was skeptical that 
manufacturers would submit ASP data in a timely and accurate manner, 
because the commenter believed manufacturers have little incentive to 
do so. The commenter recommended that CMS base payment on hospital 
invoice data in order to provide accurate payment.
    Response: We disagree with the commenter and continue to believe 
that providing payment for therapeutic radiopharmaceuticals based on 
ASP or mean unit cost if ASP information is not available would provide 
appropriate payment for these products. We acknowledge in the proposed 
rule (74 FR 35335) that some manufacturers may be unable or unwilling 
to submit ASP

[[Page 60525]]

data for the CY 2010 January OPPS quarterly update and we, therefore, 
proposed to make payment based on the most recent hospital mean unit 
cost data that we have available for therapeutic radiopharmaceuticals 
if ASP is not available. Many other commenters, including 
radiopharmaceutical manufacturers, stated that manufacturers have a 
significant incentive to submit ASP information because they believe 
payment based on the default of mean unit cost would not be most 
reflective of the cost to hospitals to acquire these products. 
Furthermore, some therapeutic radiopharmaceutical manufacturers already 
submit ASP data for separately payable drugs and biologicals and, 
therefore, are familiar with the submission process, including its 
timing and other requirements. As we stated previously, we continue to 
believe that the use of ASP information for OPPS payment would provide 
an opportunity to improve payment accuracy for nonpass-through, 
separately payable therapeutic radiopharmaceuticals by applying an 
established methodology that has already been successfully implemented 
under the OPPS for other separately payable drugs and biologicals. The 
OPPS has relied upon ASP information as an accurate method for 
providing payment for drugs and biologicals for several years.
    Comment: One commenter requested that CMS not include payment rates 
based on mean unit cost for therapeutic radiopharmaceuticals in the 
Addenda to the CY 2010 OPPS/ASC final rule with comment period when a 
manufacturer intends to report ASP information for CY 2010. The 
commenter offered this recommendation in order to avoid having other 
payers that utilize Medicare payment rates adopt these payment rates 
that the commenter believes will never be those paid to hospitals in CY 
2010.
    Response: We believe that payment at mean unit cost would 
appropriately pay for the average hospital acquisition cost and 
associated handling costs of nonpass-through, separately payable 
therapeutic radiopharmaceuticals if ASP data are not available. 
Therefore, we have included the mean unit cost amounts for nonpass-
through, separately payable therapeutic radiopharmaceuticals in Addenda 
A and B to this CY 2010 OPPS/ASC final rule with comment period that 
would be used for payment in any CY 2010 calendar quarter for which ASP 
information is not submitted by the product's manufacturer(s). 
Inclusion of mean unit cost for all nonpass-through, separately payable 
therapeutic radiopharmaceuticals in the addenda is unique to CY 2010, 
because we have no ASP information available for these products based 
on their payment in CY 2009. For future years, based on our usual final 
rule addenda publication policy, we note that if a radiopharmaceutical 
manufacturer has submitted ASP for OPPS payment in October 2010, as 
long as our CY 2011 payment methodology for nonpass-through, separately 
payable therapeutic radiopharmaceuticals relies on ASP, we would 
publish a payment rate in the CY 2011 OPPS/ASC final rule with comment 
period that reflects the radiopharmaceutical's third quarter CY 2010 
ASP information.
    We follow this final rule addenda publication policy based on our 
general expectation that drugs and biologicals with ASP information 
available for payment in the fourth quarter of CY 2009 will have ASP 
information available for payment in the first quarter of CY 2010. 
Therefore, we believe that posting illustrative CY 2010 payment rates 
for drugs and biologicals based on the October 2009 ASP information, 
rather than mean unit cost, provides a better illustration of the 
likely payment rates for these product in January 2010. In the event 
that we have no ASP information for a therapeutic radiopharmaceutical 
or any other drug or biological paid based on the ASP methodology for 
any quarter of CY 2010, the applicable mean unit cost for payment of 
the product in CY 2010 is available on the CMS web site in the OPPS 
drug median file that is posted as supporting information for this 
final rule with comment period at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage.
    Comment: One commenter requested that CMS establish a temporary 
Level II HCPCS C-code, effective January 1, 2010, to be used in CY 2010 
to report the product currently described by HCPCS code A9605 (Samarium 
Sm-153 Lexidronam, per 50 millicuries). The commenter recommended that 
CMS replace the current ``per 50 millicuries'' in the code descriptor 
with ``per treatment dose'' in the HCPCS C-code descriptor. The 
commenter stated that the current code descriptor for HCPCS code A9605 
is problematic for coding and ASP reporting purposes because of the 
decay in radiopharmaceutical radioactivity. Under the existing code 
descriptor of ``per 50 millicuries,'' while the manufacturer would 
report ASP for the HCPCS code based on the radioactivity level of the 
product at the time of sale, the hospital would report units of the 
HCPCS code based on the dose administered to the patient at a later 
point in time, and there would be a mismatch between the reported price 
and the dose actually administered to the patient. The commenter 
concluded that reporting the sales and administration of this product 
on a ``per treatment dose'' basis would allow ASP information to be 
aligned with payment for the product under the OPPS, taking into 
consideration radioactive decay over time since administration would 
always occur after the manufacturer's sale of the product.
    Response: We understand the concerns raised by the commenter in 
regards to the current code descriptor for A9605. In response to these 
concerns, CMS' HCPCS Workgroup has decided to create a new HCPCS code, 
A9604 Samarium SM-153 lexidronam, therapeutic, per treatment dose, up 
to 150 millicuries), effective January 1, 2010, and delete existing 
HCPCS code A9605. This new code should facilitate alignment between ASP 
reporting by the manufacturer and hospital reporting of administration 
on a ``per treatment dose'' basis. We note that the default payment 
rate for HCPCS code A9604 included in Addendum A and B to this final 
rule with comment period is based on the per-day mean unit cost of 
HCPCS code A9605. We believe that the CY 2008 hospital per-day cost of 
HCPCS code A9605 reflects the cost of a single treatment dose and, 
therefore, it is the mean per-day cost that we will use for payment of 
new HCPCS code A9604 in CY 2010 if ASP information is not available.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to pay all 
nonpass-through, separately payable therapeutic radiopharmaceuticals at 
ASP+4 percent based on ASP information, if available, for a ``patient-
ready'' dose beginning on January 1, 2010, and updated on a quarterly 
basis for products for which manufacturers report ASP data. We are 
defining a ``patient-ready'' dose for OPPS purposes as including all 
component materials of the radiopharmaceutical, at a minimum, and any 
other processing the manufacturer requires to produce the 
radiopharmaceutical that it sells that are reflected in the sales 
price, including radiolabeling, as long as any fees paid for such 
processing done on behalf of the manufacturer meet the definition of 
``bona fide service fees'' under Sec.  414.802. We also are finalizing 
our CY 2010 proposal, without modification, to base nonpass-through, 
separately payable therapeutic radiopharmaceutical payment on mean

[[Page 60526]]

unit cost derived from CY 2008 claims data when ASP pricing is not 
available. The nonpass-through therapeutic radiopharmaceuticals that 
are separately payable in CY 2010 are identified in Table 42 below. The 
CY 2010 payment rates for these products included in Addenda A and B to 
this final rule with comment period are based on mean unit cost. 
Moreover, we note that, should ASP be submitted timely for January 2010 
OPPS payment, according to our usual process for updating the payment 
rates for separately payable drugs and biologicals on a quarterly basis 
if updated ASP information is available, these payment rates will be 
updated through the January 2010 OPPS quarterly release.

             Table 42--CY 2010 Nonpass-Through, Separately Payable Therapeutic Radiopharmaceuticals
----------------------------------------------------------------------------------------------------------------
                                                                                           Final  CY   Final  CY
               CY 2010 HCPCS code                         CY 2010 long descriptor           2010 APC   2010  SI
----------------------------------------------------------------------------------------------------------------
A9517...........................................  Iodine I-131 sodium iodide capsule(s),        1064          K
                                                   therapeutic, per millicurie.
A9530...........................................  Iodine I-131 sodium iodide solution,          1150          K
                                                   therapeutic, per millicurie.
A9543...........................................  Yttrium Y-90 ibritumomab tiuxetan,            1643          K
                                                   therapeutic, per treatment dose, up to
                                                   40 millicuries.
A9545...........................................  Iodine I-131 tositumomab, therapeutic,        1645          K
                                                   per treatment dose.
A9563...........................................  Sodium phosphate P-32, therapeutic, per       1675          K
                                                   millicurie.
A9564...........................................  Chromic phosphate P-32 suspension,            1676          K
                                                   therapeutic, per millicurie.
A9600...........................................  Strontium Sr-89 chloride, therapeutic,        0701          K
                                                   per millicurie.
A9604...........................................  Samarium SM-153 lexidronam,                   1295          K
                                                   therapeutic, per treatment dose, up to
                                                   150 millicuries.
----------------------------------------------------------------------------------------------------------------

6. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, but Without OPPS Hospital Claims 
Data
    Public Law 108-173 does not address the OPPS payment in CY 2005 and 
after for drugs, biologicals, and radiopharmaceuticals that have 
assigned HCPCS codes, but that do not have a reference AWP or approval 
for payment as pass-through drugs or biologicals. Because there is no 
statutory provision that dictated payment for such drugs, biologicals, 
and radiopharmaceuticals in CY 2005, and because we had no hospital 
claims data to use in establishing a payment rate for them, we 
investigated several payment options for CY 2005 and discussed them in 
detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 
through 65799).
    For CYs 2005 to 2007, we implemented a policy to provide separate 
payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS 
codes (specifically those new drug, biological, and radiopharmaceutical 
HCPCS codes in each of those calendar years that did not crosswalk to 
predecessor HCPCS codes) but which did not have pass-through status, at 
a rate that was equivalent to the payment they received in the 
physician's office setting, established in accordance with the ASP 
methodology for drugs and biologicals, and based on charges adjusted to 
cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a 
policy to provide payment for new drugs (excluding contrast agents) and 
biologicals (excluding implantable biologicals for CY 2009) with HCPCS 
codes, but which did not have pass-through status and were without OPPS 
hospital claims data, at ASP+5 percent and ASP+4 percent, respectively, 
consistent with the final OPPS payment methodology for other separately 
payable drugs and biologicals. New therapeutic radiopharmaceuticals 
were paid at charges adjusted to cost based on the statutory 
requirement for CY 2008 and CY 2009 and payment for new diagnostic 
radiopharmaceuticals was packaged in both years. In the CY 2010 OPPS/
ASC proposed rule (74 FR 35336 through 35337), for CY 2010, we proposed 
to continue the CY 2009 payment methodology for new drugs (excluding 
contrast agents) and nonimplantable biologicals and extend the 
methodology to payment for new therapeutic radiopharmaceuticals, when 
their period of payment at charges adjusted to cost no longer would 
apply. Therefore, for CY 2010, we proposed to provide payment for new 
drugs (excluding contrast agents), nonimplantable biologicals, and 
therapeutic radiopharmaceuticals with HCPCS codes (those new CY 2010 
drug (excluding contrast agents), nonimplantable biological, and 
therapeutic radiopharmaceutical HCPCS codes that do not crosswalk to CY 
2009 HCPCS codes), but which do not have pass-through status and are 
without OPPS hospital claims data, at ASP+4 percent, consistent with 
the proposed CY 2010 payment methodology for other separately payable 
nonpass-through drugs, nonimplantable biologicals, and therapeutic 
radiopharmaceuticals. We believed this proposed policy would ensure 
that new nonpass-through drugs, nonimplantable biologicals, and 
therapeutic radiopharmaceuticals would be treated like other drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals under 
the OPPS, unless they are granted pass-through status. Only if they are 
pass-through drugs, nonimplantable biologicals, or therapeutic 
radiopharmaceuticals would they receive a different payment for CY 
2010, generally equivalent to the payment these drugs and biologicals 
would receive in the physician's office setting, consistent with the 
requirements of the statute. We proposed to continue packaging payment 
for all new nonpass-through diagnostic radiopharmaceuticals, contrast 
agents, and implantable biologicals with HCPCS codes (those new CY 2010 
diagnostic radiopharmaceutical, contrast agent, and implantable 
biological HCPCS codes that do not crosswalk to predecessor HCPCS 
codes), consistent with the proposed packaging of all existing nonpass-
through diagnostic radiopharmaceuticals, contrast agents and 
implantable biologicals, as discussed in more detail in the proposed 
rule (74 FR 35323 through 35324).
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, in the CY 2010 OPPS/ASC proposed rule (74 FR 35336), for CY 2010, 
we proposed to continue the policy we implemented beginning in CY 2005 
of using the WAC for the product to establish the initial payment rate 
for new nonpass-through drugs and biologicals with HCPCS codes, but 
which are without OPPS claims data. However, we note that if the WAC is

[[Page 60527]]

also unavailable, we would make payment at 95 percent of the product's 
most recent AWP. We also proposed to assign status indicator ``K'' to 
HCPCS codes for new drugs and nonimplantable biologicals without OPPS 
claims data and for which we have not granted pass-through status. We 
further noted that, with respect to new items for which we do not have 
ASP data, once their ASP data become available in later quarter 
submissions, their payment rates under the OPPS would be adjusted so 
that the rates would be based on the ASP methodology and set to the 
finalized ASP-based amount (proposed for CY 2010 at ASP+4 percent) for 
items that have not been granted pass-through status.
    We did not receive any public comments specific to these proposals. 
While commenters, in general, objected to payment for drugs and 
biologicals at ASP+4 percent, these comments were not specific to new 
drugs and biologicals with HCPCS codes but without OPPS claims data. 
Further, we summarize the general public comments on payment for 
separately payable drugs and provide our responses in section V.B.3.b. 
of this final rule with comment period. In addition, commenters on the 
CY 2010 OPPS/ASC proposed rule objected to packaging payment for 
diagnostic radiopharmaceuticals and contrast agents in general, but 
these comments were not directed to new diagnostic radiopharmaceuticals 
or contrast agents with HCPCS codes but without OPPS claims data. We 
summarize these comments and provide our responses in section V.A.2.d. 
of this final rule with comment period.
    Therefore, we are finalizing our CY 2010 proposals, without 
modification, as follows: Payment for new drugs (excluding contrast 
agents), nonimplantable biologicals, and therapeutic 
radiopharmaceuticals with HCPCS codes, but which do not have pass-
through status and are without OPPS hospital claims data, will be made 
at ASP+4 percent for CY 2010. In cases where ASP information is not 
available, payment will be made using WAC, and if WAC is also 
unavailable payment will be made at 95 percent of the most recent AWP. 
Further, payment for all new nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals with 
HCPCS codes but without OPPS claims data will be packaged for CY 2010. 
Finally, we are assigning status indicator ``K'' to HCPCS codes for new 
drugs and nonimplantable biologicals without OPPS claims data and for 
which we have not granted pass-through status in CY 2010.
    For CY 2010, we also proposed to base payment for new therapeutic 
radiopharmaceuticals with HCPCS codes as of January 1, 2010, but which 
do not have pass-through status, on the WACs for these products if ASP 
data for these therapeutic radiopharmaceuticals are not available. If 
the WACs are also unavailable, we proposed to make payment for new 
therapeutic radiopharmaceuticals at 95 percent of their most recent 
AWPs because we would not have mean costs from hospital claims data 
upon which to base payment. Analogous to new drugs and biologicals, we 
proposed to assign status indicator ``K'' to HCPCS codes for new 
therapeutic radiopharmaceuticals for which we have not granted pass-
through status.
    We did not receive any public comments specific to our proposal for 
new therapeutic radiopharmaceuticals with HCPCS codes but without pass-
through status. However, commenters on the CY 2010 OPPS/ASC proposed 
rule were supportive of the ASP methodology, in general, for payment 
for therapeutic radiopharmaceuticals in the HOPD, and we are finalizing 
an ASP payment methodology for separately payable therapeutic radio- 
pharmaceuticals for CY 2010 as discussed in section V.B.5. of this 
final rule with comment period.
    Therefore, we are finalizing our CY 2010 proposals, without 
modification, to provide payment for new therapeutic 
radiopharmaceuticals with HCPCS codes but without pass-through status, 
if ASP information is not available, based on WAC. If WAC information 
is also unavailable, we will make payment for new therapeutic 
radiopharmaceuticals at 95 percent of their most recent AWP. In 
addition, we are assigning status indicator ``K'' to HCPCS codes for 
new therapeutic radiopharmaceuticals in CY 2010 that do not have pass-
through status.
    Consistent with other ASP-based payments, for CY 2010, we proposed 
to announce any changes to the payment amounts for new drugs and 
biologicals in the CY 2010 OPPS/ASC final rule with comment period and 
also on a quarterly basis on the CMS Web site during CY 2010 if later 
quarter ASP submissions (or more recent WACs or AWPs) indicate that 
changes to the payment rates for these drugs and biologicals are 
necessary. The payment rates for new therapeutic radiopharmaceuticals 
would also be changed accordingly, based on later quarter ASP 
submissions. We note that the new CY 2010 HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals were not available at 
the time of development of the proposed rule. However, they are 
included in Addendum B to this CY 2010 OPPS/ASC final rule with comment 
period. They are assigned comment indicator ``NI'' in Addendum B to 
reflect that their interim final OPPS treatment is open to public 
comment on the CY 2010 OPPS/ASC final rule with comment period.
    We did not receive any public comments on our proposal to announce, 
via the CMS Web site, any changes to the OPPS payment amounts for new 
drugs and biologicals on a quarterly basis. Therefore, we are 
finalizing our proposals and will update payment rates for new drugs, 
biologicals, and therapeutic radiopharmaceuticals, as necessary, in 
association with our quarterly update process and provide this 
information on the CMS Web site.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2008 and/or CY 2009 for which we did not have any CY 2008 
hospital claims data available for the proposed rule and for which 
there were no other HCPCS codes that describe different doses of the 
same drug but for which we did have pricing information for the ASP 
methodology. In the CY 2010 OPPS/ASC proposed rule (74 FR 35337), we 
noted that there are currently no therapeutic radiopharmaceuticals in 
this category. In order to determine the packaging status of these 
products for CY 2010, we calculated an estimate of the per day cost of 
each of these items by multiplying the payment rate for each product 
based on ASP+4 percent, similar to other nonpass-through drugs and 
biologicals paid separately under the OPPS, by an estimated average 
number of units of each product that would typically be furnished to a 
patient during one administration in the hospital outpatient setting. 
We proposed to package items for which we estimated the per 
administration cost to be less than or equal to $65, which is the 
general packaging threshold that we proposed for drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals in CY 2010. We 
proposed to pay separately for items with an estimated per day cost 
greater than $65 (with the exception of diagnostic 
radiopharmaceuticals, contrast agents and implantable biologicals, 
which we proposed to continue to package regardless of cost, as 
discussed in more detail in the proposed rule (74 FR 35323 through 
35324)) in CY 2010. We proposed that the CY 2010 payment for separately 
payable items without CY 2008 claims

[[Page 60528]]

data would be ASP+4 percent, similar to payment for other separately 
payable nonpass-through drugs and biologicals under the OPPS. In 
accordance with the ASP methodology used in the physician's office 
setting, in the absence of ASP data, we proposed to use the WAC for the 
product to establish the initial payment rate. However, we note that if 
the WAC is also unavailable, we would make payment at 95 percent of the 
most recent AWP available.
    We did not receive any public comments on our proposal to use 
estimated per day costs for these drugs and biologicals or on the 
resulting packaging status of these drugs and biologicals. Therefore, 
we are finalizing our CY 2010 proposal, without, modification to use 
the estimated number of units per day included in Table 43 below to 
determine estimated per day costs for the corresponding drugs and 
biologicals for CY 2010. Further, we are finalizing our proposal to 
package those drugs with an estimated per day cost less than or equal 
to $65 and to provide separate payment for those drugs and biologicals 
with estimated per day costs over $65 for CY 2010. For those drugs and 
biologicals that we determined to be separately payable in CY 2010, 
payment will be made at ASP+4 percent. If ASP information is not 
available, payment will be based on WAC or 95 percent of the most 
recently published AWP if WAC is not available. The final estimated 
units per day and status indicators for these items are displayed in 
Table 43 below.

                           Table 43--Drugs and Biologicals Without CY 2008 Claims Data
----------------------------------------------------------------------------------------------------------------
                                                                              Estimated
                                                                           average number   Final CY    Final CY
           CY 2010 HCPCS code                 CY 2010 long descriptor       of units per     2010 SI    2010 APC
                                                                           administration
----------------------------------------------------------------------------------------------------------------
90681...................................  Rotavirus vaccine, human,                   1            K        1239
                                           attenuated, 2 dose schedule,
                                           live, for oral use.
90696...................................  Diphtheria, tetanus toxoids,                1            N   .........
                                           acellular pertussis vaccine
                                           and poliovirus vaccine,
                                           inactivated (DTaP-IPV), when
                                           administered to children 4
                                           through 6 years of age, for
                                           intramuscular use.
J0364...................................  Injection, apomorphine                     12            N   .........
                                           hydrochloride, 1 mg.
J2724...................................  Injection, protein c                     2240            K        1139
                                           concentrate, intravenous,
                                           human, 10 iu.
J3355...................................  Injection, urofollitropin, 75               2            K        1741
                                           IU.
J9215...................................  Injection, interferon, alfa-n3,             5            K        0865
                                           (human leukocyte derived),
                                           250,000 iu.
----------------------------------------------------------------------------------------------------------------

    Finally, there were eight drugs and biologicals, shown in Table 31 
of the CY 2010 OPPS/ASC proposed rule (74 FR 35337), that were payable 
in CY 2008, but for which we lacked CY 2008 claims data and any other 
pricing information for the ASP methodology for the CY 2010 OPPS/ASC 
proposed rule. In CY 2009, for similar items without CY 2007 claims 
data and without pricing information for the ASP methodology, we stated 
that we were unable to determine their per day cost and we packaged 
these items for the year, assigning these items status indicator ``N.''
    For CY 2010, we proposed to change the status indicator for eight 
drugs and biologicals shown in Table 31 of the CY 2010 OPPS/ASC 
proposed rule (74 FR 35337) to status indicator ``E'' (Not paid by 
Medicare when submitted on outpatient claims (any outpatient bill 
type)) as we understood that these drugs and biologicals are not 
currently sold or have been identified as obsolete. In addition, we 
proposed to provide separate payment for these drugs and biologicals if 
pricing information reflecting recent sales becomes available mid-year 
in CY 2010 for the ASP methodology. If pricing information becomes 
available, we would assign the products status indicator ``K'' and pay 
for them separately for the remainder of CY 2010.
    We did not receive any public comments on our proposal to change 
the status indicators for drugs and biologicals without claims data or 
pricing information for the ASP methodology. Therefore, we are 
finalizing our CY 2010 proposal, without modification, to assign status 
indicator ``E'' to these drugs and biologicals. As we have used updated 
claims data and ASP pricing information for this final rule with 
comment period, we have newly identified for this final rule with 
comment period CPT codes 90393 (Vaccinia immune globulin, human, for 
intramuscular use); 90477 (Adenovirus vaccine, type 7, live, for oral 
use); 90644 (Meningococcal conjugate vaccine, serogroups C & Y and 
Hemophilus influenza b vaccine, tetanus toxoid conjugate (Hib-MenCY-
TT), 4-dose schedule, when administered to children 2-15 months of age, 
for intramuscular use); and 90670 (Pneumococcal conjugate vaccine, 13 
valent, for intramuscular use) as lacking CY 2008 claims data and any 
other pricing information for the ASP methodology. Therefore, in 
addition to the HCPCS codes we proposed to assign status indicator 
``E'' for CY 2010 on this basis in the proposed rule, we are assigning 
status indicator ``E'' to CPT codes 90393, 90477, 90644 and 90670 for 
CY 2010. All drugs and biologicals without CY 2008 hospital claims data 
and data based on the ASP methodology that are assigned status 
indicator ``E'' on this basis at the time of this final rule with 
comment period for CY 2010 are displayed in Table 44 below.

     Table 44--Drugs and Biologicals Without CY 2008 Claims Data and Without Pricing Information for the ASP
                                                   Methodology
----------------------------------------------------------------------------------------------------------------
                                                                                                       Final CY
             CY 2010 HCPCS code                              CY 2010 long descriptor                    2010 SI
----------------------------------------------------------------------------------------------------------------
90296......................................  Diphtheria antitoxin, equine, any route................          E
90393......................................  Vaccinia immune globulin, human, for intramuscular use.          E

[[Page 60529]]

 
90477......................................  Adenovirus vaccine, type 7, live, for oral use.........          E
90581......................................  Anthrax vaccine, for subcutaneous use..................          E
90644......................................  Meningococcal conjugate vaccine, serogroups C & Y and            E
                                              Hemophilus influenza b vaccine, tetanus toxoid
                                              conjugate (Hib-MenCY-TT), 4-dose schedule, when
                                              administered to children 2-15 months of age, for
                                              intramuscular use.
90670......................................  Pneumococcal conjugate vaccine, 13 valent, for                   E
                                              intramuscular use.
90727......................................  Plague vaccine, for intramuscular use..................          E
J0128......................................  Injection, abarelix, 10 mg.............................          E
J0350......................................  Injection, anistreplase, per 30 units..................          E
J0395......................................  Injection, arbutamine hcl, 1 mg........................          E
J1452......................................  Injection, fomivirsen sodium, intraocular, 1.65 mg.....          E
J2460......................................  Injection, oxytetracycline HCL, up to 50 mg............          E
----------------------------------------------------------------------------------------------------------------

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, radio- 
pharmaceuticals, and categories of devices for a given year to an 
``applicable percentage'' of total program payments estimated to be 
made under section 1833(t) of the Act for all covered services 
furnished for that year under the hospital OPPS. For a year before CY 
2004, the applicable percentage was 2.5 percent; for CY 2004 and 
subsequent years, we specify the applicable percentage up to 2.0 
percent.
    If we estimate before the beginning of the calendar year that the 
total amount of pass-through payments in that year would exceed the 
applicable percentage, section 1833(t)(6)(E)(iii) of the Act requires a 
uniform reduction in the amount of each of the transitional pass-
through payments made in that year to ensure that the limit is not 
exceeded. We make an estimate of pass-through spending to determine not 
only whether payments exceed the applicable percentage, but also to 
determine the appropriate reduction to the conversion factor for the 
projected level of pass-through spending in the following year in order 
to ensure that total estimated pass-through spending for the 
prospective payment year is budget neutral as required by section 
1883(t)(6)(E) of the Act.
    For devices, developing an estimate of pass-through spending in CY 
2010 entails estimating spending for two groups of items. The first 
group of items consists of device categories that were recently made 
eligible for pass-through payment and that would continue to be 
eligible for pass-through payment in CY 2010. The CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66778) describes the methodology 
we have used in previous years to develop the pass-through spending 
estimate for known device categories continuing into the applicable 
update year. The second group contains items that we know are newly 
eligible, or project would be newly eligible, for device pass-through 
payment in the remaining quarters of CY 2009 or beginning in CY 2010. 
As discussed in section V.A.4. of this final rule with comment period, 
we proposed that, beginning in CY 2010, the pass-through evaluation 
process and pass-through payment for implantable biologicals newly 
approved for pass-through payment beginning on or after January 1, 
2010, that are always surgically inserted or implanted (through a 
surgical incision or a natural orifice) would be the device pass-
through process and payment methodology only. Therefore, we proposed 
that the estimate of pass-through spending for implantable biologicals 
newly eligible for pass-through payment beginning in CY 2010 would be 
included in the pass-through spending estimate for this second group of 
device categories. The sum of the CY 2010 pass-through estimates for 
these two groups of device categories equals the total CY 2010 pass-
through spending estimate for device categories with pass-through 
status.
    For devices eligible for pass-through payment, section 
1833(t)(6)(D)(ii) of the Act establishes the pass-through amount as the 
amount by which the hospital's charges for the device, adjusted to 
cost, exceeds the portion of the otherwise applicable Medicare OPD fee 
schedule that the Secretary determines is associated with the device. 
As discussed in section IV.A.2. of this final rule with comment period, 
we deduct from the pass-through payment for an identified device 
category eligible for pass-through payment an amount that reflects the 
portion of the APC payment amount that we determine is associated with 
the cost of the device, defined as the device APC offset amount, when 
we believe that predecessor device costs for the device category newly 
approved for pass-through payment are already packaged into the 
existing APC structure. For each device category that becomes newly 
eligible for device pass-through payment, including an implantable 
biological under our CY 2010 proposal, we estimate pass-through 
spending to be the difference between payment for the device category 
and the device APC offset amount, if applicable, for the procedures 
that would use the device. If we determine that predecessor device 
costs for the new device category are not already included in the 
existing APC structure, the pass-through spending estimate for the 
device category would be the full payment at charges adjusted to cost.
    For drugs and biologicals eligible for pass-through payment, 
section 1833(t)(6)(D)(i) of the Act establishes the pass-through 
payment amount as the amount by which the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a competitive acquisition contract under section 1847B of the 
Act, an amount determined by the Secretary equal to the average price 
for the drug or biological for all competitive acquisition areas and 
year established under such section as calculated and adjusted by the 
Secretary) exceeds the portion of the otherwise applicable fee schedule 
amount that the Secretary determines is associated with the drug or 
biological. As we proposed, we are paying for most nonpass-through 
separately payable drugs and nonimplantable biologicals under the

[[Page 60530]]

CY 2010 OPPS at ASP+4 percent, which represents the otherwise 
applicable fee schedule amount associated with most pass-through drugs 
and biologicals, and because we are paying for CY 2010 pass-through 
drugs and nonimplantable biologicals at ASP+6 percent or the Part B 
drug CAP rate, if applicable, our estimate of drug and nonimplantable 
biological pass-through payment for CY 2010 is not zero. Furthermore, 
payment for certain drugs, specifically diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals 
without pass-through status, is always packaged into payment for the 
associated procedures because these products would never be separately 
paid. However, all pass-through diagnostic radiopharmaceuticals, 
contrast agents, and those implantable biologicals with pass-through 
status approved prior to CY 2010 are paid at ASP+6 percent or the Part 
B drug CAP rate, if applicable, like other pass-through drugs and 
biologicals. Therefore, our estimate of pass-through payment for all 
diagnostic radiopharmaceuticals and contrast agents and those 
implantable biologicals with pass-through status approved prior to CY 
2010 is also not zero.
    In section V.A.6. of this final rule with comment period, we 
discuss our policy to determine if the cost of certain ``policy-
packaged'' drugs, including diagnostic radiopharmaceuticals and 
contrast agents, are already packaged into the existing APC structure. 
If we determine that a ``policy-packaged'' drug approved for pass-
through payment resembles predecessor diagnostic radiopharmaceuticals 
or contrast agents already included in the costs of the APCs that would 
be associated with the drug receiving pass-through payment, as we 
proposed, we are offsetting the amount of pass-through payment for 
diagnostic radiopharmaceuticals and contrast agents. For these drugs, 
the APC offset amount is the portion of the APC payment for the 
specific procedure performed with the pass-through diagnostic 
radiopharmaceutical or contrast agent that is attributable to 
diagnostic radiopharmaceuticals or contrast agents, which we refer to 
as the ``policy-packaged'' drug APC offset amount. If we determine that 
an offset is appropriate for a specific diagnostic radiopharmaceutical 
or contrast agent receiving pass-through payment, we reduce our 
estimate of pass-through payment for these drugs by this amount. We 
have not established a policy to offset pass-through payment for 
implantable biologicals when approved for pass-through payment as a 
drug or biological, that is, for CY 2009 and earlier, so we consider 
full payment at ASP+6 percent for these implantable biologicals 
receiving biological pass-through payment in our estimate of CY 2010 
pass-through spending for drugs and biologicals.
    We note that the Part B drug CAP program has been suspended 
beginning January 1, 2009. We refer readers to the Medicare Learning 
Network (MLN) Matters Special Edition article SE0833 for more 
information on this suspension. As of the publication of the CY 2010 
OPPS/ASC proposed rule and this final rule with comment period, the 
Part B drug CAP program has not been reinstituted. Therefore, for this 
final rule with comment period, we are continuing to not have an 
effective Part B drug CAP rate for pass-through drugs and biologicals. 
Similar to estimates for devices, the first group of drugs and 
biologicals requiring a pass-through payment estimate consists of those 
products that were recently made eligible for pass-through payment and 
that continue to be eligible for pass-through payment in CY 2010. The 
second group contains drugs and nonimplantable biologicals that we know 
are newly eligible, or project would be newly eligible, in the 
remaining quarters of CY 2009 or beginning in CY 2010. The sum of the 
CY 2010 pass-through estimates for these two groups of drugs and 
biologicals equals the total CY 2010 pass-through spending estimate for 
drugs and biologicals with pass-through status.

B. Estimate of Pass-Through Spending

    For CY 2010, we proposed to set the applicable pass-through payment 
percentage limit at 2.0 percent of the total projected OPPS payments 
for CY 2010, consistent with our OPPS policy from CY 2004 through 2009 
(74 FR 35339).
    For the first group of devices for pass-through payment estimate 
purposes, there were no device categories receiving pass-through 
payment in CY 2009 that would continue for payment during CY 2010 (74 
FR 35339) and, therefore, we proposed a device pass-through payment 
estimate for the first group of pass-through device categories of $0.
    We also proposed for CY 2010 to use the device pass-through process 
and payment methodology for implantable biologicals that are always 
surgically inserted or implanted (through a surgical incision or a 
natural orifice). We proposed to consider existing implantable 
biologicals approved for pass-through payment under the drugs and 
biologicals pass-through provision prior to CY 2010 as drugs and 
biologicals for pass-through payment estimate purposes. We proposed to 
continue to consider these implantable biologicals that have been 
approved for pass-through status prior to CY 2010 drugs and biologicals 
until they expire from pass-through status. Therefore, the proposed 
pass-through spending estimate for the first group of pass-through 
devices did not include implantable biologicals that were granted pass-
through status prior to CY 2010. Finally, we proposed to provide 
payment for implantable biologicals newly eligible for pass-through 
payment beginning in CY 2010 based on hospital charges adjusted to 
cost, rather than the ASP methodology that is applicable to pass-
through drugs and biologicals. Therefore, we proposed that, beginning 
in CY 2010, the estimate of pass-through spending for implantable 
biologicals first paid as pass-through devices in CY 2010 would be 
based on the payment methodology for pass-through devices and would be 
included in the device pass-through spending estimate.
    In estimating our proposed CY 2010 pass-through spending for device 
categories in the second group, that is, device categories that we knew 
at the time of the development of the proposed rule would be newly 
eligible for pass-through payment in CY 2010 (of which there were 
none), additional device categories (including categories that describe 
implantable biologicals) that we estimated could be approved for pass-
through status subsequent to the development of the proposed rule and 
before January 1, 2010, and contingent projections for new categories 
(including categories that describe implantable biologicals in the 
second through fourth quarters of CY 2010), we proposed to use the 
general methodology described in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66778), while also taking into account recent 
OPPS experience in approving new pass-through device categories. There 
were no new device categories (including categories that describe 
implantable biologicals) for CY 2010 of which we were aware at the time 
of development of the proposed rule. The estimate of CY 2010 pass-
through spending for this second group of device categories was $10.0 
million for the proposed rule (74 FR 35339).
    Employing our established methodology that the estimate of pass-
through device spending in CY 2010 incorporates CY 2010 estimates of 
pass-through spending for known device categories continuing in CY 
2010, those known or projected to be first effective

[[Page 60531]]

January 1, 2010, and those device categories projected to be approved 
during subsequent quarters of CY 2009 or CY 2010, our proposed CY 2010 
estimate of total pass-through spending for device categories was $10.0 
million (74 FR 35339).
    To estimate CY 2010 proposed pass-through spending for drugs and 
biologicals in the first group, specifically those drugs (including 
radiopharmaceuticals and contrast agents) and biologicals (including 
implantable biologicals) recently made eligible for pass-through 
payment and continuing on pass-through status for CY 2010, we proposed 
to utilize the most recent Medicare physician's office data regarding 
their utilization, information provided in the respective pass-through 
applications, historical hospital claims data, pharmaceutical industry 
information, and clinical information regarding those drugs or 
biologicals, in order to project the CY 2010 OPPS utilization of the 
products.
    For the known drugs and biologicals (excluding diagnostic radio- 
pharmaceuticals, contrast agents, and implantable biologicals) that 
would be continuing on pass-through status in CY 2010, we estimated the 
proposed pass-through payment amount as the difference between ASP+6 
percent or the Part B drug CAP rate, as applicable, and ASP+4 percent, 
aggregated across the projected CY 2010 OPPS utilization of these 
products. Because payment for a diagnostic radiopharmaceutical or 
contrast agent would be packaged if the product were not paid 
separately due to its pass-through status, we included in the pass-
through estimate the difference between payment for the drug or 
biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if 
ASP information is not available) and the ``policy-packaged'' drug APC 
offset amount, if we determined that the diagnostic radiopharmaceutical 
or contrast agent approved for pass-through payment resembles 
predecessor diagnostic radiopharmaceuticals or contrast agents already 
included in the costs of the APCs that would be associated with the 
drug receiving pass-through payment. Because payment for an implantable 
biological continuing on pass-through status in CY 2010 would be 
packaged if the product were not paid separately due to its pass-
through status and because we have not established a pass-through 
payment offset policy for implantable biologicals when approved for 
pass-through payment as biologicals, that is, for CY 2009 and earlier, 
we included in the proposed pass-through spending estimate the full 
payment for these implantable biologicals at ASP+6 percent (or WAC+6 
percent or 95 percent of AWP, if ASP information is not available). We 
note that our spending estimate for this first group of drugs and 
biologicals was stated in the CY 2010 OPPS/ASC proposed rule as $8.9 
million (74 FR 35340), while our estimate for the second group of drugs 
and biologicals was reported as $19.1 million. We inadvertently 
mislabeled these two spending estimates in the CY 2010 OPPS/ASC 
proposed rule. For this first group of drugs and biologicals, the 
proposed spending estimate should have been reported as $19.1 million 
and the second group should have been reported as $8.9 million.
    To estimate CY 2010 pass-through spending for drugs and 
nonimplantable biologicals in the second group (that is, drugs and 
nonimplantable biologicals that we knew at the time of development of 
the proposed rule would be newly eligible for pass-through payment in 
CY 2010, additional drugs and nonimplantable biologicals that we 
estimated could be approved for pass-through status subsequent to the 
development of the proposed rule and before January 1, 2010, and 
projections for new drugs and nonimplantable biologicals that could be 
initially eligible for pass-through payment in the second through 
fourth quarters of CY 2010), we proposed to use utilization estimates 
from pass-through applicants, pharmaceutical industry data, clinical 
information, recent trends in the per unit ASPs of hospital outpatient 
drugs, and projected annual changes in service volume and intensity as 
our basis for making the CY 2010 proposed pass-through payment 
estimate. We also considered the most recent OPPS experience in 
approving new pass-through drugs and nonimplantable biologicals. As 
noted earlier, we also proposed to include new implantable biologicals 
that we expect to be approved for pass-through status as devices 
beginning in CY 2010 in the second group of items considered for device 
pass-through estimate purposes. Therefore, we did not include 
implantable biologicals in the second group of items in the proposed 
drug and biological pass-through spending estimate.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35314 through 35317), 
we proposed to revise our pass-through payment policy regarding ``new'' 
drugs and biologicals that were not receiving hospital outpatient 
payment as of December 31, 1996, and that also met the other criteria 
for receiving pass-through payment. Specifically, we proposed to change 
the start date of the pass-through payment eligibility period for a 
``new'' drug or biological from the first date on which pass-through 
payment is made to the date on which payment is first made for a drug 
or biological as an outpatient hospital service under Part B, using the 
date of first sale of the drug or biological in the United States after 
FDA approval as a proxy, to better reflect the statutory provisions for 
pass-through payment under section 1833(t)(6) of the Act. We expected 
that a number of the drugs and biologicals currently receiving pass-
through payment in CY 2009 would not be eligible for pass-through 
payment under the proposed revised definition of the pass-through 
payment eligibility period, Accordingly, for the CY 2010 OPPS/ASC 
proposed rule, we reduced our estimate of CY 2010 pass-through spending 
for new drugs and nonimplantable biologicals in the second group that 
could be initially eligible for pass-through payment beginning in CY 
2010 to take into consideration the potential effect of the proposed CY 
2010 pass-through payment eligibility period policy on the future 
number of drugs and biologicals newly approved for pass-through 
payment, in comparison with our historical OPPS experience over the 
past several years.
    As noted above, we inadvertently mislabeled the spending estimates 
for the two groups of drugs and biologicals in the CY 2010 OPPS/ASC 
proposed rule. Therefore, while we reported that the spending estimate 
for this second group of drugs and biologicals in the CY 2010 OPPS/ASC 
proposed rule was $19.1 million (74 FR 35340), the estimate that should 
have been reported for this second group of drugs and biologicals was 
$8.9 million.
    We did not receive any public comments on the proposed methodology 
to estimate pass-through spending for drugs, biologicals, 
radiopharmaceuticals, and device categories in CY 2010. However, we did 
receive public comments on our proposal to use the first date of sale 
in the United States after FDA approval as a proxy for the first date 
of payment under Medicare Part B as an outpatient hospital service for 
determining the pass-through payment eligibility period for pass-
through drugs and nonimplantable biologicals under the OPPS for CY 
2010, which would have reduced the pass-through payment estimate for 
drugs and nonimplantable biologicals. These public comments, our 
responses, and our final policy for CY 2010 are discussed in section 
V.A.5 of this final rule with comment period. As with our current 
policy, in CY 2010 the

[[Page 60532]]

pass-through payment eligibility period and the period of pass-through 
payment period will run concurrently. Thus, for our final CY 2010 pass-
through spending estimate for new drugs and nonimplantable biologicals 
that could be initially eligible for pass-through payment beginning in 
CY 2010, we have no need to reduce our estimate of pass-through 
spending to take into consideration a policy change in the pass-through 
payment eligibility period. Therefore, we are finalizing our proposed 
methodology to estimate annual pass-through spending for devices and 
drugs and nonimplantable biologicals, with the modification as 
described above.
    As stated in section V.A.4. of this final rule with comment period, 
as we proposed, beginning in CY 2010, implantable biologicals that are 
always surgically inserted or implanted (through a surgical incision or 
a natural orifice) will be evaluated under the device pass-through 
process and paid according to the device payment methodology. We are 
continuing to consider implantable biologicals approved for pass-
through payment under the drug and biological pass-through provision 
prior to CY 2010 as drugs and biologicals for pass-through payment 
estimate purposes. These implantable biologicals that have been 
approved for pass-through status prior to CY 2010 continue to be 
considered drugs and biologicals until they expire from pass-through 
status. Therefore, the final pass-through spending estimate for the 
first group of pass-through device categories does not include 
implantable biologicals that have been granted pass-through status 
prior to CY 2010.
    In section V.A.4. of this final rule with comment period, as we 
proposed, we are providing that payment for implantable biologicals 
newly eligible for pass-through payment beginning in CY 2010 is based 
on hospital charges adjusted to cost, rather than the ASP methodology 
that is applicable to pass-through drugs and biologicals. Therefore, we 
are providing that, beginning in CY 2010, the estimate of pass-through 
spending for implantable biologicals first paid as pass-through devices 
in CY 2010 is based on the payment methodology for pass-through 
devices, and is included in the final CY 2010 device pass-through 
spending estimate for the second group of pass-through device 
categories.
    The final CY 2010 pass-through spending estimate for the first 
group of pass-through device categories is $0. The estimate of CY 2010 
pass-through spending for the second group of pass-through device 
categories is $10.0 million for this final rule with comment period, as 
it was for the proposed rule (74 FR 35339). Our final CY 2010 estimate 
of total pass-through spending for device categories is $10.0 million.
    The estimate for pass-through spending for the first group of drugs 
and biologicals is $28.9 million for CY 2010. The estimate for pass-
through spending for the second group of drugs and biologicals is $6.7 
million for CY 2010. As stated above, the final estimates differ, in 
part, from our proposed rule estimates in order to reflect our final 
policy regarding the pass-through payment eligibility period. As 
discussed in section V.A. of this final rule with comment period, 
radiopharmaceuticals are considered drugs for pass-through purposes. 
Therefore, we have included radiopharmaceuticals in our CY 2010 pass-
through spending estimate for drugs and biologicals. Our final CY 2010 
estimate of total pass-through spending for drugs and biologicals is 
$35.6 million.
    In summary, in accordance with the methodology described above in 
this section, we estimate that total pass-through spending for the 
device categories and the drugs and biologicals that are continuing to 
receive pass-through payment in CY 2010 and those device categories, 
drugs, and nonimplantable biologicals that first become eligible for 
pass-through payment during CY 2010 is approximately $45.5 million, 
which represents 0.14 percent of total OPPS projected payments for CY 
2010. We estimate that pass-through spending in CY 2010 will not amount 
to 2.0 percent of total projected OPPS CY 2010 program spending.

VII. OPPS Payment for Brachytherapy Sources

A. Background

    Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) 
of Public Law 108-173 (MMA), mandated the creation of additional groups 
of covered OPD services that classify devices of brachytherapy 
consisting of a seed or seeds (or radioactive source) (``brachytherapy 
sources'') separately from other services or groups of services. The 
additional groups must reflect the number, isotope, and radioactive 
intensity of the brachytherapy sources furnished and include separate 
groups for palladium-103 and iodine-125 sources.
    Section 1833(t)(16)(C) of the Act, as added by section 621(b)(1) of 
Public Law 108-173, established payment for brachytherapy sources 
furnished from January 1, 2004, through December 31, 2006, based on a 
hospital's charges for each brachytherapy source furnished adjusted to 
cost. Under section 1833(t)(16)(C) of the Act, charges for the 
brachytherapy sources may not be used in determining any outlier 
payments under the OPPS for that period of payment. Consistent with our 
practice under the OPPS to exclude items paid at cost from budget 
neutrality consideration, these items were excluded from budget 
neutrality for that time period as well.
    In our CY 2007 annual OPPS rulemaking, we proposed and finalized a 
policy of prospective payment based on median costs for the 11 
brachytherapy sources for which we had claims data. We based the 
prospective payment rates on median costs for each source from our CY 
2005 claims data (71 FR 68102 through 71 FR 68115).
    Subsequent to publication of the CY 2007 OPPS/ASC final rule with 
comment period, section 107 of Public Law 109-432 (MIEA-TRHCA) amended 
section 1833 of the Act. Specifically, section 107(a) of Public Law 
109-432 amended section 1833(t)(16)(C) of the Act by extending the 
payment period for brachytherapy sources based on a hospital's charges 
adjusted to cost for 1 additional year, through December 31, 2007. 
Therefore, we continued to pay for brachytherapy sources based on 
charges adjusted to cost for CY 2007.
    Section 107(b)(1) of Public Law 109-432 amended section 
1833(t)(2)(H) of the Act by adding a requirement for the establishment 
of separate payment groups for ``stranded and non-stranded'' 
brachytherapy sources furnished on or after July 1, 2007, in addition 
to the existing requirements for separate payment groups based on the 
number, isotope, and radioactive intensity of brachytherapy sources 
under section 1833(t)(2)(H) of the Act. Section 107(b)(2) of Pub. L. 
109-432 authorized the Secretary to implement this requirement by 
``program instruction or otherwise.'' We note that public commenters 
who responded to the CY 2007 OPPS/ASC proposed rule asserted that 
stranded sources, which they described as embedded into the stranded 
suture material and separated within the strand by material of an 
absorbable nature at specified intervals, had greater production costs 
than non-stranded sources (71 FR 68113 through 68114).
    As a result of the statutory requirement to create separate groups 
for stranded and non-stranded sources as of July 1, 2007, we 
established several coding changes through a transmittal, effective 
July 1, 2007 (Transmittal 1259, dated June 1, 2007). Based on public

[[Page 60533]]

comments received on the CY 2007 OPPS/ASC proposed rule and industry 
input, we were aware of three sources available in stranded and non-
stranded forms at that time: iodine-125; palladium-103; and cesium-131 
(72 FR 42746). We created six new HCPCS codes to differentiate the 
stranded and non-stranded versions of iodine, palladium, and cesium 
sources.
    In Transmittal 1259, we indicated that if we receive information 
that any of the other sources now designated as non-stranded are also 
FDA-approved and marketed as a stranded source, we would create a code 
for the stranded source. We also established two ``Not Otherwise 
Specified'' (NOS) codes for billing stranded and non-stranded sources 
that are not yet known to us and for which we do not have source-
specific codes. We established HCPCS code C2698 (Brachytherapy source, 
stranded, not otherwise specified, per source) for stranded NOS sources 
and HCPCS code C2699 (Brachytherapy source, non-stranded, not otherwise 
specified, per source) for non-stranded NOS sources.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66784), we again finalized prospective payment for brachytherapy 
sources, beginning in CY 2008, with payment rates determined using the 
CY 2006 claims-based costs per source for each brachytherapy source. 
Consistent with our policy regarding APC payments made on a prospective 
basis, we finalized the policy in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66686) to subject the cost of brachytherapy 
sources to the outlier provision of section 1833(t)(5) of the Act, and 
to also subject brachytherapy source payment weights to scaling for 
purposes of budget neutrality. Therefore, brachytherapy sources could 
receive outlier payments if the costs of furnishing brachytherapy 
sources met the criteria for outlier payment. In addition, as noted in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66683), 
implementation of prospective payment for brachytherapy sources would 
provide opportunities for hospitals to receive additional payments 
under certain circumstances through the 7.1 percent rural SCH 
adjustment.
    For CY 2008, we also proposed and finalized a policy regarding 
payment for new brachytherapy sources for which we have no claims data 
(72 FR 42749 and 72 FR 66786, respectively). We indicated we would 
assign future new HCPCS codes for new brachytherapy sources to their 
own APCs, with prospective payment rates set based on our consideration 
of external data and other relevant information regarding the expected 
costs of the sources to hospitals. Finally, we proposed and finalized 
our policy to discontinue using status indicator ``H'' (Pass-Through 
Device Categories. Separate cost based pass-through payment; not 
subject to co-payment) because we would not be paying charges adjusted 
to costs after December 31, 2007, and instead adopted a policy of using 
status indicator ``K'' (which includes, among others, ``Brachytherapy 
Sources. Paid under OPPS; separate APC payment'') for CY 2008 (72 FR 
42749 and 72 FR 66785, respectively).
    After we finalized these proposals for CY 2008, section 106(a) of 
Pub. L. 110-173 (MMSEA) extended the charges-adjusted-to-cost payment 
methodology for brachytherapy sources for an additional 6 months, 
through June 30, 2008. Because our final CY 2008 policies paid for 
brachytherapy sources at prospective rates based on median costs, we 
were unable to implement these policies during this extension.
    In the CY 2009 OPPS/ASC proposed rule (73 FR 41502), we again 
proposed prospective payment rates for brachytherapy sources for CY 
2009. We proposed to pay for brachytherapy sources at prospective rates 
based on their source-specific median costs as calculated from CY 2007 
claims data available for CY 2009 ratesetting. Subsequent to issuance 
of the CY 2009 OPPS/ASC proposed rule, Public Law 110-275 (MIPPA) was 
enacted on July 15, 2008. Section 142 of Public Law 110-275 amended 
section 1833(t)(16)(C) of the Act, as amended by section 106(a) of 
Public Law 110-173 (MMSEA), to further extend the payment period for 
brachytherapy sources based on a hospital's charges adjusted to cost 
from July 1, 2008, through December 31, 2009. Therefore, we continued 
to pay for brachytherapy sources at charges adjusted to cost in CY 2008 
from July 1 through December 31, and we maintained the assignment of 
status indicator ``H'' to brachytherapy sources for claims processing 
purposes in CY 2008. For CY 2009, we have continued to pay for all 
separately payable brachytherapy sources based on a hospital's charges 
adjusted to cost. Because brachytherapy sources are paid at charges 
adjusted to cost, we did not subject them to outlier payments under 
section 1833(t)(5) of the Act, or subject brachytherapy source payment 
weights to scaling for purposes of budget neutrality. Moreover, during 
the CY 2009 period of payment at charges adjusted to cost, 
brachytherapy sources are not eligible for the 7.1 percent rural SCH 
adjustment (as discussed in detail in section II.E. of this final rule 
with comment period).
    Furthermore, for CY 2009, we did not adopt the policy we 
established in the CY 2008 OPPS/ASC final rule with comment period of 
paying stranded and non-stranded NOS codes for brachytherapy sources, 
HCPCS codes C2698 and C2699, based on a rate equal to the lowest 
stranded or non-stranded prospective payment for such sources. Also, 
for CY 2009, we did not adopt the policy we established in the CY 2008 
OPPS/ASC final rule with comment period regarding payment for new 
brachytherapy sources for which we have no claims data. NOS HCPCS codes 
C2698 and C2699 and newly established specific source codes are paid at 
charges adjusted to cost through December 31, 2009, consistent with 
section 142 of Public Law 110-275.
    For CY 2009, we finalized our proposal to create new status 
indicator ``U'' (Brachytherapy Sources. Paid under OPPS; separate APC 
payment) for brachytherapy source payment, instead of using status 
indicator ``K'' as proposed and finalized for CY 2008 for prospective 
payment, or status indicator ``H,'' used during the period of charges 
adjusted to cost payment. As noted in the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68670), assigning a status indicator, such 
as status indicator ``K,'' to several types of items and services with 
potentially differing payment policies added unnecessary complexity to 
our operations. Status indicator ``U'' is used only for brachytherapy 
sources, regardless of their specific payment methodology for any 
period of time.
    At the February 2009 meeting, the APC Panel recommended paying for 
brachytherapy sources in CY 2010 using a prospective payment 
methodology based on median costs from claims data. The APC Panel 
reviewed CY 2007 and CY 2008 brachytherapy source median costs from 
claims data and noted the stability of the data from year to year.

B. OPPS Payment Policy

    Under section 142 of Public Law 110-275, payment for brachytherapy 
sources is mandated at charges adjusted to cost only through CY 2009. 
In the CY 2010 OPPS/ASC proposed rule (74 FR 35342), we proposed to 
adopt for CY 2010 the general OPPS prospective payment methodology for 
brachytherapy sources, consistent with section 1833(t)(2)(C) of the 
Act.
    As we have previously stated (72 FR 66780 and 73 FR 41502), we 
believe that adopting the general OPPS prospective payment methodology 
for brachytherapy sources is appropriate for

[[Page 60534]]

a number of reasons. The general OPPS payment methodology uses median 
costs based on claims data to set the relative payment weights for 
hospital outpatient services. This payment methodology results in more 
consistent, predictable, and equitable payment amounts per source 
across hospitals by eliminating some of the extremely high and low 
payment amounts resulting from payment based on hospitals' charges 
adjusted to cost. We believe the OPPS prospective payment methodology 
would also provide hospitals with incentives for efficiency in the 
provision of brachytherapy services to Medicare beneficiaries. 
Moreover, this approach is consistent with our payment methodology for 
the vast majority of items and services paid under the OPPS.
    We proposed to use CY 2008 claims data for setting the CY 2010 
payment rates for brachytherapy sources, as we proposed for most other 
items and services that will be paid under the CY 2010 OPPS. For CY 
2008, we have a full year of claims data for each of the separately 
payable sources, including iodine, palladium, and cesium sources that 
have stranded and non-stranded configurations. As indicated earlier, 
the APC Panel, at the February 2009 meeting, recommended using the 
median cost data for CY 2010 rates. Our proposal was consistent with 
the APC Panel's recommendation.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35342), we proposed to 
adopt the other payment policies for brachytherapy sources we finalized 
in previous final rules. We proposed to pay for the stranded and non-
stranded NOS codes, HCPCS codes C2698 and C2699, at a rate equal to the 
lowest stranded or non-stranded prospective payment rate for such 
sources, respectively, on a per source basis (as opposed, for example, 
to a per mCi), which is based on the policy we established in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66785). The 
proposed payment methodology for NOS sources would provide payment to a 
hospital for new sources, while encouraging interested parties to 
quickly bring new sources to our attention so that specific coding and 
payment could be established.
    We also proposed to implement the policy we established in the CY 
2008 OPPS/ASC final rule with comment period (which was superseded by 
section 142 of Public Law 110-275) regarding payment for new 
brachytherapy sources for which we have no claims data, based on the 
same reasons we discussed in that final rule with comment period (72 FR 
66786). That policy is intended to enable us to assign future new HCPCS 
codes for new brachytherapy sources to their own APCs, with prospective 
payment rates set based on our consideration of external data and other 
relevant information regarding the expected costs of the sources to 
hospitals.
    Consistent with our policy regarding APC payments made on a 
prospective basis, we proposed to subject brachytherapy sources to 
outlier payments under section 1833(t)(5) of the Act, and also to 
subject brachytherapy source payment weights to scaling for purposes of 
budget neutrality. Therefore, brachytherapy sources could receive 
outlier payments if the costs of furnishing brachytherapy sources meet 
the criteria for outlier payment. In addition, as noted in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66683), implementation 
of prospective payments for brachytherapy sources would provide 
opportunities for hospitals to receive additional payments in CY 2010 
under certain circumstances through the 7.1 percent rural adjustment as 
described in section II.E. of the proposed rule (74 FR 35295) and this 
final rule with comment period.
    Therefore, in the CY 2010 OPPS/ASC proposed rule, we proposed to 
pay for brachytherapy sources at prospective payment rates based on 
their source-specific median costs for CY 2010. The separately payable 
brachytherapy source HCPCS codes, long descriptors, APCs, status 
indicators, and approximate median costs that we proposed for CY 2010 
were presented in Table 32 of the proposed rule (74 FR 35342).
    Comment: A number of commenters recommended that CMS continue to 
pay for brachytherapy sources separately based on hospitals' charges 
adjusted to cost due to the commenters' ongoing concerns regarding 
Medicare hospital claims data for brachytherapy sources; the commenters 
provided various examples of issues of concern. Some commenters were 
concerned that characteristics of high dose rate (HDR) iridium-192, 
which is a renewable source whose life decays over a 90-day period and 
is used to treat multiple patients, makes establishment of fair and 
adequate payment difficult on a fixed prospective basis. The commenters 
also claimed that the CMS brachytherapy source data continue to show 
huge variations in per unit costs on claims across hospitals. Several 
commenters stated that one half of the current brachytherapy sources 
have proposed payment rates based on 50 or fewer hospitals reporting 
claims for these sources. Some commenters also indicated that ``rank 
order anomalies'' exist in proposed payment rates for brachytherapy 
sources, citing that HCPCS code C2635 (Brachytherapy source, non-
stranded, High Activity, Palladium-103, greater than 2.2 mCi (NIST), 
per source) always costs more than low activity sources (HCPCS code 
C2640, Brachytherapy source, stranded, Palladium-103, per source, and 
HCPCS code C2641, Brachytherapy source, non-stranded, Palladium-103, 
per source), yet hospital claims data do not reflect this difference. A 
number of commenters believed that the current charges-adjusted-to-cost 
methodology is more accurate and has been tested over time. A few 
commenters argued that the charges-adjusted-to-cost methodology 
provides overall cost savings to the Medicare program compared to the 
prospective payment methodology proposed for CY 2010, according to an 
analysis performed by the brachytherapy source industry. The commenters 
thus concluded that implementing prospective brachytherapy source 
payment would increase aggregate Medicare expenditures for 
brachytherapy sources compared with the charges-adjusted-to-cost 
payment methodology.
    Several commenters supported the CY 2010 proposal to pay for 
brachytherapy sources prospectively based on median costs from claims 
data. One commenter asserted that hospital-specific payments based on 
the charges-adjusted-to-cost payment methodology violate the intent of 
a prospective payment system, namely to provide incentives to improve 
efficiency and control costs. The commenter believed that hospital-
specific payments could be manipulated because hospitals know the CCR 
used to determine payments for brachytherapy sources.
    Response: As we stated in the CY 2008 final rule with comment 
period (72 FR 66782), we believe that median costs based on hospital 
claims data for brachytherapy sources have produced reasonably 
consistent per-source cost estimates over the past several years, 
comparable to the patterns we have observed for many other OPPS 
services whose payments are set based upon relative payment weights 
from claims data. We believe that our per-source payment methodology 
specific to each source's radioisotope, radioactive intensity, and 
stranded or non-stranded configuration, supplemented by payment based 
on the number of sources used in a specific clinical case, adequately 
accounts for the major expected sources of variability across 
treatments.
    As we also explained in the CY 2008 OPPS/ASC final rule with 
comment

[[Page 60535]]

period (72 FR 66782), a prospective payment system such as the OPPS 
relies on the concept of averaging, where the payment may be more or 
less than the estimated cost of providing a service for a particular 
patient, but with the exception of outlier cases, it is adequate to 
ensure access to appropriate care. In the case of brachytherapy sources 
for which the law requires separate payment groups, without packaging, 
the costs of these individual items could be expected to show greater 
variation than some other APCs under the OPPS because higher 
variability in costs for some component items and services is not 
balanced with lower variability for others and because relative weights 
are typically estimated using a smaller set of claims.
    Nevertheless, we believe that prospective payment for brachytherapy 
sources based on median costs from claims calculated according to the 
standard OPPS methodology is appropriate at this time and would provide 
hospitals with the greatest incentives for efficiency in furnishing 
brachytherapy treatment. Under the budget-neutral OPPS, it is the 
relativity of costs of services, not their absolute costs, that is 
important, and we believe that brachytherapy sources can now be 
appropriately paid according to the standard OPPS payment approach. 
Moreover, OPPS payments for all services are similarly subjected to the 
same 2-year lag in costs from claims data available for ratesetting. 
Therefore, we believe the relative costs of OPPS services should 
generally be appropriate. It is important that the same measure of 
central tendency (median cost) from claims be used to establish the 
payment weights for all OPPS services in order to provide appropriate 
payment for all of these services. The inflation rate of medical 
services is taken into consideration through the conversion factor, 
which is updated annually to account for inflation and used to 
calculate payment rates from the relative payment weights based on 
median costs.
    It is not uncommon for OPPS prospective payment rates to be based 
on claims from a relatively small number of hospitals that furnished 
the service in the year of claims data available for the OPPS update 
year. We are not concerned that some sources may have median costs and 
proposed payment rates based on 50 or fewer providers, as are some 
commenters. Fifty hospitals may report hundreds of brachytherapy source 
claims for many cases and comprise the universe of providers using 
particular low volume sources, for which we are required to pay 
separately by statute. Further, our methodology for estimating median 
costs for brachytherapy sources utilizes all line-item charges for 
those sources, which allows us to use all hospital reported charge and 
estimated cost information to set payment rates for these items. This 
is in contrast to our limitation of relying on ``natural'' single and 
``pseudo'' single procedure claims to set APC payment rates for 
services with packaged costs. We have no reason to believe that 
prospective payment rates based on claims from those providers 
furnishing a particular source do not appropriately reflect the cost of 
that source to hospitals.
    As for most other OPPS services, we note that the median costs for 
brachytherapy sources are based upon the costs of those providers that 
furnished the sources in CY 2008. Hospitals individually determine 
their charge for an item or service, and one of Medicare's primary 
requirements for setting a charge is that it be reasonably and 
consistently related to the cost of the item or service for that 
facility (Medicare Provider Reimbursement Manual-I, Section 2203). We 
then estimate a cost from that charge using the hospital's most recent 
Medicare hospital cost report data in our standard OPPS ratesetting 
process. In as much as we paid hospitals at charges adjusted to cost 
for brachytherapy sources in CY 2008 based on these exact charges, we 
believe hospital's individual charges to be accurate for their 
institution.
    In the case of high and low activity iodine-125 sources, our claims 
data showed that the cost of the high activity source is greater than 
the low activity sources, yet this relationship is reversed for 
palladium-103 sources, as the commenter pointed out. We have no 
information about the expected cost differential between high and low 
activity sources of various isotopes other than what is available in 
our claims and hospital cost report data. For high activity palladium-
103, only 16 hospitals provided this source in CY 2008, compared to 166 
and 268 providers for low activity palladium sources described by HCPCS 
codes C2640 and C2641, respectively. Clearly, fewer providers furnished 
high activity palladium-103 sources, and we expect that the hospital 
cost distribution for those hospitals could be different than the cost 
distribution of the large number of providers reporting the low 
activity sources. These varied cost distributions clearly contribute to 
the observed relationship in median costs between the different types 
of sources, yet we see no reason why our standard ratesetting 
methodology for brachytherapy sources that relies on all claims from 
all hospitals furnishing brachytherapy sources would not yield valid 
median costs for those hospitals furnishing the different brachytherapy 
sources upon which CY 2010 prospective payments rates are based.
    When the statutory requirement for payment of brachytherapy sources 
at a hospital's charges adjusted to cost ends on December 31, 2009 
(section 1833(t)(16)(C) of the Act), prospective payment for 
brachytherapy sources based on their median costs would make the source 
payment an integral part of the OPPS, rather than a separate cost-based 
payment methodology within the OPPS. We believe that consistent and 
predictable prospectively established payment rates under the OPPS for 
brachytherapy sources are appropriate because we do not believe that 
the hospital resource costs associated with specific brachytherapy 
sources would vary greatly across hospitals or clinical conditions 
under treatment, other than through differences in the numbers of 
sources utilized that would be accounted for in the standard OPPS 
payment methodology we are finalizing.
    We agree that sources such as HDR irirdium-192 have a fixed active 
life and must be replaced every 90 days; as a result, hospitals' per-
treatment cost for the source would be dependent on the number of 
treatments furnished per source. The source cost must be amortized over 
the life of the source. Therefore, in establishing their charges for 
HDR iridium, we expect hospitals to project the number of treatments 
that would be provided over the life of the source and establish their 
charges for the source accordingly, as we have stated previously (72 FR 
66783). For most such OPPS services, our practice is to establish 
prospective payment rates based on the median costs from hospitals 
claims data, to provide incentives for efficient and cost-effective 
delivery of these services.
    We do not agree with the commenters that prospective brachytherapy 
source payment based on median costs would increase aggregate Medicare 
expenditures compared to the charges-adjusted-to-cost methodology, or 
that the charges-adjusted-to-cost methodology would provide overall 
cost savings to the Medicare program compared to the prospective 
payment methodology. We also do not believe that the beneficiary 
copayment in the aggregate would increase under the prospective payment 
methodology. We have traditionally estimated charge inflation for 
brachytherapy sources as higher than the market basket inflation

[[Page 60536]]

update applicable to prospective payment under the OPPS. We estimated 
charge inflation for brachytherapy sources between the 2 most recent 
years of hospital claims data by comparing the per-unit charge in CY 
2008 claims to the per-unit charge in CY 2007 claims across all 
sources, and we used this estimate in our budget neutrality 
calculations. We are currently estimating a charge inflation factor of 
17.1 percent for brachytherapy sources between CY 2007 and CY 2008 and, 
over the past several years, we have consistently estimated 
brachytherapy source charge inflation factors higher than 8 percent. 
Inflating payment at hospitals' charges adjusted to cost in the CY 2008 
claims to CY 2010 using this most recent charge inflation factor and 
comparing it to an estimate of prospective payment for the same sources 
suggest that aggregate brachytherapy source payment for CY 2010 at 
charges adjusted to cost would be slightly higher than prospective 
payment for brachytherapy sources in CY 2010. Although the commenters 
did not include the details of their analysis in their comments, it is 
possible that the analysis did not include a charge inflation factor to 
increase payment estimated at charges adjusted to cost from CY 2008 to 
CY 2010.
    Comment: One commenter indicated that the proposed source-specific 
payments were consistent with its experience with the cost per unit of 
the sources, except for the proposed payment for HCPCS code C2634 
(Brachytherapy source, non-stranded, High Activity, Iodine-125, greater 
than 1.01 mCi (NIST), per source). The commenter noted that the 
proposed payment rate for HCPCS code C2634 is $60, yet its invoices for 
high activity I-125, that is, HCPCS code C2634, range between $174 and 
$689. The commenter also stated that high activity I-125 sources are 
ordered based on a range of activity levels. The commenter suggested 
that there may have been errors in hospital reporting of HCPCS code 
C2634 in CY 2008 that resulted in the low proposed payment rate. The 
commenter requested that CMS reevaluate the proposed payment rate for 
HCPCS code C2634 for CY 2010 using average cost data from 
manufacturers.
    Response: We are pleased that the proposed CY 2010 payment rates 
for all but one of the brachytherapy sources are consistent with the 
commenter's experience. The CY 2008 median cost of HCPCS code C2634 for 
this final rule with comment period is approximately $59, compared with 
approximately $31 in CY 2006 and approximately $38 in CY 2007. The CY 
2008 median cost is somewhat higher than the previous 2 years, and we 
acknowledge that the variability in the activity of sources reported 
with HCPCS code C2634 could explain some of the variability in cost for 
this source. Furthermore, we note that the CY 2008 median cost for 
HCPCS code C2634 is based on 18,602 units, over 267 days, from 48 
providers. We believe that some variation in relative cost from year to 
year is to be expected in a prospective payment system, particularly 
for low volume items.
    For all APCs whose payment rates are based upon relative payment 
weights, we note that the quality and accuracy of reported units and 
charges significantly influence the final median costs that are the 
basis for our payments. Beyond our standard OPPS trimming methodology 
(described in section II.A.2. of this final rule with comment period) 
that we apply to those claims that have passed various types of claims 
processing edits, it is not our policy to judge the accuracy of 
hospital coding and charging for the purpose of ratesetting. Moreover, 
we do not believe it is necessary to incorporate external cost data 
from manufacturers of brachytherapy sources or others because, in a 
relative weight system like the OPPS, it is the relativity of the costs 
to one another, rather than absolute cost, that is important in setting 
payment rates. External data lack relativity to the estimated costs 
derived from the claims and cost report data and generally are not 
appropriate for determining relative weights that result in payment 
rates when costs derives from hospital claims and cost report data for 
services are available.
    Comment: One commenter suggested that brachytherapy sources are not 
reported consistently by all providers using a specific revenue center 
and recommended that CMS maintain payment at charges adjusted to cost 
until cost data are improved by refined information resulting from the 
new cost center for high cost supplies.
    Response: In analyzing the reporting of brachytherapy sources in CY 
2008 claims, we found that the great majority of brachytherapy sources 
are reported under revenue code 0278 (Other Implants). Under the policy 
finalized in the FY 2009 IPPS final rule (73 FR 48462 through 48463), 
we finalized a definition of a new'' Implantable Devices Charged to 
Patients'' cost center to which costs and charges under revenue code 
0278 would map in the future. Thus, brachytherapy sources would 
generally be subject to the ``Implantable Devices Charged to Patients'' 
cost center for future cost estimation under the OPPS, potentially 
leading to greater accuracy in cost estimation for these devices as 
noted by the commenter. This new cost center was available for use for 
cost reporting periods beginning on or after May 1, 2009, and was 
discussed in Transmittal 20 (dated July 2009) that updated Chapter 36, 
Hospital and Hospital Health Care Complex Cost Report (Form CMS 2552-
96) of the Medicare Provider Reimbursement Manual, Part 2, to provide 
Line 55.30 to report ``Implantable Devices Charged to Patients.'' The 
proposed draft cost report Form CMS-2552-10, published in the Federal 
Register for public comment on July 2, 2009 (74 FR 31738), provides new 
line 69 to report ``Implantable Devices Charged to Patients.'' 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 have stated previously that we continue to emphasize our 
preference for long-term cost reporting changes and broad education 
initiatives to address the accuracy of claims data (73 FR 68524). This 
recent change to include a new cost center will ultimately influence 
both the IPPS and OPPS relative weights in the future. Nevertheless, in 
the meantime, we believe it is fully appropriate to utilize our current 
cost estimates for brachytherapy sources and all other implantable 
devices in calculating payment weights under the OPPS because these are 
our best current estimates of costs as derived from claims and cost 
report data. When hospital-specific CCRs from the new cost center are 
available for ratesetting in several years, we will incorporate those 
into the revenue code-to-cost center crosswalk that we use for OPPS 
cost estimation. However, at the present time, we believe our current 
methodology that generally utilizes the available single medical supply 
CCR leads to appropriate cost estimates for brachytherapy sources, and 
we see no reason why payment at charges adjusted to cost, which applies 
an hospital-specific overall ancillary CCR to hospital charges for 
brachytherapy sources, would lead to a more accurate cost estimate for 
these items. The hospital-specific overall ancillary CCR is based on 
costs and charges for a wide range of OPPS services, and we have no 
reason to believe that hospital markup practices for brachytherapy 
sources are similar to the relationship between costs

[[Page 60537]]

and charges represented in this very general CCR.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to pay for 
brachytherapy sources prospectively based on CY 2008 median costs from 
historical hospital claims data. In addition, we will pay the stranded 
and non-stranded NOS codes, HCPCS codes C2698 and C2699, at a rate 
equal to the lowest stranded or non-stranded prospective payment rate 
for such sources, respectively, on a per source basis. Payment for new 
brachytherapy sources, which may be established quarterly, will be made 
through their own APCs, with prospective payment rates set based on our 
consideration of external data and other relevant information regarding 
the expected costs of the sources to hospitals because we would have no 
information from claims data on the costs of these new sources to 
hospitals. Finally, in CY 2010, brachytherapy sources will be subject 
to outlier payments, their payment weights subject to scaling for 
purposes of budget neutrality, and, under some circumstances, their 
payment subject to the 7.1 percent rural adjustment as discussed in 
section II.E. of this final rule with comment period.
    Table 45 below displays the separately payable brachytherapy source 
HCPCS codes, long descriptors, APCs, status indicators, and approximate 
median costs for CY 2010.

                         Table 45--Separately Payable Brachytherapy Sources for CY 2010
----------------------------------------------------------------------------------------------------------------
                                                                                                       Final CY
                                                                                                         2010
           CY 2010 HCPCS Code                  CY 2010 long descriptor        Final CY    Final CY   approximate
                                                                              2010 APC     2010 SI    APC median
                                                                                                         cost
----------------------------------------------------------------------------------------------------------------
A9527...................................  Iodine I-125, sodium iodide              2632          U           $38
                                           solution, therapeutic, per
                                           millicurie.
C1716...................................  Brachytherapy source, non-               1716          U            42
                                           stranded, Gold-198, per source.
C1717...................................  Brachytherapy source, non-               1717          U           229
                                           stranded, High Dose Rate
                                           Iridium-192, per source.
C1719...................................  Brachytherapy source, non-               1719          U            63
                                           stranded, Non-High Dose Rate
                                           Iridium-192, per source.
C2616...................................  Brachytherapy source, non-               2616          U        15,635
                                           stranded, Yttrium-90, per
                                           source.
C2634...................................  Brachytherapy source, non-               2634          U            59
                                           stranded, High Activity, Iodine-
                                           125, greater than 1.01 mCi
                                           (NIST), per source.
C2635...................................  Brachytherapy source, non-               2635          U            28
                                           stranded, High Activity,
                                           Palladium-103, greater than 2.2
                                           mCi (NIST), per source.
C2636...................................  Brachytherapy linear source, non-        2636          U            19
                                           stranded, Palladium-103, per
                                           1MM.
C2638...................................  Brachytherapy source, stranded,          2638          U            42
                                           Iodine-125, per source.
C2639...................................  Brachytherapy source, non-               2639          U            36
                                           stranded, Iodine-125, per
                                           source.
C2640...................................  Brachytherapy source, stranded,          2640          U            60
                                           Palladium-103, per source.
C2641...................................  Brachytherapy source, non-               2641          U            57
                                           stranded, Palladium-103, per
                                           source.
C2642...................................  Brachytherapy source, stranded,          2642          U           109
                                           Cesium-131, per source.
C2643...................................  Brachytherapy source, non-               2643          U            65
                                           stranded, Cesium-131, per
                                           source.
C2698...................................  Brachytherapy source, stranded,          2698          U           *42
                                           not otherwise specified, per
                                           source.
C2699...................................  Brachytherapy source, non-               2699          U           *28
                                           stranded, not otherwise
                                           specified, per source.
----------------------------------------------------------------------------------------------------------------
* Median cost is that of the lowest cost stranded or non-stranded source upon which CY 2010 payment for the NOS
  HCPCS code is based.

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

VIII. OPPS Payment for Drug Administration Services

A. Background

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

[[Page 60538]]

level APC structure for drug administration services. In CY 2008, we 
continued to use the full set of CPT codes for drug administration 
services and continued our assignment of drug administration services 
to this six-level APC structure.
    For CY 2009, we continued to allow hospitals to use the full set of 
CPT codes for drug administration services but moved from a six-level 
APC structure to a five-level APC structure. We note that, while there 
were changes in the CPT numerical coding for nonchemotherapy drug 
administration services in CY 2009, the existing CPT codes were only 
renumbered, and there were no significant changes to the code 
descriptors themselves. As we discussed in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68672), the CY 2009 ratesetting process 
afforded us the first opportunity to examine hospital claims data for 
the full set of CPT codes that reflected the concepts of initial, 
sequential, and concurrent services. For CY 2009, we performed our 
standard annual OPPS review of the clinical and resource 
characteristics of the drug administration CPT codes assigned to the 
six-level CY 2008 APC structure based on the CY 2007 claims data 
available for the CY 2009 OPPS/ASC proposed rule. As a result of our 
hospital cost analysis and detailed clinical review, we adopted a five-
level APC structure for CY 2009 drug administration services to more 
appropriately reflect their resource utilization in APCs that also 
group clinically similar services. As we noted in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68671), these APCs generally 
demonstrated the clinically expected and actually observed comparative 
relationships between the median costs of different types of drug 
administration services, including initial and additional services; 
chemotherapy and other diagnostic, prophylactic, or therapeutic 
services; injections and infusions; and simple and complex methods of 
drug administration. In the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68673), we indicated our belief that the five-level APC 
structure was the most appropriate structure based on updated hospital 
claims data for the full range of CPT codes for drug administration for 
the CY 2009 OPPS/ASC final rule with comment period because the 
structure resulted in payment groups with greater clinical and resource 
homogeneity.

B. Coding and Payment for Drug Administration Services

    In the CY 2010 OPPS/ASC proposed rule (74 FR 35343), we proposed 
for CY 2010 to continue to use the full set of CPT codes for drug 
administration services. In addition, as a part of our standard annual 
review, we analyzed the assignments of CPT codes for drug 
administration into the five-level APC structure and, based on the 
results of this review, proposed to continue a five-level APC structure 
for CY 2010. Further, we proposed some minor reconfigurations of the 
APCs as described below to account for changes in HCPCS code-specific 
median costs resulting from updated CY 2008 claims data and the most 
recent cost report data, and the CY 2010 drug payment proposal that is 
discussed in section V.B.3.b. of the proposed rule (74 FR 35326 through 
35333) and this final rule with comment period.
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68117), we explained that we expected CPT codes for additional hours of 
infusion to be reported with CPT codes for the initial hour of drug 
infusion. This would result in a substantial number of claims for drug 
administration services that were unusable for ratesetting purposes 
because multiple services would be present on the same bill and result 
in essentially no correctly coded claims upon which to set the median 
costs for the CPT codes describing additional hours of infusion. (We 
refer readers to section II.A.1.b. of the proposed rule (74 FR 35239 
through 35241) and this final rule with comment period for a further 
discussion of multiple bills and our ratesetting methodology.) In order 
to use these claims for ratesetting purposes for both the initial drug 
administration codes and the additional hour drug administration codes, 
we adopted the policy of adding the additional hour drug administration 
codes to the bypass list in order to create ``pseudo'' single claims 
that would be useable for OPPS ratesetting purposes. After the creation 
of these ``pseudo'' single claims, we applied the standard OPPS 
methodology to calculate HCPCS code-specific median costs for these 
initial and additional hour drug administration codes.
    As we explained further in the CY 2007 OPPS/ASC final rule with 
comment period, bypassing these additional hour drug administration CPT 
codes and developing additional ``per unit'' claims provided a 
methodology for calculating median costs for these previously packaged 
drug administration services which attributed all of their line-item 
cost data to their assigned APCs. However, we noted that this 
methodology allocates all packaged costs on claims for drug 
administration services to the associated initial hour of infusion 
code. Because these additional hours of infusion codes were always 
reported with other drug administration services, we expected that the 
packaging related to additional hours of infusion would be 
appropriately assigned to the initial drug administration service also 
included on the same claim. While we stated our belief that there are 
some packaged costs that are clinically related to the second and 
subsequent hours of infusion, especially for infusions of packaged 
drugs spanning several hours, we were not able to accurately assign 
representative portions of packaged costs to multiple different 
services due to the limitations of our claims data.
    We indicated that, while this methodology did not assign any 
packaged costs to the additional hours of drug administration codes, we 
believed this methodology took into account all of the packaging on 
claims for drug administration services and provided a reasonable 
framework for developing median costs for drug administration services 
that were often provided in combination with one another.
    Since this approach was first adopted for CY 2007, we have updated 
and expanded the bypass methodology to reflect changing drug 
administration HCPCS codes that are recognized under the OPPS. We 
placed all of the add-on CPT codes for drug administration services, 
including the sequential infusion and intravenous push codes, on the 
bypass list in CY 2009 (73 FR 68513) and proposed to include them in CY 
2010 (74 FR 35242 through 35252) in order to continue this framework 
for transforming these otherwise unusable multiple bills into 
``pseudo'' single claims that can be used for OPPS ratesetting 
purposes. Table 33 of the proposed rule (74 FR 35345 through 35349) 
displayed the proposed configurations of the five drug administration 
APCs for CY 2010. In proposing to reassign several HCPCS codes for CY 
2010, we took into consideration the resource characteristics of the 
services, as reflected in their HCPCS code-specific median costs and 
their clinical characteristics. We believed the proposed APC 
configurations group drug administration services that share 
sufficiently similar clinical and resource characteristics, taking into 
consideration updated CY 2008 claims data and the most recent cost 
report data and

[[Page 60539]]

common clinical scenarios that have been described to us.
    Comment: Several commenters supported the proposal to include the 
drug administration add-on codes on the bypass list. The commenters 
stated that, by including these codes in the bypass methodology, more 
single bills can be used for ratesetting purposes.
    One commenter recommended that 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)) be included on the bypass list in order to ensure 
consistency with the treatment of other drug administration codes.
    Response: As stated in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68117), we expect CPT codes for additional hours of 
infusion to be reported with CPT codes for the initial hour of drug 
infusion. This would result in a substantial number of claims for drug 
administration services that would be unusable for ratesetting purposes 
because multiple services would be present on the same bill and result 
in essentially no correctly coded claims upon which to set the median 
costs for the CPT codes describing additional hours of infusion. In 
order to use these claims for ratesetting purposes for both the initial 
drug administration codes and the additional hour drug administration 
codes, we adopted the policy of adding the additional hour drug 
administration codes on the bypass list in order to create ``pseudo'' 
single claims that would be useable for OPPS ratesetting purposes. We 
continue to believe that bypassing these additional hour drug 
administration CPT codes and developing additional ``per unit'' claims 
provide a methodology for calculating median costs for these previously 
packaged additional hour drug administration services, which attributes 
all of their line-item cost data to their assigned APCs. Although we 
understand that this methodology does not assign any packaged costs to 
the additional hours of drug administration codes, we continue to 
believe this methodology takes into account all of the packaging on 
claims for drug administration services and provides a reasonable 
framework for developing median costs for drug administration services 
that are often provided in combination with one another.
    As discussed above, since this approach was first adopted for CY 
2007, we have updated and expanded the bypass methodology to reflect 
changing drug administration HCPCS codes that are recognized under the 
OPPS. We placed all of the add-on CPT codes for drug administration 
services, including the sequential infusion and intravenous push codes, 
on the bypass list in CY 2009 (73 FR 68513) and proposed to include 
them in CY 2010 (74 FR 35242 through 35252) in order to continue this 
framework for transforming these otherwise unusable multiple bills into 
``pseudo'' single claims that can be used for OPPS ratesetting 
purposes.
    We have not added CPT code 96368 (or its predecessor CPT code 
90768) on the bypass list because our CY 2010 policy unconditionally 
packages payment for this service and, therefore, it is not a candidate 
for the bypass list. The purpose of the bypass list is to develop 
``pseudo'' single claims so that there are more data available to 
determine the median costs of separately payable services for 
ratesetting purposes. Including packaged codes would be contrary to the 
purpose of the bypass list.
    We refer readers to section II.A.1.b. of this final rule with 
comment period for a full discussion of our final bypass policy and 
list for CY 2010.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to use the full 
set of CPT codes for drug administration and include all separately 
paid drug administration add-on HCPCS codes on the CY 2010 bypass list. 
We will not add CPT code 96368 on the bypass list because it is not a 
separately paid service and, therefore, it is not a candidate for the 
bypass list.
    Comment: Several commenters expressed support for the proposed 
five-level APC structure for drug administration services. Some 
commenters requested that CMS continue to evaluate the five-level 
structure annually. In addition, several commenters specifically 
supported the proposed CY 2010 reconfiguration of the HCPCS code 
assignments to the drug administration APCs.
    One commenter stated that the data used to propose reassignments of 
drug administration codes to drug administration APCs for the proposed 
rule were inadequate. The commenter explained that changes to CPT codes 
require hospitals to train staff and implement guidelines for code use 
and, therefore, accurate claims hospital data for updated CPT codes are 
not immediately available from the first year of their use. The 
commenter added that differences in definitions for drug administration 
codes by Medicare contractors contribute to incomplete and inconsistent 
data.
    Response: In proposing to reassign several HCPCS codes for CY 2010, 
we took into consideration the resource characteristics of the 
services, as reflected in their HCPCS code-specific median costs and 
their clinical characteristics. We believe the proposed APC 
configurations group drug administration services that share 
sufficiently similar clinical and resource characteristics, taking into 
consideration updated CY 2008 claims data and the most recent cost 
report data and common clinical scenarios that have been described to 
us.
    We disagree with the commenter who believed that our costs from 
hospital claims data are inadequate. We believe that the hospital 
claims data for drug administration HCPCS codes are robust and 
representative of the costs of the many hospitals performing these 
services. Multiple drug administration HCPCS codes are reported on 
several hundred thousand hospital outpatient claims annually and almost 
all drug administration HCPCS codes are reported on at least several 
thousand claims. The data that we have reviewed for CY 2010 do not 
dramatically differ from previous years' data for these high volume 
services furnished by thousands of hospitals. This is evidenced in the 
number of hospitals billing for drug administration services, the 
frequency of specific drug administration services, and the resulting 
median costs of the drug administration services.
    Finally, we note that it is our standard practice to annually 
review the configuration of all APCs. Therefore, as part of our 
standard methodology, we expect to continue to review the configuration 
of drug administration APCs in future years.
    Comment: A few commenters requested that HCPCS code C8957 
(Intravenous infusion for therapy/diagnosis; initiation of prolonged 
infusion (more than eight hours), requiring use of portable or 
implantable pump) not be reassigned to APC 0439 (Level IV Drug 
Administration) as proposed for CY 2010. Instead, the commenters 
requested that HCPCS code C8957 continue to be assigned to APC 0440 
(Level V Drug Administration) for CY 2010. In addition, one commenter 
requested that CPT code 96521 (Refilling and maintenance of portable 
pump) not be reassigned to APC 0439 as proposed for CY 2010. Instead, 
the commenter requested that CPT code 96521 continue to be assigned to 
APC 0440. The commenters stated that HCPCS code C8957 and CPT code 
96521 represent prolonged infusions that require the use of a pump and 
a significant amount of time and nursing resources.

[[Page 60540]]

    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 HCPCS 
code C8957 to APC 0439 because we believed that the proposed HCPCS-
specific median cost more closely matched the proposed median cost of 
APC 0439. Upon further review, we agree with the commenters that the 
clinical characteristics of the procedure described by HCPCS code C8957 
that describes a prolonged intravenous infusion lasting more than 8 
hours more closely resemble those of procedures assigned to APC 0440. 
Further, the HCPCS-specific median cost of HCPCS code C8957 
(approximately $179) is only slightly less than the median cost of APC 
0440 (approximately $218), resulting in our belief that APC 0440 would 
be the most appropriate assignment of HCPCS code C8957 for CY 2010.
    In addition, we proposed to reassign CPT code 96521 to APC 0439 
because we believed that the proposed HCPCS-specific median cost more 
closely matched the median cost of APC 0439. We continue to believe 
that the HCPCS-specific median cost of CPT code 96521 (approximately 
$133) closely resembles the median cost of APC 0439 (approximately 
$126). In addition, we note that while HCPCS code C8957 describes the 
initiation of a prolonged infusion that we would expect to be resource-
intensive, CPT code 96521 describes the refilling and maintenance of a 
portable infusion pump, a drug administration service that we would 
expect to require less hospital resources. Therefore, while we believe 
that there is a compelling reason to assign HCPCS code C8957 to the 
higher level drug administration APC 0440, we do not find a compelling 
reason to do the same for CPT code 96521.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal for the five-level APC structure for 
drug administration services, with a modification to not reassign HCPCS 
code C8957 to APC 0439 as proposed. Instead, we will continue to assign 
HCPCS code C8957 to APC 0440 for CY 2010, with a final APC median cost 
of approximately $218. We are finalizing our proposed CY 2010 
assignment of CPT code 96521 to APC 0439, with a final APC median cost 
of approximately $126.
    Comment: A few commenters requested that CPT codes 96376 
(Therapeutic, prophylactic, or diagnostic injection (specify substance 
or drug); each additional sequential intravenous push of the same 
substance/drug provided in a facility) and 96368 (Intravenous infusion, 
for therapy, prophylaxis, or diagnosis (specify substance or drug); 
concurrent infusion) be paid separately in CY 2010. Some commenters 
stated that CPT code 96376 is similar to CPT code 96374 (Therapeutic, 
prophylactic, or diagnostic injection (specify substance or drug); 
intravenous push, single or initial substance/drug) and should be 
assigned to the same APC as CPT code 96374 for CY 2010. In addition, 
some commenters indicated that CPT code 96368 is similar to CPT code 
96375 (Therapeutic, prophylactic, or diagnostic injection (specify 
substance or drug); each additional sequential intravenous push of a 
new substance/drug (List separately in additional to code for primary 
procedure)) and should be assigned to the same APC as CPT code 96375 
for CY 2010. Other commenters noted that because CMS now has claims 
data upon which to set specific payment rate for these services, the 
OPPS should pay separately for CPT codes 96376 and 96368.
    Response: We agree with the commenters that we have cost data for 
these CPT codes based on historical hospital claims data. However, we 
also believe that these codes remain appropriate for packaging and, 
therefore, we include their costs in payment for the independent 
services with which they are always associated. As we discussed in the 
CY 2008 OPPS/ASC final rule with comment period (72 FR 66787 through 
66788) and in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68674), in deciding whether to package a service or pay for it 
separately, we consider a variety of factors, including whether the 
service is normally provided separately or in conjunction with other 
services; how likely it is for the costs of the packaged code to be 
appropriately mapped to the separately payable codes with which it was 
performed; and whether the expected cost of the service is relatively 
low. CPT codes 96376 and 96368, by definition, are always provided in 
association with other drug administration services, and we continue to 
believe that they are most appropriately packaged under the OPPS.
    Furthermore, we do not agree with the commenters that the services 
described by CPT code 96376 are similar to those described by CPT code 
96374. CPT code 96374 is an initial intravenous push code, and, per CPT 
instructions, special billing guidelines apply. Commonly, this service 
requires the initial establishment of intravenous access in a patient, 
a resource-intensive task performed by hospital staff using special 
supplies. In contrast, CPT code 96376 is an add-on code and is reported 
for each additional sequential intravenous push of the same substance/
drug. In the case of this sequential service, the patient already has 
established intravenous access, so we would expect the service to 
require fewer hospital resources. In addition, we do not agree with 
commenters that the services described by CPT code 96368 are similar to 
those described by CPT code 96375. CPT code 96368 describes a 
concurrent intravenous infusion while CPT code 96375 describes a 
sequential intravenous push, and we would expect these services to 
require different hospital resources.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to 
unconditionally package payment for CPT codes 96368 and 96376. These 
CPT codes are, therefore, assigned status indicator ``N'' in Addendum B 
to this final rule with comment period.
    Comment: Several commenters submitted questions related to coding 
for drug administration services. Some commenters requested information 
on how to code for specific clinical scenarios, while other commenters 
were concerned about documentation requirements for a stop time for an 
infusion.
    Response: Each of these comments and 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.
    In summary, after review of the public comments we received, we are 
finalizing our proposed coding and payment structure for drug 
administration as follows. We are finalizing, without modification, our 
proposal to include all separately payable drug administration add-on 
codes on the bypass list for CY 2010. In addition, we are finalizing 
our proposed five-level APC structure for payment of drug 
administration services in the HOPD for CY 2010, with the exception of 
a modification to continue to assign HCPCS code C8957 to APC 0440 for 
CY 2010, rather than APC 0439 as we proposed. Finally, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
package payment for CPT codes 96376 and 96368 for CY 2010.
    Table 46 below displays the final configurations of the five drug 
administration APCs for CY 2010.

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IX. OPPS Payment for Hospital Outpatient Visits

A. Background

    Currently, hospitals report visit HCPCS codes to describe three 
types of OPPS services: Clinic visits, emergency department visits, and 
critical care services. For OPPS purposes, we recognize clinic visit 
codes as those codes defined in the CPT codebook to report evaluation 
and management (E/M) services provided in the physician's office or in 
an outpatient or other ambulatory facility. We recognize emergency 
department visit codes as those codes used to report E/M services 
provided in the emergency department. Emergency department visit codes 
consist of five CPT codes that apply to Type A emergency departments, 
and five Level II HCPCS codes that apply to Type B emergency 
departments. For OPPS purposes, we recognize critical care codes as 
those CPT codes used by hospitals to report critical care services that 
involve the ``direct delivery by a physician(s) of medical care for a 
critically ill or critically injured patient,'' as defined by the CPT 
codebook. In Transmittal 1139, Change Request 5438, dated December 22, 
2006, we stated that, under the OPPS, the time that can be reported as 
critical care is the time spent by a physician and/or hospital staff 
engaged in active face-to-face critical care of a critically ill or 
critically injured patient. Under the OPPS, we also recognize HCPCS 
code G0390 (Trauma response team associated with hospital critical care 
service) for the reporting of a trauma response in association with 
critical care services.
    As we proposed in the CY 2010 OPPS/ASC proposed rule (74 FR 35349 
through 35350), we are continuing to recognize these CPT and HCPCS 
codes describing clinic visits, Type A and B emergency department 
visits, critical care services, and trauma team activation provided in 
association with critical care services for CY 2010. These codes are 
listed below in Table 47.

  Table 47--HCPCS Codes Used To Report Clinic and Emergency Department
                    Visits and Critical Care Services
------------------------------------------------------------------------
      CY 2010 HCPCS Code                   CY 2010 Descriptor
------------------------------------------------------------------------
                        Clinic Visit HCPCS Codes
------------------------------------------------------------------------
99201........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 1).

[[Page 60546]]

 
99202........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 2).
99203........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 3).
99204........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 4).
99205........................  Office or other outpatient visit for the
                                evaluation and management of a new
                                patient (Level 5).
99211........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 1).
99212........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 2).
99213........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 3).
99214........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 4).
99215........................  Office or other outpatient visit for the
                                evaluation and management of an
                                established patient (Level 5).
------------------------------------------------------------------------
                 Emergency Department Visit HCPCS Codes
------------------------------------------------------------------------
99281........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 1).
99282........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 2).
99283........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 3).
99284........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 4).
99285........................  Emergency department visit for the
                                evaluation and management of a patient
                                (Level 5).
G0380........................  Type B emergency department visit (Level
                                1).
G0381........................  Type B emergency department visit (Level
                                2).
G0382........................  Type B emergency department visit (Level
                                3).
G0383........................  Type B emergency department visit (Level
                                4).
G0384........................  Type B emergency department visit (Level
                                5).
------------------------------------------------------------------------
                   Critical Care Services HCPCS Codes
------------------------------------------------------------------------
99291........................  Critical care, evaluation and management
                                of the critically ill or critically
                                injured patient; first 30-74 minutes.
99292........................  Critical care, evaluation and management
                                of the critically ill or critically
                                injured patient; each additional 30
                                minutes.
G0390........................  Trauma response associated with hospital
                                critical care service.
------------------------------------------------------------------------

    During the February 2009 APC Panel meeting, the APC Panel 
recommended that CMS present at the next APC Panel meeting an analysis 
of the most common diagnoses and services associated with Type A and 
Type B emergency department visits, including an analysis by hospital-
specific characteristics, as well as an analysis of CY 2008 claims data 
for clinic and emergency department (Types A and B) visits. The APC 
Panel also recommended that the work of the Visits and Observation 
Subcommittee continue. We adopted these recommendations in the CY 2010 
OPPS/ASC proposed rule (74 FR 35350) and provided frequency and cost 
data from CY 2008 claims for clinic and emergency department visits at 
the August 2009 meeting of the APC Panel. We plan to provide the 
requested analysis of the most common diagnoses and services associated 
with Type A and Type B emergency department visits to the APC Panel at 
the winter 2010 meeting of the APC Panel.
    At its August 2009 meeting, the APC Panel recommended that CMS 
present an analysis of CY 2009 claims data for clinic and emergency 
department (Type A and B) visits at the next meeting of the APC Panel. 
The APC Panel recommended again that CMS provide analyses of the most 
common diagnoses and services associated with Type A and Type B 
emergency department visits at the next meeting of the APC Panel, 
including analysis by hospital-specific characteristics. We are 
accepting all of these recommendations and will present the available 
requested data at the winter 2010 meeting of the APC Panel.

B. Policies for Hospital Outpatient Visits

1. Clinic Visits: New and Established Patient Visits
    As reflected in Table 47, hospitals use different CPT codes for 
clinic visits based on whether the patient being treated is a new or an 
established patient. Beginning in CY 2009, we refined the definitions 
of new and established patients to reflect whether or not the patient 
has been registered as an inpatient or outpatient of the hospital 
within the past 3 years. A patient who has been registered as an 
inpatient or outpatient of the hospital within the 3 years prior to a 
visit would be considered to be an established patient for that visit, 
while a patient who has not been registered as an inpatient or 
outpatient of the hospital within the 3 years prior to a visit would be 
considered to be a new patient for that visit. We refer readers to the 
CY 2009 OPPS/ASC final rule with comment period (73 FR 68677 through 
68680) for a full discussion of the refined definitions.
    We stated in the CY 2010 OPPS/ASC proposed rule (74 FR 35350) that 
we continue to believe that defining new or established patient status 
based on whether the patient has been registered as an inpatient or 
outpatient of the hospital within the 3 years prior to a visit will 
reduce hospitals' administrative burden associated with reporting 
appropriate clinic visit CPT codes. For CY 2010, we proposed to 
continue recognizing the refined definitions of new and established 
patients, and our policy of calculating median costs for clinic visits 
under the OPPS using historical hospital claims data.
    Comment: Several commenters recommended that CMS remove the 
distinction between new and established patient clinic visits, arguing 
that facilities must expend the same level of resources regardless of 
whether the patient was registered as an inpatient or an outpatient in 
the hospital within the past 3 years. According to some commenters, 
CMS' use of the CPT codes for visits, which differentiate between new 
and established patients, is contrary to CMS'

[[Page 60547]]

past statements that the CPT guidelines and definitions for E/M visit 
codes are not applicable in the hospital outpatient setting because 
they fail to reflect hospital services and resource consumption. In 
addition, some commenters stated there are significant operational 
issues involved with implementing the 3-year criterion for hospital 
clinic visit billing purposes, and expressed concerns that hospitals' 
incorrect compliance with this requirement could be targeted by 
Recovery Audit Contractor (RAC) audits and other types of audits. Some 
commenters argued that any differential in costs that is evident in 
claims data for new versus established patient visits would be the 
result of hospitals' erroneous reporting of these codes, rather than 
any real difference in the level of resources expended treating a new 
versus an established patient. One commenter characterized the median 
cost differences between new and established patient visit codes as 
random and suggested that some providers report CPT codes 99201 and 
99211 as ``default codes'' when reporting clinic visits, which, 
according to the commenter, raises the costs reflected in the claims 
data for these codes and artificially impacts the overall APC 
ratesetting process.
    Some commenters asserted that CMS' proposal in the CY 2010 MPFS 
proposed rule to eliminate the use of consultation codes for physician 
payment purposes provides a precedent for discontinuing the use of the 
CPT E/M codes by hospitals. According to the commenters, CMS cited 
findings in the March 2006 OIG report entitled ``Consultations in 
Medicare: Coding and Reimbursement'' that physicians frequently misuse 
CPT codes for consultation services as a basis for no longer 
recognizing those codes under the MPFS. The commenters stated that 
hospitals similarly misuse the clinic visit codes, and that CMS should 
cease to recognize the clinic visit CPT codes under the OPPS for this 
reason.
    Many commenters suggested that, as an alternative to the clinic 
visit CPT codes for new and established patients, hospitals bill for 
visits based on the resources expended in the visit at a level 
determined by the hospitals' internal reporting guidelines, regardless 
of whether the patient is new or established. Some commenters supported 
the use of Level II HCPCS G-codes for hospital clinic visits to 
represent hospital resources expended, without the distinction between 
new and established patients. According to the commenters, creation of 
these HCPCS G-codes would streamline hospital reporting of visits, 
enable hospitals to correctly code for visits based on established 
definitions, and facilitate elimination of the new versus established 
patient visit concept for hospital reporting. The commenters noted 
that, in the past, providers have resisted implementing hospital-
specific HCPCS codes for reporting visits before the implementation of 
national visit reporting guidelines for hospitals, but suggested that 
providers may now favor HCPCS G-codes over the existing CPT codes for 
visits that are tied to CMS' definition of new and established patients 
for purposes of reporting those codes. Some commenters suggested that 
CMS discuss the development of clinic visit HCPCS G-codes at the winter 
2010 APC Panel meeting and include a proposal for clinic visit HCPCS G-
codes in the CY 2011 OPPS/ASC proposed rule.
    Response: Because hospital claims data continue to show significant 
cost differences between new and established patient visits, we 
continue to believe it is necessary and appropriate to recognize the 
CPT codes for both new and established patient visits and, in some 
cases, provide differential payment for new and established patient 
visits of the same level. For example, the final CY 2010 median cost 
for the level 3 new patient clinic visit, described by CPT code 99203 
and calculated using over 200,000 single claims from CY 2008, is 
approximately $96, while the final CY 2010 median cost for the level 3 
established patient clinic visit, described by CPT code 99213 and 
calculated using over 4.5 million single claims from CY 2008, is 
approximately $70. We believe this difference in median costs warrants 
continued assignment of these CPT codes to different APCs for CY 2010.
    Given that we have a substantial volume of single claims from a 
significant number of hospitals upon which to calculate the median 
costs for all levels of clinic visits, we do not agree with the 
commenters that the differences in costs for new versus established 
patient visits are random or the result of erroneous billing. We expect 
hospitals to report all HCPCS codes in accordance with correct coding 
principles, CPT code descriptions, and relevant CMS guidance, which, in 
this case, specifies that the meanings of ``new'' and ``established'' 
patients as included in the clinic visit CPT code descriptors pertain 
to whether or not the patient has been registered as an inpatient or an 
outpatient of the hospital within the past 3 years (73 FR 68679). We 
have no reason to believe that hospitals are systematically 
disregarding these principles to the extent that our median costs for 
clinic visits, which are based on data from millions of single claims, 
would be artificially skewed.
    We also do not agree with the commenters that CMS' proposal in the 
CY 2010 MPFS proposed rule to eliminate the use of consultation codes 
for physician payment purposes (74 FR 33553 through 33554) has any 
direct relevance to the distinction between new and established patient 
visits under the OPPS. As we stated previously, we have no reason to 
believe that hospitals are not correctly reporting these services. 
Furthermore, unlike the MPFS proposal that would require physicians to 
report the existing CPT codes for new and established patient visits 
instead of the consultation CPT codes, we could not easily implement a 
policy to eliminate the use of the clinic visit CPT codes under the 
OPPS, because there are no other existing codes that hospitals could 
use to report these services.
    We recognize that some commenters believe hospitals would now 
support the creation of Level II HCPCS G-codes for hospital clinic 
visits, whereas in the past they generally opposed hospital-specific 
codes for visits in the absence of national visit reporting guidelines. 
We welcome any comments hospitals have on alternative coding schemes 
for reporting hospital clinic visits that would not require hospitals 
to distinguish between new and established patients, such as the 
creation of hospital-specific clinic visit HCPCS G-codes or the 
exclusive use of established patient clinic visit codes. We are 
particularly interested in commenters' thoughts on how we would develop 
payment rates for clinic visits under another coding scheme, 
considering the claims data that we have now for these services 
demonstrate significant differences in costs between new and 
established patient clinic visits and could not be easily crosswalked 
to a structure that does not distinguish between new and established 
patients. We will consider any ideas that we receive as we prepare for 
the CY 2011 OPPS/ASC proposed rule.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
define new or established patient status for the purpose of reporting 
the clinic visit CPT codes, on the basis of whether or not the patient 
has been registered as an inpatient or outpatient of the hospital 
within the past 3 years. We also are finalizing our CY 2010 proposal, 
without modification, to continue our policy of calculating median 
costs for

[[Page 60548]]

clinic visits under the OPPS using historical hospital claims data. As 
discussed in detail in section II.A.2.e.(1) of this final rule with 
comment period and consistent with our CY 2009 policy, when calculating 
the median costs for the clinic visit APCs (0604 through 0608), we 
utilized our methodology that excludes those claims for visits that are 
eligible for payment through the extended assessment and management 
composite APC 8002 (Level I Extended Assessment and Management 
Composite). We continue to believe that this approach results in the 
most accurate cost estimates for APCs 0604 through 0608 for CY 2010.
2. Emergency Department Visits
    Since CY 2007, we have recognized two different types of emergency 
departments for payment purposes under the OPPS--Type A emergency 
departments and Type B emergency departments. As described in greater 
detail below, by providing payment for two types of emergency 
departments, we recognize for OPPS payment purposes both the CPT 
definition of an emergency department, which requires the facility to 
be available 24 hours, and the requirements for emergency departments 
specified in the provisions of the Emergency Medical Treatment and 
Labor Act (EMTALA) (Pub. L. 99-272), which do not stipulate 24-hour 
availability but do specify other obligations for hospitals that offer 
emergency services. For more detailed information on the EMTALA 
provisions, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68680).
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68132), we finalized the definition of Type A emergency departments to 
distinguish them from Type B emergency departments. A Type A emergency 
department must be available to provide services 24 hours a day, 7 days 
a week, and meet one or both of the following requirements related to 
the EMTALA definition of a dedicated emergency department specified at 
Sec.  489.24(b), specifically: (1) It is licensed by the State in which 
it is located under the applicable State law as an emergency room or 
emergency department; or (2) it is held out to the public (by name, 
posted signs, advertising, or other means) as a place that provides 
care for emergency medical conditions on an urgent basis without 
requiring a previously scheduled appointment. For CY 2007 (71 FR 
68140), we assigned the five CPT E/M emergency department visit codes 
for services provided in Type A emergency departments to five created 
Emergency Visit APCs, specifically APC 0609 (Level 1 Emergency Visits), 
APC 0613 (Level 2 Emergency Visits), APC 0614 (Level 3 Emergency 
Visits), APC 0615 (Level 4 Emergency Visits), and APC 0616 (Level 5 
Emergency Visits). We defined a Type B emergency department as any 
dedicated emergency department that incurred EMTALA obligations, but 
did not meet the CPT definition of an emergency department. For 
example, a hospital department that may be characterized as a Type B 
emergency department would meet the definition of a dedicated emergency 
department, but may not be available 24 hours a day, 7 days a week. 
Hospitals with such dedicated emergency departments incur EMTALA 
obligations with respect to an individual who presents to the 
department and requests, or has a request made on his or her behalf, 
examination or treatment for a medical condition.
    To determine whether visits to Type B emergency departments have 
different resource costs than visits to either clinics or Type A 
emergency departments, in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68132), we finalized a set of five HCPCS G-codes for use 
by hospitals to report visits to all entities that meet the definition 
of a dedicated emergency department under the EMTALA regulations but 
that are not Type A emergency departments. These codes are called 
``Type B emergency department visit codes.'' In the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68132), we explained that these 
new HCPCS G-codes would serve as a vehicle to capture median cost and 
resource differences among visits provided by Type A emergency 
departments, Type B emergency departments, and clinics. We stated that 
the reporting of specific HCPCS G-codes for emergency department visits 
provided in Type B emergency departments would permit us to 
specifically collect and analyze the hospital resource costs of visits 
to these facilities in order to determine if, in the future, a proposal 
for an alternative payment policy might be warranted. We expected 
hospitals to adjust their charges appropriately to reflect differences 
in Type A and Type B emergency department visit costs.
    As we noted in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68681), the CY 2007 claims data used for that rulemaking were 
from the first year of claims data available for analysis that included 
hospital's cost data for these new Type B emergency department HCPCS 
visit codes. Based on our analysis of the CY 2007 claims data, we 
confirmed that the median costs of Type B emergency department visits 
were less than the median costs of Type A emergency department visits 
for all but the level 5 visit. In other words, the median costs from 
the CY 2007 hospital claims represented real differences in the 
hospital resource costs for the same level of visits in a Type A or 
Type B emergency department. Therefore, for CY 2009, we adopted the 
August 2008 APC Panel recommendation to assign levels 1 through 4 Type 
B emergency department visits to their own APCs and to assign the level 
5 Type B emergency department visit to the same APC as the level 5 Type 
A emergency department visit.
    We now have CY 2008 cost data for CY 2010 ratesetting for the Type 
B emergency department HCPCS G-codes, representing a second year of 
claims data for these Type B emergency department visit HCPCS codes. In 
the CY 2010 OPPS/ASC proposed rule (74 FR 35351 through 35353), we 
presented our observation of frequency and patterns of billing based on 
the CY 2008 claims available at that time. We also repeated some of our 
analyses of Type B emergency department visits using the available CY 
2008 claims and cost report data to confirm that Type B emergency 
department visit costs are generally lower than Type A emergency 
department visit costs and to assess whether there are systematic 
differences in the costs of Type A and Type B emergency department 
visits by Medicare contractor. The pattern of relative cost differences 
between Type A and Type B emergency department visits was largely 
consistent with the distributions we observed in the CY 2007 data, with 
the exception that, in the CY 2008 claims data available for the 
proposed rule, we observed a relatively lower HCPCS code-specific 
median cost associated with level 5 Type B emergency department visits 
compared to the HCPCS-code specific median cost of level 5 Type A 
emergency department visits. In contrast, in our CY 2007 claims data, 
we observed similar resource costs for level 5 Type A and Type B 
emergency department visits. We also determined that there are no 
significant differences in how Medicare contractors have interpreted 
our Type A and Type B emergency department visit reporting policies.
    We shared cost and frequency data with the Visits and Observation 
Subcommittee of the APC Panel during the February 2009 meeting, and in 
the CY 2010 OPPS/ASC proposed rule (74

[[Page 60549]]

FR 35353), we proposed to pay for Type B emergency department visits in 
CY 2010 consistent with their median costs. Specifically, we proposed 
to pay for levels 1 through 4 Type B emergency department visits 
through four levels of APCs: APC 0626 (Level 1 Type B Emergency 
Visits), APC 0627 (Level 2 Type B Emergency Visits), APC 0628 (Level 3 
Type B Emergency Visits), and APC 0629 (Level 4 Type B Emergency 
Visits). In addition, we proposed to adopt new APC 0630 (Level 5 Type B 
Emergency Visits) and to pay for level 5 Type B emergency department 
visits through this new APC. We proposed to assign HCPCS codes G0380, 
G0381, G0382, G0383, and G0384 (the levels 1, 2, 3, 4, and 5 Type B 
emergency department visit Level II HCPCS codes) to APCs 0626, 0627, 
0628, 0629, and 0630, respectively, for CY 2010. These HCPCS codes 
would be the only HCPCS codes assigned to these APCs. Furthermore, to 
distinguish new APC 0630 from the APC for the level 5 Type A emergency 
visits, we proposed to modify the title of the current level 5 Type A 
emergency visit APC to incorporate Type A in the title. Therefore, the 
revised title of APC 0616 would be ``Level 5 Type A Emergency Visits.''
    We noted in the CY 2010 OPPS/ASC proposed rule (74 FR 35353) that 
the proposed policy to pay for Type B emergency department visits based 
on their median costs is consistent with the APC Panel's March 2008 
recommendation for payment of Type B emergency department visits. As 
part of its recommended configuration of APCs for Type B emergency 
department visits in CY 2009, the APC Panel also stated that, given the 
limited CY 2007 claims data available for Type B emergency department 
visits, CMS should reconsider payment adjustments as more claims data 
become available. In general, the APC Panel's recommended CY 2009 
configuration paid appropriately for each level of the Type B emergency 
department visits, based on the resource costs of the Type B emergency 
department visits that are reflected in claims data. We stated in the 
proposed rule that we believe our proposed CY 2010 configuration also 
would pay appropriately for each level of Type B emergency department 
visits based on estimated resource costs from more recent claims data.
    For this final rule with comment period, based on updated CY 2008 
claims data, we note that 344 hospitals billed at least one Type B 
emergency department visit code in CY 2008, with a total frequency of 
visits provided in Type B emergency departments of approximately 
220,000. All except 5 of the 344 hospitals reporting Type B emergency 
department visits in CY 2008 also reported Type A emergency department 
visits. Overall, many more hospitals (approximately 3,238 total 
hospitals) reported Type A emergency department visits than Type B 
emergency department visits. For comparison purposes, the total 
frequency of visits provided in hospital outpatient clinics and Type A 
emergency departments is approximately 17.5 million and 11.6 million, 
respectively. The median costs for the Type B emergency department 
visit APCs, as compared to the Type A emergency department visit APCs 
and the clinic visit APCs, are shown in Table 48 below.

 Table 48--Comparison of Median Costs for Clinic Visit APCs, Type B Emergency Department Visit APCs, and Type A
                                         Emergency Department Visit APCs
----------------------------------------------------------------------------------------------------------------
                                                                                   Final CY 2010   Final CY 2010
                                                                   Final CY 2010      type B          type A
                                                                   clinic visit      emergency       emergency
                           Visit level                              approximate     department         visit
                                                                    APC median      approximate     approximate
                                                                       cost         APC median      APC median
                                                                                       cost            cost
----------------------------------------------------------------------------------------------------------------
Level 1.........................................................             $57             $45             $53
Level 2.........................................................              69              62              87
Level 3.........................................................              88              97             139
Level 4.........................................................             112             141             221
Level 5.........................................................             166             230             327
----------------------------------------------------------------------------------------------------------------

    As demonstrated in Table 48, the median costs of the lowest level 
visits, based on the CY 2008 claims and cost report data available for 
this final rule with comment period, continue to be similar across all 
settings, including clinic and Type A and B emergency departments. 
Visit levels 2 and 3 share similar resource costs in the clinic and 
Type B emergency department settings, while visits provided in Type A 
emergency departments have higher estimated resource costs at these 
levels. The level 4 clinic visit APC is less resource-intensive than 
the level 4 Type B emergency department visit APC, which is similarly 
less resource-intensive than the level 4 Type A emergency department 
visit APC. Similarly, the level 5 clinic visit APC is less resource-
intensive than the level 5 Type B emergency department visit APC, which 
is less resource-intensive than the level 5 Type A emergency department 
visit APC.
    This pattern of relative cost differences between Type A and Type B 
emergency department visits is largely consistent with the 
distributions we observed in the CY 2007 data, with the exception that, 
in the updated CY 2008 claims data, we observe a relatively lower HCPCS 
code-specific median cost associated with level 5 Type B emergency 
department visits compared to the HCPCS-code specific median cost of 
level 5 Type A emergency department visits. In contrast, in our CY 2007 
claims data, we observed similar resource costs for level 5 Type A and 
Type B emergency department visits. In the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68683), we hypothesized that, for the 
highest level of emergency department visits, the resources required 
would be the same in both emergency department settings. Now that more 
data on Type B emergency department visits are available and hospitals 
have more experience billing for Type B services, we observe 
differences in the resources for the highest level emergency department 
visits to Type A and Type B emergency departments.
    As noted in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68683), we performed data analyses regarding the costs of Type A and 
Type B emergency department visits in addition to our standard median 
cost calculations. These analyses included studying the emergency 
department

[[Page 60550]]

visit costs of hospitals that billed Type B emergency department visits 
only, analyzing the cost data for hospitals that billed both Type A and 
Type B emergency department visits, and evaluating whether there were 
differences in the costs of Type A and Type B emergency department 
visits by Medicare contractor to ascertain whether there were 
differences in how Medicare contractors have interpreted our Type A and 
Type B emergency department visit policies. In the CY 2007 data, we 
observed that hospitals that billed both Type A and Type B emergency 
department visits had lower costs for Type B emergency department 
visits than Type A emergency department visits at all levels except for 
the level 5 Type B emergency department visit. Our analyses of the 
differences in Type A and Type B emergency department visit median 
costs by Medicare contractors did not identify concerning differences. 
Overall, we observed a distribution of visit costs as expected, 
including generally lower Type B emergency department visit costs in 
comparison with Type A emergency department visits, and increasing 
costs for Type B emergency department visits from levels 1 through 5, 
similar to the cost increases we observed from levels 1 through 5 for 
Type A emergency department visits. We also observed a few contractors 
with more unusual cost distributions for Type B emergency department 
visits, including relatively similar or higher costs across levels 1 
through 5 for Type B emergency department visits. For CY 2009, we 
concluded that we had no reason to believe that the cost differences 
between Type A and Type B emergency department visits evident in our 
aggregate OPPS claims data resulted from varying Medicare contractor 
criteria as to what defines Type A and Type B emergency departments. We 
also committed to monitoring these distributions in future years.
    As we did for the CY 2010 OPPS/ASC proposed rule, for this final 
rule with comment period, we repeated some of our analyses of Type B 
emergency department visits using updated CY 2008 claims data to 
confirm that Type B emergency department visit costs are generally 
lower than Type A emergency department visit costs and to again assess 
whether there are systematic differences in the costs of Type A and 
Type B emergency department visits by Medicare contractor. As noted 
above, we observed that hospitals that billed both Type A and Type B 
emergency department visits had lower costs for Type B emergency 
department visits than Type A emergency department visits, including 
level 5 Type B emergency department visits, which is a change from the 
CY 2007 data. We further evaluated differences in the costs of Type A 
and Type B emergency department visits by Medicare contractor. Based on 
our updated analysis of CY 2008 claims, we continue to observe similar 
patterns in HCPCS code-specific median cost differences between Type A 
and Type B emergency department visits as observed in the CY 2007 
claims. Hospitals in the jurisdictions of most Medicare contractors 
have generally lower Type B emergency department visit costs in 
comparison with Type A emergency department visits, as well as 
increasing costs for Type B emergency department visits from levels 1 
through 5, similar to the cost increases we observed from levels 1 
through 5 for Type A emergency department visits.
    Like last year, we also continue to observe a few Medicare 
contractors with more unusual cost distributions for Type B emergency 
department visits, including those with Type B emergency department 
visit costs that are relatively similar or higher than Type A emergency 
department visit costs across levels 1 through 5. Some of these 
Medicare contractors are the same contractors that we noted had more 
unusual cost distributions for Type B emergency department visits 
relative to Type A emergency department visit costs in the CY 2007 
claims data. In order to confirm that these Medicare contractors are 
applying our policies consistently, we examined the HCPCS code-specific 
median costs for Type A and Type B emergency department visits for the 
hospitals in each Medicare contractor's area. For almost all of these 
Medicare contractors, we see one or two hospitals with relatively high 
Type B emergency department visit costs relative to Type B emergency 
department visit costs nationwide or with Type B emergency department 
visit costs that are relatively similar to or higher than Type A 
emergency department visit costs. These one or two hospitals have 
sufficient visit volumes to influence the calculation of the HCPCS 
code-specific median costs for their respective Medicare contractors.
    Comment: Several commenters supported CMS' proposal to create a new 
APC for level 5 Type B emergency department visits. One commenter 
encouraged CMS to adopt the recommendation made by the APC Panel at the 
August 2009 meeting to provide an analysis of the most common diagnoses 
and services associated with Type A and Type B emergency department 
visits at the next meeting of the APC Panel, including analysis by 
hospital-specific characteristics, as well as an analysis of CY 2009 
claims data for Type A and B emergency department visit APCs.
    Response: We appreciate commenters' support of our proposal to 
create a new APC for level 5 Type B emergency department visits. Our 
updated analyses of Type B emergency department visits costs for this 
CY 2010 OPPS/ASC final rule with comment period confirm that the median 
costs of Type B emergency department visits are less than the median 
costs of Type A emergency department visits across all levels. Our 
updated analyses also confirm that there are no significant differences 
in how Medicare contractors have interpreted our Type A and Type B 
emergency department visit reporting policies. The median costs from CY 
2008 hospital claims represent real differences in the hospital 
resource costs for the same level of visit in a Type A or Type B 
emergency department.
    Therefore, as we proposed, for the CY 2010 OPPS, we are continuing 
to pay for Type B emergency department visits in CY 2010 consistent 
with their median costs. Specifically, we are continuing to pay levels 
1 through 4 Type B emergency department visits through four levels of 
APCs: APC 0626 (Level 1 Type B Emergency Visits), APC 0627 (Level 2 
Type B Emergency Visits), APC 0628 (Level 3 Type B Emergency Visits), 
and APC 0629 (Level 4 Type B Emergency Visits). In addition, we are 
adopting new APC 0630 (Level 5 Type B Emergency Visits) and will pay 
for level 5 Type B emergency department visits through this new APC. We 
are assigning HCPCS codes G0380, G0381, G0382, G0383, and G0384 (the 
levels 1, 2, 3, 4, and 5 Type B emergency department visit Level II 
HCPCS codes) to APCs 0626, 0627, 0628, 0629, and 0630, respectively, 
for CY 2010. These HCPCS codes are the only HCPCS codes assigned to 
these APCs. Furthermore, to distinguish new APC 0630 from the APC for 
the level 5 Type A emergency visits, as we proposed, we are modifying 
the title of the current level 5 Type A emergency visit APC to 
incorporate Type A in the title. Therefore, the revised title of APC 
0616 is ``Level 5 Type A Emergency Visits.'' We believe our CY 2010 
configuration pays appropriately for each level of Type B emergency 
department visits based on estimated resource costs from more recent 
claims data.
    As stated previously, we plan to provide the requested analysis of 
the most common diagnoses and services associated with Type A and Type 
B

[[Page 60551]]

emergency department visits to the APC Panel at the winter 2010 meeting 
of the APC Panel, as well as an analysis of CY 2009 claims data for 
Type A and B emergency department visit APCs available at that time.
    Comment: One commenter expressed concerns regarding the 30 minute 
minimum to bill critical care services, described by CPT code 99291. 
The commenter argued that the resources expended in less than 30 
minutes warrant payment at the highest level of E/M payment, and 
recommended that CMS change the criteria for payment for critical care 
services to include instances of 15 minutes of critical care and 
instances in which the patient expires in less than 30 minutes, despite 
the critical care services furnished. According to the commenter, the 
significant resources utilized during these critical care episodes are 
not appropriately recognized for payment purposes because they cannot 
be reported with CPT code 99291 under existing guidelines.
    Another commenter requested that CMS consider extending payment for 
trauma team activations, described by HCPCS code G0390, to level 5 
emergency department visits, in addition to critical care services when 
all other trauma activation criteria are met. According to the 
commenter, an emergency department that is extremely efficient can send 
a patient in need of a trauma team to surgery before the 30 minute time 
threshold for reporting critical care services is met. The commenter 
stated that, because the hospital would bill a level 5 emergency 
department visit code, rather than a critical care code, the encounter 
would not qualify for trauma response payment even though a trauma 
response team was utilized. The commenter argued that hospitals should 
receive an APC payment for HCPCS code G0390 under these circumstances 
because equivalent trauma team resources are expended even though the 
encounter lasted fewer than 30 minutes and cannot be reported with CPT 
code 99291.
    Response: As we have stated in the past (72 FR 66806), the CPT 
instructions for reporting of critical care services with CPT code 
99291 and the CPT code descriptor specify that the code can only be 
billed if 30 minutes or more of critical care services are provided. 
Hospitals must continue to provide a minimum of 30 minutes of critical 
care services in order to bill CPT code 99291, according to the CPT 
code descriptor and CPT instructions. We note that hospitals can report 
the appropriate clinic or emergency department visit code consistent 
with their internal guidelines if fewer than 30 minutes of critical 
care is provided. These CPT instructions and our payment policies for 
covered hospital outpatient services do not apply any differently if 
the patient dies while undergoing treatment. We do allow hospitals to 
use the 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. We refer readers to section II.A.2.d.(7) of this final rule 
with comment period for more information on how these services are paid 
under the OPPS.
    We do not agree with the commenter that we should modify our policy 
to recognize HCPCS code G0390 for the reporting of a trauma response in 
association with critical care services when the hospital provides 
fewer than 30 minutes of critical care and cannot report CPT code 
99291. We believe that it would be extremely unusual for a patient to 
require trauma team services, be rushed to surgery within 30 minutes of 
arrival in the emergency department, and not be subsequently admitted 
to the hospital as an inpatient. Furthermore, hospitals that provide 
less than 30 minutes of critical care when trauma activation occurs 
under the circumstances described by the NUBC guidelines that would 
permit reporting a charge under revenue code series 68x may report a 
charge under 68x, but they may not report HCPCS code G0390. In these 
cases, payment for the trauma team activation is packaged into payment 
for the other services provided to the patient in the encounter, 
including the associated emergency department visit that is reported.
    Comment: One commenter requested clarification regarding ``triage 
only'' visits in which a patient is seen by a nurse and triaged in the 
hospital emergency department but leaves prior to a physician's 
examination and treatment. The commenter asked if hospitals can bill 
visit codes for such cases if the patient is not seen by a physician.
    Response: As we have stated in the past (73 FR 68686), under the 
OPPS, unless indicated otherwise, we do not specify the type of 
hospital staff (for example, nurses or pharmacists) who may provide 
services in hospitals because the OPPS only makes payment for services 
provided incident to physicians' services. Hospitals providing services 
incident to physicians' services may choose a variety of staffing 
configurations to provide those services, taking into account other 
relevant factors, including State and local laws, hospital policies, 
and other Federal requirements such as EMTALA and the Medicare 
conditions of participation related to hospital staffing. Billing a 
visit code in addition to another service merely because the patient 
interacted with hospital staff or spent time in a room for that service 
is inappropriate. A hospital may bill a visit code based on the 
hospital's own coding guidelines which must reasonably relate the 
intensity of hospital resources to different levels of HCPCS codes. 
Services furnished must be medically necessary and documented.
    As described previously in this section, we are adopting our 
proposal, without modification, to continue paying for Type B emergency 
department visits in CY 2010 consistent with their median costs through 
5 levels of Type emergency department visit APCs.
    Table 49 below displays the APC median costs for each level of Type 
B emergency department visit under our CY 2010 configuration. As more 
cost data become available and hospitals gain additional experience 
with reporting visits to Type B emergency departments, we will continue 
to regularly reevaluate patterns of Type A and Type B emergency 
department visit reporting to ensure that hospitals continue to bill 
appropriately and differentially for these services. In addition, 
according to our usual practice, we will examine trends in cost data 
over time and consider proposing alternative emergency department visit 
APC configurations in the future if updated data indicate that changes 
to the payment structure should be considered.
    We also note that, as discussed in section II.A.2.e.(1) of this 
final rule with comment period and consistent with our CY 2009 policy, 
when calculating the median costs for the emergency department visit 
and critical care APCs (0609 through 0617 and 0626 through 0630), we 
utilized our methodology that excludes those claims for visits that are 
eligible for payment through the extended assessment and management 
composite APC 8002 (Level I Extended Assessment and Management 
Composite). We continue to believe that this approach will result in 
the most accurate cost estimates for APCs 0604 through 0608 for CY 
2010.

[[Page 60552]]



 Table 49--CY 2010 Type B Emergency Department Visit APC Assignments and
                              Median Costs
------------------------------------------------------------------------
                                                           Final CY 2010
                                           Final CY 2010    approximate
    Type B emergency department level     APC assignment    APC median
                                                               cost
------------------------------------------------------------------------
Level 1.................................            0626             $45
Level 2.................................            0627              62
Level 3.................................            0628              97
Level 4.................................            0629             141
Level 5.................................            0630             230
------------------------------------------------------------------------

3. Visit Reporting Guidelines
    Since April 7, 2000, we have instructed hospitals to report 
facility resources for clinic and emergency department hospital 
outpatient visits using the CPT E/M codes and to develop internal 
hospital guidelines for reporting the appropriate visit level. Because 
a national set of hospital-specific codes and guidelines do not 
currently exist, we have advised hospitals that each hospital's 
internal guidelines that determine the levels of clinic and emergency 
department visits to be reported should follow the intent of the CPT 
code descriptors, in that the guidelines should be designed to 
reasonably relate the intensity of hospital resources to the different 
levels of effort represented by the codes.
    As noted in detail in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66802 through 66805), we observed a normal and stable 
distribution of clinic and emergency department visit levels in 
hospital claims over the past several years. The data indicated that 
hospitals, on average, were billing all five levels of visit codes with 
varying frequency, in a consistent pattern over time. Overall, both the 
clinic and emergency department visit distributions indicated that 
hospitals were billing consistently over time and in a manner that 
distinguished between visit levels, resulting in relatively normal 
distributions nationally for the OPPS, as well as for specific classes 
of hospitals. The results of these analyses were generally consistent 
with our understanding of the clinical and resource characteristics of 
different levels of hospital outpatient clinic and emergency department 
visits. In the CY 2008 OPPS/ASC proposed rule (72 FR 42764 through 
42765), we specifically invited public comment as to whether a pressing 
need for national guidelines continued at this point in the maturation 
of the OPPS, or if the current system where hospitals create and apply 
their own internal guidelines to report visits was currently more 
practical and appropriately flexible for hospitals. We explained that 
although we have reiterated our goal since CY 2000 of creating national 
guidelines, this complex undertaking for these important and common 
hospital services was proving more challenging than we initially 
thought as we received new and expanded information from the public on 
current hospital reporting practices that led to appropriate payment 
for the hospital resources associated with clinic and emergency 
department visits. We stated our belief that many hospitals had worked 
diligently and carefully to develop and implement their own internal 
guidelines that reflected the scope and types of services they provided 
throughout the hospital outpatient system. Based on public comments, as 
well as our own knowledge of how clinics operate, it seemed unlikely 
that one set of straightforward national guidelines could apply to the 
reporting of visits in all hospitals and specialty clinics. In 
addition, the stable distribution of clinic and emergency department 
visits reported under the OPPS over the past several years indicated 
that hospitals, both nationally in the aggregate and grouped by 
specific hospital classes, were generally billing in an appropriate and 
consistent manner as we would expect in a system that accurately 
distinguished among different levels of service based on the associated 
hospital resources.
    Therefore, we did not propose to implement national visit 
guidelines for clinic or emergency department visits for CY 2008. Since 
publication of the CY 2008 OPPS/ASC final rule with comment period, we 
have again examined the distribution of clinic and Type A emergency 
department visit levels based upon updated CY 2008 claims data 
available for the CY 2010 proposed rule and for this final rule with 
comment period and confirmed that we continue to observe a normal and 
stable distribution of clinic and emergency department visit levels in 
hospital claims. We continue to believe that, based on the use of their 
own internal guidelines, hospitals are generally billing in an 
appropriate and consistent manner that distinguishes among different 
levels of visits based on their required hospital resources. As a 
result of our updated analyses, we are encouraging hospitals to 
continue to report visits during CY 2010 according to their own 
internal hospital guidelines. In the absence of national guidelines, we 
will continue to regularly reevaluate patterns of hospital outpatient 
visit reporting at varying levels of disaggregation below the national 
level to ensure that hospitals continue to bill appropriately and 
differentially for these services. As originally noted in detail in the 
CY 2008 OPPS/ASC final rule with comment period (72 FR 66648), we 
continue to expect that hospitals will not purposely change their visit 
guidelines or otherwise upcode clinic and emergency department visits 
for purposes of extended assessment and management composite APC 
payment.
    In addition, we note our continued expectation that hospitals' 
internal guidelines will comport with the principles listed in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66805). We 
encourage hospitals with more specific questions related to the 
creation of internal guidelines to contact their local fiscal 
intermediary or MAC.
    Comment: Several commenters supported CMS' policy of requiring 
hospitals to use their own internal guidelines to distinguish among 
different levels of visits based on their required hospital resources 
and did not favor the implementation of national guidelines at any 
point in the future. Other commenters expressed appreciation for CMS' 
approach of studying the challenges associated with national guidelines 
prior to their implementation. However, many commenters urged CMS to 
move forward with the implementation of national guidelines for 
hospitals to report clinic visits because of several problems that they 
believe continue to exist due to the lack of such guidelines, such as 
variations in hospitals' internal guidelines that may result in

[[Page 60553]]

inconsistent cost data upon which payment rates for visits are based. 
Some commenters noted that some Medicare contractors, including RACs, 
use their own auditing methods rather than reviewing each hospital's 
internal guidelines while conducting medical review.
    The commenters urged CMS to adopt national guidelines no later than 
CY 2011 due to the burden hospitals would face if they had to implement 
national visit coding guidelines concurrently with the ICD-10-CM and 
ICD-10-PCS changes required by FY 2013. According to the commenters, 
the national guidelines should be clear, concise, and specific with 
little or no room for varying interpretations, and hospitals should 
have at least 1 year to prepare for the transition. Many commenters 
indicated that the American Hospital Association (AHA) will reconvene 
an expert panel to submit a request to the AMA CPT Editorial Panel to 
create CPT codes for hospital visits and encouraged CMS to be engaged 
in and supportive of the recommendations of the expert panel.
    Several commenters also recommended that, in the absence of 
national guidelines for hospital visit reporting, CMS provide 
additional guidance relating to the specific services that should be 
included or bundled into the visit levels reported by hospitals. One 
commenter requested that CMS ask the AMA to supplement its CPT Codebook 
to include a compilation of instructions from CMS regarding appropriate 
reporting of hospital visits, such as the 11 principles specified in 
the CY 2008 OPPS/ASC final rule with comment period that hospitals 
should follow in developing internal guidelines for reporting visits.
    Another commenter performed extensive review of a large sample of 
hospital emergency department visits to determine whether the 
distributions observed in this sample resembled the distribution 
described by CMS and printed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66804). The commenter explained that the results 
are similar to those of CMS at the national level, but that emergency 
departments have increased the proportion of level 4 and 5 emergency 
department visits in recent years, and that several outlier providers 
are billing significantly more high level visits than expected based on 
their geographic location and hospital type. Therefore, the commenter 
concluded that national guidelines could help slow rapidly increasing 
health care costs.
    Response: We acknowledge that it would be desirable to many 
hospitals to have national guidelines. However, we also understand that 
it would be disruptive and administratively burdensome to other 
hospitals that have successfully adopted internal guidelines to 
implement any new set of national guidelines while we address the 
problems that would be inevitable in the case of any new set of 
guidelines that would be applied by thousands of hospitals. As noted in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66806), we 
encourage fiscal intermediaries and MACs to review a hospital's 
internal guidelines when an audit occurs. While we also would encourage 
RACs to review a hospital's internal guidelines when an audit occurs, 
we note that currently there are no RAC activities involving visit 
services. RAC audits may involve CMS-approved issues only and must be 
posted to each RAC's Web site.
    We agree with the commenters that national guidelines should be 
clear, concise, and specific with little or no room for varying 
interpretations, and that hospitals should have at least 1 year to 
prepare for the transition. We look forward to reviewing any 
recommendations that result from the AHA-convened expert panel 
referenced by the commenters. If the AMA were to create facility-
specific CPT codes for reporting visits provided in HOPDs, we would 
certainly consider such codes for OPPS use. We also appreciate the 
visit level distribution analysis provided to us by one commenter and 
note that, in the absence of national guidelines, we will continue to 
regularly reevaluate patterns of hospital outpatient visit reporting at 
varying levels of disaggregation below the national level to ensure 
that hospitals continue to bill appropriately and differentially for 
these services. We reiterate our expectation that hospitals' internal 
guidelines fully comply with the principles listed in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 68805).
    Regarding the public comments requesting clarification of services 
that should be included or bundled into visit codes, as we have stated 
in the past (73 FR 68685), hospitals should separately report all HCPCS 
codes in accordance with correct coding principles, CPT code 
descriptions, and any additional CMS guidance, when applicable. We 
refer readers to the July 2008 OPPS quarterly update (Transmittal 1536, 
Change Request 6094, issued on June 19, 2008) for further clarification 
about the reporting of CPT codes for hospital outpatient services paid 
under the OPPS. In that transmittal, we note that, while CPT codes 
generally are created to describe and report physician services, they 
also are used by other providers/suppliers to describe and report 
services that they provide. Therefore, the CPT code descriptors do not 
necessarily reflect the facility component of a service furnished by 
the hospital. Some CPT code descriptors include reference to a 
physician performing a service. For OPPS purposes, unless indicated 
otherwise, the usage of the term ``physician'' does not restrict the 
reporting of the code or application of related policies to physicians 
only, but applies to all practitioners, hospitals, providers, or 
suppliers eligible to bill the relevant CPT codes in accordance with 
applicable portions of the Act, the Medicare regulations, and other 
Medicare guidance. In cases where there are separate codes for the 
technical component, professional component, and/or complete procedure, 
hospitals should report the code that represents the technical 
component for their facility services. If there is no separate 
technical component code for the service, hospitals should report the 
code that represents the complete procedure. Consistent with past input 
we have received from many hospitals, hospital associations, the APC 
Panel, and others, we will continue to utilize CPT codes for reporting 
services under the OPPS whenever possible to minimize hospitals' 
reporting burden.
    We do not agree with the commenter that we should ask the AMA to 
supplement its CPT Codebook to include a compilation of instructions 
from CMS regarding appropriate reporting of hospital visits. Under the 
OPPS, we develop policies specifically and exclusively for purposes of 
the Medicare program, while the CPT Codebook provides instructions that 
are applicable to hospital coding for all payers, unless those payers 
choose to implement different individual policies. If hospitals believe 
the inclusion of such information in the CPT Codebook is necessary and 
appropriate, they may directly request the AMA to do so.
    Comment: One commenter requested that CMS recognize CPT codes 99363 
(Anticoagulation management for an outpatient taking warfarin, 
physician review and interpretation of International Normalized Ratio 
(INR) testing, patient instructions, dosage adjustment (as needed), and 
ordering of additional tests; initial 90 days of therapy (must include 
a minimum of 8 INR measurements)) and 99364 (Anticoagulation management 
for an outpatient taking warfarin, physician review and interpretation 
of International Normalized Ratio (INR) testing, patient instructions, 
dosage

[[Page 60554]]

adjustment (as needed), and ordering of additional tests; each 
subsequent 90 days of therapy (must include a minimum of 3 INR 
measurements)), which are currently assigned status indicator ``B'' 
(Codes that are not recognized by OPPS when submitted on an outpatient 
hospital Part B bill type (12x and 13x)), as payable under the OPPS. 
The commenter stated that making these CPT codes payable under the OPPS 
is appropriate because they accurately describe anticoagulation 
management services. The commenter argued that recognition of these CPT 
codes would reduce patient liability because they are billed only once 
every 90 days.
    Response: While we appreciate the commenter's concern about patient 
liability, we cannot assess whether recognition of CPT codes 99363 and 
99364 as payable under the OPPS would actually reduce the cumulative 
amount of copayment a patient may have to pay for all of the different 
services that may be involved in anticoagulation management, which may 
be provided at varying time intervals and with very different levels of 
intensity for individual patients. We expect that a patient undergoing 
anticoagulation management by hospital staff for a significant medical 
condition would periodically have hospital visits, and we would package 
payment for the non-face-to-face management of the patient's therapy 
between visits into payment for the visits themselves. Our usual policy 
is to package payment for the hospital resources associated with 
managing patients' medical conditions between hospital encounters for 
patients who undergo surgery or receive hospital visits for any medical 
condition, including diabetes, hypertension, or cardiac arrhythmias, 
and we do not believe that payment for anticoagulation management 
services should be made differently than payment for other medical or 
surgical management services. Therefore, we see no reason to recognize 
CPT codes 99363 and 99364 for payment under the OPPS.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
assign status indicator ``B'' to CPT codes 99363 and 99364 to indicate 
that these codes are not recognized for payment under the OPPS. We 
expect that hospitals will continue to consider the hospital resources 
required to manage patients, including patients requiring 
anticoagulation management, between hospital encounters when setting 
their charges for the services furnished in those encounters.
    As we have stated in the past (73 FR 68686), we note that billing a 
visit code in addition to another service merely because the patient 
interacted with hospital staff or spent time in a room for that service 
is inappropriate. A hospital may bill a visit code based on the 
hospital's own coding guidelines, which must reasonably relate the 
intensity of hospital resources to the different levels of HCPCS codes. 
Services furnished must be medically necessary and documented. For 
example, CPT code 85610 (Prothrombin time) is a code that describes 
performance of the prothrombin time test. If the only service provided 
is a venipuncture and laboratory test to determine the prothrombin 
time, this service is the only service that should be billed. If a 
hospital provides a distinct, separately identifiable service in 
addition to the test, the hospital is responsible for billing the code 
that most closely describes the service provided.
    We appreciate all of the comments we have received in the past from 
the public on visit guidelines, and we encourage continued submission 
of comments throughout the year that would assist us and other 
stakeholders interested in the development of national guidelines. 
Until national guidelines are established, hospitals should continue 
using their own internal guidelines to determine the appropriate 
reporting of different levels of clinic and emergency department 
visits. While we understand the interest of some hospitals in having us 
move quickly to promulgate national guidelines that would ensure 
standardized reporting of hospital outpatient visit levels, we believe 
that the issues and concerns identified both by us and others are 
important and require serious consideration prior to the implementation 
of national guidelines. Because of our commitment to provide hospitals 
with 6 to 12 months notice prior to implementation of national 
guidelines, we would not implement national guidelines prior to CY 
2011. Our goal is to ensure that OPPS national or hospital-specific 
visit guidelines continue to facilitate consistent and accurate 
reporting of hospital outpatient visits in a manner that is resource-
based and supportive of appropriate OPPS payments for the efficient and 
effective provision of visits in hospital outpatient settings.

X. Payment for Partial Hospitalization Services

A. Background

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

[[Page 60555]]

the listed cost centers, we consider the overall hospital CCR as the 
default. For partial hospitalization services, the revenue center codes 
billed by hospital-based PHPs are mapped to Primary Cost Center 3550 
(Psychiatric/Psychological Services). If that cost center is not 
available, they are mapped to the Secondary Cost Center 6000 (Clinic). 
We use the overall facility CCR for CMHCs because PHPs are CMHCs' only 
Medicare cost, and CMHCs do not have the same cost structure as 
hospitals. Therefore, for CMHCs, we use the CCR from the outpatient 
provider-specific file. A closer examination of the revenue-code-to-
cost-center crosswalk revealed that 10 of the revenue center codes used 
by hospital-based PHPs did not map to a Primary Cost Center of 3550 or 
a Secondary Cost Center of 6000. We believe this occurred because these 
codes may also be used for services that are not furnished in a PHP or 
services that are not psychiatric related (for example, occupational 
therapy). As discussed in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66671 through 66672), we updated this analysis using more 
recent PHP claims and CCR data. After remapping codes, we computed an 
alternate cost for each line item of the hospital-based PHP claims. 
Remapping those 10 revenue center codes reduced the number of lines 
that defaulted to the hospitals' overall CCR and thus created a more 
accurate estimate of PHP per diem costs for a significant number of 
claims.
    Secondly, we refined our methodology for calculating median PHP per 
diem costs by computing a separate per diem cost for each day rather 
than for each claim. When there were multiple days of care entered on a 
claim, a unique cost was computed for each day of care. We only 
assigned costs for line items on days when a payment was made. All of 
these costs were then arrayed from lowest to highest, and the middle 
value of the array was considered the median per diem cost. A complete 
discussion of the refined method of computing the PHP median per diem 
cost can be found in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66672).
    After completing extensive data analysis, we continued to observe a 
clear downward trend in the median per diem cost based on the CY 2006 
data used to develop the median per diem cost under the CY 2008 OPPS/
ASC final rule with comment period. The analysis revealed that fewer 
PHP services were being provided in a given day. We believed, and 
continue to believe, that the data reflect the level of cost for the 
type of services that were being provided and continue to be provided.
    Because partial hospitalization is provided in lieu of inpatient 
care, it should be a highly structured and clinically intensive 
program, usually lasting most of the day. In order to improve the level 
of services furnished in a PHP day, in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66673), we reiterated our expectation that 
hospitals and CMHCs must provide a comprehensive program consistent 
with the statutory intent. We also indicated our intent to explore 
changes to our regulations and claims processing systems in order to 
deny payment for low intensity days.
    For CY 2009, we implemented several regulatory, policy, and payment 
changes, including a two-tiered payment approach for PHP services under 
which we pay one amount for days with 3 units of service (APC 0172 
(Level I Partial Hospitalization)) and a higher amount for days with 4 
or more units of service (APC 0173 (Level II Partial Hospitalization)). 
We implemented this payment approach to reflect the lower costs of a 
less intensive day while still paying programs that provide 4 or more 
units of service an amount that recognizes that they have provided a 
more intensive day of care. In this way, we pay more appropriately for 
the level of care provided while still allowing PHPs necessary 
scheduling flexibility (73 FR 68689). As we stated in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68688), it was never our 
intention that days with only 3 units of service become the number of 
services provided in a typical day. Our intention was to provide 
payment to cover days that consisted of 3 units of service only in 
certain limited circumstances. For example, we believe 3 units of 
service a day may be appropriate when a patient is transitioning 
towards discharge or when a patient is required to leave the PHP early 
for the day due to an unexpected medical appointment. We refer readers 
to section X.C.2. of the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68688 through 68695) for a full discussion of this 
requirement.
    For CY 2009, we proposed to calculate the payment rates for PHP 
APCs 0172 and 0173 using both hospital-based and CMHC PHP data (73 FR 
41513). After consideration of the public comments received on our 
proposal, we decided to base payment rates for the two-tiered approach 
on hospital-based PHP data only. As we explained in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68689), using the CMHC data 
for CY 2009 would have significantly reduced the CY 2009 PHP rates and 
negatively impacted hospital-based PHPs. Because hospital-based PHPs 
are geographically diverse, whereas CMHCs are located in only a few 
States, we were concerned that a significant drop in the rate could 
result in hospital-based PHPs closing and lead to possible beneficiary 
access to care problems. To calculate the CY 2009 PHP payment rate for 
APC 0172, we used the median per diem cost for hospital-based PHP days 
with 3 units of service to derive a PHP payment rate of $157. For APC 
0173, we used the median per diem cost for hospital-based PHP days with 
4 or more units of service to derive a CY 2009 PHP payment rate of 
$200.
    In addition, for CY 2009, we finalized our policy to deny payment 
for any PHP claims for days when fewer than 3 units of therapeutic 
services are provided. As noted in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68694), we believe that 3 units of service should 
be the minimum number of services allowed in a PHP day because a day 
with 1 or 2 units of service does not meet the statutory intent of a 
PHP program. Three units of service are a minimum threshold that 
permits unforeseen circumstances, such as medical appointments, while 
allowing payment, but maintains the integrity of the PHP benefit.
    Further, for CY 2009, we revised the regulations at Sec.  410.43 to 
codify existing basic PHP patient eligibility criteria and added a 
reference to current physician certification requirements at Sec.  
424.24. We believed these changes would help strengthen the PHP benefit 
by conforming our regulations to our longstanding policy (73 FR 68694 
through 68695). Specifically, we revised Sec.  410.43 to add a 
reference to existing regulations at Sec.  424.24(e) that require that 
PHP services be furnished pursuant to a physician certification and 
plan of care. While the requirements at Sec.  424.24(e) are not new, we 
included the reference in Sec.  410.43 to provide a more complete 
description of our expectations for PHP programs in one regulatory 
section. We also revised Sec.  410.43 to add the following patient 
eligibility criteria and clarify that PHPs are intended for patients 
who--(1) require a minimum of 20 hours per week of therapeutic services 
as evidenced in their plan of care; (2) are likely to benefit from a 
coordinated program of services and require more than isolated sessions 
of outpatient treatment; (3) do not require 24-hour care; (4) have an 
adequate support system while not actively engaged in the program; (5) 
have a mental health

[[Page 60556]]

diagnosis; (6) are not judged to be dangerous to self or others; and 
(7) have the cognitive and emotional ability to participate in the 
active treatment process and can tolerate the intensity of the PHP. We 
refer readers to section X.C.2. of the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68694 through 68695) for a full discussion of 
this requirement.
    Lastly, in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68695 through 68697), we revised the partial hospitalization benefit 
to include several coding updates. We removed three PHP billable codes 
(CPT codes 90899 (Unlisted psychiatric service or procedure), 90853 
(Group psychotherapy other than of a multiple-family group), and 90857 
(Interactive group psychotherapy)), and created two new timed HCPCS 
codes (GO410 (Group psychotherapy other than of a multiple-family 
group, in a partial hospitalization setting, approximately 45 to 50 
minutes) and G0411 (Interactive group psychotherapy in a partial 
hospitalization setting, approximately 45 to 50 minutes)). The 
elimination of CPT code 90899 was a result of our concerns about the 
type of services that may be billed using an unlisted CPT code when a 
more appropriate code may be available that better describes the 
services for which PHP payment may be made. The decision to eliminate 
the two group therapy CPT codes (90853 and 90857) and replace them with 
two new parallel timed HCPCS G-codes (G-0410 and G-0411) was based on 
the need for consistency. As most of the current PHP codes already 
include time estimates, we wanted to maintain consistency with the 
existing HCPCS codes used in the PHP by applying a time descriptor to 
the group therapy codes. In addition to these coding updates, we also 
decided to eliminate CPT code 90849 (multi-family group psychotherapy) 
as a billable PHP code because we believed that CPT code 90849 focuses 
the service on the needs of the family and not specifically on the 
needs of the patient, which is not consistent with the intent of the 
statute that treatment in a PHP be focused on the patient's condition 
(73 FR 68696).

B. PHP APC Update for CY 2010

    For the CY 2010 OPPS/ASC proposed rule (74 FR 35356), we used CY 
2008 claims data and computed median per diem costs in the following 
three categories: (1) All days; (2) days with 3 units of service; and 
(3) days with 4 or more units of service. These updated median per diem 
costs were computed separately for CMHCs and hospital-based PHPs and 
are shown in Table 50 below.

 Table 50--PHP Median Per Diem Costs for CMHCs and Hospital-Based PHPs,
                by Category, Based on CY 2008 Claims Data
------------------------------------------------------------------------
                                                 Hospital-
                                      CMHCs      based PHPs    Combined
------------------------------------------------------------------------
All Days.........................         $140         $200         $144
Days with 3 units of service.....          129          149          131
Days with 4 units or more units            173          213          175
 of service......................
------------------------------------------------------------------------

    Using CY 2008 data and the refined methodology for computing PHP 
per diem costs that we adopted in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66672), we computed the median per diem cost from 
all claims of $144. The data indicate that CMHCs continue to provide 
far fewer days with 4 or more units of service (33 percent compared to 
70 percent for hospital-based PHPs) and that the CMHC median per diem 
cost for 4 or more units of service ($173) is substantially lower than 
the comparable data from hospital-based PHPs ($213). The median per 
diem cost for claims containing 4 or more units of service for all PHP 
claims, regardless of site of service, is $175. Medians for claims 
containing 3 units of service are $129 for CMHCs, $149 for hospital-
based PHPs, and $131 for all PHP claims, regardless of site of service.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35356), for CY 2010, 
we proposed to continue to use the two-tiered payment approach for PHP 
services established in CY 2009. In addition, for CY 2010, we proposed 
to use only hospital-based PHP data to develop the two PHP APC per diem 
payment rates for the following reasons. If we used combined CMHC and 
hospital-based PHP data to develop the rates, the two per diem payment 
rates would be reduced by approximately $26 for APC 0172 and $25 for 
APC 0173. We are concerned about further reducing both PHP APC per diem 
payment rates without knowing the impact of the policy and payment 
changes we made in CY 2009. Because there is a 2-year delay between 
data collection and rulemaking, the changes we made in CY 2009 will not 
be reflected in the claims data until next year when we are developing 
the update for CY 2011. The two proposed APCs median per diem rates for 
PHP services were as follows:

    Table 51--CY 2010 Proposed Median Per Diem Rates for PHP Services
------------------------------------------------------------------------
                                                             Proposed
          Proposed APC                 Group title          median per
                                                             diem rate
------------------------------------------------------------------------
0172...........................  Level I Partial                    $149
                                  Hospitalization (3
                                  services).
0173...........................  Level II Partial                    213
                                  Hospitalization (4 or
                                  more services).
------------------------------------------------------------------------

    In general, public commenters supported the two-tiered PHP APC per 
diem payment approach in the proposed rule, the proposed CY 2010 
payment rates, and the use of hospital-based PHP data only for 
generating the PHP APC payment rates.
    Comment: A majority of the commenters supported the proposed PHP 
rates for CY 2010, as well as the two-tiered PHP APC payment structure 
(with high and low intensity rates). Many of these commenters strongly 
recommended that CMS use only hospital-based PHP data to determine the 
final rates. The commenters believed

[[Page 60557]]

that hospital-based data are more reliable, predictable, national in 
scope, consistent, and stable, and that hospital-based data are meeting 
the intent of the PHP statute and CMS rules.
    Several commenters urged CMS not to combine the CMHC and hospital-
based PHP data to set the final CY 2010 PHP payment rates. The 
commenters pointed out that the volatility and significant fluctuation 
of the CMHC costs and changes in data since 2000 has continued to place 
the reliability of the CMHC data in doubt. One commenter urged CMS to 
use PHP hospital-based data only to set the rates because CMS does not 
know the impact of the comprehensive policy and payment changes made to 
PHP services during 2009.
    The commenters also recommended that, if CMS were to change the 
methodology to establish the per diem payment rate in CY 2010 and 
beyond, CMS adopt two additional APCs for separate CMHCs PHP payment 
rates. The commenter recommended establishing site specific APCs for 
PHP services where the hospital-based PHP APCs for Level I (3 units of 
service) and Level II (4 or more units of service) would be established 
using hospital cost data and CMHC-based PHP APCs for Level I (3 units 
of service) and Level II (4 or more units of service) would be 
established using CMHC data. One commenter pointed out that while the 
aggregate number of PHP service providers has remained relatively 
stable over time, the number of hospital-based PHPs has dropped by 16 
percent, while the number of CMHC PHPs has increased by 53 percent 
(with the majority of CMHCs located in Florida, Louisiana, and Texas). 
The commenters reported that 80 percent of the States have two or more 
hospital-based programs, and only 30 percent of States have more than 
one CMHC.
    Response: We appreciate the commenters' support for our proposals 
on the two-tiered payment approach and use of hospital-based PHP data 
only to develop the CY 2010 payment rates. As we continue to evaluate 
ways to reflect CMHC costs in establishing PHP future rates, we will 
take the recommendation to establish site-specific PHP APCs into 
consideration. After consideration of the public comments we received, 
we have decided to retain the two-tiered payment approach for CY 2010, 
using hospital-based PHP data only.
    Comment: Several commenters urged CMS to propose an APC code or 
payment rate for PHP claims for days with fewer than 3 units of service 
or, at a minimum, the commenters want CMS to suspend for medical review 
claims with fewer than units of services per day.
    Response: We continue to believe that days with 1 or 2 units of 
service are inconsistent with a benefit designed as a full-day program 
to substitute for inpatient care. PHP is furnished in lieu of an 
inpatient psychiatric hospitalization and is intended to be a highly 
structured and clinically intense program, usually lasting most of the 
day. We believe that 3 units of service should be the minimum number of 
services allowed in a PHP day because a day with 1 or 2 units of 
service does not meet the statutory intent of a PHP program. Our 
intention was to provide payment to cover days that consisted of 3 
units of service only in certain limited circumstances. Therefore, we 
believe that 3 units of service are a minimum threshold that permits 
unforeseen circumstances, such as medical appointments, while allowing 
payment, but still maintains the integrity of a comprehensive program. 
If there are legitimate instances when 1 or 2 units of service days are 
justified, the provider has the option of appealing the denial of 
payment for that day, as specified in the Medicare Claims Processing 
Manual (Pub. 100-04), Chapter 29 and Chapter 30, Section 30.2.2.
    Comment: One commenter stated that the number of rural hospital-
based PHPs has declined during the CY 2003-2006 period and indicated 
that a study conducted last year found that rural areas are being hit 
with the loss of PHP programs. A few commenters were greatly relieved 
by the projection of an increase in the reimbursement rate for Level II 
PHP services. They believed another cut in rates would jeopardize the 
existence of the PHP benefit, reduce the financial viability of PHPs, 
and probably lead to closure of many PHPs, thus affecting access to 
care for this vulnerable population. In addition, because hospital 
outpatient mental health services paid under the OPPS are capped at the 
PHP per diem payment rate, many commenters were concerned about overall 
access to outpatient mental health treatment. The commenters urged CMS 
to keep mental health services available to all.
    Response: We have established the final CY 2010 payment rate based 
on hospital-based PHP data, yielding an increase in the median for days 
with 4 or more units of service compared to CY 2009 payment rates. This 
increase will benefit all PHP programs, including those in rural areas. 
The CY 2010 payment rates for Level I (3 units of service) shows a 
decrease in CY 2010 compared to CY 2009. We believe using the CMHC data 
would significantly reduce the current rate and negatively impact 
hospital-based PHPs and CMHCs, resulting possibly in reduced access to 
care. Because hospital-based PHPs are geographically diverse, whereas 
CMHCs are located in only a few states, we are concerned that a 
significant drop in the rate could result in hospital-based PHPs 
closing and leading to possible access problems. For this reason, we 
are using hospital-based PHP data only to calculate the CY 2010 median 
per diem payment rates.
    Comment: One commenter expressed concern that CMS' data and 
analysis regarding the median per diem costs for PHP services have been 
and remain fundamentally flawed. The commenter recommended that CMS 
conduct further research and, in particular, conduct detailed provider-
level research to better understand the costs necessary to deliver PHP 
services in hospital and CMHC settings. The commenter recommended the 
payment rate for PHP services (APC 0173) be set at approximately $325 
per patient day and no less than the CY 2007 payment rate of $234.73.
    Response: We base the PHP APC per diem payment rates on providers' 
charges reported on claims adjusted by the providers' CCRs. This 
approach is consistent with the method used to compute payment rates 
for other APCs under the OPPS, except that, for PHPs for which the unit 
of service is a day, we sum the charges for a given day and then 
determine the median cost of all days. We expect that a provider's 
charges will reflect the level of services provided, which has a 
relationship to the cost of providing those services. In Medicare cost 
reporting, the total charges are to be reported along with the 
provider's cost. To the extent that a provider is submitting bills that 
have charges that do not directly relate to the delivery or provision 
of services, its CCRs will be unpredictable and would distort the costs 
of the services provided.
    In developing the CY 2010 PHP APC per diem payment rates, we 
excluded days that have only 1 or 2 units of service. In addition, we 
did not include days where no payment was made to avoid diluting the 
cost. To calculate the Level I PHP APC payment rate, we used days with 
3 units of service, and to calculate the Level II PHP APC payment rate, 
we used days with 4 or more units of service. We believe our 
methodology accurately reflects the median cost of providing these two 
levels of PHP services. As discussed previously, we made several 
refinements to our

[[Page 60558]]

methodology for computing the per diem costs that more accurately 
reflect the per diem cost of providing PHP services.
    Comment: Many commenters stated that cost report information for 
CMHCs is not currently included in the Healthcare Cost Report 
Information System (HCRIS) and recommended that CMS base its 
calculations only on the cost report information that the agency can 
verify directly and not on data provided by the fiscal intermediaries 
or MACs. The commenters believed that CMS should calculate payment 
rates using only cost data from those cost reports currently in and 
accessible through the HCRIS.
    Response: We understand the commenters concern about making CMHC 
data available through the HCRIS, and we are taking steps to make the 
data available in the future. For CY 2010, we will use PHP hospital-
based data only to set the PHP APC payment rates. The hospital-based 
PHP data are based on cost report data currently in and accessible 
through the HCRIS.
    Comment: Several commenters expressed concern that there are 
additional services furnished by CMHCs that are currently provided to 
PHP patients for which the providers are not reimbursed. The commenters 
pointed out that the Substance Abuse and Mental Health Services 
Administration recognizes these additional services by including 
payment for treatment of mental illness, not just for substance abuse 
treatment, and for costs for other services, including locating 
housing. The commenter included a list of HCPCS H-codes as an example 
of additional services as specified in Table 52 below.

Table 52--Additonal HCPCS H-Codes Recommended by a Commenter for Payment
                             as PHP Services
------------------------------------------------------------------------
            HCPCS H-code                          Description
------------------------------------------------------------------------
H0001...............................  Alcohol and/or drug assessment.
H0004...............................  Behavioral health counseling and
                                       therapy, per 15 minutes.
H0028...............................  Alcohol and/or drug prevention
                                       problem identification and
                                       referral service (e.g., student
                                       assistance and employee
                                       assistance programs), does not
                                       include assessment.
H0029...............................  Alcohol and/or drug prevention
                                       alternatives service (services
                                       for populations that exclude
                                       alcohol and other drug use, e.g.
                                       alcohol free social events).
H0030...............................  Behavioral health hotline service.
H0031...............................  Mental health assessment, by non-
                                       physician.
H0032...............................  Mental health service plan
                                       development by non-physician.
H0033...............................  Oral medication administration,
                                       direct observation.
H0034...............................  Medication training and support,
                                       per 15 minutes.
H0047...............................  Alcohol and/or other drug abuse
                                       services, not otherwise
                                       specified.
H0049...............................  Alcohol and/or drug screening.
H0050...............................  Alcohol and/or drug services,
                                       brief intervention, per 15
                                       minutes.
H1011...............................  Family assessment by licensed
                                       behavioral health professional
                                       for state defined purposes.
H2000...............................  Comprehensive multidisciplinary
                                       evaluation.
H2010...............................  Comprehensive medication services,
                                       per 15 minutes.
H2011...............................  Crisis intervention service, per
                                       15 minutes.
H2014...............................  Skills training and development,
                                       per 15 minutes.
H2027...............................  Psycho educational service, per 15
                                       minutes.
------------------------------------------------------------------------

    Response: Partial hospitalization services are specifically defined 
in section 1861(ff) of the Act and are a Medicare benefit category. 
Because there is no benefit category for substance abuse programs, any 
such program would have to meet requirements established for PHPs, 
including the requirements that a physician certify that the patient 
would otherwise require inpatient psychiatric care in the absence of 
the partial hospitalization services and that the program provides 
active treatment (section 1835(a)(2)(F) of the Act and 42 CFR 
424.27(e)). PHP services involving direct patient care costs are 
payable under Medicare. The HCPCS H-codes listed above are not payable 
by Medicare. However, certain services for substance abuse are payable 
under a PHP because a PHP provides for patient education, mental health 
assessment, occupational therapy, and behavioral health treatment/
services among other services. For a complete list of services covered 
under a PHP under Medicare, we refer readers to the Medicare Claims 
Processing Manual (Pub. 100-04), Chapter 4, Section 260. Medicare does 
not pay for services such as 12-step programs. Many of the HCPCS H-
codes listed duplicate allowable PHP service codes, for example, 
patient education and training. However, the PHP service codes 
generally are not defined in 15-minute increments.
    Comment: One commenter suggested that CMS consider alternative 
arrangements for partial hospitalization and hospital outpatient 
services for the future. The commenter suggested removing PHP from the 
APC codes and instead establish a separate payment system (similar to 
home health) by establishing a reasonable base rate for PHP for Level 
II PHP services at a slightly higher level (such as $220-$225 per day), 
annually adjusting the base rate by a conservative inflation factor 
such as the CPI, establishing quality criteria to judge performance, 
and dropping the payment level for Level I PHP services so that only 4 
or more services are recognized for payment.
    Response: Currently, the statute does not provide for a separate 
payment system for partial hospitalization services. Therefore, a 
statutory change would be required to establish an independent payment 
system for PHPs. Regarding the commenter's recommendation to establish 
quality criteria, we agree that establishing benchmarks and indicators 
would be useful, and we encourage providers to share that information 
with us. We believe that creating a rate specific to days with three 
services is consistent with our policy to require CMHCs and hospital-
based PHPs to provide a minimum of 3 units of service per day in order 
to receive payment. Although we do not expect Level I PHP service days 
to be frequent, we do recognize that there are times when a patient may 
need a less intensive day of service. Therefore, we continue to 
recognize the need for a two-tiered payment system: one payment for 
those less intensive days with three services; and another payment for 
those more intensive days with four or more services.
    Comment: A few commenters urged CMS to find a way to strengthen the 
integrity of the program by developing and implementing standards of 
participation. The commenters recommended the implementation of 
standards of care with emphasis on quality of services and urged CMS to 
develop conditions of participation that would be a useful regulatory 
tool for

[[Page 60559]]

PHP providers. The commenters suggested that the development process 
must include all providers and other stakeholders. Several commenters 
offered to work with CMS to reform and improve the PHP by establishing 
standards for quality of PHP services provided; adopting CMHC facility-
level quality measures and a reporting regime; and assisting with 
accreditation and cost reporting reforms.
    Response: We agree with the commenters that standards of 
participation is an area that should be addressed, and we are exploring 
proposing conditions for coverage for CMHCs to establish minimum 
standards for patient rights, physical environment, staffing, and 
documentation requirements. We believe that adding conditions for 
coverage would contribute to more consistency between CMHCs and 
hospital-based PHPs.
    Comment: One commenter suggested that CMS use fiscal intermediaries 
and MACs to work with hospitals and CMHC providers to establish 
separate PHP lines on their appropriate Medicare cost reports to arrive 
at a CCR for PHPs rather than the default psychiatric, clinics, or 
overall outpatient CCR lines. The commenter believed that, nationally, 
the CCRs for the PHPs are being understated by applying overall CCRs 
and/or clinic CCRs and, thus, penalizing the structured intensive 
partial programs.
    Response: We note that most hospitals do not have a cost center for 
partial hospitalization; therefore, we have used the CCR as specific to 
PHP as possible. As described earlier in section X.A. of this final 
rule with comment period, for CY 2008, we proposed and finalized two 
refinements to the methodology for computing the PHP median per diem 
cost that we believe resulted in a more accurate median per diem cost. 
The first of the two CY 2008 refinements was a remapping of 10 revenue 
codes-to-cost centers for hospital-based PHP claims. We believe that 
the CY 2008 refinement to the mapping approach continues to be the best 
method for assigning the most appropriate cost center for hospital-
based PHP claims. For a detailed explanation of the remapping of 
revenue codes for hospital-based PHP claims, we refer readers to the CY 
2008 OPPS/ASC proposed rule (72 FR 42691 through 42692) and the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66671 through 66672).
    In addition, we note that this remapping refinement applies only to 
hospital-based PHP claims and not to CMHC claims. In the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68690), in response to 
commenters' request that CMS apply the remapping of revenue codes to 
cost centers to CMHC claims, we stated that we cannot apply the same 
mapping method to CMHCs because PHP is the CMHCs' only Medicare cost 
and CMHCs do not have the same cost structure as hospitals.
    Comment: One commenter expressed concern that the PHP benefit 
lacked flexibility. The commenter believed that the rigid guidelines 
for attendance of 5 plus days a week (20 hours) could create excessive 
overutilization at times. The commenter stated that it would be more 
beneficial to restructure PHP to be a more flexible, less costly, 
outcome-based system of care.
    Response: Partial hospitalization is an intensive outpatient 
program of psychiatric services provided to patients as an alternative 
to inpatient psychiatric hospitalization or as a step down to shorten 
an inpatient stay and transition a patient to a less intensive level of 
care. We understand the commenters' concerns about the 20 hours per 
week requirement with regard to scheduling flexibility, but we were 
concerned that if we reduce the minimum number of hours lower than the 
current guideline, the low end of the range will become the new 
minimum. Therefore, instead of reducing the number of hours a patient 
needs in order to be eligible to receive the benefit, we clarified that 
the patient eligibility requirement that patients require 20 hours of 
therapeutic services is evidenced in a patient's plan of care rather 
than in the actual hours of therapeutic services a patient receives. 
The intent of this eligibility requirement is that, for most weeks, we 
expect attendance conforming to the patient's plan of care. We 
recognize that there may be times at the beginning (or end) of a 
patient's transition into (or out of) a PHP where the patient may not 
receive 20 hours of therapeutic services.
    Comment: One commenter expressed concern about the proposed cuts 
for Partial Hospitalization (APC 0173) and the impact the cuts will 
have on its hospital and community. The commenter reviewed the history 
of APC payment rates for these services and noted the trend of the 
payment rates decreasing over the past 7 years. The commenter pointed 
out that it experienced a significant increase in the staff salary and 
benefit costs. The commenter expressed concern that the decreasing 
payment rate and increasing expenses will make it difficult for the 
hospital to sustain these services and access to care for Medicare 
beneficiaries could worsen.
    Response: Hospital costs per day for PHP services for APC 0173 have 
remained in the range of $200--$225 for CY 2000 through CY 2010. This 
is the reason we have decided to use hospital-based PHP data only for 
computing the CY 2010 PHP payment rates, as this approach will lead to 
payment stability for CY 2010.
    In summary, after consideration of the public comments we received, 
we are adopting as final our CY 2010 proposal to retain the two-tiered 
payment approach for PHP services and to use only hospital-based PHP 
data in computing the payment. The two updated PHP APC per diem median 
costs that we are finalizing for CY 2010 are shown in Table 53 below.

             Table 53--CY 2010 PHP APC per Diem Median Costs
------------------------------------------------------------------------
                                                              Median per
           APC                        Group title             diem costs
------------------------------------------------------------------------
0172.....................  Level I Partial Hospitalization          $148
                            (3 services).
0173.....................  Level II Partial Hospitalization          209
                            (4 or more services).
------------------------------------------------------------------------

C. Separate Threshold for Outlier Payments to CMHCs

    In the November 7, 2003 final rule with comment period (68 FR 
63469), we indicated that, given the difference in PHP charges between 
hospitals and CMHCs, we did not believe it was appropriate to make 
outlier payments to CMHCs using the outlier percentage target amount 
and threshold established for hospitals. Prior to that time, there was 
a significant difference in the amount of outlier payments made to 
hospitals and CMHCs for PHP services. In addition, further analysis 
indicated that using the same OPPS outlier threshold for both hospitals 
and CMHCs did not limit outlier payments to high cost cases and 
resulted in excessive outlier payments to CMHCs. Therefore,

[[Page 60560]]

beginning in CY 2004, we established a separate outlier threshold for 
CMHCs. The separate outlier threshold for CMHCs has resulted in more 
commensurate outlier payments.
    In CY 2004, the separate outlier threshold for CMHCs resulted in 
$1.8 million in outlier payments to CMHCs. In CY 2005, the separate 
outlier threshold for CMHCs resulted in $0.5 million in outlier 
payments to CMHCs. In contrast, in CY 2003, more than $30 million was 
paid to CMHCs in outlier payments. We believe this difference in 
outlier payments indicates that the separate outlier threshold for 
CMHCs has been successful in keeping outlier payments to CMHCs in line 
with the percentage of OPPS payments made to CMHCs. Table 54 below 
includes a listing of the outlier target amounts and the portion of the 
target amount allocated to CMHCs for PHP outliers for CYs 2004 through 
2009.

  Table 54--Outlier Target Amount Percentages and Portions Allocated to
             CMHCs for PHP Outliers--CY 2004 Through CY 2007
------------------------------------------------------------------------
                                                            Portion of
                                               Outlier     target amount
                                                target     allocated to
                    Year                        amount     CMHCs for PHP
                                              percentage   outliers  (in
                                                             percent)
------------------------------------------------------------------------
CY 2004....................................          2.0             0.5
CY 2005....................................          2.0             0.6
CY 2006....................................          1.0             0.6
CY 2007....................................          1.0            0.15
CY 2008....................................          1.0            0.02
CY 2009....................................          1.0            0.12
------------------------------------------------------------------------

    As noted in section II.F. of the CY 2010 OPPS/ASC proposed rule (74 
FR 35296), for CY 2010, we proposed to continue our policy of 
identifying 1.0 percent of the aggregate total payments under the OPPS 
for outlier payments. We proposed that a portion of that 1.0 percent, 
an amount equal to 0.02 percent of outlier payments (or 0.0002 percent 
of total OPPS payments), would be allocated to CMHCs for PHP outliers. 
As discussed in section II.F. of the CY 2010 OPPS/ASC proposed rule (74 
FR 35296), we proposed to set a dollar threshold in addition to an APC 
multiplier threshold for OPPS outlier payments. However, because the 
PHP APC is the only APC for which CMHCs may receive payment under the 
OPPS, we would not expect to redirect outlier payments by imposing a 
dollar threshold. Therefore, we did not propose to set a dollar 
threshold for CMHC outliers. As noted in section II.F. of the CY 2010 
OPPS/ASC proposed rule (74 FR 35296), we proposed to set the outlier 
threshold for CMHCs for CY 2010 at 3.40 times the APC payment amount 
and the CY 2010 outlier payment percentage applicable to costs in 
excess of the threshold at 50 percent. Specifically, we proposed that 
if a CMHC's cost for partial hospitalization services, paid under 
either APC 0172 or APC 0173, exceeds 3.40 times the payment for APC 
0173, the outlier payment would be calculated as 50 percent of the 
amount by which the cost exceeds 3.40 times the APC 0173 payment rate.
    Comment: Several commenters suggested that instead of creating 
separate threshold for outlier payments to CMHCs, it would be 
beneficial to eliminate the outlier payment and use those funds 
allocated to outlier payments to bolster payments for services provided 
by CMHCs.
    Response: We note that the Secretary shall provide an outlier 
payment for each covered OPD service (or group of services) in 
accordance with the requirements set forth in section1833(t)(5) of the 
Act and the applicable regulations. Because CMHCs are a provider of PHP 
services, outlier payments must be provided for them in accordance with 
the statute. We note that eliminating outlier payments for CMHCs would 
not result in an increase in the PHP rate, but rather would provide 
additional funding for hospital outlier payments for all HOPD services.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal to set a separate outlier threshold for 
CMHCs. As discussed in section II.F. of this final rule with comment 
period, using more recent data for this final rule with comment period, 
we set the target for hospital outpatient outlier payments at 1.0 
percent of total estimated OPPS payments. We allocated a portion of 
that 1.0 percent, an amount equal to 0.03 percent of outlier payments 
and 0.0003 percent of total estimated OPPS payments to CMHCs for PHP 
outliers. For CY 2010, as proposed, we are setting the outlier 
threshold at 3.40 multiplied by the APC amount and CY 2010 outlier 
percentage applicable to costs in excess of the threshold at 50 
percent.

XI. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

    Section 1833(t)(1)(B)(i) of the Act gives the Secretary broad 
authority to determine the services to be covered and paid for under 
the OPPS. Before implementation of the OPPS in August 2000, Medicare 
paid reasonable costs for services provided in the HOPD. The claims 
submitted were subject to medical review by the fiscal intermediaries 
to determine the appropriateness of providing certain services in the 
outpatient setting. We did not specify in our regulations those 
services that were appropriate to provide only in the inpatient setting 
and that, therefore, should be payable only when provided in that 
setting.
    In the April 7, 2000 final rule with comment period (65 FR 18455), 
we identified procedures that are typically provided only in an 
inpatient setting and, therefore, would not be paid by Medicare under 
the OPPS. These procedures comprise what is referred to as the 
``inpatient list.'' The inpatient list specifies those services for 
which the hospital will be paid only when provided in the inpatient 
setting because of the nature of the procedure, the underlying physical 
condition of the patient, or the need for at least 24 hours of 
postoperative recovery time or monitoring before the patient can be 
safely discharged. As we discussed in that rule and in the November 30, 
2001 final rule with comment period (66 FR 59856), we may use any of a 
number of criteria we have specified when reviewing procedures to 
determine whether or not they should be removed from the inpatient list 
and assigned to an APC group for payment under the OPPS when provided 
in the hospital outpatient setting. Those criteria include the 
following:
     Most outpatient departments are equipped to provide the 
services to the Medicare population.
     The simplest procedure described by the code may be 
performed in most outpatient departments.
     The procedure is related to codes that we have already 
removed from the inpatient list.
    In the November 1, 2002 final rule with comment period (67 FR 
66741), we added the following criteria for use in reviewing procedures 
to determine whether they should be removed from the inpatient list and 
assigned to an APC group for payment under the OPPS:
     A determination is made that the procedure is being 
performed in numerous hospitals on an outpatient basis; or
     A determination is made that the procedure can be 
appropriately and safely performed in an ASC, and is on the list of 
approved ASC procedures or has been proposed by us for addition to the 
ASC list.
    The list of codes that we proposed to be paid by Medicare in CY 
2010 only as inpatient procedures was included as

[[Page 60561]]

Addendum E to the CY 2010 OPPS/ASC proposed rule.

B. Changes to the Inpatient List

    In the CY 2010 OPPS/ASC proposed rule (74 FR 35358), we proposed to 
use for the CY 2010 OPPS the same methodology as described in the 
November 15, 2004 final rule with comment period (69 FR 65835) to 
identify a subset of procedures currently on the inpatient list that 
are being performed a significant amount of the time on an outpatient 
basis. Using this methodology, we identified three procedures that met 
the criteria for potential removal from the inpatient list. We then 
clinically reviewed these three potential procedures for possible 
removal from the inpatient list and found them to be appropriate 
candidates for removal from the inpatient list. During the February 
2009 meeting of the APC Panel, we solicited the APC Panel's input on 
the appropriateness of removing the following three procedures from the 
CY 2010 inpatient list: CPT codes 21256 (Reconstruction of orbit with 
osteotomies (extracranial) and with bone grafts (includes obtaining 
autografts) (eg, micro-ophthalmia)); 27179 (Open treatment of slipped 
femoral epiphysis; osteoplasty of femoral neck (Heyman type 
procedure)); and 51060 (Transvesical ureterolithotomy).
    In addition to presenting to the APC Panel the three procedures 
above, we also presented utilization data for the first 9 months of CY 
2008 for two other specific procedures, in response to a request by the 
APC Panel from the March 2008 meeting: CPT code 20660 (Application of 
cranial tongs, caliper or stereotactic frame, including removal 
(separate procedure)), a procedure that we removed from the inpatient 
list for CY 2009; and CPT code 64818 (Sympathectomy, lumbar), a 
procedure that we maintained on the inpatient list for CY 2009.
    Following the discussion at the February 2009 meeting, the APC 
Panel recommended that CMS remove from the CY 2010 inpatient list CPT 
codes 21256, 27179, and 51060. The APC Panel also recommended that CPT 
code 64818 remain on the inpatient list for CY 2010. The APC Panel made 
no recommendation regarding CPT code 20660.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35358), we proposed to 
accept the APC Panel's recommendations to remove the procedures 
described by CPT codes 21256, 27179, and 51060 from the inpatient list 
because we agree with the APC Panel that the procedures may be 
appropriately provided as hospital outpatient procedures for some 
Medicare beneficiaries. We also proposed to retain CPT code 64818 on 
the inpatient list because we agree with the APC Panel that this 
procedure should be provided to Medicare beneficiaries only in the 
hospital inpatient setting. The three procedures we proposed to remove 
from the inpatient list for CY 2010 and their CPT codes, long 
descriptors, and proposed APC assignments were displayed in Table 37 of 
the CY 2010 OPPS/ASC proposed rule (74 FR 35358).
    Comment: Several commenters supported the proposal to remove the 
procedures reported by CPT codes 21256, 27179, and 51060 from the 
inpatient list, one commenter opposed removing the procedure coded by 
CPT code 51060, and one commenter expressed concern about removing any 
of the three procedures proposed for removal from the inpatient list. 
The commenter that requested that CMS retain CPT code 51060 on the 
inpatient list reported that the procedure is an open surgical 
procedure that is much more extensive than a hernia repair. In that 
commenter's experience, patients who undergo this surgery are not able 
to go home the same day as surgery because most require parenteral pain 
medication and ongoing monitoring of the pain, and of possible ileus or 
hematuria. Another commenter provided no rationale for objecting to the 
removal of the three procedures as proposed by CMS beyond stating that 
if CMS does not eliminate the entire inpatient list, then the commenter 
would have serious concerns about removing the three procedures.
    Response: We appreciate the commenters' support of our proposal. In 
response to the commenters who expressed concern about removing one or 
more of the three procedures from the inpatient list, we reevaluated 
the three procedures using more recent utilization data and further 
clinical review by CMS medical advisors. As a result of that 
reevaluation, we remain convinced that all three procedures may be 
safely performed in the HOPD for some Medicare beneficiaries. As we 
have indicated previously, the removal of a procedure from the 
inpatient list does not signify a determination by CMS that the 
procedure should be performed in the HOPD for all beneficiaries. The 
removal only indicated that CMS is relying on the individual 
beneficiary's surgeon to advise the most appropriate setting for the 
procedure based on the beneficiary's medical condition. In fact, as 
evidenced by the utilization data over the years, most of the newly-
removed procedures from the inpatient list continue to be commonly 
provided in the inpatient setting after they are removed from the list. 
The removal of a procedure from the inpatient list simply is 
recognition that there is evidence that the procedure may be safely 
performed for some beneficiaries who are outpatients and represents no 
directive about whether the inpatient setting or the outpatient setting 
is more appropriate in any particular circumstance.
    Comment: Several commenters requested the removal of additional 
procedures from the inpatient list. Although the commenters requested 
that CMS remove a total of 20 additional procedures from the inpatient 
list, 4 of the requested codes were not on the proposed CY 2010 
inpatient list. All of the codes requested for removal are displayed in 
Table 55 below.
    As identified by asterisks, 11 of the procedures displayed in the 
chart below were submitted by one commenter representing a group of 
hospitals. This commenter stated that each of the procedures requested 
for removal from the inpatient list was carefully reviewed and could be 
safely provided to Medicare beneficiaries in the HOPD. The commenter 
reported that research and investigation indicated that clinical 
criteria sets such as the Milliman Care Guidelines support the safe 
provision of the 11 procedures in outpatient settings. In addition, the 
commenter stated that the group's hospitals have physicians providing 
the procedures safely in the outpatient setting for non-Medicare 
patients who are in the same age group as the Medicare population.

Table 55--Additional Procedures Requested by Commenters for Removal From
                     the Inpatient List for CY 2010
------------------------------------------------------------------------
                                         CY 2009 short       Proposed CY
         CY 2009 HCPCS code                descriptor          2010 SI
------------------------------------------------------------------------
01402..............................  Anesth, knee                      C
                                      arthroplasty.
22548..............................  Neck spine fusion....             C
*22554.............................  Neck spine fusion....             C
*22585.............................  Additional spinal                 C
                                      fusion.
*22851.............................  Apply spine prosth               T
                                      device.
27447..............................  Total knee                        C
                                      arthroplasty.
28805..............................  Amputation thru                   C
                                      metatarsal.
*32662.............................  Thoracoscopy,                     C
                                      surgical.
*37182.............................  Insert hepatic shunt              C
                                      (tips).
*37215.............................  Transcath stent, cca              C
                                      w/eps.

[[Page 60562]]

 
*44950.............................  Appendectomy.........             C
44955..............................  Appendectomy, add-on.             C
44960..............................  Appendectomy.........             C
55866..............................  Laparo radical                    C
                                      prostatectomy.
*60505.............................  Explore parathyroid               C
                                      glands.
*63047.............................  Removal spinal lamina            T
63075..............................  Neck spine disk                  T
                                      surgery.
*63076.............................  Neck spine disk                   C
                                      surgery.
*63267.............................  Excise intraspinal                C
                                      lesion.
64999..............................  Nervous system                   T
                                      surgery.
------------------------------------------------------------------------
* Submitted by commenter representing a group of hospitals.

    Response: In response to the commenters' requests, we reviewed 
utilization and clinical information for each of the procedures 
suggested for removal from the inpatient list. Of the 16 procedures 
reviewed (those with status indicator ``C'' in the chart above) our 
medical advisors agreed with the commenters that it would be 
appropriate to remove 5 of them from the inpatient list. Thus, for CY 
2010, we are removing from the inpatient list the procedures reported 
by CPT codes 28805 (Amputation, foot; transmetatarsal); 37215 
(Transcatheter placement of intravascular stent(s), cervical carotid 
artery, percutaneous; with distal embolic protection); 44950 
(Appendectomy); 44955 (Appendectomy; when done for indicated purpose at 
time of other major procedure (not as separate procedure) (List 
separately in addition to code for primary procedure)); and 63076 
(Discectomy, anterior, with decompression of spinal cord and/or nerve 
root(s), including osteophytectomy; cervical, each additional 
interspace (List separately in addition to code for primary 
procedure)). These procedures and the APCs to which they are assigned 
for CY 2010 are displayed in Table 56 below.
    The clinical and utilization data for the other 11 procedures did 
not support the appropriateness of providing the procedures to Medicare 
beneficiaries in the HOPD. We believe that Medicare beneficiaries who 
undergo any of these 11 procedures should do so only as inpatients.
    Comment: Many commenters suggested that CMS eliminate the inpatient 
list. They believed that each patient's status should be determined by 
the physician who can establish the most appropriate care plan for the 
individual. The commenters pointed out the many safety provisions that 
are met by hospitals participating in the Medicare program as evidence 
that hospitals would provide care safely and appropriately.
    A few of the commenters stated that the inconsistency between the 
Medicare payment policies for hospitals and physicians of allowing 
physicians to receive full payment for inpatient procedures that are 
performed on Medicare beneficiaries in the HOPD who are not inpatients, 
but denying hospitals payment for those same procedures, gives 
physicians little incentive to avoid providing inpatient procedures to 
Medicare beneficiaries who are outpatients. Several commenters 
suggested that if CMS maintains the inpatient list, the associated 
payment restrictions be applied consistently to both hospitals and 
physicians in order to promote a collaborative effort in documentation 
and clinical care plans.
    One commenter stated that the inpatient list, which requires that 
Medicare beneficiaries be handled differently than the rest of the 
patient population in some circumstances, creates chaos for the 
physicians and hospitals who are trying to apply consistent clinical 
criteria to determine appropriate levels of care for all of their 
patients.
    Many of the commenters argued that there are a variety of 
circumstances that result in procedures on the inpatient list being 
performed without an inpatient admission and that hospitals should not 
be held accountable for those situations. For example, they explained 
that sometimes during the intraoperative period, due to clinical 
circumstances, the surgeon performs a procedure that is on the 
inpatient list in addition to, or rather than, the procedure that was 
planned.
    Finally, the commenters believed that the inpatient list penalizes 
hospitals unfairly and suggested that if CMS is unwilling to eliminate 
the inpatient list, it consider developing an appeals process to 
address circumstances in which payment for a service provided on an 
outpatient basis is denied due to its presence on the inpatient list. 
The commenters believed that the appeal would give the hospital the 
opportunity to submit documentation on the physician's intent, the 
patient's clinical condition, and the circumstances that enabled the 
patient to be sent home safely without an inpatient stay.
    Response: While we understand the commenters' reasons for 
advocating the elimination of the inpatient list, we continue to 
believe that the inpatient list serves an important purpose in 
identifying procedures that cannot be safely and effectively provided 
to Medicare beneficiaries in the HOPD. We are concerned that the 
elimination of the inpatient list could result in unsafe or prolonged 
care in hospital outpatient departments for Medicare beneficiaries. 
Therefore, we are not discontinuing our use of the inpatient list at 
this time.
    Although the commenters suggested that we apply the same payment 
restrictions to physicians and hospitals when inpatient procedures are 
performed inappropriately, payment for physicians' services are outside 
of the scope of OPPS payment policy and of this OPPS/ASC final rule 
with comment period. We continue to believe that it is very important 
for hospitals to educate physicians on Medicare services covered under 
the OPPS to avoid inadvertently providing services in a hospital 
outpatient setting that only are covered during an inpatient stay.
    We also are concerned about the potential results of eliminating 
the inpatient list on Medicare beneficiary liability. For instance, we 
are concerned that, without the inpatient list, Medicare beneficiaries 
could experience longer stays in HOPDs after some procedures. The APC 
Panel has discussed its concern about these long stays that frequently 
exceed 24 hours. Moreover, the financial liability for OPPS copayments 
for complex surgical procedures and long periods of care in the HOPD 
and coverage of items such as usually self-administered drugs differs 
significantly from a beneficiary's inpatient cost-sharing 
responsibilities and coverage, and the beneficiary may incur higher 
out-of-pocket costs for prolonged outpatient encounters than for an 
inpatient stay for the same surgical intervention.
    We continue to encourage physicians' awareness of the implications 
for Medicare beneficiaries and hospitals of performing inpatient list 
procedures in the HOPD on beneficiaries who are not inpatients. We do 
not plan to adopt a specific appeals process for claims related to 
inpatient list procedures performed in the HOPD at this time. The 
existing processes established for a beneficiary or a provider to 
appeal a specific claim remain in effect.
    Comment: One commenter suggested that CMS implement a method to 
identify scheduled outpatient procedures that become, through

[[Page 60563]]

intraoperative circumstances, inpatient procedures. The commenter 
asserted that, due to hospital billing practices, hospital coding staff 
do not know until well after the surgery is completed that an 
unscheduled inpatient procedure was performed on an outpatient who was 
not admitted as an inpatient. The commenter suggested that CMS 
implement a HCPCS modifier that the hospital could append to the 
inpatient procedure on the claim and that payment for the claim could 
be made at the same rate as those coded with the -CA modifier (APC 0375 
(Ancillary Outpatient Services When Patient Expires)).
    Response: While we appreciate the commenter's suggestion for 
addressing circumstances when unplanned inpatient list procedures are 
performed during operative sessions where outpatient surgical 
procedures were planned, we do not believe there is a need for a 
modifier to identify those situations. We continue to believe that the 
inpatient list procedures are not appropriate for performance on 
Medicare beneficiaries in the HOPD and, therefore, we expect that when 
such a procedure is performed, the beneficiary would be admitted as an 
inpatient.
    We established payment for ancillary services reported in 
association with an inpatient procedure to which the -CA modifier is 
appended in order to provide payment to hospitals for services 
furnished in those rare cases in which procedures on the inpatient list 
are 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 these 
situations, hospitals are unable to admit the patients as inpatients. 
In the circumstances described by the commenter, we see no 
insurmountable hospital barriers to admitting the patients as 
inpatients of the hospital and do not believe it would be appropriate 
to provide payment (through APC 0375) for a mix of surgical procedures 
provided to patients who survive at the rate developed specifically to 
pay for the ancillary services furnished in association with procedures 
reported with the -CA modifier when a patient dies prior to admission 
as an inpatient. The calculation of the payment rate for APC 0375 is 
discussed in detail in section II.A.2.d.(7) of this final rule with 
comment period.
    We understand hospitals' dilemma when the decision is made 
intraoperatively to perform an unscheduled procedure. However, we 
continue to believe that it is important for hospitals to educate 
physicians on Medicare services paid under the OPPS to avoid 
inadvertently providing services in a hospital outpatient setting that 
would be paid only during an inpatient stay because we believe that the 
HOPD is not an appropriate site of service for inpatient list 
procedures.
    Comment: Another commenter recommended that CMS expand the use of 
the -CA modifier to allow payments to the hospitals for performance of 
procedures on the inpatient list that must be performed to resuscitate 
or stabilize an outpatient with an emergency, life-threatening 
condition, but the patient is stabilized medically and transferred to 
another acute care hospital for admission. In other words, the 
commenter added, the patient is never admitted to the hospital where 
the inpatient list procedure was performed.
    Response: We established the -CA modifier policy to provide payment 
to hospitals for services provided in the specific and rare situations 
in which procedures on the inpatient list are performed in the HOPD 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, not as a method for 
hospitals to recoup costs incurred when inpatient procedures are 
performed inappropriately on a Medicare beneficiary in the HOPD.
    We see no rationale for allowing hospitals to report the -CA 
modifier for any circumstances other than those for which it was 
created. In the scenario described by the commenter, there is no 
evidence of the hospital's insurmountable barriers to admitting the 
patient, a criterion for use of the -CA modifier. In addition, we are 
not convinced that there is a need for a modifier to describe these 
rare events. We also do not believe it would be appropriate to provide 
payment at the rate developed specifically to pay for the ancillary 
services furnished in association with procedures reported with the -CA 
modifier when a patient dies prior to admission as an inpatient (APC 
0375), for a mix of surgical procedures provided to patients who 
survive. The calculation of the payment rate for APC 0375 is discussed 
in detail in section II.A.2.d.(7) of this final rule with comment 
period.
    Comment: One commenter suggested that CMS may lack information on 
the types of inpatient procedures that are performed for beneficiaries 
who are outpatients because those claims are returned to the provider 
by the I/OCE, thereby preventing CMS from capturing the unpaid services 
in its claims data. To address this situation, the commenter 
recommended that CMS modify the I/OCE so that claims for inpatient 
procedures provided on an outpatient basis could be processed as not 
payable rather than returned to the provider. The commenter believed 
that this modification would enable CMS to gather claims data on these 
procedures and to see how many and what types of procedures physicians 
believe are appropriate for performance in the HOPD. The claims data 
also would provide CMS information about the hospital resources 
expended to care for these Medicare beneficiaries. In addition, the 
commenter suggested that CMS could share the data with the APC Panel 
for discussion and review in support of their evaluations of which 
procedures may appropriately be removed from the inpatient list.
    Response: We believe that our outpatient claims data include the 
claims for inpatient procedures that are performed on Medicare 
beneficiaries who are outpatients. As would be expected, the volume for 
these nonpayable procedures is low compared to the number of payable 
outpatient claims, but we believe that the claims hospitals submit are 
available to us for examination in our OPPS claims data each year.
    The I/OCE logic does not result in claims for inpatient procedures 
being returned to the provider. Rather, once the inpatient procedure is 
identified, it is line-item denied and then, with very few exceptions 
(for example, claims with the -CA modifier and an indication that the 
beneficiary expired), it assigns line-item edits to result in payment 
denial for each of the other services on the claim because these 
services were furnished on the same day as the inpatient procedure. A 
full description of the I/OCE logic and edits is available on the CMS 
Web site at: http://www.cms.hhs.gov/OutpatientCodeEdit/.
    After consideration of the public comments we received, we are 
finalizing our proposal to remove the procedures reported by CPT codes 
21256, 27179, and 51060 from the inpatient list. We also are removing 
five additional procedures that public commenters requested be removed 
from the inpatient list. These procedures are reported by CPT codes 
28805 (Amputation, foot; transmetatarsal); 37215 (Transcatheter 
placement of intravascular stent(s), cervical carotid artery, 
percutaneous; with distal embolic protection); 44950 (Appendectomy); 
44955 (Appendectomy; when done for

[[Page 60564]]

indicated purpose at time of other major procedure (not as separate 
procedure) (List separately in addition to code for primary 
procedure)); and 63076 (Discectomy, anterior, with decompression of 
spinal cord and/or nerve root(s), including osteophytectomy; cervical, 
each additional interspace (List separately in addition to code for 
primary procedure)). The final eight procedures we are removing from 
the inpatient list for CY 2010 and their CPT codes, long descriptors, 
and final APC assignments are displayed in Table 56 below.

        Table 56--Procedures Removed From the Inpatient List and Their Final APC Assignments for CY 2010
----------------------------------------------------------------------------------------------------------------
                                                                                                  Final CY 2010
             CY 2010 HCPCS Code                    CY 2010 long descriptor        Final CY 2010       status
                                                                                 APC assignment     indicator
----------------------------------------------------------------------------------------------------------------
21256......................................  Reconstruction of orbit with                  0256               T
                                              osteotomies (extracranial) and
                                              with bone grafts (includes
                                              obtaining autografts) (eg, micro-
                                              ophthalmia).
27179......................................  Open treatment of slipped femoral             0052               T
                                              epiphysis; osteoplasty of femoral
                                              neck (Heyman type procedure).
28805......................................  Amputation, foot; transmetatarsal.            0055               T
37215......................................  Transcatheter placement of                    0229               T
                                              intravascular stent(s), cervical
                                              carotid artery, percutaneous;
                                              with distal embolic protection.
44950......................................  Appendectomy......................            0153               T
44955......................................  Appendectomy; when done for                   0153               T
                                              indicated purpose at time of
                                              other major procedure (not as
                                              separate procedure) (List
                                              separately in addition to code
                                              for primary procedure).
51060......................................  Transvesical ureterolithotomy.....            0163               T
63076......................................  Discectomy, anterior, with                    0208               T
                                              decompression of spinal cord and/
                                              or nerve root(s), including
                                              osteophytectomy; cervical, each
                                              additional interspace (List
                                              separately in addition to code
                                              for primary procedure).
----------------------------------------------------------------------------------------------------------------

XII. OPPS Nonrecurring Technical and Policy Changes and Clarifications

A. Kidney Disease Education Services

1. Background
    Section 152(b) of Public Law 110-275 (MIPPA) amended section 
1861(s)(2) of the Act by adding a new subsection (EE) to provide for 
coverage of kidney disease education (KDE) services as a Medicare Part 
B benefit for Medicare beneficiaries diagnosed with stage IV chronic 
kidney disease (CKD) who, according to accepted clinical guidelines 
identified by the Secretary, will require dialysis or a kidney 
transplant, effective for services furnished on or after January 1, 
2010. Section 152(b) also added a new subsection (ggg) to section 1861 
of the Act to define ``kidney disease education services'' and to 
specify who may furnish these services as a ``qualified person.'' 
Section 1861(ggg)(2)(A)(i) of the Act, as added by section 152(b) of 
Public Law 110-275, defines a qualified person as a physician (as 
defined in section 1861(r)(1) of the Act); or a physician assistant, 
nurse practitioner, or clinical nurse specialist (as defined in section 
1861(aa)(5) of the Act) who furnishes services for which payment may be 
made under the fee schedule established under section 1848 of the Act. 
Section 1861(ggg)(2)(A)(ii) of the Act also defines a qualified person 
as a ``provider of services located in a rural area (as defined in 
section 1886(d)(2)(D) [of the Act]).'' The definition of a ``qualified 
person'' for this benefit includes certain rural providers of services, 
such as hospitals, critical access hospitals (CAHs), skilled nursing 
facilities (SNFs), home health agencies (HHAs), comprehensive 
outpatient rehabilitation facilities (CORFs), and hospices. Section 
1861(ggg)(2)(B) of the Act provides that a qualified person does not 
include a provider of services (other than a provider of services 
described in section 1861(ggg)(2)(A)(ii)) or a renal dialysis facility.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35358), we proposed to 
implement the provisions of section 1861(s)(2)(EE) and 1861(ggg) of the 
Act, as added by section 152(b) of Pub. L. 110-275, mainly through the 
June 2009 CY 2010 MPFS proposed rule (CMS-1413-P; Medicare Program; 
Payment Policies under the Physician Fee Schedule and Other Revisions 
to Part B for CY 2010), hereinafter referred to as the CY 2010 MPFS 
proposed rule. Specifically, in section II.G.10. of the CY 2010 MPFS 
proposed rule (74 FR 33617), we proposed to define the Medicare 
coverage criteria that would be applicable to KDE services and who may 
provide these services (that is, a ``qualified person''), consistent 
with the provisions of sections 1861(s)(2)(EE) and 1861(ggg) of the 
Act. In that proposed rule, we also proposed to define a provider of 
services in a rural area as defined in section 1886(d)(2)(D) of the Act 
as a hospital, CAH, SNF, CORF, HHA, or hospice that is physically 
located in a rural area as defined in Sec.  412.64(b)(ii)(C) of the 
regulations or a hospital or CAH that is reclassified from urban to 
rural status pursuant to section 1886(d)(8)(E) of the Act, as defined 
in Sec.  412.103 of the regulations. According to the proposal included 
in the CY 2010 MPFS proposed rule, a hospital, CAH, SNF, CORF, HHA, or 
hospice would not be considered to be a qualified person if the 
facility providing KDE services is located outside of a rural area 
unless the service is furnished in a hospital or CAH that has 
reclassified from urban to rural status under Sec.  412.103.
    In addition, in the CY 2010 MPFS proposed rule (74 FR 33614), 
consistent with the provisions of section 1861(ggg) of the Act, we 
proposed a payment amount for KDE services furnished by a ``qualified 
person.'' Specifically, we proposed to establish two new Level II HCPCS 
G-codes to describe KDE services and to specify the associated relative 
value units (RVUs) under the MPFS for payment for these codes.
    We instructed individuals who wished to comment on the proposed 
coverage criteria for KDE services under section 1861(ggg) of the Act, 
including the definition of a ``qualified person,'' the proposed HCPCS 
G-codes, and the proposed RVUs for KDE services to submit their 
comments to CMS in response to the CY 2010 MPFS proposed rule that we 
describe above. Below we discuss our proposed payment for KDE services 
furnished by providers of services located in a rural area. We 
instructed individuals who wished to submit public comments relating to 
payment for KDE services furnished by providers of services located in 
a rural area to submit those

[[Page 60565]]

comments in response to the CY 2010 OPPS/ASC proposed rule.
2. Payment for Services Furnished by Providers of Services Located in a 
Rural Area
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35358), we proposed to 
pay under the MPFS for KDE services under section 1861(ggg) of the Act 
when the services are furnished by a qualified person that is a 
hospital, CAH, SNF, CORF, HHA, or hospice that is located in a rural 
area as defined in section 1886(d)(2)(D) of the Act or a hospital or 
CAH that is reclassified from urban to rural status pursuant to section 
1886(d)(8)(E) of the Act, as defined in Sec.  412.103 of the 
regulations. Section 152(b) of Public Law 110-275 amended section 
1848(j)(3) of the Act to add section 1861(s)(2)(EE) (kidney disease 
education services) to the list of subsections of section 1861(s)(2) of 
the Act, which are included in the definition of physician services in 
section 1848(j)(3) of the Act. However, the statute does not specify 
the payment methodology for KDE services furnished by providers of 
these services located in rural areas.
    Given that the statute provides the Secretary with the flexibility 
to pay all qualified persons under the MPFS and there is precedent for 
paying both diabetes self-management training and medical nutrition 
therapy services (which we believe KDE is similar to in terms of 
resource use, specifically staffing and infrastructure) under the MPFS, 
we proposed to pay all qualified persons for KDE services under the 
MPFS. This single payment methodology would apply to all qualified 
persons, including providers of services in a rural area as we proposed 
to define such providers in the CY 2010 MPFS proposed rule.
    The language in section 1861(ggg) of the Act that defines KDE 
services is similar to the language in section 1861(qq) of the Act that 
defines ``diabetes self-management training services,'' which is a 
medical or other health service under section 1861(s)(2)(S) of the Act. 
In addition, the language in section 1861(ggg) of the Act is similar to 
the language in section 1861(vv) of the Act that defines ``medical 
nutrition therapy services,'' which is also a medical or other health 
service under section 1861(s)(2)(V) of the Act. Finally, both diabetes 
self-management training and medical nutrition therapy are included in 
the definition of ``physicians' services'' for purposes of the MPFS at 
section 1848(j)(3) of the Act, and our standard policy is to pay for 
both services under the MPFS when they are furnished in an HOPD. Given 
that the statute permits us to pay all qualified persons under the MPFS 
and the precedent for paying both diabetes self-management training and 
medical nutrition therapy under the MPFS when these services are 
provided in the hospital outpatient setting, we believe that payment 
under the MPFS is the most appropriate methodology for payment to 
qualified persons who are providers of services located in a rural area 
or who are hospitals or CAHs that have been reclassified from urban to 
rural status pursuant to Sec.  412.103 of the regulations for the KDE 
services they furnish.
    The proposed CY 2010 MPFS payments for HCPCS codes GXX26 
(Educational services related to the care of chronic kidney disease; 
individual, per session; face-to-face), now finalized in the CY 2010 
MPFS final rule with comment period as G0420 (Educational services 
related to the care of chronic kidney disease; individual per session, 
per hour, face-to-face), and GXX27 (Educational services related to the 
care of chronic kidney disease; group, per session; face-to-face), now 
finalized in the CY 2010 MPFS final rule with comment period as 
G0421(Educational services related to the care of chronic kidney 
disease; group, per session, per hour, face-to-face), are discussed in 
the CY 2010 MPFS proposed rule (74 FR 33619). When the qualified person 
is a rural provider, we proposed to pay the provider the applicable 
amount under the MPFS and a single payment would be made for each KDE 
session, limited to no more than six sessions as discussed in the CY 
2010 MPFS proposed rule. Subsequently, we would not provide separate 
payment for both a physician's professional services and the associated 
facility services if a single session of KDE services was furnished in 
a rural hospital or CAH. Therefore, because of operational constraints, 
we proposed that payment would be made to only one qualified person for 
KDE services on the same day for the same beneficiary. We also note 
that the MPFS' geographic practice cost index would apply to the 
calculation of the payment in a particular fee schedule locality 
because this locality adjustment methodology is applicable to payment 
for all services paid under the MPFS. We proposed to assign status 
indicator ``A'' to HCPCS codes GXX26 and GXX27 in Addendum B to the CY 
2010 OPPS/ASC proposed rule to signify that these services, when 
covered, would be paid under a payment system other than the OPPS, 
specifically the MPFS in the case of both HCPCS codes.
    We instructed individuals who wished to submit public comments on 
this proposal to pay under the MPFS for covered KDE services furnished 
by qualified persons who are hospitals, CAHs, SNFs, CORFs, HHAs, or 
hospices that are located in a rural area or are treated as being rural 
under Sec.  412.103 to submit those comments in accordance with the 
instructions for commenting on the CY 2010 OPPS/ASC proposed rule. We 
instructed individuals who wished to submit public comments on all 
other aspects of the proposed implementation of sections 1861(s)(2)(EE) 
and 1861(ggg) of the Act, including, but not limited to, the proposed 
criteria for coverage of the services, the proposed definition of 
``session,'' the proposed HCPCS G-codes, and the proposed content of 
the program, to submit those comments in response to the CY 2010 MPFS 
proposed rule.
    Comment: A few commenters objected to the proposed payment to rural 
providers for KDE services. The commenters believed that the proposed 
rates were too low for appropriate payment for KDE services and 
recommended that CMS revise its KDE payment rates to reflect the 
greater resources required for rural provider to furnish KDE services.
    Response: As a result of our review of the public comments and 
further analysis, we are adjusting the final CY 2010 MPFS RVUs for 
HCPCS codes G0420 and G0421. Specifically, we reviewed the medical 
nutrition therapy CPT codes, 97802 (Medical nutrition therapy; initial 
assessment and intervention, individual, face-to-face with the patient, 
each 15 minutes) and 97804 (Medical nutrition therapy; group (2 or more 
individual(s)), each 30 minutes), that we are crosswalking to the KDE 
codes for payment under the MPFS. We have adjusted the final CY 2010 
values for HCPCS codes G0420 and G0421 to reflect not only the final 
specification of the time of one hour for an individual or group KDE 
session but also to reflect the appropriate supplies and equipment 
without duplication. We multiplied the physician work RVUs for HCPCS 
code G0420 by four and the work RVUs for HCPCS code G0421 by two to 
account for the fact that we are crosswalking a 15 minute MNT code to a 
60 minute KDE code for the individual service and a 30 minute MNT code 
to a 60 minute KDE code for the group service case. We refer readers to 
the CY 2010 MPFS final rule with comment period for the CY 2010 RVUs 
for KDE services that determine payment to rural providers for HCPCS 
codes G0420 and G0421.

[[Page 60566]]

    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to pay under the 
MPFS for covered KDE services furnished by qualified persons that are 
hospitals, CAHs, SNFs, CORFs, HHAs, or hospices that are located in a 
rural area or are treated as being rural under Sec.  412.103. Public 
comments concerning the definition of a ``qualified person,'' the 
proposed HCPCS G-codes, the proposed RVUs for KDE services, the 
proposed criteria for coverage of the services, the proposed definition 
of ``session,'' and the proposed content of the program are discussed 
in the CY 2010 MPFS final rule with comment period.

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

1. Legislative Changes
    Section 144(a) of Public Law 110-275 (MIPPA) made a number of 
changes to the Act to provide Medicare Part B coverage and payment for 
pulmonary and cardiac rehabilitation services furnished to 
beneficiaries with chronic obstructive pulmonary disease and certain 
other conditions, respectively, effective January 1, 2010. 
Specifically, section 144(a)(1) of the Act amended section 1861(s)(2) 
of the Act by adding new subparagraphs (CC) and (DD) to specify 
Medicare Part B coverage of items and services furnished under (1) a 
cardiac rehabilitation (CR) program (as defined in an added new section 
1861(eee)(1) of the Act) or under a pulmonary rehabilitation (PR) 
program (as defined under an added new section 1861(fff)(1) of the Act; 
and (2) an intensive cardiac rehabilitation (ICR) program (as defined 
in an added new section 1861(eee)(4) of the Act). The amendments made 
by section 144(a) of Public Law 110-275 provide for coverage of CR, PR, 
and ICR services provided in a physician's office, in a hospital on an 
outpatient basis, or in other settings as the Secretary determines 
appropriate. Section 144(a)(2) of Public Law 110-275 amended section 
1848(j)(3) to provide for payment for services furnished in an ICR 
program under the MPFS and also added a new section 1848(b)(5) to 
provide specific language governing payment for ICR services. Under 
that specific section, the Secretary shall substitute the Medicare OPD 
fee schedule amount established under the prospective payment system 
for hospital outpatient department services under section 1833(t)(3)(D) 
of the Act for CR (under HCPCS codes 93797 (Physician services for 
outpatient cardiac rehabilitation; without continuous ECG monitoring 
(per session)) and 93798 (Physician services for outpatient cardiac 
rehabilitation; with continuous ECG monitoring (per session)) for CY 
2007, or any succeeding HCPCS codes established for cardiac 
rehabilitation). Section 144(a)(2) also defines under the new section 
1848(b)(5) a ``session'' for each of the component CR items and 
services defined in subparagraphs (A) through (E) of section 
1861(eee)(3) of the Act, when furnished for one hour, as a separate 
session of ICR, and specified that payment may be made for up to 6 
sessions per day of the series of 72 one-hour sessions of ICR services. 
Section 144(a)(1)(B) also requires that a physician must be immediately 
available and accessible for medical consultations and medical 
emergencies at all times items and services are being furnished under 
CR, ICR, and PR programs, except that in the case of such items and 
services furnished under such a program in a hospital, such 
availability shall be presumed.
    As we discuss in detail in section II.G.8. of the CY 2010 MPFS 
proposed rule (74 FR 33606), we proposed to use the MPFS and the OPPS 
rulemaking processes, and may use the national coverage determination 
(NCD) process as well, to implement the amendments made by section 
144(a) of Public Law 110-275. In the CY 2010 MPFS proposed rule, we 
specified our policy proposals for implementing Medicare Part B 
coverage and payment for services furnished in a CR, ICR, and PR 
program under the MPFS. In the CY 2010 OPPS/ASC proposed rule (74 FR 
35360), we proposed the CY 2010 OPPS payment for services in a CR, ICR, 
or PR program furnished to hospital outpatients.
    Comment: A number of commenters asked that CMS confirm that the 
services of physical therapists are not part of the PR, CR, or ICR 
benefits authorized by section 144(a)(1) of Public Law 100-275 and are 
always paid under the physical therapy benefit and that, therefore, the 
therapy services do not require physician supervision when furnished as 
part of a PR, CR, or ICR program, including in the HOPD. With regard to 
PR, they stated that CMS has a longstanding history of recognizing the 
services of a physical therapist as an integral part of a PR program 
and requiring that these services be reported and paid as physical 
therapy services. Specifically, the commenters indicated that in the CY 
2002 MPFS regulation (66 FR 55246) and in the current Medicare Claims 
Processing Manual (Pub. 100-04, Chapter 5, Section 20.A), CMS specifies 
that when physical therapists treat respiratory conditions, they should 
report CPT codes for physical therapy in the 97000 series and should 
not report HCPCS codes G0237 (Therapeutic procedures to increase 
strength or endurance of respiratory muscles, one on one, face to face, 
per 15 minutes (includes monitoring)); G0238 (Therapeutic procedures to 
improve respiratory function or increase strength or endurance of 
respiratory muscles, one on one, face to face, per 15 minutes (includes 
monitoring)); or G0239 (Therapeutic procedures to improve respiratory 
function or increase strength or endurance of respiratory muscles, two 
or more individuals (includes monitoring)). The commenters added that 
in the September 25, 2007 Decision Memo for Pulmonary Rehabilitation 
(CAG-00356N), CMS recognized the importance of physical therapy to 
patients with pulmonary conditions and stated that these services 
should be billed and paid under the physical therapy benefit. The 
commenters argued that a plan of care developed by a physical therapist 
to improve pulmonary function for a patient with chronic obstructive 
pulmonary disease (COPD), which meets the medical necessity criteria 
for physical therapy services, is covered and paid under the physical 
therapy benefit. They explained that, although it is a covered PR 
service, the therapy plan of care is separate from the PR benefit 
authorized by section 144(a)(1) of Public Law 100-275, should continue 
to be reported under the CPT codes for physical therapy services, and 
should be paid under the physical therapy benefit. In addition, the 
commenters requested that CMS confirm that skilled physical therapy 
services that are rendered in the CR setting by a qualified physical 
therapist should be conducted, reported, and paid as physical therapy 
services, and that physician supervision is not necessary in the CR 
setting when the physical therapist is delivering treatment that 
clearly meets the criteria for a physical therapy service. The 
commenters explained that CMS has recognized and codified that physical 
therapy is a separate benefit and that physical therapists are 
qualified to perform certain services independent of direct physician 
supervision.
    Response: We expect that most patients participating in PR, CR, or 
ICR programs authorized by section 144(a)(1) of Public Law 100-275 and 
covered by Medicare Part B will be debilitated based on their 
underlying medical condition, age, or other factors. In order to 
develop a PR, CR, or ICR

[[Page 60567]]

treatment plan, some debilitated patients may require evaluations by 
therapists on the multidisciplinary team, in addition to assessments by 
other team members. In order to participate successfully in the 
prescribed exercise component of the PR, CR, or ICR program, we also 
expect that these patients may receive individualized treatments by 
therapists on the multidisciplinary team and others to promote the 
increased functionality that is a principle goal of PR, CR, and ICR 
programs. As we stated in the CY 2010 MPFS proposed rule, the items and 
services furnished by a CR or PR program are individualized and set 
forth in written treatment plans for each beneficiary (74 FR 33607 and 
33611). We believe these evaluations and individualized treatments are 
a part of the PR, CR, or ICR program. As such, we believe they should 
be conducted by one or more members of the multidisciplinary team of 
the PR, CR, or ICR program with the appropriate expertise.
    While we have not defined PR, CR, or ICR services as always 
including therapists' services as part of the comprehensive benefit (74 
FR 33608 and 33614), we acknowledged that written treatment plans are 
highly individualized and that there should be flexibility in the type, 
amount, frequency, and duration of services provided in each session 
(74 FR 33607). We expect that physical therapists could conduct 
assessments and individualized treatments as part of the PR, CR, or ICR 
program because physical therapists have the knowledge and skills to 
assist in addressing common problems that lead to physicians ordering 
PR, CR, or ICR services for their patients, including poor aerobic 
capacity, poor endurance, and shortness of breath in the context of 
chronic pulmonary or cardiovascular disease. In the context of PR, 
while we also stated that individuals requiring PR services have a 
chronic respiratory disease and are in need of supervised aerobic 
exercise, we acknowledged that patients require assessments to address 
individualized needs and the provision of a mix of services necessary 
to address those needs (74 FR 33613).
    Patients in PR, CR, or ICR programs must receive the full 
complement of care as defined under these benefits, in accordance with 
their individualized treatment plan, including assessments and 
prescribed exercise. Additionally, the standard HCPCS coding guidance 
instructs practitioners and providers to report the code for the 
procedure or service that most accurately describes the service 
performed. As stated in Section 20.12.1.b. of Chapter 5 of the Medicare 
Contractor Beneficiary and Provider Communications Manual, in instances 
where several component services, which have different CPT/HCPCS codes, 
may be described in one more comprehensive code, only the single code 
most accurately describing the procedure performed or service rendered 
should be reported. Therefore, we would expect that when therapists 
provide these evaluations and individualized treatment services under a 
comprehensive PR, CR, or ICR treatment plan, these services would be 
billed by the hospital as PR, CR, or ICR services under the 
comprehensive PR, CR, or ICR CPT codes or Level II HCPCS G-codes that 
apply, and not as physical therapy services. Furthermore, as discussed 
in section XII.B.4. of this final rule with comment period, for 
purposes of PR, CR, and ICR services, direct supervision must be 
provided by a doctor of medicine or osteopathy as defined in section 
1861(r)(1) of the Act. This direct supervision rule would also apply to 
services furnished by therapists on the multidisciplinary team, and 
these services would be paid to the hospital as PR, CR, or ICR 
services.
    We expect that most patients who meet the diagnosis requirements 
for coverage of PR, CR, or ICR would receive component services covered 
under the PR, CR, or ICR benefit as part of a comprehensive PR, CR, or 
ICR program, subject to the coverage and payment policies that we are 
finalizing in this CY 2010 OPPS/ASC final rule with comment period and 
the CY 2010 MPFS final rule with comment period. We understand that 
some component services of PR, CR, or ICR have previously been 
furnished to beneficiaries and paid by Medicare under other benefits, 
such as the outpatient physical therapy benefit. Because section 
144(a)(1) of Public Law 100-275 authorized a new comprehensive PR 
benefit and codified specific benefits for CR and ICR, we believe that 
hospitals should furnish the full scope of the PR, CR, or ICR benefit, 
where services will be paid as hospital outpatient services under the 
OPPS, as comprehensive programs to those patients who qualify for 
coverage. We would not expect the component services of PR, CR, and ICR 
programs to be unbundled and billed separately by different providers 
or practitioners under other benefit categories, such as the physical 
therapy benefit where services would be paid under the MPFS. Therefore, 
we expect that it would be uncommon for a patient receiving care under 
a PR, CR, or ICR treatment plan to also be receiving physical therapy 
services under a separate physical therapy plan of care. There may be 
patients with therapy needs that are outside the treatment plan 
appropriate for PR, CR, or ICR, and such patients should receive 
medically necessary physical therapy services specific to those other 
needs. However, we would not expect this to be the norm. Clearly, a 
single period of care can only be billed as one type of treatment 
service, so hospitals could never bill both physical therapy and PR, 
CR, or ICR services for the same time period for the same patient (for 
example, an hour session from 10 a.m. to 11 a.m. on a single date of 
service).
    We plan to monitor claims data for PR, CR, and ICR services, as 
well as any additional claims for therapy services. If we detect 
patterns of care that are inconsistent with our stated expectations for 
PR, CR, or ICR services and therapy services, we may encourage Medicare 
contractors to review cases in which a hospital reports both types of 
services for the same patient during the same span of time (for 
example, over a several month period) or we may propose changes to our 
payment methodologies for these services.
    After considering the public comments we received, we are 
clarifying that we would expect component services that are furnished 
under a PR, CR, or ICR treatment plan to beneficiaries who qualify for 
PR, CR, or ICR services to be furnished as PR, CR, or ICR services, 
regardless of whether they are furnished by a physical therapist or 
other healthcare practitioner, and that all of the coverage and payment 
requirements for hospital outpatient services, including, but not 
limited to, the physician supervision requirements for hospital 
outpatient therapeutic services, apply to those PR, CR, or ICR 
services. We refer readers to section XII.D.3. of this final rule with 
comment period for a discussion of the final CY 2010 policies for the 
direct supervision of hospital outpatient therapeutic services. We 
expect that hospitals will furnish the comprehensive set of services 
that is contemplated in the criteria for PR, CR, or ICR programs to 
beneficiaries who qualify for the benefit.
2. Payments for Services Furnished to Hospital Outpatients in a 
Pulmonary Rehabilitation Program
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35360), we proposed to 
create for CY 2010 one new Level II HCPCS code for hospitals to report 
and bill for the services furnished under a PR program as specified in 
section 1861(fff) of the Act. Specifically, we

[[Page 60568]]

proposed to use HCPCS code GXX30 (Pulmonary rehabilitation, including 
aerobic exercise (includes monitoring), per session, per day). This 
proposed new HCPCS G-code would be used by hospitals to report PR 
services furnished to patients performing physician-prescribed 
exercises that are targeted to improving the patient's physical 
functioning and may also include the provision of other aspects of PR, 
such as education and training. Consistent with our proposal in the CY 
2010 MPFS proposed rule, we proposed that hospitals would use HCPCS 
code GXX30 to report sessions lasting a minimum of 60 minutes each, 
generally for two to three sessions of PR per week, under the OPPS. We 
also proposed to allow no more than one session per day because 
individuals who are furnished services in a PR program have significant 
respiratory compromise and would not typically be capable of performing 
more than one session of exercise per day.
    We proposed that PR described by HCPCS code GXX30 would be a new 
comprehensive service. We did not believe there was an existing 
clinical APC to which this service could be appropriately assigned 
under the OPPS based on the information currently available to us. We 
did not believe that any services currently paid under the OPPS were 
sufficiently similar to PR, based on both clinical and resource 
characteristics, to justify the initial assignment of HCPCS code GXX30 
to the same clinical APC as an existing service. Historically, 
individual component services that comprise comprehensive PR have been 
reported separately with existing HCPCS codes that are paid under the 
OPPS through the individual APC that is most appropriate for each 
service described by the specific HCPCS code reported.
    For payment under the MPFS, we proposed relative value units for 
new HCPCS code GXX30 for CY 2010 based on the estimated resources and 
work intensity associated with existing CR and respiratory therapy 
services. The nonfacility practice expense amount is the component of 
the MPFS payment that is most comparable to what Medicare pays under 
the OPPS. Both the MPFS nonfacility practice expense payment and the 
OPPS payment include payment for the service costs other than the 
physician professional services that are billed and paid under the MPFS 
in all service settings. The CY 2010 proposed nonfacility practice 
expense payment amount under the MPFS was between $10 and $20.
    For the CY 2010 OPPS, we proposed to assign HCPCS code GXX30 to New 
Technology APC 1492 (New Technology--Level IB ($10-$20)), the New 
Technology APC that provides payment for new services with estimated 
facility costs between $10 and $20, because we believed that we lacked 
appropriate hospital cost data from claims to guide the initial 
assignment of the new HCPCS code that would describe services furnished 
under the new PR benefit. The New Technology APC payment of $15, at the 
midpoint of the cost band, would be approximately the same as the 
proposed CY 2010 MPFS nonfacility practice expense amount for PR 
services described by HCPCS code GXX30. As discussed above, this is the 
portion of the proposed MPFS payment that is most comparable to what 
Medicare would pay under the OPPS. We believed that this proposed 
temporary assignment to a New Technology APC would allow us to pay 
appropriately for the service under the OPPS at a rate that is similar 
to the corresponding physician's office payment amount, while we 
gathered hospital claims data and experience with the new service on 
which to base a clinically relevant APC assignment in the future.
    Comment: Many commenters claimed that 90 percent of PR services are 
furnished in HOPDs and that CMS is currently paying considerably more 
for these services than the proposed payment. The commenters indicated 
the PR services are commonly furnished in the group setting in the 
HOPD, although they added that patients commonly require significant 
one-on-one assistance from hospital staff to encourage and facilitate 
their full participation in supervised exercise. The commenters 
objected to the proposal to pay $15 per session under New Technology 
APC 1492 because they believed that it would reduce payment for PR 
services to such an extent that hospitals would no longer be able to 
afford to furnish the services and that access to care would be 
diminished, rather than expanded as the law intended. Specifically, the 
commenters were concerned about the proposed payment rate because PR 
services would be reported under a new HCPCS G-code that would include 
all component services and assessments furnished in a single session 
per day with a minimum session duration of 60 minutes and a maximum of 
1 session per day. The commenters estimated that the proposed payment 
for PR services would result in less than 25 percent of the current 
payment to hospitals for the same component services that are reported 
under existing HCPCS codes.
    The commenters opposed the proposed payment of PR services under a 
New Technology APC because they believe that CMS has considerable 
experience with payment for these services under HCPCS codes G0237, 
G0238, or G0239, which are currently assigned to APC 0077 (Level I 
Pulmonary Treatment) under the OPPS. They argued that these three 
existing HCPCS G-codes are now being reported for PR services in HOPDs 
and that OPPS payment should be made for comprehensive PR services as 
authorized by section 144(a)(1) of Public Law 100-275 based on the 
historical payments made for services reported using these codes. They 
stated that the OPPS currently pays approximately $27 per unit for 
HCPCS codes G0237, G0238 and G0239 and that, therefore, the proposed 
payment for PR services would be much less than hospitals are currently 
being paid for the same services and would seriously erode the quality 
and quantity of care currently being furnished. The commenters 
indicated that PR services require considerable hospital staff and 
overhead costs that include, but are not limited to, the costs of 
respiratory therapists and the purchase and maintenance of a wide range 
of expensive exercise equipment, such as oximeters with printers, one 
channel ECG monitors, dedicated emergency cart/resuscitation equipment, 
and portable oxygen equipment. They reasoned that payment at $15 per 
session of one hour's duration would be insufficient to permit hospital 
PR programs to continue to function because the current sessions are at 
least 1 hour (and typically 2 hours) long and, therefore, OPPS payment 
for 1 hour of service reported using HCPCS codes G0237 and G0238 is 
currently about $100 per hour. Further, they noted that the OPPS pays 
separately for all assessments and tests under the current policy. They 
identified the assessment services that are currently paid separately 
but for which payment would be included in the per session payment for 
PR services according to the proposal as including, but not limited to, 
CPT codes 94620 (Pulmonary stress testing; simple (e.g., 6-minute walk 
test, prolonged exercise test for bronchospasm with pre- and post-
spirometry and oximetry)); 94664 (Demonstration and/or evaluation of 
patient utilization of an aerosol generator, nebulizer, metered dose 
inhaler or IPPB device); and 94667 (Manipulation chest wall, such as 
cupping, percussion and vibration to facilitate lung function; initial 
demonstration and/or evaluation). One

[[Page 60569]]

commenter requested that CMS create two new Level II HCPCS codes for PR 
sessions, one including the assessment services and one excluding the 
assessment services.
    Some commenters claimed that it is not appropriate to compare the 
costs of CR to PR services because the overhead costs for PR services 
are higher than for CR services. They also indicated that it is 
contradictory for CMS to require that lung volume reduction surgery 
patients receive no less than 2 hours of PR services per day but to 
limit coverage of PR for moderate to severe COPD patients to 1 session 
per day.
    The commenters suggested three alternatives to the proposed payment 
for a single PR HCPCS code through a New Technology APC. One 
alternative would be to continue to permit hospitals to bill HCPCS 
codes G0237, G0238, and G0239 for PR services and also to bill 
separately for the assessment services proposed to be included in the 
single comprehensive PR HCPCS code (with a separate visit payment for 
the initial physician or hospital staff assessment of the patient that 
commenters claimed requires 60 to 90 minutes of professional time). 
Payment for HCPCS codes G0237, G0238, and G0239 would continue to be 
made through APC 0077 and the assessment services would be paid through 
their existing clinical APCs as well. Some commenters suggested a 
variation of this alternative that would establish an APC with a 
payment rate of $50 to which HCPCS codes G0237, G0238, and G0239, as 
currently defined, would be assigned. As a second alternative, the 
commenters suggested that CMS assign the new comprehensive PR HCPCS 
code to APC 0078 (Level II Pulmonary Treatment), which had a proposed 
payment rate of approximately $96, and not allow separate reporting and 
payment for CPT codes 94620, 94664, and 94667 and the 60 to 90 minute 
intake visit. Finally, the commenters stated that CMS could establish a 
payment rate for the new comprehensive PR HCPCS code by multiplying the 
OPPS payment rate for APC 0077 by 4 because the cost of the new per 
hour PR code would be at least 4 times the cost of HCPCS codes G0237 
and G0238 that describe 15 minutes of care and are assigned to APC 
0077. The commenters believed that any of these alternatives would 
result in a PR payment to hospitals that is appropriate for the cost of 
the services being furnished.
    Response: We examined our hospital and physician claims data for 
HCPCS codes G0237, G0238, and G0239, and we agree with the commenters 
that most services for restoration of pulmonary function have 
historically been furnished in hospitals and that there is considerable 
evidence of hospital outpatient utilization and cost in our claims 
data. We found that, in CY 2008, Medicare paid approximately $20 
million in aggregate to about 900 hospitals for services reported under 
HCPCS codes G0237, G0238, and G0239, which describe pulmonary therapy 
services that commenters believe reflect the costs of the same types of 
hospital staff, supplies, and overhead that would be used to furnish PR 
services.
    Therefore, for the CY 2010 OPPS, we will pay for PR services in 
HOPDs under the OPPS through a new clinical APC with a median ``per 
session'' cost simulated from historical hospital claims data for 
similar pulmonary therapy services, rather than assigning the new PR 
HCPCS G-code to a New Technology APC as we proposed. We have previously 
used a simulation approach to develop a median cost estimate for a 
single new CPT or Level II HCPCS code that would previously have been 
reported under several existing HCPCS codes when furnished in the HOPD, 
most recently for echocardiography services as discussed in detail in 
section II.A.2.d.(4) of this final rule with comment period. 
Specifically, we are assigning the comprehensive Level II HCPCS code 
G0424 (Pulmonary rehabilitation, including exercise (includes 
monitoring), per hour, per session) to new clinical APC 0102 (Level II 
Pulmonary Treatment), with payment based on the aggregate per day 
simulated ``per session'' hospital median cost of approximately $50 as 
calculated from claims data for the existing pulmonary therapy HCPCS G-
codes and associated assessments and tests. No other HCPCS codes are 
assigned to APC 0102 for CY 2010. (APC 0078 has been renamed Level III 
Pulmonary Treatment without any change in its configuration for CY 
2010.) Our claims data show that, in most cases patients furnished the 
pulmonary therapy services reported by HCPCS codes G0237, G0238, and 
G0239 in the HOPD on a single date of service received some individual 
and some group services (approximately 2.4 units of service per day) 
and, less often, associated assessments and tests. We found 
approximately 19,000 days of care for patients who had diagnoses 
consistent with moderate to very severe COPD, consistent with the 
coverage requirements for PR in CY 2010, and that included both an 
individual and group service on the same day. The claims for these days 
of care, for which we calculated a ``per session'' median cost of 
approximately $50, were similar to the time duration and services that 
will be reported under new HCPCS code G0424 in CY 2010.
    Specifically, to simulate the ``per session'' median cost of new 
HCPCS code G0424 from claims data for existing services, we used only 
claims that contained at least one unit of HCPCS code G0239, the group 
code that is without limitation on time duration, and one unit of HCPCS 
code G0237 or G0238, the individual, face-to-face codes that report 15 
minutes of service, on the same date of service. We reasoned that 
patients in a PR program would typically receive individual and group 
services in each session of approximately 1 hour in duration. The 
approach was consistent with the public comments that suggested that PR 
is often provided in group sessions in the HOPD, although patients 
commonly require additional one-on-one care in order to fully 
participate in the program. We note that our use of ``per session'' 
claims reporting one unit of HCPCS code G0237 or G0238 and one unit of 
HCPCS code G0239 in this simulation methodology was also consistent 
with our overall finding of approximately 2.4 service units of the 
HCPCS G-codes per day on a single date of service, usually consisting 
of both individual and group services, for patients receiving pulmonary 
therapy services in the HOPD based upon CY 2008 claims. We concluded 
that the typical session of PR would be 1 hour based on public comments 
that indicated that a session of PR is typically 1 hour and based on 
our findings that the most commonly reported HCPCS code for pulmonary 
treatment is HCPCS code G0239, which has no time definition for this 
group service.
    We included all costs of the related tests and assessment services 
(CPT codes 94620, 94664, and 94667 and all CPT codes for established 
patient clinic visits) on the same date of service as the HCPCS G-codes 
in the claims we used to simulate the median cost for HCPCS code G0424. 
After identifying these ``per session'' claims, which we believe to 
represent 1 hour of care, we summed the costs on them and calculated 
the median cost for the set of selected claims. In light of the cost 
and clinical similarities of PR and the existing services described by 
HCPCS codes G0237, G0238, and G0239 and the CPT codes for related 
assessments and tests, and the significant number of ``per session'' 
hospital claims we found, we are confident that the simulated median 
cost for HCPCS code G0424 is a valid

[[Page 60570]]

estimate of the expected hospital cost of a PR session. Since there is 
no existing clinical APC to which HCPCS code G0424 could be 
appropriately assigned based on considerations of the clinical and 
resource characteristics of PR services, we are creating new APC 0102 
(Level II Pulmonary Treatment) for CY 2010. Existing APC 0078 (Level II 
Pulmonary Treatment) has been renamed ``Level III Pulmonary Treatment'' 
for CY 2010, with no change in its configuration.
    We also are adding the phrase ``per hour'' to the new HCPCS code 
G0424 descriptor to conform the descriptor of the code to the basis for 
the payment being made for one unit of the code and to enable providers 
to determine when one session of PR ends and the second session begins. 
Because we are modifying our final policy to cover up to 2 sessions of 
PR per day in response to public comments that we should permit more 
than 1 session of PR on the same date, it became necessary to add a 
time to the definition of HCPCS code G0424 so that providers could 
determine when they could report a second session. Moreover, when we 
based the payment for new APC 0102 on the per session costs derived 
from the OPPS claims data for HCPCS codes G0237, G0238, and G0239, we 
assumed that a session represented 1 hour of care; and therefore, 
adding ``per hour'' to the descriptor for the new HCPCS G-code for PR 
conforms the HCPCS G-code to the payment we are establishing.
    We do not agree with the commenters' suggestion that we permit 
hospitals to report and be paid for PR services under the existing 
HCPCS codes G0237, G0238, and G0239 and the CPT codes for assessments 
and tests because PR is a comprehensive program that consists of 
multiple component items and services as specified in the statute and 
discussed in the CY 2010 MPFS final rule with comment period. These 
three HCPCS G-codes were developed principally to describe services 
furnished by respiratory therapists in CORFs, and the services consist 
of therapeutic procedures to increase the strength and endurance of 
respiratory muscles or to improve respiratory function. When the HCPCS 
G-codes were established, we indicated that these were developed to 
provide more specific information about the services being delivered 
since those services were not previously clearly described by existing 
CPT codes (66 FR 55311). We also noted that there was no respiratory or 
pulmonary rehabilitation benefit (67 FR 79999).
    The existing HCPCS G-codes do not represent the full scope of 
services in a comprehensive PR program as now authorized by section 
144(a)(1) of Public Law 100-275. We want to ensure that when hospitals 
bill and are paid for PR services, they attest to meeting all 
requirements of the comprehensive PR program by the reporting of a 
HCPCS G-code specific to a PR session. As discussed above in the 
context of therapy services, patients in PR, CR, or ICR programs must 
receive the full complement of care defined under the benefit, 
including assessments and individualized treatments in accordance with 
their PR treatment plan. When hospitals furnish these evaluations and 
individualized treatment services under a PR treatment plan, we would 
not expect the component services of PR, CR, and ICR programs to be 
unbundled and billed separately. Instead, the services must be billed 
by the hospital as PR services under the new Level II HCPCS G-code for 
PR services, not the existing HCPCS codes G0237, G0238, and G0239 for 
respiratory treatment services, the CPT codes for the individual 
assessment services discussed above, or HCPCS codes for physical 
therapy or other services. Furthermore, we also expect that it would be 
uncommon for a patient receiving care under a PR treatment plan to also 
be receiving services under a separate plan of care to improve their 
respiratory strength and function, such as physical therapy or 
respiratory treatment. Only those patients whose medical needs for 
treatment to improve their respiratory strength and function are 
outside the treatment plan appropriate for PR should receive medically 
necessary services specific to those other needs. However, we would not 
expect this to be the norm.
    As discussed above, a single period of care can only be billed as 
one type of treatment service, so hospitals could never bill services 
reported by HCPCS codes G0237, G0238, or G0239 and PR services for the 
same time period for the same patient (for example, an hour session 
from 10:00 a.m. to 11:00 a.m. on a single date of service). We plan to 
monitor claims data for PR services, as well as any additional claims 
for these other services. If we detect patterns of care that are 
inconsistent with our stated expectations for PR services, we may 
encourage Medicare contractors to review cases in which a hospital 
reports both types of services for the same patient during the same 
span of time (for example, over a period of several months) or we may 
propose changes to our payment methodologies for these services.
    In addition, we note that a specific code for PR services allows us 
to administratively account for the limit on the number of covered 
sessions. Furthermore, we are not creating different HCPCS codes for PR 
sessions provided with and without assessments because we continue to 
believe PR is a comprehensive program and all sessions should be 
reported and paid through a single HCPCS G-code. We believe that it is 
most appropriate to pay for all of the assessments and tests that may 
be furnished in the program as required for coverage through our single 
per-session PR payment, and we took the hospital costs of these related 
services into consideration in establishing the CY 2010 OPPS payment 
rate for HCPCS code G0424. We also do not agree with the commenters' 
recommendation to assign the new PR per session HCPCS code to APC 0078 
because the median cost of APC 0078 is almost twice the simulated ``per 
session'' median cost of HCPCS code G0424 that we calculated based on 
historical hospital claims data for existing, similar HCPCS codes 
through our ``per session'' methodology as described above. Finally, we 
do not agree with the commenters' suggestion to establish a payment 
rate for PR HCPCS code G0424 at the rate of 4 times the payment for APC 
0077 because that also would pay for PR services at more than twice the 
simulated median cost for a typical session of PR as reported in our 
claims data.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, with modification, for OPPS payment 
for PR services furnished as a part of the comprehensive PR program 
benefit for CY 2010. We are adopting new HCPCS code G0424 (Pulmonary 
rehabilitation, including exercise (includes monitoring), per hour, per 
session) and are assigning the G-code to new APC 0102 (Level II 
Pulmonary Treatment), with a simulated ``per-session'' median cost of 
approximately $50. As discussed in the CY 2010 MPFS final rule with 
comment period, PR is covered for up to 36 one-hour sessions, with a 
maximum of 2 sessions per day, and with contractor discretion to 
approve up to 72 sessions.
3. Payment for Services Furnished to Hospital Outpatients Under a 
Cardiac Rehabilitation or an Intensive Cardiac Rehabilitation Program
    Currently, CR services furnished by hospitals are reported using 
CPT codes 93797 and 93798. In the CY 2010 MPFS proposed rule (74 FR 
33607), we proposed that each day CR items and services are furnished 
to a patient, aerobic exercises along with other exercises must be 
included (that is, a

[[Page 60571]]

patient must exercise aerobically every day he or she attends a CR 
session). In addition, we proposed that each session must be a minimum 
of 60 minutes and patients must participate in a minimum of two CR 
sessions a week, with a maximum of two CR sessions a day.
    With respect to ICR services, section 1861(eee)(4)(C) of the Act, 
states that ``an intensive cardiac rehabilitation program may be 
provided in a series of 72 one-hour sessions (as defined in section 
1848(b)(5)), up to 6 sessions per day, over a period of up to 18 
weeks.'' In the CY 2010 OPPS/ASC proposed rule (74 FR 35361), for the 
CY 2010 OPPS, we proposed to create two new Level II HCPCS codes to 
report the services of an ICR program that are furnished to hospital 
outpatients, consistent with the provisions of section 1861(eee)(4)(C) 
of the Act: HCPCS code GXX28 (Intensive cardiac rehabilitation; with or 
without continuous ECG monitoring with exercise, per session) and HCPCS 
code GXX29 (Intensive cardiac rehabilitation; with or without 
continuous ECG monitoring; without exercise, per session). These 
proposed new HCPCS G-codes would be used to report ICR services 
furnished by hospitals that have an ICR program that has received a 
designation as a qualified ICR program. Consistent with the proposal in 
the CY 2010 MPFS proposed rule, we proposed that each session of ICR 
must be a minimum of 60 minutes and that each day ICR items and 
services are provided to a patient, aerobic exercises along with other 
exercises must be included (that is, a patient must exercise 
aerobically every day he or she attends a ICR session).
    For the CY 2010 OPPS, we proposed to assign HCPCS codes GXX28 and 
GXX29 to APC 0095 (Cardiac Rehabilitation) with a status indicator of 
``S.'' The proposed median cost of APC 0095 for CY 2010 was 
approximately $39. This proposed median cost reflected historical 
hospital cost data for one session of general CR services reported with 
CPT code 93797 or 93798. Both CR and ICR programs consist of exercise, 
cardiac risk factor modification, psychosocial assessment, outcomes 
assessment, and other services, as described in the CY 2010 MPFS 
proposed rule (74 CR 33607). Although more sessions per day for a 
beneficiary may be provided in an ICR program than a CR program, in the 
CY 2010 OPPS/ASC proposed rule (74 FR 35361) we noted our belief the 
hospital costs for a single session would be similar, and OPPS payment 
for CR and ICR services would be provided on a per session basis. 
Therefore, because CR and ICR services are similar from both clinical 
and resource perspectives, we believed that it would be appropriate to 
assign the two proposed new Level II HCPCS codes for ICR services to 
APC 0095 while we collect cost information from hospitals specific to 
ICR. We proposed to make a single payment through APC 0095 for each 
session of ICR reported on hospital outpatient claims.
    Comment: Some commenters supported the proposal to create two new 
HCPCS G-codes for ICR services and to pay them at the same rate as CR 
services through APC 0095. Other commenters objected to setting the 
payment for ICR services at the same level as CR services on the basis 
that ICR services should be more costly than CR services because of 
their intensive nature. Some commenters were concerned about basing 
payment for CR on historical hospital costs because these costs do not 
include the new level of physician and clinical staff work required for 
coverage of CR and ICR, in particular, the psychosocial and outcome 
assessments that are required by section 144(a)(1) of Public Law 100-
275. Under CMS' proposal, these assessments would not be paid 
separately but, instead, would be paid through payment for the per 
session CR CPT codes or ICR HCPCS codes.
    Some commenters believed the proposed median cost for APC 0095 was 
too low on the basis that the July 2008 RTI final report for CMS 
entitled ``Refining Cost to Charge Ratios for Calculating APC and DRG 
Relative Payment Weights'' indicated that the current payment 
calculations for CR are significantly flawed because hospitals 
misclassify CR costs and that, therefore, the resulting APC 0095 median 
cost understates the cost of CR. The commenters indicated that the 
study showed that the cost of CR is approximately $100 per session when 
an appropriate CCR, based on the costs and charges for CR and not on 
the application of a hospital-specific overall ancillary CCR, is 
applied to the charges for CR services. The commenters were concerned 
about CMS' stated delay in implementing a specific nonstandard cost 
center for CR until 2011 because the true cost of CR would not be 
captured by the OPPS for ratesetting until CY 2013 or later. The 
commenters encouraged CMS to correct the underpayment of CR services 
for CY 2010 in order to ensure the availability of CR programs for 
Medicare beneficiaries.
    Response: We have no reason to believe that ICR services as defined 
in the coverage criteria are more costly to furnish per session than CR 
services. We note that one of the major differences between CR and ICR 
services is that ICR may be furnished in up to six sessions per day, in 
comparison with the two sessions per day that are covered for CR. In 
the case of a Medicare beneficiary who receives six ICR sessions in one 
day, payment also would be six times the payment for one session and, 
therefore, the total hospital payment would appropriately pay for the 
additional costs of more services in a day.
    With regard to the comment that our claims data do not reflect the 
costs of the additional assessments that are now required for CR and 
ICR coverage, we analyzed the per session cost of CR in our historical 
hospital claims data and incorporated the costs of hospital outpatient 
visits that we believe would have been previously reported for 
assessments furnished on the same day to CR patients into our estimate 
of the median cost for APC 0095. We found that the APC median cost was 
essentially unchanged. We believe that psychosocial and outcomes 
assessments are already a part of high quality CR/ICR programs and that 
our per session payment for CR and ICR services through APC 0095 will 
appropriately provide payment for all required components of CR and 
ICR, including the necessary assessments.
    The median cost on which the CY 2010 payment for APC 0095 is based 
is approximately $38, which is an increase over the median cost of 
approximately $36 on which the CY 2009 payment is based. As we 
explained in the CY 2009 OPPS/ASC final rule with comment period (74 FR 
68525), we recognize that there are areas of concern with the cost 
report that are integral to our estimation of hospital costs for OPPS 
ratesetting and we are taking steps to address some of them, including 
adopting a nonstandard cost center for CR. This cost center will be 
available for use in cost reporting periods beginning on or after 
February 2010. We refer readers to section II.A.1.c.(2) of this final 
rule with comment for further discussion of the creation of this new 
cost center. However, as we have previously explained (74 FR 68522), 
modifying the cost report data from its submitted form for use in OPPS 
ratesetting based upon assumptions about the data typically would be 
contrary to our principle of using the data as submitted by hospitals. 
Therefore, we are not making changes or adjustments to our OPPS cost 
estimation for CR services for CY 2010 but, instead, will await more 
accurate information for future ratesetting that may be submitted to us 
by hospitals when the nonstandard cost center for CR services is 
available.

[[Page 60572]]

We currently have no reason to believe that Medicare beneficiaries have 
limited access to CR services or that our payment is inappropriate. We 
have over 2.5 million claims for CR sessions from CY 2008 claims data, 
and further note that the overall number of services and the number of 
providers furnishing CR have been stable over the past several years.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to continue to 
assign the CPT codes for CR, specifically CPT codes 93797 and 93798, to 
APC 0095. We also are finalizing our CY 2010 proposal to assign the new 
HCPCS G-codes for ICR, specifically G0422 (Intensive cardiac 
rehabilitation; with or without continuous ECG monitoring, with 
exercise, per hour, per session) and G0423 (Intensive cardiac 
rehabilitation; with or without continuous ECG monitoring, without 
exercise, per hour, per session) to APC 0095. We have added the phrase 
``per hour'' to the descriptors of these codes because we expect that 
the OPPS cost data for CR services from the claims submitted for CPT 
codes 93978 and 93979 generally reflect 1 hour of CR services, in 
accordance with our reporting instructions for more than one session 
per day of CR services in Section 200.1 of Chapter 4 of the Medicare 
Claims Processing Manual. We believe that 1 hour of service is the 
standard for a session of CR. Section 1861(eee)(4)(C) of the Act 
provides for up to 72 one-hour sessions of ICR and hence, adding ``per 
hour'' to the two new HCPCS code descriptors for ICR services 
implements the statutory definition of an ICR session as being one hour 
of service. Moreover, we have established the payment for ICR services 
on the presumption that one session represents one hour of care. 
Therefore, we believe that it is appropriate to specify in the 
descriptors of the HCPCS codes for ICR services that one unit of the 
code represents one hour of care. The final APC median cost of APC 0095 
is approximately $38. As discussed in the CY 2010 MPFS final rule with 
comment period, CR is covered for up to 36 one-hour sessions, with a 
minimum of 1 session per week and a maximum of 2 sessions per day, and 
Medicare contractors have the authority to approve additional sessions, 
up to 72 sessions, over an additional period of time. With respect to 
ICR, section 144(a)(1) of Public Law 100-275 authorizes coverage of ICR 
programs in a series of 72 one-hour sessions, up to 6 sessions per day, 
over a period of 18 weeks.
    We also note that as discussed in section II.G.9. of the CY 2010 
MPFS final rule with comment period, we are requiring that all ICR 
programs be approved through the NCD process. Once we have approved an 
ICR program or programs through the NCD process, individual sites 
wishing to furnish ICR items and services via an approved ICR program 
may enroll with their local Medicare contractor to become an ICR 
program supplier as outlined in Sec.  424.510. This enrollment is 
designed to ensure that the specific sites meet the specific statutory 
and regulatory requirements to furnish these services and will provide 
a mechanism to appeal a disapproval of a prospective ICR program site. 
With regards to billing and payment for CR and ICR services, hospital 
providers will continue to use their CMS Certification Number (CCN or 
provider number) and appeals related to the payment of claims will 
follow those established processes. CMS will provide further 
instructions for the NCD and individual site enrollment processes.
4. Physician Supervision for Pulmonary Rehabilitation, Cardiac 
Rehabilitation, and Intensive Cardiac Rehabilitation Services
    Section 144 of Public Law 110-275 includes requirements for 
immediate and ongoing physician availability and accessibility for both 
medical consultations and medical emergencies at all times items and 
services are being furnished under CR, ICR, and PR programs. In section 
II.G.8. of the CY 2010 MPFS proposed rule (74 FR 33606), we proposed 
that these requirements would be met through existing definitions for 
direct physician supervision in physicians' offices and hospital 
outpatient departments at Sec.  410.26(a)(2) (defined through cross 
reference to Sec.  410.32(b)(3)(ii)) and Sec.  410.27, respectively). 
We noted that direct supervision, as defined in the regulations, is 
consistent with the requirements of Public Law 110-275 because the 
physician must be present and immediately available where the services 
are being furnished. The physician must also be able to furnish 
assistance and direction throughout the performance of the services, 
which would include medical consultations and medical emergencies.
    For CR, ICR, and PR services provided to hospital outpatients, 
direct physician supervision is the standard set forth in the April 7, 
2000 OPPS final rule with comment period (68 FR 18524 through 18526) 
for supervision of hospital outpatient therapeutic services covered and 
paid by Medicare in hospitals and provider-based departments of 
hospitals. We noted in the discussions of CR and PR in the CY 2010 MPFS 
proposed rule (74 FR 33609 and 33614) that if we were to propose future 
changes to the physician office or hospital outpatient policies for 
direct physician supervision, we would provide our assessment of the 
implications of those proposals for the supervision of CR and PR 
services at that time.
    As discussed in more detail in the CY 2010 OPPS/ASC proposed rule 
(74 FR 35362), we proposed to refine the definition of the direct 
supervision of hospital outpatient therapeutic services for those 
services provided in the hospital and in an on-campus PBD of the 
hospital. For services, including CR, ICR, and PR services, provided in 
the hospital and in an on-campus PBD of the hospital, direct 
supervision would mean that the physician must be present on the same 
campus, in the hospital or the on-campus PBD of the hospital, as 
defined in Sec.  413.65, and immediately available to furnish 
assistance and direction throughout the performance of the procedure. 
We also proposed to define ``in the hospital'' in proposed new 
paragraph Sec.  410.27(g) to mean areas in the main building(s) of the 
hospital that are under the ownership, financial, and administrative 
control of the hospital; are operated as part of the hospital; and for 
which the hospital bills the services furnished under the hospital's 
CCN. We did not propose significant change to the definition or 
requirements for direct supervision of hospital outpatient therapeutic 
services provided in off-campus PBDs of a hospital. Thus, with respect 
to CR, ICR, and PR services furnished in off-campus PBDs of the 
hospital, direct supervision would continue to mean that the physician 
must be in the off-campus PBD and immediately available to furnish 
assistance and direction throughout the performance of the procedure. 
We believe that direct supervision, as defined in the proposed 
regulations for hospital outpatient therapeutic services, continues to 
be consistent with the requirements of Pub. L. 110-275 for CR, ICR, and 
PR services because the physician must be present and immediately 
available where the services are being furnished. The physician must 
also be able to furnish assistance and direction throughout the 
performance of the services, which would include medical consultations 
and medical emergencies. For a complete discussion of the current and 
proposed requirements for the direct

[[Page 60573]]

supervision of hospital outpatient therapeutic services, we refer 
readers to section XII.D. of the CY 2010 OPPS/ASC proposed rule (74 FR 
35362 through 35368).
    Section 144 of Public Law 110-275 also states that in the case of 
items and services furnished under such a CR, ICR, or PR program in a 
hospital, physician availability shall be presumed. As we have stated 
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68702 
through 68704), the longstanding presumption of direct physician 
supervision for hospital outpatient services means that direct 
physician supervision is the standard for supervision of hospital 
outpatient therapeutic services covered and paid by Medicare in 
hospitals and PBDs of hospitals, and we expect that hospitals are 
providing services in accordance with this standard.
    We note that in the CY 2010 OPPS/ASC proposed rule (74 FR 35362), 
we also proposed that nonphysician practitioners, defined for the 
purpose of proposed revised Sec.  410.27 of the regulations as clinical 
psychologists, physician assistants, nurse practitioners, clinical 
nurse specialists, and certified nurse-midwives, may directly supervise 
all hospital outpatient therapeutic services that they may perform 
themselves within their State scope of practice and hospital-granted 
privileges, provided that they meet all additional requirements, 
including any collaboration or supervision requirements as specified in 
Sec. Sec.  410.71, 410.74, 410.75, 410.76, and 410.77. However, in the 
CY 2010 MPFS proposed rule and in the corresponding proposed regulation 
text (74 FR 33674 and 33675, respectively), we proposed a different 
requirement for the direct supervision of CR, ICR, and PR services. We 
proposed that services provided in CR, ICR, and PR programs must be 
supervised by a doctor of medicine or osteopathy, as defined in section 
1861(r)(1) of the Act. In addition, we proposed specific requirements 
for the expertise and licensure of physicians supervising CR and ICR 
services. It would not be in accordance with the proposed regulations 
for a nonphysician practitioner to supervise services furnished in a 
CR, ICR, or PR program. The physician supervision and expertise 
requirements proposed in the coverage policy and regulations for CR, 
ICR, and PR services must be met for those services to be covered and, 
therefore, paid by Medicare in hospital outpatient settings.
    Comment: One commenter supported the proposed requirements for 
physician supervision of CR programs and requested that CMS confirm 
that the proposed definition of ``direct supervision'' that would apply 
to therapeutic services in the HOPD would also apply to CR services. 
Many commenters objected to the requirement that a physician must be 
present when PR or CR/ICR services are furnished. They indicated that 
the law presumes that physician supervision exists in hospitals and 
that, therefore, the same rules that apply to other hospital outpatient 
therapeutic services provided in hospitals should apply to PR, CR, and 
ICR services. The commenters also asked that CMS permit physician 
assistants, nurse practitioners, clinical nurse specialists, and 
certified nurse midwives who are functioning within their State 
licensure and scope of practice and who are permitted to supervise the 
services under the hospital bylaws to supervise PR, CR, and ICR 
services. The commenters expressed concern that the CY 2010 proposals 
in the MPFS proposed rule did not include a justification for why it 
would be necessary to impose physician-only direct supervision for PR, 
CR, and ICR services in HOPDs than for other outpatient services. Some 
commenters explained that rural providers have great difficulty 
securing physician services and rely heavily on nonphysician 
practitioners to furnish care in hospitals. They argued that to require 
physician-only supervision would mean that some PR, CR, and ICR 
programs in rural areas would have to close for lack of physician 
supervision and that there would be no access to the PR, CR, and ICR 
services for beneficiaries in those communities.
    Response: We understand the reasoning of the commenters that PR, 
CR, and ICR services should require direct supervision by physicians 
and certain nonphysician practitioners, as we proposed for other 
hospital outpatient therapeutic services, given that PR, CR and ICR 
services are similar to other hospital outpatient therapeutic services. 
However, we are unable to revise the regulations to permit nonphysician 
practitioners to supervise PR, CR, and ICR services. We do not believe 
that the law provides the flexibility for us to permit anyone other 
than a physician to supervise hospital outpatient PR, CR, and ICR 
services because nonphysician practitioners are not physicians as 
defined in section 1861(r)(1) of the Act. The statutory language of 
section 144(a)(1) of Public Law 100-275 defines PR, CR and ICR programs 
as ``physician-supervised.'' More specifically, it establishes in 
section 1861(eee)(2)(B) of the Act that for PR, CR and ICR programs, 
``a physician is immediately available and accessible for medical 
consultation and medical emergencies at all times items and services 
are being furnished under the program, except that, in the case of 
items and service furnished under such a program in a hospital, such 
availability shall be presumed * * *.'' The text of the statute uses 
the word ``physician'' and does not include nonphysician practitioners. 
Also, as we explained in the CY 2009 OPPS/ASC proposed rule and final 
rule with comment period (73 FR 41518 through 41519 and 73 FR 68702 
through 68704, referencing the April 7, 2000 OPPS final rule (65 FR 
18525)), the ``presumption'' or ``assumption'' of direct supervision 
means that direct physician supervision is the standard for all 
hospital outpatient therapeutic services. We have assumed this 
requirement is met on hospital premises (meaning we have expected that 
hospitals are meeting this requirement) because staff physicians would 
always be nearby in the hospital. In other words, the requirement is 
not negated by a presumption that the requirement is being met. Hence, 
unlike the standards for the direct supervision of other hospital 
outpatient therapeutic services, which we have established through 
regulation based on section 1861(s) of the Act, in the case of PR, CR, 
and ICR services, the authorizing provision of the Act at section 
1861(eee)(2)(B) explicitly requires direct physician supervision of 
these services. While we have some flexibility to determine the type of 
practitioner who may supervise other hospital outpatient therapeutic 
services, as discussed in XII.D.3. of this final rule with comment 
period, in the case of PR, CR, and ICR services specifically, the 
statutory language of section 144(a)(1) of Public Law 100-275 does not 
provide such flexibility. Instead, the statute imposes strict 
requirements, describing the direct physician supervision standard for 
PR, CR, and ICR services, and gives us no flexibility to modify the 
requirement to allow for other supervisory practitioners.
    After consideration of the public comments we received, and in 
accordance with the final policies set forth in sections II.G.8. and 
II.G.9. of the CY 2010 MPFS final rule with comment period, we are 
finalizing our CY 2010 proposal, without modification, to require the 
direct physician supervision (by a doctor of medicine or doctor of 
osteopathy) of PR, CR, and ICR services that are furnished to hospital 
outpatients. We note that we define ``direct supervision'' with regard 
to

[[Page 60574]]

what it means to be immediately available and accessible for medical 
consultation and medical emergencies in the same manner for PR, CR, and 
ICR programs as we do for other therapeutic services furnished in 
HOPDs. The final CY 2010 definitions of direct supervision for hospital 
outpatient therapeutic services provided on the campus and in off-
campus provider-based departments also apply. These definitions are 
discussed in detail in section XII.D.3. of this final rule with comment 
period, including the new and revised regulations.

C. Stem Cell Transplant

    Stem cell transplantation is a treatment in which stem cells that 
are harvested from either a patient's or a donor's bone marrow or 
peripheral blood are later infused into that patient to treat an 
illness. Autologous stem cell transplantation is a technique for 
providing additional stem cells using the patient's own previously 
harvested stem cells. Allogeneic stem cell transplantation is a 
procedure in which stem cells from a healthy donor are acquired and 
prepared to provide a patient with new stem cells.
    We recently revised section 90.3.3 of Chapter 3 of the Medicare 
Claims Processing Manual (Pub. 100-04) and created new section 231.10 
of Chapter 4 of the Medicare Claims Processing Manual in order to 
clarify billing under Medicare for autologous and allogeneic stem cell 
transplant services. As stated in the cited new and revised manual 
sections, autologous stem cell transplants performed on Medicare 
beneficiaries may be provided on an inpatient or an outpatient basis. 
Hospitals are instructed to bill and show all charges for autologous 
stem cell harvesting, processing, and transplant procedures based on 
the status of the patient (that is, inpatient or outpatient) when the 
individual services are furnished. The CPT codes describing these 
services may be billed and are separately payable under the OPPS when 
the services are provided in the hospital outpatient setting.
    In contrast, we stated in the CY 2010 OPPS/ASC proposed rule (74 FR 
35362) that we believe allogeneic stem cell transplants performed on 
Medicare beneficiaries are provided on an inpatient basis only, and all 
services related to acquiring the stem cells from a donor (whether 
performed on an inpatient or outpatient basis) are billed and are 
payable under Medicare Part A through the IPPS MS-DRG payment for the 
stem cell transplant. In addition to payment for the stem cell 
transplant procedure itself, the MS-DRG payment for the stem cell 
transplant includes payment for stem cell acquisition services, which 
include, but are not limited to, National Marrow Donor Program fees for 
stem cells from an unrelated donor (if applicable); tissue typing of a 
donor and a recipient; donor evaluation; physician pre-admission/pre-
procedure donor evaluation services; costs associated with the 
harvesting procedure; post-operative/post-procedure evaluation of a 
donor; and preparation and processing of stem cells. While certain 
acquisition services, such as donor harvesting procedures, may be 
performed in the hospital outpatient setting, hospitals are instructed 
to include the charges for these services in the recipient's inpatient 
transplant bill as acquisition services and not to bill them under the 
OPPS.
    In order to be consistent with the revised Section 90.3.3 and the 
new Section 231.10 of the Medicare Claims Processing Manual cited 
earlier, which reflect what we believed at the time to be the current 
clinical practice of performing allogeneic stem cell transplants on 
Medicare beneficiaries on an inpatient basis only, in the CY 2010 OPPS/
ASC proposed rule (74 FR 35362), we proposed to revise the status 
indicator assignments of certain stem cell transplant-related CPT codes 
under the OPPS. Specifically, we proposed to change the status 
indicator for CPT code 38205 (Blood-derived hematopoietic progenitor 
cell harvesting for transplantation, per collection; allogenic) from 
``S'' to ``E'' for the CY 2010 OPPS to reflect that, while an 
allogeneic stem cell harvesting procedure performed on the donor may 
take place in the HOPD, payment for the service is made through the 
IPPS MS-DRG payment for the associated transplant procedure performed 
on the recipient. We also proposed to change the status indicators for 
CPT code 38240 (Bone marrow or blood-derived peripheral stem cell 
transplantation; allogenic) and CPT code 38242 (Bone marrow or blood-
derived peripheral stem cell transplantation; allogeneic donor 
lymphocyte infusions) from ``S'' to ``C'' for the CY 2010 OPPS to 
reflect that these allogeneic stem cell transplant procedures are 
payable by Medicare as inpatient procedures only.
    At its August 2009 meeting, the APC Panel heard from presenters who 
stated that reduced intensity conditioning (RIC) regimens have made 
outpatient allogeneic stem cell transplants feasible for some Medicare 
beneficiaries. The presenters stated that revising the status 
indicators for CPT codes 38205, 38240, and 38242 to make them 
nonpayable on outpatient claims would impede the current clinical 
practice of providing allogeneic stem cell transplant and harvesting 
procedures on an outpatient basis, which, according to public 
commenters on the proposed rule, would lower costs, provide greater 
patient comfort, optimize hospital resources, and decrease the risk of 
nosocomial infections. The APC Panel agreed with the presenters and 
recommended that CMS maintain the CY 2009 APC assignments and status 
indicators for CPT codes 38205 and 38242, which are both currently 
assigned to APC 0111 (Blood Product Exchange), and for CPT code 38240, 
which is currently assigned to APC 0112 (Apheresis and Stem Cell 
Procedures) for CY 2009.
    Comment: Several commenters on the CY 2010 proposed rule disagreed 
with CMS' assertion that allogeneic stem cell transplants performed on 
Medicare beneficiaries are provided on an inpatient basis only. 
According to the commenters, allogeneic stem cell transplants are 
currently performed in both the inpatient and outpatient settings and 
are considered safe and clinically appropriate for many Medicare 
patients. The commenters argued that CMS' proposal would create strong 
financial incentives for hospitals to unnecessarily admit patients who 
could have otherwise been treated in the outpatient setting and 
requested that CMS maintain the current CY 2009 status indicators and 
APC assignments of CPT codes 38205, 38240, and 38242 for CY 2010. The 
commenters urged CMS to continue to pay for CPT code 38205 separately 
under the OPPS, regardless of where the transplant ultimately occurs, 
because CMS' policy of bundling payment for stem cell harvesting 
procedures into the payment for the transplant procedure is overly 
complicated and burdensome, particularly when the harvesting procedure 
is performed in a different hospital from the hospital where the 
transplant is performed. The commenters also requested that CMS revise 
its manual guidance to reflect that hospitals should report all 
allogeneic stem cell harvesting, processing, and transplant services 
and their associated charges based on the status of the patient (that 
is, inpatient or outpatient) when the individual services are 
furnished.
    Some commenters summarized other billing and payment issues related 
to allogeneic stem cell transplants for which they are seeking further 
direction and policy development from CMS, such as how hospitals could 
be paid for search and procurement costs related to

[[Page 60575]]

allogeneic stem cell transplants that do not occur due to a change in 
the patient's health status and the potential creation of separate MS-
DRGs for allogeneic and autologous stem cell transplant services. The 
commenters recognized that greater analysis of these complex and unique 
issues would be required before CMS could address them fully.
    Response: We appreciate the information on current clinical 
practice for allogeneic stem cell transplants provided by commenters. 
Upon further review, we agree with the commenters and the APC Panel 
that the allogeneic stem cell transplant procedures described by CPT 
codes 38240 and 38242 can be safely and appropriately performed on some 
Medicare beneficiaries on an outpatient basis. Therefore, we are not 
adopting our CY 2010 proposal to change the status indicators for CPT 
codes 38240 and 38242 from ``S'' to ``C'' in order to indicate that 
Medicare would only pay for these procedures when furnished in the 
hospital inpatient setting. Rather, we are continuing to assign CPT 
code 38240 to APC 0112 and CPT code 38242 to APC 0111 for CY 2010 for 
purposes of hospital outpatient payment, and are maintaining the 
assignment of status indicator ``S'' to both CPT codes that describe 
these procedures. CPT codes 38240 and 38242 are assigned to these same 
APCs for CY 2009, and we believe the allogeneic stem cell transplant-
related procedures they describe share the clinical and resource 
characteristics of other procedures assigned to those APCs for CY 2010.
    We do not agree with the public commenters and the APC Panel that 
the allogeneic stem cell harvesting procedure described by CPT code 
38205 should be separately payable with status indicator ``S'' under 
the OPPS for CY 2010 because hospitals may bill and receive payment 
only for services provided to the Medicare beneficiary who is the 
recipient of the stem cell transplant and whose illness is being 
treated with the stem cell transplant. We do not agree with the 
commenters that we should pay for allogeneic stem cell harvesting 
services separately because these services are not directly furnished 
to beneficiaries. Instead, we believe that it continues to be 
appropriate to pay for these services through payment for the 
associated stem cell transplant procedure. The hospital should report 
all allogeneic stem cell acquisition charges, including costs 
associated with the harvesting procedure, on the recipient's inpatient 
or outpatient transplant bill under revenue code 0819. Payment for the 
allogeneic stem cell harvesting procedure performed on the donor and 
reported under revenue code 0819 is packaged into the IPPS MS-DRG 
payment or the OPPS APC payment for the associated transplant procedure 
performed on the recipient, depending on whether the transplant 
procedure is performed in the inpatient setting or the outpatient 
setting. Therefore, we are modifying our CY 2010 proposal to change the 
status indicator for CPT code 38205 from ``S'' to ``E'' for the CY 2010 
OPPS. Instead, we are assigning status indicator ``B'' to CPT code 
38205 for CY 2010 to reflect that the code is not recognized by OPPS 
when submitted on an outpatient hospital Part B bill type. We will 
update section 90.3.3 of Chapter 3 and section 231.10 of Chapter 4 of 
the Medicare Claims Processing Manual to comport with these billing and 
payment changes for allogeneic stem cell transplants and related 
services as described in this section.
    We appreciate the commenters' summaries of other billing and 
payment issues related to allogeneic stem cell transplants for which 
they sought further direction and policy development from CMS. While we 
consider these issues to be outside of the scope of the proposed rule, 
we will consider the commenters' suggestions as we explore this policy 
area more broadly in the future. We note that current guidance in 
Section 90.3.3 of Chapter 3 of the Medicare Claims Processing Manual 
instructs providers to include on the Medicare cost report any costs 
associated with acquisition services for allogeneic stem cell 
acquisition services in cases that do not result in transplant due to 
death of the intended recipient or other causes.
    After consideration of the public comments we received, we are 
modifying our CY 2010 proposal for allogeneic stem cell transplant 
procedures. Specifically, for CY 2010, we are accepting the APC Panel's 
recommendation and continuing to assign CPT code 38240 to APC 0112 and 
CPT code 38242 to APC 0111, which is consistent with their CY 2009 
assignments. The final APC median costs of APC 0112 and APC 0111 are 
approximately $2,225 and $798, respectively, for CY 2010. We are 
maintaining status indicator ``S'' for the procedures described by both 
of these CPT codes. In addition, we are not adopting the APC Panel's 
recommendation or the public commenters' suggestion to maintain the CY 
2009 status indicator and APC assignment for CPT code 38205. Instead, 
we are assigning status indicator ``B'' to CPT code 38205 for CY 2010 
to reflect that the code is not recognized by OPPS when submitted on an 
outpatient hospital Part B bill type because payment is made for 
allogeneic stem cell harvesting through payment for the recipient's 
transplant procedure, whether the transplant is provided in the 
hospital inpatient setting or the outpatient setting.

D. Physician Supervision

1. Background
    In the CY 2009 OPPS/ASC proposed rule and final rule with comment 
period (73 FR 41518 through 41519 and 73 FR 68702 through 68704, 
respectively), we provided a restatement and clarification of the 
requirements for physician supervision of hospital outpatient 
diagnostic and therapeutic services that were set forth in the April 
2000 OPPS final rule with comment period (65 FR 18524 through 18526). 
As we stated in those rules, section 1861(s)(2)(C) of the Act 
authorizes payment for diagnostic services that are furnished to a 
hospital outpatient for the purpose of diagnostic study. We have 
further defined the requirements for diagnostic services furnished to 
hospital outpatients, including requirements for physician supervision 
of diagnostic services, in Sec. Sec.  410.28 and 410.32 of our 
regulations. Section 410.28(e) states that Medicare Part B makes 
payment for diagnostic services furnished at provider-based departments 
(PBDs) of hospitals ``only when the diagnostic services are furnished 
under the appropriate level of physician supervision specified by CMS 
in accordance with the definitions in Sec. Sec.  410.32(b)(3)(i), 
(b)(3)(ii), and (b)(3)(iii).'' In addition, in the April 2000 OPPS 
final rule with comment period (65 FR 18526), we stated that our model 
for the requirement was the requirement for physician supervision of 
diagnostic tests payable under the MPFS that was set forth in the CY 
1998 MPFS final rule (62 FR 59048). In 2000, we also explained with 
respect to the supervision requirements for individual diagnostic tests 
that we intended to instruct hospitals and fiscal intermediaries to use 
the MPFS as a guide pending issuance of updated requirements. For 
diagnostic services not listed in the MPFS, we stated that fiscal 
intermediaries, in consultation with their medical directors, would 
define appropriate supervision levels in order to determine whether 
claims for these services are reasonable and necessary. Since 2000, we 
have continued to follow the supervision requirements for individual 
diagnostic tests as listed in the MPFS Relative Value File. The file is 
updated quarterly and is available on the CMS Web site at:

[[Page 60576]]

http://www.cms.hhs.gov/PhysicianFeeSched/.
    In the CY 2009 OPPS/ASC proposed rule and final rule with comment 
period (73 FR 41518 through 41519 and 73 FR 68702 through 68704, 
respectively), we also reiterated that direct physician supervision is 
the standard for physician supervision as set forth in the April 2000 
OPPS final rule with comment period for supervision of hospital 
outpatient therapeutic services covered and paid by Medicare in 
hospitals and PBDs of hospitals. We noted that section 1861(s)(2)(B) of 
the Act authorizes payment for hospital services ``incident to 
physicians' services rendered to outpatients.'' We have further defined 
the supervision requirements for hospital outpatient therapeutic 
services and supplies ``incident to'' a physician's service in Sec.  
410.27 of our regulations. More specifically, Sec.  410.27(f) states: 
``Services furnished at a department of a provider, as defined in Sec.  
413.65(a)(2) of this subchapter, that has provider-based status in 
relation to a hospital under Sec.  413.65 of this subchapter, must be 
under the direct supervision of a physician. `Direct supervision' means 
the physician must be present and on the premises of the location and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. It does not mean that the physician 
must be present in the room when the procedure is performed.'' This 
language makes no distinction between on-campus and off-campus PBDs.
    In the preamble of the April 2000 OPPS final rule with comment 
period (65 FR 18525), we further discussed the requirement for 
physician supervision and the finalization of the proposed regulation 
text. In that discussion, we stated that the language of Sec.  
410.27(f) ``applies to services furnished at an entity that is located 
off the campus of a hospital that we designate as having provider-based 
status as a department of a hospital in accordance with Sec.  413.65.'' 
We also stated that, for services furnished in a department of a 
hospital that is located on the campus of a hospital, ``we assume the 
direct supervision requirement to be met as we explain in Section 
3112.4(a) of the Intermediary Manual.'' We further stated that ``we 
assume the physician supervision requirement is met on hospital 
premises because staff physicians would always be nearby within the 
hospital.''
    In the CY 2009 OPPS/ASC proposed rule and final rule with comment 
period (73 FR 41518 through 41519 and 73 FR 68702 through 68704, 
respectively), we restated the existing physician supervision policy 
for hospital outpatient therapeutic services because we were concerned 
that some stakeholders may have misunderstood our use of the term 
``assume'' in the April 2000 OPPS final rule with comment period, 
believing that our statement meant that we do not require any 
supervision in the hospital or in an on-campus PBD for hospital 
outpatient therapeutic services, or that we only require general 
supervision for those services. This is not the case. It has been our 
expectation that hospital outpatient therapeutic services are provided 
under the direct supervision of physicians in the hospital and in all 
PBDs of the hospital, specifically, both on-campus and off-campus 
departments of the hospital. The expectation that a physician would 
always be nearby predates the OPPS and is related to the statutory 
authority for payment of hospital outpatient services--that Medicare 
makes payment for hospital outpatient services ``incident to'' the 
services of physicians in the treatment of patients as described in 
section 1861(s)(2)(B) of the Act. Section 410.27(a)(1)(ii) of the 
regulations states that Medicare Part B pays for hospital services and 
supplies furnished incident to a physician service to outpatients if 
they are provided ``as an integral though incidental part of a 
physician's services.'' In addition, we have stated in Section 20 of 
Chapter 6 of the Medicare Benefit Policy Manual (Pub. 100-2) that 
hospitals provide two distinct types of services to outpatients: 
Services that are diagnostic in nature, and other services that aid the 
physician in the treatment of the patient. We further defined these 
therapeutic services and supplies in Section 20.5.1 of the Medicare 
Benefit Policy Manual, stating ``therapeutic services and supplies 
which hospitals provide on an outpatient basis are those services and 
supplies (including the use of hospital facilities) which are incident 
to the services of physicians in the treatment of patients.'' We also 
provide in Section 20.5.1 that services and supplies must be furnished 
on a physician's order and delivered under physician supervision. 
However, the manual indicates further that each occasion of a service 
by a nonphysician does not need to also be the occasion of the actual 
rendition of a personal professional service by the physician 
responsible for the care of the patient. Nevertheless, as stipulated in 
that same section of the manual ``during any course of treatment 
rendered by auxiliary personnel, the physician must personally see the 
patient periodically and sufficiently often enough to assess the course 
of treatment and the patient's progress and, where necessary, to change 
the treatment regimen.''
    The expectation that a physician would always be nearby within the 
hospital also dates back to a time when hospital inpatient services 
provided in a single hospital building represented the majority of 
hospital payments by Medicare. Since that time, advances in medical 
technology, changes in the patterns of health care delivery, and 
changes in the organizational structure of hospitals have led to the 
development of extensive hospital campuses, sometimes spanning several 
city blocks, as well as off-campus and satellite provider-based 
campuses at different locations. In the April 2000 OPPS final rule with 
comment period (65 FR 18525), we described the focus of the direct 
physician supervision requirement for off-campus PBDs. In the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68703), we stated that 
we do expect direct physician supervision of all hospital outpatient 
therapeutic services, regardless of their on-campus or off-campus 
location, but that we would continue to emphasize the physician 
supervision requirement for off-campus PBDs. However, we also noted 
that if there were problems with outpatient care in a hospital or in an 
on-campus PBD where direct supervision was not in place (that is, the 
expectation of direct physician supervision was not met), we would 
consider that to be a quality concern. We noted that we want to ensure 
that payment is made for high quality hospital outpatient services 
provided to beneficiaries in a safe and effective manner and consistent 
with Medicare requirements.
    Finally, we noted that the definition of direct supervision in 
Sec.  410.27(f) for PBDs requires that the physician must be present 
and on the premises of the location and immediately available to 
furnish assistance and direction throughout the performance of the 
procedure. In the April 2000 OPPS final rule with comment period (65 FR 
18525), we further distinguished ``on the premises of the location'' by 
stating ``* * * a physician must be present on the premises of the 
entity accorded status as a department of the hospital and therefore, 
immediately available to furnish assistance and direction for as long 
as patients are being treated at the site.'' We also stated that this 
characterization does not mean that the physician must be physically in 
the room where a procedure or service is furnished. We noted in the CY 
2009 OPPS/ASC final rule with comment

[[Page 60577]]

period (73 FR 68703) that although we have not further defined the term 
``immediately available'' for this specific context, the lack of timely 
physician response to a problem in the HOPD would represent a quality 
concern from our perspective that hospitals should consider in 
structuring their provision of services in ways that meet the direct 
physician supervision requirement for HOPD services.
    In response to a comment requesting clarification, we also 
discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68703 through 68704) that a nonphysician practitioner may not provide 
the physician supervision in a PBD, even if a nurse practitioner's or a 
physician assistant's professional service was being billed as a nurse 
practitioner or a physician assistant service and not a physician 
service. We noted that section 1861(r) of the Act defines a physician 
as follows: ``[t]he term `physician', when used in connection with the 
performance of any function or action, means (1) a doctor of medicine 
or osteopathy legally authorized to practice medicine and surgery by 
the State in which he performs such function or action * * *; (2) a 
doctor of dental surgery or of dental medicine [legally authorized to 
practice in the State and acting within the scope of his license]; (3) 
a doctor of podiatric medicine [for certain purposes and to the extent 
authorized by the State]; (4) a doctor of optometry [for certain 
purposes and to the extent legally authorized by the State]; or (5) a 
chiropractor [for certain purposes and to the extent legally authorized 
by the State and consistent with the Secretary's standards].'' In 
addition, we pointed out that the conditions of participation for 
hospitals under Sec.  482.12(c)(1)(i) through (c)(1)(vi) of our 
regulations require that every Medicare hospital patient is under the 
care of a doctor of medicine or osteopathy, a doctor of dental surgery 
or dental medicine, a doctor of podiatric medicine, a doctor of 
optometry, a chiropractor, or a clinical psychologist; each practicing 
within the extent of the Act, the Federal regulations, and State law. 
Further, Sec.  482.12(c)(4) of our regulations requires that a doctor 
of medicine or osteopathy must be responsible for the care of each 
Medicare patient with respect to any medical or psychiatric condition 
that is present on admission or develops during hospitalization and is 
not specifically within the scope of practice of one of the other 
practitioners listed in Sec.  482.12(c)(1)(ii) through (c)(1)(vi).
    Moreover, section 1861(s)(2)(B) of the Act authorizes payment for 
hospital services ``incident to physicians' services rendered to 
outpatients.'' We have further defined the requirements for hospital 
outpatient therapeutic services and supplies ``incident to'' a 
physician's service in Sec.  410.27 of our regulations. Section 
410.27(a)(1)(ii) describes payment for hospital outpatient services 
when they are ``an integral though incidental part of a physician's 
services.'' Also, Sec.  410.27(f) requires that hospital outpatient 
services provided in PBDs must be under the direct supervision of a 
physician. We stated that the language of the statute and regulations 
does not include nonphysician practitioners other than clinical 
psychologists. Therefore, it would not be in accordance with the law 
and regulations for a nonphysician practitioner other than a clinical 
psychologist to be providing the physician supervision in a PBD, even 
if a nurse practitioner's or a physician assistant's professional 
service was being billed as a nurse practitioner or a physician 
assistant service and not a physician service.
2. Issues Regarding the Physician Supervision of Hospital Outpatient 
Services Raised by Hospitals and Other Stakeholders
    Although we received a few public comments on the discussion of 
physician supervision in the CY 2009 OPPS/ASC proposed rule, since 
publication of the CY 2009 OPPS/ASC final rule with comment period on 
November 18, 2008, we have received many questions and concerns about 
the current policies from hospitals and other stakeholders, as we 
discussed in the CY 2010 OPPS/ASC proposed rule (74 FR 35364). Some 
stakeholders expressed appreciation for the CMS clarification, stating 
that the supervision policies were clear and represented needed 
safeguards for beneficiaries. On the other hand, we have received 
numerous questions about the application of the policies to hospital 
outpatient therapeutic services furnished in areas of the hospital that 
some stakeholders believe have not clearly been discussed, such as the 
application of direct supervision to hospital outpatient therapeutic 
services furnished within the main buildings of the hospital that may 
not be PBDs of the hospital. Some hospitals expressed difficulty in 
determining whether certain areas of their hospitals were considered 
provider-based. Other stakeholders cited the direct supervision policy 
as first articulated in 2000 as problematic because they believe that 
CMS failed to consider hospitals' current organizational structures. 
Some hospitals and other stakeholders inquired about a physician's 
qualifications for providing supervision or questioned whether 
physician supervision must be provided by a physician in a particular 
medical specialty. A number of stakeholders challenged the current 
policy that nonphysician practitioners cannot provide direct 
supervision for those hospital outpatient therapeutic services they may 
personally perform or that they may order to be provided by other 
hospital staff incident to the nonphysician practitioner's services. In 
addition, numerous stakeholders, especially rural hospitals, raised 
budgetary and patient access concerns related to ensuring adequate 
physician staffing, especially because nonphysician practitioners may 
not directly supervise the delivery of hospital outpatient therapeutic 
services. Furthermore, rural hospitals and CAHs raised concerns 
regarding the inconsistency of the direct supervision requirements for 
CAHs with other CAH policies, pointing out that the Medicare conditions 
of participation for CAHs allow nurse practitioners and physician 
assistants to be responsible for the care of Medicare patients in CAHs. 
Some stakeholders specifically questioned whether Sec.  410.27(f) 
applied to CAHs because the term ``CAH'' is not in the heading of Sec.  
410.27, which currently reads ``Outpatient hospital services and 
supplies incident to a physician service: Conditions.'' Other 
stakeholders complained about the significant burden on hospitals to 
provide direct physician supervision because they believe there is no 
clear clinical need for such supervision, particularly a uniform level 
of supervision for all types of hospital outpatient therapeutic 
services. Some stakeholders challenged the applicability of the direct 
supervision requirements to specific types of hospital outpatient 
services, such as partial hospitalization or chemotherapy 
administration services.
    Similar to the issues related to direct supervision of hospital 
outpatient therapeutic services raised by hospitals and other 
stakeholders, we have received questions since publication of the CY 
2009 OPPS/ASC final rule with comment period regarding the application 
of physician supervision policies for hospital outpatient diagnostic 
services, especially with respect to services provided within the main 
buildings of the hospital that are not PBDs. In addition, some 
stakeholders have pointed out that there is no site-of-service 
requirement for hospital outpatient diagnostic services, and that, 
therefore, hospitals may send

[[Page 60578]]

patients to independent diagnostic testing facilities (IDTFs) or other 
entities to receive diagnostic services under arrangement. They added 
that although these facilities are not PBDs, the hospital would bill 
for these services as hospital outpatient services in accordance with 
the hospital bundling rules. Some of these stakeholders have asked what 
type of physician supervision is required for diagnostic services 
provided under arrangement.
    A number of stakeholders urged CMS to withdraw or delay the 
physician supervision policies discussed in the CY 2009 OPPS/ASC final 
rule with comment period, arguing that this rule included policy 
changes rather than clarification and, therefore, sufficient 
opportunity for public notice and comment was not provided. Some 
further argued that CMS should suspend enforcement of these policies 
while CMS gathers additional public input and considered alternatives. 
These stakeholders suggested a variety of additional approaches to 
soliciting full feedback from the hospital and physician communities on 
the supervision policies and their impact, including holding an open 
door forum or town hall meeting and reopening the discussion during the 
CY 2010 OPPS rulemaking process.
    As discussed in the CY 2010 OPPS/ASC proposed rule (74 FR 35365), 
we provided a restatement and clarification of existing policy in the 
CY 2009 OPPS/ASC proposed rule (73 FR 41518 through 41519), citing 
numerous existing statutory, regulatory, manual, and prior rule 
preamble statements in section XII.A. of that rule specifically titled, 
``Physician Supervision of HOPD Services.'' The CY 2009 OPPS/ASC 
proposed rule provided for a 60-day comment period. We stated that we 
continue to believe that the CY 2009 restatement and clarification made 
no change to longstanding hospital outpatient physician supervision 
policies as incorporated in prior statements of policy, including the 
codified Federal regulations. In addition, we provided for public 
notice and comment regarding these physician supervision polices 
through the CY 2009 OPPS/ASC proposed rule in which, as noted above, we 
discussed physician supervision in a distinct section of the proposed 
rule. However, we received only a few public comments on that section. 
We also noted that the physician supervision policies for hospital 
outpatient diagnostic and therapeutic services as described in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68702 through 
68704) continue to be in effect for CY 2009. In the CY 2010 OPPS/ASC 
proposed rule (74 FR 35365), we stated that we have not instructed 
contractors to delay initiation of enforcement actions or to 
discontinue pursuing pending enforcement actions regarding the 
physician supervision of hospital outpatient services.
    However, while we did not propose to withdraw the longstanding 
physician supervision policies for hospital outpatient services in CY 
2009, we stated in the CY 2010 OPPS/ASC proposed rule (74 FR 35365) 
that we had extensively considered the many questions and concerns on 
this topic raised to us by stakeholders in the course of developing the 
proposed rule in order to assess whether proposed changes to the 
existing policies should be considered. We appreciated the many 
detailed comments and suggestions interested stakeholders have raised 
in the first few months since publication of the CY 2009 OPPS/ASC final 
rule with comment period. We considered a wide variety of potential 
modifications to our physician supervision policies in response to this 
information about current health care delivery practices and 
challenges. The dialogue with interested stakeholders provided us with 
sufficient information to develop proposals for certain changes to the 
supervision policies for hospital outpatient services for CY 2010 in 
order to take into full consideration current clinical practice and 
patterns of care, the need to ensure patient access, the associated 
hospital and physician responsibilities, consistency among requirements 
for different sites of services, and other important factors. We 
indicated our belief that the proposals we were making for CY 2010 
would address many of the concerns and questions regarding our existing 
policies that had been raised to us by stakeholders over the first 6 
months of CY 2009. In the CY 2010 OPPS/ASC proposed rule (74 FR 35365), 
we welcomed robust public comments regarding our CY 2010 proposals for 
physician supervision in order to inform our decisions regarding final 
policies for CY 2010.
    In considering the questions and concerns that had been raised over 
the first 6 months of CY 2009, we identified three areas within our 
existing hospital outpatient physician supervision policies for which 
we stated our belief that proposals of policy changes were appropriate 
for CY 2010, two related to the supervision of therapeutic services and 
one related to the supervision of diagnostic services. Our specific CY 
2010 proposals, including the proposed changes to our regulations to 
conform to these proposals, the public comments on the proposals and 
our responses, and our final CY 2010 supervision policies for hospital 
outpatient therapeutic and diagnostic services are discussed below.
3. Policies for Direct Supervision of Hospital and CAH Outpatient 
Therapeutic Services
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35365), we proposed 
that nonphysician practitioners, specifically physician assistants, 
nurse practitioners, clinical nurse specialists, and certified nurse-
midwives, may directly supervise all hospital outpatient therapeutic 
services that they may perform themselves in accordance with their 
State law and scope of practice and hospital-granted privileges, 
provided that they continue to meet all additional requirements, 
including any collaboration or supervision requirements as specified in 
the regulations at Sec. Sec.  410.74 through 410.77. Clinical 
psychologists may already provide direct supervision, as we mentioned 
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68703 
through 68704) because they, along with physicians (as defined in 
section 1861(r)(1) of the Act), may be responsible for the care of a 
hospital patient, as discussed in the Medicare conditions of 
participation for hospitals in Sec.  482.12(c) of our regulations. We 
stated our belief that allowing certain nonphysician practitioners 
(nurse practitioners, physician assistants, clinical nurse specialists, 
and certified nurse-midwives) to provide direct supervision of certain 
hospital outpatient therapeutic services is appropriate because, even 
though these practitioners are not physicians, they are recognized in 
statute and regulation as providing services that are analogous to 
physicians' services. Medicare Part B covers the professional services 
of clinical psychologists, nurse practitioners, physician assistants, 
clinical nurse specialists, and certified nurse-midwives when the 
services would be physicians' services if furnished by a physician (a 
doctor of medicine or osteopathy, as set forth in section 1861(r)(1) of 
the Act). Their services are described in Sec. Sec.  410.71(a), 
410.74(a), 410.75(a) and (c), 410.76(a) and (c), and 410.77(a), 
respectively, of our regulations. Medicare also makes payment for 
services provided incident to the services of these nonphysician 
practitioners as specified in Sec. Sec.  410.71(a)(2)(iii), 410.74(b), 
410.75(d), 410.76(d), and 410.77(c), respectively.
    We also noted that section 1861(r) of the Act does not include 
clinical psychologists, nurse practitioners,

[[Page 60579]]

physician assistants, clinical nurse specialists, or certified nurse-
midwives in the definition of a physician. However, as previously 
mentioned, the conditions of participation for hospitals at Sec.  
482.12(c)(1)(vi) of our regulations do include clinical psychologists 
as practitioners who may be responsible for the care of Medicare 
patients. The conditions of participation at Sec. Sec.  482.12(c)(1)(i) 
through (c)(1)(vi) require that every Medicare hospital patient be 
under the care of a doctor of medicine or osteopathy, a doctor of 
dental surgery or dental medicine, a doctor of podiatric medicine, a 
doctor of optometry, a chiropractor, or a clinical psychologist; each 
practicing in accordance with the Act, Federal regulations, and State 
law. Further, Sec.  482.12(c)(4) of our regulations requires that a 
doctor of medicine or osteopathy must be responsible for the care of 
each Medicare patient with respect to any medical or psychiatric 
condition that is present on admission or develops during 
hospitalization and is not specifically within the scope of practice of 
one of the other practitioners listed in Sec. Sec.  482.12(c)(1)(ii) 
through (c)(1)(vi). Also, as permitted by State law, certain 
nonphysician practitioners may admit individuals to a hospital or CAH 
and order and provide therapeutic services to them. Since 1998, we have 
allowed payment for the professional services of these nonphysician 
practitioners in addition to payment for physicians' services when the 
nonphysician practitioner's professional services are furnished in an 
HOPD. We also have made outpatient facility payments to the hospital 
for those facility services provided incident to the professional 
services of these nonphysician practitioners (63 FR 58873). In 
addition, the conditions of participation for CAHs at Sec.  485.631 
require that a doctor of medicine or osteopathy, a nurse practitioner, 
a physician assistant, or a clinical nurse specialist be available to 
furnish patient care services at all times the CAH operates. A doctor 
of medicine or osteopathy must be present for sufficient periods of 
time to provide medical direction, medical care services, consultation 
and supervision as described in the conditions of participation and 
must be available through radio or telephone contact for assistance 
with medical emergencies or patient referral.
    Taking into consideration the totality of these existing conditions 
and requirements, we proposed to revise Sec.  410.27 of the regulations 
to make clear that Medicare Part B payment may be made for hospital 
outpatient services and supplies furnished incident to the services of 
a physician, clinical psychologist, nurse practitioner, physician 
assistant, clinical nurse specialist, or certified nurse-midwife 
service; and to add that, effective January 1, 2010, clinical 
psychologists, nurse practitioners, physician assistants, clinical 
nurse specialists, or certified nurse-midwives may provide direct 
supervision for hospital outpatient therapeutic services that they may 
perform themselves under State law and within their scope of practice 
and hospital-granted privileges in the context of the existing 
requirements in Sec. Sec.  410.71, 410.74, 410.75, 410.76, and 410.77. 
However, we note that, in the CY 2010 OPPS/ASC proposed rule (74 FR 
35366), we proposed that the direct supervision of CR, ICR, and PR 
services must be furnished by a doctor of medicine or osteopathy, as 
specified in the proposed coverage policy and regulations for CR, ICR, 
and PR services. We also noted that Medicare does not make a payment to 
a physician under the MPFS when the physician solely provides the 
direct physician supervision of hospital outpatient therapeutic 
services but furnishes no direct professional services to a patient. 
This also would apply to the supervision of hospital outpatient 
therapeutic services provided by nonphysician practitioners.
    We also indicated that we did not propose to modify requirements 
relating to physician supervision or collaboration for these 
nonphysician practitioners. In regard to the supervision of physician 
assistants, Sec.  410.74(a)(iv) requires that physician assistants 
perform services under the general supervision of a physician. We have 
further defined this general supervision in section 190(c) of Chapter 
15 of the Medicare Benefit Policy Manual. Section 190(c) states that 
``the PA's physician supervisor (or a physician designated by the 
supervising physician or employer as provided under State law or 
regulations) is primarily responsible for the overall direction and 
management of the physician assistant's professional activities and for 
assuring that the services provided are medically appropriate for the 
patient. The physician supervisor (or physician designee) need not be 
physically present with the physician assistant when a service is being 
furnished to a patient and may be contacted by telephone, if necessary, 
unless State law or regulations require otherwise.''
    The requirements for collaboration of nurse practitioners are 
defined in Sec.  410.75(c)(3) of the regulations and Section 200(D) of 
Chapter 15 of the Medicare Benefit Policy Manual. The requirements for 
clinical nurse specialists are located in Sec.  410.76(c)(3) of the 
regulations and Section 210(D) of Chapter 15 of the Medicare Benefit 
Policy Manual. These sections define collaboration as a process in 
which the nurse practitioner or the clinical nurse specialist works 
with one or more physicians (doctors of medicine or osteopathy) to 
deliver health care services within the scope of the practitioner's 
expertise, with medical direction and appropriate supervision as 
required by the law of the State in which the services are being 
furnished. In the absence of more stringent State law requirements 
governing collaboration, collaboration is to be evidenced by the nurse 
practitioner or the clinical nurse specialist documenting his or her 
scope of practice and indicating the relationships that he or she has 
with physicians to deal with issues outside their scope of practice. 
The collaborating physician does not need to be present with the nurse 
practitioner or clinical nurse specialist when the services are 
furnished or to make an independent evaluation of each patient who is 
seen by the nurse practitioner or clinical nurse specialist.
    In addition, for CY 2010, we proposed to refine the definition of 
direct supervision of hospital outpatient therapeutic services for 
those services furnished in a hospital and in on-campus PBDs of a 
hospital. For services furnished on a hospital's main campus, we 
proposed that direct supervision means that the supervisory physician 
or nonphysician practitioner must be present on the same campus, in the 
hospital or the on-campus PBD of the hospital as defined in Sec.  
413.65, and immediately available to furnish assistance and direction 
throughout the performance of the procedure. We proposed to add a new 
paragraph (a)(1)(iv)(A) to Sec.  410.27 to reflect this requirement. We 
also proposed to define ``in the hospital'' in new paragraph Sec.  
410.27(g) as meaning areas in the main building(s) of a hospital that 
are under the ownership, financial, and administrative control of the 
hospital; that are operated as part of the hospital; and for which the 
hospital bills the services furnished under the hospital's CCN. 
Therefore, to be present in the hospital or the on-campus PBD of the 
hospital and immediately available requires that the physician or 
nonphysician practitioner must be physically present in areas on the 
campus of the hospital that are part of

[[Page 60580]]

the hospital, including on-campus PBDs, that are operated by the 
hospital, and where services furnished in those areas are billed under 
the hospital's CCN. Under the CY 2010 proposal, the supervisory 
physician or nonphysician practitioner of the hospital's outpatient 
therapeutic services may not be located in any other entity, such as a 
physician's office, IDTF, co-located hospital, or hospital-operated 
provider or supplier such as a skilled nursing facility (SNF), end-
stage renal disease (ESRD) facility, or home health agency (HHA), or 
any other nonhospital space that may be co-located on the hospital's 
campus, as ``hospital campus'' is defined in Sec.  413.65(a)(2) of the 
regulations.
    We stated that while we have not previously specified in policy 
guidance a definition for the term ``immediately available'' with 
respect to services provided in areas of the hospital on its main 
campus that are not PBDs, we believe that the existing definitions of 
direct supervision in Sec. Sec.  410.27(f) and 410.32(b)(3)(ii) that 
apply to PBDs and physician office settings indicate that the physician 
must be physically present in order to provide direct supervision of 
services. With regard to services provided in PBDs of hospitals or 
physicians' offices, these regulations specify that the physician must 
be present in the PBD or in the office suite, respectively. Thus, we 
have previously established that direct supervision requires immediate 
physical presence. While we also have not specifically defined the word 
``immediate'' for direct supervision in terms of time or distance, we 
noted that the general definition of the word means ``without interval 
of time.'' Therefore, the supervisory physician or nonphysician 
practitioner could not be immediately available while, for example, 
performing another procedure or service that he or she could not 
interrupt. In addition, we stated that we understand that advances in 
medical technology, changes in the patterns of health care delivery, 
and changes in the organizational structure of hospitals have led to 
the development of extensive hospital campuses, sometimes spanning 
several city blocks. However, in the context of direct physician or 
nonphysician practitioner supervision, we believed that it would be 
neither appropriate nor ``immediate'' for the supervisory physician or 
nonphysician practitioner to be so physically far away on the main 
campus from the location where hospital outpatient services are being 
furnished that he or she could not intervene right away. As we stated 
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68703), 
if there were problems with outpatient care in a hospital or in an on-
campus PBD where the requirement for direct supervision was not met, we 
would consider that to be a quality concern. Appropriate supervision is 
a key aspect of the delivery of safe and high quality hospital 
outpatient services that are paid under Medicare.
    In addition, the definition of direct supervision in existing Sec.  
410.27(f) has included and would continue to specify under our CY 2010 
proposal that the physician or nonphysician practitioner must be 
available to furnish assistance and direction throughout the 
performance of the procedure. This means that the physician or 
nonphysician practitioner must be prepared to step in and perform the 
service, not just to respond to an emergency. This includes the ability 
to take over performance of a procedure and, as appropriate to both the 
supervisory physician or nonphysician practitioner and the patient, to 
change a procedure or the course of treatment being provided to a 
particular patient. We originally stated in the April 2000 OPPS final 
rule (65 FR 18525) that the physician does not ``necessarily need to be 
of the same specialty as the procedure or service that is being 
performed.'' We also have stated in manual guidance that hospital 
medical staff that supervises the services ``need not be in the same 
department as the ordering physician'' (Section 20.5.1 of Chapter 6 of 
the Medicare Benefits Policy Manual). However, in order to furnish 
appropriate assistance and direction for any given service or 
procedure, we believed the supervisory physician or nonphysician 
practitioner must have, within his or her State scope of practice and 
hospital-granted privileges, the ability to perform the service or 
procedure.
    We did not propose significant changes to the definition or 
requirements for direct supervision in off-campus PBDs of the hospital 
other than to allow nonphysician practitioners to provide direct 
supervision in these PBDs for the services that these practitioners may 
perform. With respect to off-campus PBDs of hospitals, direct 
supervision would continue to mean that the physician or nonphysician 
practitioner must be in the off-campus PBD and immediately available to 
furnish assistance and direction throughout the performance of the 
procedure. We proposed to revise existing Sec.  410.27(f) and include 
the revised language as Sec.  410.27(a)(1)(iv) and make a technical 
change in Sec.  410.27(a)(i)(iv)(B) to clarify the current language by 
removing ``present and on the premises of the location'' and replacing 
it with ``present in the off-campus provider-based department.'' While 
the meaning of this provision is the same, we believed that this 
proposed modification to the language defining direct supervision is 
more consistent with the language of the other proposed changes to 
Sec.  410.27. As we clarified in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68704), the supervisory physician for hospital 
outpatient therapeutic services must be in each PBD of a particular 
off-campus outpatient location, but that does not mean that the 
physician must be in the room when the procedure is performed. In the 
April 2000 OPPS final rule (65 FR 18525), we responded to public 
commenters who asserted that requiring a physician to be onsite at a 
PBD throughout the performance of all ``incident to'' (therapeutic) 
services would be burdensome and costly for hospitals where there are a 
limited number of physicians available to provide coverage, 
particularly in rural settings. We disagreed then that the supervision 
requirement was unnecessary and burdensome because hospitals, prior to 
2000, were already required to ``meet a direct supervision of `incident 
to' services requirement that is unrelated to the provider-based rules. 
That is, we require that hospital services and supplies furnished to 
outpatients that are incident to physician services be furnished on a 
physician's order by hospital personnel and under a physician's 
supervision'' (Section 3112.4 of the Medicare Intermediary Manual). In 
addition, when we discussed the ``assumption'' or expectation that the 
physician supervision requirement is met on the hospital's main campus 
in the April 2000 OPPS final rule (65 FR 18525), we specifically did 
not extend that assumption to off-campus departments of the hospital. 
We stated that we continue to believe that it would be inappropriate to 
allow one physician or nonphysician practitioner to supervise all 
services being provided in all PBDs at a particular off-campus 
outpatient location. Since first allowing off-campus sites to be 
considered PBDs of hospitals, we have placed particular emphasis on 
ensuring the quality and safety of the services provided in these 
locations, which can be many miles from the main hospital campus, 
through both additional provider-based requirements in Sec.  413.65(e) 
and our emphasis on direct physician supervision under existing Sec.  
410.27(f). In addition, because

[[Page 60581]]

the physician or nonphysician practitioner must be immediately 
available and have, within his or her State scope of practice and 
hospital-granted privileges, the ability to perform the services being 
supervised, we believed it would be highly unlikely that one physician 
or nonphysician practitioner would be both immediately available at all 
times that therapeutic services are being provided and would have the 
knowledge and ability to adequately supervise all services being 
performed at once in multiple off-campus PBDs at a single location.
    To reflect these proposed changes for the provision of direct 
supervision of therapeutic services provided to hospital outpatients in 
our regulations, we proposed to revise the language of the existing 
Sec.  410.27(f) and include the revised language in a new paragraph 
(a)(1)(iv) of Sec.  410.27 to specify that direct physician or 
nonphysician practitioner supervision of hospital outpatient 
therapeutic services is required for Medicare Part B payment. We 
proposed to add a new paragraph (a)(1)(iv)(A) to Sec.  410.27 to state 
that, for services provided on the hospital's main campus, direct 
supervision means that the physician or nonphysician practitioner must 
be present on the same campus, in the hospital or on-campus PBD of the 
hospital, as defined in Sec.  413.65, and immediately available to 
furnish assistance and direction throughout the performance of the 
procedure. It does not mean that the physician or nonphysician 
practitioner must be in the room when the procedure is performed. We 
also proposed to add new paragraph (a)(1)(iv)(B) to Sec.  410.27 to 
reflect that, for off-campus PBDs of hospitals, the physician or 
nonphysician practitioner must be present in the off-campus PBD, as 
defined in Sec.  413.65, and immediately available to furnish 
assistance and direction throughout the performance of the procedure. 
It does not mean that the physician or nonphysician practitioner must 
be in the room when the procedure is performed. As we stated 
previously, the proposed language of paragraph (a)(1)(iv)(B) is similar 
to existing Sec.  410.27(f) that we proposed to revise. Furthermore, we 
proposed to make a technical change to clarify the language in this 
paragraph to remove ``present and on the premises of the location'' and 
replace it with ``present in the off-campus provider-based 
department.'' Also, in the CY 2010 OPPS/ASC proposed rule (74 FR 35368) 
and as proposed in the CY 2010 MPFS proposed rule (74 FR 33674), we 
proposed that the direct supervision of CR, ICR, and PR services must 
be furnished by a doctor of medicine or osteopathy, as specified in 
proposed Sec. Sec.  410.47 and 410.49, respectively. We proposed to 
include this exception in proposed paragraphs (a)(1)(iv)(A) and 
(a)(1)(iv)(B) in Sec.  410.27. In addition, we proposed to add a new 
paragraph (f) to Sec.  410.27 to define a nonphysician practitioner for 
purposes of Sec.  410.27 as a clinical psychologist, a physician 
assistant, a nurse practitioner, a clinical nurse specialist, or a 
certified nurse-midwife. Proposed new Sec.  410.27(a)(1)(iv) would 
provide that these nonphysician practitioners may directly supervise 
services that they could furnish themselves in accordance with State 
law and within their scope of practice and hospital-granted privileges, 
as long as all requirements for coverage, including the physician 
supervision or collaboration for these nonphysician practitioners, are 
met in accordance with Sec. Sec.  410.71, 410.74, 410.75, 410.76, and 
410.77, respectively. We also proposed to define ``in the hospital'' in 
new paragraph Sec.  410.27(g) to mean areas in the main building(s) of 
the hospital that are under the ownership, financial, and 
administrative control of the hospital; that are operated as part of 
the hospital; and for which the hospital bills the services furnished 
under the hospital's CCN. Finally, we proposed to make a technical 
correction to the title of Sec.  410.27 to read, ``Outpatient hospital 
or CAH services and supplies incident to a physician service: 
Conditions'' to clarify in the title that the requirements for payment 
of hospital outpatient therapeutic services incident to a physician or 
nonphysician practitioner service in that section apply to both 
hospitals and CAHs. Similarly, we proposed to include the phrase 
``hospital or CAH'' throughout the text of Sec.  410.27 wherever the 
text currently refers just to ``hospital.'' The omission of the term 
``CAH'' from Sec.  410.27 was a drafting oversight. However, we have 
applied the requirements of Sec.  410.27, including ``incident to'' 
requirements such as the site-of-service requirement and physician 
supervision, as well as other hospital policies, such as the bundling 
rules, to CAHs, just as we have in 42 CFR Part 409 (Subparts A through 
D and F through H) and Sec.  410.28 and Sec.  413.65 of the regulations 
where CAHs are explicitly mentioned.
    Comment: All commenters who addressed the proposed direct 
supervision by nonphysician practitioners (specifically physician 
assistants, nurse practitioners, clinical nurse specialists, and 
certified nurse-midwives) supported the proposal. Some commenters also 
requested that CMS include licensed clinical social workers in the list 
of nonphysician practitioners who are permitted to supervise outpatient 
psychiatric services and partial hospitalization program (PHP) 
services. Other commenters requested that pharmacists be permitted to 
supervise medication therapy management services and that specialty 
certified registered nurses, such as wound care nurses, also be able to 
provide the direct supervision of hospital outpatient therapeutic 
services. One commenter stated that because physicians do not furnish 
nursing services or the services of other ancillary health 
professionals, they should not be expected to supervise those services 
and it would be inappropriate to expect physicians to accept 
responsibility for care that they have not personally furnished.
    Response: We appreciate the commenters' support for our proposal to 
revise Sec.  410.27 of the regulations to allow certain nonphysician 
practitioners to directly supervise services that they may perform 
themselves under their State scope of practice and hospital-granted 
privileges in the context of the existing requirements in Sec. Sec.  
410.71, 410.74, 410.75, 410.76 and 410.77. We agree with the commenters 
that we should add licensed clinical social workers to the group of 
nonphysician practitioners permitted to provide direct supervision for 
hospital outpatient therapeutic services. We believe this is 
appropriate because licensed clinical social workers are recognized 
under the Medicare program as independent practitioners who may furnish 
services for the diagnosis and treatment of mental illness that they 
are legally authorized to perform under State law of the State in which 
the services are performed. We further agree with the commenters that 
the inclusion of licensed clinical social workers would help to ensure 
continued access to mental health services, especially in rural 
hospitals and CAHs where other types of practitioners may be less 
available. We emphasize though, that licensed clinical social workers, 
like other nonphysician practitioners, may only supervise those 
therapeutic services within their own scope of practice and hospital-
granted privileges. We are not expanding the regulations further to 
allow supervision by pharmacists, registered nurses, or other medical 
professionals. These professionals are not recognized in the Social 
Security Act as providing services that would be physicians' services 
if performed by a physician and

[[Page 60582]]

they may not enroll in Medicare as independent practitioners and 
receive payment directly for their professional services.
    With regard to the comments about physician scope of practice and 
supervision, we remind hospitals that the only statutory basis for 
payment of hospital outpatient therapeutic services is incident to the 
services of a physician, meaning the services are ordered by the 
physician or qualified practitioner and furnished as an integral though 
incidental part of his or her services. It follows, then, that a 
qualified physician or nonphysician practitioner would supervise the 
provision of those services to ensure the service or procedure is being 
furnished appropriately.
    Comment: One commenter supported the proposed requirements for the 
direct physician supervision of CR programs and requested that CMS 
confirm that the proposed definition of ``direct supervision'' that 
would apply to therapeutic services in the HOPD would also apply to CR 
services. However, many commenters, especially CAHs and rural 
hospitals, asked that CMS permit physician assistants, nurse 
practitioners, clinical nurse specialists, and certified nurse-midwives 
who are functioning within their State licensure and scope of practice 
and who are permitted to supervise the services under the hospital or 
CAH bylaws to supervise CR, ICR, and PR services.
    Response: As discussed in detail in sections sections II.G.8. and 
II.G.9. of the CY 2010 MPFS final rule with comment period and in 
section XII.B.4. of this final rule with comment period, section 
144(a)(1) of Public Law 100-275 imposes strict requirements for the 
direct physician supervision of PR, CR, and ICR services and gives us 
no flexibility to modify the requirement. Therefore, we are finalizing 
our CY 2010 proposal, without modification, to require the direct 
physician supervision (by a doctor of medicine or a doctor of 
osteopathy) of PR, CR, and ICR services that are furnished to hospital 
outpatients. We note that we define ``direct supervision'' with regard 
to what it means to be immediately available and accessible for medical 
consultation and medical emergencies in the same manner for PR, CR, and 
ICR services as we do for other therapeutic services furnished in 
HOPDs, as discussed below. Also, the final definitions of direct 
supervision in Sec.  410.27 for therapeutic services provided on campus 
and in off-campus PBDs also apply. These definitions and the final 
regulation text of Sec. Sec.  410.27(a)(1)(iv)(A) and (B) are discussed 
in detail below.
    Comment: With respect to the proposed definition of direct 
supervision of hospital outpatient therapeutic services, some 
commenters fully supported the proposals as appropriate and necessary 
for ensuring that Medicare beneficiaries receive safe and high quality 
care. Many commenters acknowledged that the proposal to broaden the 
location of the supervising physician from in the department on campus 
to ``in the hospital'' would give hospitals significantly more 
flexibility. However, the commenters stated that, while the proposal 
would be more flexible, it would still limit access to care and would 
cost hospitals and the Medicare program. Other commenters questioned 
why CMS has a supervision requirement at all, stating that there is no 
such specified requirement for hospital inpatient services. Many 
commenters believed that the proposals would not help CAHs and rural 
hospitals, where physicians often maintain offices off-campus and 
qualified nonphysician practitioners may not be readily available to 
provide services in the hospital. The commenters claimed that the 
proposed definition of direct supervision would mean that CAHs and 
rural hospitals would be required to hire staff solely to supervise 
services and that this extra cost would force these hospitals and CAHs 
to eliminate services. These commenters requested that CMS not apply 
the ``incident to'' requirements of Sec.  410.27 to CAHs.
    Response: We appreciate the commenters' support and the 
acknowledgement that we are striving to provide more flexibility for 
hospitals, while maintaining appropriate supervision of hospital 
outpatient therapeutic services that helps to ensure safe, high quality 
care and providing Medicare payment that is consistent with the 
statutory requirements for coverage. We have received numerous comments 
and questions since publication of the CY 2009 OPPS/ASC final rule with 
comment period, met with interested stakeholders to hear their 
questions and concerns throughout the year, and reviewed many 
thoughtful, wide-ranging comments on the CY 2010 OPPS/ASC proposed 
rule. In considering all of this information, we have taken into full 
consideration current clinical practice and patterns of care, the need 
to ensure patient access, the associated hospital and physician 
responsibilities, consistency among requirements for different sites of 
services, and other important factors. We believe that our final 
policies address many of the concerns and questions regarding our 
proposals. Through the expansion of supervisory authority to 
nonphysician practitioners and a modification to the requirement for 
direct supervision of on-campus therapeutic services, discussed in more 
detail below, we believe our final policies allow more flexibility for 
hospitals and CAHs and help ensure access to care for Medicare 
beneficiaries while maintaining our standards for safe, high quality 
care and consistent interpretation of longstanding regulations.
    We disagree with the commenters who suggested that there should be 
no supervision requirements for hospital outpatient services because 
there are not similar codified supervision requirements for hospital 
inpatient services. Hospitals provide a wide variety of complex 
services to their outpatients who may or may not have an established 
relationship with the supervising physician or nonphysician 
practitioner and hospital staff on the day the hospital outpatient 
services are furnished. A treating physician or nonpractitioner in the 
community may not even be aware that ordered outpatient services are 
being furnished by the hospital on a given day. Therefore, we believe 
it is appropriate for CMS to set requirements for the safe and 
effective diagnosis and treatment of Medicare beneficiaries, including 
standards for the appropriate supervision of hospital outpatient 
services by a physician or nonphysician practitioner, in accordance 
with the statutory basis for payment of hospital outpatient services in 
section 1861(s)(2)(B) of the Act, which is ``incident to physicians' 
services rendered to outpatients.''
    We set the standard for direct supervision of hospital outpatient 
therapeutic services that we have held since the implementation of the 
OPPS in 2000, and we have assumed that this standard was being met 
because we assumed that a physician would always be nearby in the 
hospital. Given that hospital inpatients generally have medically 
complex conditions requiring a high level of acute care, we have not 
established explicit supervision requirements in regulations because we 
believe hospitals would have physicians or other qualified 
practitioners available at all times that complex hospital inpatient 
services are being furnished. If this is not the case, we may consider 
addressing the supervision of hospital inpatient services in the 
future.
    In regard to hospital and CAH concerns about hiring physician and 
nonphysician staff solely for

[[Page 60583]]

supervisory services, we reiterate that the supervisor need only be 
available when outpatient therapeutic services and procedures are being 
furnished, meaning that many services or departments would not require 
24 hour per day, 7 days per week direct supervision, as some commenters 
believed. We also believe that allowing the supervisory physician or 
nonphysician practitioner to be located anywhere on the hospital 
campus, as discussed more fully below, should alleviate this concern 
for many hospitals and CAHs. In addition, we remind CAHs that the 
conditions of participation for CAHs at Sec.  485.631 require that a 
doctor of medicine or osteopathy, a nurse practitioner, a physician 
assistant, or a clinical nurse specialist is available ``to furnish 
patient care services at all times the CAH operates'' (emphasis added). 
It follows then that this physician or nonphysician practitioner who is 
available at all times the CAH operates would be directly furnishing 
services that are within his or her State scope of practice and CAH-
granted privileges and that the CAH would not be furnishing services 
that are not within this practitioner's scope.
    Comment: Many commenters stated that it is overly restrictive and 
arbitrary to not allow direct supervision by practitioners located in 
other entities on-campus and to require the immediate physical presence 
of the physician. Several commenters pointed out that, because of the 
varying ways that hospitals have structured their services and 
campuses, a physician's office may be next door or closer to the HOPD 
in which services that he or she would be supervising are furnished, 
than a practitioner located in another HOPD. Other commenters stated 
that the proposal would preclude physicians from taking a lunch break, 
patronizing the retail establishments in the hospital, or going to 
other areas such as parking lots.
    The commenters were particularly concerned about specialized 
services such as chemotherapy, blood transfusions, and radiation 
therapy services. Several hospital associations and other commenters 
requested that CMS remove the phrase ``immediately available to furnish 
assistance and direction throughout the performance of the procedure.'' 
They instead recommended that CMS redefine direct supervision for 
therapeutic services to mean that the physician may be on or in close 
proximity to the campus and able to respond in a timely manner 
according to hospital's policies and bylaws. The commenters also 
believed that ``immediate availability'' does not and should not mean 
immediate physical presence and that requiring physical presence in 
every instance is impractical. Instead, the commenters believed the 
supervising practitioner should be able to directly supervise services 
and procedures remotely by telephone, radio, robotic device, or 
electronic media.
    Response: We appreciate the many public comments that we received 
on the proposed definition of direct supervision for hospital 
outpatient therapeutic services provided on the campus of the hospital. 
We acknowledge the comments related to hospital building and campus 
structures and the physical proximity of physicians' offices and other 
entities to the hospital department where a particular hospital 
outpatient service is furnished. We agree with the commenters that 
allowing the supervising physician to be in nonhospital space on the 
campus could make it easier for a supervising physician or nonphysician 
practitioner to respond immediately. Therefore, we believe it would be 
appropriate to allow the supervising physician or nonphysician 
practitioner to be located anywhere on the same campus of the hospital, 
as long as he or she was immediately available to furnish assistance 
and direction throughout the performance of the procedure.
    This is consistent with our longstanding definition of ``direct 
supervision'' as it has been applied across settings in terms of the 
immediate physical presence of the physician and what it means to 
``furnish assistance and direction throughout the performance of the 
procedure.'' However, we continue to believe that the supervisory 
physician or nonphysician practitioner could not be immediately 
available while, for example, performing another procedure or service 
that he or she could not interrupt. It also would be neither 
appropriate nor ``immediate'' for the supervisory physician or 
nonphysician practitioner to be so physically far away on the main 
campus from the location where hospital outpatient services are being 
furnished that he or she could not intervene right away.
    As we stated in the CY 2010 OPPS/ASC proposed rule (74 FR 35367), 
we believe that the existing definitions of direct supervision in 
Sec. Sec.  410.27(f) and 410.32(b)(3)(ii) that apply to PBDs and 
physicians' office settings indicate that the physician must be 
physically present in order to provide direct supervision of services. 
With regard to services provided in PBDs of hospitals or physicians' 
offices, for at least 9 years these regulations have specified that the 
physician must be present in the PBD or in the office suite, 
respectively. Thus, we have previously established that direct 
supervision requires immediate physical presence. Medicare only covers 
hospital outpatient therapeutic services furnished incident to 
physicians' services, yet a hospital service ordered by a physician may 
be furnished on a day when the beneficiary does not receive services 
directly from a physician. Therefore, we believe it is important to 
retain direct supervision as the standard.
    With regard to the commenters' recommendations that CMS redefine 
direct supervision for therapeutic services to mean that the physician 
may be ``on or in close proximity to the campus'' and ``able to respond 
in a timely manner'' according to hospital's policies and bylaws, we 
believe that the suggested new definition of direct supervision for on-
campus hospital outpatient therapeutic services would be wholly 
inconsistent with the definition of the term as previously codified in 
at least two Medicare sections of the Code of Federal Regulations. We 
disagree with the commenters that describing immediate availability as 
without lapse of time would be read so narrowly as to require that the 
supervising physician or nonphysician practitioner must be standing in 
the room next to the nonphysician personnel furnishing the service. A 
similar argument could be made that the phrase ``able to respond in a 
timely manner'' is so vague that a supervising physician or 
nonphysician practitioner could interpret it to mean that arriving 
within an hour or hours would be reasonable. In addition, we note that 
the definition proposed by commenters is virtually identical in 
interpretation to the current existing definition of general 
supervision. Section 410.32(b)(3)(i) of the regulations defines general 
supervision to mean that ``the procedure is furnished under the 
physician's overall direction and control, but the physician's presence 
is not required during the performance of the procedure.'' We have 
historically interpreted this to mean that the physician may be 
available by telephone or other electronic device to supervise and 
direct the nonphysician personnel furnishing the service. This lower 
standard of general supervision would not ensure the immediate presence 
of a qualified practitioner in the hospital to furnish assistance and 
direction to hospital personnel providing a wide array of complex 
therapeutic services to hospital outpatients. Several of the

[[Page 60584]]

commenters requesting this relaxed definition of direct supervision 
also asked that certain services be designated as requiring only 
general supervision. We are unclear about the commenters' understanding 
of the definition of general supervision if their suggested definition 
of direct supervision requires no physical presence and only specifies 
availability in a reasonable period of time by telephone, radio, 
robotics, or telemedicine.
    We have set direct supervision as a minimum standard for 
supervision of all Medicare hospital outpatient therapeutic services. 
We do not believe that this standard or the definition, as codified, 
precludes a hospital from developing bylaws, credentialing procedures, 
and policies that it believes are appropriate to ensure that all 
hospital patients receive high quality services in a safe and effective 
manner. We believe that hospitals take quality of care and patient 
safety very seriously, and we understand that hospitals are subject to 
accreditation requirements. Considering that hospitals provide a wide 
array of very complex services and procedures, including surgeries, we 
would expect that hospitals already have the leadership, credentialing 
procedures, bylaws, and other policies in place to ensure that services 
furnished to Medicare beneficiaries are being provided only by 
qualified practitioners in accordance with all applicable laws, 
regulations, and coding guidance. For services not furnished directly 
by a physician, we would expect that these bylaws and policies would 
ensure that the services are being supervised in a manner commensurate 
with the complexity of the service, including personal supervision 
where appropriate.
    Comment: Many commenters disagreed with statements in the proposed 
rule that the supervising physician should have, within his or her 
scope of practice and hospital-granted privileges, the knowledge, 
ability, and hospital privileges to perform the services being 
supervised. Some commenters stated that the supervisor should be 
required to provide only medical consultation and attend to medical 
emergencies, but should not be expected to intervene or change the 
course of treatment because this usurps the responsibility of treating 
physician. Other commenters stated that the supervisor should be 
``clinically appropriate'' to supervise the outpatient therapeutic 
services.
    Response: As we explained in the CY 2010 OPPS/ASC proposed rule (74 
FR 35367), we believe the supervising physician or nonphysician 
practitioner must be prepared to step in and perform the service, not 
just to respond to an emergency. This includes the ability to take over 
performance of a procedure and, as appropriate to both the supervisory 
physician or nonphysician practitioner and the patient, to change a 
procedure or the course of treatment being provided to a particular 
patient. We originally stated in the April 2000 OPPS final rule (65 FR 
18525) that the physician does not ``necessarily need to be of the same 
specialty as the procedure or service that is being performed.'' We 
also have stated in manual guidance that hospital medical staff that 
supervises the services ``need not be in the same department as the 
ordering physician'' (Section 20.5.1 of Chapter 6 of the Medicare 
Benefits Policy Manual). We understand hospitals' concerns, and note 
that we would not expect that a supervising physician would operate in 
a vacuum, making all decisions without informing or consulting the 
patient's treating physician or nonphysician practitioner. This would 
be illogical and inappropriate for good medical practice. However, in 
order to furnish appropriate assistance and direction for any given 
service or procedure, we continue to believe the supervisory physician 
or nonphysician practitioner must have, within his or her State scope 
of practice and hospital-granted privileges, the ability to perform the 
service or procedure. We believe that our interpretation of the 
requirement means that the supervisor must be a person who is 
``clinically appropriate'' to supervise the service or procedure. We 
believe it is inappropriate for a supervisory physician or nonphysician 
practitioner to be responsible for patients, hospital staff, and 
services that are outside the scope of their knowledge, skills, 
licensure, or hospital-granted privileges.
    This interpretation of the previously codified language is 
consistent with our longstanding application of direct supervision 
across settings in terms of the physical presence of the physician and 
what it means to ``furnish assistance and direction throughout the 
performance of the procedure.'' We do not believe that allowing a 
supervisor to be responsible for emergencies only would satisfy the 
standard to ``furnish assistance and direction throughout the 
performance of the procedure'' as the language has historically been 
interpreted for physicians' offices and PBDs. We disagree with 
commenters who stated that the historical intent of direct supervision 
has been for a supervising physician to provide guidance and direction 
without expecting that professional to be able to perform the service 
or procedure and that performance of the procedure applies only to 
personal supervision. It would be unreasonable to think that a 
physician or nonphysician practitioner could competently assist and 
direct a procedure for which they do not have sufficient knowledge and 
skills to perform or redirect the procedure or service.
    Comment: Several commenters requested additional guidance as to 
what CMS considers hospital outpatient ``incident to'' services. One 
commenter requested clarification on the applicability of ``incident 
to'' to emergency department services. The commenter believed that the 
``incident to'' provision for hospital outpatient services may not be 
applicable to emergency department services because the emergency 
department physician would be immediately available in the area to care 
for patients, but would not have previously seen and established a 
relationship with the patient, as this commenter believed is required. 
Other commenters believed that the requirements for supervision of 
hospital outpatient therapeutic services should be specific to each 
clinical service and should be designated as either general or direct, 
as for diagnostics. Some commenters asked for clarification of how to 
report services in a Condition Code 44 situation when the patient 
received care as an inpatient, with no direct supervision, and the 
hospital then changed the patient's status to outpatient.
    Response: As previously stated in this discussion, Sec.  
410.27(a)(1)(ii) of the regulations states that Medicare Part B pays 
for hospital services and supplies furnished incident to a physician 
service to outpatients if they are provided ``as an integral though 
incidental part of a physician's services.'' In addition, we have 
stated in Section 20 of Chapter 6 of the Medicare Benefit Policy Manual 
that hospitals provide two distinct types of services to outpatients: 
services that are diagnostic in nature and other services that aid the 
physician in the treatment of the patient. We further defined these 
therapeutic services and supplies in Section 20.5.1 of Chapter 6 of the 
Medicare Benefit Policy Manual, stating ``therapeutic services and 
supplies which hospitals provide on an outpatient basis are those 
services and supplies (including the use of hospital facilities) which 
are incident to the services of physicians in the treatment of 
patients.'' In essence, all hospital outpatient services that are not

[[Page 60585]]

diagnostic are services that aid the physician in the treatment of the 
patient, and are called therapeutic services. These are the services 
for which Medicare makes a hospital facility payment only when they are 
provided ``incident to'' the services of a physician.
    We also provide in Section 20.5.1 that services and supplies must 
be furnished on a physician's order and delivered under physician 
supervision. However, the manual indicates further that each occasion 
of a service by a nonphysician does not need to also be the occasion of 
the actual rendition of a personal professional service by the 
physician responsible for the care of the patient. Nevertheless, as 
stipulated in that same section of the manual ``during any course of 
treatment rendered by auxiliary personnel, the physician must 
personally see the patient periodically and sufficiently often enough 
to assess the course of treatment and the patient's progress and, where 
necessary, to change the treatment regimen.'' Section 20.5.1 also 
explicitly includes clinic and emergency room services as examples of 
hospital outpatient services that are provided incident to the services 
of a physician. We note in this section that the policies for hospital 
services incident to physicians' services rendered to outpatients 
differ in some respects from policies that pertain to ``incident to'' 
services furnished in office and physician-directed clinic settings. 
Those requirements are discussed in Section 60 of Chapter 15 of the 
Medicare Benefit Policy Manual. The commenter incorrectly believed that 
for hospital services to be ``incident to'' a physician's services, the 
physician must have previously seen and established a relationship with 
the patient. When a patient presents to an emergency department or a 
hospital clinic and a physician examines the patient and orders 
services to be provided, the provision of those services is incident to 
the services of that physician.
    We recognize the potential benefit to hospitals of specifically 
designating supervision requirements for individual therapeutic 
services based on clinical complexity, especially for less complex 
services that we might deem to require general supervision. We note 
that the commenters requesting individual designations mentioned only 
defining services as requiring general or direct supervision. However, 
as we discussed earlier in this section, direct supervision represents 
a minimum standard currently applicable to all outpatient therapeutic 
services. If we were to designate individual supervision levels for 
hospital outpatient therapeutic services just as we do for diagnostic 
services, it would be most consistent and appropriate for CMS to make 
specific determinations for services that we believe may only be safely 
provided under the personal supervision of a physician or that must be 
performed only by a physician. We stated above that we expect that 
hospitals already have credentialing procedures, bylaws, and other 
policies established to ensure that services furnished to Medicare 
beneficiaries are being provided only by qualified practitioners in 
accordance with all applicable laws, regulations and coding guidance. 
For services not furnished directly by a physician, we would expect 
that these bylaws and policies would ensure that the services are being 
supervised in a manner commensurate with the complexity of the service, 
including personal supervision where appropriate.
    The use of Condition Code 44 pertains to the entire patient 
encounter, the patient's status, and the hospital bill type submitted. 
Reporting of individual HCPCS codes on an outpatient claim must be 
consistent with all instructions and CMS guidance, including the 
requirements of Sec.  410.27 of the regulations, which specify that 
direct supervision is required for hospital outpatient therapeutic 
services.
    Comment: One commenter requested clarification of the meaning of 
the phrase ``performance of the procedure'' in the definition of direct 
supervision. The commenter was unclear whether this phrase specifically 
applied only to surgical procedures or whether it was a general term 
for services and procedures. The commenter also asked if the direct 
supervision requirement would apply to recovery room services following 
a surgical procedure performed by the physician.
    Response: The use of the term ``procedure'' is intended to 
encompass all services and procedures and includes all components of a 
service or procedure furnished by a hospital to an outpatient, 
including recovery room services, and covered and paid by Medicare, 
regardless of whether separate payment is made for those component 
services. This is how we have applied the term within the codified 
definitions of the levels of supervision (general, direct, and 
personal) in Sec. Sec.  410.27 and 410.32. While each supervision 
definition uses the phrase ``performance of the procedure,'' the term 
``service'' may be substituted for the word ``procedure'' each time 
``procedure'' appears in the regulations.
    Comment: Several commenters raised questions about the proposed 
definition of the phrase ``in the hospital.'' Some requested 
clarification of the meaning of ``on the same campus.'' Several 
commenters suggested that the word ``ownership'' in the definition 
seems to unintentionally exclude areas that are operated and controlled 
by the hospital under a lease agreement or a written operations 
agreement. These commenters suggested either removing this term from 
the definition of ``in the hospital'' or clarifying in this final rule 
with comment period where CMS is referring to the business operation 
aspect of ownership rather than the physical building.
    Response: ``On the same campus'' was used to denote that the 
supervising physician or nonphysician practitioner must be physically 
located on the same campus as the services being furnished by the 
hospital because it is possible for some hospitals to have more than 
one main campus, as well as off-campus PBDs.
    We appreciate the public comments that raised the questions about 
the term ``ownership.'' We agree with the commenters that a narrow 
interpretation of the word ``ownership'' would exclude spaces that the 
hospital leases or operates under another type of operations agreement. 
This was not our intention. The commenters correctly pointed out that 
the word ``ownership'' in this context applies to the actual business 
operation, not solely a physical building. However, we also believe 
that the rest of the definition includes these aspects. If the 
definition is read as a whole, instead of parsing individual clauses 
out of context, then the spirit of the regulation is understood. 
Because the phrase ``in the hospital or CAH'' applies broadly to 
``incident to'' requirements such as the site of service requirement 
for therapeutic services provided by the hospital directly and under 
arrangement, we are finalizing the proposed definition of ``in the 
hospital'' in new paragraph (g) of Sec.  410.27 as meaning areas in the 
main building(s) of a hospital that are under the ownership, financial, 
and administrative control of the hospital; that are operated as part 
of the hospital; and for which the hospital bills the services 
furnished under the hospital's CCN.
    Comment: One commenter requested that CMS reiterate that the 
``incident to'' and physician supervision requirements of Sec.  410.27 
do not apply to physical therapy, occupational therapy, and speech-
language pathology services furnished under a therapy plan of care.
    Response: Section 1833(t) of the Act excludes physical therapy, 
occupational

[[Page 60586]]

therapy, and speech-language pathology from hospital outpatient 
services paid under the OPPS. In addition, in the April 2000 OPPS final 
rule (65 FR 18525), we stated in response to a comment about physical 
therapy services that the coverage provision in section 1861(s)(2)(D) 
of the Act does not require that physical therapy services be provided 
incident to the services of a physician. Finally, in Section 20 
(Hospital Outpatient Services) of Chapter 6 of the Medicare Benefit 
Policy Manual, we state, ``[t]he following rules pertaining to the 
coverage of outpatient hospital services are not applicable to physical 
therapy, speech-language pathology, occupational therapy, or end stage 
renal disease (ESRD) services furnished by hospitals to outpatients.'' 
This section instructs readers to consult sections 220 and 230 of 
Chapter 15 of the Medicare Benefit Policy Manual for rules on the 
coverage of outpatient physical therapy, occupational therapy, and 
speech-language pathology furnished by a hospital.
    Comment: Several commenters from CMHCs and hospital-based PHPs 
questioned whether the direct physician supervision clarifications and 
the ``incident to'' requirements of Sec.  410.27 apply to those 
programs. Several hospital-based PHP stakeholders noted the discrepancy 
in the physician supervision requirements for PHP services furnished by 
CMHCs and hospitals.
    Response: Medicare makes payment for hospital outpatient 
therapeutic services only when provided ``incident to'' the services of 
a physician. Outpatient psychiatric and hospital-based PHP services are 
outpatient hospital services paid under the OPPS and, therefore, must 
meet all conditions of Sec.  410.27, including the requirement for 
direct supervision by a physician or qualified nonphysician 
practitioner.
    Because CMHCs are paid under the OPPS for PHP services, the 
``incident to'' requirements of Sec.  410.27 also apply to CMHCs, with 
the exception of direct supervision for outpatient PHP services. 
Currently, CMHCs have a different physician supervision standard to 
meet. On February 11, 1994, CMS issued the Partial Hospitalization 
Services in Community Mental Health Centers (CMHCs) interim final rule 
with comment period (59 FR 6570), developing and implementing the 
coverage criteria and payment methodology for CMHCs under Medicare. At 
the time when the CY 1994 CMHC rule was published, the decision was 
made to permit general supervision in CMHCs. As implemented in Sec.  
410.110(a), services provided in a CMHC PHP must be prescribed by a 
physician and furnished under the general supervision of a physician. 
General supervision means that a physician must be at least available 
by telephone, but is not required to be on the premises of the CMHC at 
all times (59 FR 6573). We recognized that a direct supervision 
requirement could cause hardship to CMHCs because some of these 
entities were unable to employ physicians on a full-time basis due to 
the expense involved. In the CY 1994 interim final rule with comment, 
we explained that because we believed that less than direct supervision 
by a full-time physician in a CMHC would not jeopardize a patient's 
health or treatment program, in combination with our belief that there 
would be a number of professionals involved in the care of the patient 
who are authorized to furnish services that would otherwise be 
furnished by a physician, we required general physician supervision.
    On August 1, 2000 (65 FR 18434), the OPPS was implemented and 
provided payment for PHP services provided in two settings: hospital 
outpatient departments to their outpatients and CMHCs. Although PHP is 
one benefit and both provider types receive the same payment for 
services rendered, CMHCs have been permitted to furnish PHP services 
under general supervision; and the OPPS has, since 2000, held a 
standard of direct supervision for hospital outpatient therapeutic 
services, including PHP services (42 CFR 410.110 (a)). While the policy 
was clearly codified for PBDs of hospitals in the CY 2009 OPPS/ASC 
proposed rule and final rule with comment period, CMS restated and 
clarified that the policy also applies to hospital outpatient services 
not provided in PBDs due to questions referencing the assumption of 
physician supervision in the April 2000 OPPS final rule (73 FR 68702 
through 68704 referencing 65 FR 18525). Even though there are different 
physician supervision standards for CMHCs and hospital-based PHPs, the 
certification, recertification, and plan of treatment requirements at 
Sec.  424.24(e) and section 1835(2)(F) of the Act continue to apply to 
both provider types. The physician would certify and recertify (where 
services are furnished over a period of time) that the individual would 
require inpatient psychiatric care in the absence of such services; an 
individualized, written plan for furnishing such services has been 
established by a physician and is reviewed periodically by a physician; 
and such services are or were furnished while the individual is or was 
under the care of a physician. The physician recertification must be 
signed by a physician who is treating the patient and has knowledge of 
the patient's response to treatment.
    In order to unify the benefit and create more equity and 
consistency, we are exploring the possibility of extending the same 
physician supervision requirements to both provider types. 
Specifically, we are concerned whether the current policy of requiring 
only general physician supervision in CMHCs continues to be 
appropriate, taking into account the differences among provider 
settings. We also plan to analyze PHP claims data from the past several 
years and assess whether our current policies and payment structures 
are working. Therefore, we will evaluate the policies and the 
possibility of extending the same physician supervision requirement to 
PHP services furnished in both CMHCs and HOPDs in future rulemaking.
    With that in mind, we are requesting comments on this final rule 
with comment period that address: (1) What types of practitioners 
currently provide the supervision of PHP services in CMHCs; (2) what is 
the expertise of supervising practitioners in CMHCs and what is the 
expectation for their availability; (3) based on the final CY 2010 
supervision requirements for hospital outpatient therapeutic services 
(including PHP services furnished in HOPDs), under what circumstances 
would direct supervision of PHP services furnished in CMHCs not be 
occurring, according to the applicable definitions for direct 
supervision of on-campus and off-campus therapeutic services; and (4) 
what would be the rationale for maintaining different supervision 
requirements for PHP services furnished in CMHCs and HOPDs, given that 
all PHP services are paid under the OPPS.
    Comment: A few commenters stated that the provisions for off-campus 
PBDs should not require the supervising practitioner to be in the 
department because the existing policy is burdensome and costly, 
especially for rural providers. The commenters requested that a 
supervising physician or nonphysician practitioner be able to supervise 
services being furnished in more than one off-campus PBD at a time. 
Some commenters stated that they know of off-campus PBDs in current 
operation that operate with a supervisor nearby, for example, in a 
physician's office, but not in the PBD.
    Response: We first note that the requirement for direct supervision 
of hospital outpatient therapeutic services furnished in PBDs of the 
hospital was

[[Page 60587]]

codified in Sec.  410.27(f) of the regulations in the April 2000 OPPS 
final rule. In that rule, we explicitly stated that ``on the premises 
of the location'' means that the supervisor must be on the premises of 
the PBD (65 FR 18525). We also responded to public commenters who 
asserted that requiring a physician to be onsite at a PBD throughout 
the performance of all ``incident to'' therapeutic services would be 
burdensome and costly for hospitals where there are a limited number of 
physicians available to provide coverage, particularly in rural 
settings. We disagreed then that the supervision requirement was 
unnecessary and burdensome because hospitals, prior to 2000, were 
already required to ``meet a direct supervision of `incident to' 
services requirement that is unrelated to the provider-based rules.'' 
We continue to believe that it would be inappropriate to allow one 
physician or nonphysician practitioner to supervise all services being 
provided in all PBDs at a particular off-campus outpatient location. 
Since first allowing off-campus sites to be considered PBDs of 
hospitals, we have placed particular emphasis on ensuring the quality 
and safety of the services provided in these locations, which can be 
many miles from the main hospital campus, through both additional 
provider-based requirements in Sec.  413.65(e) and our emphasis on 
direct physician supervision under Sec.  410.27(f). In addition, 
because the physician or nonphysician practitioner must be immediately 
available and have, within his or her State scope of practice and 
hospital-granted privileges, the ability to perform the services being 
supervised, we believe it would be highly unlikely that one physician 
or nonphysician practitioner would be both immediately available at all 
times that therapeutic services are being provided and would have the 
knowledge and ability to adequately supervise all services being 
performed at once in multiple off-campus PBDs.
    Comment: Many commenters maintained that the CY 2009 OPPS/ASC final 
rule with comment period statements on supervision were not a 
``restatement or clarification'' but a significant change in policy. 
They argued that any enforcement should be prospective beginning in CY 
2010 only, with no enforcement regarding prior years' hospital 
outpatient therapeutic services. The commenters believed that the 
policy prior to CY 2009 at best was unclear, and that the regulations 
were not comprehensive, and therefore, they concluded that hospitals 
should not be held accountable to the policy stated in the CY 2009 
OPPS/ASC final rule with comment period for hospital outpatient 
therapeutic services furnished in 2000 through CY 2008. The commenters 
stated that CMS should also not enforce the policy as clarified in the 
CY 2009 OPPS/ASC final rule with comment period for CY 2009 hospital 
outpatient therapeutic services because sufficient opportunity for 
public notice and comment was not provided. Many hospitals were unaware 
that the policy had been discussed in the CY 2000 OPPS rulemaking 
process, and the commenters argued that hospitals may not have had 
enough time to meet these requirements for CY 2009. Furthermore, 
hospitals expressed concern about their potential liability due to qui 
tam litigation.
    Response: We provided a restatement and clarification of existing 
policy in the CY 2009 OPPS/ASC proposed rule (73 FR 41518 through 
41519), citing numerous existing statutory, regulatory, manual, and 
prior rule preamble statements in section XII.A. of that rule, 
specifically titled, ``Physician Supervision of HOPD Services.'' The CY 
2009 OPPS/ASC proposed rule provided for a 60-day comment period. We 
continue to believe that the CY 2009 restatement and clarification made 
no change to longstanding hospital outpatient physician direct 
supervision policies as incorporated in prior statements of policy, 
including the regulations. In addition, we provided for public notice 
and comment regarding these physician supervision policies through the 
CY 2009 OPPS/ASC proposed rule in which, as noted above, we discussed 
physician supervision explicitly in a distinct section of the proposed 
rule, and we responded in the final rule to the few public comments we 
received on the supervision discussion. Therefore, we believe that the 
usual enforcement practices of Medicare contractors are appropriate for 
services furnished in CY 2009. Likewise, the final supervision policies 
described in this CY 2010 final rule with comment period for hospital 
outpatient therapeutic services are effective and, therefore, subject 
to enforcement beginning January 1, 2010.
    In regard to hospital outpatient therapeutic services provided in 
CY 2000 through CY 2008, in CY 2009 we recognized the need for 
clarification of the direct supervision policy. CMS was relatively 
silent on this topic between 2000 and 2008. Furthermore, the existing 
regulations at Sec.  410.27(f) only specify the supervision 
requirements for hospital outpatient therapeutic services furnished in 
PBDs but do not address services furnished in areas of the hospital 
that may not be PBDs. However, we note that the details of the direct 
supervision policy for hospital outpatient therapeutic services 
furnished in off-campus PBDs were clearly and consistently stated in 
the April 2000 OPPS final rule discussion and the regulations, 
including the requirement that the supervising practitioner be 
physically present in an off-campus PBD when such services were being 
furnished. As stated earlier in this section, we have placed and will 
continue to place particular emphasis on ensuring the quality and 
safety of the services provided in these locations and will continue to 
do so through our enforcement and other efforts. However, in the case 
of hospital outpatient therapeutic services furnished on the hospital's 
campus in 2000 through 2008, we plan to exercise our discretion and 
decline to enforce in situations involving claims where the hospital's 
noncompliance with the direct physician supervision policy resulted 
from error or mistake.
    After consideration of the public comments we received, we are 
finalizing our proposal to allow, in addition to clinical 
psychologists, certain other nonphysician practitioners to directly 
supervise services that they may perform themselves under their State 
license and scope of practice and hospital-granted or CAH-granted 
privileges, with one modification. In addition to physician assistants, 
nurse practitioners, clinical nurse specialists, and certified nurse-
midwives, in this final rule with comment period, we are allowing 
licensed clinical social workers to provide direct supervision. 
Specifically, we are modifying the final text of revised Sec.  
410.27(f) to include licensed clinical social workers among the listing 
of nonphysician practitioners who may directly supervise the provision 
of hospital outpatient therapeutic services. These nonphysician 
practitioners may directly supervise services that they may personally 
furnish in accordance with State law and all additional requirements, 
including those specified in Sec. Sec.  410.71, 410.73, 410.74, 410.75, 
410.76, and 410.77, respectively. Accordingly, we also are adding the 
cross-reference to Sec.  410.73 (Clinical social worker services) in 
the final revision of paragraph (a)(1)(iv) of Sec.  410.27 (which 
indicates that services must be furnished under the direct supervision 
of a physician or a nonphysician practitioner as specified in paragraph 
(f)).
    We are finalizing the proposed direct physician supervision 
requirements for PR, CR, and ICR services furnished in

[[Page 60588]]

the HOPD that would require the direct supervision to be provided by a 
doctor of medicine or osteopathy. Accordingly, we are finalizing the 
relevant language in proposed Sec. Sec.  410.27(a)(1)(iv)(A) and (B) 
which indicates that, for PR, CR, and ICR services, direct supervision 
must be furnished by a doctor of medicine or osteopathy, as specified 
in Sec. Sec.  410.47 and 410.49, respectively.
    For services furnished on a hospital's main campus, we are 
finalizing a modification of our proposed definition of ``direct 
supervision'' in new paragraph (a)(1)(iv)(A) of Sec.  410.27 that 
allows for the supervisory physician or nonphysician practitioner to be 
anywhere on the hospital campus, including a physician's office, an on-
campus SNF, RHC, or other nonhospital space. Therefore, direct 
supervision means that the supervisory physician or nonphysician 
practitioner must be present on the same campus and immediately 
available to furnish assistance and direction throughout the 
performance of the procedure.
    Because the term ``in the hospital or CAH'' applies broadly to 
``incident to'' requirements such as the site of service requirement 
for therapeutic services provided by the hospital directly and under 
arrangement, we also are finalizing the definition of ``in the 
hospital'' in new paragraph Sec.  410.27(g) as meaning areas in the 
main building(s) of a hospital or CAH that are under the ownership, 
financial, and administrative control of the hospital or CAH; that are 
operated as part of the hospital; and for which the hospital bills the 
services furnished under the hospital's or CAH's CCN.
    We are finalizing, without modification, the addition of new 
paragraph (a)(1)(iv)(B) to Sec.  410.27 to reflect that, for off-campus 
PBDs of hospitals, the physician or nonphysician practitioner must be 
present in the off-campus PBD, as defined in Sec.  413.65, and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. It does not mean that the physician 
or nonphysician practitioner must be in the room when the procedure is 
performed. As we stated previously, the language of paragraph 
(a)(1)(iv)(B) is similar to existing Sec.  410.27(f) that we are 
revising and relocating. Furthermore, we are finalizing the proposed 
technical change to clarify the language in this paragraph by removing 
the phrase ``present and on the premises of the location'' and 
replacing it with the phrase ``present in the off-campus provider-based 
department.''
    Additionally, we are finalizing the proposal to make a technical 
correction to the title of Sec.  410.27 to read, ``Outpatient hospital 
or CAH services and supplies incident to a physician service: 
Conditions'' to clarify in the title that the requirements for payment 
of hospital outpatient therapeutic services incident to a physician or 
nonphysician practitioner service in that section apply to both 
hospitals and CAHs. Similarly, we are including the phrase ``hospital 
or CAH'' throughout the text of Sec.  410.27 wherever the text 
currently refers just to ``hospital.''
4. Policies for Direct Supervision of Hospital and CAH Outpatient 
Diagnostic Services
    As we discussed in detail in the CY 2010 OPPS/ASC proposed rule (74 
FR 35368), with respect to the physician supervision requirements for 
individual diagnostic tests, we have continued since the April 2000 
OPPS final rule discussion (65 FR 18526) to instruct hospitals that, 
for diagnostic services furnished in PBDs of hospitals, hospitals 
should follow the supervision requirements for individual diagnostic 
tests as listed in the MPFS Relative Value File. For diagnostic 
services not listed in the MPFS file, Medicare contractors, in 
consultation with their medical directors, define appropriate 
supervision levels in order to determine whether claims for these 
services are reasonable and necessary. To further specify the 
supervision policy across service settings and to provide consistency 
for all hospital outpatient diagnostic services, for CY 2010 we 
proposed to require that all hospital outpatient diagnostic services 
that are provided directly or under arrangement, whether provided in 
the main buildings of the hospital, in a PBD of a hospital, or at a 
nonhospital location, follow the physician supervision requirements for 
individual tests as listed in the MPFS Relative Value File. We also 
proposed that the definitions of general, direct, and personal 
supervision as defined in Sec. Sec.  410.32(b)(3)(i) through 
(b)(3)(iii) would also apply. In the case of direct supervision of 
diagnostic services furnished directly by the hospital or under 
arrangement in the main hospital buildings or on-campus in a PBD, we 
proposed that the definition of direct supervision would be the same as 
the definition we proposed for therapeutic services provided on-campus 
as discussed in the CY 2010 OPPS/ASC proposed rule (74 FR 35369), 
meaning that the physician would be present on the same campus, in the 
hospital or the on-campus PBD of the hospital, as defined in Sec.  
413.65, and immediately available to furnish assistance and direction 
throughout the performance of the procedure. In addition, the 
definition of ``in the hospital or CAH'' as defined in proposed Sec.  
410.27(g), discussed above, would apply. In the CY 2010 OPPS/ASC 
proposed rule, we explained that this means that the supervisory 
physician may not be located in any entity such as a physician's 
office, co-located hospital, IDTF, or hospital-operated provider or 
supplier such as a SNF, ESRD facility, or HHA, or any other nonhospital 
space that may be co-located on the hospital's campus, as campus is 
defined in Sec.  413.65(a)(2).
    Similarly, in the case of direct physician supervision of 
diagnostic services furnished directly or under arrangement in an off-
campus PBD, we proposed that the definition of direct supervision would 
be the same as the current definition for therapeutic services provided 
in an off-campus PBD as discussed in the CY 2010 OPPS/ASC proposed rule 
(74 FR 35369), meaning the physician must be present in the off-campus 
PBD, as defined in Sec.  413.65 and immediately available to furnish 
assistance and direction throughout the performance of the procedure. 
As we discussed in the April 2000 OPPS final rule (65 FR 18524 through 
18525) and the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68702 through 68704), we have long made the analogy of the PBD to the 
physician's office suite, as described in the definition of direct 
supervision in Sec.  410.32(b)(3)(ii).
    In addition to providing diagnostic services directly or under 
arrangement in the hospital, including PBDs of the hospital, a hospital 
may also send its outpatients to another entity, such as an IDTF, to 
furnish these services under arrangement for the hospital. For example, 
in the April 2000 OPPS final rule (65 FR 185440 through 185441), in a 
discussion of the hospital bundling rules, we discussed that an entity, 
like an IDTF, may be located in the main buildings of a hospital or on 
the hospital campus but operated independently of the hospital. In 
addition, these suppliers, providers, or other entities may be located 
elsewhere, not on a hospital's main campus or other hospital property. 
These entities, like IDTFs and physicians' offices, may provide 
services to their own patients (not hospital outpatients) and to 
hospital outpatients under arrangements with the hospital. They follow 
the physician supervision requirements of the MPFS and Sec.  410.32 
when providing services to Medicare beneficiaries who are not hospital 
outpatients. For consistency, we proposed for CY 2010

[[Page 60589]]

that all diagnostic services provided to hospital outpatients under 
arrangement in nonhospital entities, whether those entities are located 
on the main campus of the hospital or elsewhere, would also follow the 
requirements as described in Sec.  410.32(b)(3)(i) through (iii). When 
hospitals contract with other entities to provide services under 
arrangement, the hospital must exercise professional responsibility 
over the arrangement for services, in accordance with the guidance 
provided in Section 10.3 (Under Arrangements) of Chapter 5 of the 
Medicare General Information, Eligibility and Entitlement Manual. This 
means that for the hospital to receive payment, it is responsible for 
ensuring that all applicable requirements in Sec. Sec.  410.28 and 
410.32 are met. In the case of hospital outpatient diagnostic services 
provided under arrangement at nonhospital locations, such as IDTFs, we 
believe that the term ``office suite'' used in Sec.  410.32(b)(3)(ii) 
is directly applicable because these facilities usually also provide 
diagnostic services to their own patients and, therefore, would be able 
to apply the direct supervision requirement in Sec.  410.32(b)(3)(ii) 
without further definition.
    We stated in the CY 2010 OPPS/ASC proposed rule (74 FR 35369) that 
physician assistants, nurse practitioners, clinical nurse specialists, 
and certified nurse-midwives who operate within the scope of practice 
under State law may order and perform diagnostic tests, as discussed 
under Sec.  410.32(a)(3) and in the corresponding manual guidance in 
section 80 (Requirements for Diagnostic X-Ray, Diagnostic Laboratory, 
and Other Diagnostic Tests) of Chapter 15 of the Medicare Benefit 
Policy Manual. However, this manual guidance and the regulations at 
Sec.  410.32(b)(1) also state that diagnostic x-ray and other 
diagnostic tests must be furnished under the appropriate level of 
supervision by a physician as defined in section 1861(r) of the Act. 
Thus, physician assistants, nurse practitioners, clinical nurse 
specialists, and certified nurse-midwives may not function as 
supervisory physicians for the purposes of diagnostic tests. In 
accordance with these existing requirements, we did not propose to 
allow physician assistants, nurse practitioners, clinical nurse 
specialists, and certified nurse-midwives to provide the supervision of 
diagnostic tests provided to hospital outpatients. Clinical 
psychologists may supervise only diagnostic psychological and 
neuropsychological testing services as described in an exception to the 
basic rule at Sec.  410.32(b)(2)(iii) for diagnostic psychological and 
neuropsychological testing services, when these services are personally 
furnished by a clinical psychologist or an independently practicing 
psychologist or when they are furnished under the general supervision 
of a physician or clinical psychologist.
    To reflect these proposed changes for the provision of direct 
supervision of diagnostic services provided to hospital outpatients in 
the regulations, we proposed to revise existing Sec.  410.28(e). First, 
we proposed to specify that the provisions of proposed revised 
paragraph (e) apply to diagnostic services furnished by the hospital, 
directly or under arrangement, consistent with our proposal to apply 
the existing diagnostic services supervision requirement for PBDs to 
diagnostic services provided directly by the hospital or under 
arrangement. We would continue to specify that the definitions of 
general and personal physician supervision included in Sec.  
410.32(b)(3)(i) and (b)(3)(iii) apply to these levels of supervision of 
hospital outpatient diagnostic services. Furthermore, we proposed to 
add new paragraph (e)(1) to Sec.  410.28 to indicate that, for services 
furnished directly or under arrangement, in the hospital or in an on-
campus department of a provider, as defined in Sec.  413.65, direct 
supervision means that the physician must be present on the same 
campus, in the hospital or PBD of the hospital as defined in Sec.  
413.65, and immediately available to furnish assistance and direction 
throughout the performance of the procedure. We also would continue to 
provide that direct supervision does not mean that the physician must 
be in the room when the procedure is performed. As discussed above, we 
would apply the definition of ``in the hospital'' as proposed in Sec.  
410.27(g) of the regulations. In addition, we proposed to add new 
paragraph (e)(2) to Sec.  410.28 to reflect that, for the direct 
physician supervision of diagnostic services furnished directly or 
under arrangement in off-campus PBDs of hospitals, the physician must 
present in the off-campus PBD, as defined in Sec.  413.65, and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. We would continue to provide that 
direct supervision does not mean that the physician must be in the room 
when the procedure is performed. Finally, we proposed to add new 
paragraph (e)(3) to specify that for the direct supervision of hospital 
outpatient services provided under arrangement in physicians' offices 
and other nonhospital locations, the definition of direct supervision 
in Sec.  410.32(b)(3)(ii) applies.
    Comment: Some commenters fully supported the proposal for hospital 
outpatient diagnostic services, agreeing with CMS that it is 
appropriate to apply the requirements for physician supervision 
consistently across all sites of service. Other commenters, including 
major hospitals associations and commenters representing rural 
hospitals, believed the proposal is unnecessary, unrealistic, costly, 
and would reduce access to diagnostic services. Several commenters 
stated that CMS' interpretation of ``furnish assistance and direction 
throughout the performance of the procedure'' would mean that the 
physician would have to be able to operate sophisticated equipment, 
replacing the technicians who are trained to operate the equipment. 
Some commenters indicated that rural hospitals would not be able to 
meet the proposed requirements. Other commenters requested that CMS add 
a column to Addendum B specifying the required level of supervision for 
diagnostic tests to make it easier for hospitals to comply with the 
requirements.
    Response: We disagree with the commenters that requiring hospitals 
to follow the MPFS levels of supervision for individual diagnostic 
tests would create additional hospital burden for many services because 
CMS has already applied the lowest level of supervision (general 
supervision) to numerous diagnostic services. Additionally, in the 
April 2000 OPPS final rule (65 FR 18536), we codified Sec.  410.28(e) 
of the regulations to apply this requirement to all on and off campus 
PBDs of hospitals. It is appropriate to apply the same requirements to 
diagnostic services that are provided ``in the hospital'' as those that 
have been long established for on-campus and off-campus PBDs of the 
hospital, including rural hospitals. We also believe that, in the 
interest of safe and high quality care for beneficiaries, it is 
appropriate for hospitals to follow the same requirements for 
supervision as physicians and IDTFs when furnishing more complex 
diagnostic tests that we have specifically identified as requiring 
direct or personal supervision, or should be performed only by the 
physician. In addition, since hospitals may contract with other 
entities to have diagnostic services provided under arrangement, it is 
also appropriate to ensure that those entities are consistently 
following the supervision levels that we have identified for both their 
own patients as well as hospital outpatients. We recognize that 
specially trained

[[Page 60590]]

ancillary staff and technicians are the primary operators of some 
specialized diagnostic testing equipment. However, we also believe it 
is reasonable for the physician that supervises the provision of the 
services to be knowledgeable about those tests.
    Therefore, we are finalizing our CY 2010 proposal that all hospital 
outpatient diagnostic services that are provided directly or under 
arrangement, whether provided in the main buildings of the hospital, in 
a PBD of the hospital, or at a nonhospital location, follow the 
physician supervision requirements for individual tests as listed in 
the MPFS Relative Value File. The definitions of general, direct, and 
personal supervision as defined in Sec. Sec.  410.32(b)(3)(i) through 
(b)(3)(iii) also apply. In the case of direct supervision of diagnostic 
services furnished directly by the hospital or under arrangement in the 
main hospital buildings or on-campus in a PBD, the definition of direct 
supervision is the same as the modified definition that we are 
finalizing for therapeutic services provided on-campus, as discussed in 
section XII.D.3. of this final rule with comment period, meaning that 
the physician would be present on the same campus and immediately 
available to furnish assistance and direction throughout the 
performance of the procedure. We would continue to specify that direct 
supervision does not mean that the physician must be in the room when 
the procedure is performed. As discussed above, we are applying the 
definition of ``in the hospital'' as proposed and finalized in Sec.  
410.27(g) of the regulations. While the definition of ``in the 
hospital'' is no longer a component of the definition of direct 
supervision, it remains applicable to describe areas operated as part 
of the hospital that are not PBDs for other purposes, such as services 
provided under arrangement. It is also appropriate to apply the 
definition of that term consistently for both diagnostic and 
therapeutic hospital outpatient services. In addition, we are 
finalizing our proposal to add new paragraph (e)(2) to Sec.  410.28 to 
reflect that, for the direct physician supervision of diagnostic 
services furnished directly or under arrangement in off-campus PBDs of 
hospitals, the physician must be present in the off-campus PBD of the 
hospital, as defined in Sec.  413.65, and immediately available to 
furnish assistance and direction throughout the performance of the 
procedure. We would continue to specify that direct supervision does 
not mean that the physician must be in the room when the procedure is 
performed. Also, we are finalizing our proposal to add new paragraph 
(e)(3) to specify that for the direct supervision of hospital 
outpatient services provided under arrangement in physicians' offices 
and other nonhospital locations, the definition of direct supervision 
in Sec.  410.32(b)(3)(ii) applies.
    We acknowledge the commenters' request to publish the diagnostic 
supervision levels in Addendum B. Addendum B currently specifies 
information related directly to the payment for services described by 
HCPCS codes, including relative weights, payment rates, and copayments. 
We do not believe it is necessary to include the supervision levels for 
diagnostic services in Addendum B that are not directly relevant to the 
payment rates for those services. These supervision levels are readily 
available on the CMS Web site in the MPFS RVU File, and, because we 
make both the MPFS RVU File and Addendum B available in spreadsheet 
format, an interested hospital can easily modify Addendum B to add 
whatever code-specific information the hospital believes would be most 
useful to incorporate in a single electronic file for reference 
purposes.
    Comment: Several commenters asserted that nonphysician 
practitioners should be able to supervise diagnostic tests because they 
may order and perform diagnostic tests that are within their scope of 
practice under State law.
    Response: We acknowledged in the CY 2010 OPPS/ASC proposed rule (74 
FR 35369) that physician assistants, nurse practitioners, clinical 
nurse specialists, and certified nurse-midwives who operate within the 
scope practice under State law may order and perform diagnostic tests, 
as discussed in Sec.  410.32(a)(3) and corresponding manual guidance in 
Section 80 of Chapter 15 of the Medicare Benefit Policy Manual. 
However, we noted that this manual guidance and the long established 
regulation at Sec.  410.32(b)(1) also state that diagnostic x-ray and 
other diagnostic tests must be furnished under the appropriate level of 
supervision by a physician as defined in section 1861(r) of the Act. 
Thus, CMS historically has not permitted physician assistants, nurse 
practitioners, clinical nurse specialists, and certified nurse-midwives 
to function as supervisory ``physicians'' for the purposes of 
diagnostic tests. In accordance with these existing requirements, we 
did not propose to allow physician assistants, nurse practitioners, 
clinical nurse specialists, and certified nurse-midwives to provide the 
supervision of diagnostic tests provided to hospital outpatients. 
Because we establish the physician supervision levels in the MPFS 
Relative Value File based on the policy that only a physician may 
provide the supervision, we believe it continues to be most appropriate 
to allow only physicians to provide the supervision of hospital 
outpatient diagnostic services.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to require that 
all hospital outpatient diagnostic services that are provided directly 
or under arrangement, whether provided in the main buildings of the 
hospital, in a PBD of a hospital, or at a nonhospital location, follow 
the physician supervision requirements for individual tests as listed 
in the MPFS RVU File. The definitions of general, direct, and personal 
supervision as defined in Sec. Sec.  410.32(b)(3)(i) through 
(b)(3)(iii) also apply. In the case of direct supervision of diagnostic 
services furnished directly by the hospital or under arrangement in the 
main hospital buildings or on-campus in a PBD of a hospital, the 
definition of direct supervision is the same as the modified definition 
that we are finalizing for therapeutic services provided on-campus as 
discussed in section XII.D.3. of this final rule with comment period, 
meaning that the physician must be present on the same campus and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. We continue to provide that direct 
supervision does not mean that the physician must be in the room when 
the procedure is performed. As discussed above, we are applying the 
definition of ``in the hospital'' as specified in new Sec.  410.27(g) 
of the regulations. While the definition of in the hospital is no 
longer a component of the definition of direct supervision, it remains 
applicable to describe areas operated as part of the hospital that are 
not PBDs for other purposes, such as services provided under 
arrangement. It is also appropriate to apply the definition of that 
term consistently for both diagnostic and therapeutic hospital 
outpatient services. In addition, we are finalizing our CY 2010 
proposal, without modification, to add new paragraph (e)(2) to Sec.  
410.28 to reflect that, for the direct physician supervision of 
diagnostic services furnished directly or under arrangement in off-
campus PBDs of hospitals, the physician must present in the off-campus 
PBD, as defined in Sec.  413.65, and immediately available to furnish

[[Page 60591]]

assistance and direction throughout the performance of the procedure. 
We continue to provide that direct supervision does not mean that the 
physician must be in the room when the procedure is performed. Also, we 
are finalizing the CY 2010 proposal, without modification, to add new 
paragraph (e)(3) to specify that, for the direct supervision of 
hospital outpatient services provided under arrangement in physicians' 
offices and other nonhospital locations, the definition of direct 
supervision in Sec.  410.32(b)(3)(ii) applies. We did not propose to 
allow physician assistants, nurse practitioners, clinical nurse 
specialists, and certified nurse-midwives to provide the supervision of 
diagnostic tests provided to hospital outpatients and we are finalizing 
this policy.
5. Summary of CY 2010 Physician Supervision Final Policy
    In summary, for CY 2010, nonphysician practitioners who are 
specified under Sec.  410.27 of the final regulations as clinical 
psychologists, licensed clinical social workers, physician assistants, 
nurse practitioners, clinical nurse specialists, and certified nurse-
midwives, may directly supervise all hospital outpatient therapeutic 
services that they may perform themselves within their State scope of 
practice and hospital-granted privileges, provided that they meet all 
additional requirements, including any collaboration or supervision 
requirements as specified in Sec. Sec.  410.71, 410.73, 410.74, 410.75, 
410.76, and 410.77. We are finalizing the proposed direct physician 
supervision requirements for PR, CR, and ICR services furnished in the 
HOPD that would require the supervision to be provided by a doctor of 
medicine or osteopathy. Accordingly, we are finalizing proposed 
Sec. Sec.  410.27(a)(1)(iv)(A) and (B) which indicate that, for PR, CR, 
and ICR services, direct supervision must be furnished by a doctor of 
medicine or osteopathy, as specified in Sec. Sec.  410.47 and 410.49, 
respectively.
    We also are refining the definition of the direct supervision of 
hospital outpatient therapeutic services for those services provided in 
the hospital or on-campus PBD of the hospital. For services provided in 
the hospital or on-campus PBD of the hospital, direct supervision would 
mean that the physician or nonphysician practitioner must be present on 
the same campus and immediately available to furnish assistance and 
direction throughout the performance of the procedure. In addition, we 
are finalizing the definition of ``in the hospital'' in new paragraph 
Sec.  410.27(g) to mean areas in the main building(s) of a hospital or 
CAH that are under the ownership, financial, and administrative control 
of the hospital or CAH; that are operated as part of the hospital or 
CAH; and for which the hospital or CAH bills the services furnished 
under the hospital's or CAH's CCN.
    We are not making any significant changes to the definition or 
requirements for direct supervision of hospital outpatient therapeutic 
services provided in off-campus PBDs of a hospital or CAH, other than 
to allow nonphysician practitioners to provide direct supervision for 
the services that they may perform themselves in those locations. 
Therefore, we are finalizing, without modification, the addition of new 
paragraph (a)(1)(iv)(B) to Sec.  410.27 to reflect that, for off-campus 
PBDs of hospitals or CAHs, the physician or nonphysician practitioner 
must be present in the off-campus PBD, as defined in Sec.  413.65, and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. We state that this requirement does 
not mean that the physician or nonphysician practitioner must be in the 
room when the procedure is performed.
    Additionally, we are finalizing the proposal to make a technical 
correction to the title of Sec.  410.27 and the text of Sec.  410.27 to 
clarify throughout that the requirements for payment of hospital 
outpatient therapeutic services incident to a physician or nonphysician 
practitioner service in that section apply to both hospitals and CAHs.
    For CY 2010, we are finalizing the proposal to require that all 
hospital outpatient diagnostic services provided directly or under 
arrangement, whether provided in the hospital, in a PBD of a hospital, 
or at a nonhospital location, follow the physician supervision 
requirements for individual tests as listed in the MPFS Relative Value 
File. The existing definitions of general and personal supervision as 
defined in Sec. Sec.  410.32(b)(3)(i) and (b)(3)(iii) also apply. For 
services furnished directly or under arrangement in the hospital or on-
campus PBD, direct supervision means that the physician must be present 
on the same campus and immediately available to furnish assistance and 
direction throughout the performance of the procedure. For the purposes 
of Sec.  410.28, as for the general purposes of Sec.  410.27, the 
definition of ``in the hospital,'' as defined in Sec.  410.27(g), 
applies. For diagnostic services furnished directly or under 
arrangement off-campus in a PBD of the hospital, direct supervision 
continues to mean that the physician must be present in the off-campus 
PBD and immediately available to furnish assistance and direction 
throughout the performance of the procedures. For all hospital 
outpatient diagnostic services provided under arrangement in 
nonhospital locations, such as IDTFs and physicians' offices, the 
existing definition of direct supervision under Sec.  410.32(b)(3)(ii) 
applies. We are revising Sec.  410.28 of the regulations to reflect 
these changes.

E. Direct Referral for Observation Services

    Since CY 2003, hospitals have reported a Level II HCPCS code for 
Medicare billing purposes for a ``direct admission'' to a hospital for 
outpatient observation services. In section 290 of Chapter 4 of the 
Medicare Claims Processing Manual (Pub. 100-4), we define a ``direct 
admission'' as the direct referral of a patient by a community 
physician to a hospital for observation services without an associated 
emergency room visit, hospital outpatient clinic visit, critical care 
service, or hospital outpatient surgical procedure (that is, a status 
indicator ``T'' procedure) on the day of the initiation of observation 
services. Since CY 2006, we have instructed hospitals to report a 
``direct admission'' referred for observation services using HCPCS code 
G0379 (Direct admission of patient for hospital observation care) (70 
FR 68688 through 68691).
    Observation care is a hospital outpatient service that is reported 
using HCPCS code G0378 (Hospital observation services, per hour). 
Hospitals report outpatient observation services, which are commonly 
provided in association with a hospital clinic visit, emergency 
department visit, or other major service, on hospital outpatient 
claims, just like other outpatient services. Physicians order 
observation care, defined as clinically appropriate services, including 
ongoing short-term treatment, assessment, and reassessment furnished in 
order for the physician to determine whether the beneficiary will 
require further treatment as an inpatient or whether the beneficiary 
may be safely discharged from the hospital.
    We have become aware that, because the word ``admission'' is 
generally used in reference to inpatient hospital care, our historical 
use of the phrase ``direct admission'' in the code descriptor for HCPCS 
code G0379 and the use of the phrase ``observation status'' in the 
Medicare Claims Processing Manual (Chapter 4, Section 290) and the 
Medicare Benefit Policy Manual

[[Page 60592]]

(Chapter 6, Section 20) may be contributing to confusion for hospitals 
and beneficiaries related to a beneficiary's status as an inpatient or 
an outpatient when he or she is receiving observation services. For 
Medicare payment purposes, there is no patient status termed 
``observation status.'' Hospitals may only bill for items and services 
furnished to inpatients, outpatients, or nonpatients. We believe that 
using terminology such as ``observation status'' or ``admission to 
observation'' may be confusing for physicians, hospitals, and 
beneficiaries. Therefore, in the CY 2010 OPPS/ASC proposed rule (74 FR 
35370 through 35371), we proposed to modify the code descriptor for 
HCPCS code G0379 to remove the reference to the word ``admission'' and 
to replace it with ``referral.'' The proposed long code descriptor for 
HCPCS code G0379 would be ``Direct referral for hospital observation 
care.'' We proposed this change to more accurately reflect that the 
physician in the community has referred the beneficiary to the hospital 
for observation services as a hospital outpatient. In addition to the 
proposed CY 2010 change to the code descriptor for HCPCS code G0379, we 
modified the Medicare Claims Processing Manual and the Medicare Benefit 
Policy Manual to remove most references related to ``admission'' for 
observation services or ``observation status.'' We refer readers to 
Transmittal 1760 dated June 23, 2009 (which rescinded and replaced 
Transmittal 1745, dated May 22, 2009) and Transmittal 107 dated May 22, 
2009 (both issued under Change Request 6492), for more information 
regarding the specific changes incorporated in the manuals.
    We did not propose to change the status indicator or payment 
methodology for HCPCS code G0379 for CY 2010. Instead, we proposed to 
continue the payment policy that was finalized for the CY 2009 OPPS (73 
FR 68554). In the CY 2010 OPPS/ASC proposed rule (74 FR 35370 through 
35371), we proposed to continue to assign HCPCS code G0379 status 
indicator ``Q3,'' indicating that it would be eligible for payment 
through APC 8002 (Level I Extended Assessment & Management Composite) 
when certain criteria are met or through APC 0604 (Level I Hospital 
Clinic Visits) when other criteria are met; otherwise, its payment 
would be packaged into payment for other separately payable services in 
the same encounter. The established criteria for payment of HCPCS code 
G0379 under either composite APC 8002, as part of the extended 
assessment and management composite service, or APC 0604, as a 
separately payable individual service that we would continue for CY 
2010 are: (1) both HCPCS codes G0378 and G0379 are reported with the 
same date of service; and (2) no service with a status indicator of 
``T'' or ``V'' or Critical Care (APC 0617) is provided on the same date 
of service as HCPCS code G0379. If either of the above criteria is not 
met, HCPCS code G0379 is assigned status indicator ``N'' and its 
payment is packaged into the payment for other separately payable 
services provided in the same encounter.
    We did not receive any public comments related to our CY 2010 
proposal to revise the code descriptor for HCPCS code G0379 to read 
``Direct referral for hospital observation care,'' or on our proposal 
to continue the CY 2009 status indicator assignment and payment 
methodology for HCPCS code G0379 for CY 2010. Therefore, we are 
finalizing these CY 2010 proposals, without modification.

XIII. OPPS Payment Status and Comment Indicators

A. OPPS Payment Status Indicator Definitions

    Payment status indicators (SIs) that we assign to HCPCS codes and 
APCs play an important role in determining payment for services under 
the OPPS. They indicate whether a service represented by a HCPCS code 
is payable under the OPPS or another payment system and also whether 
particular OPPS policies apply to the code. The final CY 2010 status 
indicator assignments for APCs and HCPCS codes are shown in Addendum A 
and Addendum B, respectively, to this final rule with comment period.
    As we proposed in the CY 2010 OPPS/ASC proposed rule (74 FR 35371), 
in this final rule with comment period, we are changing the definitions 
of status indicators ``H'' and ``K.'' We did not propose to make any 
changes to the other status indicators that were listed in Addendum D1 
of the CY 2009 OPPS/ASC final rule with comment period. The final 
status indicators are listed in the tables under sections XIII.A.1., 
2., 3., and 4. of this final rule with comment period.
1. Payment Status Indicators to Designate Services That Are Paid Under 
the OPPS

------------------------------------------------------------------------
      Indicator           Item/code/service        OPPS payment status
------------------------------------------------------------------------
G...................  Pass-Through Drugs and    Paid under OPPS;
                       Biologicals.              separate APC payment.
H...................  Pass-Through Device       Separate cost-based pass-
                       Categories.               through payment; not
                                                 subject to copayment.
K...................  Nonpass-Through Drugs     Paid under OPPS;
                       and Nonimplantable        separate APC payment.
                       Biologicals, including
                       Therapeutic
                       Radiopharmaceuticals.
N...................  Items and Services        Paid under OPPS; payment
                       Packaged into APC Rates.  is packaged into
                                                 payment for other
                                                 services. Therefore,
                                                 there is no separate
                                                 APC payment.
P...................  Partial Hospitalization.  Paid under OPPS; per
                                                 diem APC payment.
Q1..................  STVX-Packaged Codes.....  Paid under OPPS;
                                                 Addendum B displays APC
                                                 assignments when
                                                 services are separately
                                                 payable. (1) Packaged
                                                 APC payment if billed
                                                 on the same date of
                                                 service as a HCPCS code
                                                 assigned status
                                                 indicator ``S,'' ``T,''
                                                 ``V,'' or ``X.'' (2) In
                                                 all other
                                                 circumstances, payment
                                                 is made through a
                                                 separate APC payment.
Q2..................  T-Packaged Codes........  Paid under OPPS;
                                                 Addendum B displays APC
                                                 assignments when
                                                 services are separately
                                                 payable. (1) Packaged
                                                 APC payment if billed
                                                 on the same date of
                                                 service as a HCPCS code
                                                 assigned status
                                                 indicator ``T.'' (2) In
                                                 all other
                                                 circumstances, payment
                                                 is made through a
                                                 separate APC payment.

[[Page 60593]]

 
Q3..................  Codes that may be paid    Paid under OPPS;
                       through a composite APC.  Addendum B displays APC
                                                 assignments when
                                                 services are separately
                                                 payable. Addendum M
                                                 displays composite APC
                                                 assignments when codes
                                                 are paid through a
                                                 composite APC. (1)
                                                 Composite APC payment
                                                 based on OPPS composite-
                                                 specific payment
                                                 criteria. Payment is
                                                 packaged into a single
                                                 payment for specific
                                                 combinations of
                                                 service. (2) In all
                                                 other circumstances,
                                                 payment is made through
                                                 a separate APC payment
                                                 or packaged into
                                                 payment for other
                                                 services.
R...................  Blood and Blood Products  Paid under OPPS;
                                                 separate APC payment.
S...................  Significant Procedure,    Paid under OPPS;
                       Not Discounted When       separate APC payment.
                       Multiple.
T...................  Significant Procedure,    Paid under OPPS;
                       Multiple Reduction        separate APC payment.
                       Applies.
U...................  Brachytherapy Sources...  Paid under OPPS;
                                                 separate APC payment.
V...................  Clinic or Emergency       Paid under OPPS;
                       Department Visit.         separate APC payment.
X...................  Ancillary Services......  Paid under OPPS;
                                                 separate APC payment.
------------------------------------------------------------------------

    Section 142 of Public Law 110-275 (MIPPA) required CMS to pay for 
therapeutic radiopharmaceuticals for the period of July 1, 2008, 
through December 31, 2009, at hospitals' charges adjusted to the costs. 
The status indicator ``H'' was assigned to therapeutic 
radiopharmaceuticals to indicate that an item was paid at charges 
adjusted to cost during CY 2009. In the CY 2010 OPPS/ASC proposed rule 
(74 FR 35373), we proposed to pay prospectively and separately for 
therapeutic radiopharmaceuticals with average per day costs greater 
than the proposed CY 2010 drug packaging threshold of $65 under the 
OPPS. Therefore, we proposed to change the status indicator for HCPCS 
codes used to report separately payable therapeutic 
radiopharmaceuticals from ``H'' to ``K,'' which indicates that an item 
is separately paid under the OPPS at the APC payment rate established 
for the item. We refer readers to section V.B.5. of the proposed rule 
(74 FR 35333 through 36336) and this final rule with comment period for 
discussion of the proposed and final CY 2010 changes to our payment 
policy for therapeutic radiopharmaceuticals.
    We received many comments on our proposal to establish prospective 
payment rates for therapeutic radiopharmaceuticals. We respond to these 
comments and discuss our final policy in section V. B. 5. of this final 
rule with comment period. However, we did not receive any public 
comments related to our proposal to change the definitions of status 
indicators ``H'' and ``K,'' to reflect this change in policy. 
Therefore, we are changing the definitions of status indicators ``H'' 
and ``K'' as proposed, without modification, to reflect our final 
therapeutic radiopharmaceutical payment policy, and we are finalizing 
assignment of status indicator ``K'' to therapeutic 
radiopharmaceuticals with average per day costs greater than the final 
CY 2010 drug packaging threshold of $65 under the OPPS.
    As we discussed in detail in section V.A.4. of the CY 2010 OPPS/ASC 
proposed rule (74 FR 35311 through 35314), we proposed to consider 
implantable biologicals that are not on pass-through status as a 
biological before January 1, 2010, as devices for pass-through 
evaluation and payment beginning in CY 2010. Therefore, as devices, 
pass-through implantable biologicals would be assigned a status 
indicator of ``H,'' while nonpass-through implantable biologicals would 
be assigned a status indicator of ``N'' beginning in CY 2010. Those 
implantable biologicals that have been granted pass-through status 
under the drug and biological criteria prior to January 1, 2010, would 
continue to be assigned a status indicator of ``G'' until they are 
proposed for expiration from pass-through status during our annual 
rulemaking cycle. In the proposed rule (74 FR 35373), we proposed to 
assign status indicator ``K'' to nonimplantable biologicals and to 
adjust the definition of status indicator ``K'' accordingly.
    We received numerous comments on our proposal to treat implantable 
biologicals as devices and we respond to them in section V.A.4. of this 
final rule with comment period. We did not receive any public comments 
with regard to the proposed changes to status indicator ``K'' to 
reflect the implantable biological pass-through payment policy. 
Therefore, we are finalizing our proposal, without modification, to 
assign status indicator ``K'' to nonimplantable biologicals and to 
adjust the definition of status indicator ``K'' accordingly.
    The final CY 2010 status indicators are displayed in the table 
above, as well as in Addendum D1 to this final rule with comment 
period.
2. Payment Status Indicators to Designate Services That Are Paid Under 
a Payment System Other Than the OPPS
    We did not propose any changes to the status indicators listed 
below for the CY 2010 OPPS.

------------------------------------------------------------------------
      Indicator           Item/code/service        OPPS payment status
------------------------------------------------------------------------
A...................  Services furnished to a   Not paid under OPPS.
                       hospital outpatient       Paid by fiscal
                       that are paid under a     intermediaries/MACs
                       fee schedule or payment   under a fee schedule or
                       system other than OPPS,   payment system other
                       for example:              than OPPS.
                       Ambulance        ........................
                       Services.
                       Clinical         Not subject to
                       Diagnostic Laboratory     deductible or
                       Services.                 coinsurance.
                       Non-Implantable  ........................
                       Prosthetic and Orthotic
                       Devices.
                       EPO for ESRD     ........................
                       Patients.
                       Physical,        ........................
                       Occupational, and
                       Speech Therapy.
                       Routine          ........................
                       Dialysis Services for
                       ESRD Patients Provided
                       in a Certified Dialysis
                       Unit of a Hospital.
                       Diagnostic       ........................
                       Mammography.
                       Screening        Not subject to
                       Mammography.              deductible.
C...................  Inpatient Procedures....  Not paid under OPPS.
                                                 Admit patient. Bill as
                                                 inpatient.

[[Page 60594]]

 
F...................  Corneal Tissue            Not paid under OPPS.
                       Acquisition; Certain      Paid at reasonable
                       CRNA Services; and        cost.
                       Hepatitis B Vaccines.
L...................  Influenza Vaccine;        Not paid under OPPS.
                       Pneumococcal Pneumonia    Paid at reasonable
                       Vaccine.                  cost; not subject to
                                                 deductible or
                                                 coinsurance.
M...................  Items and Services Not    Not paid under OPPS.
                       Billable to the Fiscal
                       Intermediary/MAC.
Y...................  Non-Implantable Durable   Not paid under OPPS. All
                       Medical Equipment.        institutional providers
                                                 other than home health
                                                 agencies bill to DMERC.
------------------------------------------------------------------------

    We did not receive any public comments regarding the status 
indicators that designate services that are paid under a payment system 
other than the OPPS. Therefore, we are finalizing our CY 2010 proposal, 
without modification. The final CY 2010 status indicators are displayed 
in the table above, as well as in Addendum D1 to this final rule with 
comment period.
3. Payment Status Indicators To Designate Services That are Not 
Recognized Under the OPPS but That May Be Recognized by Other 
Institutional Providers
    We did not propose any changes to the status indicators listed 
below for the CY 2010 OPPS.

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

    We did not receive any public comments regarding the status 
indicators that designate services that are not recognized under the 
OPPS but that may be recognized for payment to other institutional 
providers. Therefore, we are finalizing our CY 2010 proposal, without 
modification. The final status indicators are displayed in the table 
above, as well as in Addendum D1 to this final rule with comment 
period.
4. Payment Status Indicators To Designate Services That Are Not Payable 
by Medicare on Outpatient Claims
    We did not propose any changes to the payment status indicators 
listed below for the CY 2010 OPPS.

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

    We did not receive any public comments related to payment status 
indicators that designate services that are not payable by Medicare on 
outpatient claims and, therefore, we are finalizing our CY 2010 
proposal, without modification. The final status indicators are 
displayed in the table above, as well as in Addendum D1 to this final 
rule with comment period.
    Addendum B, with a complete listing of HCPCS codes that includes 
their payment status indicators and APC assignments for CY 2010 is 
available electronically on the CMS Web site under supporting 
documentation for this final rule with comment period at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD/list.asp#TopOfPage.

B. Comment Indicator Definitions

    In the CY 2010 OPPS/ASC proposed rule (74 FR35374), we proposed to 
use the same two comment indicators that are in effect for the CY 2009 
OPPS.
     ``CH''--Active HCPCS codes in current and next calendar 
year; status indicator and/or APC assignment have changed or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
     ``NI''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year as compared to current calendar year, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code.
    We proposed to use the ``CH'' comment indicator in this CY 2010 
OPPS/ASC final rule with comment period to indicate HCPCS codes for 
which the status indicator or APC assignment, or both, would change in 
CY 2010 compared to their assignment as of December 31, 2009.
    We believe that using the ``CH'' indicator in this CY 2010 OPPS/ASC 
final rule with comment period will

[[Page 60595]]

help facilitate the public's review of the changes that we are 
finalizing for CY 2010. The use of the comment indicator ``CH'' in 
association with a composite APC indicates that the configuration of 
the composite APC is changed in this CY 2010 OPPS/ASC final rule with 
comment period.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35374 through 35375), 
we did not propose any changes to the definitions of the OPPS comment 
indicators for CY 2010 and we did not receive any public comments on 
the comment indicators. However, we want to clarify our policy 
regarding the use of comment indicator ``NI'' in this CY 2010 OPPS/ASC 
final rule with comment period to describe a new code. There are 
numerous instances in which the descriptor of an existing Category I 
CPT code is substantially revised for CY 2010 so that it describes a 
new service or procedure that could have been assigned a new code 
number by the CPT Editorial Panel and that new code number would then 
have been assigned the ``NI'' comment indicator. Because, for CY 2010, 
not all new services or procedures will be assigned a new CPT code 
number, but instead will be described by an existing CPT code number 
with a substantially revised code descriptor, we are assigning the 
comment indicator ``NI'' to these codes in order to allow for comment 
on these substantially revised codes. Therefore, for this final rule 
with comment period, we have expanded the definition of comment 
indicator ``NI'' to include an existing code with a substantial 
revision to its code descriptor in the next calendar year as compared 
to the current calendar year to indicate that the code's CY 2010 OPPS 
treatment is open to public comment on this final rule with comment 
period. Like all codes labeled with comment indicator ``NI,'' we will 
respond to public comments and finalize their OPPS treatment in the CY 
2011 OPPS/ASC final rule with comment period. In accordance with our 
usual practice, CPT and Level II HCPCS code numbers that are new for CY 
2010 are also labeled with comment indicator ``NI'' in Addendum B to 
this final rule with comment period.
    Only HCPCS codes with comment indicator ``NI'' in this CY 2010 
OPPS/ASC final rule with comment period are subject to comment. HCPCS 
codes that do not appear with comment indicator ``NI'' in this CY 2010 
OPPS/ASC final rule with comment period are not open to public comment, 
unless we specifically have requested additional comments elsewhere in 
this final rule with comment period. The CY 2010 treatment of HCPCS 
codes that appears in this CY 2010 OPPS/ASC final rule with comment 
period to which comment indicator ``NI'' is not appended was open to 
public comment during the comment period for the CY 2010 OPPS/ASC 
proposed rule, and we are responding to those comments in this final 
rule with comment period.
    We did not receive any public comments regarding comment 
indicators. Therefore, we are finalizing our proposal, without 
modification, and we are continuing to use the two comment indicators, 
``CH'' and ``NI,'' for CY 2010. Their definitions are listed in 
Addendum D2 to this final rule with comment period.

XIV. OPPS Policy and Payment Recommendations

A. MedPAC Recommendations

    MedPAC was established under section 1805 of the Act to advise the 
U.S. Congress on issues affecting the Medicare program. As required 
under the statute, MedPAC submits reports to Congress not later than 
March and June of each year that present its Medicare payment policy 
recommendations. The following section describes recent recommendations 
relevant to the OPPS that have been made by MedPAC.
    The March 2009 MedPAC ``Report to Congress: Medicare Payment 
Policy'' included the following recommendation relating specifically to 
the Medicare hospital OPPS:
    Recommendation 2A-1: The Congress should increase payment rates for 
the acute inpatient and outpatient prospective payment systems in 2010 
by the projected rate of increase in the hospital market basket index, 
concurrent with implementation of a quality incentive payment program.
    CMS Response: As proposed in the CY 2010 OPPS/ASC proposed rule (74 
FR 35375), in this final rule with comment period, we are increasing 
payment rates for the CY 2010 OPPS by the projected rate of increase in 
the hospital market basket through adjustment of the full CY 2010 
conversion factor. Simultaneously, for CY 2010, we are continuing to 
reduce the annual update factor by 2.0 percentage points for hospitals 
that are defined under section 1886(d)(1)(B) of the Act and that do not 
meet the hospital outpatient quality data reporting required by section 
1833(t)(17) of the Act. Specifically, we have calculated two conversion 
factors: A full conversion factor based on the full hospital market 
basket increase and a reduced conversion factor that reflects the 2.0 
percentage point reduction to the hospital market basket. We discuss 
our update of the conversion factor and our adoption and implementation 
of the reduced conversion factor that will apply to hospitals that fail 
their quality reporting requirements for the full CY 2010 OPPS update 
in section XVI of this final rule with comment period.
    The full March 2009 MedPAC report can be downloaded from MedPAC's 
Web site at: http://www.medpac.gov/documents/Mar09_EntireReport.pdf.
    We note that MedPAC also submitted comments on the CY 2010 OPPS/ASC 
proposed rule. The specific issues that were the subject of MedPAC's 
comments and the sections of this final rule with comment period where 
they are addressed are listed below:
     Pharmacy overhead costs and setting payments for 
separately paid drugs: Section V.B.3.
     Payment rates for brachytherapy sources and therapeutic 
radiopharmaceuticals: Sections VII. and V.B.5.
     Collection of quality data through clinical registries and 
electronic health records (EHRs): Section XVI.I.
     Collection of quality data from ASCs: Section XVI.H.
     Collection of cost data from ASCs: Section XV.G.
     Payment policy for healthcare-associated conditions: 
Section XVII.

B. APC Panel Recommendations

    Recommendations made by the APC Panel at its February 2009 and 
August 2009 meetings are discussed in the sections of this final rule 
with comment period that correspond to topics addressed by the APC 
Panel. The report and recommendations from the APC Panel's February 18-
19, 2009 and August 5-6, 2009 meetings are available on the CMS Web 
site at: http://www.cms.hhs.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.

C. OIG Recommendations

    The mission of the Office of the Inspector General (OIG), as 
mandated by Public Law 95-452, as amended, is to protect the integrity 
of the U.S. Department of Health and Human Services (HHS) programs as 
well as the health and welfare of beneficiaries served by those 
programs. This statutory mission is carried out through a nationwide 
network of audits, investigations, and inspections. In June 2007, the 
OIG released a report, entitled ``Impact of Not Retroactively Adjusting 
Outpatient Outlier Payments,'' that described the OIG's research into 
sources of errors in CMHC outlier payments. The OIG report included the

[[Page 60596]]

following two recommendations relating specifically to the hospital 
OPPS under which payment is made for outpatient services provided by 
CMHCs.
    Recommendation 1: The OIG recommended that CMS require adjustments 
of outpatient outlier payments at final cost report settlement, 
retroactive to the beginning of the cost report period.
    Recommendation 2: The OIG recommended that CMS require retroactive 
adjustments of outpatient outlier payments when an error caused by the 
fiscal intermediary or provider is identified after a cost report is 
settled.
    We addressed both of these recommendations in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68594). We noted in that final 
rule that the OIG's findings were based largely on information from the 
OPPS' early implementation period, between CY 2000 and CY 2003, and 
that we believed we had taken several steps since that time in order to 
improve the accuracy and frequency of the Medicare contractors' CCR 
calculations, including updating our instructions for calculating CCRs, 
increasing the frequency of CCR calculation, and conducting an annual 
review of CMHC CCRs.
    However, taking into account these OIG recommendations, we proposed 
and finalized a policy to provide for reconciliation of outlier 
payments under the OPPS at final cost report settlement as recommended 
by the OIG, beginning in CY 2009. We discuss our rationale for this 
policy in detail in section II.F.4. of the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68594 through 68599).
    Other than the June 2007 recommendations, there have been no other 
recent OIG recommendations pertaining to the OPPS.

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

A. Background

1. Legislative Authority for the ASC Payment System
    Section 1832(a)(2)(F)(i) of the Act provides that benefits under 
Medicare Part B include payment for facility services furnished in 
connection with surgical procedures specified by the Secretary that are 
performed in an ASC. To participate in the Medicare program as an ASC, 
a facility must meet the standards specified in section 
1832(a)(2)(F)(i) of the Act, which are set forth in 42 CFR part 416, 
subpart B and Subpart C of our regulations. The regulations at 42 CFR 
part 416, subpart B describe the general conditions and requirements 
for ASCs, and the regulations at subpart C explain the specific 
conditions for coverage for ASCs.
    Section 141(b) of the Social Security Act Amendments of 1994, 
Public Law 103-432, required establishment of a process for reviewing 
the appropriateness of the payment amount provided under section 
1833(i)(2)(A)(iii) of the Act for intraocular lenses (IOLs) that belong 
to a class of new technology intraocular lenses (NTIOLs). That process 
was the subject of a final rule entitled ``Adjustment in Payment 
Amounts for New Technology Intraocular Lenses Furnished by Ambulatory 
Surgical Centers,'' published on June 16, 1999, in the Federal Register 
(64 FR 32198).
    Section 626(b) of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 (MMA), Public Law 108-173, added subparagraph 
(D) to section 1833(i)(2) of the Act, which required the Secretary to 
implement a revised ASC payment system to be effective not later than 
January 1, 2008. Section 626(c) of the MMA amended section 1833(a)(1) 
of the Act by adding new subparagraph (G), which requires that, 
beginning with implementation of the revised ASC payment system, 
payment for surgical procedures furnished in ASCs shall be 80 percent 
of the lesser of the actual charge for the services or the amount 
determined by the Secretary under the revised payment system.
    Section 5103 of the Deficit Reduction Act of 2005 (DRA), Public Law 
109-171, amended section 1833(i)(2) of the Act by adding a new 
subparagraph (E) to place a limitation on payment amounts for surgical 
procedures furnished in ASCs on or after January 1, 2007, but before 
the effective date of the revised ASC payment system (that is, January 
1, 2008). Section 1833(i)(2)(E) of the Act provides that if the 
standard overhead amount under section 1833(i)(2)(A) of the Act for an 
ASC facility service for such surgical procedures, without application 
of any geographic adjustment, exceeds the Medicare payment amount under 
the hospital OPPS for the service for that year, without application of 
any geographic adjustment, the Secretary shall substitute the OPPS 
payment amount for the ASC standard overhead amount.
    Section 109(b) of the Medicare Improvements and Extension Act of 
2006 of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA), Public 
Law 109-432, amended section 1833(i) of the Act, in part, by 
redesignating clause (iv) as clause (v) and adding a new clause (iv) to 
paragraph (2)(D) and adding paragraph (7)(A), which provide the 
Secretary the authority to require ASCs to submit data on quality 
measures and to reduce the annual update by 2 percentage points for an 
ASC that fails to submit data as required by the Secretary on selected 
quality measures. Section 109(b) of the MIEA-TRHCA also amended section 
1833(i) of the Act by adding new paragraph (7)(B), which requires that, 
to the extent the Secretary establishes such an ASC quality reporting 
program, certain quality of care reporting requirements mandated for 
hospitals paid under the OPPS, under section 109(a) of the MIEA-TRHCA, 
be applied in a similar manner to ASCs unless otherwise specified by 
the Secretary.
    For a detailed discussion of the legislative history related to 
ASCs, we refer readers to the June 12, 1998 proposed rule (63 FR 32291 
through 32292).
2. Prior Rulemaking
    On August 2, 2007, we published in the Federal Register (72 FR 
42470) the final rule for the revised ASC payment system, effective 
January 1, 2008 (the ``August 2, 2007 final rule''). We revised our 
criteria for identifying surgical procedures that are eligible for 
Medicare payment when furnished in ASCs and adopted the method we would 
use to set payment rates for ASC covered surgical procedures and 
covered ancillary services furnished in association with those covered 
surgical procedures beginning in CY 2008. In that final rule, we also 
established a policy for updating on an annual calendar year basis the 
ASC conversion factor, the relative payment weights, the ASC payment 
rates, and the list of procedures for which Medicare would not make an 
ASC payment. We also established a policy for treating new and revised 
HCPCS and CPT codes under the ASC payment system. This policy is 
consistent with the OPPS to the extent possible (72 FR 42533).
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66827), we updated and finalized the CY 2008 ASC rates and lists of 
covered surgical procedures and covered ancillary services. We also 
made regulatory changes to 42 CFR parts 411, 414, and 416 related to 
our final policies to provide payments to physicians who perform 
noncovered ASC procedures in ASCs based on the facility practice 
expense (PE) relative value units (RVUs), to exclude covered ancillary 
radiology services and covered ancillary drugs and biologicals from the 
categories of designated health services (DHS) that are subject to the 
physician self-referral prohibition, and to reduce

[[Page 60597]]

ASC payments for surgical procedures when the ASC receives full or 
partial credit toward the cost of the implantable device. In the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68722), we updated 
and finalized the CY 2009 ASC rates and lists of covered surgical 
procedures and covered ancillary services.
3. Policies Governing Changes to the Lists of Codes and Payment Rates 
for ASC Covered Surgical Procedures and Covered Ancillary Services
    The August 2, 2007 final rule established our policies for 
determining which procedures are ASC covered surgical procedures and 
covered ancillary services. Under Sec. Sec.  416.2 and 416.166 of the 
regulations, subject to certain exclusions, covered surgical procedures 
are surgical procedures that are separately paid under the OPPS, that 
would not be expected to pose a significant risk to beneficiary safety 
when performed in an ASC, and that would not be expected to require 
active medical monitoring and care at midnight following the procedure 
(``overnight stay''). We adopted this standard for defining which 
surgical procedures are covered surgical procedures under the ASC 
payment system as an indicator of the complexity of the procedure and 
its appropriateness for Medicare payment in ASCs. We use this standard 
only for purposes of evaluating procedures to determine whether or not 
they are appropriate for Medicare beneficiaries in ASCs. We define 
surgical procedures as those described by Category I CPT codes in the 
surgical range from 10000 through 69999, as well as those Category III 
CPT codes and Level II HCPCS codes that crosswalk or are clinically 
similar to ASC covered surgical procedures (72 FR 42478). We note that 
we added over 800 surgical procedures to the list of covered surgical 
procedures for ASC payment in CY 2008, the first year of the revised 
ASC payment system, based on the criteria for payment that we adopted 
in the August 2, 2007 final rule as described above in this section. 
Patient safety and health outcomes continue to be important to us as 
more health care moves to the ambulatory care setting. Therefore, as we 
gain additional experience with the ASC payment system, we are 
interested in any information the public may have regarding the 
comparative patient outcomes of surgical care provided in ambulatory 
settings, including HOPDs, ASCs, and physicians' offices, particularly 
with regard to the Medicare population.
    In the August 2, 2007 final rule, we also established our policy to 
make separate ASC payments for the following ancillary items and 
services when they are provided integral to ASC covered surgical 
procedures: Brachytherapy sources; certain implantable items that have 
pass-through status under the OPPS; certain items and services that we 
designate as contractor-priced, including, but not limited to, 
procurement of corneal tissue; certain drugs and biologicals for which 
separate payment is allowed under the OPPS; and certain radiology 
services for which separate payment is allowed under the OPPS. These 
covered ancillary services are specified in Sec.  416.164(b) and, as 
stated previously, are eligible for separate ASC payment (72 FR 42495). 
Payment for ancillary items and services that are not paid separately 
under the ASC payment system is packaged into the ASC payment for the 
covered surgical procedure.
    The full CY 2009 lists of ASC covered surgical procedures and 
covered ancillary services are included in Addenda AA and BB, 
respectively, to the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68840 through 68933 and 69270 through 69308).
    We update the lists of, and payment rates for, covered surgical 
procedures and covered ancillary services, in conjunction with the 
annual proposed and final rulemaking process to update the OPPS and ASC 
payment systems (Sec.  416.173; 72 FR 42535). In addition, because we 
base ASC payment policies for covered surgical procedures, drugs, 
biologicals, and certain other covered ancillary services on the OPPS 
payment policies, we also provide quarterly updates for ASC services 
throughout the year (January, April, July, and October), just as we do 
for the OPPS. The updates are to implement newly created Level II HCPCS 
codes and Category III CPT codes for ASC payment and to update the 
payment rates for separately paid drugs and biologicals based on the 
most recently submitted ASP data. New Category I CPT codes, except 
vaccine codes, are released only once a year and, therefore, are 
implemented through the January quarterly update. New Category I CPT 
vaccine codes are released twice a year and thus are implemented 
through the January and July quarterly updates.
    In our annual updates to the ASC list of, and payment rates for, 
covered surgical procedures and covered ancillary services, we 
undertake a review of excluded surgical procedures (including all 
procedures newly proposed for removal from the OPPS inpatient list), 
new procedures, and procedures for which there is revised coding, to 
identify any that we believe meet the criteria for designation as ASC 
covered surgical procedures or covered ancillary services. Updating the 
lists of covered surgical procedures and covered ancillary services, as 
well as their payment rates, in association with the annual OPPS 
rulemaking cycle is particularly important because the OPPS relative 
payment weights and, in some cases, payment rates, are used as the 
basis for the payment of covered surgical procedures and covered 
ancillary services under the revised ASC payment system. This joint 
update process ensures that the ASC updates occur in a regular, 
predictable, and timely manner.
    Comment: Several commenters provided a number of general 
suggestions related to the ASC list of covered surgical procedures. 
They contended that CMS should not restrict which procedures are 
payable in ASCs any more than CMS restricts which procedures are 
payable in HOPDs. The commenters added that if the policy to exclude 
procedures from the list is maintained, CMS should at least provide the 
exclusionary criteria for all of the payable OPPS procedures that are 
excluded from the ASC list so that the public can provide meaningful 
comments about CMS' decisions. They suggested that CMS publish an 
addendum to the proposed and final OPPS/ASC rules that would identify 
which of the criteria at Sec.  416.166(c) triggered CMS' decision to 
exclude each procedure.
    Some commenters urged CMS to eliminate unlisted codes from the 
exclusionary criteria at Sec.  416.166(c), and other commenters 
requested that ASCs be allowed to use unlisted codes to bill for 
procedures that are from anatomic sites that could not possibly pose a 
potential risk to beneficiary safety. The commenters reported that 
unlisted codes enable surgeons to utilize innovative techniques or new 
technologies and are paid under the OPPS and by commercial insurers. 
They suggested that ASCs could provide documentation to the contractor 
that explains and justifies the procedure reported by an unlisted code; 
thus ensuring that Medicare does not make payment for a service that 
would otherwise be excluded from payment.
    Response: We appreciate the commenters' suggestions regarding the 
consistency of CMS' decisions about which procedures are excluded from 
the ASC list. However, as we explained in the August 2, 2007 final rule 
(72 FR 42479), we do not believe that all

[[Page 60598]]

procedures that are appropriate for performance in HOPDs are 
appropriate in ASCs. HOPDs are able to provide much higher acuity care 
than ASCs. ASCs have neither patient safety standards consistent with 
those in place for hospitals, nor are they required to have the trained 
staff and equipment needed to provide the breadth and intensity of care 
that hospitals are required to maintain. Therefore, we are not 
modifying our policy and will continue to exclude from the ASC list of 
covered surgical procedures certain procedures for which payment is 
made in HOPDs.
    We do not agree with the commenters' request that we provide 
specific reasons for our decisions to exclude each procedure from the 
ASC list other than that we believe a procedure is expected to pose a 
significant risk to beneficiary safety or to require an overnight stay. 
We believe that these reasons are sufficiently specific to enable the 
public to provide meaningful comments on our decisions to exclude 
procedures from the list of covered surgical procedures. Our decisions 
to exclude procedures from the ASC list are based on a number of the 
criteria listed at Sec.  416.166 of the regulations, and we believe 
that it would be unnecessary and overly burdensome to list each and 
every reason for those decisions.
    We also do not agree with the commenters' recommendation that we 
include certain unlisted codes on the list of covered procedures. Even 
though it may be highly unlikely that any procedures that would be 
expected to pose a risk to beneficiary safety or to require an 
overnight stay would be reported by an unlisted code from certain 
anatomic sites, we cannot know what surgical procedure is being 
reported by an unlisted code. Therefore, because we cannot evaluate any 
such procedure, we believe that we must exclude unlisted codes as a 
group from the list of covered surgical procedures.
    We do not believe it is reasonable, or within the scope of our 
contractors' work, to accept the commenters' suggestion that ASCs could 
provide documentation to our Medicare contractors, upon request, in 
order for the contractors to make a retrospective determination about 
whether or not a procedure that was billed using an unlisted code 
represented a significant risk to beneficiary safety or would be 
expected to require an overnight stay.
    Comment: One commenter noted that, although CMS specified in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68714) that 
patients may remain in ASCs up to 24 hours in order to allow adequate 
time for recovery following some surgical procedures, CMS did not 
specify the requirements for physician supervision during the recovery 
period. The commenter argued that CMS also failed to specify the time 
period during which the required post-anesthesia assessment is to be 
performed by requiring only that it be performed prior to discharge 
from the ASC. The commenter's concern was that patients in ASCs may 
have no physician supervision for extended periods, a policy in 
contrast to CMS' policy regarding the direct physician supervision 
required for hospital outpatient services. The commenter requested that 
CMS clarify why the same supervision requirements are not applied 
equally to hospitals and ASCs.
    Response: Historically, Medicare has covered surgical procedures 
performed in ASCs that have relatively short recovery periods and, 
therefore, we have believed that physicians were always immediately 
available to furnish assistance and direction in the ASC while ASC 
services were being furnished, including during the postoperative 
recovery period. However, as the commenter points out, not only have we 
recently revised the Conditions for Coverage to allow longer stays in 
ASCs, we have greatly expanded the list of covered surgical procedures 
under the revised ASC payment system, including covering some surgical 
procedures that may require a prolonged recovery period. Given these 
two revisions, both of which enable ASCs to provide more clinically 
complex surgical procedures, and taking into consideration patient 
safety and quality of care, we believe it could be appropriate to 
consider establishing requirements for physician or nonphysician 
practitioner supervision in ASCs, similar to the requirements for the 
direct supervision of hospital outpatient therapeutic services that we 
are finalizing for HOPDs in this CY 2010 OPPS/ASC final rule with 
comment period. We note that, for therapeutic services furnished 
incident to a physician's professional service in an office setting, 
there also is a requirement for direct physician supervision, meaning 
that the physician must be in the office suite and immediately 
available to furnish assistance and direction throughout the procedure 
(Sec.  410.26(a)(2) and (b)(5)). In addition, we note that payment for 
covered ancillary services may be made to ASCs, including payment for 
some of the diagnostic tests that would be subject to the physician 
supervision requirements for hospital outpatient diagnostic services if 
provided in the HOPD. The final CY 2010 physician supervision 
requirements for hospital outpatient diagnostic and therapeutic 
services are discussed in detail in section XII.E. of this final rule 
with comment period. For diagnostic services furnished in physicians' 
offices, IDTFs and other Part B settings, the requirements of Sec.  
410.32 of the regulations apply, including supervision of diagnostic 
services.
    We did not propose to adopt supervision requirements for 
therapeutic and diagnostic services furnished in ASCs similar to the 
requirements for HOPDs for CY 2010. However, given the overlap in 
surgical procedures that may be performed in HOPDs and ASCs and the 
increased breadth and complexity of ASC covered procedures, we are 
requesting comments on this final rule with comment period that 
address: (1) What types of practitioners currently provide the 
diagnostic and therapeutic services in ASCs, particularly during the 
extended postoperative recovery period; (2) what types of practitioners 
currently provide the supervision for the diagnostic and therapeutic 
services in ASCs, particularly during the extended postoperative 
period; (3) what is the expertise of supervising practitioners in ASCs 
and what is the expectation for their availability; (4) based on the 
final CY 2010 supervision requirements for hospital outpatient 
therapeutic services, under what circumstances would direct supervision 
of ASC services (including during the postoperative recovery period) 
not be occurring, according to the applicable definitions for direct 
supervision for HOPD services; and (5) what would be the rationale for 
not establishing supervision requirements for ASC services that 
parallel the supervision requirements in other settings, including 
HOPDs and physicians' offices.
    After consideration of the public comments we received, we are not 
accepting the commenters' recommendations to not exclude all procedures 
reported by unlisted codes or all procedures for which Medicare payment 
is made to HOPDs. We will continue to exclude all procedures that we 
determine would be expected to pose a significant risk to beneficiary 
safety or require an overnight stay. Further, we are not accepting the 
commenters' recommendation that CMS provide more specific reasons for 
its decisions regarding exclusion of specific procedures from the ASC 
list of covered surgical procedures. In this final rule with comment 
period, we are soliciting public comments on the issue of physician 
supervision of ASC services, especially as related to extended

[[Page 60599]]

postoperative stays. In summary, we are making no changes to the final 
criteria for determining which procedures are excluded from the ASC 
list of covered surgical procedures.

B. Treatment of New Codes

1. Treatment of New Category I and Category III CPT Codes and Level II 
HCPCS Codes
    We finalized a policy in the August 2, 2007 final rule to evaluate 
each year all new Category I and Category III CPT codes and Level II 
HCPCS codes that describe surgical procedures, and to make preliminary 
determinations in the annual OPPS/ASC final rule with comment period 
regarding whether or not they meet the criteria for payment in the ASC 
setting and, if so, whether they are office-based procedures (72 FR 
42533). In addition, we identify new codes as ASC covered ancillary 
services based upon the final payment policies of the revised ASC 
payment system. New HCPCS codes that are released in the summer through 
the fall of each year, to be effective January 1, are included in the 
final rule with comment period updating the ASC payment system for the 
following calendar year. These new codes are flagged with comment 
indicator ``NI'' in Addenda AA and BB to the OPPS/ASC final rule with 
comment period to indicate that we are assigning a payment indicator to 
the codes on an interim basis. The interim payment indicators assigned 
to the new codes under the revised ASC payment system are subject to 
public comment in that final rule with comment period. These interim 
determinations must be made in the OPPS/ASC final rule with comment 
period because, in general, the new HCPCS codes and their descriptors 
for the upcoming calendar year are not available at the time of 
development of the OPPS/ASC proposed rule. We will respond to those 
comments in the OPPS/ASC final rule with comment period for the 
following calendar year. In the CY 2010 OPPS/ASC proposed rule (74 FR 
35377), we proposed to continue this identification and recognition 
process for CY 2010.
    We did not receive any public comments regarding this proposal. For 
CY 2010, we are continuing our established policy for recognizing new 
Category I and Category III CPT codes and Level II HCPCS codes.
    In addition, we proposed to continue our policy of implementing 
through the ASC quarterly update process new mid-year CPT codes, 
generally Category III CPT codes, that the AMA releases in January to 
become effective the following July, and released in July to become 
effective the following January. We proposed to include in Addenda AA 
or BB, as appropriate, to this CY 2010 OPPS/ASC final rule with comment 
period the new Category III CPT codes released in January 2009 for 
implementation on July 1, 2009 (through the ASC quarterly update 
process), that we identify as ASC covered services. Similarly, we 
proposed to include in Addenda AA and BB to this final rule with 
comment period any new Category III CPT codes that the AMA released in 
July 2009 to be effective on January 1, 2010, that we identify as ASC 
covered services. However, only those new Category III CPT codes 
implemented effective January 1, 2010, are designated by comment 
indicator ``NI'' in the Addenda to this CY 2010 OPPS/ASC final rule 
with comment period to indicate that we have assigned them an interim 
payment indicator that is subject to public comment. The two Category 
III CPT codes implemented in July 2009 for ASC payment, which appeared 
in Table 38 of the CY 2010 OPPS/ASC proposed rule (74 FR 35378), were 
subject to comment through that proposed rule, and we proposed to 
finalize their payment indicators in this CY 2010 OPPS/ASC final rule 
with comment period.
    We proposed to assign payment indicator ``G2'' (Non office-based 
surgical procedure added in CY 2008 or later; payment based on OPPS 
relative payment weight) to both of these two new codes. Because new 
Category III CPT codes that become effective for July are not available 
to CMS in time for incorporation into the Addenda to the OPPS/ASC 
proposed rule, our policy is to include the codes, their proposed 
payment indicators, and proposed payment rates in the preamble to the 
proposed rule but not in the Addenda to the proposed rule. These codes 
and their final payment indicators and rates are included in the 
Addenda to this CY 2010 OPPS/ASC final rule with comment period.
    We did not receive any public comments regarding this proposal. For 
CY 2010, we are continuing our established policy for recognizing new 
mid-year CPT codes, and the new mid-year codes implemented in July 2009 
are displayed in Table 57 below, as well as in Addendum AA to this 
final rule with comment period.

  Table 57--New Category III CPT Codes Implemented in July 2009 for ASC
                                 Payment
------------------------------------------------------------------------
                                                          Final CY 2010
       CY 2010 HCPCS code             CY 2010 long         ASC payment
                                       descriptor           indicator
------------------------------------------------------------------------
0200T..........................  Percutaneous sacral                 G2
                                  augmentation
                                  (sacroplasty),
                                  unilateral
                                  injection(s),
                                  including the use of
                                  a balloon or
                                  mechanical device (if
                                  utilized), one or
                                  more needles.
0201T..........................  Percutaneous sacral                 G2
                                  augmentation
                                  (sacroplasty),
                                  bilateral injections,
                                  including the use of
                                  a balloon or
                                  mechanical device (if
                                  utilized), two or
                                  more needles.
------------------------------------------------------------------------

    For CY 2010, there are numerous instances in which the descriptor 
of an existing Category I CPT code is substantially revised so that it 
describes a new service or procedure. In each such instance, revision 
of the code's descriptor created a more specific description of some of 
the services or procedures that were reported by the existing CPT code 
and required that at least one other code be created to describe the 
other services that were described by the existing code descriptor. 
Thus, the services or procedures that were described by the existing 
CPT code descriptor will be described by two new codes for CY 2010: one 
newly created code number and descriptor and one code with the same 
code number for which the code descriptor has been substantially 
revised. For example, CPT code 21556 (Excision tumor, soft tissue of 
neck or thorax; deep, subfascial, intramuscular) was revised to create 
two new procedures, one of which will be reported by the same CPT code 
number with a different description. Thus, for CY 2010, two new 
procedures are reported by revised CPT code 21556 (Excision, tumor, 
soft tissue of neck or anterior thorax, subfascial (e.g. 
intramuscular); less than 5 cm) and new CPT code 21554 (Excision, 
tumor, soft tissue of neck or anterior thorax, subfascial (e.g. 
intramuscular); 5 cm or

[[Page 60600]]

greater). In the past, the more common practice has been to delete an 
existing code number which was used to report a general description of 
a procedure and assign a new code number to each new, more 
specifically-described procedure.
    Due to the practice of maintaining an existing CPT code number for 
a substantially revised descriptor, we have had to make changes to the 
payment indicators for existing code numbers that now describe 
different procedures. Specifically, thirty-one of the existing CPT code 
numbers that are used to represent new procedures in CY 2010 are 
currently used to report procedures that were on the ASC list of 
covered surgical procedures in CY 2007 and, therefore, in CY 2009 are 
assigned payment indicator ``A2'' (Surgical procedure on ASC list in CY 
2007; payment based on OPPS relative payment weight based on their old 
descriptions). All of the newly created procedures, including the 31 
procedures that will be reported by an existing CPT code number, were 
evaluated for appropriateness for inclusion on the ASC list of covered 
surgical procedures. For the procedures that we included on the ASC 
list, we also made an interim determination regarding whether the 
procedure should be designated as office-based for CY 2010. Therefore, 
in Addendum AA to this final rule with comment period, the same CPT 
code number that was assigned payment indicator ``A2'' for CY 2009 may 
be assigned payment indicators ``G2'' (Non office-based surgical 
procedure added in CY 2008 or later; payment based on OPPS relative 
payment weight); ``P2'' (Office-based surgical procedure added to ASC 
list in CY 2008 or later with MPFS nonfacility PE RVUs; payment based 
on OPPS relative payment weight); ``P3'' (Office-based surgical 
procedure added to ASC list in CY 2008 or later with MPFS nonfacility 
PE RVUs; payment based on MPFS nonfacility PE RVUs); or ``R2'' (Office-
based surgical procedure added to ASC list in CY 2008 or later without 
MPFS nonfacility PE RVUs; payment based on OPPS relative payment 
weight) due to the change in the procedure assigned to the numeric 
code.
    Any existing CPT codes with substantial revisions to their code 
descriptors for CY 2010 such that we consider them to describe new 
procedures and for which their ASC payment indicator may change are 
labeled with comment indicator ``NI'' in Addendum AA to this final rule 
with comment period, to indicate that we have assigned them an interim 
final payment status which is subject to public comment. Like all codes 
labeled with comment indicator ``NI,'' we will respond to public 
comments and finalize their ASC treatment in the CY 2011 OPPS/ASC final 
rule with comment period. In addition to assigning the ``NI'' indicator 
to these new CPT codes, in accordance with our standard practice, all 
new CPT and Level II HCPCS code numbers for CY 2010 are labeled with 
comment indicator ``NI'' in Addendum AA and BB to this final rule with 
comment period.
2. Treatment of New Level II HCPCS Codes Implemented in April and July 
2009
    New Level II HCPCS codes may describe covered surgical procedures 
or covered ancillary services. All new Level II HCPCS codes implemented 
in April and July 2009 for ASCs describe covered ancillary services. 
During the second quarter of CY 2009, we added to the list of covered 
ancillary services two new Level II HCPCS codes because they are drugs 
or biologicals for which separate payment was newly allowed under the 
OPPS in the same calendar quarter. The two Level II HCPCS codes added, 
effective April 1, 2009, were HCPCS code C9247 (Iobenguane, I-123, 
diagnostic, per study dose, up to 10 millicuries) and HCPCS code C9249 
(Injection, certolizumab pegol, 1 mg). Although HCPCS code C9247 was 
created for use beginning on January 1, 2009, initially it was not paid 
separately under the hospital OPPS, and therefore its payment also was 
packaged under the ASC payment system, until April 1, 2009.
    After publication of the CY 2010 OPPS/ASC proposed rule, the CMS 
HCPCS Workgroup created permanent HCPCS codes to replace these two 
HCPCS C-codes that were implemented in April 2009. We will be 
recognizing these HCPCS codes for payment of these drugs and 
biologicals under the CY 2010 ASC payment system, consistent with our 
general policy to use permanent HCPCS codes, if appropriate, for the 
reporting of drugs and biologicals. Table 58 shows the new permanent 
HCPCS codes that replace the HCPCS C-codes that will be deleted 
effective December 31, 2009.
    Specifically, HCPCS code C9247 was replaced with HCPCS code A9582 
(Iodine I-123 iobenguane, diagnostic, per study dose, up to 15 
millicuries) and HCPCS code C9249 was replaced with HCPCS code J0718 
(Injection, certolizumab pegol, 1 mg). The new HCPCS codes, effective 
January 1, 2010, describe the same drugs. Although 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,'' we believe that the reporting of one study dose would be 
the same in most cases under either the new permanent code or the 
predecessor code. 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 and, therefore, there would be no 
effect on the payment indicator.
    For the third quarter of CY 2009, we added 11 new Level II drug and 
biological HCPCS codes to the list of ASC covered ancillary services 
because they were newly eligible for separate payment under the OPPS 
effective July 1, 2009. These HCPCS codes are: C9250 (Human plasma 
fibrin sealant, vapor-heated, solvent-detergent (Artiss), 2 ml); C9251 
(Injection, C1 esterase inhibitor (human) 10 units); C9252 (Injection, 
plerixafor, 1 mg); C9253 (Injection, temozolomide, 1 mg); C9360 (Dermal 
substitute, native, non-denatured collagen, neonatal bovine origin 
(SurgiMend Collagen Matrix), per 0.5 square centimeters); C9361 
(Collagen matrix nerve wrap (NeuroMend Collagen Nerve Wrap), per 0.5 
centimeter length); C9362 (Porous purified collagen matrix bone void 
filler (Integra Mozaik Osteoconductive Scaffold Strip), per 0.5 cc); 
C9363 (Skin substitute, Integra Meshed Bilayer Wound Matrix, per square 
centimeter); C9364 (Porcine implant, Permacol, per square centimeter); 
Q2023 (Injection, factor viii (antihemophilic factor, recombinant) 
(Xyntha), per i.u.); and Q4116 (Skin substitute, Alloderm, per square 
centimeter).
    We assigned payment indicator ``K2'' (Drugs and biologicals paid 
separately when provided integral to a surgical procedure on ASC list; 
payment based on OPPS rate) to all of these new Level II HCPCS codes 
and added the codes to the list of covered ancillary services through 
either the April 2009 update (Transmittal 1698, Change Request 6424, 
dated March 13, 2009) or the July 2009 update (Transmittal 1740, Change 
Request 6496, dated May 22, 2009) to the CY 2009 ASC payment system. 
Initially, we assigned payment indicator ``K2'' to new HCPCS code Q4115 
(Skin substitute, Alloskin, per square centimeter) for July 2009, but 
then changed that assignment retroactive to July 2009 to signify that 
this HCPCS code was not a covered ancillary service because it was not 
recognized for payment under the OPPS during that

[[Page 60601]]

same time period. Subsequently, in the October 2009 quarterly update CR 
(Transmittal 1806, Change Request 6629, dated August 28, 2009), HCPCS 
code Q4115 was added as payable (assigned payment indicator ``K2''), 
effective October 1, 2009.
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35378), we solicited 
public comment on the proposed CY 2010 ASC payment indicators and 
payment rates for the drugs and biologicals, as listed in Tables 39 and 
40 of the proposed rule (74 FR 35378 through 35379). Those HCPCS codes 
became payable in ASCs beginning in April 2009 or July 2009, 
respectively, based on the ASC rates posted for the appropriate 
calendar quarter on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/.
    The HCPCS codes that were listed in Table 39 of the proposed rule 
became effective in April 2009 and were included in Addendum BB to the 
proposed rule. However, because HCPCS codes that become effective for 
July are not available to CMS in time for incorporation into the 
Addenda to the OPPS/ASC proposed rule, our policy is to include these 
HCPCS codes and their proposed payment indicators and payment rates in 
the preamble to the proposed rule but not in the Addenda to the 
proposed rule. These codes and their final payment indicators and rates 
are included in the appropriate Addendum to this CY 2010 OPPS/ASC final 
rule with comment period. Thus, the codes implemented by the July 2009 
ASC quarterly update and their proposed CY 2010 payment rates (based on 
July 2009 ASP data) that were displayed in Table 40 of the CY 2010 
OPPS/ASC proposed rule were not included in Addendum BB to the CY 2010 
OPPS/ASC proposed rule. We proposed to include the services reported 
using the new HCPCS codes that were displayed in Tables 39 and 40 as 
covered ancillary services and to incorporate all of them into Addendum 
BB to this CY 2010 OPPS/ASC final rule with comment period, consistent 
with our annual update policy.
    After publication of the CY 2010 OPPS/ASC proposed rule, the HCPCS 
Workgroup created permanent HCPCS J-codes for 4 of the 11 separately 
payable covered ancillary services that were displayed in Table 40 of 
the proposed rule. Consistent with our general policy of using 
permanent HCPCS codes, if appropriate, rather than HCPCS C-codes in 
order to streamline coding, effective for CY 2010, we are adopting the 
4 permanent HCPCS J-codes to replace the HCPCS C-codes. As displayed in 
Table 59 below, HCPCS code C9251 is replaced with J0598 (Injection, C1 
esterase inhibitor (human), 10 units); C9252 with J2562 (Injection, 
plerixafor, 1 mg); C9253 with J9328 (Injection, temozolomide, 1 mg); 
and Q2023 with J7185 (Injection, factor viii (antihemophilic factor, 
recombinant) (Xyntha), per i.u.). The HCPCS J-codes, effective January 
1, 2010, describe the same drugs and the same dosages as the HCPCS C-
codes that will be deleted December 31, 2009. Therefore, there is no 
effect on the services' payment indicators.
    We did not receive any public comments regarding our proposals. We 
are adopting as final the ASC payment indicators for the new Level II 
HCPCS codes implemented in April and July 2009 as shown in Tables 58 
and 59, respectively. Moreover, we are adopting as final the 
replacement HCPCS codes, specifically, A9582 and J0718, as shown in 
Table 58 and HCPCS codes J0598, J2562, J7185, and J9328 as displayed in 
Table 59 below. All of the new HCPCS codes and payment indicators also 
are included in Addendum BB to this final rule with comment period.

           Table 58--New Level II HCPCS Codes for Covered Ancillary Services Implemented in April 2009
----------------------------------------------------------------------------------------------------------------
                                                                                                  Final CY 2010
             CY 2010 HCPCS Code               CY 2009 HCPCS        CY 2010 Long descriptor           payment
                                                  Code                                              indicator
----------------------------------------------------------------------------------------------------------------
A9582......................................           C9247  Iodine I-123 iobenguane,                        K2
                                                              diagnostic, per study dose, up to
                                                              15 millicuries.
J0718......................................           C9249  Injection, certolizumab pegol, 1                K2
                                                              mg.
----------------------------------------------------------------------------------------------------------------


           Table 59--New Level II HCPCS Codes for Covered Ancillary Services Implemented in July 2009
----------------------------------------------------------------------------------------------------------------
                                                                                                  Final CY 2010
             CY 2010 HCPCS Code               CY 2009 HCPCS        CY 2010 Long descriptor         ASC payment
                                                  Code                                              indicator
----------------------------------------------------------------------------------------------------------------
C9250......................................           C9250  Human plasma fibrin sealant, vapor-             K2
                                                              heated, solvent-detergent
                                                              (Artiss), 2 ml.
J0598......................................           C9251  Injection, C1 esterase inhibitor                K2
                                                              (human), 10 units.
J2562......................................           C9252  Injection, plerixafor, 1 mg.......              K2
J9328......................................           C9253  Injection, temozolomide, 1 mg.....              K2
C9360......................................           C9360  Dermal substitute, native, non-                 K2
                                                              denatured collagen, neonatal
                                                              bovine origin (SurgiMend Collagen
                                                              Matrix), per 0.5 square
                                                              centimeters.
C9361......................................           C9361  Collagen matrix nerve wrap                      K2
                                                              (NeuroMend Collagen Nerve Wrap),
                                                              per 0.5 centimeter length.
C9362......................................           C9362  Porous purified collagen matrix                 K2
                                                              bone void filler (Integra Mozaik
                                                              Osteoconductive Scaffold Strip),
                                                              per 0.5 cc.
C9363......................................           C9363  Skin substitute, Integra Meshed                 K2
                                                              Bilayer Wound Matrix, per square
                                                              centimeter.
C9364......................................           C9364  Porcine implant, Permacol, per                  K2
                                                              square centimeter.
J7185......................................           Q2023  Injection, factor viii                          K2
                                                              (antihemophilic factor,
                                                              recombinant) (Xyntha), per i.u..
Q4116......................................           Q4116  Skin substitute, Alloderm, per                  K2
                                                              square centimeter.
----------------------------------------------------------------------------------------------------------------


[[Page 60602]]

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

1. Covered Surgical Procedures
a. Additions to the List of ASC Covered Surgical Procedures
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35379), we proposed to 
update the ASC list of covered surgical procedures by adding 28 
procedures to the list. Twenty-six of these procedures were among those 
excluded from the ASC list for CY 2009 because we believed they did not 
meet the definition of a covered surgical procedure based on our 
expectation that they would pose a significant safety risk to Medicare 
beneficiaries or would require an overnight stay if performed in ASCs. 
The other two procedures, specifically those described by CPT code 
0200T (Percutaneous sacral augmentation (sacroplasty), unilateral 
injection(s), including the use of a balloon or mechanical device (if 
utilized), one or more needles) and CPT code 0201T (Percutaneous sacral 
augmentation (sacroplasty), bilateral injections, including the use of 
a balloon or mechanical device (if utilized), two or more needles), are 
new Category III CPT codes that became effective July 1, 2009, and were 
implemented in the July 2009 ASC update (Table 57 above). As a result 
of our clinical evaluation of the procedures described by the new 
Category III codes, we determined that these two new procedures may be 
appropriately provided to Medicare beneficiaries in ASCs.
    In response to comments on the CY 2009 proposed rule, we stated in 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68724) that, 
as we developed the CY 2010 proposed rule, we would perform a 
comprehensive review of the APCs in order to identify potentially 
inconsistent ASC treatment of procedures assigned to a single APC under 
the OPPS. Thus, we examined surgical procedures that are excluded from 
the current ASC list of covered surgical procedures and the APCs to 
which they are assigned under the OPPS. We identified for review 223 
excluded surgical procedures that were assigned to the same APCs in CY 
2009 as one or more ASC covered surgical procedures. Based upon our 
clinical review of those procedures, we determined that 26 surgical 
procedures may be appropriate for performance in ASCs and proposed to 
add them to the CY 2010 ASC list of covered surgical procedures and to 
assign payment indicator ``G2'' (Non office-based surgical procedure 
added in CY 2008 or later; payment based on OPPS relative payment 
weight) to each of them. We found that the remaining 197 excluded 
procedures would pose significant safety risks to beneficiaries or 
would be expected to require an overnight stay if provided in ASCs. 
Therefore, we did not propose to add those 197 procedures to the CY 
2010 ASC list of covered surgical procedures.
    The 28 procedures that we proposed to add to the ASC list of 
covered surgical procedures, including their HCPCS code short 
descriptors and proposed CY 2010 payment indicators, were displayed in 
Table 41 in the CY 2010 OPPS/ASC proposed rule (74 FR 35379 through 
35380).
    Among the procedures we identified as meeting the criteria for 
designation as a covered surgical procedure was CPT code 35475 
(Transluminal balloon angioplasty, percutaneous; brachiocephalic trunk 
or branches, each vessel). The volume and utilization data for this 
procedure indicate that it is most frequently performed in outpatient 
settings. After review, our CMS medical advisors found that it would be 
appropriate to propose designation of CPT code 35475 as an ASC covered 
surgical procedure for CY 2010. Related to our proposal to add CPT code 
35475 to the list of covered surgical procedures is our concurrent 
proposal to delete two Level II HCPCS codes we created effective for CY 
2007, HCPCS codes G0392 (Transluminal balloon angioplasty, 
percutaneous; for maintenance of hemodialysis access, arteriovenous 
fistula or graft; arterial) and G0393 (Transluminal balloon 
angioplasty, percutaneous; for maintenance of hemodialysis access, 
arteriovenous fistula or graft; venous) to enable ASCs to receive 
Medicare payment for providing the angioplasty services required to 
maintain the arteriovenous fistulae that are important to individuals 
who undergo routine dialysis. We proposed to delete HCPCS codes G0392 
and G0393 concurrently with the designation of CPT code 35475 as a 
covered surgical procedure because there no longer would be a need for 
the two Level II HCPCS G-codes. ASCs would be able to use CPT 35475 and 
CPT code 35476 (Transluminal balloon angioplasty, percutaneous; 
venous), which was included on the list of ASC covered surgical 
procedures beginning in CY 2008, to report the same procedures 
currently reported by HCPCS codes G0392 and G0393.
    Thus, we proposed to add the 28 surgical procedures listed in Table 
41 of the OPPS/ASC proposed rule to the list of covered ASC surgical 
procedures and to delete the HCPCS codes displayed in Table 42 of the 
proposed rule (74 FR 35380).
    Comment: One commenter requested that CMS not finalize several of 
its proposed additions to the ASC list for CY 2010. The commenter 
believed that the procedure described by CPT code 26037 (Decompressive 
fasciotomy, hand) is inappropriate for the ASC setting. The commenter 
stated that the typical patient that requires this procedure has had a 
severe crush injury to the hand and/or an infection and would require 
at least 23 hours of medical monitoring following the surgery. The 
commenter also objected to adding procedures described by CPT codes 
42225 (Palatoplasty for cleft palate; attachment pharyngeal flap) and 
42227 (Lengthening of palate, with island flap) because those 
procedures are overwhelmingly performed on infants and very young 
children who would require at least an overnight stay to observe for 
postoperative swelling, airway compromise, and bleeding. The commenter 
believed that CMS' inclusion of these procedures on the ASC list would 
be inappropriate because Medicare claims data are inadequate for CMS' 
use in making its determination and that inclusion of the procedures on 
the Medicare ASC list leads to interpretation by commercial insurers 
that the ASC setting is appropriate for all patient populations and 
would result in very young patients not being able to receive care in 
more appropriate settings.
    The commenter also reiterated a previous request (73 FR 68729) that 
CMS remove other cleft lip and palate reconstruction procedures from 
the ASC list of covered surgical procedures. Those procedures and their 
CPT codes are: 21215 (Graft, bone; mandible (includes obtaining 
graft)); 40700 (Plastic repair of cleft lip/nasal deformity; primary, 
partial or complete, unilateral); 40701 (Plastic repair of cleft lip/
nasal deformity, primary bilateral, one stage procedure); 42200 
(Palatoplasty for cleft palate, soft and/or hard palate only); 42205 
(Palatoplasty for cleft palate, with closure of alveolar ridge; soft 
tissue only); 42210 (Palatoplasty for cleft palate, with closure of 
alveolar ridge; with bone graft to alveolar ridge includes obtaining 
graft)), 42215 (Palatoplasty for cleft palate; major revision); and 
42220 (Palatoplasty for cleft palate; secondary lengthening procedure). 
The commenter stated that all of these procedures require general 
anesthesia and close postoperative monitoring and are often performed 
in the inpatient setting.

[[Page 60603]]

    Response: Our medical advisors reviewed the three procedures 
described by CPT codes 26037, 42225, and 42227 that we proposed to add 
to the ASC list for CY 2010. As a result of that review, we continue to 
believe that all three of the procedures may be appropriately provided 
to a Medicare beneficiary in an ASC. We do not see a basis for removing 
the eight procedures from the ASC list as requested by the commenter. 
All of these procedures were on the list of covered surgical procedures 
even before CY 2007 and, to our knowledge, have been safely performed 
in ASCs for many years. We continue to believe that these 11 procedures 
would not pose a significant safety risk to Medicare beneficiaries and 
would not require an overnight stay if performed in ASCs.
    As established at Sec.  416.166(b), decisions regarding whether a 
surgical procedure should be excluded from the Medicare ASC list of 
covered surgical procedures are based on assessments of the needs of 
Medicare beneficiaries and not all patient populations. We include on 
the ASC list all procedures we believe are appropriate for some 
Medicare beneficiaries in order to provide physicians and patients with 
the greatest possible choice for sites-of-service. We expect that 
physicians will consider for each individual patient which site-of-
service is most appropriate. We understand that the procedures on the 
ASC list are sometimes more appropriately performed on an inpatient 
basis due to the individual's age or other clinical considerations.
    Comment: Several commenters supported the proposal to add 28 
procedures to the list of covered surgical procedures and requested 
that CMS add 24 additional surgical procedures. A few commenters on the 
CY 2010 OPPS/ASC proposed rule and on the CY 2009 OPPS/ASC final rule 
with comment period requested that a total of 18 specific unlisted 
codes be added to the ASC list. Some commenters provided specific 
reasons for their requests for addition of particular procedures, but 
for most of the requested additions, no specific information was 
submitted.
    The commenters who requested that the procedure reported by CPT 
code 50593 (Ablation, renal tumor(s) unilateral, percutaneous, 
cryotherapy) be added to the ASC list stated that the procedure is 
similar to the procedure reported by CPT code 50592 (Ablation, 1 or 
more renal tumor(s), percutaneous, unilateral, radiofrequency), which 
is already on the ASC list, and that CPT code 50593 is compatible with 
CMS' safety criteria. The commenters also reported that a significant 
number of the laminectomy procedures listed in Table 60 below already 
are being performed in ASCs for commercially insured patients. They 
stated that the most common of these laminectomy procedures are 
performed on the cervical and lumbar regions of the spine, take only 60 
to 90 minutes to perform, and typically require only about 4 hours of 
recovery time. They also stated that patients are carefully screened 
before the ASC is selected as the appropriate site for their surgical 
procedures, a practice they would expect to see applied to the Medicare 
population as well.
    The commenters who requested the addition of the procedure reported 
by CPT code 52649 (Laser enucleation of the prostate with morcellation, 
including control of postoperative bleeding, complete (vasectomy, 
meatotomy, cystourethroscopy, urethral calibration and/or dilation, 
internal urethrotomy and transurethral resection of prostate are 
included if performed)) requested that the procedure be added to the 
ASC list because it does not require an overnight stay and it is 
similar to benign prostatic hypertrophy treatment procedures, which are 
already included on the ASC list. The commenters who requested addition 
of the procedure described by CPT code 57310 (Closure of urethrovaginal 
fistula) reported that it should be added to the list because a 
substantially similar and more complex procedure, described by CPT code 
57320 (Closure of vesicovaginal fistula; vaginal approach), is already 
on the ASC list.
    The commenters who requested the addition of the unlisted procedure 
described by CPT code 19499 (Unlisted procedure, breast) stated that it 
should be added to the list because it is used for setting breast 
ductoscopy prior to some surgeries in lieu of a ductogram and because 
it may be used to report services described by CPT codes 0046T 
(Catheter lavage of a mammary duct(s) for collection of cytology 
specimen(s), in high risk individuals (GAIL risk scoring or prior 
personal history of breast cancer), each breast; single duct) and 0047T 
(Catheter lavage of a mammary duct(s) for collection of cytology 
specimen(s), in high risk individuals (GAIL risk scoring or prior 
personal history of breast cancer), each breast; each additional duct) 
that were payable in ASCs in CY 2008 but were deleted effective for CY 
2009. Some commenters requested the addition of unlisted CPT codes 
55899 (Unlisted procedure, male genital system); 58999 (Unlisted 
procedure, female genital system (nonobstetrical)); and 64999 (Unlisted 
procedure, nervous system) because these codes may be used to report 
the procedures that were described by CPT codes 0027T (Endoscopic lysis 
of epidural adhesions with direct visualization using mechanical means 
(eg, spinal endoscopic catheter system) or solution injection (eg, 
normal saline) including radiologic localization and epidurography); 
0031T (Speculoscopy); 0032T (Speculoscopy; with directed sampling); and 
53853 (Transurethral destruction of prostate tissue; by water-induced 
thermotherapy) that were payable in ASCs in CY 2008 but were deleted 
effective for CY 2009.
    Finally, the commenter who requested the addition of intravascular 
stent placement procedures, CPT codes 37205 (Transcatheter placement of 
an intravascular stent(s)(except coronary, carotid, and vertebral 
vessel), percutaneous; initial vessel) and 37206 (Transcatheter 
placement of an intravascular stent(s) (except coronary, carotid, and 
vertebral vessel), percutaneous; each additional vessel), claimed that 
the addition of these procedures to the ASC list of covered surgical 
procedures would improve access to care for patients with vascular 
access dysfunction, decrease costs to Medicare, and result in a higher 
quality of care for these patients. The commenters requested that if 
CMS is reluctant to add these procedures to the ASC list because CPT 
codes 37205 and 37206 are not restricted to the treatment of 
hemodialysis vascular access sites, CMS could allow reporting of the 
codes for ASC payment with a new and distinct modifier that would apply 
to hemodialysis vascular access procedures.
    All of the procedures requested by commenters for addition to the 
ASC list of covered surgical procedures are displayed in Tables 60 and 
61 below.

 Table 60--Surgical Procedures Requested for Addition to the CY 2010 ASC
                   List of Covered Surgical Procedures
------------------------------------------------------------------------
         CY 2010 CPT code                 CY 2010 short descriptor
------------------------------------------------------------------------
27485.............................  Surgery to stop leg growth.
29867.............................  Allgrft implnt, knee w/scope.
29868.............................  Meniscal trnspl, knee w/scope.
35470.............................  Repair arterial blockage.
35474.............................  Repair arterial blockage.
35493.............................  Atherectomy, percutaneous.
35495.............................  Atherectomy, percutaneous.
37205.............................  Transcath iv stent, percut.
37206.............................  Transcath iv stent/perc addl.
50593.............................  Perc cryo ablate renal tum.
52649.............................  Prostate laser enucleation.
57310.............................  Repair urethrovaginal lesion.
60210.............................  Partial thyroid excision.
60220.............................  Partial removal of thyroid.

[[Page 60604]]

 
63001.............................  Removal spinal lamina.
63005.............................  Removal spinal lamina.
63020.............................  Neck spine disk surgery.
63030.............................  Low back disk surgery.
63035.............................  Spinal disk surgery add-on.
63040.............................  Laminotomy, single cervical.
63042.............................  Laminotomy, single lumbar.
63045.............................  Removal of spinal lamina.
63047.............................  Removal of spinal lamina.
63048.............................  Remove spinal lamina add-on.
------------------------------------------------------------------------


Table 61--Specific CPT Unlisted Codes Requested for Addition to ASC List
                     of Covered Surgical Procedures
------------------------------------------------------------------------
         CY 2010 CPT code                 CY 2010 short descriptor
------------------------------------------------------------------------
17999.............................  Skin tissue procedure.
19499.............................  Breast surgery procedure.
23929.............................  Shoulder surgery procedure.
27599.............................  Leg surgery procedure.
27899.............................  Leg/ankle surgery procedure.
28899.............................  Foot/toes surgery procedure.
29999.............................  Arthroscopy of joint.
31299.............................  Sinus surgery procedure.
55899.............................  Genital surgery procedure.
58999.............................  Genital surgery procedure.
64999.............................  Nervous system surgery.
66999.............................  Eye surgery procedure.
67299.............................  Eye surgery procedure.
67399.............................  Eye muscle surgery procedure.
67999.............................  Revision of eyelid.
68399.............................  Eyelid lining surgery.
68899.............................  Tear duct system surgery.
92499.............................  Eye service or procedure.
------------------------------------------------------------------------

    Response: We reviewed all of the surgical procedures that 
commenters requested be added to the ASC list of covered surgical 
procedures. We did not review any of the procedures that may be 
reported by the CPT unlisted codes listed in Table 61 because those 
codes are not eligible for addition to the ASC list, consistent with 
our final policy which is discussed in detail in the August 2, 2007 
final rule (72 FR 42484 through 42486). We do not agree that any of the 
procedures recommended by the commenters are appropriate for provision 
to Medicare beneficiaries in ASCs. Although the commenters asserted 
that some of the procedures they were requesting for addition to the 
list are less complex than procedures already on the list and that all 
of the requested procedures are as safe as procedures on the list, our 
review did not support those assertions.
    We exclude from ASC payment any procedure for which standard 
medical practice dictates that the beneficiary who undergoes the 
procedure would typically be expected to require active medical 
monitoring and care at midnight following the procedure (overnight 
stay) as well as all surgical procedures that our medical advisors 
determine may be expected to pose a significant safety risk to Medicare 
beneficiaries. The criteria used under the revised ASC payment system 
to identify procedures that would be expected to pose a significant 
safety risk when performed in an ASC include, but are not limited to, 
those procedures that: generally result in extensive blood loss; 
require major or prolonged invasion of body cavities; directly involve 
major blood vessels; are emergent or life-threatening in nature; or 
commonly require systemic thrombolytic therapy (see Sec.  416.166).
    In our review of the procedures listed in Table 60, we found that 
all of the procedures either may be expected to pose a threat to 
beneficiary safety or require active medical monitoring at midnight 
following the procedure. Specifically, we found that prevailing medical 
practice called for inpatient hospital stays for beneficiaries 
undergoing many of the procedures and that some of the procedures 
directly involve major blood vessels and/or may result in extensive 
blood loss.
    After consideration of the public comments we received, we are not 
adding any of the procedures requested by the commenters to the list of 
ASC covered surgical procedures. We also are not removing any of the 
procedures from the list as requested by commenters. We are finalizing, 
without modification, our proposal to add 28 procedures to the CY 2010 
ASC list and to delete two Level II HCPCS codes. The procedures, their 
short descriptors, and payment indicators are displayed in Tables 62 
and 63 below.

        Table 62--New ASC Covered Surgical Procedures for CY 2010
------------------------------------------------------------------------
                                                              Final CY
                                                              2010 ASC
       CY 2010 CPT Code          CY 2010 short descriptor      payment
                                                              indicator
------------------------------------------------------------------------
26037........................  Decompress fingers/hand....           G2
27475........................  Surgery to stop leg growth.           G2
27479........................  Surgery to stop leg growth.           G2
27720........................  Repair of tibia............           G2
35460........................  Repair venous blockage.....           G2
35475........................  Repair arterial blockage...           G2
41512........................  Tongue suspension..........           G2
42225........................  Reconstruct cleft palate...           G2
42227........................  Lengthening of palate......           G2
43130........................  Removal of esophagus pouch.           G2
43752........................  Nasal/orogastric w/stent...           G2
45541........................  Correct rectal prolapsed...           G2
49435........................  Insert subq exten to ip               G2
                                cath.
49436........................  Embedded ip cath exit-site.           G2
49442........................  Place cecostomy tube perc..           G2
50080........................  Removal of kidney stone....           G2
50081........................  Removal of kidney stone....           G2
50727........................  Revise ureter..............           G2
51535........................  Repair of ureter lesion....           G2
57295........................  Revise vag graft via vagina           G2
60210........................  Partial thyroid excision...           G2
60212........................  Partial thyroid excision...           G2
60220........................  Partial removal of thyroid.           G2
60225........................  Partial removal of thyroid.           G2
61770........................  Incise skull for treatment.           G2
0193T........................  Rf bladder neck                       G2
                                microremodel.
0200T *......................  Perq sacral augmt unilat              G2
                                inj.
0201T *......................  Perq sacral augmt bilat inj           G2
------------------------------------------------------------------------
* Indicates codes are new, effective July 2009.


             Table 63--HCPCS Codes Deleted Effective CY 2010
------------------------------------------------------------------------
                                                             CY 2009 ASC
      CY 2009 HCPCS Code         CY 2009 short descriptor      payment
                                                              indicator
------------------------------------------------------------------------
G0392........................  AV fistula or graft                   A2
                                arterial.

[[Page 60605]]

 
G0393........................  AV fistula or graft venous.           A2
------------------------------------------------------------------------

b. Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC list of covered surgical procedures in CY 2008 or later years that 
we determine are performed predominantly (more than 50 percent of the 
time) in physicians' offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC list of covered surgical procedures beginning in CY 
2008 that we determined were office-based were identified in Addendum 
AA to that rule by payment indicator ``P2'' (Office-based surgical 
procedure added to ASC list in CY 2008 or later with MPFS nonfacility 
PE RVUs; payment based on OPPS relative payment weight); ``P3'' 
(Office-based surgical procedure added to ASC list in CY 2008 or later 
with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE 
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in 
CY 2008 or later without MPFS nonfacility PE RVUs; payment based on 
OPPS relative payment weight), depending on whether we estimated it 
would be paid according to the standard ASC payment methodology based 
on its OPPS relative payment weight or at the MPFS nonfacility PE RVU 
amount.
    Consistent with our final policy to annually review and update the 
list of surgical procedures eligible for payment in ASCs, each year we 
identify surgical procedures as either temporarily or permanently 
office-based after taking into account updated volume and utilization 
data.
(2) Changes to Covered Surgical Procedures Designated as Office-Based 
for CY 2010
    In developing the CY 2010 OPPS/ASC proposed rule (74 FR 35381), we 
followed our policy to annually review and update the surgical 
procedures for which ASC payment is made and to identify new procedures 
that may be appropriate for ASC payment, including their potential 
designation as office-based. We reviewed CY 2008 volume and utilization 
data and the clinical characteristics for all surgical procedures that 
are assigned payment indicator ``G2'' in CY 2009, as well as for those 
procedures assigned one of the temporary office-based payment 
indicators, specifically ``P2*,'' ``P3*,'' or ``R2*'' in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68730 through 68733). As 
a result of that review, we proposed to newly designate 6 procedures as 
office-based for CY 2010 (74 FR 35381). We also proposed to make 
permanent the office-based designations of 4 surgical procedures that 
have temporary office-based designations in CY 2009.
    The 6 procedures we proposed to permanently designate as office-
based are: CPT code 15852 (Dressing change (for other than burns) under 
anesthesia (other than local)); CPT code 19105 (Ablation, cryosurgical, 
of fibroadenoma, including ultrasound guidance, each fibroadenoma); CPT 
code 20555 (Placement of needles or catheters into muscle and/or soft 
tissue for subsequent interstitial radioelement application (at the 
time of or subsequent to the procedure)); CPT code 36420 (Venipuncture, 
cutdown; younger than age 1 year); CPT code 50386 (Removal (via snare/
capture) of internally dwelling ureteral stent via transurethral 
approach, without use of cystoscopy, including radiological supervision 
and interpretation); and CPT code 57022 (Incision and drainage of 
vaginal hematoma; obstetrical/postpartum). These procedures and their 
HCPCS code short descriptors and proposed CY 2010 payment indicators 
were displayed in Table 43 of the CY 2010 OPPS/ASC proposed rule (74 FR 
35381).
    Comment: Many commenters expressed their continued disagreement 
with the policy to make payment at the lower of the ASC rate or MPFS 
nonfacility PE RVU payment amount for procedures we identify as office-
based and requested that CMS not finalize any of the proposed office-
based designations. They believed that, due to the payment limits 
required by CMS' payment policy for providing these procedures in ASCs, 
beneficiaries who require the level of care provided in ASCs instead 
have to receive treatment in the more costly HOPD setting and that the 
policy makes the ASC payment rates subject to the fluctuations of the 
MPFS nonfacility PE RVUs and other problems of the MPFS.
    The commenters recommended that CMS revise its policies in at least 
three ways. First, they recommended that CMS establish a minimum volume 
threshold before designating a procedure office-based. They asserted 
that it is unnecessary and inappropriate to designate as office-based 
procedures with extremely low volume because the utilization data for 
those procedures are variable and, thus, not reliable. Second, they 
recommended that CMS raise the utilization threshold above 50 percent 
for designating a procedure office-based and use multiple years of data 
for making the designation because of the variability in the 
utilization data across years. Third, the commenters recommended that 
CMS recognize the OPPS median costs for procedures as the best proxy 
for relative ASC costs and limit the reduction in payment to ASCs for 
the office-based procedures. The commenters reasoned that, because the 
ASC payment system was to be based on the relative payment weights 
under the OPPS, which are updated annually based on hospital claims and 
cost reports, OPPS median costs are a better source of relative payment 
weights than the MPFS, which is not based on facility costs estimated 
from claims and cost reports like the OPPS. In addition, they expressed 
concern that as more procedures are designated as office-based for ASC 
payment, the linkage between the OPPS and ASC ratesetting methodologies 
would be eroded and the ASC payment system would be increasingly 
affected by the unpredictable inflation updates under the MPFS.
    Response: We continue to believe that our policy of identifying low 
complexity procedures that are usually provided in physicians' offices 
and limiting their payment in ASCs to the physician's office payment 
amount is necessary and valid. We believe this is the most appropriate 
approach to preventing the creation of payment incentives for services 
to move from physicians' offices to ASCs for the many newly-covered low 
complexity procedures on the ASC list. Moreover, we are confident that 
the CY 2008 claims data, the most recent full year of volume and 
utilization data, are an appropriate source to inform our decisions 
regarding the site-of-service for procedures. In our review process, 
when we believe that the available data are inadequate bases

[[Page 60606]]

upon which to make a determination that a procedure should be office-
based, we either make no change to the procedure's payment status or 
make the change temporary and reevaluate our decision using data that 
become available for our next evaluation. We believe that it is 
appropriate to continue using our judgment regarding whether the volume 
of cases and the proportion of cases that are provided in the 
physicians' office setting indicate that the procedure is an office-
based procedure in addition to our medical advisors' clinical 
judgments, utilization data for procedures that are closely related to 
the procedures being evaluated, and any other information that is 
available to us. Thus, we will not alter our review and decision 
processes with respect to establishing or changing volume or 
utilization thresholds as recommended by the commenters.
    We continue to believe that it is appropriate that ASCs be paid no 
more for performing office-based procedures than those procedures would 
be paid when performed in physicians' offices, in order to deter 
inappropriate migration of these surgical procedures to ASCs based on 
financial considerations rather than clinical needs. Although our 
policy to pay for some services at the MPFS non-facility PE RVU amount 
does introduce payment for a number of procedures at rates not based on 
the ASC relative payment weights and, as such, may be viewed as an 
erosion of the linkage between the OPPS and ASC payment system, we do 
not believe that the alternative of making payments at the higher ASC 
rate is preferable. None of the office-based procedures was eligible 
for ASC payment prior to implementation of the revised payment system 
and we see no inherent unfairness in limiting ASC payment to the rate 
for the lower-intensity site of service (physician's office) that our 
data indicate is the care setting for most Medicare cases. In fact, the 
lower than expected CY 2008 ASC utilization for office-based procedures 
reported by commenters (discussed in section XV.I.2.of this final rule 
with comment period) may be an indication that our policy does not 
encourage inappropriate migration of these services to ASCs, as was our 
intention. While we acknowledge the potential volatility of the office-
based payments under the MPFS, we continue to believe it is appropriate 
to treat office-based procedures similarly in the office and ASC 
settings for purposes of Medicare payment. Therefore, we also will not 
adopt the commenters' recommendation that ASC payment rates should be 
based only on OPPS median costs and will continue to update the office-
based list of ASC covered surgical procedures annually, to account for 
changes in medical practice and new surgical procedures that may result 
in additional surgical procedures that are predominantly performed in 
physicians' offices.
    The utilization data for the procedures listed in Table 43 of the 
proposed rule and restated in Table 64, below, did not change between 
the proposed rule and this final rule with comment period. We did not 
receive any public comments that specifically addressed our proposals 
to designate the 6 procedures listed in Table 64 as office-based for CY 
2010. Therefore, we are finalizing our CY 2010 proposals, without 
modification, to designate the procedures displayed in Table 64 below 
as office-based for CY 2010.

    Table 64--CY 2010 Final Designations of ASC Covered Surgical Procedures Newly Designated as Office-Based
----------------------------------------------------------------------------------------------------------------
                                                 CY 2009 ASC payment  Proposed CY 2010 ASC    Final CY 2010 ASC
 CY 2010 HCPCS code   CY 2010 short descriptor        indicator         payment indicator    payment indicator *
----------------------------------------------------------------------------------------------------------------
15852...............  Dressing change not for   G2..................  R2..................  R2
                       burn.
19105...............  Cryosurg ablate fa, each  G2..................  P3..................  P2
20555...............  Place ndl musc/tis for    G2..................  R2..................  R2
                       rt.
36420...............  Vein access cutdown < 1   G2..................  R2..................  R2
                       yr.
50386...............  Remove stent via          G2..................  P2..................  P2
                       transureth.
57022...............  I & d vaginal hematoma,   G2..................  R2..................  R2
                       pp.
----------------------------------------------------------------------------------------------------------------
* Payment indicators are based on a comparison of the rates according to the ASC standard ratesetting
  methodology and the MPFS final CY 2010 rates. Under current law, the MPFS payment rates have a negative update
  for CY 2010. For a discussion of those rates, we refer readers to the CY 2010 MPFS final rule with comment
  period.

    In the CY 2010 OPPS/ASC proposed rule (74 FR 35381), we also 
reviewed CY 2008 volume and utilization data and other information for 
the 10 procedures with temporary office-based designations for CY 2009. 
Among these 10 procedures, there were no claims data for the 3 
procedures with CPT codes that were new in CY 2009. Those 3 new 
procedure codes are: CPT code 46930 (Destruction of internal 
hemorrhoid(s) by thermal energy (eg, infrared coagulation, cautery, 
radiofrequency)); CPT code 64455 (Injection(s), anesthetic agent and/or 
steroid, plantar common digital nerve(s) (eg, Morton's neuroma)); and 
CPT code 64632 (Destruction by neurolytic agent; plantar common digital 
nerve). Consequently, in the CY 2010 OPPS/ASC proposed rule (74 FR 
35381), we proposed to maintain their temporary office-based 
designations for CY 2010.
    As a result of our review of the remaining 7 procedures that have 
temporary office-based designations for CY 2009, we proposed to make 
permanent the office-based designations for 4 procedures for CY 2010. 
The 4 surgical procedure codes are: CPT code 0084T (Insertion of a 
temporary prostatic urethral stent); CPT code 21073 (Manipulation of 
temporomandibular joint(s) (TMJ), therapeutic, requiring an anesthesia 
service (ie, general or monitored anesthesia care)); CPT code 55876 
(Placement of interstitial device(s) for radiation therapy guidance 
(eg, fiducial markers, dosimeter), prostate (via needle, any approach), 
single or multiple); and HCPCS code C9728 (Placement of interstitial 
device(s) for radiation therapy/surgery guidance (eg, fiducial markers, 
dosimeter), other than prostate (any approach), single or multiple). 
Although we have no Medicare volume and utilization data in physicians' 
offices for HCPCS code C9728 because this code is not recognized for 
payment under the MPFS, we noted in the CY 2009 OPPS/ASC proposed rule 
(73 FR 41528) that because HCPCS code C9728 is

[[Page 60607]]

analogous to CPT code 55876, we believe they should be paid according 
to the same ASC payment methodology under the ASC payment system. In 
the CY 2010 OPPS/ASC proposed rule, we indicated our belief that the 
volume and utilization data for CPT codes 0084T, 21073, and 55876 are 
sufficient to support our determination that these procedures are most 
commonly provided in physicians' offices. Therefore, we proposed to 
make permanent the office-based designations for the four procedures 
(including HCPCS code C9728) for CY 2010.
    We did not propose to make permanent the office-based designations 
for the 3 other procedures for which the CY 2009 office-based 
designations are temporary because we did not believe that the 
currently available volume and utilization data provided an adequate 
basis for proposing permanent office-based designations. Rather, 
available data supported our determination that maintaining the 
temporary office-based designation was appropriate for CY 2010 for CPT 
code 0099T (Implantation of intrastromal corneal ring segments); CPT 
code 0124T (Conjunctival incision with posterior extrascleral placement 
of pharmacological agent (does not include supply of medication)); and 
CPT code 67229 (Treatment of extensive or progressive retinopathy, 1 or 
more sessions; preterm infant (less than 37 weeks gestation at birth), 
performed from birth up to 1 year of age (eg, retinopathy of 
prematurity), photocoagulation or cryotherapy). Thus, we proposed to 
maintain the temporary office-based designation for those procedures 
for CY 2010.
    The procedures that we proposed to permanently designate as office-
based for CY 2010 that were temporarily designated as office-based 
procedures in CY 2009 were displayed in Table 44 in the CY 2010 OPPS/
ASC proposed rule (74 FR 35382). The procedures that we proposed to 
continue to temporarily designate as office-based for CY 2010 were 
displayed in Table 45 in the CY 2010 OPPS/ASC proposed rule (74 FR 
35382). The procedures for which the proposed office-based designation 
for CY 2010 is temporary also were indicated by an asterisk in Addendum 
AA to the proposed rule.
    We did not receive any public comments that specifically addressed 
our proposals to designate the 4 procedures listed in Table 44 of the 
proposed rule and restated in Table 65, below, as permanently office-
based for CY 2010. Therefore, we are adopting as final for CY 2010 
permanent office-based payment indicators as proposed for the 
procedures reported by HCPCS codes 0084T, 21073, 55876, and C9728 that 
were designated temporarily office-based for CY 2009.

  Table 65--CY 2009 Temporarily Designated Office-Based ASC Covered Surgical Procedures That Are Designated as
                                      Permanently Office-Based for CY 2010
----------------------------------------------------------------------------------------------------------------
                                                                                               Final CY 2010 ASC
       CY 2009 HCPCS code         CY 2010 HCPCS       CY 2010 short           CY 2009 ASC      payment indicator
                                      code              descriptor         payment indicator          **
----------------------------------------------------------------------------------------------------------------
0084T..........................           53855  Temp prostate urethral   R2 *..............  P2
                                                  stent.
21073..........................           21073  Mnpj of tmj w/anesth...  P3 *..............  P3
55876..........................           55876  Place rt device/marker,  P3 *..............  P3
                                                  pros.
C9728..........................           C9728  Place device/marker,     R2 *..............  R2
                                                  non pro.
----------------------------------------------------------------------------------------------------------------
* If designation is temporary.
** Payment indicators are based on a comparison of the rates according to the ASC standard ratesetting
  methodology and the MPFS final CY 2010 rates. Under current law, the MPFS payment rates have a negative update
  for CY 2010. For a discussion of those rates, we refer readers to the CY 2010 MPFS final rule with comment
  period.

    Comment: One commenter supported the proposal to maintain CPT codes 
64455 and 64632 as temporarily office-based pending the availability of 
actual claims data.
    Response: We appreciate the commenter's support.
    After consideration of the public comment we received, we are 
finalizing our CY 2010 proposal, without modification, to maintain the 
temporary office-based payment indicators as displayed in Table 66 for 
the 6 procedures reported by CPT codes 0099T, 0124T, 46930, 64455, 
64632, and 67229 that were designated temporarily office-based for CY 
2009.

     Table 66--CY 2009 Temporarily Office-Based Procedures That Are
          Designated as Temporarily Office-Based for CY 2010 *
------------------------------------------------------------------------
                                                          Final CY 2010
        CY 2010 HCPCS Code             CY 2010 short       ASC payment
                                        descriptor         indicator **
------------------------------------------------------------------------
0099T............................  Implant corneal ring            R2 *
0124T............................  Conjunctival drug               R2 *
                                    placement.
46930............................  Destroy internal                P3 *
                                    hemorrhoids.
64455............................  N block inj, plantar            P3 *
                                    digit.
64632............................  N block inj, common             P3 *
                                    digit.
67229............................  Tr retinal les                   R2*
                                    preterm inf.
------------------------------------------------------------------------
* If designation is temporary.
** Payment indicators are based on a comparison of the rates according
  to the ASC standard ratesetting methodology and the MPFS final CY 2010
  rates. Under current law, the MPFS payment rates have a negative
  update for CY 2010. For a discussion of those rates, we refer readers
  to the CY 2010 MPFS final rule with comment period.

    Displayed in Table 67 below are new (or substantially revised) CY 
2010 HCPCS codes to which we have assigned temporary office-based 
payment indicators. As explained in section XV.B.1. of this final rule 
with comment period, we reviewed all of the newly created HCPCS codes 
that became available after the issuance of the CY 2009 OPPS/ASC 
proposed rule that will be used to report surgical procedures in CY 
2010 to evaluate their appropriateness for the ASC list of covered 
surgical procedures. Of the procedures reported by new or substantially 
revised CY 2010 HCPCS codes that we determined should not be excluded 
from the ASC list based on our clinical review, including assessment of

[[Page 60608]]

available utilization and volume data for any closely related 
procedures and consideration of other available information, we 
determined that 16 of the procedures would predominantly be performed 
in physicians' offices. However, because we had no utilization data for 
the procedures specifically described by these new HCPCS codes, we made 
the office-based designations temporary rather than permanent and will 
reevaluate the procedures when data become available. The temporary 
payment indicators for the 16 office-based procedures displayed in 
Table 67 are interim designations and are open to public comment during 
the 60-day comment period for this final rule with comment period. 
HCPCS codes that are new (or substantially revised) for CY 2010 are 
designated with an ``NI'' comment indicator in Addendum AA. We will 
respond to public comments on the interim designations in the CY 2011 
OPPS/ASC final rule with comment period.

 Table 67--Final CY 2010 Payment Indicators for New CY 2010 HCPCS Codes
  for ASC Covered Surgical Procedures Designated as Temporarily Office-
                        Based on an Interim Basis
------------------------------------------------------------------------
                                                          Final CY 2010
        CY 2010 HCPCS Code             CY 2010 short       ASC payment
                                        descriptor         indicator **
------------------------------------------------------------------------
21015............................  Resection of facial             R2 *
                                    tumor.
21555............................  Remove lesion, neck/            P3 *
                                    chest.
21930............................  Remove lesion, back             P3 *
                                    or flank.
23075............................  Removal of shoulder             P3 *
                                    lesion.
24075............................  Remove arm/elbow                P3 *
                                    lesion.
25075............................  Removal forearm                 P3 *
                                    lesion subcu.
26115............................  Removal hand lesion,            P3 *
                                    subcut.
27047............................  Remove hip/pelvis               P3 *
                                    lesion.
27327............................  Removal of thigh                P3 *
                                    lesion.
27618............................  Remove lower leg                P3 *
                                    lesion.
28039............................  Exc foot/toe tum sc             P3 *
                                    > 1.5 cm.
28041............................  Exc foot/toe tum                R2 *
                                    deep > 1.5 cm.
28043............................  Excision of foot                P3 *
                                    lesion.
28045............................  Excision of foot                P3 *
                                    lesion.
28046............................  Resection of tumor,             R2 *
                                    foot.
37761............................  Ligate leg veins                R2 *
                                    open.
------------------------------------------------------------------------
* If designation is temporary.
** Payment indicators are based on a comparison of the rates according
  to the ASC standard ratesetting methodology and the MPFS final CY 2010
  rates. Under current law, the MPFS payment rates have a negative
  update for CY 2010. For a discussion of those rates, we refer readers
  to the CY 2010 MPFS final rule with comment period.

c. ASC Covered Surgical Procedures Designated as Device-Intensive
(1) Background
    As discussed in the August 2, 2007 final rule (72 FR 42503 through 
42508), we adopted a modified payment methodology for calculating the 
ASC payment rates for covered surgical procedures that are assigned to 
the subset of OPPS device-dependent APCs with a device offset 
percentage greater than 50 percent of the APC cost under the OPPS, in 
order to ensure that payment for the procedure is adequate to provide 
packaged payment for the high-cost implantable devices used in those 
procedures. We assigned payment indicators ``H8'' (Device-intensive 
procedure on ASC list in CY 2007; paid at adjusted rate) and ``J8'' 
(Device-intensive procedure added to ASC list in CY 2008 or later; paid 
at adjusted rate) to identify the procedures that were eligible for ASC 
payment calculated according to the modified methodology, depending on 
whether the procedure was included on the ASC list of covered surgical 
procedures prior to CY 2008 and, therefore, subject to transitional 
payment as discussed in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68739 through 68742). The 52 device-intensive procedures 
for which the modified rate calculation methodology applies in CY 2009 
were displayed in Table 47 and in Addendum AA to the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68736 through 68738 and 68840 
through 68933).
(2) Changes to List of Covered Surgical Procedures Designated as 
Device-Intensive for CY 2010
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35382), we proposed to 
update the ASC list of covered surgical procedures that are eligible 
for payment according to the device-intensive procedure payment 
methodology for CY 2010, consistent with the proposed OPPS device-
dependent APC update, reflecting the proposed APC assignments of 
procedures, designation of APCs as device-dependent, and APC device 
offset percentages based on the CY 2008 OPPS claims and cost report 
data available for the proposed rule. The ASC covered surgical 
procedures that we proposed to designate as device-intensive and that 
would be subject to the device-intensive procedure payment methodology 
for CY 2010 were listed in Table 46 in the CY 2010 OPPS/ASC proposed 
rule (74 FR 35383 through 35384).
    Comment: Some commenters expressed general concerns regarding the 
sufficiency of ASC payment for device-related services and recommended 
modifications to the ASC device-intensive payment methodology. First, 
the commenters argued that CMS should not apply the ASC conversion 
factor to the device-related portion of the payment for all procedures 
for which CMS can establish a median device cost, regardless of whether 
they are designated as device-intensive under the established 
methodology. The commenters stated that, unlike ASCs' general abilities 
to achieve greater operational efficiencies than HOPDs, ASCs are unable 
to extract greater discounts on devices and expensive operative 
supplies than their hospital counterparts. Second, the commenters 
argued that CMS should not adjust the device portion of the ASC payment 
for device-intensive procedures by the wage index. According to the 
commenters, the acquisition of devices occurs on a national market, and 
ASCs in rural areas pay approximately the same for medical devices and 
equipment as facilities in more expensive labor markets. The commenters 
stated that CMS is underpaying device costs in markets where the wage 
index is low, and overpaying in markets where the wage index is high.
    One commenter specifically remarked that the procedures described 
by CPT code 19296 (Placement of radiotherapy afterloading balloon 
catheter into the breast for interstitial radioelement application 
following partial mastectomy, includes imaging guidance; on date 
separate from partial

[[Page 60609]]

mastectomy) and CPT code 19297 (Placement of radiotherapy afterloading 
balloon catheter into the breast for interstitial radioelement 
application following partial mastectomy, includes imaging guidance; 
concurrent with partial mastectomy), which map to OPPS device-dependent 
APC 0648 (Level IV Breast Surgery), require the use of a device that 
has a list price that exceeds 50 percent of the median costs calculated 
for those CPT codes and, therefore, concluded that these procedures 
should be added to the ASC list of device-intensive procedures. Another 
commenter requested that CMS add the procedure described by CPT code 
66180 (Aqueous shunt to extraocular reservoir (eg, Molteno, Schocket, 
Denver-Krupin)) to the ASC list of device-intensive procedures, arguing 
that the list prices of devices involved in performing this procedure 
are greater than 50 percent of the proposed ASC payment rate for this 
procedure for CY 2010.
    Response: In the August 2, 2007 final rule (72 FR 42508), we 
established that the modified payment methodology for calculating ASC 
payment rates for device-intensive procedures shall apply to ASC 
covered surgical procedures that are assigned to device-dependent APCs 
under the OPPS for the same calendar year, where those APCs have a 
device cost of greater than 50 percent of the APC cost (that is, the 
device offset percentage is greater than 50). We continue to believe 
these criteria ensure that ASC payment rates are adequate to provide 
packaged payment for high cost implantable devices and ensure Medicare 
beneficiaries have access to these procedures in all appropriate 
settings of care. We do not agree that we should change our criteria 
and treat as device-intensive ASC services that are assigned to APCs 
for which the device offset percentage is less than 50 percent (such as 
the procedures described by CPT codes 19296 and 19297) or ASC services 
that are not assigned to OPPS device-dependent APCs (such as the 
procedure described by CPT code 66180). Under the modified payment 
methodology for ASC covered surgical procedures designated as device-
intensive, we separately determine both the device payment and service 
payment portions of the ASC payment rate, and apply the ASC conversion 
factor only to the specifically calculated OPPS relative payment weight 
for the service portion, while providing the same packaged payment for 
the device portion as would be made under the OPPS. The 50-percent 
device offset threshold is established to ensure that the ASC 
conversion factor is not applied to the costs of high cost implantable 
devices, which likely do not vary between ASCs and HOPDs in the same 
manner service costs have been shown to vary. As we have stated in the 
past (73 FR 68734), we believe that when device costs comprise less 
than 50 percent of total procedure costs, those costs are less likely 
to be as predictable across sites-of-service. Accordingly, we believe 
that it is possible for ASCs to achieve efficiencies relative to HOPDs 
when providing those procedures, and that the application of the ASC 
conversion factor to the entire ASC payment weight is appropriate.
    We also do not believe it is appropriate to vary the percentage of 
the national payment that is wage adjusted for different services. 
Under the revised ASC payment system, we utilize 50 percent as the 
labor-related share to adjust national ASC payment rates for geographic 
wage differences. We apply to ASC payments the IPPS pre-floor, pre-
reclassification wage index values associated with the June 2003 OMB 
geographic localities, as recognized under the IPPS and OPPS, in order 
to adjust the labor-related portion of the national ASC payment rates 
for geographic wage differences. Consistent with the OPPS, we apply the 
ASC geographic wage adjustment to the entire ASC payment rate for 
device-intensive procedures. As we have noted in the past (73 FR 
68735), MedPAC has indicated its intent to evaluate CMS' method for 
adjusting payments for variations in labor costs in light of 
differences in labor-related costs for device-implantation services. We 
look forward to reviewing the results of its evaluation, as well as any 
recommendations it may provide, regarding the OPPS or ASC wage 
adjustment policy.
    Comment: Some commenters argued that CMS should not subject 
procedures that were on the ASC list of covered surgical procedures in 
CY 2007 but were rarely performed in ASCs prior to CY 2008 to the 
transitional adjustment. One commenter provided a data analysis 
demonstrating that CPT code 55873 (Cryosurgical ablation of the 
prostate (includes ultrasonic guidance and monitoring)) was present on 
three ASC claims in CY 2007, on one claim in CY 2006, and was not 
billed at all by ASCs in CY 2005. According to the commenter, the 
transitional payment for CPT code 55873 is inadequate to cover ASCs' 
costs of providing the procedure and will prevent Medicare 
beneficiaries from accessing this procedure in the ASC setting.
    Response: As established in regulation at Sec.  416.171(c), the 
transitional adjustment applies to all services on the CY 2007 ASC list 
of covered services. We cannot make an exception for procedures, such 
as the one described by CPT code 55873, that were on the CY 2007 list 
of covered services but were rarely performed in ASCs according to the 
commenter. Furthermore, as we stated in the August 2, 2007 final rule 
(72 FR 42520), the transition to the fully implemented revised ASC 
system payment system should not be asymmetrical, meaning that 
procedures with decreasing payments under the revised payment system 
should not be transitioned differently from those with increasing 
payments.
    Comment: One commenter requested that CMS adjust the OPPS device 
offset percentages for ASC device-intensive payment purposes to account 
for the effects of charge compression. The commenter suggested that CMS 
``decompress'' the supply median costs to minimize any artificial 
reductions that charge compression causes in the estimate of the OPPS 
device offset percentages.
    Response: Charge compression is the practice of applying a lower 
charge markup to higher-cost services and a higher charge markup to 
lower-cost services. As a result of charge compression, the cost-based 
OPPS 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. As discussed in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68524), we did not adopt any short-term 
statistical regression-based adjustments under the OPPS that would 
serve to ``decompress'' the median costs for procedures involving 
devices, or for any other procedures. Rather, we chose to focus on 
long-term changes to Medicare cost reporting to address the effects of 
charge compression, including the creation of two new cost centers, 
``Medical Supplies Charged to Patients'' and ``Implantable Devices 
Charged to Patients,'' as discussed in more detail in section 
II.A.1.c.(2) of this final rule with comment period. We believe that 
this change to how hospitals report costs for devices and supplies will 
improve our future estimates of costs related to high cost implantable 
devices, including the device offset percentages upon which we base the 
device portions of ASC payment rates for device-intensive procedures.

[[Page 60610]]

    Comment: Several commenters remarked on the adequacy of the 
proposed payment rates calculated according to the ASC device-intensive 
payment methodology for procedures involving cochlear implants, 
described by CPT code 69930 (Cochlear device implantation, with or 
without mastoidectomy). According to the commenters, the proposed 
increase to the ASC payment rate for CPT code 69930 is a necessary 
improvement to ensure beneficiary access to cochlear implants. Several 
commenters also supported the proposed payment rate increases for 
procedures involving 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). 
Other commenters encouraged CMS to finalize a somewhat higher payment 
rate for these procedures.
    Response: We appreciate the commenters' support of the proposed 
payment rates for procedures involving cochlear implants and auditory 
osseointegrated devices. We believe that the final CY 2010 ASC payment 
rates for these procedures, calculated according to the ASC device-
intensive ratesetting methodology, are appropriate and adequate to 
ensure beneficiaries have access to these procedures in the ASC 
setting.
    After consideration of the public comments we received, we are 
designating the ASC covered surgical procedures displayed in Table 68 
below as device-intensive for CY 2010. The HCPCS code, the HCPCS code 
short descriptor, the CY 2010 ASC payment indicator, the CY 2010 OPPS 
APC assignment, the OPPS APC Title, and the CY 2010 OPPS APC device 
offset percentage are listed in Table 68. Each device-intensive 
procedure is assigned payment indicator ``H8'' or ``J8,'' depending on 
whether it is subject to transitional payment. All of these procedures 
are included in Addendum AA to this final rule with comment period. The 
OPPS device-dependent APCs are discussed further in section 
II.A.2.d.(1) of this final rule with comment period.

              Table 68.--ASC Covered Surgical Procedures Designated as Device-Intensive for CY 2010
----------------------------------------------------------------------------------------------------------------
                                                                                                       Final CY
                                                  Final CY 2010    Final CY                          2010 device-
       CY 2010 CPT code          CY 2010 short    ASC  payment    2010 OPPS       OPPS APC title       dependent
                                  descriptor        indicator        APC                              APC offset
                                                                                                      percentage
----------------------------------------------------------------------------------------------------------------
24361........................  Reconstruct       H8............         0425  Level II Arthroplasty           58
                                elbow joint.                                   or Implantation with
                                                                               Prosthesis.
24363........................  Replace elbow     H8............         0425  Level II Arthroplasty           58
                                joint.                                         or Implantation with
                                                                               Prosthesis.
24366........................  Reconstruct head  H8............         0425  Level II Arthroplasty           58
                                of radius.                                     or Implantation with
                                                                               Prosthesis.
25441........................  Reconstruct       H8............         0425  Level II Arthroplasty           58
                                wrist joint.                                   or Implantation with
                                                                               Prosthesis.
25442........................  Reconstruct       H8............         0425  Level II Arthroplasty           58
                                wrist joint.                                   or Implantation with
                                                                               Prosthesis.
25446........................  Wrist             H8............         0425  Level II Arthroplasty           58
                                replacement.                                   or Implantation with
                                                                               Prosthesis.
27446........................  Revision of knee  J8............         0425  Level II Arthroplasty           58
                                joint.                                         or Implantation with
                                                                               Prosthesis.
33206........................  Insertion of      J8............         0089  Insertion/Replacement           72
                                heart pacemaker.                               of Permanent
                                                                               Pacemaker and
                                                                               Electrodes.
33207........................  Insertion of      J8............         0089  Insertion/Replacement           72
                                heart pacemaker.                               of Permanent
                                                                               Pacemaker and
                                                                               Electrodes.
33208........................  Insertion of      J8............         0655  Insertion/Replacement/          75
                                heart pacemaker.                               Conversion of a
                                                                               permanent dual
                                                                               chamber pacemaker.
33212........................  Insertion of      H8............         0090  Insertion/Replacement           74
                                pulse generator.                               of Pacemaker Pulse
                                                                               Generator.
33213........................  Insertion of      H8............         0654  Insertion/Replacement           75
                                pulse generator.                               of a permanent dual
                                                                               chamber pacemaker.
33214........................  Upgrade of        J8............         0655  Insertion/Replacement/          75
                                pacemaker                                      Conversion of a
                                system.                                        permanent dual
                                                                               chamber pacemaker.
33224........................  Insert pacing     J8............         0418  Insertion of Left               81
                                lead & connect.                                Ventricular Pacing
                                                                               Elect..
33225........................  Lventric pacing   J8............         0418  Insertion of Left               81
                                lead add-on.                                   Ventricular Pacing
                                                                               Elect..
33240........................  Insert pulse      J8............         0107  Insertion of                    89
                                generator.                                     Cardioverter-
                                                                               Defibrillator.
33249........................  Eltrd/insert      J8............         0108  Insertion/Replacement/          88
                                pace-defib.                                    Repair of
                                                                               Cardioverter-
                                                                               Defibrillator Leads.
33282........................  Implant pat-      J8............         0680  Insertion of Patient            73
                                active ht                                      Activated Event
                                record.                                        Recorders.
53440........................  Male sling        H8............         0385  Level I Prosthetic              59
                                procedure.                                     Urological
                                                                               Procedures.
53444........................  Insert tandem     H8............         0385  Level I Prosthetic              59
                                cuff.                                          Urological
                                                                               Procedures.
53445........................  Insert uro/ves    H8............         0386  Level II Prosthetic             71
                                nck sphincter.                                 Urological
                                                                               Procedures.
53447........................  Remove/replace    H8............         0386  Level II Prosthetic             71
                                ur sphincter.                                  Urological
                                                                               Procedures.
54400........................  Insert semi-      H8............         0385  Level I Prosthetic              59
                                rigid                                          Urological
                                prosthesis.                                    Procedures.
54401........................  Insert self-      H8............         0386  Level II Prosthetic             71
                                contd                                          Urological
                                prosthesis.                                    Procedures.
54405........................  Insert multi-     H8............         0386  Level II Prosthetic             71
                                comp penis pros.                               Urological
                                                                               Procedures.
54410........................  Remove/replace    H8............         0386  Level II Prosthetic             71
                                penis prosth.                                  Urological
                                                                               Procedures.
54416........................  Remv/repl penis   H8............         0386  Level II Prosthetic             71
                                contain pros.                                  Urological
                                                                               Procedures.

[[Page 60611]]

 
55873........................  Cryoablate        H8............         0674  Prostate Cryoablation           56
                                prostate.
61885........................  Insrt/redo        H8............         0039  Level I Implantation            85
                                neurostim 1                                    of Neurostimulator
                                array.                                         Generator.
61886........................  Implant           H8............         0315  Level II Implantation           88
                                neurostim                                      of Neurostimulator
                                arrays.                                        Generator.
62361........................  Implant spine     H8............         0227  Implantation of Drug            83
                                infusion pump.                                 Infusion Device.
62362........................  Implant spine     H8............         0227  Implantation of Drug            83
                                infusion pump.                                 Infusion Device.
63650........................  Implant           H8............         0040  Percutaneous                    58
                                neuroelectrodes.                               Implantation of
                                                                               Neurostimulator
                                                                               Electrodes.
63655........................  Implant           J8............         0061  Laminectomy,                    64
                                neuroelectrodes.                               Laparoscopy, or
                                                                               Incision for
                                                                               Implantation of
                                                                               Neurostimulator
                                                                               Electr.
63685........................  Insrt/redo spine  H8............         0039  Level I Implantation            85
                                n generator.                                   of Neurostimulator
                                                                               Generator.
64553........................  Implant           H8............         0040  Percutaneous                    58
                                neuroelectrodes.                               Implantation of
                                                                               Neurostimulator
                                                                               Electrodes.
64555........................  Implant           J8............         0040  Percutaneous                    58
                                neuroelectrodes.                               Implantation of
                                                                               Neurostimulator
                                                                               Electrodes.
64560........................  Implant           J8............         0040  Percutaneous                    58
                                neuroelectrodes.                               Implantation of
                                                                               Neurostimulator
                                                                               Electrodes.
64561........................  Implant           H8............         0040  Percutaneous                    58
                                neuroelectrodes.                               Implantation of
                                                                               Neurostimulator
                                                                               Electrodes.
64565........................  Implant           J8............         0040  Percutaneous                    58
                                neuroelectrodes.                               Implantation of
                                                                               Neurostimulator
                                                                               Electrodes.
64573........................  Implant           H8............         0225  Implantation of                 73
                                neuroelectrodes.                               Neurostimulator
                                                                               Electrodes, Cranial
                                                                               Nerve.
64575........................  Implant           H8............         0061  Laminectomy,                    64
                                neuroelectrodes.                               Laparoscopy, or
                                                                               Incision for
                                                                               Implantation of
                                                                               Neurostimulator
                                                                               Electr.
64577........................  Implant           H8............         0061  Laminectomy,                    64
                                neuroelectrodes.                               Laparoscopy, or
                                                                               Incision for
                                                                               Implantation of
                                                                               Neurostimulator
                                                                               Electr.
64580........................  Implant           H8............         0061  Laminectomy,                    64
                                neuroelectrodes.                               Laparoscopy, or
                                                                               Incision for
                                                                               Implantation of
                                                                               Neurostimulator
                                                                               Electr.
64581........................  Implant           H8............         0061  Laminectomy,                    64
                                neuroelectrodes.                               Laparoscopy, or
                                                                               Incision for
                                                                               Implantation of
                                                                               Neurostimulator
                                                                               Electr.
64590........................  Insrt/redo pn/    H8............         0039  Level I Implantation            85
                                gastr stimul.                                  of Neurostimulator
                                                                               Generator.
65770........................  Revise cornea     H8............         0293  Level V Anterior                62
                                with implant.                                  Segment Eye
                                                                               Procedures.
69714........................  Implant temple    H8............         0425  Level II Arthroplasty           58
                                bone w/stimul.                                 or Implantation with
                                                                               Prosthesis.
69715........................  Temple bne        H8............         0425  Level II Arthroplasty           58
                                implnt w/                                      or Implantation with
                                stimulat.                                      Prosthesis.
69717........................  Temple bone       H8............         0425  Level II Arthroplasty           58
                                implant                                        or Implantation with
                                revision.                                      Prosthesis.
69718........................  Revise temple     H8............         0425  Level II Arthroplasty           58
                                bone implant.                                  or Implantation with
                                                                               Prosthesis.
69930........................  Implant cochlear  H8............         0259  Level VII ENT                   85
                                device.                                        Procedures.
----------------------------------------------------------------------------------------------------------------

d. ASC Treatment of Surgical Procedures Removed From the OPPS Inpatient 
List for CY 2010
    As we discussed in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68724), we adopted a policy to include in our annual 
evaluation procedures proposed for removal from the OPPS inpatient list 
for possible inclusion on the ASC list of covered surgical procedures. 
The final list of procedures removed from the inpatient list for CY 
2009 may be found in section XI.B. of that final rule with comment 
period.
    We evaluated each of the 3 procedures we proposed to remove from 
the OPPS inpatient list for CY 2010 according to the criteria for 
exclusion from the list of covered ASC surgical procedures. As we 
stated in the CY 2010 OPPS/ASC proposed rule (74 FR 35384), we believe 
that all of these procedures should continue to be excluded from the 
ASC list of covered surgical procedures for CY 2010 because they would 
be expected to pose a significant risk to beneficiary safety or to 
require an overnight stay in ASCs. A full discussion about the APC 
Panel's recommendations regarding the procedures we proposed to remove 
from the OPPS inpatient list for CY 2010 may be found in section XI.B. 
of this final rule with comment period. The HCPCS codes for these 3 
procedures and their long descriptors were listed in Table 47 in the CY 
2010 OPPS/ASC proposed rule (74 FR 35384).
    We did not receive any public comments specifically about our 
proposal to continue to exclude from the ASC list the 3 procedures 
reported by CPT codes 21256 (Reconstruction of orbit with osteotomies 
(extracranial) and with bone grafts (includes obtaining autografts) 
(eg, micro-ophthalmia); 27179 (Open treatment of slipped femoral 
epiphysis; osteoplasty of femoral neck (Heyman type procedure); and 
51060 (Transvesical

[[Page 60612]]

ureterolithotomy). However, we did receive public comments requesting 
that we remove additional procedures from the OPPS inpatient list. In 
response to those comments, we removed 5 additional procedures from the 
OPPS inpatient list for CY 2010. The comments requesting that we remove 
additional procedures from the inpatient list and our responses may be 
found in section XI.B. of this final rule with comment period. Our 
review of the 5 procedures removed from the OPPS inpatient list in 
response to comments convinced us that none of them was appropriate for 
performance in the ASC setting. Our medical advisors determined that 
the procedures were expected to pose significant risks to beneficiary 
safety or to require an overnight stay when provided in ASCs.
    The final list of procedures that have been removed from the CY 
2010 OPPS inpatient list but that continue to be excluded from the ASC 
list of covered surgical procedures is displayed in Table 69 below.

   Table 69--Procedures Excluded From the ASC List of Covered Surgical
Procedures for CY 2010 That Were Removed From the CY 2010 OPPS Inpatient
                                  List
------------------------------------------------------------------------
      CY 2010 HCPCS code                CY 2010 long descriptor
------------------------------------------------------------------------
21256........................  Reconstruction of orbit with osteotomies
                                (extracranial) and with bone grafts
                                (includes obtaining autografts) (eg,
                                micro-ophthalmia).
27179........................  Open treatment of slipped femoral
                                epiphysis; osteoplasty of femoral neck
                                (Heyman type procedure).
28805........................  Amputation, foot; transmetatarsal.
37215........................  Transcatheter placement of intravascular
                                stent(s), cervical carotid artery,
                                percutaneous; with distal embolic
                                protection.
44950........................  Appendectomy.
44955........................  Appendectomy; when done for indicated
                                purpose at time of other major procedure
                                (not as separate procedure) (List
                                separately in addition to code for
                                primary procedure).
51060........................  Transvesical ureterolithotomy.
63076........................  Discectomy, anterior, with decompression
                                of spinal cord and/or nerve root(s),
                                including osteophytectomy; cervical,
                                each additional interspace (List
                                separately in addition to code for
                                primary procedure).
------------------------------------------------------------------------

2. Covered Ancillary Services
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35384), consistent 
with the established ASC payment system policy, we proposed to update 
the ASC list of covered ancillary services to reflect the proposed 
payment status for the services under the CY 2010 OPPS. Maintaining 
consistency with the OPPS resulted in proposed changes to ASC payment 
indicators for some covered ancillary items and services because of 
changes that were proposed under the OPPS for CY 2010. Comment 
indicator ``CH,'' discussed in section XV.F. of the CY 2010 OPPS/ASC 
proposed rule (74 FR 35390), was used in Addendum BB to that proposed 
rule to indicate covered ancillary services for which we proposed a 
change in the ASC payment indicator to maintain consistency with a 
proposed change in the OPPS treatment of the service for CY 2010.
    Except for the Level II HCPCS codes listed in Table 40 of the 
proposed rule (74 FR 35379), all ASC covered ancillary services and 
their proposed payment indicators for CY 2010 were included in Addendum 
BB to the proposed rule.
    We did not receive any public comments on our proposal to update 
the ASC list of covered ancillary services to reflect the payment 
status for the services under the OPPS. Therefore, we are finalizing, 
without modification, our proposed updates to the ASC list of covered 
ancillary services as proposed. All CY 2010 ASC covered ancillary 
services and their final payment indicators are included in Addendum BB 
to this final rule with comment period.

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

1. Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are fully described in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66828 through 66831). Under our 
established policy for the revised ASC payment system, the ASC standard 
ratesetting methodology of multiplying the ASC relative payment weight 
for the procedure by the ASC conversion factor for that same year is 
used to calculate the national unadjusted payment rates for procedures 
with payment indicator ``G2.'' For procedures assigned payment 
indicator ``A2,'' our final policy established blended rates to be used 
during the transitional period and, beginning in CY 2011, ASC rates 
calculated according to the ASC standard ratesetting methodology. The 
rate calculation established for device-intensive procedures (payment 
indicators ``H8'' and ``J8'') is structured so that the packaged device 
payment amount is the same as under the OPPS, and only the service 
portion of the rate is subject to the ASC standard ratesetting 
methodology. In the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68722 through 68759), we updated the CY 2008 ASC payment rates for 
ASC covered surgical procedures with payment indicators of ``A2,'' 
``G2,'' ``H8,''and ``J8'' using CY 2007 data, consistent with the CY 
2009 OPPS update. Payment rates for device-intensive procedures also 
were updated to incorporate the CY 2009 OPPS device offset percentages.
    Payment rates for office-based procedures (payment indicators 
``P2,'' ``P3,'' and ``R2'') are the lower of the MPFS nonfacility PE 
RVU amount (we refer readers to the CY 2010 MPFS final rule with 
comment period) or the amount calculated using the ASC standard 
ratesetting methodology for the procedure. In the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68722 through 68759), we updated 
the payment amounts for office-based procedures (payment indicators 
``P2,'' ``P3,'' and ``R2'') using the most recent available MPFS and 
OPPS data. We compared the estimated CY 2009 rate for each of the 
office-based procedures, calculated according to the ASC standard 
ratesetting methodology, to the MPFS nonfacility PE RVU amount to 
determine which was lower and, therefore, would be the CY 2009 payment 
rate for the procedure according to the final policy of the revised ASC 
payment system (see Sec.  416.171(d)).
b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2010
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35385), we proposed to 
update ASC payment rates for CY 2010

[[Page 60613]]

using the established rate calculation methodologies under Sec.  
416.171. Thus, we proposed to calculate CY 2010 payments for procedures 
subject to the transitional payment methodology (payment indicators 
``A2'' and ``H8'') using a blend of 75 percent of the proposed CY 2010 
ASC rate calculated according to the ASC standard ratesetting 
methodology and 25 percent of the CY 2007 ASC payment rate, 
incorporating the device-intensive procedure methodology, as 
appropriate, for procedures assigned ASC payment indicator ``H8.'' We 
proposed to use the amount calculated under the ASC standard 
ratesetting methodology for procedures assigned payment indicator 
``G2'' because these procedures are not subject to the transitional 
payment methodology.
    We proposed payment rates for office-based procedures (payment 
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures 
not subject to transitional payment (payment indicator ``J8'') 
calculated according to our established policies. Thus, we proposed to 
update the payment amounts for device-intensive procedures based on the 
CY 2010 OPPS proposal that reflects updated OPPS device offset 
percentages, and to make payment for office-based procedures at the 
lesser of the CY 2010 proposed MPFS nonfacility PE RVU amount or the 
proposed CY 2010 ASC payment amount calculated according to the ASC 
standard ratesetting methodology.
    Comment: Many commenters requested that CMS modify its packaging 
policy to provide separate payment for procedures that were eligible 
for separate ASC payment prior to becoming packaged into separately 
payable services under the OPPS that are not reported by any of the 
codes within the CPT surgical code range. The commenters stated that 
these HCPCS codes into which minor procedure payments are packaged are 
not on the list of ASC covered surgical procedures. The commenters 
believed that, as an unintended result of CMS' OPPS packaging policies, 
procedural services that meet the criteria for performance in ASCs are 
being excluded from coverage. They recommended that CMS adopt a policy 
under which packaging policy changes under the OPPS would not result in 
surgical procedures that were on the ASC list of covered surgical 
procedures in CY 2007 or CY 2008 becoming nonpayable.
    Response: We did not propose to make any change in our policy to 
adopt the packaging decisions made under the OPPS for the ASC payment 
system. Further, we do not know which procedures the commenters were 
referring to in their comments and, therefore, are unable to fully 
address their other concerns.
    Comment: One commenter requested that CMS correct the ASC payment 
rates for the procedures reported by CPT codes 64626 (Destruction by 
neurolytic agent, paravertebral facet joint nerve; cervical or 
thoracic, single level); 64627 (Destruction by neurolytic agent, 
paravertebral facet joint nerve; cervical or thoracic, each additional 
level); and 64680 (Destruction by neurolytic agent, with or without 
radiologic monitoring; celiac plexus). The commenter stated that the 
rates in Addendum AA to the proposed rule for these procedures were 
incorrectly listed as $299.12, $158.13, and $312.90. respectively.
    Response: We reviewed the proposed payment rates for these three 
procedures and found that they are all correct. We believe that the 
commenter failed to notice that we proposed to assign two of the 
procedures, CPT codes 64626 and 64680, to different APCs under the OPPS 
for CY 2010. The proposed changes in their OPPS APC assignments 
resulted in lower OPPS relative payment weights and, therefore, lower 
proposed ASC payment rates for CY 2010. The proposed payment rate for 
the third procedure, CPT code 64627, is correct as displayed in 
Addendum AA to the CY 2010 OPPS/ASC proposed rule. There was no 
proposed change to the APC assignment for that procedure under the OPPS 
for CY 2010. Therefore, the proposed ASC payment rate change for CY 
2010 is due to the recalibration of the OPPS APC relative payment 
weight, which was subsequently incorporated into the ASC payment 
system, and also due to the progression to the third year of the 
transition to ASC rates calculated entirely based on the standard 
ratesetting methodology.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 proposal, without modification, to calculate the 
CY 2010 final ASC payment rates according to our established 
methodologies.
c. Adjustment to ASC Payments for No Cost/Full Credit and Partial 
Credit Devices
    Our ASC policy with regard to payment for costly devices implanted 
in ASCs at no cost or with full or partial credit as set forth in Sec.  
416.179 is consistent with the OPPS policy. The CY 2010 OPPS APCs and 
devices subject to the adjustment policy are discussed in section 
IV.B.2. of this final rule with comment period. The established ASC 
policy includes adoption of the OPPS policy for reduced payment to 
providers when a specified device is furnished without cost or with 
full or partial credit for the cost of the device for those ASC covered 
surgical procedures that are assigned to APCs under the OPPS to which 
this policy applies. We refer readers to the CY 2009 OPPS/ASC final 
rule with comment period for a full discussion of the ASC payment 
adjustment policy for no cost/full credit and partial credit devices 
(73 FR 68742 through 68745).
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35385), consistent 
with the OPPS, we proposed to update the list of ASC covered device-
intensive procedures and devices that would be subject to the no cost/
full credit and partial credit device adjustment policy for CY 2010. 
Table 48 in the CY 2010 OPPS/ASC proposed rule (74 FR 35386 through 
35387) displayed the ASC covered device-intensive procedures that we 
proposed would be subject to the no cost/full credit and partial credit 
device adjustment policy for CY 2010. Specifically, when a procedure 
that is listed in Table 48 is performed to implant a device that is 
listed in Table 49 of the proposed rule (74 FR 35387), where that 
device is furnished at no cost or with full credit from the 
manufacturer, the ASC would append the HCPCS ``FB'' modifier on the 
line with the procedure to implant the device. The contractor would 
reduce payment to the ASC by the device offset amount that we estimate 
represents the cost of the device when the necessary device is 
furnished without cost to the ASC or with full credit. We would provide 
the same amount of payment reduction based on the device offset amount 
in ASCs that would apply under the OPPS under the same circumstances. 
We stated in the CY 2010 OPPS/ASC proposed rule (74 FR 35385) that we 
continue to believe that the reduction of ASC payment in these 
circumstances is necessary to pay appropriately for the covered 
surgical procedure being furnished by the ASC.
    We also proposed to reduce the payment for implantation procedures 
listed in Table 48 of the proposed rule by one-half of the device 
offset amount that would be applied if a device was provided at no cost 
or with full credit, if the credit to the ASC is 50 percent or more of 
the cost of the new device. The ASC would append the HCPCS ``FC'' 
modifier to the HCPCS code for a surgical procedure listed in Table 48 
in the proposed rule when the facility receives a partial credit of 50 
percent or more of the cost of a device listed in Table 49. In order to 
report that they received a partial credit of 50 percent or

[[Page 60614]]

more of the cost of a new device, ASCs would have the option of either: 
(1) Submitting the claim for the device replacement procedure to their 
Medicare contractor after the procedure's performance but prior to 
manufacturer acknowledgment of credit for the device, and subsequently 
contacting the contractor regarding a claim adjustment once the credit 
determination is made; or (2) holding the claim for the device 
implantation procedure until a determination is made by the 
manufacturer on the partial credit and submitting the claim with the 
``FC'' modifier appended to the implantation procedure HCPCS code if 
the partial credit is 50 percent or more of the cost of the replacement 
device. Beneficiary coinsurance would continue to be based on the 
reduced payment amount.
    We did not receive any comments on our CY 2010 proposal to continue 
the no cost/full credit and partial credit device adjustment policy for 
ASCs. For CY 2010, as we proposed, we will reduce the payment for the 
device implantation procedures listed in Table 70, below, by the full 
device offset amount for no cost/full credit cases. ASCs must append 
the modifier ``FB'' to the HCPCS procedure code when the device 
furnished without cost or with full credit is listed in Table 71, 
below, and the associated implantation procedure code is listed in 
Table 70. In addition, for CY 2010, we will reduce the payment for 
implantation procedures listed in Table 70 by one half of the device 
offset amount that would be applied if a device were provided at no 
cost or with full credit, if the credit to the ASC is 50 percent or 
more of the device cost. If the ASC receives a partial credit of 50 
percent or more of the cost of a device listed in Table 71, the ASC 
must append the modifier ``FC'' to the associated implantation 
procedure code if the procedure is listed in Table 70. We are adding 
device HCPCS code L8680 (Implantable neurostimulator electrode, each) 
to the list of devices in Table 71 because we are recognizing this code 
as packaged under the OPPS for CY 2010, as described in section IV.B.2. 
of this final rule with comment period.
BILLING CODE 4120-01-P

[[Page 60615]]

[GRAPHIC] [TIFF OMITTED] TR20NO09.043


[[Page 60616]]


[GRAPHIC] [TIFF OMITTED] TR20NO09.044


[[Page 60617]]


[GRAPHIC] [TIFF OMITTED] TR20NO09.045

BILLING CODE 4120-01-C

    Table 71--Devices for which the ``FB'' or ``FC'' modifier must be
reported with the procedure code in CY 2010 when furnished at no cost or
                       with full or partial credit
------------------------------------------------------------------------
         CY 2010 device HCPCS code            CY 2010 short descriptor
------------------------------------------------------------------------
C1721.....................................  AICD, dual chamber.
C1722.....................................  AICD, single chamber.
C1764.....................................  Event recorder, cardiac.
C1767.....................................  Generator, neurostim, imp.
C1771.....................................  Rep dev, urinary, w/sling.
C1772.....................................  Infusion pump, programmable.
C1776.....................................  Joint device (implantable).
C1778.....................................  Lead, neurostimulator.
C1779.....................................  Lead, pmkr, transvenous VDD.
C1785.....................................  Pmkr, dual, rate-resp.
C1786.....................................  Pmkr, single, rate-resp.
C1813.....................................  Prosthesis, penile,
                                             inflatab.
C1815.....................................  Pros, urinary sph, imp.
C1820.....................................  Generator, neuro rechg bat
                                             sys.
C1881.....................................  Dialysis access system.
C1882.....................................  AICD, other than sing/dual.
C1891.....................................  Infusion pump, non-prog,
                                             perm.
C1897.....................................  Lead, neurostim, test kit.
C1898.....................................  Lead, pmkr, other than
                                             trans.
C1900.....................................  Lead coronary venous.
C2619.....................................  Pmkr, dual, non rate-resp.
C2620.....................................  Pmkr, single, non rate-resp.
C2621.....................................  Pmkr, other than sing/dual.

[[Page 60618]]

 
C2622.....................................  Prosthesis, penile, non-inf.
C2626.....................................  Infusion pump, non-prog,
                                             temp.
C2631.....................................  Rep dev, urinary, w/o sling.
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.
------------------------------------------------------------------------

2. Payment for Covered Ancillary Services
a. Background
    Our final payment policies under the revised ASC payment system for 
covered ancillary services vary according to the particular type of 
service and its payment policy under the OPPS. Our overall policy 
provides separate ASC payment for certain ancillary items and services 
integrally related to the provision of ASC covered surgical procedures 
that are paid separately under the OPPS and provides packaged ASC 
payment for other ancillary items and services that are packaged under 
the OPPS. Thus, we established a final policy to align ASC payment 
bundles with those under the OPPS (72 FR 42495).
    Our ASC payment policies provide separate payment for drugs and 
biologicals that are separately paid under the OPPS at the OPPS rates, 
while we pay for separately payable radiology services at the lower of 
the MPFS nonfacility PE RVU (or technical component) amount or the rate 
calculated according to the ASC standard ratesetting methodology (72 FR 
42497). In all cases, ancillary items and services must be provided 
integral to the performance of ASC covered surgical procedures for 
which the ASC bills Medicare, in order for those ancillary services 
also to be paid.
    ASC payment policy for brachytherapy sources generally mirrors the 
payment policy under the OPPS. We finalized our policy in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 42499) to pay for 
brachytherapy sources applied in ASCs at the same prospective rates 
that were adopted under the OPPS or, if OPPS rates were unavailable, at 
contractor-priced rates. Subsequent to publication of that rule, 
section 106 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 
(Pub. L. 110-173) mandated that, for the period January 1, 2008 through 
June 30, 2008, brachytherapy sources be paid under the OPPS at charges 
adjusted to cost. Therefore, consistent with our final overall ASC 
payment policy, we paid ASCs at contractor-priced rates for 
brachytherapy sources provided in ASCs during that period of time. 
Beginning July 1, 2008, brachytherapy sources applied in ASCs were to 
be paid at the same prospectively set rates that were finalized in the 
CY 2008 OPPS/ASC final rule with comment period (72 FR 67165 through 
67188). Immediately prior to the publication of the CY 2009 OPPS/ASC 
proposed rule, section 142 of the Medicare Improvements for Patients 
and Providers Act of 2008 (Pub. L. 110-275) amended section 
1833(t)(16)(C) of the Act (as amended by section 106 of the Medicare, 
Medicaid, and SCHIP Extension Act of 2007) to extend the requirement 
that brachytherapy sources be paid under the OPPS at charges adjusted 
to cost through December 31, 2009. Therefore, consistent with final ASC 
payment policy, ASCs continued to be paid at contractor-priced rates 
for brachytherapy sources provided integral to ASC covered surgical 
procedures during that period of time.
    Other separately paid covered ancillary services in ASCs, 
specifically corneal tissue acquisition and device categories with OPPS 
pass-through status, do not have prospectively established ASC payment 
rates according to the final policies of the revised ASC payment system 
(72 FR 42502 and 42509). Under the revised ASC payment system, corneal 
tissue acquisition is paid based on the invoiced costs for acquiring 
the corneal tissue for transplantation. As discussed in section IV.A.1. 
of this final rule with comment period, new pass-through device 
categories may be established on a quarterly basis, but currently there 
are no OPPS device pass-through categories that would continue for OPPS 
pass-through payment (and, correspondingly, separate ASC payment) in CY 
2010.
b. Payment for Covered Ancillary Services for CY 2010
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35388), we proposed to 
update the ASC payment rates and make changes to ASC payment indicators 
as necessary to maintain consistency between the OPPS and ASC payment 
system regarding the packaged or separately payable status of services 
and the proposed CY 2010 OPPS and ASC payment rates. The proposed CY 
2010 OPPS payment methodologies for separately payable drugs and 
biologicals and brachytherapy sources were discussed in sections V. and 
VII. of the CY 2010 OPPS/ASC proposed rule (74 FR 35324 through 35333 
and 74 FR 35340 through 35343), respectively, and we proposed to set 
the CY 2010 ASC payment rates for those services equal to the proposed 
CY 2010 OPPS rates.
    Consistent with established ASC payment policy (72 FR 42497), the 
proposed CY 2010 payment for separately payable covered radiology 
services was based on a comparison of the CY 2010 proposed MPFS 
nonfacility PE RVU amounts (74 FR 33687 through 33800) and the proposed 
CY 2010 ASC payment rates calculated according to the ASC standard 
ratesetting methodology and then set at the lower of the two amounts. 
Alternatively, payment for a radiology service may be packaged into the 
payment for the ASC covered surgical procedure if the radiology service 
is packaged under the OPPS. The payment indicators in Addendum BB to 
the CY 2010 OPPS/ASC proposed rule indicated whether the proposed 
payment rates for radiology services are based on the MPFS nonfacility 
PE RVU amount or the ASC standard ratesetting methodology, or whether 
payment for a radiology service is packaged into the payment for the 
covered surgical procedure (payment indicator ``N1''). Radiology 
services that we proposed to pay based on the ASC standard ratesetting 
methodology are assigned payment indicator ``Z2'' (Radiology service 
paid separately when provided integral to a surgical procedure on ASC 
list; payment based on OPPS relative payment weight) and those for 
which the proposed payment is based on the MPFS nonfacility PE RVU 
amount are assigned payment indicator ``Z3'' (Radiology service paid 
separately when provided integral to a surgical procedure on ASC list; 
payment based on MPFS nonfacility PE RVUs).
    All covered ancillary services and their proposed payment 
indicators were listed in Addendum BB to the CY 2010 OPPS/ASC proposed 
rule.
    Comment: One commenter expressed continued disagreement with the 
ASC packaging policy related to discography services. According to the 
policy, the injection procedures reported by CPT codes 62290 (Injection 
procedure for

[[Page 60619]]

discography, each level; lumbar) and 62291 (Injection procedure for 
discography, each level; cervical or thoracic) are packaged into the 
services reported by CPT codes 72285 (Discography, cervical or 
thoracic, radiological supervision and interpretation) and 72295 
(Discography, lumbar, radiological supervision and interpretation) and, 
therefore, separate payment is made to an ASC only when the radiology 
service is provided integral to a covered surgical procedure. The 
commenter asserted that the injection procedures reported by CPT codes 
62290 and 62291 are the major procedures of the discography because 
they require more time and resources than the radiological services 
and, as such, should not be packaged into the lesser radiological 
services.
    The commenter believed that discography has many similarities to 
vertebroplasty, for which separate payment is made under the ASC 
payment system. The commenter stated that both procedures require 
sedation, insertion of a needle into the spine (one into the disc and 
the other into the bone), and image guidance, and that material 
(contrast agent or bone cement, respectively) is injected into the 
spine in both procedures. Based on discography's similarities to the 
separately payable vertebroplasty procedures, the commenter requested 
that CMS implement separate payments for discography and radiological 
supervision and interpretation, recognizing that the injection 
procedures are the major procedures in discography.
    Response: As we explained fully in the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68747), we continue to believe that our 
packaging policy for discography services is appropriate and we do not 
agree that packaging policies under the ASC payment system should vary 
from those under the OPPS. Also, we continue to believe that 
discography is a radiology service, even though a component of it may 
be defined as surgical, and that radiology services are not appropriate 
for performance and separate payment in ASCs unless they are integral 
to covered surgical procedures.
    Comment: Several commenters requested that CMS pay for low dose 
rate (LDR) prostate brachytherapy services under the ASC payment system 
based on the composite APC methodology used under the OPPS rather than 
making two separate payments for the services reported by CPT codes 
55875 (Transperineal placement of needles or catheters into prostate 
for interstitial radioelement application, with or without cystoscopy) 
and 77778 (Interstitial radiation source application; complex). The 
composite APCs were developed for procedures like LDR prostate 
brachytherapy in which two procedures are frequently performed in a 
single hospital visit. The commenters asserted that basing ASC payments 
for the services on the composite APC methodology in which one payment 
is made for the combination of the two services, would result in a more 
accurate payment than is currently being made to ASCs because ASC 
payment is based on the median costs from single-service claims that 
CMS has acknowledged are mostly incorrectly coded claims.
    Response: Although we have tried to align the ASC and OPPS 
packaging polices to the fullest extent, in the case of the LDR 
prostate brachytherapy composite APC and other composite APCs, the 
differences in the payment policies across the two payment systems pose 
some obstacles to making payment to ASCs using the composite packages 
of services. In the case of the two services included in the LDR 
brachytherapy composite APC, the surgical procedure was on the ASC list 
in CY 2007 and, therefore, is subject to the transitional payment 
methodology in CY 2010. The other service in the LDR brachytherapy 
composite APC is a covered ancillary service for which the ASC payment 
is made at the lesser of the ASC rate calculated according to the ASC 
standard ratesetting methodology or the MPFS nonfacility PE RVU amount 
for that year. We do not see a method by which to calculate an ASC rate 
for the package of the two procedures that is consistent with the 
established ASC payment policies. Further, we did not propose to 
implement composite payment policies under the ASC payment system.
    After consideration of the public comments we received, we are 
providing CY 2010 payment for covered ancillary services in accordance 
with the final policies of the revised ASC payment system as described 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 42493 
through 42501). Covered ancillary services and their final CY 2010 
payment indicators are listed in Addendum BB to this final rule with 
comment period.

E. New Technology Intraocular Lenses (NTIOLs)

1. Background
    In the CY 2007 OPPS/ASC final rule with comment period (71 FR 
68176), we finalized our current process for reviewing applications to 
establish new active classes of new technology intraocular lenses 
(NTIOLs) and for recognizing new candidate intraocular lenses (IOLs) 
inserted during or subsequent to cataract extraction as belonging to a 
NTIOL class that is qualified for a payment adjustment. Specifically, 
we established the following process:
     We announce annually in the Federal Register a document 
that proposes the update of ASC payment rates for the following 
calendar year, a list of all requests to establish new NTIOL classes 
accepted for review during the calendar year in which the proposal is 
published and the deadline for submission of public comments regarding 
those requests. Pursuant to Section 141(b)(3) of Public Law 103-432 and 
our regulations at Sec.  416.185(b), the deadline for receipt of public 
comments is 30 days following publication of the list of requests.
     In the Federal Register document that finalizes the update 
of ASC payment rates for the following calendar year, we--
    [cir] Provide a list of determinations made as a result of our 
review of all new class requests and public comments; and
    [cir] Announce the deadline for submitting requests for review of 
an application for a new NTIOL class for the following calendar year.
    In determining whether a lens belongs to a new class of NTIOLs and 
whether the ASC payment amount for insertion of that lens in 
conjunction with cataract surgery is appropriate, we expect that the 
insertion of the candidate IOL would result in significantly improved 
clinical outcomes compared to currently available IOLs. In addition, to 
establish a new NTIOL class, the candidate lens must be distinguishable 
from lenses already approved as members of active or expired classes of 
NTIOLs that share a predominant characteristic associated with improved 
clinical outcomes that was identified for each class. Furthermore, in 
the CY 2007 OPPS/ASC final rule with comment period (71 FR 68227), we 
finalized our proposal to base our determinations on consideration of 
the following factors set out at Sec.  416.195:
     The IOL must have been approved by the FDA and claims of 
specific clinical benefits and/or lens characteristics with established 
clinical relevance in comparison with currently available IOLs must 
have been approved by the FDA for use in labeling and advertising;
     The IOL is not described by an active or expired NTIOL 
class; that is, it does not share the predominant, class-

[[Page 60620]]

defining characteristic associated with improved clinical outcomes with 
designated members of an active or expired NTIOL class; and
     Evidence demonstrates that use of the IOL results in 
measurable, clinically meaningful, improved outcomes in comparison with 
use of currently available IOLs. According to the statute, and 
consistent with previous examples provided by CMS, superior outcomes 
that we consider include the following:
    [cir] Reduced risk of intraoperative or postoperative complication 
or trauma;
    [cir] Accelerated postoperative recovery;
    [cir] Reduced induced astigmatism;
    [cir] Improved postoperative visual acuity;
    [cir] More stable postoperative vision; and/or
    [cir] Other comparable clinical advantages, such as--
    [dec221] Reduced dependence on other eyewear (for example, 
spectacles, contact lenses, and reading glasses);
    [dec221] Decreased rate of subsequent diagnostic or therapeutic 
interventions, such as the need for YAG laser treatment;
    [dec221] Decreased incidence of subsequent IOL exchange; and
    [dec221] Decreased blurred vision, glare, other quantifiable 
symptom or vision deficiency.
    For a request to be considered complete, we require submission of 
the information that is found in the guidance document entitled 
``Application Process and Information Requirements for Requests for a 
New Class of New Technology Intraocular Lens (NTIOL)'' posted on the 
CMS Web site at: http://www.cms.hhs.gov/ASCPayment/08_NTIOLs.asp#TopOfPage.
    As we stated in the CY 2007 OPPS/ASC final rule with comment period 
(71 FR 68180), there are three possible outcomes from our review of a 
request for establishment of a new NTIOL class. As appropriate, for 
each completed request for consideration of a candidate IOL into a new 
class that is received by the established deadline, one of the 
following determinations is announced annually in the final rule 
updating the ASC payment rates for the next calendar year:
     The request for a payment adjustment is approved for the 
candidate IOL for 5 full years as a member of a new NTIOL class 
described by a new HCPCS code;
     The request for a payment adjustment is approved for the 
candidate IOL for the balance of time remaining as a member of an 
active NTIOL class; or
     The request for a payment adjustment is not approved.
    We also discussed our plan to summarize briefly in the final rule 
with comment period the evidence that we reviewed, the public comments, 
and the basis for our determinations in consideration of applications 
for establishment of a new NTIOL class. We established that when a new 
NTIOL class is created, we identify the predominant characteristic of 
NTIOLs in that class that sets them apart from other IOLs (including 
those previously approved as members of other expired or active NTIOL 
classes) and that is associated with improved clinical outcomes. The 
date of implementation of a payment adjustment in the case of approval 
of an IOL as a member of a new NTIOL class would be set prospectively 
as of 30 days after publication of the ASC payment update final rule, 
consistent with the statutory requirement.
2. NTIOL Application Process for Payment Adjustment
    In CY 2007, we posted an updated guidance document to the CMS Web 
site to provide process and information requirements for applications 
requesting a review of the appropriateness of the payment amount for 
insertion of an IOL to ensure that the ASC payment for covered surgical 
procedures includes payment that is reasonable and related to the cost 
of acquiring a lens that is approved as belonging to a new class of 
NTIOLs. This guidance document can be accessed on the CMS Web site at: 
http://www.cms.hhs.gov/ASCPayment/downloads/NTIOLprocess.pdf.
    We note that we have also issued a guidance document entitled 
``Revised Process for Recognizing Intraocular Lenses Furnished by 
Ambulatory Surgery Centers (ASCs) as Belonging to an Active Subset of 
New Technology Intraocular Lenses (NTIOLs).'' This guidance document 
can be accessed on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/Downloads/Request_for_inclusion_in_current_NTIOL_subset.pdf.
    This second guidance document provides specific details regarding 
requests for recognition of IOLs as belonging to an existing, active 
NTIOL class, the review process, and information required for a request 
to review. Currently, there is one active NTIOL class whose defining 
characteristic is the reduction of spherical aberration. CMS accepts 
requests throughout the year to review the appropriateness of 
recognizing an IOL as a member of an active class of NTIOLs. That is, 
review of candidate lenses for membership in an existing, active NTIOL 
class is ongoing and not limited to the annual review process that 
applies to the establishment of new NTIOL classes. We ordinarily 
complete the review of such a request within 90 days of receipt of all 
information that we consider pertinent to our review, and upon 
completion of our review, we notify the requestor of our determination 
and post on the CMS Web site notification of a lens newly approved for 
a payment adjustment as an NTIOL belonging to an active NTIOL class 
when furnished in an ASC.
3. Classes of NTIOLs Approved and New Requests for Payment Adjustment
a. Background
    Since implementation of the process for adjustment of payment 
amounts for NTIOLs that was established in the June 16, 1999 Federal 
Register, we have approved three classes of NTIOLs, as shown in the 
following table, with the associated qualifying IOLs to date:

----------------------------------------------------------------------------------------------------------------
                                                $50 approved for
            NTIOL class              HCPCS   services furnished on   NTIOL characteristic    IOLs eligible for
                                      code          or after                                     adjustment
----------------------------------------------------------------------------------------------------------------
1.................................    Q1001  May 18, 2000, through  Multifocal...........  Allergan AMO Array
                                              May 18, 2005.                                 Multifocal lens,
                                                                                            model SA40N.
2.................................    Q1002  May 18, 2000, through  Reduction in           STAAR Surgical
                                              May 18, 2005.          Preexisting            Elastic Ultraviolet-
                                                                     Astigmatism.           Absorbing Silicone
                                                                                            Posterior Chamber
                                                                                            IOL with Toric
                                                                                            Optic, models
                                                                                            AA4203T, AA4203TF,
                                                                                            and AA4203TL.

[[Page 60621]]

 
3.................................    Q1003  February 27, 2006,     Reduced Spherical      Advanced Medical
                                              through February 26,   Aberration.            Optics (AMO)
                                              2011.                                         Tecnis[supreg] IOL
                                                                                            models Z9000, Z9001,
                                                                                            Z9002, ZA9003, and
                                                                                            AR40xEM and
                                                                                            Tecnis[supreg] 1-
                                                                                            Piece model ZCB00;
                                                                                            Alcon
                                                                                            Acrysof[supreg] IQ
                                                                                            Model SN60WF,
                                                                                            Acrysert Delivery
                                                                                            System model SN60WS
                                                                                            and Acrysof [supreg]
                                                                                            IQ Toric model
                                                                                            SN6ATT; Bausch &
                                                                                            Lomb Sofport AO
                                                                                            models LI61AO and
                                                                                            LI61AOV and Akreos
                                                                                            AO models AO60 and
                                                                                            MI60; STAAR Affinity
                                                                                            Collamer model
                                                                                            CQ2015A and CC4204A
                                                                                            and Elastimide model
                                                                                            AQ2015A; Hoya model
                                                                                            FY-60AD, FC-60AD, PY-
                                                                                            60AD, and PC-60AD.
----------------------------------------------------------------------------------------------------------------

b. Request To Establish New NTIOL Class for CY 2010 and Deadline for 
Public Comment
    As explained in the guidance document on the CMS Web site, the 
deadline for each year's requests for review of the appropriateness of 
the ASC payment amount for insertion of a candidate IOL as a member of 
a new class of NTIOLs is announced in the final rule updating the ASC 
and OPPS payment rates for that calendar year. Therefore, a request for 
review for a new class of NTIOLs for CY 2010 must have been submitted 
to CMS by March 2, 2009, the due date published in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68752). We did not receive any 
requests for review to establish a new NTIOL class for CY 2010 by the 
March 2, 2009 due date.
4. Payment Adjustment
    The current payment adjustment for a 5-year period from the 
implementation date of a new NTIOL class is $50. In the CY 2007 OPPS/
ASC final rule with comment period, we revised Sec.  416.200(a) through 
(c) to clarify how the IOL payment adjustment is made and how an NTIOL 
is paid after expiration of the payment adjustment, and made minor 
editorial changes to Sec.  416.200(d). For CY 2008 and CY 2009, we did 
not revise the payment adjustment amount, and, in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35390), we did not propose to revise the payment 
adjustment amount for CY 2010 in light of our limited experience with 
the revised ASC payment system, implemented initially on January 1, 
2008. Therefore, the final ASC payment adjustment amount for NTIOLS in 
CY 2010 is $50.
5. ASC Payment for Insertion of IOLs
    In accordance with the final policies of the revised ASC payment 
system, for CY 2010, payment for IOL insertion procedures is 
established according to the standard payment methodology of the 
revised payment system, which multiplies the ASC conversion factor by 
the ASC payment weight for the surgical procedure to implant the IOL. 
CY 2010 ASC payment for the cost of a conventional lens is packaged 
into the payment for the associated covered surgical procedures 
performed by the ASC. The HCPCS codes for IOL insertion procedures were 
included in Table 50 in the CY 2010 OPPS/ASC proposed rule (74 FR 
35390), and their proposed CY 2010 payment rates were included in 
Addendum AA to that proposed rule.
    We did not receive any public comments concerning the proposed CY 
2010 payment rates for the insertion of IOL procedures. Therefore, we 
are finalizing the payment rates for the insertion of IOL procedures, 
calculated according to the standard methodology of the revised ASC 
payment system. The HCPCS codes for IOL insertion procedures are 
displayed in Table 72 below, and their final CY 2010 payment rates may 
be found in Addendum AA to this final rule with comment period.

                  Table 72--Insertion of IOL Procedures
------------------------------------------------------------------------
           CY 2009 HCPCS code                CY 2009 long descriptor
------------------------------------------------------------------------
66983..................................  Intracapsular cataract
                                          extraction with insertion of
                                          intraocular lens prosthesis
                                          (one stage procedure).
66984..................................  Extracapsular cataract removal
                                          with insertion of intraocular
                                          lens prosthesis (one stage
                                          procedure), manual or
                                          mechanical technique (eg,
                                          irrigation and aspiration or
                                          phacoemulsification).
66985..................................  Insertion of intraocular lens
                                          prosthesis (secondary
                                          implant), not associated with
                                          concurrent cataract removal.
66986..................................  Exchange of intraocular lens.
------------------------------------------------------------------------

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
    In accordance with Sec.  416.185(a) of our regulations as revised 
by the CY 2007 OPPS/ASC final rule with comment period, CMS announces 
that in order to be considered for payment effective January 1, 2011, 
requests for review of applications for a new class of new technology 
IOLs must be received at CMS by 5 p.m. EST, on March 8, 2010. Send 
requests to ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17, 
Centers for Medicare and Medicaid, 7500 Security Boulevard, Baltimore, 
MD 21244-1850.
    To be considered, requests for NTIOL reviews must include the 
information on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/downloads/NTIOLprocess.pdf.

F. ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we also created final comment indicators for 
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66855). We created Addendum DD1 to define ASC payment 
indicators that we use in Addenda AA and BB to provide payment 
information regarding covered surgical procedures and covered ancillary 
services, respectively, under the revised ASC payment system. The ASC 
payment indicators in Addendum DD1 are intended to capture policy-
relevant characteristics of HCPCS codes that may receive packaged or 
separate payment in ASCs, including: their ASC payment status prior to 
CY 2008; their designation as device-intensive or office-based and the 
corresponding ASC payment methodology; and their classification as 
separately payable radiology services,

[[Page 60622]]

brachytherapy sources, OPPS pass-through devices, corneal tissue 
acquisition services, drugs or biologicals, or NTIOLs.
    We also created Addendum DD2 that lists the ASC comment indicators. 
The ASC comment indicators used in Addenda AA and BB to the proposed 
rules and final rules with comment period serve to identify, for the 
revised ASC payment system, the status of a specific HCPCS code and its 
payment indicator with respect to the timeframe when comments will be 
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final 
rule with comment period to indicate new HCPCS codes for the next 
calendar year or existing codes with substantial revisions to their 
descriptors such that we consider them to be describing new services or 
procedures for which their ASC payment indicators may change. All HCPCS 
codes to which the interim payment indicator is assigned are subject to 
comment.
    The ``CH'' comment indicator was used in Addenda AA and BB to the 
CY 2010 OPPS/ASC proposed rule to indicate that a new payment indicator 
(in comparison with the indicator for the CY 2009 ASC April quarterly 
update) was proposed for assignment to an active HCPCS code for the 
next calendar year; an active HCPCS code was proposed for addition to 
the list of procedures or services payable in ASCs; or an active HCPCS 
code was proposed for deletion at the end of the current calendar year. 
The ``CH'' comment indicators that are published in the final rule with 
comment period are provided to alert readers that a change has been 
made from one calendar year to the next, but do not indicate that the 
change is subject to comment. The full definitions of the payment 
indicators and comment indicators are provided in Addenda DD1 and DD2 
to this final rule with comment period.
2. ASC Payment and Comment Indicators
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35390 through 35391), 
we did not propose any changes to the definitions of the ASC payment 
and comment indicators for CY 2010 and we did not receive any public 
comments on the payment and comment indicators. Therefore, we are 
finalizing our proposed CY 2010 payment and comment indicators in 
Addenda DD1 and DD2 to this final rule with comment period, with 
modification to the meaning of comment indicator ``NI'' as follows. We 
want to clarify our policy regarding the use of comment indicator 
``NI'' in this CY 2010 OPPS/ASC final rule with comment period to 
describe a new code. There are numerous instances in which the 
descriptor of an existing Category I CPT code is substantially revised 
for CY 2010 so that it describes a new service or procedure that could 
have been assigned a new code number by the CPT Editorial Panel and 
that new code number would then have been assigned the ``NI'' comment 
indicator. Because, for CY 2010, not all new services or procedures 
will be assigned a new CPT code number, but instead will be described 
by an existing CPT code number with a substantially revised code 
descriptor, we are assigning the comment indicator ``NI'' to these 
codes in order to allow for comment on these substantially revised 
codes. Like all codes labeled with comment indicator ``NI,'' we will 
respond to public comments and finalize their ASC treatment in the CY 
2011 OPPS/ASC final rule with comment period. In accordance with our 
usual practice, CPT and Level II HCPCS code numbers that are new for CY 
2010 and are ASC covered surgical procedures or covered ancillary items 
and services are also labeled with comment indicator ``NI'' in Addenda 
AA and BB to this final rule with comment period.

G. ASC Policy and Payment Recommendations

    MedPAC was established under section 1805 of the Act to advise the 
U.S. Congress on issues affecting the Medicare program. Sections 
1805(b)(1)(B) and 1805(b)(1)(C) of the Act require MedPAC to submit 
reports to Congress not later than March 1 and June 15 of each year 
that present its Medicare payment policy reviews and recommendations. 
The following section describes a recent MedPAC recommendation that is 
relevant to the ASC payment system.
    The March 2009 MedPAC ``Report to the Congress: Medicare Payment 
Policy'' included the following recommendation relating specifically to 
the ASC payment system for CY 2010:
    Recommendation 2B-4: The Congress should increase payments for 
ambulatory surgery center (ASC) services in calendar year 2010 by 0.6 
percent. In addition, the Congress should require ASCs to submit to the 
Secretary cost data and quality data that will allow for an effective 
evaluation of the adequacy of ASC payment rates.
    CMS Response: As we proposed in the CY 2010 proposed rule (74 FR 
35391), in this final rule with comment period we are increasing the 
payment amounts for the ASC payment system according to our established 
policy as stated in the August 2, 2007 final rule (72 FR 42518 through 
42519). Section 1833(i)(2)(C) of the Act requires that, if the 
Secretary has not updated the ASC payment amounts in a calendar year, 
the payment amounts shall be increased by the percentage increase in 
the Consumer Price Index for All Urban Consumers (CPI-U) as estimated 
by the Secretary for the 12-month period ending with the midpoint of 
the year involved. We indicated that we planned to implement the annual 
updates through an adjustment to the conversion factor under the ASC 
payment system beginning in CY 2010 when the statutory requirement for 
a zero update no longer applies. Further, we noted that we were 
proposing to update the conversion factor for the CY 2010 ASC payment 
system by the percentage increase in the CPI-U, consistent with our 
policy as codified under Sec.  416.171(a)(2).
    We also did not propose to require ASCs to submit cost data to the 
Secretary for CY 2010 and, therefore, will not require cost reporting 
in this final rule with comment period. We explained that the 2006 GAO 
report, ``Medicare: Payment for Ambulatory Surgical Centers Should Be 
Based on the Hospital Outpatient Payment System'' (GAO-07-86), 
concluded that the APC groups in the OPPS reflect the relative costs of 
surgical procedures performed in ASCs in the same way they reflect the 
relative costs of the same procedures when they are performed in HOPDs. 
Consistent with the GAO findings, CMS is using the OPPS as the basis 
for the ASC payment system, which provides for an annual revision of 
the ASC payment rates under the budget neutral ASC payment system. In 
addition, we noted that under the methodology of the revised ASC 
payment system, we do not utilize ASC cost information to set and 
revise the payment rates for ASCs but, instead, rely on the relativity 
of hospital outpatient costs developed for the OPPS, consistent with 
the recommendation of the GAO. Furthermore, we explained that we have 
never required ASCs to routinely submit cost data and expressed our 
concern that a new Medicare requirement for ASCs to do so could be 
administratively burdensome for ASCs. However, in light of the MedPAC 
recommendation, in the CY 2010 OPPS/ASC proposed rule (74 FR 35391), we 
solicited public comment on the feasibility of ASCs submitting cost 
information to CMS, including whether costs should be collected from a 
sample or the universe of ASCs, the administrative burden associated 
with

[[Page 60623]]

such an activity, the form that such a submission could take 
considering existing Medicare requirements for other types of 
facilities and the scope of ASC services, the expected accuracy of such 
cost information, and any other issues or concerns of interest to the 
public on this topic.
    Finally, we noted that section 109(b) of the MIEA-TRHCA (Pub. L. 
109-432) gives the Secretary the authority to implement ASC quality 
measure reporting and to reduce the payment update for ASCs that fail 
to report those required measures. We restated our belief that 
promoting high quality care in the ASC setting through quality 
reporting is highly desirable and fully in line with our efforts under 
other payment systems. For the reasons discussed in section XVI.G. of 
this final rule with comment period, we did not require ASC quality 
data reporting for CY 2010, but our intention is to implement ASC 
quality reporting in a future rulemaking.
    Comment: Commenters' expressed varied opinions regarding the 
feasibility of requiring ASCs to submit cost data to the Secretary. 
MedPAC's comments on CMS' solicitation in the CY 2010 OPPS/ASC proposed 
rule (74 FR 35391) stated that, although ASCs are generally small 
facilities that may have limited resources for collecting cost data, 
other small providers submit cost reports to CMS and, therefore, MedPAC 
did not believe that the resources involved in submitting cost data 
would be an insurmountable obstacle for ASCs. Further, MedPAC suggested 
that the scale of cost reporting for ASCs would be limited to the 
information that analysts would need to assess the adequacy of Medicare 
payments and evaluate the ASC update and may be satisfied by 
implementing either a streamlined cost report or a random survey. If a 
survey method is used, MedPAC recommended that CMS require ASCs to 
respond in order to ensure adequate data.
    Other commenters, mostly those representing hospitals, believed 
that in light of the MedPAC recommendation that ASCs be required to 
submit cost data, ASCs should be required to do so even though ASC cost 
data are not used to set or revise the payment rates. They suggested 
that collection of ASC cost data could be accomplished through 
implementing an ASC cost reporting system or through the periodic 
collection of ASC cost data at the procedure level. On the other hand, 
some commenters (predominantly commenters who represented ASCs) opposed 
a requirement that ASCs submit cost data to CMS. The commenters 
believed that a requirement to submit cost data would be both 
unnecessary and administratively burdensome for ASCs. Further, some 
commenters stated that requiring ASCs to submit cost data that would 
not be used to update or set payment rates would very likely result in 
submissions of data that would not be reliable.
    In its comment on the statement in the proposed rule (74 FR 35391) 
that CMS has the authority under section 109(b) of the MIEA-TRHCA (Pub. 
L. 109-432) to implement ASC quality measure reporting, MedPAC noted 
that CMS was not required to implement that reporting as MedPAC 
recommended in its March 2009 Report to Congress. MedPAC expressed 
concern about CMS' proposal to delay implementation of ASC quality 
measurement reporting and argued it should be technically feasible for 
ASCs to report in CY 2010 on at least the five quality measures that 
were developed by the ASC industry-sponsored ASC Quality Collaboration 
and endorsed by the National Quality Forum. Briefly, these five 
facility-level measures are: patient being burned; patient fall in the 
ASC; errors related to wrong surgery, wrong patient, wrong side, wrong 
site or wrong implant; timing of prophylactic intravenous antibiotic; 
and hospital transfer/admission upon discharge from the ASC. MedPAC 
believed that ASCs could report these five measures without undue 
administrative burden and that CMS should require ASCs to report these 
measures without further delay.
    Many other commenters also urged CMS to implement ASC quality 
reporting as soon as possible and reported that ASCs are anxious to 
begin the process. The commenters believed that CMS should ensure the 
availability of fair and accurate quality data from ASCs in order to 
promote transparency and allow beneficiaries to make meaningful 
comparisons across outpatient surgical settings. Some commenters 
believed that ASCs should be required to report quality data because 
ASCs should be held to the same accountability standards as hospitals 
with respect to the quality of care they deliver and that the ASC 
quality measures should be consistent, and where possible, identical to 
the measures reported by HOPDs.
    Response: We thank all of the commenters for their thoughts 
regarding the feasibility and value of requiring ASCs to submit cost 
data that could be used to evaluate the adequacy of the Medicare ASC 
payment rates. We will keep the commenters' perspectives about 
collecting cost information from ASCs in mind as we further consider 
the adequacy of the Medicare ASC payment rates.
    We also appreciate the commenters' thoughtful remarks and 
suggestions regarding ASC quality reporting. We will be mindful of the 
opinions and information shared in the public comments as we move 
toward implementation of ASC quality reporting.

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

1. Background
    The August 5, 1982 ASC final rule (47 FR 34082) established the 
initial Medicare ASC payment system and implementing Federal 
regulations under 42 CFR part 416. Under Sec.  416.26 of our 
regulations, ASCs operated by hospitals, like other ASCs, must meet the 
applicable conditions for coverage and enter into an agreement with CMS 
in which CMS accepts the ASC as qualified to furnish ambulatory 
surgical services. Sections 416.30(a) through (g) of our regulations 
specify terms of agreement for ASCs. Section 416.30(f) specifies the 
following additional terms of agreement for an ASC operated by a 
hospital--
     The agreement is made effective on the first day of the 
next Medicare cost reporting period of the hospital that operates the 
ASC;
     The ASC participates and is paid only as an ASC, without 
the option of converting to or being paid as a hospital outpatient 
department, unless CMS determines there is good cause to do otherwise; 
and
     Costs incurred by the ASC are treated as a nonreimbursable 
cost center on the hospital's Medicare cost report.
    In addition, Sec.  416.35 provides guidance regarding the 
termination of ASC agreements with CMS. Voluntary terminations are 
those initiated by an ASC and as specified in Sec.  416.35, an ASC may 
terminate its agreement either by sending written notice to CMS or by 
ceasing to furnish services to the community.
    Although some sections of part 416 of the regulations governing 
ASCs have been revised since they were established in 1982, most 
recently for CY 2008 with the adoption of the revised ASC payment 
system, Sec. Sec.  416.30(a) through 416.30(g) have not been changed or 
updated. At the time Sec. Sec.  416.30 and 416.35 were promulgated, 
Medicare paid for hospital outpatient services on a reasonable cost 
basis. In contrast, Medicare initially paid ASCs for a small number of 
surgical procedures at one of only four prospective rates that were

[[Page 60624]]

developed for the ASC payment system using cost data obtained from 
surveys of ASCs. Since then, Medicare has adopted a prospective payment 
system for HOPDs (the OPPS), the ASC list of covered surgical 
procedures and payment rates have been updated a number of times, and, 
beginning in CY 2008, the revised ASC payment system was introduced.
    Under the revised ASC payment system, Medicare greatly increased 
the number and types of surgical procedures that are eligible for 
payment in ASCs. As a result, many more of the same surgical procedures 
may be paid under the OPPS and ASC payment system, with the specific 
payment determined by whether the service is provided by a hospital or 
an ASC. Further, under the current, revised payment methodology, ASC 
payment rates have a direct relationship to the relative payment 
weights under the OPPS for the same services. Today, hospital 
outpatient and ASC surgical procedures are paid based on the relative 
weights adopted for the OPPS, and the difference between payments under 
the two systems is largely a reflection of the differences in capital 
and operating costs attributable to being an ASC or being an HOPD.
    Another change that has taken place since the establishment of the 
Medicare ASC payment system and the implementing regulations at Sec.  
416.30 has been our effort to simplify the Medicare regulations to 
reduce the burden on providers and suppliers. As discussed in the 
August 1, 2002 IPPS final rule (67 FR 50084 through 50090), as part of 
that effort, we revised the provider-based status regulations at Sec.  
413.65 that outline the requirements for a determination that a 
facility or an organization has provider-based status as a department 
or entity of a hospital (main provider). The provider-based status 
rules generally apply to situations where there is a financial 
incentive for a facility or organization to claim affiliation with a 
main provider. The provider-based status rules establish criteria for a 
facility or organization to demonstrate that it is integrated with the 
main provider for payment purposes. We do not make provider-based 
status determinations for certain facilities, listed under Sec.  
413.65(a)(1)(ii) of the regulations, because the outcome of the 
determination (that is, whether a facility, unit, or department is 
found to be freestanding or provider-based) would not affect the 
methodology used to make Medicare or Medicaid payment, the scope of 
benefits available to a Medicare beneficiary in or at the facility, or 
the deductible or coinsurance liability of a Medicare beneficiary in or 
at the facility. According to Sec.  413.65(a)(1)(ii), we do not make 
provider-based determinations for ASCs or other suppliers that have 
active supplier agreements with Medicare because services provided in 
such entities are paid under other fee schedules, specifically in the 
case of ASCs regardless of whether the ASC is operated by a hospital.
    In the August 1, 2002 IPPS final rule (67 FR 50084 through 50090), 
we revised the provider-based status rules where the main providers 
were no longer required to submit an attestation to CMS to demonstrate 
that their provider-based departments or entities met the provider-
based status rules. However, the provider-based department or entity of 
a main provider must still meet the provider-based status rules in 
Sec.  413.65 in order for the main provider to bill for services 
performed in the provider-based department or entity.
2. Change to the Terms of Agreements for ASCs Operated by Hospitals
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35392), in order to 
further streamline our regulations to reduce the administrative burden 
on providers and suppliers, we proposed to revise existing Sec.  
416.30(f)(2) to remove the language requiring a hospital-operated ASC 
to satisfy CMS that there is good cause for its request to become a 
provider-based department of a hospital prior to being recognized as 
such. Specifically, we proposed to remove the language, ``without the 
option of converting to or being paid as a hospital outpatient 
department, unless CMS determines there is good cause to do 
otherwise.'' We believe that this proposed revision to the requirements 
that apply to hospital-operated ASCs is consistent with our earlier 
regulation simplification activities related to the provider-based 
status rules under Sec.  413.65. We believe that we would reduce the 
administrative burden on hospitals and ASCs that terminate their 
supplier agreements with Medicare and bring the requirements into 
closer alignment with the provider-based status rules for other 
facilities or organizations that wish to be integrated with the main 
provider for payment purposes. While an ASC participating in Medicare 
would continue to be paid only as an ASC, an ASC would also continue to 
be able to voluntarily terminate its agreements in accordance with 
Sec.  416.35. Thus, if an ASC chooses to voluntarily terminate its 
agreement as an ASC and a main provider wants to consider the surgical 
facility a provider-based department of that main provider, the 
facility must meet the provider-based status rules under Sec.  413.65.
    We did not receive any public comments on our proposal to revise 
Sec.  416.30(f)(2) to remove the language, ``without the option of 
converting to or being paid as a hospital outpatient department, unless 
CMS determines there is good cause to do otherwise.'' Therefore, we are 
adopting as final our proposed revision of Sec.  416.30(f)(2), without 
modification.

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

1. Background
    In the August 2, 2007 final rule (72 FR 42493), we established our 
policy to base ASC relative payment weights and payment rates under the 
revised ASC payment system on APC groups and relative payment weights. 
Consistent with that policy and the requirement at section 
1833(i)(2)(D)(ii) of the Act that the revised payment system be 
implemented so that it would be budget neutral, the initial ASC 
conversion factor (CY 2008) was calculated so that estimated total 
Medicare payments under the revised ASC payment system in the first 
year would be budget neutral to estimated total Medicare payments under 
the prior (CY 2007) ASC payment system. That is, application of the ASC 
conversion factor was designed to result in aggregate Medicare 
expenditures under the revised ASC payment system in CY 2008 equal to 
aggregate Medicare expenditures that would have occurred in CY 2008 in 
the absence of the revised system, taking into consideration the cap on 
ASC payments in CY 2007 as required under section 1833(i)(2)(E) of the 
Act (72 FR 42521 through 42522).
    We note that we consider the term ``expenditures'' in the context 
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of 
the Act to mean expenditures from the Medicare Part B Trust Fund. We do 
not consider expenditures to include beneficiary coinsurance and 
copayments. This distinction was important for the CY 2008 ASC budget 
neutrality model that considered payments across hospital outpatient, 
ASC, and MPFS payment systems. However, because coinsurance is almost 
always 20 percent for ASC services, this interpretation of expenditures 
has minimal impact for subsequent budget neutrality adjustments 
calculated within the revised ASC payment system.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 
through 66858), we set out a step-by-step illustration of the final 
budget

[[Page 60625]]

neutrality adjustment calculation based on the methodology finalized in 
the August 2, 2007 final rule (72 FR 42521 through 42531) and as 
applied to updated data available for the CY 2008 OPPS/ASC final rule 
with comment period. The application of that methodology to the data 
available for the CY 2008 OPPS/ASC final rule with comment period 
resulted in a budget neutrality adjustment of 0.65.
    For CY 2008, we adopted the OPPS relative payment weights as the 
ASC relative payment weights for most services and, consistent with the 
final policy, we calculated the CY 2008 ASC payment rates by 
multiplying the ASC relative payment weights by the final CY 2008 ASC 
conversion factor of $41.401. For covered office-based surgical 
procedures and covered ancillary radiology services, the established 
policy is to set the relative payment weights so that the national 
unadjusted ASC payment rate does not exceed the MPFS unadjusted 
nonfacility PE RVU amount. Further, as discussed in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66841 through 66847), we also 
adopted alternative ratesetting methodologies for specific types of 
services (for example, device-intensive procedures).
    As discussed in the August 2, 2007 final rule (72 FR 42518) and as 
codified under Sec.  416.172(c) of the regulations, the revised ASC 
payment system accounts for geographic wage variation when calculating 
individual ASC payments by applying the pre-floor and pre-reclassified 
hospital wage indices to the labor-related share, which is 50 percent 
of the ASC payment amount. Beginning in CY 2008, CMS accounted for 
geographic wage variation in labor cost when calculating individual ASC 
payments by applying the pre-floor and pre-reclassified hospital wage 
index values that CMS calculates for payment, using updated Core Based 
Statistical Areas (CBSAs) issued by the Office of Management and Budget 
in June 2003. The reclassification provision provided at section 
1886(d)(10) of the Act is specific to hospitals. We believe the use of 
the most recent available raw pre-floor and pre-reclassified hospital 
wage indices results in the most appropriate adjustment to the labor 
portion of ASC costs. In addition, use of the unadjusted hospital wage 
data avoids further reductions in certain rural statewide wage index 
values that result from reclassification. We continue to believe that 
the unadjusted hospital wage indices, which are updated yearly and are 
used by many other Medicare payment systems, appropriately account for 
geographic variation in labor costs for ASCs.
    Comment: Several commenters recommended that CMS adopt for the ASC 
payment system the same wage index values used for hospital payment 
under the OPPS. They believed that applying different wage indices in 
the ASC payment system than are used in the OPPS is inequitable 
because, in many market areas, ASCs compete directly with hospitals for 
employees with skills and functions that are applicable in both 
settings. The commenters believed that, in all but a few instances, the 
adjusted wage index values used in the OPPS would be higher than the 
current wage index values used in the ASC payment system. Specifically, 
the commenters believed the adjustments that are applied to the wage 
indices used in the OPPS system also should be applied to the ASC wage 
indices. The adjustments that commenters requested be applied to the 
wage index values used in the ASC payment system are: an imputed 
statewide rural wage index for States with no counties outside of an 
urban area; a mechanism to prevent urban areas from having indices 
below the statewide rural wage index; a mechanism to prevent the wage 
index of urban areas that cross state lines from falling below the 
State-specific rural floor; and an adjustment for counties where a 
significant proportion of residents commute to other counties for work.
    Response: We continue to believe that the unadjusted hospital wage 
indices, which are updated yearly and are used by almost all Medicare 
payment systems, appropriately account for geographic variance in labor 
costs for ASCs. The post-reclassification wage indices for 1886(d) 
hospitals include many statutory adjustments specific to 1886(d) 
hospitals and some regulatory adjustments for 1886(d) hospitals 
including, but not limited to, the areas requested by commenters: an 
imputed statewide rural wage index for States with no counties outside 
of an urban area; a ``rural floor'' mechanism to prevent urban areas 
from having indices below the statewide rural wage index; a mechanism 
to prevent the wage index of urban areas that cross state lines from 
falling below the State-specific rural floor; and an adjustment for 
counties where a significant proportion of residents commute to other 
counties. Because many of these adjustments are specified in statute 
for 1886(d) hospitals, we believe it is appropriate to apply these 
adjustments to 1886(d) hospitals. The OPPS adopts the post-
reclassification wage indices (adjusted hospital wage indices) because 
the majority of participating hospitals are section 1886(d) hospitals 
and, in these hospitals, the exact same personnel staff the ancillary 
departments of the hospital that simultaneously treat both inpatients 
and outpatients. For payments systems for other providers and suppliers 
for which there is no specific statutory provision for adjustments to 
the wage index values, CMS calculates and employs unadjusted hospital 
wage indices that reflect the reported cost of hospital labor in each 
area. Specifically, CMS uses some form of the unadjusted hospital wage 
indices to pay long-term care, psychiatric, and inpatient 
rehabilitation hospitals for inpatient care, as well as skilled nursing 
facilities, hospice programs, home health agencies, and ESRD 
facilities. CMS historically has only applied the adjusted, post-
reclassification hospital wage indices to pay section 1886(d) hospitals 
for both inpatient and outpatient services for the reasons noted above. 
It is our policy to treat ASCs as we do all other providers and 
suppliers using hospital wage index values.
    Further, adopting the post-reclassification hospital wage indices 
with rural floor and associated statewide budget neutrality adjustment 
would not increase overall ASC payment because we apply a budget 
neutrality adjustment for changes in the wage indices to the conversion 
factor. Therefore, any anticipated increases in aggregate ASC payment 
created by adopting the post-reclassification wage indices would lead 
to a comparable downward adjustment to the conversion factor to ensure 
that the only increase in payments to ASCs are those allowed by the 
update factor. We discuss our budget neutrality adjustment for changes 
to the wage indices below in section XV.I.2.b. of this final rule with 
comment period.
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2010 and Future 
Years
    We update the ASC relative payment weights each year using the 
national OPPS relative payment weights (and MPFS nonfacility PE RVU 
amounts, as applicable) for that same calendar year and uniformly scale 
the ASC relative payment weights for each update year to make them 
budget neutral (72 FR 42531 through 42532). In the CY 2010 OPPS/ASC 
proposed rule (74 FR 35393), consistent with our established policy, we 
proposed to scale the CY 2010 relative payment weights for ASCs 
according to the following method. Holding ASC utilization and the mix 
of

[[Page 60626]]

services constant from CY 2008, for CY 2010, we proposed to compare the 
total payment weight using the CY 2009 ASC relative payment weights 
under the 50/50 blend (of the CY 2007 payment rate and the ASC payment 
rate calculated under the ASC standard ratesetting methodology) with 
the total payment weight using the CY 2010 ASC relative payment weights 
under the 25/75 blend (of the CY 2007 ASC payment rate and the ASC 
payment rate calculated under the ASC standard ratesetting methodology) 
to take into account the changes in the OPPS relative payment weights 
between CY 2009 and CY 2010. We proposed to use the ratio of CY 2009 to 
CY 2010 total payment weight (the weight scaler) to scale the ASC 
relative payment weights for CY 2010. The proposed CY 2010 ASC scaler 
was 0.9514 and scaling would apply to the ASC relative payment weights 
of the covered surgical procedures and covered ancillary radiology 
services for which the ASC payment rates are based on OPPS relative 
payment weights.
    Scaling would not apply in the case of ASC payment for separately 
payable covered ancillary services that have a predetermined national 
payment amount (that is, their national ASC payment amounts are not 
based on OPPS relative payment weights), such as drugs and biologicals 
that are separately paid or services that are contractor-priced or paid 
at reasonable cost in ASCs. Any service with a predetermined national 
payment amount would be included in the ASC budget neutrality 
comparison, but scaling of the ASC relative payment weights would not 
apply to those services. The ASC payment weights for those services 
without predetermined national payment amounts (that is, those services 
with national payment amounts that would be based on OPPS relative 
payment weights if a payment limitation did not apply) would be scaled 
to eliminate any difference in the total payment weight between the 
current year and the update year.
    The proposed weight scaler used to model CY 2010 ASC fully 
implemented payment rates in order to reflect our estimated of rates if 
there was no transition was equal to 0.9329. We applied this scaler to 
the payment weights subject to scaling, in order to estimate the ASC 
payment rates for CY 2010 without the transition, for purposes of the 
ASC impact analysis discussed in section XXI.C. of the CY 2010 OPPS/ASC 
proposed rule (74 FR 35418).
    For any given year's ratesetting, we typically use the most recent 
full calendar year of claims data to model budget neutrality 
adjustments. When we developed the CY 2010 OPPS/ASC proposed rule, we 
had available 98 percent of CY 2008 ASC claims data. In the CY 2010 
OPPS/ASC proposed rule (74 FR 35393), we reported that we had 95 
percent of the CY 2008 ASC claims data available to model proposed 
revisions to the CY 2010 ASC payment system, but we have since 
confirmed that we had a slightly higher percentage available at that 
time. For this final rule with comment period, we have close to 100 
percent of all claims for CY 2008. CY 2010 is the first year that the 
claims data used for ratesetting include new covered surgical 
procedures and covered ancillary services under the revised ASC payment 
system. Because we had almost all of the CY 2008 claims data available 
when we calculated the conversion factor and budget neutrality 
adjustments for our proposed rule, for the final CY 2010 budget 
neutrality adjustments, we did not expect there would be significant 
changes in our calculated budget neutrality adjustments (the weight 
scaler or wage adjustment) that could be attributable to more 
utilization available from additional claims data for this CY 2010 
OPPS/ASC final rule with comment period.
    To create an analytic file to support calculation of the weight 
scaler and budget neutrality adjustment for the wage index (discussed 
below), we summarized available CY 2008 ASC claims by provider and by 
HCPCS code. We created a unique supplier identifier solely for the 
purpose of identifying unique ASCs within the CY 2008 claims data. We 
used the supplier zip code reported on the claim to associate State, 
county, and CBSA with each ASC. This file, available to the public as a 
supporting data file for the CY 2010 OPPS/ASC proposed rule, is posted 
on the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/01_Overview.asp#TopOfPage.
    Comment: Many commenters again expressed their opposition to 
scaling the ASC relative payment weights. Many of the commenters on the 
CY 2010 proposed rule offered the same views as the public commenters 
on the CY 2009 OPPS/ASC final rule with comment period, the year when 
CMS first applied the scaling policy that was finalized in the August 
2, 2007 final rule. The commenters expressed many concerns, including 
that scaling is contrary to the intent of using the cost-based OPPS 
relative payment weights as the bases for determining the relative 
payments for the same services in ASCs and that scaling would continue 
to erode the payment relationship between the OPPS and ASC payment 
system. Further, the commenters stated that increasing the difference 
between ASC and OPPS payments is in direct conflict with the goal of 
ensuring that patients have continued access to surgical care in the 
lowest priced setting appropriate to their clinical needs. They 
asserted that, although scaling is intended to maintain budget 
neutrality within the ASC payment system, it is instead creating 
increasingly large payment differentials between the ASC and OPPS 
payments for the same services, without evidence of growing differences 
in capital and operating costs between the two settings.
    The commenters argued that CMS is not required to scale the ASC 
relative weights and that it should use its authority to suspend the 
application of scaling the ASC relative weights for CY 2010. They noted 
that CMS established at Sec.  416.171(e)(2) of the regulations a 
process by which it may (emphasis added) make annual adjustment to the 
relative payment weights, as needed (emphasis added).
    The commenters also expressed their continuing disagreement with 
aspects of the budget neutrality adjustment methodology used by CMS to 
establish the conversion factor. They provided the results of their 
comparison of actual volume and payment for services that were new to 
the ASC list in CY 2008. Based upon the results of their analyses of CY 
2008 claims data, the commenters concluded that the migration estimates 
used by CMS to establish budget neutrality in CY 2008 were several 
times higher than the actual ASC spending for newly covered procedures 
and, therefore, that the resulting CY 2008 conversion factor was too 
low. They believed that these findings provide a further basis for CMS 
not to scale the ASC relative payment weights for CY 2010 after the 
weights are scaled under the OPPS.
    In addition, many of the commenters reasoned that because the ASC 
payment system is based on the OPPS relative weights, the weights 
should be equal in both settings and because the weights are scaled to 
ensure budget neutrality under the OPPS, the weights should not be 
scaled again to ensure budget neutrality under the ASC system. The 
commenters believed that the CY 2010 OPPS relative payment weights 
reflected real growth in the relative costs of surgical services 
provided in HOPDs and that the ASC scaler should not reclaim dollars 
from the ASC payment system because there also has been real cost 
growth for the surgical services provided in ASCs. However, they 
acknowledge that suspending

[[Page 60627]]

application of the scaler for CY 2010 would result in an aggregate 
increase in ASC spending in that year.
    The commenters expressed concern that other payment adjustments are 
depressing the ASC payments for many procedures, including the freeze 
on the ASC payment update through CY 2009 and the transition policy and 
that scaling further reduces rates to inappropriately low levels. 
Further, the commenters argued that scaling is forcing procedures for 
which the OPPS median cost increased from CY 2009 to CY 2010 to finance 
the transitional payment policies, and that the procedures the 
transition was intended to aid are the procedures financing the bulk of 
the scaler.
    Response: Many of these comments are similar to public comments on 
the proposal for the revised ASC payment system that we responded to in 
the August 2, 2007 final rule (72 FR 42531 through 42533). For example, 
with regard to scaling, we addressed these same concerns raised by 
commenters ``that annual rescaling would cause divergence of the 
relative weights between the OPPS and the revised ASC payment system 
for individual procedures'' in the August 2, 2007 final rule (72 FR 
42532). We refer the commenters to that discussion for our detailed 
response in promulgating the scaling policy that was initially applied 
in CY 2009 (72 FR 42531 through 42533). Below, we address new issues 
raised by the commenters and provide a general summary of some of the 
relevant responses from the August 2, 2007 final rule and the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68754 through 68755).
    The ASC weight scaling methodology is entirely consistent with the 
OPPS methodology for scaling the relative payment weights and, for the 
most part, the increasing payment differentials between the ASC and 
OPPS payments for the same services are not attributable to scaling ASC 
relative payment weights. Considerations of differences between the 
capital and operating costs of ASCs and HOPDs are not part of the ASC 
standard ratesetting methodology, which relies only on maintaining the 
same relativity of payments for services under the two payment systems, 
as well as budget neutrality within each payment system. Furthermore, 
unlike HOPDs, we do not have information about the costs of ASC 
services in order to assess differences in capital and operating costs 
over time between the two settings. In order to maintain budget 
neutrality of the ASC payment system, we need to adjust for the effects 
of changes in relative weights. The ASC payment system adopts the OPPS 
relative weights as the mechanism for apportioning total payments, 
after application of the update factor, among all of the services 
covered by the ASC payment system. The OPPS relative weights serve the 
same purpose in the OPPS. The OPPS relative weights do not represent an 
estimate of absolute cost of any given procedure; rather, they reflect 
our estimate of the cost of the procedure within the context of our 
cost estimation methodology for the OPPS. With the exception of 
services with a predetermined national payment amount, the use of a 
uniform scaling factor for changes in total weight between years in the 
ASC payment system does not alter the relativity of the OPPS payment 
weights as used in the ASC payment system. Differences in the 
relativity between the ASC relative payment weights and the OPPS 
relative payment weights are not driven by the application of the 
uniform scaling factor. The ASC weight scaling methodology is entirely 
consistent with the OPPS weight scaling methodology and the weights 
serve the same purpose in both systems, to apportion total budget 
neutral payment allowed under the update.
    We do not believe that the application of the scaler will lead to 
beneficiary access problems. We believe that the fully implemented 
relative weights will be representative of relative costs across all 
ASC services and that payments will support the continued provision of 
high quality surgical procedures to Medicare beneficiaries in the most 
appropriate settings. We also expect that, over time, ASCs will provide 
an increased breadth of services. Appropriate beneficiary access to 
services in appropriate care settings is always an important concern 
and we will continue to monitor access under the revised ASC payment 
system.
    As stated in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68754), with respect to the use of ``as needed'' in the text of 
Sec.  416.171(e)(2) that commenters have interpreted to mean that CMS 
has the authority to suspend scaling the relative payment weights if it 
determines there is not a need to do so, the phrase does not mean that 
CMS will determine whether or not to adjust for budget neutrality. 
Rather, it means that CMS adjusts the relative payment weights as 
needed to ensure budget neutrality and, as acknowledged by the 
commenters on the CY 2010 OPPS/ASC proposed rule, if we were not to 
scale the ASC relative payment weights, we estimate that the CY 2010 
revisions would not be budget neutral.
    We agree that there are differences between the service volume 
estimates CMS used to establish budget neutrality based on CY 2006 
claims data and those reflected in the CY 2008 claims data. In the 
final regulations implementing the revised ASC payment system, we made 
our best actuarial estimate to ensure budget neutrality. We did not 
intend to revisit the actuarial budget neutrality regardless of whether 
or not it could be determined that there was a difference between 
actual experience and our underlying data assumptions and regardless of 
whether or not any difference that could be determined resulted in 
increased or decreased expenditures under the revised ASC payment 
system.
    Establishing budget neutrality under the OPPS does not result in 
budget neutrality under the revised ASC payment system; it is only to 
maintain budget neutrality under the OPPS. Scaling the ASC relative 
payment weights is an integral and separate process for maintaining 
budget neutrality under the ASC prospective payment system. Scaling is 
the budget neutrality adjustment that ensures that changes in the 
relative weights do not, in and of themselves, change aggregate payment 
to ASCs. It ensures a specific amount of payment for ASCs in any given 
year. Without scaling, total ASC payment could increase or decrease 
relative to changes in hospital outpatient payment.
    Although the commenters believed that scaling prevents increases in 
ASC spending that may be appropriate because ASC costs have increased 
over time, increases in cost in a prospective payment system are 
handled by the update factor. In a budget neutral system, we remove the 
independent effects of increases or decreases in payments as a result 
of changes in the relative payment weights or the wage indices and 
constrain increases to the allowed update factor. Therefore, changes in 
aggregate ASC expenditures related to payment rates should be 
determined by the update to the ASC conversion factor, the CPI-U.
    Regarding commenters' concern that other payment adjustments, 
including the freeze on ASC payment updates and the transitional 
payment policy, are depressing the ASC payments for many procedures and 
that scaling has a disproportionate effect on some covered surgical 
procedures, we note that the statute set a zero percent update for CY 
2008 and CY 2009. We implemented the 4-year transitional payment policy 
in response to public comments that persuaded us that ASCs would 
benefit from more gradual implementation of the revised ASC payment 
rates, especially for historically high volume

[[Page 60628]]

procedures because the prior rates for those procedures were 
disproportionately high compared to the prior rates for other ASC 
procedures. As explained in the August 2, 2007 final rule (72 FR 
42542), a major effect of the revised ASC payment system is 
redistribution of payments across all ASC procedures. Historically, the 
highest volume ASC procedures had payment rates that were close to the 
payments in HOPDs and, as such, accounted for most of the total 
Medicare payments to ASCs. As a result, payments for many of those high 
volume services are the most adversely affected under the revised 
payment system as the relative weights across all ASC procedures become 
more closely aligned with those of the OPPS. We appreciate the 
commenters' concern that scaling is forcing procedures for which the 
OPPS median cost increased from CY 2009 to CY 2010 to finance the 
transitional payment policies, and that the procedures the transition 
was intended to aid are the procedures financing the bulk of the 
scaler. However, as already noted, the ASC payment system adopts the 
relativity of the OPPS weights, not the actual median costs or payments 
for OPPS services. It is fully consistent that a budget neutrality 
adjustment for differences in aggregate payment weight, specifically 
scaling, would change the amount of payment under the ASC payment 
system relative to the OPPS median cost and to the previous year's 
payment under the ASC payment system for the same service. It is 
critical that the amount of payment allowed under the ASC payment 
system, after application of the update factor, distributes the 
appropriate proportional payment amount to each service. The same 
statement is true for commenters' concerns that scaling is reducing 
payment for services explicitly designated as receiving a transition 
payment. Scaling ensures that the changes in the relative weights do 
not, in and of themselves, change aggregate payment to ASCs. The 
calculation of the transition weight over a fully implemented weight 
for any procedures paid in CY 2007 under the previous ASC payment 
system changes the relativity of the weight of those services relative 
to other services newly covered by the revised ASC payment system. This 
clearly changes the proportional resources distributed to services 
subject to the transition compared to what would be distributed under a 
fully implemented system. However, entitlement to a transition weight 
under a budget neutral system does not guarantee a specific amount of 
payment in absolute dollar terms. A service that experienced an 
increase in the OPPS relative weight may very well experience a decline 
in payment relative to the previous year's actual payment rate because 
the scaling necessary to maintain equal weight in the system is greater 
than the proportional increase in the OPPS relative weight portion of 
the transition weight. Again, this outcome is fully consistent with 
implementation of a budget neutral prospective payment system with a 
specific update factor.
    For this final rule with comment period, we used our proposed 
methodology described above to calculate the scaler adjustment using 
updated ASC claims data. The final CY 2010 scaler adjustment for the 
third year of the transition is 0.9567. This scaler adjustment is 
necessary to budget neutralize the difference in aggregate ASC payments 
calculated using the CY 2009 ASC transitional (50/50 blend) relative 
payment weights and the CY 2010 ASC transitional (75/25 blend) relative 
payment weights. We calculated the difference in aggregate payments due 
to the change in relative payment weights (including drugs and 
biologicals) holding constant the ASC conversion factor, the most 
recent CY 2008 ASC utilization from our claims data, and the CY 2009 
wage index values. For this final CY 2010 calculation, we used the CY 
2009 ASC conversion factor updated by the CY 2010 CPI-U, which is 1.2 
percent.
    After consideration of the public comments we received, we are 
finalizing our CY 2010 ASC relative payment weight scaling methodology, 
without modification. The final CY 2010 ASC payment weight scaler is 
0.9567.
b. Updating the ASC Conversion Factor
    Under the OPPS, we typically apply a budget neutrality adjustment 
for provider-level changes, most notably a change in the wage index 
values for the upcoming year, to the conversion factor. In the CY 2010 
OPPS/ASC proposed rule (74 FR 35393), consistent with our final ASC 
payment policy, for the CY 2010 ASC payment system, we proposed to 
calculate and apply the pre-floor and pre-reclassified hospital wage 
indices that are used for ASC payment adjustment to the ASC conversion 
factor, just as the OPPS wage index adjustment is calculated and 
applied to the OPPS conversion factor (73 FR 41539). For CY 2010, we 
calculated this proposed adjustment for the ASC payment system by using 
the most recent CY 2008 claims data available and estimating the 
difference in total payment that would be created by introducing the CY 
2010 pre-floor and pre-reclassified hospital wage indices. 
Specifically, holding CY 2008 ASC utilization and service-mix and CY 
2010 national payment rates after application of the weight scaler 
constant, we calculated the total adjusted payment using the CY 2009 
pre-floor and pre-reclassified hospital wage indices and the total 
adjusted payment using the proposed CY 2010 pre-floor and pre-
reclassified hospital wage indices. We used the 50-percent labor-
related share for both total adjusted payment calculations. We then 
compared the total adjusted payment calculated with the CY 2009 pre-
floor and pre-reclassified hospital wage indices to the total adjusted 
payment calculated with the proposed CY 2010 pre-floor and pre-
reclassified hospital wage indices and applied the resulting ratio of 
0.9996 (the proposed CY 2010 ASC wage index budget neutrality 
adjustment) to the CY 2009 ASC conversion factor to calculate the 
proposed CY 2010 ASC conversion factor.
    Section 1833(i)(2)(C) of the Act requires that, if the Secretary 
has not updated the ASC payment amounts in a calendar year, the payment 
amounts shall be increased by the percentage increase in the CPI-U as 
estimated by the Secretary for the 12-month period ending with the 
midpoint of the year involved. However, section 1833(i)(2)(C)(iv) of 
the Act required that the increase of ASC payment amounts for CYs 2008 
and 2009 equal zero percent. As discussed in the August 2, 2007 final 
rule, we adopted a final policy to update the ASC conversion factor 
using the CPI-U in order to adjust ASC payment rates for CY 2010 and 
subsequent years (72 FR 42518 through 42519 and Sec.  416.171(a)(2)). 
In the CY 2010 OPPS/ASC proposed rule (74 FR 35394), we proposed to 
implement the annual updates through an adjustment to the ASC 
conversion factor beginning in CY 2010 when the statutory requirement 
for a zero update no longer applies.
    For our proposed rule, for the 12-month period ending with the 
midpoint of CY 2010, the Secretary estimated that the CPI-U is 0.6 
percent. Therefore, we proposed to apply to the ASC conversion factor a 
0.6 percent increase for CY 2010.
    Thus, for CY 2010, we proposed to adjust the CY 2009 ASC conversion 
factor ($41.393) by the wage adjustment for budget neutrality of 0.9996 
and the update of 0.6 percent, which resulted in a proposed CY 2010 ASC 
conversion factor of $41.625.
    Comment: Many commenters requested that CMS adopt the hospital

[[Page 60629]]

market basket to update the ASC payment system. They explained that not 
only is the CPI-U lower than the hospital market basket but it is not 
appropriate for updating health care providers because, unlike the 
hospital market basket which analyzes hospital spending, the CPI-U is 
designed to capture household spending. The commenters stated that in 
the most recent years, the CPI-U has been dominated by energy and 
housing costs rather than healthcare provider spending. Further, the 
commenters stated that CMS' use of the midyear CPI-U percent change is 
problematic because other federal agencies, such as the Bureau of Labor 
Statistics and the Congressional Budget Office, use an end-of-year 
timeframe. They believed that a negative consequence of the midyear 
timing for CMS' forecasted CPI-U percent change is that the CPI-U used 
to update the ASC payment system cannot be validated directly with an 
independent source.
    The commenters argued that the difference between the ASC and OPPS 
conversion factors is not due to real differences in the growth of 
costs of goods and services furnished by ASCs and HOPDs and should not 
be perpetuated. The commenters asserted that CMS clearly has the 
authority to use an alternative update mechanism, and believed CMS 
should adopt a more appropriate update for the ASC payment system to 
prevent further increases in differential between the ASC and OPPS 
conversion factors.
    Response: We understand the commenters' concerns regarding the 
update to the conversion factor for CY 2010, but note that we did not 
propose to change the conversion factor update methodology. We refer 
readers to the discussion in the August 2, 2007 final rule on this 
issue (72 FR 42518 through 42519).
    After consideration of the public comments we received, we are 
applying our established methodology for determining the final CY 2010 
ASC conversion factor. Using more complete CY 2008 data for this final 
rule with comment period than was available for the proposed rule, we 
calculated a wage index budget neutrality adjustment of 0.9996 and the 
updated CPI-U projected for the midpoint of CY 2010 is 1.2 percent. The 
final ASC conversion factor of $41.873 is the product of the CY 2009 
conversion factor of $41.393 multiplied by 0.9996 and the 1.2 percent 
CPI-U.
3. Display of ASC Payment Rates
    Addenda AA and BB to this CY 2010 OPPS/ASC final rule with comment 
period display the updated ASC payment rates for CY 2010 for covered 
surgical procedures and covered ancillary services, respectively. These 
addenda contain several types of information related to the CY 2010 
payment rates. Specifically, in Addendum AA, a ``Y'' in the column 
titled ``Subject to Multiple Procedure Discounting'' indicates that the 
surgical procedure would be subject to the multiple procedure payment 
reduction policy. As discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66829 through 66830), most covered surgical 
procedures are subject to a 50-percent reduction in the ASC payment for 
the lower-paying procedure when more than one procedure is performed in 
a single operative session. Display of the comment indicator ``CH'' in 
the column titled ``Comment Indicator'' indicates a final change in 
payment policy for the item or service, including identifying 
discontinued HCPCS codes, designating items or services newly payable 
under the ASC payment system, and identifying items or services with 
changes in the ASC payment indicator for CY 2010. Display of the 
commenter indicator ``NI'' in the column titled ``Comment Indicator'' 
indicates that the code is new (or substantially revised) and that the 
payment indicator assignment is an interim assignment that is open to 
comment on this final rule with comment period.
    The values displayed in the column titled ``CY 2010 Third Year 
Transition Payment Weight'' are the relative payment weights for each 
of the listed services for CY 2010, the third year of the 4-year 
transition period. The CY 2010 ASC payment rates for the covered 
surgical procedures subject to transitional payment (payment indicators 
``A2'' and ``H8'' in Addendum AA) are based on a blend of 25 percent of 
the CY 2007 ASC payment rate for the procedure and 75 percent of the CY 
2010 ASC rate calculated under the ASC standard ratesetting methodology 
before scaling for budget neutrality. The payment weights for all 
covered surgical procedures and covered ancillary services whose ASC 
payment rates are based on OPPS relative payment weights are scaled for 
budget neutrality. Thus, scaling was not applied to the device portion 
of the device-intensive procedures, services that are paid at the MPFS 
nonfacility PE RVU amount, separately payable covered ancillary 
services that have a predetermined national payment amount, such as 
drugs and biologicals that are separately paid under the OPPS, or 
services that are contractor-priced or paid at reasonable cost in ASCs.
    To derive the CY 2010 national unadjusted payment rate displayed in 
the ``CY 2010 Third Year Transition Payment'' column, each ASC payment 
weight in the ``CY 2010 Third Year Transition Payment Weight'' column 
is multiplied by the final CY 2010 ASC conversion factor of $41.873. 
The conversion factor includes a budget neutrality adjustment for 
changes in the wage index values and the CPI-U percentage increase.
    In Addendum BB, there are no relative payment weights displayed in 
the ``CY 2010 Third Year Transition Payment Weight'' column for items 
and services with predetermined national payment amounts, such as 
separately payable drugs and biologicals. The ``CY 2010 Third Year 
Transition Payment'' column displays the final CY 2010 national 
unadjusted ASC payment rates for all items and services. The CY 2010 
ASC payment rates listed in the Addendum AA for separately payable 
drugs and biologicals are based on ASP data used for payment in 
physicians' offices in October 2009.
    For informational purposes only, we also have posted on the CMS Web 
site the fully transitioned ASC payment rates for CY 2010. These rates 
do not represent what the payment rates would be once the transition is 
over, only what the CY 2010 rates would be if there were no transition. 
The Web site address is: https://www.cms.hhs.gov/ASCPayment/ ASCPayment/.
    We did not receive any public comments regarding the continuation 
of our policy to provide CY 2010 ASC payment information as detailed in 
Addenda AA and BB. Therefore, Addenda AA and BB to this final rule with 
comment period display the updated ASC payment rates for CY 2010 for 
covered surgical procedures and covered ancillary services, 
respectively, and provide additional information related to the CY 2010 
rates.

XVI. Reporting Quality Data for Annual Payment Rate Updates

A. Background

1. Overview
    CMS has implemented quality measure reporting programs for multiple 
settings of care. These programs promote higher quality, more efficient 
health care for Medicare beneficiaries. The quality data reporting 
program for hospital outpatient care, known as the Hospital Outpatient 
Quality Data Reporting Program (HOP QDRP), has been generally modeled 
after the program for hospital inpatient services,

[[Page 60630]]

the Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) 
program. Both of these quality reporting programs for hospital 
services, as well as the program for physicians and other eligible 
professionals, known as the Physician Quality Reporting Initiative 
(PQRI), have financial incentives for reporting of quality data to CMS. 
CMS has also implemented quality reporting programs for home health 
agencies and skilled nursing facilities that are based on conditions of 
participation, and an end-stage renal disease quality reporting program 
that is based on conditions for coverage.
2. Hospital Outpatient Quality Data Reporting Under Section 109(a) of 
Pub. L. 109-432
    Section 109(a) of the MIEA-TRHCA (Pub. L. 109-432) amended section 
1833(t) of the Act by adding a new subsection (17) that affects the 
payment rate update applicable to OPPS payments for services furnished 
by hospitals in outpatient settings on or after January 1, 2009. 
Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, states that subsection 
(d) hospitals that fail to report data required for the quality 
measures selected by the Secretary in the form and manner required by 
the Secretary under section 1833(t)(17)(B) of the Act will receive a 
2.0 percentage point reduction to their annual payment update factor. 
Section 1833(t)(17)(B) of the Act requires that hospitals submit 
quality data in a form and manner, and at a time, that the Secretary 
specifies. Section 1833(t)(17)(C)(i) of the Act requires the Secretary 
to develop measures appropriate for the measurement of the quality of 
care (including medication errors) furnished by hospitals in outpatient 
settings, that these measures reflect consensus among affected parties 
and, to the extent feasible and practicable, that these measures 
include measures set forth by one or more national consensus building 
entities.
    The National Quality Forum (NQF) is a voluntary consensus standard-
setting organization that is composed of a diverse representation of 
consumer, purchaser, provider, academic, clinical, and other health 
care stakeholder organizations. NQF was established to standardize 
health care quality measurement and reporting through its consensus 
development process. We generally prefer to adopt NQF-endorsed measures 
for CMS quality reporting programs. However, we believe that consensus 
among affected parties also can be reflected by other means, including: 
consensus achieved during the measure development process; consensus 
shown through broad acceptance and use of measures; and consensus 
through public comment. We also note that section 1833(t)(17) of the 
Act does not require that each measure we adopt for the HOP QDRP be 
endorsed by a national consensus building entity, or by the NQF 
specifically.
    Section 1833(t)(17)(C)(ii) of the Act authorizes the Secretary to 
select measures for the HOP QDRP that are the same as (or a subset of) 
the measures for which data are required to be submitted under section 
1886(b)(3)(B)(viii) of the Act (the RHQDAPU program). Section 
1833(t)(17)(D) of the Act gives the Secretary the authority to replace 
measures or indicators as appropriate, such as when all hospitals are 
effectively in compliance or when the measures or indicators have been 
subsequently shown not to represent the best clinical practice. Section 
1833(t)(17)(E) of the Act requires the Secretary to establish 
procedures for making data submitted under the HOP QDRP available to 
the public. Such procedures must include giving hospitals the 
opportunity to review their data before these data are released to the 
public.
    As we stated in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68758 through 68759), we continue to believe that it is most 
appropriate and desirable to adopt measures that specifically apply to 
the hospital outpatient setting for the HOP QDRP. In other words, we do 
not believe that we should simply, without further analysis, adopt the 
RHQDAPU program measures as the measures for the HOP QDRP. Nonetheless, 
we note that section 1833(t)(17)(C)(ii) of the Act allows the Secretary 
to ``[select] measures that are the same as (or a subset of) the 
measures for which data are required to be submitted'' under the 
RHQDAPU program.
3. Reporting ASC Quality Data for Annual Payment Update
    Section 109(b) of the MIEA-TRHCA amended section 1833(i) of the Act 
by redesignating clause (iv) as clause (v) and adding new clause (iv) 
to paragraph (2)(D) and adding paragraph (7). These amendments may 
affect ASC payments for services furnished in ASC settings on or after 
January 1, 2009. Section 1833(i)(2)(D)(iv) of the Act authorizes the 
Secretary to implement the revised payment system for services 
furnished in ASCs (established under section 1833(i)(2)(D) of the Act), 
``so as to provide for a reduction in any annual update for failure to 
report on quality measures.''
    Section 1833(i)(7)(A) of the Act states that the Secretary may 
provide that any ASC that fails to report data required for the quality 
measures selected by the Secretary in the form and manner required by 
the Secretary under section 1833(i)(7) of the Act will incur a 
reduction in any annual payment update of 2.0 percentage points. 
Section 1833(i)(7)(A) of the Act also specifies that a reduction for 
one year cannot be taken into account in computing the ASC update for a 
subsequent calendar year.
    Section 1833(i)(7)(B) of the Act provides that, ``[e]xcept as the 
Secretary may otherwise provide,'' the hospital outpatient quality data 
provisions of sections 1833(t)(17)(B) through (E) of the Act, 
summarized above, shall apply to ASCs. We did not implement an ASC 
quality reporting program for CY 2008 (72 FR 66875) or for CY 2009 (73 
FR 68779).
    We refer readers to section XVI.H. of this final rule with comment 
period for a discussion of our decision to implement ASC quality data 
reporting in a later rulemaking.
4. HOP QDRP Quality Measures for the CY 2009 Payment Determination
    For the CY 2009 annual payment update, we required HOP QDRP 
reporting using seven quality measures--five Emergency Department (ED) 
AMI measures and two Perioperative Care measures. These measures 
address care provided to a large number of adult patients in hospital 
outpatient settings, across a diverse set of conditions, and were 
selected for the initial set of HOP QDRP measures based on their 
relevance as a set to all HOPDs.
    Specifically, in order for hospitals to receive the full OPPS 
payment update for services furnished in CY 2009, in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66860), we required that 
subsection (d) hospitals paid under the OPPS submit data on the 
following seven measures for hospital outpatient services furnished on 
or after April 1, 2008: (1) ED-AMI-1: Aspirin at Arrival; (2) ED-AMI-2: 
Median Time to Fibrinolysis; (3) ED-AMI-3: Fibrinolytic Therapy 
Received within 30 Minutes of Arrival; (4) ED-AMI-4: Median Time to 
Electrocardiogram (ECG); (5) ED-AMI-5: Median Time to Transfer for 
Primary PCI; (6) PQRI 20: Perioperative Care--Timing of 
Antibiotic Prophylaxis; and (7) PQRI 21: Perioperative Care--
Selection of Perioperative Antibiotic.

[[Page 60631]]

5. HOP QDRP Quality Measures for the CY 2010 Payment Determination
a. Background
    In the CY 2009 OPPS/ASC final rule with comment period, for the CY 
2010 payment update, we required continued submission of data on the 
existing seven measures discussed above (73 FR 68761), and adopted four 
imaging measures (73 FR 68766). For CY 2010, we changed the measure 
designations for the existing seven measures, including a change to an 
``OP-X'' format in order to maintain a consistent sequential 
designation system that we could expand as we add additional measures.
    The four imaging measures that we adopted beginning with the CY 
2010 payment determination (OP-8: MRI Lumbar Spine for Low Back Pain, 
OP-9: Mammography Follow-up Rates, OP-10: Abdomen CT--Use of Contrast 
Material, and OP-11: Thorax CT--Use of Contrast Material) are claims-
based measures that CMS will calculate using Medicare Part B claims 
data without imposing upon hospitals the burden of additional chart 
abstraction. For purposes of the CY 2010 payment determination, we will 
calculate these measures using CY 2008 Medicare administrative claims 
data.
    In the CY 2009 OPPS/ASC proposed rule, OP-10 had two submeasures 
listed: OP-10a: CT Abdomen--Use of contrast material excluding calculi 
of the kidneys, ureter, and/or urinary tract, and OP-10b: CT Abdomen--
Use of contrast material for diagnosis of calculi in the kidneys, 
ureter, and or urinary tract. In the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68766), we finalized OP-10: Abdomen CT--Use of 
Contrast Material. To clarify, we are calculating OP-10 excluding 
patients with renal disease. This exclusion is described in greater 
detail in the Specifications Manual for Hospital Outpatient Department 
Quality Measures (HOPD Specifications Manual) located at the QualityNet 
Web site (http://www.QualityNet.org).
    The complete set of measures to be used for the CY 2010 payment 
determination is set out below, and is shown with the CY 2010 measure 
designations as well as their ED-AMI and PQRI designations:

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

b. Maintenance of Technical Specifications for Quality Measures
    Technical specifications for each HOP QDRP measure are listed in 
the HOPD Specifications Manual, which is posted on the CMS QualityNet 
Web site at http://www.QualityNet.org. We maintain the technical 
specifications for the measures by updating this HOPD Specifications 
Manual and include detailed instructions and calculation algorithms for 
hospitals to use when collecting and submitting data on required 
measures.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68766), we established a subregulatory process for updates to the 
technical specifications that we use to calculate HOP QDRP measures. 
This process is used when changes to the measure specifications are 
necessary due to changes in scientific evidence or in the measure as 
endorsed by the consensus entity. Changes of this nature may not 
coincide with the timing of our regulatory actions, but nevertheless 
require inclusion in the measure specifications so that the HOP QDRP 
measures are calculated based on the most up-to-date scientific and 
consensus standards. We indicated that notification of changes to the 
measure specifications on the QualityNet Web site, http://www.QualityNet.org, and in the HOPD Specifications Manual that occurred 
as a result of changes in scientific evidence or national consensus 
would occur no less than 3 months before any changes become effective 
for purposes of reporting under the HOP QDRP.
    The HOPD Specifications Manual is released every 6 months and 
addenda are released as necessary, providing at least 3 months of 
advance notice for nonsubstantive changes such as changes to ICD-9, 
CPT, NUBC, and HCPCS codes, and at least 6 months notice for 
substantive changes to data elements that would require significant 
systems changes.
    Comment: A few commenters indicated that they agreed with the 
maintenance of the outpatient measure technical specifications in a 
manner consistent with the inpatient measure technical specifications. 
They agreed that providing a 3-month notification period for code 
updates is sufficient. One commenter also agreed the OP-X designations 
along with short measure names are appropriate. Commenters indicated 
that CMS should ensure that the subregulatory process that it uses to 
update the technical specifications for HOP QDRP measures is regular 
and transparent.
    Response: We thank the commenters for their support of the 
subregulatory manual update process and timeframes. We will continue to 
make such updates on a regular semi-annual basis with addenda as 
necessary, and to issue notifications of updates via the QualityNet Web 
site, http://www.QualityNet.org, in order to maintain the transparency 
of the process. The HOPD Specifications Manual will continue to be 
released regularly and addenda will continue to be issued as necessary, 
providing at least 3 months of advance notice for nonsubstantive 
changes such as changes to ICD-9, CPT, NUBC, and HCPCS codes, and at 
least 6 months notice for substantive changes to data elements that 
would require significant systems changes.
c. Publication of HOP QDRP Data
    Section 1833(t)(17)(E) of the Act requires that the Secretary 
establish procedures to make data collected under the HOP QDRP program 
available to the public. CMS also requires hospitals to complete and 
submit a registration form (``participation form'') in order to 
participate in the HOP QDRP. With submission of this form, 
participating

[[Page 60632]]

hospitals agree that they will allow CMS to publicly report the quality 
measures, including those that CMS calculates using Medicare claims, as 
required by the Act and the HOP QDRP.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68778), we established that for CY 2010, hospitals sharing the same CMS 
Certification Number (CCN, previously known as the Medicare Provider 
Number (MPN)) must combine data collection and submission across their 
multiple campuses for the clinical measures for public reporting 
purposes. We finalized the policy that, under the HOP QDRP, we will 
publish quality data by the corresponding CCN. This approach is 
consistent with the approach taken under the RHQDAPU program. In that 
final rule with comment period, we also stated that we intend to 
indicate instances where data from two or more hospitals are combined 
to form the publicly reported measures on the Web site.
    We discuss our CY 2010 policy regarding publication of HOP QDRP 
data in section XVI.F. of this final rule with comment period.

B. Quality Measures for the CY 2011 Payment Determination

1. Considerations in Expanding and Updating Quality Measures Under the 
HOP QDRP
    In general, when selecting measures for the HOP QDRP program, we 
take into account several considerations and goals. These include: (a) 
Expanding the types of measures beyond process of care measures to 
include an increased number of outcome measures, efficiency measures, 
and patients' experience-of-care measures; (b) expanding the scope of 
hospital services to which the measures apply; (c) considering the 
burden on hospitals in collecting chart-abstracted data; (d) 
harmonizing the measures used in the HOP QDRP program with other CMS 
quality programs to align incentives and promote coordinated efforts to 
improve quality; (e) seeking to use measures based on alternative 
sources of data that do not require chart abstraction or that utilize 
data already being reported by many hospitals, such as data that 
hospitals report to clinical data registries, or all-payer claims data 
bases; and (f) weighing the relevance and utility of the measures 
compared to the burden on hospitals in submitting data under the HOP 
QDRP program. Specifically, we give priority to quality measures that 
assess performance on: (a) Conditions that result in the greatest 
mortality and morbidity in the Medicare population; (b) conditions that 
are high volume and high cost for the Medicare program; and (c) 
conditions for which wide cost and treatment variations have been 
reported, despite established clinical guidelines. We have used and 
continue to use these criteria to guide our decisions regarding what 
measures to add to the HOP QDRP measure set.
    Comment: Many commenters indicated that, although CMS is not 
required to adopt only measures that are endorsed by NQF, CMS should 
continue to rely on NQF evaluations to guide selection of measures, and 
to seek NQF approval for measures considered and adopted for the HOP 
QDRP in order to maintain consistency in the selection processes for 
quality measures across physician and hospital services. Many 
commenters indicated that they prefer that measures adopted for HOP 
QDRP first go through the rigorous, consensus-based assessment 
processes of both the NQF and HQA, and that given the number of NQF-
endorsed and HQA-adopted measures currently available for use, it is 
both feasible and practicable for CMS to choose only NQF-endorsed and 
HQA-adopted measures. Other commenters indicated that although a 
consensus-based process may have been employed by CMS or CMS 
contractors to develop measures, it does not equal the rigor or broad 
stakeholder input of NQF endorsement and HQA adoption.
    Response: Section 1833(t)(17)(C)(i) of the Act requires the 
Secretary to ``develop measures that the Secretary determines to be 
appropriate for the measurement of the quality of care (including 
medication errors) furnished by hospitals in outpatient settings and 
that reflect consensus among affected parties and, to the extent 
feasible and practicable, shall include measures set forth by one or 
more national consensus building entities.'' This provision does not 
require that the measures we adopt for the HOP QDRP be endorsed by any 
particular entity, and we believe that consensus among affected parties 
can be reflected by means other than endorsement by a national 
consensus building entity, including consensus achieved during the 
measure development process, consensus shown through broad acceptance 
and use of measures, and consensus through public comment. 
Nevertheless, we have stated on numerous occasions that we prefer to 
adopt quality measures that have been endorsed by the NQF because the 
NQF uses a formal consensus development process and has been recognized 
as a voluntary consensus standards-setting organization as defined by 
the National Technology Transfer and Advancement Act of 1995 (NTTAA) 
and Office of Management and Budget Circular A 119 (see http://www.qualityforum.org/Measuring_Performance/Consensus_Development_Process.aspx). We are unaware of any other organizations that qualify 
as an NTTAA consensus organization for the endorsement of quality 
measures. However, when we propose and adopt quality measures, we take 
into consideration the measures adopted by the HQA as well as an array 
of input from the public. We appreciate HQA's integral efforts to 
improve hospital quality of care by supporting CMS' public reporting 
programs.
    Comment: Some commenters expressed concern regarding the accuracy 
of measures that rely solely on administrative (that is, claims) data 
and requested that CMS not consider these types of measures in the 
future. Several commenters questioned the value of measures based 
solely on claims data/administrative data for public reporting and pay-
for-performance in terms of their capacity to improve care delivered to 
Medicare beneficiaries.
    Response: We do not agree with these commenters' statements. We 
believe that claims data/administrative data are an appropriate data 
source upon which quality measures selected by the Secretary may be 
based. We note that many NQF-endorsed evidence-based quality measures 
that have been found appropriate for public reporting and quality 
improvement rely upon claims and administrative data as a data source. 
Furthermore, the use of claims-based measures reduces reliance upon 
chart abstraction and its associated burden for quality measurement.
    Comment: Commenters submitted the following suggested measure 
selection criteria for the HOP QDRP:
     Potential for quality improvement;
     Processes measured are related to improved patient 
outcomes;
     Processes measured occur closer in time to patient 
outcomes of interest;
     Outcome measures are related to modifiable processes that 
affect patient outcomes;
     Minimal unintended adverse consequences;
     Alignment with national priorities as described in the NQF 
NPP project;
     Amenable to collection via alternative mechanisms such as 
electronic health records (EHRs), registries, and claims;
     Harmonizes with measures used for reporting programs in 
similar settings;
     Attributable to the facility rather than a prescribing 
physician;
     Data collection should not increase hospital operational 
burden; and
     Fully tested in a variety of outpatient settings.

[[Page 60633]]

    Response: We thank the commenters for these suggestions, and we 
note that these suggestions were not submitted in reference to specific 
measures. In section XVI.B.1. of this final rule with comment period, 
we have set out the criteria that we use to guide our decisions 
regarding what measures to add to the HOP QDRP measure set. We 
determine the suitability of potential measures using consensus 
development processes, including, when appropriate, relying upon the 
NQF's voluntary consensus standards in addition to our rulemaking in 
determining the suitability of quality measures.
    In the CY 2009 OPPS/ASC final rule with comment period, we adopted 
four claims-based quality measures that do not require a hospital to 
submit chart-abstracted clinical data. This supports our goal of 
expanding the measures for the HOP QDRP while minimizing the burden 
upon hospitals and, in particular, without significantly increasing the 
chart abstraction burden. In addition to claims-based measures, we are 
considering registries \1\ and EHRs as alternative ways to collect data 
from hospitals. Many hospitals submit data to and participate in 
existing registries. In addition, registries often capture outcome 
information and provide ongoing quality improvement feedback to 
registry participants. Instead of requiring hospitals to submit the 
same data to CMS that they are already submitting to registries, we 
could collect the data directly from the registries with the permission 
of the hospital, thereby enabling us to expand the HOP QDRP measure set 
without increasing the burden of data collection for those hospitals 
participating in the registries. The data that we would receive from 
registries would be used to calculate quality measures required under 
the HOP QDRP, and would be publicly reported like other HOP QDRP 
quality measures, encouraging improvements in the quality of care. In 
the CY 2010 OPPS/ASC proposed rule (74 FR 35397), we invited public 
comment on such an approach.
---------------------------------------------------------------------------

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

    Comment: Many commenters expressed concern about the potential use 
of registries as a source of data for the HOP QDRP. Many commenters 
indicated that the fees imposed by registries would be prohibitive for 
smaller hospitals and rural hospitals. Regarding registry-based data 
submission for the HOP QDRP, CMS was urged to do the following:
     Develop and test alternatives for hospitals choosing to 
submit data directly to CMS in lieu of participating in a registry 
(that is, chart abstraction, CART tool);
     Determine and articulate a process for validating data 
submitted through registries for completeness and accuracy;
     Determine and articulate a process to transmit registry-
based data to the national data warehouse in a secure fashion and 
without violating HIPAA or other rules;
     Explore and determine the willingness and ability of the 
ORYX vendors to submit data for those hospitals not participating in a 
registry; and
     Require standardized, externally verifiable sampling for 
the measures.
    Response: We are interested in minimizing the burden associated 
with quality measurement. If hospitals are participating in registries 
and submit the same data to those registries that they would otherwise 
have to submit for measures that are part of the HOP QDRP, we believe 
that the registry-based data would be an efficient alternative source 
from which to collect the data, and that this would prevent the 
hospital from having to report the same data twice. Many hospitals are 
currently participating in a number of registries that collect data on 
quality measures that are topics of interest to us. However, we 
acknowledge the commenters' concerns regarding the cost associated with 
participation in certain registries that may make this alternative 
mechanism for data submission less feasible for some hospitals, and the 
need for standardized validation strategies for registry-based data. We 
will take these considerations into account when considering registry-
based measure submission options for this and other reporting programs 
in the future.
    Comment: Some commenters strongly supported the use of registries 
as an alternative source of data for the HOP QRDP. These commenters 
stated that registries provide a substantial advantage over chart-
abstracted data because registries provide regular feedback reports to 
participating hospitals on their performance, further minimize the 
reporting burden for physicians and facilities because registry-based 
data could be used for more than one reporting program, and aggregate 
clinical data from a provider's entire patient population and enable 
these data to be analyzed and tracked over time for adherence to 
evidence-based medicine and health outcomes. Commenters encouraged CMS 
to continue to explore this mechanism and to develop the infrastructure 
standards needed to accurately capture such data as soon as 
practicable.
    Response: We thank these commenters for their encouragement and 
will continue to investigate the feasibility of such an approach to the 
HOP QDRP and other quality data reporting programs.
    Comment: One commenter recommended that CMS request legislative 
authority to base payments on pay-for-performance so that a portion of 
payments will depend on providers' performance on the selected quality 
measures, not simply on whether they report the specified data to CMS. 
This commenter also expressed support for CMS' efforts to collect data 
on measures of hospital quality as a valuable step toward pay-for-
performance.
    Response: We thank the commenter for sharing this suggestion for 
future program direction and for supporting current program operations.
    In the CY 2009 OPPS/ASC final rule with comment period, we also 
stated our intention to explore mechanisms for data submission using 
EHRs (73 FR 68769). Establishing such a system will require 
interoperability between EHRs and CMS data collection systems, 
additional infrastructure development on the part of hospitals and CMS, 
and the adoption of standards for the capturing, formatting, and 
transmission of data elements that make up the measures. However, once 
these activities are accomplished, the adoption of measures that rely 
on data obtained directly from EHRs will enable us to expand the HOP 
QDRP measure set with less cost and burden to hospitals.
    Comment: Some commenters strongly supported the use of EHRs and 
other health information technology (IT). These commenters believed 
that such technology has the ability to capture, store, and readily 
report the types of clinical data not available from medical claims 
data, such as diagnostic laboratory test results and prescription drug 
dispensing data. Commenters commended CMS for encouraging the 
development and adoption of uniform data content and information 
technology standards across the health care industry that will support 
automated data collection and reporting of clinical data from EHR 
systems. These commenters believed that such efforts would streamline 
hospital data submission procedures and enable providers to view real-
time measurement results to initiate their own improvement 
interventions in a more timely and efficient manner.

[[Page 60634]]

    Response: We appreciate these supportive comments regarding EHR-
based data collection as an alternative data source for quality 
measures. We agree that EHR-based data submission may provide an 
alternative means of submitting quality data that would benefit 
hospitals by reducing their chart abstraction burden. We also agree 
that such systems may enable providers to implement more timely 
improvement efforts. Although we encourage adoption of EHRs, we also 
acknowledge the challenges that must be met both by hospitals and CMS 
to establish the infrastructure and interoperability necessary to 
collect data on quality measures via EHRs. We will continue to work 
collaboratively with health IT standard-setting and consensus 
development organizations to ensure that quality measures can be 
collected in a standardized manner.
    Comment: Many commenters were concerned about the ability of EHRs 
to accurately capture the data required for meaningful and accurate 
quality measures for the HOP QDRP. Commenters indicated that, 
currently, all of the necessary information for measuring performance 
against essential metrics of quality (such as exclusion and inclusion 
criteria and contraindications) is not codified within EHRs, and that 
the need for such information will still require medical record review 
because the information cannot be adequately found in EHRs. Other 
commenters indicated that current products feature inconsistent 
communication standards and may pose privacy concerns. Several 
commenters indicated that small rural hospitals may not be able to 
enhance their health IT infrastructure to support EHR-based reporting. 
Several commenters supported one-way transmission of specific data 
elements from EHRs, but would not support providing access to the whole 
EHR to abstract clinical information for quality measures. Commenters 
encouraged CMS to consider postponing new measure implementation for CY 
2012 until new measures can be verified to be structured for EHR data 
collection, especially given impending challenges of ICD-10 
implementation.
    Response: We do not agree with the commenters' belief that quality 
data produced from EHRs is not likely to accurately capture data 
elements needed for quality measurement. The data collected from the 
EHR would essentially be the same data that hospitals would otherwise 
have to manually abstract from a medical chart. These data are what we 
currently use for quality measure reporting. We acknowledge that 
additional programming work may be needed in order to enable current 
EHR systems to collect and submit quality measure data. We are 
currently working with the Healthcare Information Technology Standards 
Panel (HITSP), a public-private partnership working to establish health 
IT interoperability standards under contract to the HHS Office of the 
National Coordinator on Health IT (ONC), to standardize the 
specifications of data elements used in several measure sets so that 
they may be collected and reported via EHRs. Standardization of the 
specifications allows software to convert clinical data of different 
types into a form that can be analyzed for quality measurement. We 
encourage collaboration among standard-setting organizations and 
measure developers on the creation of standards for electronic 
collection of data elements for other quality measures as well, 
particularly those used in our quality data reporting programs.
    With regard to the commenters' concern about having to provide 
access to the entire EHR, we would only require that the hospital 
provide access to those data elements in the EHRs that are needed to 
calculate the measures. We also acknowledge the burden faced by 
hospitals in implementing multiple technological changes, including the 
ICD-10 coding system. We will carefully consider any additional burden 
that may be imposed by adopting additional measures for the HOP QDRP 
and will continue to consider other feasible alternatives to data 
collection such as registries.
    Comment: Several commenters encouraged the collection of all-payer 
or multiple-payer claims information in order to calculate measures for 
the HOP QDRP as it would provide a more complete picture of care to 
consumers. Commenters also encouraged CMS to ensure the validity of any 
third party data used in the development or calculation of measures for 
public reporting.
    Response: We thank the commenters for their encouragement of the 
collection of all-payer claims data, and we agree that all-payer claims 
data would enable us to provide consumers with more comprehensive 
claims-based quality measures that provide a comprehensive picture of 
the quality of care provided by a hospital. We currently collect other 
all-payer data where feasible for the hospital quality data reporting 
programs, and currently this is feasible for chart-abstracted data 
elements. It has been our policy to collect all-payer chart-abstracted 
data since the inception of both inpatient (RHQDAPU program) and 
outpatient (HOP QDRP) quality data reporting. While we currently do not 
have the infrastructure in place to accept all-payer claims data, we 
intend to work with stakeholders to identify options, processes, and 
opportunities to collect all-payer claims data to supplement the 
Medicare claims data we currently use in many of our reporting 
programs.
    Comment: Several commenters indicated that CMS should only concern 
itself with obtaining information and outcomes for Medicare 
beneficiaries, and should not collect information regarding patients 
for whom other payers are responsible.
    Response: For the HOP QDRP, section 1833(t)(17)(C)(i) of the Act 
requires the Secretary to develop measures appropriate for the 
measurement of the quality of care (including medication errors) 
furnished by hospitals in outpatient settings. The collection and 
publication of quality measures based on all-payer data captures 
variations in the care delivered by a hospital to different populations 
and payers, and therefore allows us to obtain comprehensive information 
regarding the quality of care provided to its beneficiaries. Therefore, 
we are collecting all-payer data elements to calculate the chart-
abstracted measures adopted into the HOP QDRP. We wish to eventually 
provide a similarly comprehensive picture of the quality of care 
provided by HOPDs with respect to the claims-based measures adopted 
into the HOP QDRP.
2. Retirement of HOP QDRP Quality Measures
    In the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule, we proposed a 
process for immediate retirement of RHQDAPU program measures based on 
evidence that the continued use of the measure as specified raises 
patient safety concerns (74 FR 24168). As we explained in that proposed 
rule, in situations such as the one prompting immediate retirement of 
the AMI-6 measure from the RHQDAPU program in December 2008, we do not 
believe that it would be appropriate to wait for the annual rulemaking 
cycle to retire a measure. This proposal was later finalized for the 
RHQDAPU program in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43863). We proposed to adopt this same immediate retirement policy for 
the HOP QDRP (74 FR 35397). Specifically, in the CY 2010 OPPS/ASC 
proposed rule, we proposed that if we receive evidence that continued 
collection of a measure that has been adopted for the HOP QDRP raises 
patient safety concerns, we would

[[Page 60635]]

promptly retire the measure and notify hospitals and the public of the 
retirement of the measure and the reasons for its retirement through 
the usual means by which we communicate with hospitals, including but 
not limited to hospital e-mail blasts and the QualityNet Web site. We 
also proposed to confirm the retirement of the measure in the next OPPS 
rulemaking. In other circumstances, where we do not believe that 
continued use of a measure raises specific patient safety concerns, we 
stated that we intend to use the regular rulemaking process to retire a 
measure.
    We invited public comment on this proposal allowing for immediate 
retirement of a HOP QDRP measure following evidence of a patient safety 
concern followed by confirmation in the next rulemaking cycle.
    Comment: Several commenters applauded the proposal to immediately 
retire a HOP QDRP measure if CMS receives evidence that the continued 
collection of a measure raises patient safety concerns. They encouraged 
CMS to establish consistent and transparent processes that address 
changes in evidence-based guidelines more quickly and to establish 
channels to exchange this type of information between the agency and 
measure developers. The commenters also encouraged CMS to retire 
measures under the following conditions:
     A measure is no longer consistent with current clinical 
guidelines;
     Another indicator exists that better, or more accurately, 
assesses good quality care;
     Redundancy of measurement on a given topic or process; and
     The burden associated with data collection and reporting a 
measure outweighs the benefit of public reporting;
    Response: We thank the commenters for their support for the 
proposed policy of prompt retirement when potential patient harm could 
result from the continued collection of a measure, and are finalizing 
our policy in this final rule with comment period. With respect to the 
suggestions we received, these criteria reflect examples of conditions 
that may warrant retirement via notice and comment rulemaking as 
opposed to prompt retirement because continued collection of the 
measure does not raise patient safety concerns. Another example of a 
nonurgent circumstance where we would use the rulemaking process to 
retire a measure would be when a measure is ``topped out.'' While we 
did not solicit public comments on criteria for retirement under 
circumstances other than potential patient harm, we will consider these 
suggestions as we consider whether to propose to retire measures in 
nonurgent circumstances.
    After consideration of the public comments we received, we are 
finalizing our proposal to promptly retire measures under circumstances 
in which we receive evidence that continued collection of a measure 
that has been adopted for the HOP QDRP raises patient safety concerns, 
to notify hospitals and the public of the retirement of the measure and 
the reasons for its retirement through the usual means by which we 
communicate with hospitals, including, but not limited to, hospital e-
mail blasts and the QualityNet Web site, and to confirm the retirement 
of measures retired in this manner in the next rulemaking cycle.
3. HOP QDRP Quality Measures for the CY 2011 Payment Determination
    For the CY 2011 payment determination, in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35397), we proposed to continue requiring that 
hospitals submit data on the existing 11 HOP QDRP measures. These 
measures continue to address areas of topical importance regarding the 
quality of care provided in HOPDs, and reflect consensus among affected 
parties. Seven of these 11 measures are chart-abstracted measures in 
two areas of importance that are also measured for the inpatient 
setting: AMI care and surgical care. The remaining four measures 
address imaging efficiency in HOPDs.
    For the CY 2011 payment determination, we proposed not to add any 
new HOP QDRP measures. Although we considered adding a number of chart-
abstracted measures, we are sensitive to the burden upon HOPDs 
associated with chart abstraction and believe that adopting such 
measures at this time would not be consistent with our stated goal to 
minimize the collection burden associated with quality measurement. We 
will continue to assess whether we can collect data on additional 
quality measures through mechanisms other than chart abstraction, such 
as from Medicare administrative claims data and EHRs.
    We invited public comment on our proposal to retain the existing 11 
HOP QDRP measures and to not adopt additional measures for the CY 2011 
payment determination.
    Comment: Most commenters were pleased that CMS recognizes the 
burden that data collection and reporting places on facilities and did 
not propose to add new measures to the HOP QDRP measurement set for the 
CY 2011 payment determination. In particular, some hospitals indicated 
that they have only one staff member performing chart abstraction for 
both the inpatient and outpatient quality data reporting programs, and 
that the burden of adding measures has a great impact under such 
circumstances.
    Response: We thank the commenters for expressing their support for 
this proposal. We will continue to carefully weigh the burden 
associated with adding chart-abstracted measures to quality reporting 
programs such as the HOP QDRP against the benefit of adding such 
measures in the future.
    We also received specific comments, discussed below, on some of the 
measures we proposed to retain.
     OP-3: Median Time To Transfer to Another Facility for 
Acute Coronary Intervention
    Comment: One commenter recommended that CMS consider measuring the 
overall median time to percutaneous coronary intervention (PCI) in 
transferred patients because this captures the entire process of care 
and will encourage collaboration between transferring and receiving ST-
segment elevation myocardial infarction (STEMI) centers.
    Response: We thank the commenter for this suggestion. The current 
measure is meant to be one of accountability for the initial 
(transferring) facility rather than for both the transferring and 
receiving facility. Therefore, the outpatient measure that is currently 
in place (OP-3) focuses on the measurable time of arrival to time of 
physical departure from the first hospital, which is an important 
component of the total time to reperfusion. A modification to the 
measure as suggested would not currently be feasible to implement as it 
would require capturing information from medical records at two 
separate facilities.
 OP-4: Aspirin at Arrival & OP-5: Median Time to ECG
    Comment: One commenter recommended that CMS consider excluding 
``Chest Pain NEC'' from the list of eligible cases for these two 
measures because many of these cases are not ``probable cardiac chest 
pain'' as is the intent of the measures. This commenter also 
recommended only using the working diagnosis in the ``final 
impression,'' rather than working diagnoses used throughout the ED 
documentation forms, and recommended excluding patients in observation 
status, as patients believed to have ``probable cardiac chest pain'' or 
AMI will likely not be kept under observation status. The commenter 
believed implementing these

[[Page 60636]]

recommendations will eliminate many cases that these measures did not 
intend to capture. Another commenter noted that OP-4 has the potential 
to become ``topped out'' as the program matures.
    Response: We will consider these suggestions as part of maintenance 
of the technical specifications for the measure. We also will evaluate 
the performance of OP-4 over time as we do with other measures that 
have been adopted for public reporting programs.
 Imaging Efficiency Measures Generally
    Comment: Several commenters objected to CMS continuing to include 
the four imaging efficiency measures in the HOP QDRP. Many of these 
commenters objected because none of the four measures have been adopted 
by the HQA. Other commenters acknowledged that OP-8 and OP-11 are NQF-
endorsed, and also acknowledged that NQF endorsement is not required, 
but recommended that CMS obtain endorsement for OP-9 and OP-10 in order 
to establish their credibility. Some commenters opined that the two 
non-NQF endorsed Imaging Efficiency measures, OP-9 and OP-10, are 
inappropriate for the HOP QDRP and could cause patient harm. One 
commenter cautioned that, because the protocols for reporting contrast 
media on claims have varied over the years, CMS should be aware that 
the use of contrast media may not be reliably documented in claims.
    Response: Many of the concerns raised by the commenters about the 
imaging efficiency measures were also raised at the time the imaging 
measures were proposed. We responded to these concerns when we adopted 
the measures (74 FR 68762 through 68766). We stated that the measures 
meet the statutory definition of reflecting consensus among affected 
parties through their consensus-based development, and that the 
measures address important patient safety concerns related to exposure 
to unnecessary radiation and contrast materials. We also stated that 
the Secretary is not required to limit measures considered for 
selection to only those adopted by the HQA or to those that have been 
NQF-endorsed. We anticipate submitting OP-9 and OP-10 for NQF 
endorsement, along with national performance information and other 
supporting information, when an appropriate call for measures occurs. 
We note the cautionary advice regarding the varying requirements for 
reporting contrast media on claims. However, the OP-10 and OP-11 
measures rely on procedure codes rather than on specific material codes 
to determine whether a with-contrast procedure or without-contrast 
procedure was performed. In other words, these measures only consider 
whether contrast media was appropriately used during diagnostic imaging 
procedures, regardless of type.
 OP-8: MRI Lumbar Spine for Low Back Pain
    Comment: Some commenters indicated that complete details of a 
patient treatment plan and history such as conservative therapy for the 
previous 60 days would often be unavailable to an imaging provider or 
outpatient center. Other commenters indicated that this measure would 
be appropriate for the PQRI program.
    Response: While a HOPD may not have complete information about a 
patient's treatment plan and history, such as conservative therapy, 
HOPDs are in a position to consult and directly communicate with 
ordering physicians and the radiologists employed by the HOPD. HOPDs 
can also educate hospital medical staff and community physicians on the 
appropriate use of MRI for low back pain. We thank the commenters for 
suggesting that OP-8 may be appropriate for the PQRI program, and will 
consider this suggestion. We agree that the basis for the measure may 
be appropriately applied at the ordering physician level. However, we 
note that the measure has been endorsed by the NQF as appropriate for 
facility-level measurement.
 OP-9: Mammography Follow-up Rates
    Comment: Some commenters objected to this measure because they 
believed that there is a lack of consensus as to what the appropriate 
recall rate should be, and that there is no established link between 
providers' recall rates and patient outcomes. Many commenters expressed 
concern that the measure implies that high follow-up rates are 
undesirable, leading to decreased access to these tests, and an 
increase in undiagnosed early cases of cancer. Other commenters 
supported this measure, stating that mammography is a life saving tool 
that is currently underutilized. In addition, some commenters suggested 
revisions that they believed would improve the current measure. These 
suggestions include:
     Extending the call back period to 3 months to allow 
adequate time for a patient to return;
     Counting breast MRI within 3 months of a screening 
examination as a call back;
     Revising the measure to be a proportion of screening 
mammograms interpreted as positive, or where the radiologist has 
recommended further evaluation.
    Response: We do not believe that HOPDs should refuse access to 
mammograms when appropriate follow-up study is needed. We also do not 
believe that the measure encourages HOPDs to do so. The measure allows 
identification of facilities with abnormally high rates of ``call-
backs'' from indeterminate or inadequate screening studies. We will 
evaluate the commenters' suggestions for improvements to the measure 
specifications as part of the maintenance process for the measure.
 OP-10: Abdomen CT--Use of Contrast Material
    Comment: Some commenters indicated that there is a lack of evidence 
in the literature to determine the appropriate use of contrast material 
for these patients, and, thus, there is no accepted best practice. In 
addition, some commenters asserted that, because the measure contains a 
number of patient exclusions, the applicable patient population is 
unclear. Other commenters approved of the decision to exclude renal 
disease patients from this measure.
    Response: We have incorporated existing clinical guidelines for 
appropriate use of combined imaging studies (with and without contrast) 
into the imaging efficiency measures. Nevertheless, imaging efficiency 
measures are not intended to define absolutes and should not be 
interpreted to mean that combined studies would never be considered 
appropriate. We believe that the measures will promote more careful 
consideration in individual cases as to whether, in the particular 
circumstance, a combined study is necessary and thus enhance the 
efficient use of combined studies. We also anticipate that the 
variation that exists will lessen and approaches to the use of combined 
studies will become more standardized.
    By implementing the denominator exclusions, we seek to more clearly 
define the applicable patient population for the quality measure. We 
thank the commenters that supported the exclusion of renal disease 
patients from the denominator of this measure.
 OP-11: Thorax CT--Use of Contrast Material
    Comment: One commenter objected to the inclusion of this measure, 
stating that current guidelines indicate that it is acceptable to 
perform a with-contrast

[[Page 60637]]

study followed by a without-contrast study as clinically indicated.
    Response: We agree that, if clinically indicated, such dual studies 
are appropriate. As with the OP-10 measure, the intent of the OP-11 
measure is not to reduce the use of contrast studies or dual studies to 
zero, but to identify facilities utilizing dual study protocols in the 
majority of cases when not clinically appropriate.
    After consideration of the public comments we received, we have 
decided to adopt as final our proposal to retain the existing 11 HOP 
QDRP measures without adding new measures to the measure set for the CY 
2011 payment determination. The measure set that will be used for the 
CY 2011 payment determination is displayed below.

       HOP QDRP Measurement Set To Be Used for the CY 2011 Payment
                              Determination
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis
OP-2: Fibrinolytic Therapy Received Within 30 Minutes
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention
OP-4: Aspirin at Arrival
OP-5: Median Time to ECG
OP-6: Timing of Antibiotic Prophylaxis
OP-7: Prophylactic Antibiotic Selection for Surgical Patients
OP-8: MRI Lumbar Spine for Low Back Pain
OP-9: Mammography Follow-up Rates
OP-10: Abdomen CT--Use of Contrast Material
OP-11: Thorax CT--Use of Contrast Material
------------------------------------------------------------------------

C. Possible Quality Measures Under Consideration for CY 2012 and 
Subsequent Years

    In previous years' rulemakings, we have provided lists of quality 
measures that are under consideration for future adoption into the HOP 
QRDP measurement set. In the CY 2010 OPPS/ASC proposed rule (74 FR 
35398), we set out a list of measures under consideration for the CY 
2012 payment determination and subsequent years. That list is displayed 
below.

          Quality Measures Under Consideration for CY 2012 and Subsequent Years' Payment Determinations
----------------------------------------------------------------------------------------------------------------
                Topic                    No.                    Measure                   Potential data sources
----------------------------------------------------------------------------------------------------------------
Cancer...............................        1  Adjuvant Chemotherapy Is Considered or   Registry.
                                                 Administered Within 4 Months of
                                                 Surgery to Patients Under Age 80 With
                                                 AJCC III Colon Cancer.
                                                The measure specifications are similar
                                                 to PQRI  72 found at the PQRI
                                                 manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
                                      ==========
                                             2  Adjuvant Hormonal Therapy for Patients   Claims, Registry.
                                                 with Breast Cancer.
                                       .......  The measure specifications are similar
                                                 to PQRI  71 found at the PQRI
                                                 manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
                                      ==========
                                             3  Needle Biopsy To Establish Diagnosis of  Claims, Registry.
                                                 Cancer Precedes Surgical Excision/
                                                 Resection.
                                       .......  The measure specifications can be found
                                                 at: http://www.qualityforum.org/pdf/reports/Cancer_Nonmember_Report.pdf.
======================================
ED Throughput........................        4  Median Time From ED Arrival to ED        Chart, EHR.
                                                 Departure for Discharged ED Patients.
                                       .......  The measure specifications can be found
                                                 at http://www.qualitynet.org/ in
                                                 Appendix P of the specifications
                                                 manual under Hospital--Outpatient.
======================================
Diabetes.............................        5  Low Density Lipoprotein Control in Type  Claims, EHR.
                                                 1 or 2 Diabetes Mellitus.
                                       .......  The measure specifications are similar
                                                 to PQRI  2 found at the PQRI
                                                 manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
                                      --------------------------------------------------========================
                                             6  Urine protein screening or medical       Claims, EHR.
                                                 attention for nephrology during at
                                                 least one office visit within last
                                                 year for patient with diabetes
                                                 mellitus.
                                                The measure specifications are similar
                                                 to PQRI  119 found at the
                                                 PQRI manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip p.
                                      ==========
                                             7  Eligible diabetes patients with          Claims, EHR.
                                                 documentation of an eye exam or
                                                 referral for an eye exam within the
                                                 last 24 months.

[[Page 60638]]

 
                                       .......  The measure specifications are similar
                                                 to PQRI  117 found at the
                                                 PQRI manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip p.
                                      --------------------------------------------------========================
                                             8  Patients who received at least one       Claims, EHR.
                                                 complete foot exam (visual inspection,
                                                 sensory examination with monofilament
                                                 and pulse exam within the last 12
                                                 months.
                                       .......  The measure specifications are similar
                                                 to PQRI  126 found at the
                                                 PQRI manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip p.
======================================
Medication Reconciliation............        9  Medication Reconciliation..............  Claims, EHR.
                                                The measure specifications are similar
                                                 to PQRI  46 found at the PQRI
                                                 manual Web site: http://www.cms.hhs.gov/apps/ama/license.asp?file=/PQRI/downloads/2009PQRIQualityMeasureSpecificationsManualandReleaseNotes.zip.
======================================
Immunization.........................       10  Pneumococcal Vaccination Status--        Chart, EHR.
                                                 Overall Rate.
                                       .......  The measure specifications are
                                                 available at http://www.qualityforum.org/pdf/reports/Immunization/4%2029%20Immunizations_Nonmembers.pdf.
                                            11  Influenza Vaccination Status--Overall    Chart, EHR.
                                                 Rate.
                                       .......  The measure specifications are
                                                 available at http://www.qualityforum.org/pdf/reports/Immunization/4%2029%20Immunizations_Nonmembers.pdf.
======================================
Imaging Efficiency...................       12  SPECT MPI and Stress Echocardiography    Claims.
                                                 for Preoperative Evaluation for Low-
                                                 Risk Non-Cardiac Surgery Risk
                                                 Assessment.
                                       .......  The measure specifications can be found
                                                 at http://www.imagingmeasures.com/.
                                      ==========
                                            13  Use of Stress Echocardiography or SPECT  Claims.
                                                 MPI Post-Revascularization Coronary
                                                 Artery Bypass Graft.
                                       .......  The measure specifications can be found
                                                 at http://www.imagingmeasures.com/.
                                      --------------------------------------------------========================
                                            14  Use of Computed Tomography in Emergency  Claims.
                                                 Department for Headache.
                                       .......  The measure specifications can be found
                                                 at http://www.imagingmeasures.com/.
                                      --------------------------------------------------========================
                                            15  Simultaneous Use of Brain Computed       Claims.
                                                 Tomography and Sinus Computed
                                                 Tomography.
                                       .......  The measure specifications can be found
                                                 at http://www.imagingmeasures.com/.
======================================
Surgery..............................       16  Appropriate surgical site hair removal.  Chart, EHR.
                                       .......  The measure specifications are similar
                                                 to Surgical Care Improvement Project
                                                 Infection (SCIP)-6 which can be found
                                                 at http://www.qualitynet.org/ under
                                                 Hospital--Inpatient.
----------------------------------------------------------------------------------------------------------------

    We invited public comment on these quality measures and topics that 
we may consider proposing to adopt beginning with the CY 2012 payment 
determination. We also sought suggestions and rationales to support the 
adoption of measures and topics for the HOP QDRP which do not appear in 
the table above.
 Cancer (Potential Measures 1, 2, and 3)
    Comment: A number of commenters supported the cancer measures 
because: (1) They align with national priorities and CMS priority 
condition areas; (2) they provide insight into an area of care that is 
very relevant to the consumer; and (3) the measure set seems to address 
health care provided across settings. One commenter indicated that CMS 
should more clearly state whether CMS or the HOPD will collect 
information on chemotherapy within the 4-month timeframe stated in the 
measure, and how this information will be collected. Some commenters 
stated that, because some of the cancer measures are registry-based 
measures, the added costs of implementing measures that require paying 
a fee to a nongovernmental entity would hinder small rural hospitals 
from being able to report data. Other commenters indicated that a 
process for validating registry-based data should be proposed prior to 
implementing quality measures based on registry data.
    Response: We agree with the commenters who supported the cancer 
measures. We acknowledge that receiving data from registries presents 
additional issues, but believe that in circumstances where substantial 
timeframes are involved, registries may

[[Page 60639]]

provide the best data collection mechanism. We will take these comments 
into consideration in deciding whether to propose these measures in the 
future for the HOP QDRP, and would specify the form and manner for data 
submission required should we, in the future, adopt these measures.
 Emergency Department Throughput (Potential Measure 4)
    Comment: A few commenters expressed strong support for the ED 
throughput Measure 4 (Median Time from ED Arrival to ED Departure for 
Discharged ED Patients) and recommended its inclusion in the HOP QDRP. 
Some commenters stated that a measure assessing delays in patient care 
is important as providers experience a growth in demand for ED 
services. Commenters saw the measure as making significant 
contributions to reducing overcrowding, and in turn increasing the 
quality of care delivered, particularly when public reporting occurs.
    Response: We thank these commenters for their supportive 
statements. We agree with the commenters that this measure addresses 
the issue of timely emergency department care and delays which have an 
adverse impact on quality of care due to overcrowding.
    Comment: One commenter indicated that the ED throughput measure is 
overly burdensome for hospitals to collect as it will require an 
arrival time to be noted for each patient, whether the patient is on 
observation, and will require sampling over 300 records per quarter. 
Other commenters indicated that, as currently structured, the measure 
includes the time spent receiving care in the ED in addition to the 
time spent waiting in the ED. These commenters indicated that the time 
spent receiving care in the ED should not be counted against the 
hospital, as it does not represent a delay in care. The commenters 
stated that, for patients discharged back into the community, and not 
admitted or transferred to another facility, there is no wait time in 
the ED after the patient has received the appropriate care. The 
commenters noted that, for these patients, any time spent waiting in 
the ED occurs before they see a provider. The commenters suggested that 
CMS modify the measure so that it reflects only the time spent waiting 
in the ED to see a provider. One commenter questioned whether the 
measure actually measures quality because fast care is not necessarily 
better care. Another commenter indicated that it could not locate the 
specifications for this measure.
    Response: We do not agree that the measure, as currently specified, 
would be overly burdensome to collect, because hospitals routinely 
collect the key information needed to calculate the median time (ED 
arrival date and time and ED departure date and time) for each 
emergency department patient. The current measure is an NQF-endorsed 
measure of quality, and feasibility of collection was among the 
considerations for its endorsement. Revising the measure in the manner 
suggested by the commenters to exclude active treatment times would be 
impractical, as it would impose a severe burden for hospitals to 
accurately track and collect the time spent in the ED not receiving 
care. We do not agree with the comment that prolonged ED throughput is 
solely due to time elapsed between arrival and first contact with a 
provider. The measure specifications are currently available in 
Appendix P of the HOPD Specifications Manual (versions 2.1b and 3.0) 
which is posted on the QualityNet Web site (http://www.qualitynet.org/
).
 Diabetes (Potential Measures 5, 6, 7, and 8)
    Comment: A few commenters indicated that they believed the three 
diabetes measures would be better suited to measure the quality of care 
in physician offices or physician-based clinics rather than in HOPDs. 
Other commenters indicated that, if finalized, CMS should consider HOPD 
participation in a disease management registry, or recognition and/or 
certification in disease management, as substitutes for the requirement 
of submitting diabetes-related quality measures to the CMS for the HOP 
QDRP. One commenter indicated that, for the LDL Control measure, CMS 
should account for the fact that some patients may not reach the goal 
but their risk may be mitigated by high HDL. One commenter indicated 
that the timeframe for the eye examination should be 24 months if there 
is no retinopathy and 12 months if retinopathy is known to be present.
    Response: We agree on the suitability of such measures for the 
physician office setting and note that these measures are currently 
part of the PQRI program. We would anticipate that these measures would 
be appropriate for reporting by those HOPDs that function as a primary 
care provider. We would not view participation in a registry or disease 
management program certification/recognition as a substitute for 
reporting quality measures for the HOP QDRP because it would not allow 
us to achieve the goal of providing comparative quality information on 
HOPDs to Medicare beneficiaries. These measures are currently being 
specified for the HOPD setting, and we will consider the suggestions 
for enhancements submitted by commenters.
 Medication Reconciliation (Potential Measure 9)
    Comment: A few commenters supported the medication reconciliation 
measure but urged CMS to clarify its expectation of medication 
reconciliation in the ED. Some commenters indicated that, although 
medication reconciliation measures were recently NQF-endorsed, 
implementing a quality measure in multiple outpatient settings may 
result in more medication errors, and recommended that the measure be 
implemented in primary care settings.
    Response: We are interested in medication reconciliation in all 
settings of care because medication errors may result in serious 
avoidable complications, and receiving the appropriate medications 
throughout the continuum of care may prevent the onset or worsening of 
serious medical conditions. Thus, the reduction of medication errors 
would contribute to overall improvements in patient outcomes and 
quality of life and would reduce mortality and hospital readmissions. 
We would expect that, prior to administration of or prescription of 
drugs in an ED setting, a patient's current medications, drug 
allergies, current acute condition, and chronic conditions would be 
assessed to the extent possible in order to prevent adverse drug-drug 
interactions and drug-disease interactions. We will take these comments 
into consideration in determining whether to propose this measure for 
the HOP QDRP in the future.
 Immunization (Potential Measures 10 and 11)
    Comment: One commenter stated that the influenza and pneumococcal 
vaccination measures will contribute to ED overcrowding, and that the 
measures are not appropriate for the HOPD setting as administering 
influenza and pneumococcal vaccinations are not part of routine 
emergency care protocols like administering a tetanus vaccine would be 
for wound care. The commenter believed that the measures will work 
against the ED throughput measures and would be more appropriate for 
physician offices and community public health departments.

[[Page 60640]]

    Response: These measures are currently being specified for HOPDs 
and are not intended for EDs. These measures are intended to apply to 
the facility under circumstances where the HOPD serves as a primary 
care provider. We will consider these comments in deciding whether to 
propose this measure for the HOP QDRP.
 Imaging Efficiency--SPECT MPI and Stress Echocardiography 
(Potential Measures 12 and 13)
    Comment: Some commenters indicated that the two measures on SPECT 
MPI and Stress Echocardiography should not be considered for the 
following reasons:
     Lack of benchmarks;
     Preoperative or postoperative period difficult for 
provider of test to track;
     Lack of medical history makes it difficult for a provider 
to determine if a test is appropriate for a patient;
     Not clear how the purpose of test (preoperative 
evaluation) is captured in Medicare claims; and
     Medicare claims provide an incomplete picture of facility 
performance.
    In addition, for Measure 13 (Use of Stress Echocardiography or 
SPECT MPI Post-Revascularization Coronary Artery Bypass Graft (CABG)), 
the commenters indicated that the measure's long time span of a 5-year 
period post-CABG hinders its usability as the information will be 
unavailable for a number of years and will be irrelevant by the time it 
becomes available.
    Response: These measures are currently under development, and we 
will take these comments into consideration as the measures are 
developed further.
    Comment: Some commenters applauded CMS' effort to obtain consensus 
among affected parties as evidenced by hosting of a public comment 
period during the measure development process, and supported Measure 12 
(SPECT MPI and Stress Echocardiography for Preoperative Evaluation of 
Low Risk Non-Cardiac Surgery) and Measure 13. However, these commenters 
also recommended stratification of the measures by imaging procedure.
    Response: We appreciate the supportive comments regarding our 
consensus-based measure development process. We will consider these 
suggestions for these measures as we continue measure development.
 Imaging Efficiency--Computed Tomography (Potential Measures 14 
and 15)
    Comment: For both measures, several commenters indicated that the 
measures target important areas where overuse of diagnostic imaging may 
be detrimental to patient care, and the measures appear valid and 
usable. However, the commenters believed that because the measures are 
based on Medicare claims, they would provide an incomplete picture of 
facility performance. One commenter suggested excluding ``sign of 
meningeal irritation (stiff neck)'' from Measure 14 (Use of Computed 
Tomography in Emergency Department for Headache).
    Response: Both of these measures are under development, and both 
address overutilization of CT scans in the outpatient setting which 
have implications for patient safety due to radiation exposure. The 
goal of these measures is not to reduce outpatient diagnostic CT 
imaging in these circumstances to zero, but to encourage its use only 
in circumstances where it is clinically indicated. Though all-payer 
claims are not currently included in these measures, due to the high 
volume of these services in the Medicare population relative to other 
populations, we believe that calculation of these measures based on 
Medicare claims only will target performance improvement where it is 
most needed: in the population that is at high risk for inappropriate 
imaging studies. We appreciate the supportive comments, and will 
consider these suggestions in the continuing development of these 
measures.
 Surgery (Potential Measure 16)
    Comment: Some commenters indicated that Measure 16 (Appropriate 
surgical site hair removal) is an unnecessary measure, as performance 
on the measure in the inpatient setting is already in the high 90 
percent range for the Nation. One commenter also indicated that SCIP 
officials may retire the measure because it is ``topped out'' and no 
longer distinguishes between high performers and low performers. Other 
commenters suggested that CMS not use this measure for quality 
reporting or, at the very least, exclude cases for which there is no 
supporting evidence that the use of razors results in lesser quality of 
care, and cases in which razors would prevent wound bandages from 
falling off, thus decreasing the chance of infection.
    Response: While hospitals may perform highly on this measure in the 
inpatient setting, we currently do not know if this is the case for the 
outpatient setting. We will take these comments into consideration in 
determining whether to propose this measure for the HOP QDRP in the 
future.
 Other Suggested Measures or Measurement Areas
    Comment: Commenters suggested several measures or measurement areas 
for CMS to consider for future development and adoption. The 
suggestions include:
     Heart Failure: ACE or ARB for LVSD (NQF 0137);
     Pneumonia: Empiric antibiotic for CAP (NQF 0096);
     Diabetes: Hemoglobin A1c poor control in type 1 or 2 
diabetes mellitus (NQF 0059);
     Outcome-based measures;
     Radiation therapy administered within 1 year of diagnosis 
for women under 70 receiving breast conserving surgery for breast 
cancer;
     Patient centeredness;
     Total lipid treatment;
     ED throughput;
     Orthopedic procedures;
     Diagnostic Mammography Positive Predictive Value;
     Screening Mammography Positive Predictive Value;
     Cancer Detection Rate (CDR);
     Abnormal Interpretation Rate;
     Emergency Department AMI mortality;
     Emergency Department-related nonmortality outcome measures 
(that is, NQF Sepsis measures);
     Overall cardiac care;
     Use and overuse of Cardiac CT;
     Percutaneous Cardiac Interventions (``PCI'');
     Care transitions/care coordination;
     AMI-2: Aspirin prescribed at discharge;
     AMI-5: Beta Blocker prescribed at discharge;
     HF-1: Discharge instructions;
     PN-3b: Blood culture performed before first antibiotic 
received in hospital;
     COPD management;
     NQF-endorsed ASC quality measures;
     Rate of surgical infections in outpatient surgery centers; 
and
     Rate of infection outbreaks related to contaminated 
scopes, syringes, and other medical equipment.
    Response: We thank the commenters for these suggestions for quality 
measures and measurement areas for the HOP QDRP, and we will consider 
them for the future. Some of the topics are reflected in the current 
list of measures and topics for future consideration.

[[Page 60641]]

Some of the specific measures suggested were considered in the past for 
the HOP QDRP but, upon evaluation, were either found not to be 
appropriate measures for HOPD services or were found to be overly 
burdensome. Other measures and measure topics on this list are 
currently under consideration as future areas of measurement for 
inpatient quality measure reporting, and we will examine the 
appropriateness of these measures for the HOP QDRP as well.

D. Payment Reduction for Hospitals That Fail To Meet the HOP QDRP 
Requirements for the CY 2010 Payment Update

1. Background
    Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, requires that hospitals 
that fail to report data required for the quality measures selected by 
the Secretary, in the form and manner required by the Secretary under 
section 1833(t)(17)(B) of the Act, incur a 2.0 percentage point 
reduction to their OPD fee schedule increase factor, that is, the 
annual payment update factor. Section 1833(t)(17)(A)(ii) of the Act 
specifies that any reduction would apply only to the payment year 
involved and would not be taken into account in computing the 
applicable OPD fee schedule increase factor for a subsequent payment 
year.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68769 
through 68772), we discussed how the payment reduction for failure to 
meet the administrative, data collection, and data submission 
requirements of the HOP QDRP affected the CY 2009 payment update 
applicable to OPPS payments for HOPD services furnished by the 
hospitals defined under section 1886(d)(1)(B) of the Act to which the 
program applies. The application of a reduced OPD fee schedule increase 
factor results in reduced national unadjusted payment rates that apply 
to certain outpatient items and services provided by hospitals that are 
required to report outpatient quality data and that fail to meet the 
HOP QDRP requirements. All other hospitals paid under the OPPS receive 
the full OPPS payment update without the reduction.
    The national unadjusted payment rates for many services paid under 
the OPPS equal the product of the OPPS conversion factor and the scaled 
relative weight for the APC to which the service is assigned. The OPPS 
conversion factor, which is updated annually by the OPD fee schedule 
increase factor, is used to calculate the OPPS payment rate for 
services with the following status indicators (listed in Addendum B to 
this final rule with comment period): ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' 
``R,'' ``S,'' ``T,'' ``V,'' ``U,'' or ``X.'' In the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68770), we adopted a policy that 
payment for all services assigned these status indicators would be 
subject to the reduction of the national unadjusted payment rates for 
applicable hospitals, with the exception of services assigned to New 
Technology APCs, assigned status indicator ``S'' or ``T,'' and 
brachytherapy sources, assigned status indicator ``U,'' which were paid 
at charges adjusted to cost in CY 2009. We excluded services assigned 
to New Technology APCs from the list of services subject to the reduced 
national unadjusted payment rates because the OPD fee schedule increase 
factor is not used to update the payment rates for these APCs.
    In addition, section 1833(t)(16)(C) of the Act, as amended by 
section 142 of Public Law 110-275, specifically required that 
brachytherapy sources be paid during CY 2009 on the basis of charges 
adjusted to cost, rather than under the standard OPPS methodology. 
Therefore, the reduced conversion factor also was not applicable to CY 
2009 payment for brachytherapy sources because payment would not be 
based on the OPPS conversion factor and, consequently, the payment 
rates for these services were not updated by the OPD fee schedule 
increase factor. However, in accordance with section 1833(t)(16)(C) of 
the Act, as amended by section 142 of Public Law 110-275, payment for 
brachytherapy sources at charges adjusted to cost is set to expire on 
January 1, 2010. For CY 2010, in the CY 2010 OPPS/ASC proposed rule (74 
FR 35399), we proposed to pay prospectively for brachytherapy sources. 
Therefore, we proposed that the CY 2010 payment for brachytherapy 
sources would be based on the conversion factor and the quality 
reporting reduction policy would be applicable to brachytherapy 
sources, which are assigned status indicator ``U.''
    We did not receive any public comments on our proposal to apply the 
reporting reduction to payment for brachytherapy sources, effective for 
services furnished on and after January 1, 2010. Therefore, we are 
finalizing our CY 2010 proposal, without modification, to apply the 
reduction to payment for brachytherapy sources to hospitals that fail 
to meet the quality data reporting requirements of the HOP QDRP for the 
CY 2010 OPD fee schedule increase factor.
    The OPD fee schedule increase factor, or market basket update, is 
an input into the OPPS conversion factor, which is used to calculate 
OPPS payment rates. To implement the requirement to reduce the market 
basket update for hospitals that fail to meet reporting requirements, 
in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68770 
through 68771), we calculated two conversion factors: a full market 
basket conversion factor (that is, the full conversion factor), and a 
reduced market basket conversion factor (that is, the reduced 
conversion factor). We then calculated a reduction ratio by dividing 
the reduced conversion factor by the full conversion factor. We refer 
to this reduction ratio as the ``reporting ratio'' to indicate that it 
applies to payment for hospitals that fail to meet their reporting 
requirements. Applying this reporting ratio to the OPPS payment amounts 
results in reduced national unadjusted payment rates that are 
mathematically equivalent to the reduced national unadjusted payment 
rates that would result if we multiplied the scaled OPPS relative 
weights by the reduced conversion factor. To determine the reduced 
national unadjusted payment rates that applied to hospitals that failed 
to meet their quality reporting requirements for the CY 2009 OPPS, we 
multiplied the final full national unadjusted payment rate in Addendum 
B to the CY 2009 OPPS/ASC final rule with comment period by the CY 2009 
OPPS final reporting ratio of 0.981 (73 FR 68771).
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 
through 68772), we established a policy that the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
would each equal the product of the reporting ratio and the national 
unadjusted copayment or the minimum unadjusted copayment, as 
applicable, for the service. We applied the reporting ratio to both the 
minimum unadjusted copayment and national unadjusted copayment for 
those hospitals that received the payment reduction for failure to meet 
the HOP QDRP reporting requirements. This application of the reporting 
ratio to the national unadjusted and minimum unadjusted copayments was 
calculated according to Sec.  419.41 of the regulations, prior to any 
adjustment for hospitals' failure to meet the quality reporting 
standards according to Sec.  419.43(h). Beneficiaries and secondary 
payers thereby share in the reduction of payments to these hospitals.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68772), we

[[Page 60642]]

established the policy that all other applicable adjustments to the 
OPPS national unadjusted payment rates apply in those cases when the 
OPD fee schedule increase factor is reduced for hospitals that fail to 
meet the requirements of the HOP QDRP. For example, the following 
standard adjustments apply to the reduced national unadjusted payment 
rates: the wage index adjustment; the multiple procedure adjustment; 
the interrupted procedure adjustment; the rural sole community hospital 
adjustment; and the adjustment for devices furnished with full or 
partial credit or without cost. We believe that these adjustments 
continue to be equally applicable to payments for hospitals that do not 
meet the HOP QDRP requirements. Similarly, outlier payments will 
continue to be made when the criteria are met. For hospitals that fail 
to meet the quality data reporting requirements, the hospitals' costs 
are compared to the reduced payments for purposes of outlier 
eligibility and payment calculation. This policy conforms to current 
practice under the IPPS. For a complete discussion of the OPPS outlier 
calculation and eligibility criteria, we refer readers to section II.F. 
of this CY 2010 OPPS/ASC final rule with comment period.
2. Reporting Ratio Application and Associated Adjustment Policy for CY 
2010
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35400), we proposed to 
continue our established policy of applying the reduction of the OPD 
fee schedule increase factor through the use of a reporting ratio for 
those hospitals that fail to meet the HOP QDRP requirements for the 
full CY 2010 annual payment update factor. For the CY 2010 OPPS, the 
proposed reporting ratio was 0.980, calculated by dividing the reduced 
conversion factor of $66.118 by the full conversion factor of $67.439. 
The final CY 2010 OPPS reporting ratio is 0.980, calculated by dividing 
the reduced conversion factor of $66.086 by the full conversion factor 
of $67.406. We proposed to continue to apply the reporting ratio to all 
services calculated using the OPPS conversion factor. For the CY 2010 
OPPS, we proposed to apply the reporting ratio, when applicable, to all 
HCPCS codes to which we have assigned status indicators ``P,'' ``Q1,'' 
``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``V,'' or ``X'' and, effective for 
services furnished on or after January 1, 2010, to also apply it to the 
HCPCS codes for brachytherapy sources, to which we have assigned status 
indicator ``U.'' Under our established policy, we would continue to 
exclude services paid under New Technology APCs. We proposed to 
continue to apply the reporting ratio to the national unadjusted 
payment rates and the minimum unadjusted and national unadjusted 
copayment rates of all applicable services for those hospitals that 
fail to meet the HOP QDRP reporting requirements. We also proposed to 
continue to apply all other applicable standard adjustments to the OPPS 
national unadjusted payment rates for hospitals that fail to meet the 
requirements of the HOP QDRP. Similarly, we proposed to continue to 
calculate OPPS outlier eligibility and outlier payment based on the 
reduced payment rates for those hospitals that fail to meet the 
reporting requirements.
    We did not receive any public comments on our CY 2010 proposal to 
apply the HOP QDRP reduction in the manner described in the paragraph 
above and, therefore, are finalizing our proposal, without 
modification. For the CY 2010 OPPS, we are applying a reporting ratio 
of 0.980 to the national unadjusted payments, minimum unadjusted 
copayments, and national unadjusted copayments for all applicable 
services reported by those hospitals failing to meet the HOP QDRP 
reporting requirements. This reporting ratio applies to lines with 
HCPCS codes assigned status indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' 
``R,'' ``S,'' ``T,'' ``U,'' ``V,'' or ``X,'' excluding services paid 
under New Technology APCs. All other applicable standard adjustments to 
the OPPS national unadjusted payment rates will continue to apply. This 
includes the OPPS outlier eligibility and payment calculations, which 
are determined using the reduced payment rates.

E. Requirements for HOPD Quality Data Reporting for CY 2011 and 
Subsequent Years

    In order to participate in the HOP QDRP, hospitals must meet 
administrative, data collection and submission, and data validation 
requirements (if applicable). Hospitals that do not meet the 
requirements of the HOP QDRP, as well as hospitals not participating in 
the program and hospitals that withdraw from the program, will not 
receive the full OPPS payment rate update. Instead, in accordance with 
section 1833(t)(17)(A) of the Act, those hospitals will receive a 
reduction of 2.0 percentage points in their updates for the applicable 
payment year.
    For payment determinations affecting the CY 2011 payment update, in 
the CY 2010 OPPS/ASC proposed rule (74 FR 35400), we proposed to 
implement the requirements listed below. Most of these requirements are 
the same as the requirements we implemented for the CY 2010 payment 
determination, with some proposed modifications.
1. Administrative Requirements
    To participate in the HOP QDRP, several administrative steps must 
be completed. These steps require the hospital to:
     Identify a QualityNet administrator who follows the 
registration process located on the QualityNet Web site (http://www.QualityNet.org) and submits the information to the appropriate CMS-
designated contractor. All CMS-designated contractors will be 
identified on the QualityNet Web site. The same person may be the 
QualityNet administrator for both the RHQDAPU program and the HOP QDRP. 
From our experience, we believe that the QualityNet administrator 
typically fulfills a variety of tasks related to the hospital's ability 
to participate in the HOP QDRP, such as: creating, approving, editing 
and/or terminating QualityNet user accounts within the organization; 
monitoring QualityNet usage to maintain proper security and 
confidentiality measures; and serving as a point of contact for 
information regarding QualityNet and the HOP QDRP.
    In the past, we have required not only that the hospital designate 
a QualityNet administrator for purposes of registering the hospital to 
participate in the HOP QDRP, but also that the hospital continually 
maintain a QualityNet administrator for as long as the hospital 
participates in the program. We have become aware that the required 
maintenance of the QualityNet administrator is creating an undue 
technical burden for some hospitals and that, in some cases, is 
preventing the hospital from meeting all of the HOP QDRP requirements. 
Therefore, we proposed to no longer require that a hospital maintain 
current designation of a QualityNet administrator. We invited public 
comment on this proposed change. Nevertheless, we strongly urged 
hospitals to maintain current designation of a QualityNet 
administrator, regardless of whether the hospital submits data directly 
to the CMS-designated contractor or uses a vendor for transmission of 
data.
    Comment: Many commenters agreed with CMS' proposal to remove the 
requirement to maintain current designation of a QualityNet 
administrator. Some of these commenters expressed their belief that it 
is in a hospital's best interest to

[[Page 60643]]

maintain a QualityNet administrator if possible. One commenter greatly 
appreciated the proposal to no longer require hospitals to maintain a 
QualityNet administrator to oversee the collection of HOP QDRP data 
because of the undue technical burden, particularly for hospitals in 
rural areas. This commenter believed that giving hospitals the option 
will lead to better quality data collection by lessening this burden on 
certain rural hospitals.
    Response: We thank these commenters for their support; we agree 
that removing this program requirement will relieve a technical burden 
especially for some small or rural hospitals. However, due to 
information systems security requirements, we have now determined that 
we are prohibited from removing the requirement for a QualityNet 
Security Administrator at this time. We remind hospitals that are 
submitting their own data without the use of a vendor that the hospital 
must have at least one active QualityNet account with the appropriate 
role assigned in order to submit data. We note that those hospitals 
with QualityNet accounts (Security Administrator and non-Security 
Administrator) that are in danger of lapsing receive multiple e-mail 
notifications that contain reminders that they must sign in or the 
account will be deactivated.
    After consideration of the public comments we received, due to 
systems requirements, we are not adopting our proposal to no longer 
require that a hospital maintain current designation of a QualityNet 
Administrator. Instead, hospitals must continue to maintain a 
QualityNet Security Administrator as part of the HOP QDRP requirements.
     Register with QualityNet, regardless of the method used 
for data submission.
     Complete and submit an online participation form if this 
form (or a paper Notice of Participation form) has not been previously 
completed, if a hospital has previously withdrawn, or if the hospital 
acquires a new CCN. For HOP QDRP decisions affecting the CY 2011 
payment determination, hospitals that share the same CCN must complete 
a single online participation form. In the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68772), we implemented an online 
registration form and eliminated the paper form. At this time, the 
participation form for the HOP QDRP is separate from the RHQDAPU 
program and completing a form for each program is required. Agreeing to 
participate includes acknowledging that the data submitted to the CMS-
designated contractor will be submitted to CMS and may also be shared 
with one or more other CMS contractors that support the implementation 
of the HOP QDRP and be publicly reported.
    Under our current requirements, the deadline for submitting the 
participation form is 30 days following receipt of a CCN form from CMS 
(73 FR 68772). In the CY 2010 OPPS/ASC proposed rule (74 FR 35400), we 
proposed to change this requirement as follows:
    Hospitals with Medicare acceptance dates on or after January 1, 
2010: For the CY 2011 payment update, we proposed that any hospital 
that has a Medicare acceptance date on or after January 1, 2010 
(including a new hospital and hospitals that have merged) must submit a 
completed participation form no later than 180 days from the date 
identified as its Medicare acceptance date on the CMS Online System 
Certification and Reporting (OSCAR) system. Hospitals typically receive 
a package notifying them of their new CCN after they receive their 
Medicare acceptance date. The Medicare acceptance date is the earliest 
date that a hospital can receive Medicare payment for the services that 
it furnishes. Completing the participation form includes supplying the 
name and address of each hospital campus that shares the same CCN.
    The use of the Medicare acceptance date as beginning the timeline 
for HOP QDRP participation will allow CMS to monitor more effectively 
hospital compliance with the requirement to complete a participation 
form because a hospital's Medicare acceptance date is readily available 
to CMS through its data systems. In addition, providing an extended 
time period to register for the program will allow newly functioning 
hospitals sufficient time to get their operations up and running before 
having to collect and submit quality data. We invited public comment on 
these proposed changes.
    Hospitals with Medicare acceptance dates before January 1, 2010, 
that want to participate or withdraw: For the CY 2011 payment update, 
we proposed that any hospital that has a Medicare acceptance date on or 
before December 31, 2009 that wants to withdraw from participation in 
the CY 2011 HOP QDRP or that is not currently participating in the HOP 
QDRP and wishes to participate in the CY 2011 HOP QDRP must submit a 
participation form by March 31, 2010. We proposed a deadline of March 
31, 2010, because we believe it will give hospitals sufficient time to 
decide whether they wish to participate in the HOP QDRP, as well as put 
into place the necessary staff and resources to timely report data for 
first quarter CY 2010 services. This requirement applies to all 
hospitals whether or not the hospital has billed for payment under the 
OPPS. We invited public comment on these proposed changes.
    Comment: Several commenters agreed with CMS' proposal to provide 
additional time for hospitals to submit an HOP QDRP participation form. 
One commenter believed that, for hospitals with Medicare acceptance 
dates prior to January 2010, a 3-month window ending March 31, 2010, is 
reasonable in which to make a decision regarding participation.
    Response: We thank the commenters for their support.
    Comment: One commenter stated that, based on its experience with 
hospital mergers, the surviving facility does not typically receive a 
new CCN and asked that the requirement that merged facilities submit a 
new participation form be confirmed.
    Response: Annual payment update decisions are made for a hospital's 
CCN. If a hospital's CCN does not change in a merger situation and the 
hospital is currently participating in the HOP QDRP, the hospital with 
that CCN would continue to be subject to HOP QDRP requirements, so a 
new participation form would not be required. However, the 
participation form requests that hospitals submit National Provider 
Identifier (NPI) information for any facilities connected to the 
hospital that bill under the hospital's CCN. The hospital may want to 
update its participation form to include any facilities added due to a 
merger, but there is no HOP QDRP requirement to do so at this time. If 
the hospital's CCN did not change in a merger situation and it was not 
participating in the HOP QDRP and now wishes to do so, or was 
participating and now wishes to withdraw, it must comply with the March 
31, 2010 timeframe for completing a participation form.
    After consideration of the public comments we received, we are 
adopting as final our proposed administrative requirements with one 
exception. We are not adopting our proposal to no longer require that a 
hospital maintain current designation of a QualityNet Administrator. 
Instead, hospitals must continue to maintain a QualityNet Security 
Administrator as part of HOP QDRP requirements.

[[Page 60644]]

2. Data Collection and Submission Requirements
a. General Data Collection and Submission Requirements
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35401), we proposed 
that, to be eligible for the full CY 2011 OPPS payment update, 
hospitals must:
     Submit data: Hospitals that are participating in the HOP 
QDRP must submit data for each applicable quarter by the deadline 
posted on the QualityNet Web site; there must be no lapse in data 
submission. For the CY 2011 annual payment update, the applicable 
quarters will be as follows: 3rd quarter CY 2009, 4th quarter CY 2009, 
1st quarter CY 2010, and 2nd quarter CY 2010. Hospitals that did not 
participate in the CY 2010 HOP QDRP, but would like to participate in 
the CY 2011 HOP QDRP, and that have a Medicare acceptance date on the 
OSCAR system before January 1, 2010, must begin data submission for 1st 
quarter CY 2010 services using the CY 2011 measure set that we are 
finalizing in this final rule with comment period. For those hospitals 
with Medicare acceptance dates on or after January 1, 2010, data 
submission must begin with the first full quarter following the 
submission of a completed online participation form. For the four 
claims-based measures, we will calculate the measures using the 
hospital's Medicare claims data. For the CY 2011 payment update, we 
will utilize paid Medicare fee-for-service (FFS) claims submitted prior 
to January 1, 2010, to calculate these four measures.
    Sampling and Case Thresholds: It will not be necessary for a 
hospital to submit data for all eligible cases for some measures if 
sufficient eligible case thresholds are met. Instead, for those 
measures where a hospital has a sufficiently large number of cases, it 
can sample cases and submit data for these sampled cases rather than 
submitting data from all eligible cases. This sampling scheme which 
includes the minimum number of cases based upon case volume will be set 
out in the HOPD Specifications Manual at least 4 months in advance of 
the required data collection. Hospitals must meet the sampling 
requirements for required quality measures each reporting quarter.
    In addition, in order to reduce the burden on hospitals that treat 
a low number of patients but otherwise meet the submission requirements 
for a particular quality measure, hospitals that have five or fewer 
claims (both Medicare and non-Medicare) for any measure included in a 
measure topic in a quarter will not be required to submit patient level 
data for the entire measure topic for that quarter. Even if hospitals 
are not required to submit patient level data because they have five or 
fewer claims (both Medicare and non-Medicare) for any measure included 
in a measure topic in a quarter, they may voluntarily do so.
    Hospitals must submit all required data according to the data 
submission schedule that will be available on the QualityNet Web site 
(https://www.QualityNet.org). This Web site meets or exceeds all 
current Health Insurance Portability and Accountability Act 
requirements. Submission deadlines will, in general, be four months 
after the last day of each calendar quarter. Thus, for example, the 
submission deadline for data for services furnished during the first 
quarter of CY 2010 (January-March 2010) will be on or around August 1, 
2010. The actual submission deadlines will be posted on the http://www.QualityNet.org Web site.
    Hospitals must submit data to the OPPS Clinical Warehouse using 
either the CMS Abstraction and Reporting Tool for Outpatient Department 
(CART-OPD) measures or the tool of a third-party vendor that meets the 
measure specification requirements for data transmission to QualityNet.
    Hospitals must submit quality data through My QualityNet, the 
secure portion of the QualityNet Web site, to the OPPS Clinical 
Warehouse. The OPPS Clinical Warehouse, which is maintained by a CMS-
designated contractor, will submit the OPPS Clinical Warehouse data to 
CMS. OPPS Clinical Warehouse data are not currently considered to be 
Quality Improvement Organization (QIO) data; rather, we consider such 
data to be CMS data. However, it is possible that the information in 
the OPPS Clinical Warehouse may at some point become QIO information. 
If this occurs, these data would also become protected under the 
stringent QIO confidentiality regulations in 42 CFR part 480.
    Hospitals must collect HOP QDRP data from outpatient episodes of 
care to which the required measures apply. For the purposes of the HOP 
QDRP, an outpatient ``episode of care'' is defined as care provided to 
a patient who has not been admitted as an inpatient, but who is 
registered on the hospital's medical records as an outpatient and 
receives services (rather than supplies alone) directly from the 
hospital. Every effort will be made to ensure that data elements common 
to both inpatient and outpatient settings are defined consistently for 
purposes of quality reporting (such as ``time of arrival'').
    Hospitals are to submit required quality data using the CCN under 
which the care was furnished.
    To be accepted into the OPPS Clinical Warehouse, data submissions, 
at a minimum, must be timely, complete, and accurate. Data submissions 
are considered to be ``timely'' when data are successfully accepted 
into the OPPS Clinical Warehouse on or before the reporting deadline. A 
``complete'' submission is determined based on whether the data satisfy 
the sampling criteria that are published and maintained in the HOPD 
Specifications Manual, and must correspond to both the aggregate number 
of cases submitted by a hospital and the number of Medicare claims the 
hospital submits for payment. We are aware of ``data lags'' that occur 
due to when hospitals submit claims, then cancel and correct those 
claims; efforts will be made to take such events into account that can 
change the aggregate Medicare case counts. To be considered 
``accurate,'' submissions must pass validation, if applicable.
    CMS strongly recommends that hospitals review OPPS Clinical 
Warehouse feedback reports and the HOP QDRP Provider Participation 
Reports that are accessible through their QualityNet accounts. These 
reports enable hospitals to verify whether the data they or their 
vendor submitted was accepted into the OPPS Clinical Warehouse and the 
date/time that such acceptance occurred. We also note that irrespective 
of whether a hospital submits data to the OPPS Clinical Warehouse 
itself or uses a vendor to complete the submissions, the hospital is 
responsible for ensuring that HOP QDRP requirements are met.
    Finally, although not required, hospitals may submit, on a 
voluntary basis, the aggregate numbers of outpatient episodes of care 
which are eligible for submission under the HOP QDRP and sample size 
counts. These aggregated numbers of outpatient episodes represent the 
number of outpatient episodes of care in the universe of all possible 
cases eligible for data reporting under the HOP QDRP. We do not wish to 
require this submission at this time because we continue to see 
evidence that some hospitals would not be able to meet this 
requirement. However, as it is vital for quality data reporting for 
hospitals to be able to determine their population sizes, we believe it 
is highly beneficial for hospitals to develop systems that can 
determine whether or not they have furnished services or billed for 
five or fewer cases for a particular measure topic on a quarterly 
basis. CMS strongly

[[Page 60645]]

recommends that all hospitals work to develop systems that can 
accurately determine their population and sample sizes for purposes of 
quality reporting.
    In the future, we plan to use the aggregate population and sample 
size data to assess data submission completeness and adherence to 
sampling requirements for Medicare and non-Medicare patients.
    For the reporting of aggregate numbers of outpatient episodes of 
care and sample size counts, we proposed that the deadlines for this 
reporting will be the same as they are for the reporting of quality 
measures, and these deadlines will be posted on the data submission 
schedule that will be available on the QualityNet Web site.
    We invited public comment on these proposed changes.
    Comment: One commenter appreciated CMS' clear and concise 
definition of an outpatient episode of care. Another commenter asked 
for a clear definition of what constitutes an outpatient setting.
    Response: We thank the first commenter for its support for our 
definition of an outpatient episode of care. This definition is drawn 
from the CMS Claims Processing Manual. Chapter 1, Section 50.3.1 of the 
CMS Claims Processing Manual (issued 06-23-09; Effective Date: 07-01-
09) states ``Outpatient' means a person who has not been admitted as an 
inpatient but who is registered on the hospital or critical access 
hospital (CAH) records as an outpatient and receives services (rather 
than supplies alone) directly from the hospital or CAH.'' Thus, based 
upon the definition of outpatient, an outpatient setting would be a 
health care setting where a person is registered on the hospital or CAH 
records as an outpatient and receives services from the hospital or 
CAH. Under the HOP QDRP, hospitals are defined as including all the 
facilities connected to a hospital that are operating and billing for 
OPPS services under the same CCN. We note that the above definition 
does not restrict the outpatient setting to the hospital or CAH itself.
    Comment: Several commenters stated that many of the program's 
processes were specified in detail for the first time and that this 
specificity was appreciated, as it is helpful for hospitals to have 
clear direction on both the requirements and the process of the 
program.
    Response: We thank the commenters for their feedback.
    Comment: One commenter supported CMS' proposal that all hospitals 
sharing the same CCN be required to combine data across multiple 
campuses for all clinical data submissions. The commenter believed 
reporting by CCN is appropriate to align clinical and financial 
reporting. This commenter also supported this proposal because this 
approach is similar to the approach being taken by the RHQDAPU program 
and noted that consistency between administrative aspects of the two 
programs is appreciated. One commenter stated that while in situations 
where a new facility is opened or remains under the same ownership, the 
statement that hospitals are to submit required quality data using the 
CCN under which the care was furnished is true. However, the commenter 
believed that, for mergers, there will be a tremendous resource burden 
placed on the hospital and measure vendor if abstracted data must be 
separated according to the CCN that applied to the hospital at the time 
the care was furnished. This commenter stated that because data are 
submitted and published for public view on a quarterly basis, there is 
tremendous concern that the public could select a hospital for patient 
care based on data that does not represent a full quarter. The 
commenter recommended that if a merger does not occur at the very 
beginning/end of a quarter, the data be combined for both facilities 
under the parent/surviving facility CCN because the child or absorbed 
facility, under its old CCN, no longer exists once the merger occurs.
    Response: We thank the commenters that supported our proposal to 
have quality measure data reported by the CCN that applies to the 
hospital at the time the care is furnished. We understand that there 
could be issues regarding burden and completeness of data reporting in 
the case of mergers. We point out that hospitals operating under 
separate CCNs participating in the HOP QDRP would be collecting quality 
measure data separately prior to a merger, and that the data could be 
kept separate after the merger. Regarding the issue of incomplete data, 
we acknowledge that the surviving hospital would have less data for the 
quarter in which the merger took place than if the absorbed hospital's 
data were included, but the surviving hospital will have all the data 
for care furnished under its CCN. Because the CCN is the financial and 
certification identifier for hospitals and is the identifier used by 
the HOP QDRP to monitor completeness of data reporting, we believe it 
is important that all quality measure data be reported under the CCN 
that was in place when the care was delivered. We urge hospitals and 
vendors to have data reporting systems sufficiently robust to be able 
to efficiently handle data by the CCN under which the care was 
delivered.
    Comment: One commenter strongly agreed that hospitals with five or 
fewer claims (Medicare and non-Medicare) for a specific measure should 
not be required to submit patient-level data for the entire measure 
topic while being allowed to report data voluntarily, but believed that 
the allowable time period to not report data was a year. Another 
commenter urged CMS to modify this provision so that it would apply to 
hospitals with five or fewer Medicare claims, not five or fewer claims 
across all payers.
    Response: We thank the first commenter for supporting our policy 
not to require hospitals with five or fewer claims for a specific 
measure to submit data while allowing these hospitals to report data 
voluntarily. However, we are clarifying that hospitals that have five 
or fewer claims (both Medicare and non-Medicare) for any measure 
included in a measure topic in a quarter will not be required to submit 
patient-level data for the entire measure topic only for that quarter.
    With respect to the second commenter's suggestion that we modify 
our policy to apply to five or fewer Medicare claims (rather than five 
or fewer Medicare and non Medicare claims), we selected more than 5 
cases per quarter (more than 20 cases per year) as the minimum 
threshold to ensure that the vast majority of hospitals with sufficient 
caseload would be required to submit data, while easing the burden on 
hospitals whose patient counts were too small to reliably predict 
hospital performance. Because we collect quality measure data on both 
Medicare and non-Medicare patients, we believe it is appropriate to set 
our case thresholds using the population for which we are collecting 
data, which includes both Medicare and non-Medicare patients.
    Comment: One commenter questioned the proposal under which 
hospitals that have five or fewer claims (both Medicare and non-
Medicare) for any measure included in a measure topic in a quarter will 
not be required to submit patient-level data for the entire measure 
topic for that quarter. The commenter stated that one of the goals of 
the CMS quality improvement programs is to improve the care given to 
Medicare beneficiaries and that, by allowing hospitals with five or 
fewer cases in a quarter to not report, the very hospitals that need 
improvement the most may be missed. The commenter also believed

[[Page 60646]]

that the burden of reporting is minor for hospitals that would abstract 
five or fewer charts as this would take less than 30 minutes in most 
cases, which would not be much of a burden over a 3-month period.
    Response: We agree with the commenter that abstracting five charts 
over a quarter would not be overly burdensome. In implementing the 
reporting of quality measure data where there are five or fewer cases 
in a quarter, we are also addressing the reported excessive burden 
associated with determining the individual cases and submitting the 
data for those hospitals with small case numbers for a measure. We 
continue to strive to collect quality of care data while limiting 
burden. We acknowledge that it is possible that quality of care 
concerns may exist with hospitals with small case numbers for a 
particular quality measure. We note that quality of care is also 
monitored through other mechanisms, including, but not limited to, the 
Medicare beneficiary complaint process through QIOs and the survey and 
certification process.
    Comment: One commenter agreed that data abstraction processes for 
outpatient services are sufficiently different from inpatient services 
as to require the hospital to spend time creating processes to ensure 
that they capture the accurate population and abstracted data. One 
commenter agreed with keeping the submission deadline for population 
and sampling counts the same as the deadline for case-level data, and 
stated that last minute updates to the population occur because of 
coding changes. The commenter also stated that synchronizing the 
deadlines aided hospitals in capturing the most accurate information 
possible. One commenter agreed with CMS' proposal to keep the 
submission of population and sampling counts voluntary, and noted that 
this can be very time consuming for hospitals.
    Response: We thank these commenters for confirming our views on the 
ability of some hospitals to meet a requirement to submit population 
and sampling data at this time. We reiterate that it is vital, for 
quality data reporting, that hospitals are able to determine their 
population sizes and that all hospitals work to develop systems that 
can accurately determine their population and sample sizes for purposes 
of quality reporting.
    Comment: One commenter urged immediate adoption of an effective 
mechanism that allows hospitals and their vendors to resubmit quality 
measure data if an error is discovered and emphasized that the point of 
public reporting is to put accurate and useful information into the 
hands of the public and this is facilitated by allowing known reporting 
mistakes to be corrected.
    Response: We agree with the commenter that publicly reporting 
accurate and useful information is important and that a mechanism or 
process for correcting errors should be implemented. While a proposal 
addressing this concern was not included in this current rulemaking, we 
will consider ways to address this concern in a future rulemaking.
    Comment: One commenter disagreed with CMS' approach that sampling 
requirements should apply based on both Medicare and non-Medicare cases 
and believed that CMS should focus only on the population of patients 
for which the agency is responsible.
    Response: We believe the commenter is arguing that we should not 
apply sampling criteria to non-Medicare claims and should focus only on 
Medicare claims. As we collect quality measure data on both Medicare 
and non-Medicare patients, we believe it is appropriate to set our 
sampling criteria so that they apply to the same population, which 
includes both Medicare and non-Medicare patients.
    Comment: One commenter supported the concept of sampling and the 
development of eligible thresholds and recommended that CMS distribute 
sampling criteria when new measures are implemented (that is, any 
measures proposed in a calendar year should include the sampling 
criteria as part of the OPPS/ASC proposed rule).
    Response: We thank the commenter for this suggestion and will 
consider it in future planning. We note that sampling criteria are 
included in each release of the HOPD Specifications Manual.
    After consideration of the public comments we received, we are 
adopting as final our proposals regarding HOP QDRP data collection and 
submission requirements for the CY 2011 payment determination.
b. Extraordinary Circumstance Extension or Waiver for Reporting Quality 
Data
    In our experience, there have been times when hospitals have been 
unable to submit required quality data due to extraordinary 
circumstances that are not within their control. It is our goal to not 
penalize hospitals for such circumstances and we do not want to unduly 
increase their burden during these times. Therefore, in the CY 2010 
OPPS/ASC proposed rule (74 FR 35402), we proposed a process for 
hospitals to request and for CMS to grant extensions or waivers with 
respect to the reporting of required quality data when there are 
extraordinary circumstances beyond the control of the hospital.
    Under the proposed process, in the event of extraordinary 
circumstances not within the control of the hospital, for the hospital 
to receive consideration for an extension or waiver of the requirement 
to submit quality data for one or more quarters, a hospital must--
    (1) Submit to CMS a request form that will be made available on the 
QualityNet Web site. The following information should be noted on the 
form:
     Hospital CCN;
     Hospital Name;
     CEO and any other designated personnel contact 
information, including name, e-mail address, telephone number, and 
mailing address (must include a physical address, a post office box 
address is not acceptable);
     Identified reason for requesting an extension or waiver;
     Hospital's reason for requesting an extension or waiver;
     Evidence of the impact of the extraordinary circumstances, 
including but not limited to photographs, newspaper and other media 
articles; and
     A date when the hospital will again be able to submit HOP 
QDRP data, and a justification for the proposed date.
    The request form must be signed by the hospital's CEO. A request 
form must be submitted within 30 days of the date that the 
extraordinary circumstance occurred.
    Following receipt of such a request, CMS will--
    (1) Provide a written acknowledgement using the contact information 
provided in the request, to the CEO and any additional designated 
hospital personnel, notifying them that the hospital's request has been 
received; and
    (2) Provide a formal response to the CEO and any additional 
designated hospital personnel using the contact information provided in 
the request notifying them of our decision.
    We invited public comment on these proposed procedures for 
requesting an extraordinary circumstance extension or waiver of the 
requirement to submit quality data for one or more quarters.
    Comment: Several commenters expressed their appreciation for CMS' 
recognition that hospitals facing certain extraordinary circumstances 
should be granted an extension or waiver. The commenters believed that, 
while decisions on granting an extension or waiver would best be made 
on a case-by-case basis depending on each hospital's unique situation, 
they

[[Page 60647]]

suggested that CMS adopt some general criteria to apply when it 
determines whether such extensions or waivers would be granted. The 
commenters also expressed concern that it might not be feasible for a 
hospital to file a request form for an extraordinary circumstances 
waiver within 30 days of such an event and urged a creative and 
flexible approach to working with hospitals in these situations to 
ensure that an undue burden is not placed on hospitals during a time of 
hardship.
    Response: We will consider these comments as we further develop 
program procedures for extraordinary circumstance extensions or 
waivers. We are mindful that many hospitals operating in these adverse 
situations cannot access the Internet or mail service. We note that we 
currently use a variety of means to communicate with hospitals in these 
circumstances, including using our HOP QDRP support contractor and both 
national and State hospital associations, and will continue to do so. 
Regarding the ability to file a request form for an extraordinary 
circumstances waiver within 30 days of such an event, we believe that 
30 days is sufficient in the vast majority of circumstances. However, 
we agree that additional time may be warranted in some extreme 
circumstances.
    After consideration of the public comments we received, we are 
adopting our proposals regarding extraordinary circumstance extensions 
or waivers for the reporting of quality data under the HOP QDRP, with a 
modification that the request form must be submitted within 45 calendar 
days of the date that the extraordinary circumstance occurred, rather 
than the 30 days we proposed.
3. HOP QDRP Validation Requirements
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68776), we announced a voluntary test validation program, the results 
of which would not affect the CY 2010 payment update for any hospital. 
Due to resource constraints, we were not able to implement this test 
validation plan.
    a. Data Validation Requirements for CY 2011
    Validation, as discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66871), is intended to provide assurance of the 
accuracy of the hospital abstracted data. For the CY 2011 payment 
determination, in the CY 2010 OPPS/ASC proposed rule (74 FR 35402), we 
proposed to implement a validation program that will require hospitals 
to supply requested medical documentation to a CMS contractor for 
purposes of being validated. However, the results of the validation 
will not affect the CY 2011 payment update for any hospital. We believe 
that it is important for hospitals to have some experience and 
knowledge of the HOP QDRP validation process before payment 
determinations are made based upon validation results. We proposed to 
implement a validation program that will both limit burden upon 
hospitals, especially small hospitals, as well as provide feedback to 
all hospitals on validation performance.
    Specifically, we proposed to select a random sample of 7,300 cases 
from all cases successfully submitted to the OPPS Clinical Warehouse by 
all participating hospitals for the relevant time period described 
below and validate those data. Based upon the quality data submitted 
for the CY 2009 payment update and our methodology for drawing the 
sample, we estimate that the sample will include up to 20 cases per 
participating hospital; the same number of cases sampled on an annual 
basis for validation under the RHQDAPU program. A sample size of 7,300 
was chosen because it will enable us to detect a relative difference of 
10 percent in the measured overall accuracy rate with a 95 percent 
(two-tailed) confidence interval and should provide sufficient data to 
conduct post-hoc stratified analyses that provide meaningful feedback. 
These figures are based upon a power analysis assuming a population 
measure mismatch rate of five percent with the outcomes being either a 
match or a mismatch between what the hospital submitted versus what was 
determined by validation. We intend to supply feedback on the 
validation results to all hospitals.
    We proposed to request medical documentation from hospitals for 
April 1, 2009 through March 31, 2010 episodes of care, which will allow 
us to gather one full year of submitted data for validation purposes.
    Once we have completed the random selection, a designated CMS 
contractor will use certified mail to request that each selected 
hospital send to the CMS contractor supporting medical record 
documentation that corresponds to each selected episode of care. Each 
hospital must submit this documentation to the designated CMS 
contractor within 45 calendar days of the date of the request (as 
documented on the request letter). If the hospital fails to comply 
within 30 days of the initial medical documentation request, the 
designated CMS contractor will send a second certified letter to the 
hospital reminding the hospital that the requested documentation must 
be received within 45 calendar days following the date of the initial 
request. If the hospital still fails to comply, a ``zero'' score will 
be assigned to each data element for each selected case and the case 
will fail for all measures in the same topic (for example, OP-6 and OP-
7 measures for a surgical care case).
    Once the CMS contractor receives the requested medical 
documentation, the CMS contractor will independently reabstract the 
same quality measure data elements that the hospital previously 
abstracted and submitted and compare the two sets of data to determine 
whether they match. Specifically, the CMS contractor will conduct a 
measures level validation by calculating each measure within a 
submitted record using the independently reabstracted data and then 
comparing this to the measure reported by the hospital; a percent 
agreement will then be calculated.
    As we stated above, the results of the validation will not affect a 
hospital's CY 2011 annual payment update because we want to give 
hospitals time to gain experience with the medical documentation 
requests and the validation process before these results are used in 
payment determinations. However, hospitals must supply the medical 
documentation for each requested case; failure to provide this 
documentation may result in a 2.0 percentage point reduction in a 
hospital's CY 2011 annual payment update.
    Comment: Many commenters expressed their support for a validation 
approach where they could receive feedback on their validation results 
without having their payment affected for the CY 2011 payment update. 
Several commenters applauded the approach, stating that hospitals will 
benefit from the program as they continue to gain experience with 
outpatient quality reporting. One of these commenters specifically 
agreed with requiring hospitals to submit charts for validation for the 
CY 2011 payment determination. One commenter expressed support for a 
12-month validation period in CY 2011. One commenter expressed support 
for a different validation process than the one in use for FY 2010 
under the inpatient RHQDAPU program.
    Response: We thank these commenters and appreciate their support. 
We agree that it is important that hospitals gain experience with 
validation for HOP QDRP data collection prior to using validation 
results to make payment determinations. We also believe that hospitals 
will benefit from the results of our proposed validation plan, both by

[[Page 60648]]

reviewing results on selected individual cases as well as the aggregate 
results.
    Comment: One commenter stated that hospitals must incur the 
additional burden of paying to copy and ship medical records to CMS 
because this funding was not incorporated into the outpatient project.
    Response: The issue of costs for copying and shipping medical 
records to CMS was not discussed in the CY 2010 OPPS/ASC proposed rule, 
and we are currently considering our policy approach regarding this 
issue. We are aware that these costs are not insignificant.
    Comment: One commenter believed that it is unrealistic to conduct 
validation and calculate reliable measures from collected HOP QDRP 
quality measure data because there have been so many changes in the 
abstraction instructions over the past year. The commenter argued that 
validation should not be part of the determination for payment 
decisions until the entire measure set is tested and proven to be 
reliable and valid. Another commenter stated that the two statements 
``the results of the validation will not affect a hospital's CY 2011 
annual payment update'' and ``failure to provide this documentation may 
result in a 2.0 percentage point reduction in the hospital's CY 2011 
payment update'' were inconsistent.
    Response: We agree that there have been issues with the HOP QDRP 
data, including changes in abstraction instructions over the past year. 
However, we believe that the validation approach that we have proposed 
addresses these concerns. For CY 2011 payment determinations, we have 
proposed to conduct validation on April 1, 2009 to March 31, 2010 
episodes of care reported to the OPPS Clinical Warehouse; this is one 
year after the initial data reported, which was for April 1, 2008 to 
June 30, 2008 episodes of care. With one exception, most of the 
significant changes in abstraction instructions during the program's 
life were incorporated by April 1, 2009. The exception, the exclusion 
of cancelled surgery cases from the Surgical measures, went into effect 
with July 1, 2009 episodes of care. We intend to determine whether a 
selected Surgical Care measure case was cancelled based upon the 
submitted medical documentation rather than drop April 1, 2009 to June 
30, 2009 cases from selection in order to maintain a 12-month sampling 
frame for validation. We intend to either drop any selected April to 
June 2009 cancelled surgery cases or otherwise account for this factor.
    While it would be optimal to use the preliminary results of the 
validation effort for CY 2011 in the final design of the validation 
process for the CY 2012 payment determinations, due to resource 
constraints, we will not obtain the results of the CY 2011 validation 
before we must put forth our proposal for CY 2012. We do intend to 
conduct further analyses of collected HOP QDRP data and will utilize 
these results in developing our CY 2012 proposals.
    Regarding our statement that the results of this validation will 
not affect a hospital's annual payment update, we wish to clarify that 
when we referred to ``results,'' we meant the results of the validation 
process where what is independently abstracted from a hospital's 
submitted documentation is compared to what the hospital self-reported. 
Therefore, while the validation ``results'' will not affect a 
hospital's CY 2011 payment update factor, to ensure that we receive an 
adequate supply of records for our test validation, a hospital must 
submit required medical record documentation for the selected cases and 
if it fails to do so, that failure would affect its CY 2011 payment 
update factor.
    Comment: Several commenters supported CMS' proposal to document the 
validation medical record request process. Specifically, the commenters 
supported CMS' plans to send two certified letter requests for medical 
records for data validation in case the hospital does not respond to 
the first request. The commenters suggested that phone calls be placed 
to hospitals that do not respond to the first letter to ensure that 
every effort is made to communicate the request to the appropriate 
staff; and suggested that this phone call should be placed to the 
QualityNet Administrator for those hospitals that have a person serving 
in this role. One commenter suggested that a telephone call to the 
hospital chief executive officer be made before assigning a ``zero'' 
score for validation, as there may be circumstances in which the CEO is 
unaware of an insufficient response to a request for records.
    Response: We thank the commenters and agree that certified letters 
provide hospitals with multiple written documented notification and 
reminder attempts; we believe that this alone is sufficient 
notification. However, we note that the planned contractor for this 
work as standard practice attempts to call hospitals at least three 
times about 30 calendar days after it sends the initial medical record 
request. As a practice, we intend to continue attempting to call 
hospitals at least three times around the 30th calendar day following 
the initial request, in addition to sending written certified letters. 
We believe that these attempted calls at different time periods around 
the 30th calendar day following the initial request demonstrate our 
commitment to notify hospitals of medical record requests using 
multiple communication modes.
    Comment: One commenter expressed concern that a random sampling of 
7,300 cases is not sufficient to provide hospitals meaningful feedback 
on the accuracy of their data collection and recommended that CMS 
select a larger number of cases over a longer period of time. The 
commenter also suggested that individual feedback on validation results 
be provided to those hospitals that submit records for this initial 
validation process.
    Response: The major purpose of our proposed sampling scheme for CY 
2011 payment determinations is to provide aggregate level feedback to 
hospitals on data elements abstracted and to validate the quality 
measure data collected while limiting hospital burden. However, we do 
intend to provide individual feedback on validation results to those 
hospitals that submit records for this initial validation effort. 
Regarding the suggestion to select cases over a longer time period, we 
have selected the April 1, 2009 to March 31, 2010 timeframe because 
this time period provides the most recent 12-month period possible. We 
believe that it is important to use the most recent data possible while 
maintaining at least a full year's worth of data. We have not included 
any data from the April 1, 2008 to March 31, 2009 time period because 
we believe that this will minimize the use for validation purposes of 
HOP QDRP data that may be unreliable because of changes in data 
abstraction guidelines that occurred, or because it was collected in 
the early stages of the program when hospitals were still developing 
HOP QDRP data collection systems. We believe that hospitals will be 
able to gain meaningful information from aggregate results produced 
under our validation sampling scheme, although we agree that it would 
be more useful to select an increased number of cases. Selecting an 
increased number of cases is not possible with present resource 
constraints and we note that this approach would increase hospital 
burden.
    Comment: Several commenters disagreed with randomly selecting only 
a subset of hospitals for validation because they believe that all 
hospitals should be held to the same threshold/expectation. One 
commenter believed that ``random validation'' would not produce 
accurate results, and another

[[Page 60649]]

commenter expressed concern that the proposed validation approach is 
not robust enough given the ever increasing scope of measures included 
in the measure set.
    Response: We appreciate the concern that these commenters express 
for treating all hospitals similarly, both in costs and benefits of the 
validation process and for maintaining hospital performance in regard 
to data validation.
    Under the HOP QDRP, all hospitals are responsible for meeting 
reliability levels for submitted abstracted data. Because hospitals 
will not know in advance whether they will be selected for validation 
and because selection will be random, we believe that hospitals will 
have sufficient incentive to maintain data quality.
    Comment: Several commenters suggested that CMS build safeguards 
into the sampling process to ensure that no more than 20 patient cases 
are selected from each hospital.
    Response: We appreciate the commenters' concerns about the number 
of cases selected under the proposed sampling design. However, it is 
highly unlikely, given the number of hospitals and the cases submitted, 
that any hospital will have more than 20 cases selected. In addition, 
building in a threshold for the number of cases selected would take 
away the ``random'' element of the sampling process.
    Comment: One commenter suggested that rather than randomly 
selecting hospitals each year, CMS adopt a validation process that 
results in those hospitals not selected in one year having a greater 
likelihood of being selected in the next/future years.
    Response: While we did not propose this approach in our validation 
plan for CY 2011, in the CY 2010 OPPS/ASC proposed rule (74 FR 35403 
through 35404), we discussed additional data validation conditions 
under consideration for CY 2012 and subsequent years, including the use 
of targeting criteria. Examples of possible targeting criteria include 
considering whether a hospital had not been previously selected for 
validation for 2 or more consecutive years.
    Comment: One commenter urged CMS to set strict timelines so that 
the public has access to data that have undergone the test validation 
process as soon as possible by publicly reporting validated 2nd and 3rd 
quarter 2009 data no later than June 2010.
    Response: We agree that it is important to make validated data 
publicly available as soon as possible and will make every effort to do 
so. However, with present resource constraints, it is not possible to 
meet the commenter's suggested timeline.
    Comment: One commenter urged that State QIOs be supportive not only 
during the validation appeals process, but proactively during data 
collection and reporting.
    Response: The HOP QDRP was implemented separately from the QIO 
program and State QIOs have not been involved with the HOP QDRP to 
date. State QIOs, however, are involved in the RHQDAPU program. We note 
that QIOs are available for quality of care concerns for individual 
Medicare cases and that their purview includes the outpatient setting.
    Comment: One commenter preferred a validation approach that would 
select five cases per quarter stratified by measure/topic for all 
hospitals. The commenter argued that such an approach provides 
hospitals an opportunity to focus on mismatches by measure set.
    Response: We interpret the commenter's statement to mean that the 
commenter prefers to have five cases that are stratified by measure/
topic be selected each quarter for all hospitals so that information on 
each hospital's individual abstraction accuracy can be assessed by 
measure/topic. We acknowledge the commenter's belief that such an 
approach would continually improve data abstraction, but we believe 
that the improved reliability under the proposed validation process 
coupled with the reduction of overall hospital burden associated with 
validation participation will outweigh the potential benefits of 
validating a smaller number of records for all hospitals. Regardless of 
whether a hospital was included in any validation selection, we intend 
to provide aggregate validation information to all hospitals that 
submit quality measure data.
    Comment: Several commenters preferred that CMS give continued 
attention to individual data element level analysis for validation for 
a variety of reasons, including: Increasing the denominator and 
minimizing the impact of a small number of errors; and looking at the 
individual data elements with a threshold based on sample size. Some of 
these commenters doubted CMS' statement that higher accuracy rates are 
possible using the proposed measure level match approach versus a data 
element level approach and believed that the proposed approach appeared 
to place hospitals at high risk for not receiving the full CY 2012 
payment update. The commenters recommended a period or process where 
any changes in the validation process be tested without penalty against 
any payment update prior to broad implementation.
    Response: We agree that there should be continued attention to the 
data element level as the individual data elements are used to 
calculate quality measures. We proposed a measure level match approach 
to replace the data element match approach because of what we have 
observed in the RHQDAPU program for inpatient quality measure data 
reporting. The intent of the measure match approach is to minimize the 
impact of errors for noncritical data elements. As we explain in more 
detail below, we are not finalizing our validation proposal for CY 
2012. Instead, we will be conducting further analyses on collected HOP 
QDRP data and considering all public comments we received on validation 
before we propose a validation process for the CY 2012 payment 
determination.
    We agree that hospitals should be allowed to gain some experience 
with validation under the HOP QDRP before we consider such results 
toward payment determinations, and we are doing so through our 
validation approach for the CY 2011 payment determination.
    Comment: Many commenters agreed with the adoption of a measure 
score match for validation instead of a data element matching approach. 
Several commenters believed that it is appropriate to focus on the 
hospital's measure rate, as opposed to individual data elements, 
because the measure rate captures the information that is truly 
important to patient care. The commenters observed that, for data 
validation in the RHQDAPU (inpatient reporting) program, there have 
been several instances in which a mismatch between single data elements 
unrelated to the quality of care provided by a hospital, such as the 
patient's birth date, have caused hospitals to fail validation and that 
validating the hospital's measure rate should eliminate these 
unfortunate incidents.
    Response: We thank these commenters for their support. The proposed 
validation process focuses on validating whether hospital abstracted 
data results in accurate measure rates and measure denominator counts. 
We will continue to use the data elements to calculate the measure 
values and, subsequently, the validation scores.
    Comment: One commenter urged CMS to extend the turnaround time for 
chart selection to 60 days and believed that hospitals should have the 
option to submit validation cases electronically rather than printed 
copies because this would avoid shipping delays and allow faster 
turnaround time.

[[Page 60650]]

    Response: We understand the commenter's concern about the deadline 
for hospitals to submit requested medical records. However, extending 
this time period increases the amount of time between when services are 
furnished, initial hospital data are submitted, data are validated, 
and, ultimately, when the results can be compiled for program purposes. 
We will consider accepting electronic submission of validation cases 
using compact disc and electronic health record submission in future 
years. We must consider both the cost to accept and review these 
submissions and the added benefit to the hospitals using electronic 
methods to store medical record information.
    After consideration of the public comments we received, we are 
adopting as final, without modification, our proposals for validation 
for the CY 2011 payment determination.
b. Data Validation Approach for CY 2012 and Subsequent Years
    Similar to our proposal for the FY 2012 RHQDAPU program (74 FR 
24178), in the CY 2010 OPPS/ASC proposed rule (74 FR 35403), we 
proposed to validate data from 800 randomly selected hospitals 
(approximately 20 percent of all participating HOP QDRP hospitals) each 
year, beginning with the CY 2012 payment determination. We note that 
because the 800 hospitals will be selected randomly, every HOP QDRP-
participating hospital will be eligible each year for validation 
selection. For each selected hospital, we proposed to randomly validate 
per year up to 48 patient episodes of care (12 per quarter) from the 
total number of cases that the hospital successfully submitted to the 
OPPS Clinical Warehouse. However, if a selected hospital has submitted 
less than 12 cases in one or more quarters, only those cases available 
will be validated. For each selected episode of care, a designated CMS 
contractor will request that the hospital submit the supporting medical 
record documentation that corresponds to the episode. We will not be 
selecting cases stratified by measure or topic; our interest is whether 
the data submitted by hospitals accurately reflect the care delivered 
and documented in the medical record, not what the accuracy is by 
measure or whether there are differences by measure or topic. We 
proposed to sample data for April 1, 2010 to March 31, 2011 services 
because this will provide a full year of the most recent data possible 
to use for purposes of completing the validation in time to make the CY 
2012 payment determination.
    For the CY 2012 and subsequent years' payment determinations, we 
proposed to use the validation methodology proposed for the CY 2011 
payment update with validation being done for each selected hospital. 
Specifically, we would conduct a measures level validation by 
calculating each measure within a submitted record using the 
independently reabstracted data and then comparing this to the measure 
reported by the hospital; a percent agreement will then be calculated.
    To receive the full OPPS payment update, we proposed that hospitals 
must attain at least a 90 percent reliability score, based upon our 
validation process, for the designated time period. We will use the 
lower bound of a two-tailed 95 percent confidence interval to estimate 
the validation score. If the calculated upper limit is above the 
required 90 percent reliability threshold, we will consider a 
hospital's data to be ``validated'' for payment purposes. We believe 
that hospitals will be able to attain higher accuracy rates based on 
the proposed measure level match approach versus a data element level 
approach; therefore, we proposed to implement a higher threshold for 
accuracy than we currently use (and are using) for validation purposes 
under the RHQDAPU program. We believe that a hospital will be able to 
achieve a higher accuracy rate under this validation process because we 
are not calculating whether each data element matches. Instead, we are 
determining whether or not the reabstracted measure result (for 
example, was aspirin given at arrival as part of an episode of care 
that was properly included in the reported data) matches the measure 
result that was submitted by the hospital. In other words, we are more 
interested in whether the measure as a whole has been accurately 
reported than we are in whether each data element that makes up the 
measure has been accurately reported. Thus, we are focusing on whether 
the quality measure as a whole that a hospital reports matches what is 
in the medical record as determined by our re-abstraction. The reason 
we proposed to implement a measure level match for the HOP QDRP, rather 
than a data element match, is that in our experience with the RHQDAPU 
program, hospitals sometimes receive low validation scores due to data 
element mismatching and not because the care furnished did not match 
what was documented in the medical record.
    We believe that validating a larger number of cases per hospital, 
but only for 800 randomly selected hospitals, and validating these 
cases at the measure level (rather than at the data element level) has 
several benefits. We believe that this approach is suitable for the HOP 
QDRP because it will: produce a more reliable estimate of whether a 
hospital's submitted data have been abstracted accurately; provide more 
statistically reliable estimates of the quality of care delivered in 
each selected hospital as well as at a national level; and reduce 
overall hospital burden because most hospitals will not be selected to 
undergo validation each year.
    We solicited public comments on this proposed validation 
methodology. The public comments we received and our responses are 
discussed below.
    Comment: Several commenters stated that CMS' proposed process for 
validating hospitals' quality data beginning with CY 2012 holds promise 
as a reasonable approach to ensure the accuracy of the quality data and 
improves upon the deficiencies in the current inpatient program 
validation process.
    Response: We agree with the commenters that the proposed new 
validation process beginning with CY 2012 is an improved approach, and 
we thank these commenters for their support. However, we have decided 
that we want to further evaluate and refine the approach and have 
decided to not finalize a validation approach for CY 2012 in this final 
rule with comment period. We intend to put forth a proposal for a CY 
2012 HOP QDRP validation process in the CY 2011 OPPS/ASC proposed rule.
    Comment: One commenter supported the proposed validation process 
for CY 2012 and subsequent years; however, this commenter believed that 
the data from the CY 2011 test year should be reviewed to ensure the 
process is functioning as it was intended and that CMS should make 
modifications to the process if necessary.
    Response: We thank the commenter for supporting our proposed 
validation process. We agree that it would be helpful to review the 
data from the CY 2011 test year to evaluate the extent to which the 
process is functioning as it was intended and to use the results to 
assist us in determining whether to propose modifications to the 
validation process for CY 2012 and subsequent years. However, due to 
resource constraints, we will not receive the results of the CY 2011 
validation before we must put forth a proposed validation plan for CY 
2012. Instead, we will be conducting further analyses on collected HOP 
QDRP data and intend to utilize these results as well as all comments 
we

[[Page 60651]]

received in developing our CY 2012 proposals.
    Comment: Several commenters recommended that if validation is 
limited to randomly selected hospitals each year, a hospital that is 
selected in one year should be excluded from the selection process for 
some period, which could be an indeterminate number of subsequent 
years, the following year, or the next 2 years, or, alternatively, CMS 
could limit the number of times during a 5-year period a hospital could 
be randomly selected. Many of these commenters suggested that such an 
exemption could apply to all hospitals that pass validation, those that 
pass with high reliability scores, or all hospitals regardless if they 
pass. Some of these commenters based their suggestions on limiting 
burden to hospitals and/or rewarding hospitals for participation or for 
achieving a high reliability or accuracy score. Some commenters 
believed that exempting a hospital from subsequent validation for some 
time period for high reliability scores would encourage hospitals to 
ensure that their data are as accurate as possible and would increase 
data quality.
    Response: We understand the commenters' desire to limit hospital 
burden on a guaranteed basis and/or to reward hospitals for 
performance. However, we do not agree that exempting hospitals from 
validation because they were selected in a previous year or achieved a 
high reliability score will encourage increased data quality or that it 
should be a ``reward'' for meeting a program requirement. It is our 
belief that any guaranteed exclusion from participating in the 
validation process also has the potential to undermine a hospital's 
incentive to maintain data quality.
    Comment: One commenter asserted that random selection of hospitals 
for validation will reduce the hospitals' focus on accuracy because 
hospitals will have the chance of not being chosen in a given year.
    Response: We understand and appreciate the commenter's concern for 
data accuracy. We believe that each hospital having a chance at 
selection for validation each year will provide incentive to hospitals 
to maintain data quality.
    Comment: Several commenters made suggestions regarding the sampling 
scheme for validation. One commenter suggested a random selection of 
fewer hospitals while increasing the number of records selected and 
that a random selection of hospitals be done quarterly to reduce the 
demands on any one hospital while increasing CMS' ability to monitor 
performance throughout the industry. One commenter supported a random 
sample of 200 hospitals per quarter with a minimum number of 20 charts 
reviewed with hospitals not to be selected for validation any more 
frequently than one time per year. Another commenter agreed with having 
a separate random selection process for small and rural hospitals that 
have five or less cases per condition each quarter.
    Response: We chose 800 as the number of hospitals we would select 
for validation each year because this comprises about 25 percent of the 
total number of HOP QDRP participating hospitals and will provide us 
with enough data to be statistically assured that we have obtained a 
representative sample of all hospital data. Regarding randomly sampling 
hospitals quarterly, we have increased the sample size to gain 
increased statistical reliability for individual hospital data; 
lowering the number of cases per hospital or sampling different 
hospitals each quarter would not enable us to achieve the same result. 
We agree with the commenters that stratifying sampling by quarter is a 
possible approach and will consider this as we develop our proposal for 
a validation process for the CY 2012 payment determination.
    Regarding having a separate random selection process for small and 
rural hospitals that have five or less cases per condition each 
quarter, we did not propose to stratify by hospital size or by a 
threshold number of cases per condition. However, we will strongly 
consider this approach when we develop our CY 2012 validation proposal.
    Comment: One commenter supported the random sampling of 800 
hospitals (which would require selected hospitals to submit supporting 
medical records for 48 randomly selected patient episodes of care (12 
per quarter)) if the sampling methodology to select the 800 hospitals 
considers the proportion of rural to urban hospitals. This commenter 
also believed that this sample must take into account the large number 
of hospitals that have sample sizes that are too small to make 
justified decisions based on gathered data. One commenter argued that 
random validation on a larger number of cases per hospital is excessive 
for small PPS hospitals.
    Response: We agree that hospital size and urban/rural status are 
important considerations regarding burden and representation of 
hospital type in any sampling scheme utilized for validation and view 
these as possible characteristics to stratify sampling of hospitals for 
CY 2012 and subsequent year's validation. We intend to consider these 
factors as we further evaluate any proposed validation methodology for 
CY 2012. Regarding the commenter's belief that this sample must take 
into account the large number of hospitals that have sample sizes that 
are too small to make justified decisions based on gathered data, we 
interpret this statement to mean that the commenter believes these 
hospitals would not have a sufficient number of cases for us to 
reliably determine that the hospitals have submitted valid data. We 
will further assess the numbers of cases submitted by hospitals and, as 
discussed here in this final rule with comment period, we will be 
considering whether we should refine our proposed validation 
methodology to take into account hospital size or a threshold number of 
case counts in any proposed sampling scheme.
    Comment: Several commenters argued that the 90 percent reliability 
proposal is too stringent for the first year of data validation. Many 
of these commenters suggested that CMS establish a lower reliability 
threshold (for example, 70 percent, 75 percent, or 80 percent). 
Commenters suggesting a 75 percent reliability threshold for the HOP 
QDRP noted that a 75 percent threshold will be used in the RHQDAPU 
program for FY 2012 when that program adopts a similar validation 
approach. One commenter recommended that CMS use data and experience 
from the CY 2011 test year to determine what an appropriate threshold 
should be, and until that is determined, the threshold should be the 
same as the 75 percent threshold that will be required in the inpatient 
setting for FY 2012. One commenter believed that more analysis of 
validation results is necessary before establishing the threshold at 90 
percent.
    Response: After consideration of the public comments regarding the 
90-percent threshold, we agree with these commenters that this level is 
too stringent for the first year of validation where the results may 
affect a hospital's annual payment update. We appreciate the suggestion 
that the experience from the CY 2011 test year should be utilized to 
determine an appropriate rate. However, due to resource constraints, we 
will not be able to determine any results of the CY 2011 validation 
prior to proposing and finalizing validation requirements for the CY 
2012 payment update factor. However, we will be analyzing collected HOP 
QDRP data and will take any analyses we complete, as well as the public 
comments we have received on this proposal, into account as we develop 
a new proposed

[[Page 60652]]

validation process for CY 2012 and subsequent years.
    Comment: One commenter suggested that no hospital be penalized in 
terms of its payment update if it fails the validation requirement for 
a single quarter.
    Response: We interpret this comment to apply to the proposed 
validation methodology for CY 2012 and subsequent years because the 
results of the proposed CY 2011 validation methodology will not affect 
the CY 2011 payment determination. We did not address whether a 
hospital would be penalized in terms of its payment update if it fails 
the validation requirement for a single quarter in the CY 2010 OPPS/ASC 
proposed rule with comment period. We will take the commenter's 
suggestion regarding this aspect of validation into consideration as we 
develop our new proposal for validation for CY 2012 and subsequent 
years.
    We appreciate all the public comments we received regarding the 
validation process we proposed for CY 2012 and subsequent years and 
will take them into account as we develop our validation proposals for 
these years.
c. Additional Data Validation Conditions Under Consideration for CY 
2012 and Subsequent Years
    In the CY 2010 OPPS/ASC proposed rule (74 FR 35403), we stated that 
we are considering building upon what we proposed as a validation 
approach for CY 2012 and subsequent years. We are considering, in 
addition to selecting a random sample of hospitals for validation 
purposes, selecting targeted hospitals based on criteria designed to 
measure whether the data they have reported raises a concern regarding 
data accuracy. Because little data have been collected under the HOP 
QDRP at this point, we are considering this approach for possible use 
beginning with the CY 2012 payment determination. Examples of targeting 
criteria could include:
     Abnormal data patterns identified such as consistently 
high HOP QDRP measure denominator exclusion rates resulting in 
unexpectedly low denominator counts;
     Whether a hospital had previously failed validation; and/
or
     Whether a hospital had not been previously selected for 
validation for 2 or more consecutive years.
    Another example of a possible targeting criterion would involve 
some combination of the some or all of the criteria discussed above.
    We solicited public comments on whether these criteria, or another 
approach, should be applied in future years. We especially solicited 
suggestions for additional criteria that could be used to target 
hospitals for validation.
    Comment: One commenter opposed the targeting criteria that might 
supplement random validation as the commenter opposed random validation 
and instead preferred that all hospitals have cases selected for 
validation.
    Response: We appreciate the commenter's desire for us to validate 
data from all hospitals. However, we believe that the increased 
reliability that will be achieved by increasing the number of cases 
that we validate per selected hospital, coupled with the overall 
reduction of burden on hospitals that our proposed validation 
methodology will achieve, outweighs any potential benefit from 
requiring all HOP QDRP participating hospitals to undergo validation 
each year of a small number of cases. We chose the sample size of 800 
hospitals because this comprises about 25 percent of the total number 
of HOP QDRP participating hospitals and will provide us with sufficient 
data to be statistically assured that we have obtained a representative 
sample of all hospital data.
    Comment: One commenter recommended that CMS use similar statistical 
processes to those used by the Joint Commission to identify outliers in 
scoring, as well as low denominators compared to population sizes, as 
these are processes that many hospitals already know.
    Response: We thank the commenter for its suggestions, and we will 
take them into account for our validation proposals for CY 2012.
    We greatly appreciate all the public comments we received regarding 
the validation process proposed for CY 2012. However, as we stated 
above, we are not finalizing a validation process for CY 2012 at this 
time. We will take all of the comments we received into account when we 
develop our validation proposals for CY 2012.

F. 2010 Publication of HOP QDRP Data

    In the CY 2009 OPPS/ASC final rule with comment period, we stated 
our intention to make the information collected under the HOP QDRP 
available to the public in 2010 (74 FR 68778). In the CY 2008 OPPS/ASC 
final rule with comment period, we stated that ``[i]nformation from 
non-validated data, including the initial reporting period (April-June 
2008) will not be posted'' (72 FR 66874). However, section 
1833(t)(17)(E) of the Act requires that the Secretary establish 
procedures to make data collected under the HOP QDRP available to the 
public, and does not require that such data be validated before it is 
made public. Moreover, under existing procedures for the RHQDAPU 
program, data submitted by hospitals are publicly reported regardless 
of whether those data are successfully validated for payment 
determination purposes. For these reasons, in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35404), we proposed to make data collected for 
quarters beginning with the third quarter of CY 2008 (July-September 
2008) under the HOP QDRP publicly available, regardless of whether 
those data have been validated for payment determination purposes. We 
invited public comment on this proposal.
    Comment: Many commenters opposed the public reporting of 
unvalidated HOP QDRP data. The commenters stated that these data would 
not be accurate and may mislead the public. The commenters also argued 
that because data for the inpatient reporting program were validated 
before they were publicly posted, the outpatient data should be as 
well. The commenters stated that making these data available on 
Hospital Compare and in the downloadable public use file accompanying a 
Hospital Compare release may lead to inappropriate use of the data in 
research and policy deliberations, and may result in inaccurate 
portrayals of the data on various other Web sites that currently 
utilize Hospital Compare data. The commenters argued that public 
reporting of unvalidated data may cause confusion among consumers 
utilizing these data on different Web sites. The commenters were 
concerned that it is not known now how the non-validated data compare 
to the validated data. The commenters argued that because data for 
cases from quarters earlier than the second quarter of 2009 will not 
have been validated, HOP QDRP data should not be publicly reported 
prior to this time period.
    Response: The validation process for both the RHQDAPU program and 
the HOP QDRP pertains only to chart-abstracted measures. Validation 
under these programs for the purposes of payment determination seeks to 
validate the accurate application of the abstraction rules described in 
the HOPD Specifications Manual when data are abstracted from medical 
records and submitted to CMS. Neither the HOP QDRP nor the RHQDAPU 
program has any validation process for claims data. Thus, the context 
of our discussion of the public reporting of unvalidated HOP QDRP data 
in previous rulemakings, our proposal in the CY 2010 OPPS/ASC proposed 
rule, and our discussion of

[[Page 60653]]

public comments we received regarding whether to post unvalidated data 
and which quarters of data would be appropriate to post on Hospital 
Compare pertain only to chart-abstracted measures.
    We note that the Secretary is required under section 1833(t)(17)(E) 
of the Act to establish procedures to make the data submitted under the 
HOP QDRP available to the public, and we intend to use generally the 
same procedures that we currently use for the RHQDAPU program. In the 
RHQDAPU program, we currently publicly report the data as they have 
been submitted by the hospitals, and we report these data regardless of 
whether the hospital passed validation. Also, no changes are made to 
quality data that have been submitted by hospitals that fail validation 
in the inpatient RHQDAPU program. However, for the RHQDAPU program, we 
have suppressed data from display on Hospital Compare in circumstances 
where we have become aware of inaccuracies in the calculation of the 
measure rates due to systematic issues with the data submitted. We 
believe that the finalized methodological improvements in the 
validation process for the CY 2011 HOP QDRP will allow CMS to better 
assess the overall accuracy of the chart-abstracted data that are 
submitted by hospitals to CMS. We also believe that our approach will 
encourage hospitals to optimize their chart abstraction processes and 
improve the accuracy of their data because it is data that hospitals 
are responsible for that are ultimately posted on Hospital Compare.
    Although we appreciate the concerns raised about the public 
reporting of unvalidated data, prior to public reporting hospitals are 
given an opportunity to preview the results to be reported. 
Additionally, should our consumer testing suggest a different approach 
to public reporting, or should our validation process for CY2011 reveal 
a low reliability of self-reported data, we will reconsider our 
approach for future public reporting.
    Comment: Many commenters were opposed to the publication of data 
beginning with 3rd quarter 2008 services because, during part of that 
period: (1) Some antibiotics needed to be updated in the specifications 
but these updates were not present at that time; (2) some procedures 
needed to be removed from the specifications but these exclusions were 
not present at that time; and (3) canceled procedures were not able to 
be excluded from the calculation of certain measures reported at that 
time. Because these changes were later put into effect, many commenters 
suggested suppressing earlier quarters of data, and beginning public 
reporting with the 1st quarter of 2009 data when these changes had been 
made, and the data specifications were stabilized.
    Response: The issues raised by the commenters apply only to the 
chart-abstracted HOP QDRP surgical care measures OP-6 and OP-7. We have 
considered the issues raised by the commenters, and because there was 
an issue with surgeries that were cancelled prior to incision that was 
not resolved in the specifications until July 1, 2009, we have decided 
not to report either of the surgery-related process measures (OP-6 & 
OP-7) for any quarter before the 3rd quarter of 2009.
    Comment: Some commenters expressed concern that the 1 year to 2 
year time lag in the public reporting of administrative claims-based 
measures would not be useful to the public.
    Response: In the CY 2009 OPPS/ASC final rule with comment period we 
adopted the 4 claims based imaging efficiency measures for the CY 2010 
payment determination and indicated that we would calculate the claims-
based imaging efficiency measures for that payment determination using 
CY 2008 claims (73 FR 68761-68763). We recognize that the time lag for 
the claims-based measures is a concern, but because of claims 
submission and claims processing timeframes, this time lag ensures that 
the most complete and accurate paid claims are used in the measure 
calculations. Part of the time lag is also due to the time needed for 
data extraction, data processing, calculation of the measures for the 
payment determination and subsequent public reporting, quality 
assurance processes, and the Hospital Compare preview and update 
schedule. We intend to publicly report the claim-based measures as soon 
as possible, and the earliest we anticipate being able to make these 
claims-based measures available to the public is June 2010.
    Comment: Some commenters commended CMS for its efforts to publicly 
report hospital outpatient measures on Hospital Compare in 2010, and 
encouraged CMS to continue to engage multi[hyphen]stakeholder groups in 
testing and preparing the measures for display on Hospital Compare, as 
is done with inpatient measures.
    Response: We appreciate the supportive comments regarding public 
reporting of hospital outpatient measures on Hospital Compare in 2010. 
We began stakeholder and consumer focus group testing of the HOPD 
measures in the Fall of 2009. We will continue to engage in consumer 
testing and obtain stakeholder input regarding public reporting of HOP 
QDRP measures.
    Comment: Commenters made numerous suggestions for enhancing the 
public reporting of HOP QDRP data including:
     Reporting comparative hospital outpatient (OP) and 
ambulatory surgical center (ASC) quality information on surgical 
services.
     Providing a mechanism for providers to raise concerns with 
information to be posted prior to its publication.
     Including a provider narrative section allowing the 
providers to advise consumers of any concerns regarding reliability or 
accuracy of information presented.
     Including information on facility accreditation status, 
state licensure and Medicare certification.
     Creating clear and explicit names and explanations for the 
measures geared toward consumers.
     Grouping like measures by condition and distinguishing 
them by care setting.
     Communicating efficiency measures in a manner that clearly 
interprets the differences among providers, and explains how consumers 
should integrate this information into decision making.
     Conducting consumer testing and multi-stakeholder vetting 
of changes in the Hospital Compare architecture, navigation, display 
and language.
     Considering how best to display hospital outpatient data 
in the context of current and anticipated future public reporting 
efforts for ASCs.
     Adding an identifier to the CCN to enable the reporting 
and display of data for individual hospitals rather than combining 
results from two or more hospitals sharing the same CCN.
     Displaying measures in a way that allows greater range and 
detail in categorizations.
    Response: We thank the commenters for these suggestions and will 
consider them as we further develop our procedures for the public 
reporting of HOP QDRP quality data.
    After consideration of the public comments we received, we have 
decided to finalize our proposal to publicly report HOP QDRP data on 
Hospital Compare in 2010 with some modifications in the periods of time 
to be reported. For measures OP-1 through OP-5, we will publicly report 
data periods beginning with the 3rd quarter of 2008. For measures OP-6 
and OP-7, we will publicly report data periods beginning with the 3rd 
quarter of 2009. For measures OP-8 through OP-11, we will report CY 
2010 payment

[[Page 60654]]

determination calculations using CY 2008 claims.
    As we noted in section XVI.A.5.c. of this final rule with comment 
period, in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68778), we established that, for CY 2010, hospitals sharing the same 
CCN must combine data collection and submission across their multiple 
campuses for the clinical measures for public reporting purposes and 
that we will publish quality data by CCN under the HOP QDRP. This 
approach is consistent with the approach taken under the RHQDAPU 
program. In that final rule with comment period, we also stated that we 
intend to indicate instances where data from two or more hospitals are 
combined to form the publicly reported measures on the Web site.
    Comment: One commenter suggested that combining the results from 
two or more hospitals that share the same CCN is misleading and will 
not allow consumers and health care payers to assess and use the 
information, reducing the effectiveness of Hospital Compare. This 
commenter stated that hospitals should be required to report at the 
unit of the hospital rather than the CCN. Another commenter suggested 
that CMS add an identifier to the CCN in order to enable the reporting 
and display of data of quality measure data for individual hospitals 
rather than combining results from two or more hospitals that share the 
same CCN.
    Response: We believe that we should publicly report combined data 
from hospitals with the same CCN because it is important to align 
clinical reporting with financial reporting. We proposed to report data 
by CCN for several reasons. First, the unit affected by the OPPS annual 
update and that must meet all HOP QDRP requirements is the CCN, not an 
individual hospital or facility that falls under that CCN. Second, 
hospitals are obligated to comply with applicable survey and 
certification requirements by CCN, and not by any other individual 
facility identifier. Third, the additional Medicare identifier for 
facilities, the National Provider Identifier (NPI), is not a uniform 
identifier. Fourth, reporting by CCN aligns the reporting of quality of 
care data with the reporting of financial data. For these reasons, we 
consider the CCN to be representative of the entire hospital entity for 
purposes of public reporting under the HOP QDRP. However, as resources 
permit, we will evaluate whether the benefits the commenter believes 
would flow from its approach outweigh the reasons outlined above for 
using the current CCN and whether this suggestion is feasible.
    After consideration of the public comments, we have decided to 
finalize our proposal to publicly report HOP QDRP data on Hospital 
Compare starting as early as 2010 with some modifications in the 
periods of time to be reported. Should our consumer testing suggest a 
different approach to public reporting, or should our validation 
process for CY 2011 reveal a low reliability of self-reported data, we 
will reconsider our approach for future public reporting. For measures 
OP-1 through OP-5, we will publicly report data periods beginning with 
the 3rd quarter of 2008. For measures OP-6 and OP-7, we will publicly 
report data periods beginning with the 3rd quarter of 2009. For 
measures OP-8 through OP-11, we will report 2010 payment determination 
calculations using calendar year 2008 claims.

G. HOP QDRP Reconsideration and Appeals Procedures

    When the RHQDAPU program was initially implemented, it did not 
include a reconsideration process for hospitals. Subsequently, we 
received many requests for reconsideration of those payment decisions 
and, as a result, established a process by which participating 
hospitals would submit requests for reconsideration. We anticipated 
similar concerns with the HOP QDRP and, therefore, in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66875), we stated our intent 
to implement for the HOP QDRP a reconsideration process modeled after 
the reconsideration process we implemented for the RHQDAPU program. In 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68779), we 
adopted a mandatory reconsideration process that will apply to the CY 
2010 payment decisions. In the CY 2010 OPPS/ASC proposed rule (74 FR 
35404), we proposed to continue this process for the CY 2011 payment 
update. Under this proposed process, the hospitals must--
    (1) Submit to CMS, via QualityNet, a Reconsideration Request form 
that will be made available on the QualityNet Web site; this form must 
be submitted by February 3, 2011, and must contain the following 
information:
     Hospital CCN.
     Hospital Name.
     CMS-identified reason for failure (as provided in any CMS 
notification of failure to the hospital).
     Hospital basis for requesting reconsideration. This must 
identify the hospital's specific reason(s) for believing it met the HOP 
QDRP requirements and should receive a full annual payment update.
     CEO and any additional designated hospital personnel 
contact information, including name, e-mail address, telephone number, 
and mailing address (must include physical address, not just a post 
office box).
     A copy of all materials that the hospital submitted in 
order to receive the full payment update for CY 2011. Such material 
would include, but may not be limited to, the applicable Notice of 
Participation form or completed online registration form, and quality 
measure data that the hospital submitted via QualityNet.
    The request must be signed by the hospital's CEO.
    (2) Following receipt of a request for reconsideration, CMS will--
     Provide an e-mail acknowledgement, using the contact 
information provided in the reconsideration request, to the CEO and any 
additional designated hospital personnel notifying them that the 
hospital's request has been received.
     Provide a formal response to the hospital CEO and any 
additional designated hospital personnel, using the contact information 
provided in the reconsideration request, notifying the hospital of the 
outcome of the reconsideration process.
    If a hospital is dissatisfied with the result of a HOP QDRP 
reconsideration decision, the hospital may file an appeal under 42 CFR 
part 405, subpart R (PRRB appeal).
    Comment: Several commenters supported the proposed hospital 
reconsideration and appeals process. Some commenters suggested 
establishing a timeline for CMS to respond to reconsiderations and 
appeals. One of these commenters suggested a timeline for CMS to 
respond so that hospitals can better plan in the event the payment rate 
update is reduced by 2 percentage points. One commenter urged that the 
full payment rate update not be reduced for hospitals until the 
reconsideration and appeals process is complete. One commenter believed 
that this mandatory reconsideration and appeals process should be a 
permanent component to the quality reporting program and, therefore, 
not proposed or renewed each calendar year.
    Response: We thank these commenters for their support of a hospital 
reconsideration and appeals process. We plan to complete any CY 2010 
reconsideration reviews and communicate the results of these 
determinations within 60 to 90 days following the date we receive the

[[Page 60655]]

request for reconsideration. While we recognize the commenter's concern 
about possibly withholding the full payment rate update before the 
reconsideration and appeals process is complete, we need to consider 
that if we waited to reduce the payment, the agency could encounter 
issues with recouping funds that were improperly paid to a hospital 
that did not meet the HOP QDRP requirements.
    Regarding making the reconsideration and appeals process a 
permanent component to the quality reporting program and, therefore, 
not proposing or renewing it each calendar year, we have customarily 
proposed most of the HOP QDRP requirements and procedures, even those 
we propose to continue with only minor modifications, through the 
annual rulemaking process in order to afford the public additional 
opportunities to comment on them. In the case of the reconsideration 
and appeals procedures, each year we also propose the date by which 
hospitals must requests for reconsiderations (for the CY 2011 payment 
update, these requests must be submitted by February 3, 2011).
    After consideration of the public comments we received, we are 
adopting as final the proposed HOP QDRP reconsideration and appeals 
procedures for CY 2010.

H. Reporting of ASC Quality Data

    As discussed above, section 109(b) of the MIEA-TRHCA amended 
section 1833(i) of the Act by redesignating clause (iv) as clause (v) 
and adding new clause (iv) to paragraph (2)(D) and new paragraph (7) to 
the Act. These amendments authorize the Secretary to require ASCs to 
submit data on quality measures and to reduce the annual payment update 
in a year by 2.0 percentage points for ASCs that fail to do so. These 
provisions permit, but do not require, the Secretary to require ASCs to 
submit such data and to reduce any annual increase for noncompliant 
ASCs.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66875) and in the CY 2009 OPPS/ASC final rule with comment period (73 
FR 68780), we indicated that we intended to implement the provisions of 
section 109(b) of the MIEA-TRHCA in a future rulemaking. While 
promoting high quality care in the ASC setting through quality 
reporting is highly desirable and fully in line with our efforts under 
other payment systems, the transition to the revised payment system in 
CY 2008 posed significant challenges to ASCs, and we determined that it 
would be most appropriate to allow time for ASCs to gain some 
experience with the revised payment system before introducing other new 
requirements. Further, by implementing quality reporting under the OPPS 
prior to establishing quality reporting for ASCs, CMS would gain 
experience with quality measurement in the ambulatory setting in order 
to identify the most appropriate measures for quality reporting in ASCs 
prior to the introduction of the requirement in ASCs. Finally, we are 
sensitive to the potential burden on ASCs associated with chart 
abstraction and believe that adopting such measures at this time is in 
contrast with our desire to minimize collection burden, particularly 
when measures may be reported via EHRs in the future.
    We continue to believe that promoting high quality care in the ASC 
setting through quality reporting is highly desirable and fully in line 
with our efforts under other payment systems. However, we continue to 
have the concerns outlined above for CY 2010 and, therefore, in the CY 
2010 OPPS/ASC proposed rule (74 FR 35405), we stated that we intend to 
implement the provisions of section 109(b) of the MIEA-TRHCA in a 
future rulemaking. We invited public comment on this deferral of 
quality data reporting for ASCs and invited suggestions for quality 
measures geared toward the services provided by ASCs. We again sought 
public comment on potential reporting mechanisms for ASC quality data, 
including electronic submission of these data.
    Comment: Several commenters agreed with CMS' proposal and reasons 
for deferring quality data reporting for ASCs. Some commenters 
supported the CMS rationale for the proposed approach, that is, 
enabling ASCs to gain experience with the recently launched payment 
system and permitting CMS to gain experience in the HOPD setting before 
implementing quality data reporting requirements for ASCs. Several 
commenters supported CMS' decision to move with caution in expanding 
quality data reporting to the ASC setting and appreciated CMS' 
sensitivity to administrative burdens faced by ASCs. Commenters stated 
that it would be beneficial to allow extra time in order to assess 
implementation challenges and identify appropriate measures. These 
commenters also indicated that issues such as preventability, risk 
adjustment, unintended consequences, coding accuracy, burden, and 
effect on overall health care costs need to be carefully examined 
before starting a reporting program for a new setting. Other commenters 
indicated it would be better to wait until ICD-10 implementation to 
begin measurement in a new setting in order to allow for more accurate 
coding and measurement and POA coding. One commenter agreed with the 
continued delay in implementing a quality data reporting program for 
ASCs based upon CMS' rationale set forth in the proposed rule and 
suggested that CMS discuss implementation of the requirements, 
including when ASC reporting will occur and the potential effects on 
ASC staff. One commenter argued that requiring ASCs to conduct quality 
data reporting is unnecessary because quality improvement is a key 
requirement for ASCs to obtain and maintain accreditation and such 
reporting would result in additional costs to ASC operations.
    Response: We thank these commenters for acknowledging the many 
operational issues that must be addressed prior to implementing a 
quality data reporting program for ASCs and supporting our decision to 
defer ASC quality reporting to a future time. However, with regard to 
the commenter's suggestion that an ASC quality data reporting program 
is unnecessary in light of ASC quality improvement accreditation 
requirements, we believe that quality measure data reporting for ASCs 
would provide consumers with quality of care information for this type 
of health care provider as well as support our quality improvement 
efforts. Therefore, notwithstanding the current issues that have led to 
our determination to implement an ASC quality reporting program in a 
future rulemaking, we believe it is important and necessary to require 
ASCs to submit quality data.
    Comment: Numerous commenters advocated that CMS move forward with 
an ASC quality data reporting program as soon as possible. Many 
commenters indicated that the collection and reporting of quality data 
is a common practice for ASC facilities, and that the industry is eager 
to make quality data available to consumers in a manner that allows 
direct comparisons between equivalent surgical care delivered in HOPDs 
and ASCs, particularly as the percentage of outpatient surgical 
services being provided in ASC settings has grown. Some commenters 
urged CMS to implement a quality data reporting system for ASCs for CY 
2010. One commenter was concerned about the continued delay in quality 
measurement for the rapidly growing ASC setting and indicated that by 
now it should be technically feasible for ASCs to report on at least 
the set of five quality measures that were developed

[[Page 60656]]

by the industry-sponsored ASC Quality Collaboration. Several commenters 
argued that any quality data reporting system implemented would not 
create significant administrative burden on ASCs. Some of these 
commenters recommended the use of administrative claims as a means for 
quality reporting as both chart abstraction and Internet-based 
reporting would impose major disadvantages for ASCs, most of which are 
classified as small businesses. Some commenters suggested beginning 
with a set of six ASC quality measures that have already been 
developed. Commenters also suggested that CMS consider claims-based 
reporting for ASCs, which would eliminate the chart abstraction burden, 
would capitalize on existing data collection infrastructure, and would 
be most feasible for the industry at this time. Another commenter 
indicated that specialty-specific measures for ASCs should be 
implemented in such a reporting program in order to ensure broad 
opportunity for participation, including those ASCs that specialize in 
a few services or procedures. One commenter indicated that at least 35 
States collect data on ASCs.
    Response: We agree that it would be beneficial for consumers to be 
able to compare the quality of surgical care across HOPDs and ASCs. 
Currently, in addition to the reasons we outlined in the proposed rule, 
we do not have the resources needed to implement a quality data 
reporting program for ASCs. We are aware of the set of five quality 
measures that were developed by the ASC Quality Collaboration as well 
as six NQF-endorsed quality measures. While some of the measures may be 
feasible to collect using claims data, others (such as the patient 
safety-related measures) may not be meaningful to report unless all 
patients treated were captured, and hence all-payer claims were 
collected to generate the measures. We will evaluate the suggested 
measures for ASC quality data reporting, as well as the feasibility of 
claims-based measure reporting for ASCs and the need for specialty-
specific measures for ASCs in the future.
    Comment: One commenter encouraged CMS to focus on electronic 
submission of data for quality reporting once it has been determined to 
move forward with the ASC quality program. One commenter recommended 
that any ASC reporting program build on the public reporting programs 
in place for the inpatient and outpatient settings and that the 
measures reported in the ASC setting be consistent and, where possible, 
identical to the outpatient department program as the consistency will 
minimize confusion, simplify data collection, and assure greater 
comparability across sectors.
    Response: We thank the commenters for these suggestions. We will 
consider them in the planning process for ASC quality measure data 
reporting.
    After consideration of the public comments we received, we are 
finalizing our proposal to implement quality measure reporting in the 
ASC setting in a future rulemaking. We continue to believe that 
promoting high quality care in the ASC setting through quality data 
reporting is highly desirable and fully in line with our efforts under 
other payment systems.

I. Electronic Health Records

    As stated above, CMS is actively seeking alternatives to manual 
chart abstraction for the collection of quality measures for its 
quality data reporting programs. Among these alternatives are claims-
based measure calculation, collection of data from systematic 
registries widely used by hospitals, and electronic submission of 
quality measures using EHRs. In the CY 2009 OPPS/ASC final rule with 
comment period, we discussed public commenters' suggestions that we 
adopt measures that can be collected via EHRs (73 FR 68769). We agree 
with the commenters about the importance of actively working to move to 
a system of data collection based on submission from EHRs. We have been 
engaged with health IT standard-setting organizations to promote the 
adoption of the necessary standards regarding data capture to 
facilitate data collection via EHRs, and have been collaborating with 
such organizations on standards for a number of quality measures. We 
encourage hospitals to take steps toward the adoption of EHRs that will 
allow for reporting of clinical quality data from the EHR directly to a 
CMS data repository. We also encourage hospitals that are implementing, 
upgrading, or developing EHR systems to ensure that such systems 
conform to standards adopted by HHS. In the CY 2010 OPPS/ASC proposed 
rule (74 FR 35405), we invited public comment on the future direction 
of EHR-based quality measure submission with respect to the HOP QDRP.
    Comment: One commenter strongly encouraged CMS to consider aligning 
the HOP QDRP with the ONC measures for ``meaningful use,'' and to 
provide clarity on those measures that appear to be similar to those 
identified as measures for meaningful use, such as the OPPS CY 2011 
``OP-4: Aspirin at Arrival'' and the meaningful use matrix measure for 
CY 2011, ``Improve quality, safety, efficiency, and reduce health 
disparities: Percentage patients at high-risk for cardiac events on 
aspirin prophylaxis [OP].''
    Response: The measure matrix referenced by the commenter is a list 
of criteria developed by the Health IT Policy Council, an advisory 
committee to ONC, for consideration by the Department as it develops 
the initial criteria for determining whether an eligible hospital or 
eligible professional is a meaningful user of certified EHR technology. 
Eligible hospitals and eligible professionals who demonstrate that they 
meaningfully use certified EHR technology will be eligible for payment 
incentives under Medicare, as authorized under the HITECH Act. To be 
considered a meaningful user of the certified EHR technology, section 
1886(n)(3)(A)(iii) of the Act, as added by section 4102(a) of the 
HITECH Act, requires that eligible hospitals submit to CMS, using 
certified EHR technology, the clinical quality measures and such other 
measures selected by the Secretary. Section 1886(n)(3)(B)(iii) of the 
Act provides that in selecting these reporting measures, the Secretary 
shall seek to avoid redundant or duplicative reporting with the 
reporting otherwise required, including reporting under RHQDAPU. CMS 
will establish the initial meaningful use criteria in future 
rulemaking, including the selection of quality measures for hospital 
reporting purposes under this separate incentive program. Some of the 
clinical quality measures included on the Health IT Policy Council's 
matrix are similar to measures adopted into the HOP QDRP. As we stated 
in the ``considerations for measurement'' section of this final rule 
with comment period, because we seek to harmonize applicable measures 
across settings, and many of the measures for the HOP QDRP that apply 
to HOPDs have been adapted from the RHQDAPU program, some of the 
measures that appear on the Health IT Policy Council's matrix are 
similar to measures adopted into the RHQDAPU program. We thank the 
commenters and will take these comments into consideration as we 
consider the future direction of EHR-based quality measure submission 
with respect to the HOP QDRP.

XVII. Healthcare-Associated Conditions

A. Background

1. Preventable Medical Errors and Hospital-Acquired Conditions (HACs) 
Under the IPPS
    As noted in its landmark 1999 report ``To Err is Human: Building a 
Safer Health System,'' the Institute of Medicine found that medical 
errors are

[[Page 60657]]

a leading cause of morbidity and mortality in the United States. Total 
national costs of these errors due to lost productivity, disability, 
and health care costs were estimated at $17 billion to $29 billion.\2\ 
As one approach to combating healthcare-associated conditions, in 2005, 
Congress authorized CMS to adjust Medicare IPPS hospital payments to 
encourage the prevention of these conditions. Section 1886(d)(4)(D) of 
the Act (as added by section 5001(c) of the Deficit Reduction Act (DRA) 
of 2005, Pub. L. 109-171) required the Secretary to select by October 
1, 2007, at least two conditions that are: (1) High cost, high volume, 
or both; (2) assigned to a higher paying diagnosis-related group (DRG) 
when present as a secondary diagnosis; and (3) could reasonably have 
been prevented through the application of evidence-based guidelines. 
CMS has titled this initiative ``Hospital-Acquired Conditions (HAC) and 
Present on Admission (POA) Indicator Reporting.'' Since October 1, 
2008, Medicare no longer assigns a hospital inpatient discharge to a 
higher paying Medicare Severity Diagnosis-Related Group (MS-DRG) if a 
selected HAC is not present on admission. That is, if there is an HAC, 
the case is paid as though the secondary diagnosis was not present. 
However, if any nonselected complications or comorbidities appear on 
the claim, the claim will be paid at the higher MS-DRG rate; to cause a 
lower MS-DRG payment, all complications or comorbidities on the claim 
must be selected conditions for the HAC payment provision. Since 
October 1, 2007, CMS has required hospitals to submit information on 
Medicare hospital inpatient claims specifying whether diagnoses were 
POA.
---------------------------------------------------------------------------

    \2\ Institute of Medicine: To Err Is Human: Building a Safer 
Health System, November 1999. Available at: http://www.iom.edu/Object.File/Master/4/117/ToErr-8pager.pdf.
---------------------------------------------------------------------------

2. Expanding the Principles of the IPPS HACs Payment Provision to the 
OPPS
    In the CY 2009 OPPS/ASC proposed rule and final rule with comment 
period (73 FR 41547 and 68781, respectively), we discussed whether the 
principle of Medicare not paying more for preventable HACs during 
inpatient stays paid under the IPPS could be applied more broadly to 
other Medicare payment systems in other settings for conditions that 
occur or result from health care delivered in those settings. We also 
acknowledged that implementation of this concept would be different for 
each setting, as each Medicare payment system is unique. As we have 
used in past rulemaking and general notices, in the following 
discussion in this final rule with comment period, we refer to 
conditions that occur in the hospital inpatient setting as ``hospital-
acquired conditions (HACs),'' to conditions that occur in HOPDs as 
``hospital outpatient healthcare-associated conditions (HOP-HACs),'' 
and to conditions that result from care in settings other than the 
hospital inpatient and HOPD settings as ``healthcare-associated 
conditions.''
    In both the CY 2009 OPPS/ASC proposed rule and final rule with 
comment period, we specifically presented our rationale for considering 
the HOPD as a possible appropriate setting for Medicare to extend to 
the OPPS the concept of not paying more for preventable healthcare-
associated conditions that occur as a result of care provided during a 
hospital encounter. For example, hospitals provide a broad array of 
services in their HOPDs that may overlap or precede the inpatient 
activities of the hospital, including many surgical procedures and 
diagnostic tests that are commonly performed on both hospital 
inpatients and outpatients. Similarly, individuals who are eventually 
admitted as hospital inpatients often initiate their hospital encounter 
in the HOPD, where they receive care during clinic or emergency 
department visits or observation care that precede their inpatient 
hospital admission. In addition, like the IPPS, the OPPS is also 
subject to the ``pay-for-reporting'' provision that affects the 
hospital outpatient annual payment update by the authority of section 
1833(t)(17) of the Act (as amended by section 109(a) of Pub. L. 109-432 
(MIEA-TRHCA)). (We refer readers to section XVI. of this final rule 
with comment period for a discussion of the HOP QDRP provisions for 
hospitals that fail to meet the reporting requirements established for 
the hospital outpatient payment update.)
    The risks of preventable medical errors leading to the occurrence 
of healthcare-associated conditions are likely to be high in outpatient 
settings, given the large number of encounters and exposures that occur 
in these settings. Approximately 530,000 preventable drug-related 
injuries are estimated to occur each year among Medicare beneficiaries 
in outpatient clinics.\3\ These statistics clearly point to the 
significant magnitude of the problem of healthcare-associated 
conditions in outpatient settings. Recent trends have shown a shift in 
services from the inpatient setting to the HOPD, and we expect the 
occurrence of healthcare-associated conditions stemming from outpatient 
care to grow directly as a result of this shift in sites of service.
---------------------------------------------------------------------------

    \3\ Asplen, P., Wolcott, J., Bootman, J.L., Cronenwett, L.R. 
(editors): Preventing Medication Errors: Quality Chasm Series, The 
National Academy Press, 2007. Available at: http://www.nap.edu/catalog.php?record_id=11623.
---------------------------------------------------------------------------

    For the CY 2009 OPPS, we did not adopt any new Medicare policy in 
our discussion of healthcare-associated conditions as they relate to 
the OPPS. Instead, in the CY 2009 OPPS/ASC proposed rule, we solicited 
public comments on options and considerations, including the statutory 
authority related to expanding the IPPS HAC provision to the OPPS. Our 
discussion addressed the following areas:
     Criteria for possible candidate OPPS conditions;
     Collaboration process;
     Potential OPPS HOP-HACs, including object left in during 
surgery; air embolism; blood incompatibility; and falls and trauma, 
including fractures, dislocations, intracranial injuries, crushing 
injuries, and burns; and
     OPPS infrastructure and payment for encounters resulting 
in healthcare-associated conditions, including the necessity of POA 
reporting for hospital outpatient services, methods for risk 
stratification, and potential methods for adjusting hospital payment.
3. Discussion in the CY 2009 OPPS/ASC Final Rule With Comment Period
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68784 
through 68787), we responded to the public comments we received on 
healthcare-associated conditions in the context of the OPPS. Several 
commenters fully supported expanding the IPPS HAC policy to other 
settings such as HOPDs and ASCs, but many commenters stated that CMS 
should not implement a related policy in other settings without gaining 
implementation experience with the IPPS HACs. A number of commenters 
addressed concerns regarding some of the potential specific HOP-HACs 
discussed in the CY 2009 OPPS/ASC proposed rule (73 FR 41549), and some 
commenters suggested other conditions that should be considered or 
identified those that should not be considered. Many commenters stated 
that the attribution of HOP-HACs in the HOPD setting is difficult and 
stated that there was a need to develop risk adjustment techniques to 
account for differences in patient severity of illness or other patient 
characteristics. Many commenters asserted that the POA

[[Page 60658]]

indicators may need to be modified for use in the HOPD or ASC setting. 
Some commenters suggested that a ``present on encounter'' indicator or 
another form of incorporation of preexisting conditions into an 
episode-of-care might be more useful than a POA indicator. Several 
commenters believed that, without changes to the existing OPPS payment 
structure, there would be no straightforward methodology for adjusting 
hospital payment.
    While we acknowledged these challenges in the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68787), we noted that we view 
addressing the ongoing problem of preventable healthcare-associated 
conditions in outpatient settings, including the HOPD, as a key value-
based purchasing strategy to sharpen the focus on such improvements 
beyond hospital inpatient care to those settings where the majority of 
Medicare beneficiaries receive most of their health care services. We 
also noted that we looked forward to continuing to work with 
stakeholders to improve the quality, safety, and value of health care 
provided to Medicare beneficiaries, beginning with a joint IPPS/OPPS 
listening session.

B. Public Comments and Recommendations on Issues Regarding Healthcare-
Associated Conditions From the Joint IPPS/OPPS Listening Session

    Subsequent to the issuance of the CY 2009 OPPS/ASC final rule with 
comment period, we held a joint Hospital-Acquired Conditions and 
Hospital Outpatient Healthcare-Associated Conditions Listening Session 
on December 18, 2008. (The listening session was announced in a notice 
published in the Federal Register on October 30, 2008 (73 FR 64618).) 
During the listening session, we provided an overview of the HAC 
program under the IPPS and our previous discussions of extending the 
underlying concepts to the HOPD, including OPPS infrastructure concerns 
such as the lack of a POA indicator and the need to address current 
ICD-9-CM POA reporting guidelines, attribution of conditions in the 
HOPD, and payment adjustment considerations. In addition to the initial 
candidate HOP-HACs that we had previously identified based on their 
adoption under the IPPS, we discussed other potential HOP-HACs, such as 
medication errors, conditions related to complications of hospital 
outpatient surgery or other procedures, and infections related to HOPD 
care. A transcript of the listening session is available on the CMS Web 
site at: http://www.cms.hhs.gov/HospitalAcqCond/07_EducationalResources.asp#TopOfPage.
    Of the many public comments presented orally at the listening 
session or submitted in writing, approximately one-half commented on 
expansion of the IPPS HAC payment provision to other settings. Some 
commenters were in favor of an expansion to the HOPD and other 
settings. Many commenters requested that CMS delay any expansion, 
citing the short duration of experience with HACs and POA indicator 
reporting for inpatient hospitalizations and the need to evaluate the 
current program prior to its expansion to other settings.
    We appreciate these commenters' perspectives and note that now that 
we have early data on the HAC program, in the near future we plan to 
evaluate the impact of the HAC payment provision through a joint 
program evaluation with CDC, AHRQ, and the Office of Public Health and 
Science.
    Many commenters pointed to the need to define the boundaries of an 
episode-of-care for healthcare-associated conditions in the HOPD and 
other settings in order to define when, how, and to whom an expanded 
policy would apply. These commenters also noted that hospital 
outpatients have frequently received care from numerous practitioners 
and providers over an extended period of time and the hospitals' or 
clinics' role would be supportive, rather than prescriptive, with 
respect to that patient care. They requested that CMS develop a 
comprehensive and accurate definition of an episode-of-care in order to 
appropriately attribute responsibility and the additional costs 
associated with HOP-HACs.
    We have previously acknowledged that short-term consideration of 
HOP-HACs would necessarily be limited to conditions that occur during 
and result from care provided in a single hospital outpatient encounter 
because a broader definition of an episode-of-care has not yet been 
developed.
    Many commenters believed that detailed information should be 
gathered and analyzed from the IPPS POA indicator reporting experience 
before an expansion of the HAC payment provision and POA indicator 
reporting to the HOPD. Other commenters pointed out that the initial 
four conditions under consideration for HOPDs based on their adoption 
under the IPPS would likely require emergency admission for treatment 
of the event. Though secondary to an initial encounter in the HOPD, 
they indicated that these conditions would be coded as POA for the IPPS 
according to current reporting guidelines and would not be captured as 
HOP-HACs. Several commenters stated that, in the HOPD, it would be 
particularly important to make an assessment over an entire episode-of-
care; thus, POA might be better defined in terms of ``present on 
encounter'' for this purpose. Other commenters pointed to the need for 
the development of new codes and determinations of when the codes 
should apply in order to capture POA conditions under the OPPS, an 
activity that would potentially significantly increase hospitals' 
administrative burden. Some commenters suggested waiting to expand the 
HAC payment provision to other settings until implementation of the 
ICD-10 classification system, which would provide more precise coding 
to identify preexisting conditions.
    We have acknowledged a number of these challenges already, and we 
will continue to consider these reporting issues as we refine our views 
regarding potential HOP-HACs.
    Many commenters highlighted that patients receiving hospital 
outpatient care may receive care in multiple departments of the 
hospital, both during a single outpatient encounter and longitudinally 
over many outpatient encounters of relatively short duration. These 
commenters stated that, because of these common patterns of care, the 
timely identification of HOP-HACs and their provider attribution would 
be particularly challenging. In addition, the commenters pointed out 
that patient factors may play a role in the development of potential 
HOP-HACs, such as adverse drug events. Several of these commenters 
suggested targeting the HOP-HAC policy to specific APCs, specific HCPCS 
codes, or specific HOPD settings, such as the emergency department. In 
the CY 2009 OPPS/ASC proposed rule and final rule with comment period 
(73 FR 41549 through 41550 and 68785 through 68787, respectively), we 
discussed the challenge of provider attribution under the OPPS, 
particularly for conditions that may develop over time and involve 
multiple encounters and other care settings. We understand the 
importance of this issue and will continue to be cognizant of it in 
future policy development.
    Several commenters asserted that CMS should consider risk 
adjustment models that incorporate population risk adjustments to avoid 
creating barriers to access for more complex patients or to avoid 
unduly placing providers treating more complex patients at higher risk 
for payment consequences due to HOP-HACs. A number of commenters 
endorsed the use of rate-based measures

[[Page 60659]]

of conditions on a provider-specific level so that the level of 
preventability of specific clinical conditions could be determined and 
compared. Several commenters stated that, under the best of 
circumstances, falls may not be ``reasonably preventable,'' 
particularly in the HOPD. Many commenters also believed that adverse 
drug events would require further definition in order to appropriately 
address medication errors that were not directly under the control of 
the hospital providing the treatment of the medication-related problem 
and were, therefore, not ``reasonably preventable.'' Similarly, some 
commenters stated that it would be difficult to appropriately attribute 
metabolic derangements in the HOPD to the hospital treating the 
resulting clinical problem.
    We appreciate these public comments and will use our collaborative 
process with CDC, AHRQ, and the Office of Public Health and Science to 
help define potential HOP-HACs that are clinically meaningful for 
patient safety, as well as attributable to care furnished by providers.
    Numerous commenters urged CMS to generally proceed with care, to 
promote the use of evidence-based guidelines and care coordination, and 
to ensure that any HOP-HAC program is aligned with other CMS quality 
programs. Many commenters believed that the challenges involved might 
be better addressed operationally within a full-scale value-based 
purchasing program. We appreciate these suggestions and will consider 
them as we advance policies that will ensure paying for the highest 
quality, safest, and most effective health care for Medicare 
beneficiaries.

C. CY 2010 Approach to Healthcare-Associated Conditions Under the OPPS

    For CY 2010, we did not propose to expand the principles behind the 
IPPS HAC payment provision to the OPPS through a HOP-HAC program (74 FR 
35407). We stated that we continue to believe that it may be 
appropriate to expand the principles of the IPPS HAC payment provision 
to the OPPS in the future. However, we acknowledged that, at this time, 
there are many operational challenges to such an expansion that will 
require further consideration and infrastructure development. We 
appreciate the input and guidance provided by the many public 
commenters to date on how to approach these challenges. Most 
stakeholders have strongly encouraged CMS to evaluate the impact of the 
IPPS HAC payment provision before further considering any expansion to 
other settings. We explained that we are evaluating the impact of the 
HAC and POA indicator reporting initiative on Medicare payment and that 
we plan to consider any relevant findings as part of our future 
decision making regarding any expansion of the HAC payment provision to 
other settings. We welcomed additional suggestions and comments from 
stakeholders on potential HOP-HACs as additional information becomes 
available and health care delivery continues to evolve.
    Comment: Several commenters commended CMS for considering an 
extension of the current IPPS HAC policy to other care settings and 
payment systems, including the OPPS. These commenters suggested that it 
would be reasonable to begin with patient safety-related conditions 
such as an object left in during surgery, air embolism, blood 
incompatibility, falls and trauma, including fractures, dislocations, 
intracranial injuries, crushing injuries, and burns.
    However, the majority of commenters supported CMS' position in not 
proposing to expand the IPPS HAC payment provision to the OPPS at this 
time. They agreed with the plan to consider any relevant findings from 
the agency's evaluation of the impact of the HAC and POA indicator 
reporting initiatives (74 FR 35407) as part of CMS' future decision-
making regarding expansion of the IPPS HAC policy to other settings. 
Several commenters reiterated their concerns related to technical 
challenges in expanding the IPPS HAC program to the OPPS, with 
particular emphasis on the need to develop a type of POA coding for 
hospital outpatient services and the fact that current POA guidelines 
designate conditions that develop during an outpatient encounter, such 
as clinic and emergency department visits, observation services, or 
outpatient surgery, as POA for hospital inpatient reporting. Other 
commenters encouraged CMS to develop a comprehensive definition of an 
episode-of-care, with the potential for inclusion of related care 
settings to appropriately attribute accountability. Some commenters 
urged CMS to evaluate the role of ICD-10 classification in the HAC 
program and to consider postponing implementation of HOP-HACs until the 
adoption of ICD-10. A number of commenters recommended that CMS focus 
on areas of patient safety in a future HOP-HACs program, including 
outpatient surgery and outpatient procedures that are correlated with 
the potential for injury and medication errors. Finally, several 
commenters encouraged CMS to ensure that any future HOP-HAC program 
provides an incentive for care coordination, aligns with other CMS 
quality initiatives, and has no detrimental effect on patient access to 
care.
    Response: We appreciate the thoughtful and detailed suggestions 
from commenters. We will continue to consider the concerns and 
suggestions from commenters as we evaluate the impact of the HAC and 
POA indicator reporting initiative and as part of our future decision 
making regarding any expansion of the HAC payment provision to other 
settings.

XVIII. Files Available to the Public Via the Internet

A. Information in Addenda Related to the CY 2010 Hospital OPPS

    Addenda A and B to this final rule with comment period provide 
various data pertaining to the CY 2010 payment for items and services 
under the OPPS. Addendum A, which includes a list of all APCs payable 
under the OPPS, and Addendum B, which includes a list of all active 
HCPCS codes with their CY 2010 OPPS payment status and comment 
indicators, are available to the public by clicking ``Hospital 
Outpatient Regulations and Notices'' on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/.
    For the convenience of the public, we also are including on the CMS 
Web site a table that displays the HCPCS code data in Addendum B sorted 
by APC assignment, identified as Addendum C.
    Addendum D1 defines the payment status indicators that are used in 
Addenda A and B. Addendum D2 defines the comment indicators that are 
used in Addendum B. Addendum E lists the HCPCS codes that are only 
payable to hospitals as inpatient procedures and are not payable under 
the OPPS. Addendum L contains the out-migration wage adjustment for CY 
2010. Addendum M lists the HCPCS codes that are members of a composite 
APC and identifies the composite APC to which each is assigned. This 
addendum also identifies the status indicator for the HCPCS code and a 
comment indicator if there is a change in the code's status with regard 
to its membership in the composite APC. Each of the HCPCS codes 
included in Addendum M has a single procedure payment APC, listed in 
Addendum B, to which it is assigned when the criteria for assignment to 
the composite APC are not met. When the criteria for payment of the 
code through the composite APC are met, one unit of the composite APC 
payment is paid, thereby providing packaged payment for all services 
that are assigned to the composite APC

[[Page 60660]]

according to the specific I/OCE logic that applies to the APC. We refer 
readers to the discussion of composite APCs in section II.A.2.e. of 
this final rule with comment period for a complete description of the 
composite APCs.
    These addenda and other supporting OPPS data files are available on 
the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/.

B. Information in Addenda Related to the CY 2010 ASC Payment System

    Addenda AA and BB to this final rule with comment period provide 
various data pertaining to the CY 2010 payment for the covered surgical 
procedures and covered ancillary services for which ASCs may receive 
separate payment. Addendum AA lists the CY 2010 ASC covered surgical 
procedures, their payment indicators, and their payment rates. Addendum 
BB displays the CY 2010 ASC covered ancillary services, their payment 
indicators, and their payment rates. All ASC relative payment weights 
and payment rates for CY 2010 are a result of applying the revised ASC 
payment system methodology established in the final rule for the 
revised ASC payment system published in the Federal Register on August 
2, 2007 (72 FR 42470 through 42548) to the CY 2010 OPPS and MPFS 
ratesetting information.
    Addendum DD1 defines the payment indicators that are used in 
Addenda AA and BB. Addendum DD2 defines the comment indicators that are 
used in Addenda AA and BB.
    Addendum EE (available only on the CMS Web site) lists the surgical 
procedures that are excluded from Medicare payment if furnished in 
ASCs. The excluded procedures listed in Addendum EE are surgical 
procedures that are assigned to the OPPS inpatient list, are not 
covered by Medicare, are reported using a CPT unlisted code, or have 
been determined to pose a significant safety risk or are expected to 
require an overnight stay when performed in ASCs.
    These addenda and other supporting ASC data files are included on 
the CMS Web site at: http://www.cms.hhs.gov/ASCPayment/. The MPFS data 
files are located at: http://www.cms.hhs.gov/PhysicianFeeSched/.
    The links to all of the FY 2010 IPPS wage index-related tables 
(that are used for the CY 2010 OPPS) that were published in the FY 2010 
IPPS/LTCH PPS final rule (74 FR 44032 through 44125) are accessible on 
the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN.

XIX. Collection of Information Requirements

A. Legislative Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    The CY 2010 OPPS/ASC proposed rule and this final rule with comment 
period do not specify any information collection requirements through 
regulatory text. However, in the proposed rule and in this final rule 
with comment period, we make reference to associated information 
collection requirements that are not discussed in the regulation text 
contained in this document. The following is a discussion of those 
requirements, for which we solicited public comment in the CY 2010 
OPPS/ASC proposed rule (74 FR 35232).

B. Associated Information Collections Not Specified in Regulatory Text

1. Hospital Outpatient Quality Data Reporting Program (HOP QDRP)
    As previously stated in section XVI. of this final rule with 
comment period, the quality data reporting program for hospital 
outpatient care, known as the Hospital Outpatient Quality Data 
Reporting Program (HOP QDRP), has been generally modeled after the 
quality data reporting program for hospital inpatient services, the 
Reporting Hospital Quality Data for Annual Payment Update (RHQDAPU) 
program. Section 109(a) of the MIEA-TRHCA (Pub. L. 109-432) amended 
section 1833(t) of the Act by adding a new subsection (17) that affects 
the payment rate update applicable to OPPS payments for services 
furnished by hospitals in outpatient settings on or after January 1, 
2009. Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, states that subsection 
(d) hospitals that fail to report data required for the quality 
measures selected by the Secretary in the form and manner required by 
the Secretary under section 1833(t)(17)(B) of the Act will receive a 
2.0 percentage point reduction to their annual payment update factor. 
Section 1833(t)(17)(B) of the Act requires that hospitals submit 
quality data in a form and manner, and at a time, that the Secretary 
specifies. Section 1833(t)(17)(C)(i) of the Act requires the Secretary 
to develop measures appropriate for the measurement of the quality of 
care (including medication errors) furnished by hospitals in outpatient 
settings, that these measures reflect consensus among affected parties 
and, to the extent feasible and practicable, that these measures 
include measures set forth by one or more national consensus building 
entities.
2. HOP QDRP Quality Measures for the CY 2010 and CY 2011 Payment 
Determinations
    In the CY 2009 final rule with comment period (73 FR 68766), we 
adopted 4 claims-based imaging measures for use in CY 2010, bringing 
the total number to 11 measures. For the CY 2010 payment update, we are 
requiring hospitals to submit data related to the seven data abstracted 
measures; we will calculate the claims-based measures using 
administrative paid claims data and do not require additional hospital 
data submissions. Similarly, as we proposed, we are using the same 11 
measures and the same data submission requirements related to the seven 
data abstracted measures for CY 2011 payment determinations.

------------------------------------------------------------------------
   HOP QDRP measurement set to be used for CY 2010 and CY 2011 payment
                              determination
-------------------------------------------------------------------------
OP-1: Median Time to Fibrinolysis
OP-2: Fibrinolytic Therapy Received Within 30 Minutes
OP-3: Median Time to Transfer to Another Facility for Acute Coronary
 Intervention
OP-4: Aspirin at Arrival

[[Page 60661]]

 
OP-5: Median Time to ECG
OP-6: Timing of Antibiotic Prophylaxis
OP-7: Prophylactic Antibiotic Selection for Surgical Patients
OP-8: MRI Lumbar Spine for Low Back Pain
OP-9: Mammography Follow-up Rates
OP-10: Abdomen CT--Use of Contrast Material
OP-11: Thorax CT--Use of Contrast Material
------------------------------------------------------------------------

    As part of the data submission process pertaining to the 11 
measures listed above, hospitals must also complete and submit a notice 
of participation in the HOP QDRP. By submitting this document, 
hospitals agree that they will allow CMS to publicly report the quality 
measures as required by the HOP QDRP.
    The burden associated with this section is the time and effort 
associated with completing the notice of participation as well as 
collecting and submitting the data on the seven data abstracted 
measures. We estimate that there will be approximately 3,500 
respondents per year. For hospitals to collect and submit the 
information on the required measures, we estimate it will take 30 
minutes per sampled case. We estimate there will be a total of 
1,800,000 cases per year, approximately 514 cases per respondent. The 
estimated annual burden associated with the aforementioned submission 
requirements is 900,000 hours ((1,800,000 cases/year) x (0.5 hours/
case)).
    We did not receive any public comments on the burden associated 
with these information collection requirements.
3. HOP QDRP Validation Requirements
    In addition to requirements for submitting of quality data, 
hospitals must also comply with the requirements for data validation in 
CY 2011. As specified in detail in section XVI.E. of this final rule 
with comment period, for the CY 2011 payment determination, as we 
proposed, we are implementing a validation program that will require 
hospitals to supply requested medical documentation to a CMS contractor 
for purposes of validating those data. However, the results of the 
validation will not affect the CY 2011 payment update for any hospital, 
although the payment update may be affected if a hospital fails to 
submit the requested data. We believe that it is important for 
hospitals to have some experience and knowledge of the HOP QDRP 
validation process before payment determinations are made based upon 
validation results. As we proposed, we are implementing a validation 
program that will both limit burden upon hospitals, especially small 
hospitals, as well as provide feedback to all hospitals on validation 
performance. We are requesting medical documentation from hospitals for 
April 1, 2009 through March 31, 2010 episodes of care, which, with a 
modification for two of the quality measures, will allow us to gather 
one full year of submitted data for validation purposes.
    The burden associated with the CY 2011 requirement is the time and 
effort necessary to submit validation data to a CMS contractor. We 
estimate that it will take each hospital approximately 38 minutes to 
comply with these data submission requirements. To comply with the 
requirements, we estimate each hospital must submit between 2 to 3 
cases on average for review. We estimate that 3,200 hospitals will need 
to comply with these requirements in order for us to collect a total of 
7,300 charts across all sampled hospitals. The estimated annual burden 
associated with the data validation process for CY 2011 is 2,026 hours.
    Similar to our policy for the FY 2012 RHQDAPU program (74 FR 43884 
through 43889), we proposed (74 FR 35403) to validate data from 800 
randomly selected hospitals each year under the HOP QDRP, beginning 
with the CY 2012 payment determination. We note that, because the 800 
hospitals will be selected randomly, every HOP QDRP-participating 
hospital will be eligible each year for validation selection. For each 
selected hospital, we will randomly validate per year up to 48 patient 
episodes of care (12 per quarter) from the total number of cases that 
the hospital successfully submitted to the OPPS Clinical Warehouse 
during the applicable time period. However, if a selected hospital has 
submitted less than 12 cases in one or more quarters, only those cases 
available will be validated. However, we did not adopt that proposal in 
this final rule with comment period. Instead, we indicated that we 
would take into account results of further analyses of collected data, 
as well as public comments we received on our proposal and propose a 
validation process for the CY 2012 payment rate update in next year's 
rulemaking process.
    The burden associated with the proposed CY 2012 requirement, if we 
adopt it next year is the time and effort necessary to submit 
validation data to a CMS contractor. We estimate that it will take each 
of the 800 sampled hospitals approximately 12 hours to comply with 
these data submission requirements. To comply with the requirements, we 
estimate each hospital must submit 48 cases for the affected year for 
review. We estimate that 800 hospitals must comply with these 
requirements to submit a total of 38,400 charts across all sampled 
hospitals. The estimated annual burden associated with the data 
validation process for CY 2012 and subsequent years is 9,600 hours.
    We discuss public comments on this information collection 
requirement in section XVI.E.3.b. of this final rule with comment 
period.
4. HOP QDRP Reconsideration and Appeals Procedures
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68779), we adopted a mandatory reconsideration process that will apply 
to the CY 2010 payment decisions. As we proposed in the CY 2010 OPPS/
ASC proposed rule, we will continue this process for the CY 2011 
payment update. Under this process, the hospitals must meet all of the 
requirements specified in section XVI.G. of this final rule with 
comment period. We did not assign burden to the aforementioned 
information collection requirements in the CY 2010 OPPS/ASC proposed 
rule because we believed the associated information collection 
requirements were exempt under 5 CFR 1320.4 (that is, information 
collected subsequent to an administrative action is not subject to the 
PRA). However, upon further review, in this final rule with comment 
period, we are assigning burden to the reconsideration and appeals 
procedures. The burden associated with the reconsideration and appeals 
procedures is the time and effort necessary to gather the required 
information and submit it to CMS. The required information, as 
specified in section XVI.G. of this final rule with comment period, 
involves the submission of a completed reconsideration request form 
that is

[[Page 60662]]

signed by the hospital's chief financial officer. We estimate that 25 
hospitals will avail themselves of the reconsideration and appeals 
procedures on an annual basis. We estimate that it will take each 
hospital approximately 40 minutes to gather the required information, 
complete the required reconsideration request form, obtain the 
signiture of the chief financial officer, and forward the documentation 
to CMS. The total annual estimated burden associated with these 
requirements is 1,000 minutes.
    We did not receive any public comments on these information 
collection requirements.
5. Additional Topics
    While we are seeking OMB approval for the information collection 
requirements associated with the HOP QDRP and the data validation 
processes, in the CY 2010 OPPS/ASC proposed rule (74 FR 35232), we also 
sought public comment on several issues that have the potential to 
ultimately affect the burden associated with HOP QDRP and the data 
validation processes. Specifically, that proposed rule listed the 
possible quality measures under consideration for CY 2012 and 
subsequent years. We also solicited public comments to explore the use 
of registries to comply with the HOP QDRP submission requirements, the 
use of EHRs as a data submission tool, the use of a standardized 
process for the retirement of HOP QDRP quality measures, the use of an 
extraordinary circumstance extension or waiver for reporting quality 
data, and the implementation of additional data validation conditions. 
We discussed the comments we received on these issues in section XVI. 
of the preamble of this final rule with comment period.

XX. Response to Comments

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

XXI. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this final rule with comment period 
as required by Executive Order 12866 (September 1993, Regulatory 
Planning and Review), the Regulatory Flexibility Act (RFA) (September 
19, 1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive 
Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 
804(2)).
1. Executive Order 12866
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules that have economically 
significant effects ($100 million or more in any 1 year) or adversely 
affect in a material way the economy, a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local, or tribal government or communities (58 FR 
51741).
    We estimate that the effects of the OPPS provisions that are being 
implemented in this final rule with comment period will result in 
expenditures exceeding $100 million in any 1 year. We estimate the 
total increase (from changes in this final rule with comment period as 
well as enrollment, utilization, and case-mix changes) in expenditures 
under the OPPS for CY 2010 compared to CY 2009 to be approximately $1.9 
billion. Because this final rule with comment period for the OPPS is 
``economically significant'' as measured by the $100 million threshold 
and also a major rule under the Congressional Review Act, we have 
prepared a regulatory impact analysis that, to the best of our ability, 
presents the costs and benefits of this rulemaking. Table 73 of this 
final rule with comment period displays the redistributional impact of 
the CY 2010 changes on OPPS payment to various groups of hospitals.
    We estimate that the effects of the ASC provisions that are being 
implemented in this final rule with comment period for the ASC payment 
system will not exceed $100 million in any 1 year and, therefore, are 
not economically significant. We estimate the total increase (from 
changes in this final rule with comment period as well as enrollment, 
utilization, and case-mix changes) in expenditures under the ASC 
payment system for CY 2010 compared to CY 2009 to be approximately $80 
million. However, because this final rule with comment period for the 
ASC payment system substantially affects ASCs, we have prepared a 
regulatory impact analysis of changes to the ASC payment system that, 
to the best of our ability, presents the costs and benefits of this 
rulemaking. Table 75 and Table 76 of this final rule with comment 
period display the redistributional impact of the CY 2010 changes on 
ASC payment, grouped by specialty area and then by procedures with the 
greatest ASC expenditures, respectively.
2. Regulatory Flexibility Act (RFA)
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Many hospitals, other providers, ASCs, and 
other suppliers are considered to be small entities, either by being 
nonprofit organizations or by meeting the Small Business Administration 
(SBA) definition of a small business (hospitals having revenues of 
$34.5 million or less in any 1 year and ASCs having revenues of $10 
million or less in any 1 year). (For details on the latest standards 
for health care providers, we refer readers the SBA's Web site at: 
http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (refer to the 620000 series).)
    For purposes of the RFA, we have determined that many hospitals and 
most ASCs would be considered small entities according to the SBA size 
standards. Individuals and States are not included in the definition of 
a small entity. Therefore, the Secretary has determined that this final 
rule with comment period will have a significant impact on a 
substantial number of small entities. Because we acknowledge that many 
of the affected entities are small entities, the analyses presented 
throughout this final rule with comment period constitute our 
regulatory flexibility analysis. Therefore, in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35410), we solicited public comments on our 
estimates and analyses of the impact of the proposed rule on those 
small entities.
3. Small Rural Hospitals
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. With 
the exception of hospitals located in certain New England

[[Page 60663]]

counties, for purposes of section 1102(b) of the Act, we now define a 
small rural hospital as a hospital that is located outside an urban 
area and has fewer than 100 beds. Section 601(g) of the Social Security 
Amendments of 1983 (Pub. L. 98-21) designated hospitals in certain New 
England counties as belonging to the adjacent urban areas. Thus, for 
OPPS purposes, we continue to classify these hospitals as urban 
hospitals. We believe that the changes to the OPPS in this final rule 
with comment period will affect both a substantial number of rural 
hospitals as well as other classes of hospitals and that the effects on 
some may be significant. Also, the changes to the ASC payment system in 
this final rule with comment period will affect rural ASCs. Therefore, 
the Secretary has determined that this final rule with comment period 
will have a significant impact on the operations of a substantial 
number of small rural hospitals.
4. Unfunded Mandates
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $133 million. This final rule with 
comment period will not mandate any requirements for State, local, or 
tribal governments, nor will it affect private sector costs.
5. Federalism
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has Federalism 
implications.
    We have examined the OPPS and ASC provisions included in this final 
rule with comment period in accordance with Executive Order 13132, 
Federalism, and have determined that they will not have a substantial 
direct effect on State, local or tribal governments, preempt State law, 
or otherwise have a Federalism implication. As reflected in Table 73 
below, we estimate that OPPS payments to governmental hospitals 
(including State and local governmental hospitals) will increase by 1.8 
percent under this final rule with comment period. While we do not know 
the number of ASCs with government ownership, we anticipate that it is 
small. We believe that the provisions related to payments to ASCs in CY 
2010 will not affect payments to any ASCs owned by government entities.
    The following analysis, in conjunction with the remainder of this 
document, demonstrates that this final rule with comment period is 
consistent with the regulatory philosophy and principles identified in 
Executive Order 12866, the RFA, and section 1102(b) of the Act.
    This final rule with comment period will affect payments to a 
substantial number of small rural hospitals and a small number of rural 
ASCs, as well as other classes of hospitals and ASCs, and some effects 
may be significant.

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

    We are making several changes to the OPPS that are required by the 
statute. We are required under section 1833(t)(3)(C)(ii) of the Act to 
update annually the conversion factor used to determine the APC payment 
rates. We also are required under section 1833(t)(9)(A) of the Act to 
revise, not less often than annually, the wage index and other 
adjustments, including pass-through payments and outlier payments. In 
addition, we must review the clinical integrity of payment groups and 
weights at least annually. Accordingly, in this final rule with comment 
period, we are updating the conversion factor and the wage index 
adjustment for hospital outpatient services furnished beginning January 
1, 2010, as we discuss in sections II.B. and II.C., respectively, of 
this final rule with comment period. We also are revising the relative 
APC payment weights using claims data for services furnished from 
January 1, 2008, through December 31, 2008, and updated cost report 
information. We are continuing the current payment adjustment for rural 
SCHs, including EACHs. Finally, we list the 6 drugs and biologicals in 
Table 30 of this final rule with comment period that we are removing 
from pass-through payment status for CY 2010.
    Under this final rule with comment period, we estimate that the 
update change to the conversion factor and other adjustments as 
provided by the statute will increase total OPPS payments by 2.1 
percent in CY 2010. The changes to the APC weights, the changes to the 
wage indices, and the continuation of a payment adjustment for rural 
SCHs, including EACHs, will not increase OPPS payments because these 
changes to the OPPS are budget neutral. However, these updates do 
change the distribution of payments within the budget neutral system as 
shown in Table 73 below and described in more detail in this section. 
We also estimate that the total change in payments between CY 2010 and 
CY 2009, considering all payments, including changes in estimated total 
outlier payments and expiration of additional money for specified wages 
indices outside of budget neutrality, will increase total OPPS payments 
by 1.9 percent.
1. Alternatives Considered
    Alternatives to the changes we are making and the reasons that we 
have chosen the options are discussed throughout this final rule with 
comment period. Some of the major issues discussed in this final rule 
with comment period and the options considered are discussed below.
a. Alternatives Considered for Pass-Through Payment for Implantable 
Biologicals
    We are finalizing our proposal to change the way we evaluate 
transitional pass-through applications for implantable biologicals and 
the way we pay for implantable biologicals newly eligible for 
transitional pass-through status beginning in CY 2010. As discussed in 
detail in section V.A.4. of this final rule with comment period, we are 
finalizing a policy 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 payment 
beginning on or after January 1, 2010, be the device pass-through 
process and payment methodology only. As a result, implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) will no longer be eligible to 
submit biological pass-through applications and to receive biological 
pass-through payment at ASP+6 percent. Rather, implantable biologicals 
that are eligible for device pass-through payment will be paid based on 
the charges-adjusted-to-cost methodology used for all pass-through 
device categories.
    We considered three alternatives for 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), as indicated in the CY 2010 OPPS/ASC proposed rule 
(74 FR 35411). The first alternative we considered was to make no 
change to the current pass-through evaluation process and payment 
methodology for

[[Page 60664]]

implantable biologicals that are surgically inserted or implanted. We 
did not select this alternative because this approach would continue 
the separate pass-through evaluation processes and payment 
methodologies for implantable biologicals and implantable nonbiological 
devices that are sometimes used for the same clinical indications, and 
where the implantable biologicals are often FDA-approved as devices. 
Moreover, under our current policy, implantable biologicals could 
potentially have two periods of pass-through payment, one as a 
biological and one as a device. 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 second alternative we considered was to add a criterion 
requiring the demonstration of substantial clinical improvement to the 
biological pass-through evaluation process in order for a biological to 
be approved for pass-through payment. This alternative would provide 
pass-through payment only for those biologicals that demonstrate 
clinical superiority, consistent with the pass-through evaluation 
process for devices, and ensure that a product could receive only one 
period of pass-through payment. We did not choose this alternative 
because this approach would continue the different pass-through payment 
methods for implantable biological and nonbiological devices. Pass-
through payment for biologicals is made at ASP+6 percent as required 
for drug and biological pass-through payment, while pass-through 
devices are paid at charges adjusted to cost. Therefore, this second 
alternative would result in continued inconsistent pass-through payment 
methodologies for biological and nonbiological devices that may 
substitute for one another.
    The third alternative we considered and the one we are adopting for 
CY 2010 is to provide 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) be the device pass-through 
process and payment methodology only. As we discuss in section V.A.4. 
of this final rule with comment period, after consideration of the 
public comments we received on the proposed rule, we are adopting this 
alternative because we believe that a consistent pass-through payment 
policy is to evaluate all such devices, both biological and 
nonbiological, under the device pass-through process. We believe that 
implantable biologicals that function as and may be substitutes for 
implantable devices are most similar to devices because of their 
required surgical insertion or implantation, and that it would be 
appropriate to evaluate them as devices because they share significant 
clinical similarity with implantable nonbiological devices.
b. Alternatives Considered for Payment of the Acquisition and Pharmacy 
Overhead Costs of Drugs and Biologicals That Do Not Have Pass-Through 
Status
    For CY 2010, we are finalizing a transition payment for separately 
payable drugs and biologicals at ASP+4 percent, which will continue to 
represent combined payment for both the acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals. As 
discussed in detail in section V.B.3. of this final rule with comment 
period, we are redistributing $200 million total of packaged drug cost 
($150 million of the pharmacy overhead cost currently attributed to 
coded packaged drugs and biologicals with an ASP and $50 million of the 
estimated pharmacy overhead cost currently attributed to uncoded 
packaged drugs and biologicals) to separately payable drugs and 
biologicals to provide an adjustment for the pharmacy overhead costs of 
these separately payable products. As a result, we are proportionally 
reducing the cost of packaged drugs and biologicals that is included in 
the separate payment for procedural APCs to offset the $200 million 
adjustment to provide payment for separately payable drugs and 
biologicals at ASP+4 percent. We received favorable public comments on 
our proposal to redistribute cost within drugs and biologicals to 
adjust payment for separately payable drugs and biologicals. The public 
commenters also agreed that our estimated total cost for all drugs and 
biologicals in our claims data is accurate. Therefore, we are 
redistributing a portion of pharmacy overhead cost in the CY 2010 final 
rule claims data from some packaged drugs and biologicals to separately 
payable drugs and biologicals. A redistribution within drug cost 
maintains the estimated total cost of drugs and biologicals under the 
OPPS.
    We considered three alternatives for payment of the acquisition and 
pharmacy overhead costs of drugs and biologicals that do not have pass-
through status for CY 2010. The first alternative we considered was to 
continue our standard policy of comparing the estimated aggregate cost 
of separately payable drugs and biologicals in our claims data to the 
estimated aggregate ASP dollars for separately payable drugs and 
biologicals, using the ASP as a proxy for average acquisition cost, to 
calculate the estimated percent of ASP that would serve as the proxy 
for the combined acquisition and pharmacy overhead costs of separately 
payable drugs and biologicals (70 FR 68642). Under this standard 
methodology, using July 2009 ASP information and updated final rule 
costs derived from CY 2008 OPPS claims data, we estimated the combined 
acquisition and pharmacy overhead costs of separately payable drugs and 
biologicals to be ASP-3 percent. We also determined the combined 
acquisition and pharmacy overhead costs of coded packaged drugs and 
biologicals with an ASP to be 258 percent of ASP. As discussed in 
section V.B.3. of this final rule with comment period, we did not 
choose this alternative because we believe that this analysis indicates 
that our standard drug payment methodology has the potential to 
``compress'' the calculated costs of separately payable drugs and 
biologicals and inflate the calculated costs of packaged drugs and 
biologicals to some degree. Further, we recognize that the attribution 
of pharmacy overhead costs to packaged or separately payable drugs and 
biologicals through our standard drug payment methodology of a combined 
payment for acquisition and pharmacy overhead costs also depends on the 
determination of separate or packaged payment for all drugs and 
biologicals each year based on our annual drug packaging threshold. 
Changes to the packaging threshold and the packaged status of drugs or 
biologicals may result in changes to the estimated combined acquisition 
and pharmacy overhead costs of drugs and biologicals that do not 
reflect actual changes in hospital pharmacy overhead cost for those 
products.
    The second alternative we considered was to adopt the February 2009 
APC Panel recommendation to accept the pharmacy stakeholders' 
recommended methodology for payment of drugs and biologicals that do 
not have pass-through status. This recommended methodology would 
establish ASP+6 percent as the cost of packaged drugs and biologicals, 
including all pharmacy overhead costs; establish ASP+6 percent as the 
acquisition cost of separately payable drugs and biologicals with some 
overhead cost included; and reallocate the residual cost of packaged 
drugs and biologicals currently reflected in the claims data across 
three categories of

[[Page 60665]]

pharmacy overhead cost that would then be paid separately for each 
administration of separately payable drugs and biologicals in CY 2010. 
The pharmacy stakeholders recommended that we pay the pharmacy overhead 
amount specific to the overhead category to which a drug or biological 
is assigned, in addition to the ASP+6 percent payment for the 
separately payable drug or biological, each time a separately payable 
drug or biological is administered. We refer readers to section V.B.3. 
of this final rule with comment period for a more detailed discussion 
of the pharmacy stakeholders' recommended methodology. We did not 
choose this alternative because we do not believe that ASP+6 percent 
would pay appropriately for the acquisition and pharmacy overhead costs 
of packaged drugs. We believe the amount of redistribution of pharmacy 
overhead costs from packaged to separately payable drugs and 
biologicals incorporated in the recommendation of the pharmacy 
stakeholders would be too great. In addition, we do not believe that it 
would be appropriate to establish separate payment for pharmacy 
overhead costs, thereby unbundling payment for the acquisition and 
overhead costs of separately payable drugs and biologicals when 
hospitals report a single charge for these products that represents 
both types of costs. For these reasons, we are not accepting the APC 
Panel recommendation to adopt the pharmacy stakeholders' recommended 
methodology.
    The third alternative we considered and the one we selected for CY 
2010 is to make a transition payment for nonpass-through separately 
payable drugs and biologicals at ASP+4 percent, which will continue to 
represent a combined payment for both the acquisition costs of 
separately payable drugs and biologicals and the pharmacy overhead 
costs applicable to these products. We also are reducing the cost of 
packaged drugs and biologicals that is included in the payment for 
procedural APCs to offset the $200 million adjustment to payment for 
separately payable drugs and biologicals. The $200 million consists of 
$150 million (one-third of the pharmacy overhead cost) from the cost of 
coded packaged drugs and biologicals with an ASP and $50 million from 
the uncoded packaged drug and biological cost. To model this policy for 
the CY 2010 final rule with comment period, we reduced the cost of 
coded packaged drugs and biologicals with an ASP by 24 percent (based 
on final rule data; the reduction was 27 percent based on proposed rule 
data) and the cost of uncoded packaged drugs and biologicals by 8 
percent when we calculated the median costs of the CY 2010 procedural 
APCs. We chose this transition alternative because we believe that it 
provides an appropriate redistribution of pharmacy overhead costs 
associated with drugs and biologicals and is consistent with the 
principles of a prospective payment system.
c. Alternatives Considered for the Physician Supervision of Hospital 
Outpatient Services
    We are revising or further defining several policies related to the 
physician supervision of services in the HOPD for CY 2010. We refer 
readers to section XII.D. of this final rule with comment period for 
the full discussion of these policies. Specifically, for the CY 2010 
OPPS, we are revising our existing policy that requires direct 
supervision to be provided by a physician to allow, when statutorily 
permitted under the Social Security Act, specified nonphysician 
practitioners to supervise the hospital outpatient therapeutic services 
that they are able to personally perform within their State scope of 
practice and hospital-granted privileges. We note that section 
144(a)(1) of Public Law 100-275 imposes strict requirements for the 
direct physician supervision of PR, CR, and ICR services and gives us 
no flexibility to modify the requirement beyond direct physician 
supervision by a doctor of medicine or a doctor of osteopathy. We also 
are establishing a policy for hospital outpatient therapeutic services 
furnished in the main hospital buildings or in on-campus provider-based 
departments (PBDs) that ``direct supervision'' means that the 
supervisory practitioner must be on the same campus and immediately 
available to furnish assistance and direction throughout the 
performance of the procedure. In addition, we are establishing in 
regulations a policy that applies the MPFS physician supervision 
requirements for diagnostic tests to all hospital outpatient diagnostic 
tests performed directly by the hospital or under arrangement.
    We considered three alternatives for the physician supervision of 
hospital outpatient services for CY 2010 in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35412 through 35413). The first alternative we 
considered was to make no changes to the existing supervision policies 
for hospital outpatient therapeutic and diagnostic services and to 
provide no new policy guidance in this area. This approach would 
require hospitals to ensure that only physicians supervise services 
that may currently be ordered or performed by nonphysician 
practitioners within their State scope of practice and hospital-granted 
privileges. Hospitals would not receive payment for outpatient services 
for which they were unable to provide supervision by a physician. In 
addition, there could continue to be confusion regarding what ``direct 
supervision'' means for services provided in an area of the hospital 
that may not be a PBD of the hospital. Lastly, there would be potential 
for misunderstanding regarding the appropriate level of physician 
supervision required for hospital outpatient diagnostic services 
without a clearly stated policy, codified in regulations, that would 
apply the same level of physician supervision to all hospital 
outpatient diagnostic services, whether provided directly or under 
arrangement, as applies to those services currently furnished in 
physicians' offices and independent diagnostic testing facilities. We 
did not choose this alternative because we believe that it is important 
to address the issues outlined above, including areas of potential 
confusion or limited current policy guidance, to ensure that hospitals 
are able to comply with the hospital outpatient supervision 
requirements while providing access to care for Medicare beneficiaries.
    The second alternative we considered was to permit specified 
nonphysician practitioners to supervise the hospital outpatient 
therapeutic services that they are able to personally perform within 
their State scope of practice and hospital-granted privileges, but to 
make no changes that would provide clearer statements of policy 
regarding other concerns raised by hospitals regarding physician 
supervision for hospital outpatient therapeutic and diagnostic 
services. We did not choose this alternative because we believe it is 
important to clearly specify the policies that apply to the supervision 
of both therapeutic and diagnostic services in all hospital outpatient 
settings in order to ensure the safety and effectiveness of hospital 
outpatient services furnished to Medicare beneficiaries.
    The third alternative we considered and the one we selected for CY 
2010 was to revise our existing policy to permit specified nonphysician 
practitioners, when statutorily permitted in the Social Security Act, 
to supervise the services that they are able to personally perform 
within their State scope of practice and hospital-granted privileges; 
to establish a specific definition of ``direct supervision'' for 
hospital outpatient therapeutic services

[[Page 60666]]

furnished in the hospital or in on-campus PBDs that was consistent for 
services furnished by the hospital on-campus; and to apply the MPFS 
supervision requirements for diagnostic tests to all hospital 
outpatient diagnostic tests provided directly by the hospital or under 
arrangement. We selected this alternative because we believe that it is 
appropriate that, unless the Act imposes strict requirements for the 
direct supervision of certain services, such as PR, CR, and ICR 
services, a licensed nonphysician practitioner who may bill and be paid 
by Medicare for the practitioner's professional services should be able 
to supervise the therapeutic services that he or she may personally 
perform within his or her State scope of practice and hospital-granted 
privileges. Furthermore, we believe that it is necessary and 
appropriate to establish consistent and operationally feasible policies 
regarding the supervision requirements for hospital outpatient 
therapeutic and diagnostic services in order to ensure safe and 
effective health care services for Medicare beneficiaries. We refer 
readers to section XII.D. of this final rule with comment period for a 
complete discussion of the final physician supervision policies.
2. Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the CY 2010 policy changes on various hospital groups. We post on 
the CMS Web site our hospital-specific estimated payments for CY 2010 
with the other supporting documentation for this final rule with 
comment period. To view the hospital-specific estimates, we refer 
readers to the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/. Select ``regulations and notices'' from the 
left side of the page and then select ``CMS-1414-P'' from the list of 
regulations and notices. The hospital-specific file layout and the 
hospital-specific file are listed with the other supporting 
documentation for this final rule with comment period. We show 
hospital-specific data only for hospitals whose claims were used for 
modeling the impacts shown in Table 73 below. We do not show hospital-
specific impacts for hospitals whose claims we were unable to use. We 
refer readers to section II.A.2. of this final rule with comment period 
for a discussion of the hospitals whose claims we do not use for 
ratesetting and impact purposes.
    We estimate the effects of the individual policy changes by 
estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our policy changes. In addition, we 
do not make adjustments for future changes in variables such as service 
volume, service mix, or number of encounters. As we have done in 
previous rules, in the CY 2010 OPPS/ASC proposed rule (74 FR 35413), we 
solicited public comment and information about the anticipated effects 
of our proposed changes on providers and our methodology for estimating 
them.
    We received many public comments on the proposed changes to payment 
policies and to proposed payment rates for the CY 2010 OPPS. We have 
summarized these public comments and provided our responses to them in 
other sections of this final rule with comment period as part of our 
discussions of the specific topics to which the comments pertained. We 
did not receive any public comments on our methodology for estimating 
the anticipated effects of our proposed changes on providers or other 
parties.
3. Estimated Effects of This Final Rule With Comment Period on 
Hospitals
    Table 73 below shows the estimated impact of this final rule with 
comment period on hospitals. Historically, the first line of the impact 
table, which estimates the change in payments to all hospitals, has 
always included cancer and children's hospitals, which are held 
harmless to their pre-BBA payment-to-cost ratio. We also are including 
CMHCs in the first line that includes all providers because we included 
CMHCs in our weight scaler estimate.
    We present separate impacts for CMHCs in Table 73 because CMHCs are 
paid under only two APCs for services under the OPPS: APC 0172 (Level 1 
Partial Hospitalization (3 services)) and APC 0173 (Level II Partial 
Hospitalization (4 or more services)). We note that CMHS are also a 
different provider type. We discuss the impact on CMHCs in section 
XXI.B.4. of this final rule with comment period.
    The estimated increase in the total payments made under the OPPS is 
limited by the increase to the conversion factor set under the 
methodology in the statute. The distributional impacts presented do not 
include assumptions about changes in volume and service mix. The 
enactment of Public Law 108-173 on December 8, 2003, provided for the 
additional payment outside of the budget neutrality requirement for 
wage indices for specific hospitals reclassified under section 508. 
Public Law 108-173 extended section 508 reclassifications through 
September 30, 2008. Section 124 of Public Law 110-275 further extended 
section 508 reclassifications through September 30, 2009. The amounts 
attributable to these reclassifications are incorporated into the CY 
2009 estimates in Table 73.
    Table 73 shows the estimated redistribution of hospital and CMHC 
payments among providers as a result of APC reconfiguration and 
recalibration; wage indices; the combined impact of the APC 
recalibration, wage effects, and the market basket update to the 
conversion factor; and, finally, estimated redistribution considering 
all payments for CY 2010 relative to all payments for CY 2009, 
including the impact of changes in the outlier threshold, expiring 
section 508 wage indices, and changes to the pass-through payment 
estimate. We did not model an explicit budget neutrality adjustment for 
the rural adjustment for SCHs because we are not making any changes to 
the policy for CY 2010. Because the updates to the conversion factor, 
including the update of the market basket and the subtraction of 
additional money dedicated to pass-through payment for CY 2010, are 
applied uniformly across services, observed redistributions of payments 
in the impact table for hospitals largely depend on the mix of services 
furnished by a hospital (for example, how the APCs for the hospital's 
most frequently furnished services will change), and the impact of the 
wage index changes on the hospital. However, total payments made under 
this system and the extent to which this final rule with comment period 
will redistribute money during implementation also will depend on 
changes in volume, practice patterns, and the mix of services billed 
between CY 2009 and CY 2010 by various groups of hospitals, which CMS 
cannot forecast.
    Overall, the final OPPS rates for CY 2010 will have a positive 
effect for providers paid under the OPPS, resulting in a 1.9 percent 
estimated increase in Medicare payments. Removing cancer and children's 
hospitals, because their payments are held harmless to the pre-BBA 
ratio between payment and cost, and CMHCs suggests that these changes 
also will result in a 1.9 percent estimated increase in Medicare 
payments to all other hospitals.
    To illustrate the impact of the final CY 2010 changes, our analysis 
begins with a baseline simulation model that uses the final CY 2009 
weights, the FY 2009 final post-reclassification IPPS wage indices, and 
the final CY 2009 conversion factor. Column 2 in Table 73

[[Page 60667]]

shows the independent effect of the changes resulting from the 
reclassification of services among APC groups and the recalibration of 
APC weights, based on 12 months of CY 2008 OPPS hospital claims data 
and the most recent cost report data. We modeled the effect of the APC 
recalibration changes for CY 2010 by varying only the weights (the 
final CY 2009 weights versus the final CY 2010 weights calculated using 
the service mix and volume in the CY 2008 claims used for this final 
rule with comment period) and calculating the percent difference in 
weight. Column 2 also reflects the effect of the changes resulting from 
the APC reclassification and recalibration changes and any changes in 
multiple procedure discount patterns or conditional packaging that 
occur as a result of the changes in the relative magnitude of payment 
weights.
    Column 3 reflects the independent effects of the updated wage 
indices, including the application of budget neutrality for the rural 
floor policy on a statewide basis. We did not model a budget neutrality 
adjustment for the rural adjustment for SCHs because we are making no 
changes to the policy for CY 2010. We modeled the independent effect of 
updating the wage indices by varying only the wage indices, holding APC 
relative weights, service mix, and the rural adjustment constant and 
using the CY 2010 scaled weights and a CY 2009 conversion factor that 
included a budget neutrality adjustment for the effect of changing the 
wage indices between CY 2009 and CY 2010.
    Column 4 demonstrates the combined ``budget neutral'' impact of APC 
recalibration (that is, Column 2), the wage index update (that is, 
Column 3), as well as the impact of updating the conversion factor with 
the market basket update. We modeled the independent effect of the 
budget neutrality adjustments and the market basket update by using the 
weights and wage indices for each year, and using a CY 2009 conversion 
factor that included the market basket update and a budget neutrality 
adjustment for differences in wage indices.
    Finally, Column 5 depicts the full impact of the CY 2010 policies 
on each hospital group by including the effect of all the changes for 
CY 2010 (including the APC reconfiguration and recalibration shown in 
Column 2) and comparing them to all estimated payments in CY 2009 
(these CY 2009 estimated payments include the payments resulting from 
the non-budget neutral increases to wage indices under section 508 of 
Pub. L. 108-173 as extended by Pub. L. 110-275). Column 5 shows the 
combined budget neutral effects of Columns 2 through 4, plus the impact 
of the change to the fixed-dollar outlier threshold from $1,800 to 
$2,175; the impact of the expiration of section 508 reclassifications; 
the change in the HOP QDRP payment reduction for the small number of 
hospitals in our impact model that failed to meet the reporting 
requirements; and the impact of increasing the estimate of the 
percentage of total OPPS payments dedicated to transitional pass-
through payments. We discuss our CY 2010 change to the outlier 
threshold in section II.F. of this final rule with comment period. Of 
the 85 hospitals that failed to meet the HOP QDRP reporting 
requirements for the full CY 2009 update (and assumed, for modeling 
purposes, to be the same number for CY 2010), we included 28 in our 
model because they had both CY 2008 claims data and recent cost report 
data. We estimate that the cumulative effect of all changes for CY 2010 
will increase payments to all providers by 1.9 percent for CY 2010. We 
modeled the independent effect of all changes in Column 5 using the 
final weights for CY 2009 and the final weights for CY 2010. We used 
the final conversion factor for CY 2009 of $66.059 and the final CY 
2010 conversion factor of $67.406. Column 5 also contains simulated 
outlier payments for each year. We used the charge inflation factor 
used in the FY 2010 IPPS/RY 2010 LTCH PPS final rule of 6.86 percent 
(1.0686) to increase individual costs on the CY 2008 claims, and we 
used the most recent overall CCR in the July 2009 Outpatient Provider-
Specific File (OPSF) (74 FR 44010). Using the CY 2008 claims and a 6.86 
percent charge inflation factor, we currently estimate that outlier 
payments for CY 2009, using a multiple threshold of 1.75 and a fixed-
dollar threshold of $1,800, will be approximately 1.03 percent of total 
payments. Outlier payments of 1.03 percent are incorporated in the CY 
2009 comparison in Column 5. We used the same set of claims and a 
charge inflation factor of 14.18 percent (1.1418) and the CCRs in the 
July 2009 OPSF, with an adjustment of 0.9880 to reflect relative 
changes in cost and charge inflation between CY 2008 and CY 2010, to 
model the CY 2010 outliers at 1.0 percent of total payments using a 
multiple threshold of 1.75 and a fixed-dollar threshold of $2,175.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 73 shows the total number of 
providers (4,222), including cancer and children's hospitals and CMHCs 
for which we were able to use CY 2008 hospital outpatient claims to 
model CY 2009 and CY 2010 payments, by classes of hospitals. We 
excluded all hospitals for which we could not accurately estimate CY 
2009 or CY 2010 payment and entities that are not paid under the OPPS. 
The latter entities include CAHs, all-inclusive hospitals, and 
hospitals located in Guam, the U.S. Virgin Islands, Northern Mariana 
Islands, American Samoa, and the State of Maryland. This process is 
discussed in greater detail in section II.A. of this final rule with 
comment period. At this time, we are unable to calculate a 
disproportionate share (DSH) variable for hospitals not participating 
in the IPPS. Hospitals for which we do not have a DSH variable are 
grouped separately and generally include freestanding psychiatric 
hospitals, rehabilitation hospitals, and long-term care hospitals. We 
show the total number (3,942) of OPPS hospitals, excluding the hold-
harmless cancer and children's hospitals and CMHCs, on the second line 
of the table. We excluded cancer and children's hospitals because 
section 1833(t)(7)(D) of the Act permanently holds harmless cancer 
hospitals and children's hospitals to a proportion of their pre-BBA 
payment relative to their pre-BBA costs and, therefore, we removed them 
from our impact analyses. We show the isolated impact on 221 CMHCs in 
the last row of the impact table and discuss that impact separately 
below.
Column 2: APC Changes Due to Reassignment and Recalibration
    This column shows the combined effects of the reconfiguration, 
recalibration, and other policies (such as setting payment for 
separately payable drugs and biologicals at ASP+4 percent with an 
accompanying reduction in the amount of cost associated with packaged 
drugs and biologicals, payment for brachytherapy sources based on 
median unit cost, and changes in payment for PHP services. Overall, we 
estimate that changes in APC reassignment and recalibration across all 
services paid under the OPPS will increase payments to urban hospitals 
by 0.1 percent. We estimate that both large and other urban hospitals 
will see an increase of 0.1 percent, all attributable to recalibration. 
We estimate that urban hospitals billing fewer than 11,000 lines for 
OPPS services will experience decreases of 0.2 to 1.0 percent, while 
urban hospitals billing 11,000 or more lines for OPPS services will see 
no change or an increase of 0.1 percent.
    Overall, we estimate that rural hospitals will experience a 
decrease of 0.1 percent as a result of changes to the APC structure. We 
estimate that rural

[[Page 60668]]

hospitals of all bed sizes will experience no change or decreases of up 
to 0.2 percent as a result of APC recalibration. We estimate that rural 
hospitals that report fewer than 5,000 lines for OPPS services will 
experience a decrease of 0.8 percent, while rural hospitals that report 
more than 5,000 lines for OPPS services will see decreases of 0.1 
percent to 0.4 percent.
    Among teaching hospitals, we estimate that the largest observed 
impact resulting from APC recalibration will include an increase of 0.2 
percent for major teaching hospitals and a increase of 0.1 percent for 
minor teaching hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary and governmental hospitals will see no change, and 
voluntary hospitals will see an estimated increase of 0.1 percent.
    Finally, we estimate that hospitals for which DSH payments are not 
available will experience decreases of 2.5 to 2.7 percent that are 
largely attributable to the reduction in PHP payment for APC 0172. We 
estimate that most other classes of hospitals will not experience any 
change from CY 2009 to CY 2010 or will experience a modest increase.
Column 3: New Wage Indices and the Effect of the Rural Adjustment
    This column estimates the impact of applying the FY 2010 IPPS wage 
indices for the CY 2010 OPPS. We are not changing the rural payment 
adjustment for CY 2010. We estimate that the combination of updated 
wage data and statewide application of rural floor budget neutrality 
will redistribute payment among regions. We also updated the list of 
counties qualifying for the section 505 out-migration adjustment. 
Overall, we estimate that urban hospitals will not experience any 
change from CY 2009 to CY 2010, and that rural hospitals will 
experience a decrease of 0.1 percent as a result of the updated wage 
indices. However, we estimate that hospitals in rural New England 
States and rural West South Central States will experience decreases of 
0.9 and 0.7 percent, respectively. We estimate that urban and rural 
Mountain States will experience increases of 0.6 percent.
Column 4: All Budget Neutrality Changes and Market Basket Update
    We estimate that the addition of the market basket update of 2.1 
percent will mitigate any negative impacts on hospital payments for CY 
2010 created by the budget neutrality adjustments made in Columns 2 and 
3, with the exception of hospitals not paid under the IPPS, including 
freestanding psychiatric, rehabilitation, and long-term care hospitals, 
that we estimate will continue to experience decreases of between -0.6 
and -0.7 percent. In general, Column 4 shows that all hospitals will 
experience an estimated increase of 2.1 percent, attributable to the 
2.1 percent market basket increase.
    Overall, we estimate that these changes will increase payments to 
urban hospitals by 2.2 percent. We estimate that large urban hospitals 
will experience an increase of 2.3 percent, and ``other'' urban 
hospitals will experience a 2.1 percent increase.
    Overall, we estimate that rural hospitals will experience a 1.9 
percent increase as a result of the market basket update and other 
budget neutrality adjustments. We estimate that rural hospitals that 
bill less than 5,000 lines of OPPS services will experience an increase 
of 1.5 percent and that rural hospitals that bill more than 5,000 lines 
of OPPS services will experience increases of 1.8 to 1.9 percent.
    Among teaching hospitals, we estimate that the observed impacts 
resulting from the market basket update and other budget neutrality 
adjustments will include an increase of 2.4 and 2.2 percent, 
respectively, for major and minor teaching hospitals.
    Classifying hospitals by type of ownership suggests that voluntary, 
proprietary, and governmental hospitals will experience estimated 
increases of 2.2 percent, 2.1 percent, and 2.0 percent, respectively.
Column 5: All Changes for CY 2010
    Column 5 compares all estimated changes for CY 2010 to estimated 
final payment for CY 2009, including the expiration of the 
reclassifications under section 508, the change in the outlier 
threshold, payment reductions for hospitals that failed to meet the HOP 
QDRP reporting requirements, and the difference in pass-through 
estimates that are not included in the combined percentages shown in 
Column 4. This column includes estimated payment for a handful of 
hospitals receiving reduced payment because they did not meet their 
hospital outpatient quality measure reporting requirements; however, we 
estimate that the anticipated change in payment between CY 2009 and CY 
2010 for these hospitals will be negligible. Overall, we estimate that 
providers will experience an increase of 1.9 percent under this final 
rule with comment period in CY 2010 relative to total spending in CY 
2009. The projected 1.9 percent increase for all providers in Column 5 
of Table 73 reflects the 2.1 percent market basket increase, less 0.03 
percent for the change in the pass-through estimate between CY 2009 and 
CY 2010, less 0.03 percent for the difference in estimated outlier 
payments between CY 2009 (1.03 percent) and CY 2010 (1.0 percent), and 
less 0.14 percent due to the expiration of the special, non-budget 
neutral wage index payments made under section 508. We estimate that 
when we exclude cancer and children's hospitals (which are held 
harmless to their pre-OPPS costs) and CMHCs, the increase remains at 
1.9 percent.
    We estimate that the combined effect of all changes for CY 2010 
will increase payments to urban hospitals by 2.0 percent. We estimate 
that large urban hospitals will experience a 2.1 percent increase, 
while ``other'' urban hospitals will experience an increase of 1.9 
percent. We estimate that urban hospitals that bill less than 5,000 
lines of OPPS services will experience an increase of 1.2 percent, and 
we estimate that all urban hospitals that bill more than 5,000 lines of 
OPPS services will experience increases between 1.9 percent and 2.0 
percent.
    Overall, we estimate that rural hospitals will experience a 1.6 
percent increase as a result of the combined effects of all changes for 
CY 2010. We estimate that rural hospitals that bill less than 5,000 
lines of OPPS services will experience an increase of 1.3 percent and 
rural hospitals that bill greater than 5,000 lines of OPPS services 
will experience increases ranging from 1.4 percent to 1.8 percent.
    Among teaching hospitals, we estimate that the impacts resulting 
from the combined effects of all changes will include an increase of 
2.0 percent for major teaching hospitals and an increase of 1.9 percent 
for minor teaching hospitals.
    Classifying hospitals by type of ownership, we estimate that 
proprietary hospitals will gain 2.0 percent, governmental hospitals 
will experience an increase of 1.8 percent, and voluntary hospitals 
will experience an increase of 1.9 percent.
4. Estimated Effects of This Final Rule With Comment Period on CMHCs
    The last row of the impact analysis in Table 73 demonstrates the 
impact on CMHCs. We modeled this impact assuming that CMHCs will 
continue to provide the same number of days of PHP care, with each day 
having either three services or four or more services, as seen in the 
CY 2008 claims data. We excluded days with one or two services. Using 
these assumptions, we estimate that there would be a 5.0 percent 
decrease in payments to CMHCs due to these APC policy changes (shown in

[[Page 60669]]

Column 2). The relative weight for low intensity partial 
hospitalization APC 0172 (Level 1 Partial Hospitalization (3 services)) 
declines between CY 2009 and CY 2010 under this final rule with comment 
period. CMHCs perform a greater proportion of low intensity partial 
hospitalization days than freestanding psychiatric hospitals. Table 73 
demonstrates our estimate that hospitals not paid under the IPPS for 
which a disproportionate patient percentage is not available (DSH Not 
Available), consisting largely of freestanding psychiatric hospitals, 
will experience a more moderate decline in payments of 2.7 percent. 
Psychiatric hospitals provide a greater proportion of APC 0173 (Level 
II Partial Hospitalization (4 or more services)) for which the relative 
weight increases between CY 2009 and CY 2010 under this final rule with 
comment period.
    Column 3 shows that the estimated impact of adopting the CY 2010 
wage index values will be no change in payments to CMHCs. We note that 
all providers paid under the OPPS, including CMHCs, will receive a 2.1 
percent market basket increase. Combining this market basket increase, 
along with changes in APC policy for CY 2010 and the CY 2010 wage index 
updates, and changes in outlier payments, we estimate that the combined 
impact on CMHCs for CY 2010 will be a 3.0 percent decrease.
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5. Estimated Effect of This Final Rule With Comment Period Rule on 
Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary share of payment will 
increase for services for which the OPPS payments will rise and will 
decrease for services for which the OPPS payments will fall. For 
example, for a service assigned to Level IV Needle Biopsy/Aspiration 
Except Bone Marrow (APC 0037) in the CY 2009 OPPS, the national 
unadjusted copayment is $228.76, and the minimum unadjusted copayment 
is $178.60. For CY 2010, the national unadjusted copayment for APC 0037 
will be $228.76, the same rate in effect for CY 2009. The minimum 
unadjusted copayment for APC 0037 will be $208.97 or 20 percent of the 
CY 2010 national unadjusted payment rate for APC 0037 of $1,044.81. The 
minimum unadjusted copayment will rise because the payment rate for APC 
0037 will rise for CY 2010. In all cases, the statute limits 
beneficiary liability for copayment for a procedure to the hospital 
inpatient deductible for the applicable year. The CY 2009 hospital 
inpatient deductible is $1,068. The CY 2010 hospital inpatient 
deductible is $1,100.
    In order to better understand the impact of changes in copayment on 
beneficiaries, we modeled the percent change in total copayment 
liability using CY 2008 claims. We estimate, using the claims of the 
4,222 hospitals and CMHCs on which our modeling is based, that total 
beneficiary liability for copayments will decline as an overall 
percentage of total payments, from 23.0 percent in CY 2009 based on 
updated claims data for this final rule with comment period to 22.6 
percent in CY 2010.
6. Conclusion
    The changes in this final rule with comment period will affect all 
classes of hospitals and CMHCs. We estimated that some classes of 
hospitals will experience significant gains and others less significant 
gains, but all classes of hospitals will experience positive updates in 
OPPS payments in CY 2010 with one exception. We estimate that hospitals 
not paid under the IPPS will see an overall decrease in payment of 0.6 
to 0.8 percent because they are largely freestanding psychiatric 
hospitals that bill mostly PHP services. As we discuss in substantial 
detail in section X. of this final rule with comment period, payment 
for APC 0172 will decline for CY 2010 and, therefore, we estimate that 
payments to CMHCs and hospitals that furnish mostly PHP services will 
also decline. In general, we estimate that CMHCs will experience an 
overall decline of 3.0 percent in total payment due to the 
recalibration of the payment rates.
    Table 73 demonstrates the estimated distributional impact of the 
OPPS budget neutrality requirements that will result in a 1.9 percent 
increase in payments for all services paid under the OPPS in CY 2010, 
after considering all changes to APC reconfiguration and recalibration, 
as well as the market basket increase, wage index changes, estimated 
payment for outliers, and changes to the pass-through payment estimate. 
The accompanying discussion, in combination with the rest of this final 
rule with comment period, constitutes a regulatory impact analysis.
7. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 74, we have 
prepared an accounting statement showing the CY 2010 estimated hospital 
OPPS incurred benefit impact associated with the CY 2010 hospital 
outpatient market basket update shown in this final rule with comment 
period based on the baseline for the 2009 Trustees Report. All 
estimated impacts are classified as transfers.

Table 74--Accounting Statement: CY 2010 Estimated Hospital OPPS Incurred
  Benefit Impact Associated With the CY 2010 Hospital Outpatient Market
                              Basket Update
------------------------------------------------------------------------
             Category                             Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers....  $0.5 billion.
From Whom to Whom.................  Federal Government to outpatient
                                     hospitals and other providers who
                                     received payment under the hospital
                                     OPPS.
    Total.........................  $0.5 billion.
------------------------------------------------------------------------

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

    On August 2, 2007, we published in the Federal Register the final 
rule for the revised ASC payment system, effective January 1, 2008 (72 
FR 42470). In that final rule, we adopted the methodologies to set 
payment rates for covered ASC services to implement the revised payment 
system so that it would be designed to result in budget neutrality as 
required by section 626 of Public Law 108-173; established that the 
OPPS relative payment weights would be the basis for payment and that 
we would update the system annually as part of the OPPS rulemaking 
cycle; and provided that the revised ASC payment rates would be phased-
in over 4 years. During the 4-year transition to full implementation of 
the ASC payment rates, payments for surgical procedures paid in ASCs in 
CY 2007 are made using a blend of the CY 2007 ASC payment rate and the 
ASC payment rate calculated according to the ASC standard ratesetting 
methodology for the applicable transitional year. In CY 2009, we are 
paying ASCs using a 50/50 blend, in which payment is calculated by 
adding 50 percent of the CY 2007 ASC rate for a surgical procedure on 
the CY 2007 ASC list of covered surgical procedures and 50 percent of 
the CY 2009 ASC rate calculated according to the ASC standard 
ratesetting methodology for the same procedure. For CY 2010, we are 
transitioning the blend to a 25/75 blend of the CY 2007 ASC rate and 
the ASC payment rate calculated according to the ASC standard 
ratesetting methodology. Beginning in CY 2011, we will pay ASCs for all 
covered surgical procedures, including those on the CY 2007 ASC list, 
at the ASC payment rates calculated according to the ASC standard 
ratesetting methodology. Payment for procedures that were not included 
on the ASC list of covered surgical procedures in CY 2007 is not 
subject to the transitional payment methodology.
    ASC payment rates are calculated by multiplying the ASC conversion 
factor by the ASC relative payment weight. As discussed fully in 
section XV. of this final rule with comment period, we set the CY 2010 
ASC relative payment weights by scaling CY 2010 ASC relative payment 
weights by the ASC scaler of 0.9567. These weights take into 
consideration the 25/75 blend for the

[[Page 60674]]

third year of transitional payment for certain services. If there were 
no transition, the scaler for the CY 2010 relative payment weights 
would be 0.9338. The estimated effects of the updated relative payment 
weights on payment rates during this transitional period are varied and 
are reflected in the estimated payments displayed in Tables 75 and 78 
below.
    The CY 2010 ASC conversion factor was calculated by adjusting the 
CY 2009 ASC conversion factor to account for changes in the pre-floor 
and pre-reclassified hospital wage indices between CY 2009 and CY 2010 
and by applying the CY 2010 CPI-U of a 1.2 percent increase. The CY 
2010 ASC conversion factor is $41.873.
1. Alternatives Considered
    Alternatives to the changes we are making and the reasons that we 
have chosen the options are discussed throughout this final rule with 
comment period. Some of the major ASC issues discussed in this final 
rule with comment period and the options considered are discussed 
below.
a. Alternatives Considered for Office-Based Procedures
    According to our final policy for the revised ASC payment system, 
we designate as office-based those procedures that are added to the ASC 
list of covered surgical procedures in CY 2008 or later years and that 
we determine are predominantly performed in physicians' offices based 
on consideration of the most recent available volume and utilization 
data for each individual procedure HCPCS code and/or, if appropriate, 
the clinical characteristics, utilization, and volume of related HCPCS 
codes. We establish payment for procedures designated as office-based 
at the lesser of the MPFS nonfacility PE RVU amount or the ASC rate 
developed according to the standard methodology of the revised ASC 
payment system.
    In developing this final rule with comment period, we reviewed the 
full CY 2008 utilization data for all surgical procedures added to the 
ASC list of covered surgical procedures in CY 2008 or later years and 
for those procedures for which the office-based designation is 
temporary in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68730 through 68733). Based on that review, and as discussed in section 
XV.C.1.b. of this final rule with comment period, we are newly 
designating six existing surgical procedures as office-based and making 
permanent the office-based designations of four existing surgical 
procedures that have temporary office-based designations in CY 2009. We 
also are providing temporary office-based designations for 16 CY 2010 
procedures reported with new or substantially revised CPT codes and 
continuing the temporary office-based designations for 6 procedures 
that were temporarily office-based in CY 2009. We considered two 
alternatives in developing this policy.
    The first alternative we considered was to make no change to the 
procedure payment designations. This would mean that we would pay for 
the 6 procedures we are designating as permanently office-based and the 
16 procedures we are newly designating as temporarily office-based at 
an ASC payment rate calculated according to the standard ratesetting 
methodology of the revised ASC payment system and for the 10 procedures 
with temporary office-based designations for 2009 according to the 
office-based methodology. We did not select this alternative because 
our analysis of the data and our clinical review indicated that all 10 
procedures we are designating permanently office-based as well as the 
22 procedures that we are designating temporarily office-based could be 
considered to be predominantly performed in physicians' offices. 
Consistent with our final policy adopted in the August 2, 2007 final 
rule (72 FR 42509), we were concerned that making payments at the 
standard ASC payment rate for the 6 procedures newly designated as 
office-based and 16 new procedures designated as temporarily office-
based could create financial incentives for the procedures to shift 
from physicians' offices to ASCs for reasons unrelated to clinical 
decisions regarding the most appropriate setting for surgical care. 
Further, consistent with our policy, we believe that when adequate data 
become available to make permanent determinations about procedures with 
temporary office-based designations, maintaining the temporary 
designation is no longer appropriate.
    The second alternative we considered and the one we selected for CY 
2010 is to designate six additional procedures as office-based for CY 
2010 and to make permanent the office-based designations of four of the 
procedures with temporary office-based designations in CY 2009. We also 
are designating 16 new procedures described by new or substantially 
revised CPT codes for CY 2010 as temporarily office-based and 
continuing to designate 6 procedures as temporarily office-based in CY 
2010. We chose this alternative because our claims data and clinical 
review indicate that these procedures could be considered to be 
predominantly performed in physicians' offices. We believe that 
designating these procedures as office-based, which results in the CY 
2010 ASC payment rate for these procedures potentially being capped at 
the CY 2010 physicians' office rate (that is, the MPFS nonfacility PE 
RVU amount), if applicable, is an appropriate step to ensure that 
Medicare payment policy does not create financial incentives for such 
procedures to shift unnecessarily from physicians' offices to ASCs, 
consistent with our final policy adopted in the August 2, 2007 final 
rule.
b. Alternatives Considered for Covered Surgical Procedures
    According to our final policy for the revised ASC payment system, 
we designate as covered all surgical procedures that we determine would 
not be expected to pose a significant risk to beneficiary safety or 
would not be expected to require an overnight stay when performed on 
Medicare beneficiaries in an ASC.
    In developing this final rule with comment period, we reviewed the 
clinical characteristics and full CY 2008 utilization data, if 
applicable, for all procedures reported by Category III CPT codes 
implemented July 1, 2009, and surgical procedures that were excluded 
from ASC payment for CY 2009. In response to public comments received 
on the CY 2009 OPPS/ASC proposed rule, we stated in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68724) that, as we developed 
the CY 2010 OPPS/ASC proposed rule and final rule with comment period, 
we would perform a comprehensive review of the APCs in order to 
identify potentially inconsistent ASC treatment of procedures assigned 
to a single APC under the OPPS. Thus, for this final rule with comment 
period, we examined surgical procedures that were excluded from the CY 
2009 ASC list of covered surgical procedures and the APCs to which they 
were assigned under the OPPS. Based on this review, we identified 26 
surgical procedures that meet the criteria for inclusion on the ASC 
list of covered surgical procedures, and we are adding those procedures 
to the list for CY 2010 payment, in addition to the 2 new surgical 
procedures described by Category III CPT codes that were new for July 
2009, and that we determined were appropriate for addition to the ASC 
list. We considered two alternatives in developing this policy.
    The first alternative we considered was to make no change to the 
ASC list of covered surgical procedures for CY 2010. We did not choose 
this alternative because our analysis of data and clinical

[[Page 60675]]

review indicated that the 28 procedures we are designating as covered 
surgical procedures for CY 2010 would not be expected to pose a 
significant risk to beneficiary safety in ASCs and would not be 
expected to require an overnight stay. Consistent with our final 
policy, we were concerned that by continuing to exclude them from the 
list of ASC covered surgical procedures, we may unnecessarily limit 
beneficiaries' access to the services in the most clinically 
appropriate settings.
    The second alternative we considered and the one we selected for CY 
2010 was to designate 28 additional procedures as ASC covered surgical 
procedures for CY 2010. We chose this alternative because our claims 
data and clinical review indicate that these procedures would not be 
expected to pose a significant risk to beneficiary safety and would not 
be expected to require an overnight stay, and thus they meet the 
criteria for inclusion on the list of ASC covered surgical procedures. 
We believe that adding these procedures to the list of covered surgical 
procedures is an appropriate step to ensure that beneficiary access to 
services is not limited unnecessarily.
2. Limitations of Our Analysis
    Presented here are the projected effects of the changes for CY 2010 
on Medicare payment to ASCs. A key limitation of our analysis is our 
inability to predict changes in ASC service mix between CY 2008 and CY 
2010 with precision. We believe that the net effect on Medicare 
expenditures resulting from the CY 2010 changes will be small in the 
aggregate for all ASCs. However, such changes may have differential 
effects across surgical specialty groups as ASCs continue to adjust to 
the payment rates based on the policies of the revised ASC payment 
system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs will experience changes 
in payment that differ from the aggregated estimated impacts presented 
below.
3. Estimated Effects of This Final Rule With Comment Period on Payments 
to ASCs
    Some ASCs are multispecialty facilities that perform the gamut of 
surgical procedures, from excision of lesions to hernia repair to 
cataract extraction; others focus on a single specialty and perform 
only a limited range of surgical procedures, such as eye, digestive 
system, or orthopedic procedures. The combined effect on an individual 
ASC of the update to the CY 2010 payments will depend on a number of 
factors, including, but not limited to, the mix of services the ASC 
provides, the volume of specific services provided by the ASC, the 
percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the CY 2010 update to the revised ASC payment system on 
Medicare payments to ASCs, assuming the same mix of services as 
reflected in our CY 2008 claims data. Table 75 depicts the estimated 
aggregate percent change in payment by surgical specialty or ancillary 
items and services group by comparing estimated CY 2009 payments to 
estimated CY 2010 payments, and Table 76 shows a comparison of 
estimated CY 2009 payments to estimated CY 2010 payments for procedures 
that we estimate will receive the most Medicare payment in CY 2010.
    Table 75 shows the estimated effects on aggregate Medicare payments 
under the revised ASC payment system by surgical specialty or ancillary 
items and services group. We have aggregated the surgical HCPCS codes 
by specialty group, grouped all HCPCS codes for covered ancillary items 
and services into a single group, and then estimated the effect on 
aggregated payment for surgical specialty and ancillary items and 
services groups, considering separately the CY 2010 transitional rates 
and the ASC payment rates calculated according to the ASC standard 
ratesetting methodology that would apply in CY 2010 if there were no 
transition. The groups are sorted for display in descending order by 
estimated Medicare program payment to ASCs. The following is an 
explanation of the information presented in Table 75.
     Column 1--Surgical Specialty or Ancillary Items and 
Services Group indicates the surgical specialty into which ASC 
procedures are grouped or the ancillary items and services group which 
includes all HCPCS codes for covered ancillary items and services. To 
group surgical procedures by surgical specialty, we used the CPT code 
range definitions and Level II HCPCS codes and Category III CPT codes, 
as appropriate, to account for all surgical procedures to which the 
Medicare program payments are attributed.
     Column 2--Estimated ASC Payments were calculated using CY 
2008 ASC utilization (the most recent full year of ASC utilization) and 
CY 2009 ASC payment rates. The surgical specialty and ancillary items 
and services groups are displayed in descending order based on 
estimated CY 2009 ASC payments.
     Column 3--Estimated CY 2010 Percent Change With Transition 
(25/75 Blend) is the aggregate percentage increase or decrease, 
compared to CY 2009, in Medicare program payment to ASCs for each 
surgical specialty or ancillary items and services group that is 
attributable to updates to the ASC payment rates for CY 2010 under the 
scaled, 25/75 blend of the CY 2007 ASC payment rates and the CY 2010 
ASC payment rates calculated according to the ASC standard ratesetting 
methodology.
     Column 4--Estimated CY 2010 Percent Change Without 
Transition (Fully Implemented) is the aggregate percentage increase or 
decrease in Medicare program payment to ASCs for each surgical 
specialty or ancillary items and services group that would be 
attributable to updates to ASC payment rates for CY 2010 compared to CY 
2009 if there were no transition period to the fully implemented 
payment rates. The percentages appearing in Column 4 are presented only 
as illustrative comparisons to the percentage changes under the 
transition policy in Column 3. We are not eliminating or modifying the 
policy for a 4-year transition that was finalized in the August 2, 2007 
final rule (72 FR 42519).
    As seen in Table 75, we estimate that the update to ASC rates for 
CY 2010 will result in no change in aggregate payment amounts for eye 
and ocular adnexa procedures and in aggregate decreases of 4 percent in 
payment amounts for both digestive system and nervous system 
procedures. As shown in Column 4 in the table, we estimate that if 
there were no transitional payment for these three surgical specialty 
groups in CY 2010, aggregate payments would decrease by 1 percent for 
eye and ocular adnexa procedures and by 10 and 6 percent for digestive 
and nervous system procedures, respectively.
    Generally, for the surgical specialty groups that account for less 
ASC utilization and spending, we estimate that the payment effects of 
the CY 2010 update are positive. We estimate that ASC payments for 
procedures in those surgical specialties will increase in CY 2010 with 
the 25/75 transitional payment rates and, in the absence of the 
transition, will increase even more. For instance, we estimate that, in 
the aggregate, payment for integumentary system procedures will 
increase by 13 percent under the CY 2010 rates and by 20 percent if 
there were no transition. We estimate similar effects for 
genitourinary, cardiovascular,

[[Page 60676]]

musculoskeletal, respiratory, hematologic and lymphatic systems, and 
auditory system procedures as well.
    An estimated increase in aggregate payment for the specialty group 
does not mean that all procedures in the group will experience 
increased payment rates. For example, the substantial estimated 
increase for CY 2010 for integumentary procedures is likely due to the 
significant median cost increase for APC 0137 (Level V Skin Repair) 
under the OPPS. The highest volume procedure in the integumentary 
surgical specialty group, described by CPT code 15823 (Blepharoplasty, 
upper eyelid; with excessive skin weighting down lid), is assigned to 
that APC under the OPPS. In contrast, the estimated increased payments 
at the surgical specialty group level may be due to decreased payments 
for some of the most frequently provided procedures in the group and 
the moderating effect of the sometimes substantial payment increases 
for the less frequently performed procedures within the surgical 
specialty group.
    Also displayed in Table 75 is a separate estimate of Medicare ASC 
payments for the group of separately payable covered ancillary items 
and services. We estimate that aggregate payments for these items and 
services will remain the same for CY 2010. The payment estimates for 
the covered surgical procedures include the costs of packaged ancillary 
items and services. In prior years' rules, we did not have ASC payment 
data for covered ancillary items and services because prior to CY 2008, 
they were paid under other fee schedules or packaged into payment for 
the covered surgical procedures. Beginning with the CY 2010 proposed 
rule and this final rule with comment period, we have utilization data 
for those services as well as for all of the covered surgical 
procedures provided in ASCs under the revised payment system.

    Table 75--Estimated Impact of the Final CY 2010 ASC Payment System on Aggregate CY 2010 Medicare Program
Payments Under the 25/75 Transition Blend and Without a Transition, by Surgical Specialty or Ancillary Items and
                                                 Services Group
----------------------------------------------------------------------------------------------------------------
                                                                                                   Estimated CY
                                                                   Estimated  CY   Estimated CY    2010 percent
                                                                     2009  ASC     2010 percent   change without
                    Surgical specialty group                       payments  (in    change with     transition
                                                                     millions)      transition        (fully
                                                                                   (25/75 blend)   implemented)
----------------------------------------------------------------------------------------------------------------
(1)                                                                          (2)             (3)             (4)
----------------------------------------------------------------------------------------------------------------
Total...........................................................           3,077               1               1
Eye and ocular adnexa...........................................           1,405               0              -1
Digestive system................................................             731              -4             -10
Nervous system..................................................             365              -4              -5
Musculoskeletal system..........................................             285              15              29
Genitourinary system............................................             112              10              17
Integumentary system............................................             106              13              20
Respiratory system..............................................              27              24              37
Cardiovascular system...........................................              20              17              27
Ancillary items and services....................................              15               0              -1
Auditory system.................................................               8               9              17
Hematologic & lymphatic systems.................................               3              22              40
----------------------------------------------------------------------------------------------------------------

    Table 76 below shows the estimated impact of the updates to the 
revised ASC payment system on aggregate ASC payments for selected 
surgical procedures during CY 2010 with and without the transitional 
blended rate. The table displays 30 of the procedures receiving the 
greatest estimated CY 2009 aggregate Medicare payments to ASCs. The 
HCPCS codes are sorted in descending order by estimated CY 2009 program 
payment.
     Column 1--HCPCS code.
     Column 2--Short Descriptor of the HCPCS code.
     Column 3--Estimated CY 2009 Allowed Charges were 
calculated using CY 2008 ASC utilization (the most recent full year of 
ASC utilization) and the CY 2009 ASC payment rates. The estimated CY 
2009 allowed charges are expressed in millions of dollars.
     Column 4--Estimated CY 2010 Percent Change with Transition 
(25/75 Blend) reflects the percent differences between the estimated 
ASC payment for CY 2009 and the estimated payment for CY 2010 based on 
the update, incorporating a 25/75 blend of the CY 2007 ASC payment rate 
and the CY 2010 ASC payment rate calculated according to the ASC 
standard ratesetting methodology.
     Column 5--Estimated CY 2010 Percent Change without 
Transition (Fully Implemented) reflects the percent differences between 
the estimated ASC payment for CY 2009 and the estimated payment for CY 
2010 based on the update if there were no transition period to the 
fully implemented payment rates. The percentages appearing in Column 5 
are presented as a comparison to the percentage changes under the 
transition policy in Column 4 for informational purposes only. We are 
not eliminating or modifying the policy for the 4-year transition that 
was finalized in the August 2, 2007 final rule (72 FR 42519).
    As displayed in Table 76, 24 of the 30 procedures with the greatest 
estimated aggregate CY 2009 Medicare payment are included in the 3 
surgical specialty groups that are estimated to account for the most 
Medicare payment to ASCs in CY 2009, specifically eye and ocular 
adnexa, digestive system, and nervous system surgical groups. 
Consistent with the estimated payment effects on the surgical specialty 
groups displayed in Table 75, the estimated effects of the CY 2010 
update on ASC payment for individual procedures in year 3 of the 
transition shown in Table 76 are varied. Aggregate ASC payments for 
many of the most frequently furnished ASC procedures will decrease as 
the transitional rates more closely align the individual procedure 
relative ASC payment weights with the relativity of payments under the 
OPPS.
    The ASC procedure for which the most Medicare payment is estimated 
to be made in CY 2009 is the cataract removal procedure reported with 
CPT code 66984 (Extracapsular cataract removal with insertion of 
intraocular lens prosthesis (one stage procedure),

[[Page 60677]]

manual or mechanical technique (e.g., irrigation and aspiration or 
phacoemulsification)). We estimate that the update to the ASC rates 
will result in a negligible payment decrease for this procedure in CY 
2010. The estimated payment effects on the three other eye and ocular 
adnexa procedures included in Table 76 will be slightly positive or 
negative, but for CPT code 66821 (Discission of secondary membranous 
cataract (opacified posterior lens capsule and/or anterior hyaloid); 
laser surgery (e.g., YAG laser) (one or more stages)), the estimated CY 
2010 payment decrease will be 10 percent, significantly greater than 
the decreases estimated for any of the other eye and ocular adnexa 
procedures shown.
    We estimate that the transitional payment rates for all but 1 of 
the 9 digestive system procedures included in Table 76 will decrease by 
5 to 8 percent in CY 2010. Those estimated decreases are consistent 
with decreases in the previous 2 years under the revised ASC payment 
system and are expected because, under the previous ASC payment system, 
the payment rates for many high volume endoscopy procedures were almost 
the same as the payments for the procedures under the OPPS.
    The estimated effects of the CY 2010 update on the 9 nervous system 
procedures for which the most Medicare ASC payment is estimated to be 
made in CY 2009 will be variable. Our estimates indicate that the CY 
2010 update will result in payment decreases of 4 percent or less for 4 
of the 9 procedures and in more substantial decreases for 2 others. We 
estimate that the greatest decreases will be for the add-on procedure 
described by CPT code 64484 (Injection, anesthetic agent and/or 
steroid, transforaminal epidural; lumbar or sacral, each additional 
level) and for the procedure described by CPT code 63685 (Insertion or 
replacement of spinal neurostimulator pulse generator or receiver, 
direct or inductive coupling), which we estimate to have 19 and 9 
percent payment decreases, respectively, in CY 2010. In contrast, the 
three nervous system procedures for which we estimate positive effects 
on CY 2010 payments, CPT code 63650 (Percutaneous implantation of 
neurostimulator electrode array, epidural); CPT code 64721 (Neuroplasty 
and/or transposition; median nerve at carpal tunnel); and CPT code 
64622 (Destruction by neurolytic agent, paravertebral facet joint 
nerve; lumbar or sacral, single level), are estimated to have 
substantial payment increases of 10, 13, and 6 percent, respectively.
    The estimated payment effects for most of the remaining procedures 
listed in Table 76 will be positive. For example, the CY 2010 
transitional payment rates for musculoskeletal CPT codes 29880 
(Arthroscopy, knee, surgical; with meniscectomy (medial AND lateral, 
including any meniscal shaving)) and 29881 (Arthroscopy, knee, 
surgical; with meniscectomy (medial OR lateral, including any meniscal 
shaving)) are estimated to increase 17 percent over the CY 2009 
transitional payment rates. We estimate that musculoskeletal procedures 
will account for a greater percentage of CY 2010 Medicare ASC spending 
as we estimate that payment for procedures in that surgical specialty 
group will increase under the revised payment system in CY 2010.

Table 76--Estimated Impact of the Final CY 2010 ASC Payment System on Aggregate Payments for Selected Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                                   Estimated  CY
                                                                   Estimated CY    Estimated CY    2010 percent
                                                                   2009 allowed    2010 percent   change without
             HCPCS code *                   Short descriptor       charges  (in     change with      transition
                                                                       mil)         transition        (fully
                                                                                   (25/75 blend)   implemented)
----------------------------------------------------------------------------------------------------------------
(1)                                     (2).....................             (3)             (4)             (5)
----------------------------------------------------------------------------------------------------------------
66984.................................  Cataract surg w/iol, 1             1,064               0              -2
                                         stage.
43239.................................  Upper gi endoscopy,                  164              -6             -13
                                         biopsy.
45380.................................  Colonoscopy and biopsy..             133              -5             -11
45378.................................  Diagnostic colonoscopy..             124              -5             -11
45385.................................  Lesion removal                        96              -5             -11
                                         colonoscopy.
66821.................................  After cataract laser                  71             -10             -20
                                         surgery.
62311.................................  Inject spine l/s (cd)...              69              -4              -8
66982.................................  Cataract surgery,                     62               0              -2
                                         complex.
64483.................................  Inj foramen epidural l/s              57              -4              -8
15823.................................  Revision of upper eyelid              35              15              21
45384.................................  Lesion remove                         33              -5             -11
                                         colonoscopy.
G0105.................................  Colorectal scrn; hi risk              33              -8             -17
                                         ind.
G0121.................................  Colon ca scrn not hi rsk              32              -8             -16
                                         ind.
29881.................................  Knee arthroscopy/surgery              25              16              30
63650.................................  Implant neuroelectrodes.              25              10              14
43235.................................  Uppr gi endoscopy,                    24               2               1
                                         diagnosis.
64721.................................  Carpal tunnel surgery...              23              13              24
52000.................................  Cystoscopy..............              22              -5              -9
29880.................................  Knee arthroscopy/surgery              20              17              30
63685.................................  Insrt/redo spine n                    18              -9              -8
                                         generator.
29826.................................  Shoulder arthroscopy/                 17              28              54
                                         surgery.
62310.................................  Inject spine c/t........              15              -4              -8
67904.................................  Repair eyelid defect....              15               0               2
28285.................................  Repair hammertoe........              15              14              25
29827.................................  Arthroscop rotator cuff               14              22              42
                                         repr.
64622.................................  Destr paravertebrl nerve              14               6              14
                                         l/s.
64484.................................  Inj foramen epidural add-             13             -19             -38
                                         on.
43248.................................  Uppr gi endoscopy/guide               12              -6             -13
                                         wire.
64623.................................  Destr paravertebral n                 12              -4              -8
                                         add-on.

[[Page 60678]]

 
26055.................................  Incise finger tendon                  12              12              21
                                         sheath.
----------------------------------------------------------------------------------------------------------------
* Note that HCPCS codes deleted for CY 2010 are not displayed in this table.

    The previous ASC payment system served as an incentive to ASCs to 
focus on providing procedures for which they determined Medicare 
payments would support their continued operation. We note that, 
historically, the ASC payment rates for many of the most frequently 
performed procedures in ASCs were similar to the OPPS payment rates for 
the same procedures. Conversely, procedures with ASC payment rates that 
were substantially lower than the OPPS rates have historically been 
performed least often in ASCs. We believed that the revised ASC payment 
system will encourage greater efficiency in ASCs and will promote 
significant increases in the breadth of surgical procedures performed 
in ASCs because it distributes payments across the entire spectrum of 
covered surgical procedures based on a coherent system of relative 
weights that are related to the clinical and facility resource 
requirements of those procedures.
    The CY 2008 claims data that we used to develop the CY 2010 ASC 
payment system relative weights and rates reflect the first year of 
utilization under the revised payment system. Although the changes in 
the claims data are not large, the data reflect increased Medicare ASC 
spending for procedures that were newly added to the ASC list in CY 
2008. Our estimates based on CY 2008 data indicate that for CY 2010 
there would be especially noticeable increases in spending for 
genitourinary and cardiovascular procedures, compared to the previous 
ASC payment system.
4. Estimated Effects of This Final Rule With Comment Period on 
Beneficiaries
    We estimate that the CY 2010 update to the ASC payment system will 
be generally positive for beneficiaries with respect to the new 
procedures that we are adding to the ASC list of covered surgical 
procedures and for those that we are designating as office-based for CY 
2010. First, except for screening colonoscopy and flexible 
sigmoidoscopy procedures, the ASC coinsurance rate for all procedures 
is 20 percent. This contrasts with procedures performed in HOPDs, where 
the beneficiary is responsible for copayments that range from 20 
percent to 40 percent of the procedure payment. Second, ASC payment 
rates under the revised payment system are lower than payment rates for 
the same procedures under the OPPS; therefore, the beneficiary 
coinsurance amount under the ASC payment system almost always will be 
less than the OPPS copayment amount for the same services. (The only 
exceptions will be if the ASC coinsurance amount exceeds the inpatient 
deductible. The statute requires that copayment amounts under the OPPS 
not exceed the inpatient deductible.) For new procedures that we are 
adding to the ASC list of covered surgical procedures in CY 2010, as 
well as for procedures already included on the list, and that are 
furnished in an ASC rather than the HOPD setting, the beneficiary 
coinsurance amount will be less than the OPPS copayment amount. 
Furthermore, the additions to the ASC list of covered surgical 
procedures will provide beneficiaries access to more surgical 
procedures in ASCs. Beneficiary coinsurance for services migrating from 
physicians' offices to ASCs may decrease or increase under the revised 
ASC payment system, depending on the particular service and the 
relative payment amounts for that service in the physician's office 
compared to the ASC. However, for those additional procedures that we 
are designating as office-based in CY 2010, the beneficiary coinsurance 
amount will be no greater than the beneficiary coinsurance in the 
physician's office.
    In addition, as finalized in the August 2, 2007 final rule (72 FR 
42520), in CY 2010, the third year of the 4-year transition to the ASC 
payment rates calculated according to the ASC standard ratesetting 
methodology of the revised ASC payment system, ASC payment rates for a 
number of commonly furnished ASC procedures will continue to be 
reduced, resulting in lower beneficiary coinsurance amounts for these 
ASC services in CY 2010.
5. Conclusion
    The updates to the ASC payment system for CY 2010 will affect each 
of the approximately 5,000 ASCs currently approved for participation in 
the Medicare program. The effect on an individual ASC will depend on 
its mix of patients, the proportion of the ASC's patients that are 
Medicare beneficiaries, the degree to which the payments for the 
procedures offered by the ASC are changed under the revised payment 
system, and the extent to which the ASC provides a different set of 
procedures in the coming year.
    The CY 2010 update to the revised ASC payment system includes a 
payment update of 1.2 percent that we estimate will result in a greater 
amount of Medicare expenditures in CY 2010 than was estimated to be 
made in CY 2009. We estimate that the update to the revised ASC payment 
system, including the addition of surgical procedures to the list of 
covered surgical procedures, will have a modest effect on Medicare 
expenditures compared to the estimated level of Medicare expenditures 
in CY 2009.
6. Accounting Statement
    As required by OMB Circular A-4 (available at http://www.whitehousegov/omb/circulars/a004/a-4.pdf), in Table 77 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the statutorily authorized 1.2 percent 
update to the CY 2010 revised ASC payment system, based on the 
provisions of this final rule with comment period and the baseline 
spending estimates for ASCs in the 2009 Medicare Trustees Report. This 
table provides our best estimate of Medicare payments to suppliers as a 
result of the final update to the CY 2010 ASC payment system, as 
presented in this

[[Page 60679]]

final rule with comment period. All expenditures are classified as 
transfers.

Table 77--Accounting Statement: Classification of Estimated Expenditures
From CY 2009 to CY 2010 as a Result of the CY 2010 Update to the Revised
                           ASC Payment System
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $33 Million.
From Whom to Whom......................  Federal Government to Medicare
                                          Providers and Suppliers.
                                        --------------------------------
    Total..............................  $33 Million.
------------------------------------------------------------------------

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

    In section XVI. of the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68758), we discussed our requirements for subsection (d) 
hospitals to report quality data under the HOP QDRP in order to receive 
the full payment update for CY 2010. In section XVI. of this final rule 
with comment period, we established additional policies affecting the 
CY 2010 and CY 2011 HOP QDRP. We estimate that about 83 hospitals may 
not receive the full payment update in CY 2010. Most of these hospitals 
are either small rural or small urban hospitals. However, at this time, 
information is not available to determine the precise number of 
hospitals that do not meet the requirements for the full hospital 
market basket increase for CY 2010. We also estimate that 83 hospitals 
may not receive the full payment update in CY 2011.
    In section XVI.E.3.a. of this final rule with comment period, for 
the CY 2011 payment update, as part of the validation process, we are 
requiring hospitals to submit paper copies of requested medical records 
to a designated contractor within the required timeframe. Failure to 
submit requested documentation can result in a 2 percentage point 
reduction in a hospital's update, but the failure to pass the 
validation itself would not. Of the 83 hospitals that we estimate will 
not receive the full payment update for CY 2011, we estimate that no 
more than 20 hospitals would fail the validation documentation 
submission requirement for the CY 2011 payment update.
    For the CY 2011 payment update, our validation sample size is 
estimated to be about 7,300 medical records. We estimate that this 
requirement will cost hospitals approximately 12 cents per page for 
copying and approximately $4.00 per chart for postage. We have found, 
based on experience, that an average sized outpatient medical chart is 
approximately 30 pages. We estimate that the total cost to the impacted 
hospitals will be approximately $55,480, with a maximum expected cost 
of $152 for an individual hospital based upon an expected maximum of 20 
selected records; the expected minimum will be $0.00 if no records were 
selected from a hospital. We believe that this cost is minimal, 
compared with the 2.0 percentage point HOP QDRP component of the annual 
payment update at risk. CMS does not plan to reimburse hospitals for 
copying and mailing costs. This validation requirement is necessary so 
that CMS has all the information it needs to validate the accuracy of 
hospital submitted data abstracted from paper medical records.
    In section XVI.E.3.b. of this final rule with comment period, we 
did not, at this time, adopt our proposal in the CY 2010 OPPS/ASC 
proposed rule (74 FR 35403) to expand the CY 2011 validation 
requirement for the CY 2012 payment update. Instead, we will consider 
the public comments we received on that proposal, as well as any 
analyses we conduct of the CY 2011 validation process, and propose a CY 
2012 validation process as a part of the CY 2011 OPPS/ASC rulemaking. 
We believe that this approach will give HOP QDRP hospitals additional 
experience with the validation process and allow these hospitals 
sufficient time to prepare for the CY 2012 validation.
    However, we noted in the CY 2010 OPPS/ASC proposed rule (74 FR 
35424) that we expected our proposal to validate data submitted by 800 
hospitals for purposes of the CY 2012 HOP QDRP payment determination 
would not have changed the number of hospitals that fail the validation 
requirement from CY 2011. For CY 2011, and under our proposal for CY 
2012 in the CY 2010 OPPS/ASC proposed rule, we stated that we would 
calculate the validation matches for CY 2011 (we note, however, that 
the validation results will not affect the CY 2011 payment update) and 
CY 2012 by assessing whether the overall measure data submitted by the 
hospital matches the independently reabstracted measure data. We 
believe that this methodology will make it easier for hospitals to 
satisfy the validation requirement than if we calculate the percent 
agreement between what the hospital submitted and what the CMS-
designated contractor independently reabstracted for each individual 
data element that was submitted. In addition, for the CY 2012 payment 
update, in the CY 2010 OPPS/ASC proposed rule, we proposed to validate 
data for only 800 hospitals out of the approximately 3,400 HOP QDRP 
participating hospitals. As a result, we believe that the effect of our 
proposed validation process for CY 2012 would have been minimal in 
terms of the number of hospitals that would not meet all program 
requirements. In the CY 2010 OPPS/ASC proposed rule (74 FR 35424), we 
stated that of the 83 hospitals that we estimated would not have 
received the full payment update for CY 2012, we estimated that 
approximately 20 hospitals would have failed to meet our proposed CY 
2012 validation requirements.

E. Executive Order 12866

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

List of Subjects

42 CFR Part 410

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

42 CFR Part 416

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

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

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

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

0
1. The authority citation for part 410 continues to read as follows:

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


0
2. Section 410.27 is amended by--
0
a. Revising the section heading.
0
b. Revising the introductory text of paragraph (a) and paragraph 
(a)(1).
0
c. Revising paragraph (e).
0
d. Revising paragraph (f).
0
e. Adding new paragraph (g).
0
The revisions and additions read as follows:


Sec.  410.27  Outpatient hospital or CAH services and supplies incident 
to a physician or nonphysician practitioner service: Conditions.

    (a) Medicare Part B pays for hospital or CAH services and supplies 
furnished

[[Page 60680]]

incident to a physician or nonphysician practitioner service to 
outpatients, including drugs and biologicals that cannot be self-
administered, if--
    (1) They are furnished--
    (i) By or under arrangements made by the participating hospital or 
CAH, except in the case of a SNF resident as provided in Sec.  
411.15(p) of this chapter;
    (ii) As an integral though incidental part of a physician's or 
nonphysician practitioner's services;
    (iii) In the hospital or CAH or in a department of the hospital or 
CAH, as defined in Sec.  413.65 of this subchapter; and
    (iv) Under the direct supervision of a physician or a nonphysician 
practitioner as specified in paragraph (f) of this section. 
Nonphysician practitioners may directly supervise services that they 
may personally furnish in accordance with State law and all additional 
requirements, including those specified in Sec. Sec.  410.71, 410.73, 
410.74, 410.75, 410.76, and 410.77.
    (A) For services furnished in the hospital or CAH or in an on-
campus outpatient department of the hospital or CAH, as defined in 
Sec.  413.65 of this subchapter, ``direct supervision'' means that the 
physician or nonphysician practitioner must be present on the same 
campus and immediately available to furnish assistance and direction 
throughout the performance of the procedure. It does not mean that the 
physician or nonphysician practitioner must be present in the room when 
the procedure is performed. For pulmonary rehabilitation, cardiac 
rehabilitation, and intensive cardiac rehabilitation services, direct 
supervision must be furnished by a doctor of medicine or osteopathy, as 
specified in Sec. Sec.  410.47 and 410.49, respectively.
    (B) For services furnished in an off-campus outpatient department 
of the hospital or CAH, as defined in Sec.  413.65 of this subchapter, 
``direct supervision'' means the physician or nonphysician practitioner 
must be present in the off-campus provider-based department of the 
hospital or CAH and immediately available to furnish assistance and 
direction throughout the performance of the procedure. It does not mean 
that the physician or nonphysician practitioner must be present in the 
room when the procedure is performed. For pulmonary rehabilitation, 
cardiac rehabilitation, and intensive cardiac rehabilitation services, 
direct supervision must be furnished by a doctor of medicine or 
osteopathy, as specified in Sec. Sec.  410.47 and 410.49, respectively.
* * * * *
    (e) Services furnished by an entity other than the hospital or CAH 
are subject to the limitations specified in Sec.  410.42(a).
    (f) For purposes of this section, ``nonphysician practitioner'' 
means a clinical psychologist, licensed clinical social worker, 
physician assistant, nurse practitioner, clinical nurse specialist, or 
certified nurse-midwife.
    (g) For purposes of this section, ``in the hospital or CAH'' means 
areas in the main building(s) of the hospital or CAH that are under the 
ownership, financial, and administrative control of the hospital or 
CAH; that are operated as part of the hospital or CAH; and for which 
the hospital or CAH bills the services furnished under the hospital's 
or CAH's CMS Certification Number.

0
3. Section 410.28 is amended by revising paragraph (e) to read as 
follows:


Sec.  410.28  Hospital or CAH diagnostic services furnished to 
outpatients: Conditions.

* * * * *
    (e) Medicare Part B makes payment under section 1833(t) of the Act 
for diagnostic services furnished by or under arrangements made by the 
participating hospital, only when the diagnostic services are furnished 
under the appropriate level of physician supervision specified by CMS 
in accordance with the definitions in Sec.  410.32(b)(3)(i), 
(b)(3)(ii), and (b)(3)(iii). Under general supervision, the training of 
the nonphysician personnel who actually perform the diagnostic 
procedure and the maintenance of the necessary equipment and supplies 
are the continuing responsibility of the facility. In addition--
    (1) For services furnished directly or under arrangement in the 
hospital or in an on-campus outpatient department of the hospital, as 
defined in Sec.  413.65 of this subchapter, ``direct supervision'' 
means that the physician must be present on the same campus and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. It does not mean that the physician 
must be present in the room when the procedure is performed. For this 
purpose, the definition of ``in the hospital'' is as specified in Sec.  
410.27(g).
    (2) For services furnished directly or under arrangement in an off-
campus outpatient department of the hospital, as defined in Sec.  
413.65 of this subchapter, ``direct supervision'' means the physician 
must be present in the off-campus provider-based department of the 
hospital and immediately available to furnish assistance and direction 
throughout the performance of the procedure. It does not mean that the 
physician must be present in the room when the procedure is performed.
    (3) For services furnished under arrangement in nonhospital 
locations, ``direct supervision'' means the definition specified in 
Sec.  410.32(b)(3)(ii).
* * * * *

PART 416--AMBULATORY SURGICAL SERVICES

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

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


0
5. Section 416.30 is amended by revising paragraph (f)(2) to read as 
follows:


Sec.  416.30  Terms of the agreement with CMS.

* * * * *
    (f) * * *
    (2) The ASC participates and is paid only as an ASC.
* * * * *

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

0
6. The authority citation for part 419 continues to read as follows:

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


0
7. Section 419.64 is amended by adding new paragraphs (a)(4)(iii) and 
(a)(4)(iv), to read as follows:


Sec.  419.64  Transitional pass-through payments: Drugs and 
biologicals.

    (a) * * *
    (4) * * *
    (iii) A biological that is not surgically implanted or inserted 
into the body.
    (iv) A biological that is surgically implanted or inserted into the 
body, for which pass-through payment as a biological is made on or 
before December 31, 2009.
* * * * *

0
8. Section 419.66 is amended by revising paragraph (b)(4)(iii) to read 
as follows:


Sec.  419.66  Transitional pass-through payments: Medical devices.

* * * * *
    (b) * * *
    (4) * * *
    (iii) A material that may be used to replace human skin (for 
example, a biological skin replacement material or synthetic skin 
replacement material).
* * * * *

[[Page 60681]]


0
9. Section 419.70 is amended by revising the heading of paragraph 
(d)(5) to read as follows:


Sec.  419.70  Transitional adjustments to limit decline in payments.

* * * * *
    (d) * * *
    (5) Temporary treatment for small sole community hospitals on or 
after January 1, 2009 and through December 31, 2009. * * *
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: October 26, 2009.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: October 29, 2009.
Kathleen Sebelius,
Secretary.
BILLING CODE 4120-01-P

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[FR Doc. E9-26499 Filed 10-30-09; 4:15 pm]
BILLING CODE 4120-01-C