[Federal Register Volume 75, Number 148 (Tuesday, August 3, 2010)]
[Notices]
[Pages 45769-46168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-16400]



  Federal Register / Vol. 75, No. 148 / Tuesday, August 3, 2010 / 
Notices  

[[Page 45769]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-1504-N]
RIN 0938-AQ08


Medicare Program; Changes to the Hospital Outpatient Prospective 
Payment System and Ambulatory Surgical Center Payment System for CY 
2010, and Extension of Part B Payment for Services Furnished by 
Hospitals or Clinics Operated by the Indian Health Service, Indian 
Tribes, or Tribal Organizations Made by the Affordable Care Act

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

ACTION: Notice.

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SUMMARY: This Notice contains the final wage indices, hospital 
reclassifications, payment rates, impacts and addenda for payments made 
under the Medicare hospital outpatient payment system (OPPS) for CY 
2010. This Notice also contains the payment rates and addenda for 
payments made under the Medicare Ambulatory Surgical Center (ASC) 
payment system for CY 2010. The final rates, wage indices, addenda and 
impacts for the OPPS and as applicable for the ASC payment system 
contained in this Notice reflect the provisions of the Affordable Care 
Act. It also announces the extension of payment under Medicare Part B 
to hospitals and ambulatory care clinics operated by the Indian Health 
Service, Indian Tribes, or Tribal Organizations.

DATES: Effective Date: The revised CY 2010 national unadjusted OPPS and 
ASC payment rates described in this Notice are effective for payments 
for services furnished on or after January 1, 2010.

FOR FURTHER INFORMATION CONTACT: Alberta Dwivedi, (410) 786-0378.

SUPPLEMENTARY INFORMATION: 

I. Provisions of the Notice

A. Medicare Hospital Outpatient Prospective Payment System (OPPS)

1. Background
    We finalized changes to the payment rates and factors under the 
hospital outpatient prospective payment system (OPPS) in the CY 2010 
OPPS/ASC final rule with comment period appearing in the November 20, 
2009 Federal Register. On March 23, 2010, subsequent to the publication 
of the CY 2010 OPPS/ASC final rule, the Patient Protection and 
Affordable Care Act (Pub. L. 111-148) was signed into law. Shortly 
thereafter, on March 30, 2010, the Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152) was signed into law. These 
two laws are discussed in this Notice and are collectively referred to 
as the ``Affordable Care Act'' throughout this Notice. As discussed in 
detail below, several provisions of these public laws revised 
components of the OPPS, and those revisions required us to revise the 
payment rates and various factors under the CY 2010 OPPS. This Notice 
addresses the provisions of the Affordable Care Act that impact the CY 
2010 OPPS final wage index tables, rates, and impacts. We note that the 
payment rates and policies set forth in the CY 2010 OPPS/ASC final rule 
with comment period appearing in the November 20, 2009 Federal Register 
continue to apply to those aspects of the OPPS that are unaffected by 
the Affordable Care Act. This Notice makes no changes to the OPPS 
payment methodologies or policies.
2. CY 2010 OPPS OPD Fee Schedule Increase Factor
    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 using the OPD fee schedule increase factor in 
1833(t)(3)(C)(iv) of the Act for the year involved. For purposes of 
section 1833(t)(3)(C)(iv) of the Act, subject to 1833(t)(17) and 
1833(t)(3)(F), the OPD fee schedule increase factor is equal to the 
market basket percentage increase applicable under section 
1886(b)(3)(B)(iii) of the Act to hospital discharges occurring during 
the fiscal year ending in such year, reduced by 1 percentage point for 
such factor for services furnished in each of 2000 and 2002. In 
addition, under 1833(t)(17) of the Act, 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 OPD fee schedule increase factor. In 
accordance with 1833(t)(3)(C)(iv), the CY 2010 OPD fee schedule 
increase factor (commonly referred to as the ``hospital operating 
market basket increase factor'') finalized in the CY 2010 OPPS final 
rule was 2.1 percent (74 FR 60419). In addition, under the CY 2010 
OPPS/ASC final rule (74 FR 60419), a hospital that fails to meet the 
reporting requirements of the HOP QDRP reporting requirements receives 
a .1 percent update (that is, the CY 2010 estimate of the OPD fee 
schedule increase factor of 2.1 percent minus 2.0 percentage points) 
for services to which the OPD fee schedule increase factor applies.
    Section 1833(t)(3)(F)(ii) and (G)(i) of the Social Security Act, as 
added by section 3401(i) of the Public Law 111-148, and as amended by 
section 10319(g) of such Act and section 1105(e) of Public Law 111-152, 
required the Secretary after calculating the OPD fee schedule increase 
factor, to reduce such factor by an adjustment of 0.25 percentage 
point, effective for services furnished on or after January 1, 2010 and 
before January 1, 2011. (In addition, new 1833(t)(3)(F) of the Act also 
provides that application of this subparagraph [1833(t)(3)(F)] may 
result in the increase factor under section 1833(t)(3)(C)(iv) of the 
Act being less than 0.0 for a year, and may result in payment rates 
under the payment system under this subsection for a year being less 
than such payment rates for the preceding year.) Therefore, the 
reduction of 0.25 percentage point applied to the full hospital 
operating market basket increase factor of 2.1 percent results in a 
revised hospital operating market basket increase factor of 1.85 
percent. A hospital that failed to meet the reporting requirements of 
the HOP QDRP reporting requirements receives a negative 0.15 percent 
hospital operating market basket increase factor (that is, the revised 
hospital operating market basket increase factor of 1.85 percent minus 
2.0 percentage points.)
 3. CY 2010 OPPS Conversion Factor
    To calculate the OPPS conversion factor for CY 2010 in the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60419), we increased the 
CY 2009 conversion factor of $66.059 by 2.1 percent. We then 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 were 
budget neutral. 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 total payments using the FY 2009 IPPS final 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 was 1.0000. For the CY 2010 OPPS/ASC final rule, 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

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the 0.11 percent estimate of pass-through spending set aside for CY 
2009 and the 0.14 percent estimate for CY 2010 pass-through spending. 
Finally, estimated payments for outliers remain at 1.0 percent of total 
OPPS payments for CY 2010. In our November 20, 2009 CY 2010 OPPS/ASC 
final rule with public comment, we announced a full conversion factor 
of $67.406 for the CY 2010 OPPS.
    As indicated previously, 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 
OPD fee schedule increase factor, which is applied to the conversion 
factor that is used to calculate their payment rates. To calculate the 
CY 2010 reduced OPD fee schedule increase factor for those hospitals 
that fail to meet the requirements of the HOP QDRP for the full CY 2010 
payment update in the CY 2010 OPPS/ASC final rule, we made all other 
adjustments described above, but used a reduced OPD fee schedule 
increase factor of 0.1 percent. This resulted in a reduced conversion 
factor of $66.086 for those hospitals that fail to meet the HOP QDRP 
reporting requirements.
    As discussed previously, section 1833(t)(3)(F)(ii) and (G)(i) of 
the Social Security Act, as added by section 3401(i) of the Affordable 
Care Act, and as amended by section 10319(g) of such Act and section 
1105(e) of Public Law 111-152, requires the Secretary, after 
calculating the OPD fee schedule increase factor, to reduce such factor 
by an adjustment of 0.25 percentage point effective for services 
furnished on and after January 1, 2010 through December 31, 2010. 
Moreover, as discussed in more detail in section I.A.4 below, section 
3137 of the Affordable Care Act extended section 508 reclassifications 
and special exception wage indices from October 1, 2009 to September 
30, 2010. Section 3137(a) also required the Secretary, for the second 
half of the year, to recalculate wage indices by excluding section 508 
and special exception hospital wage data in certain circumstances. The 
OPPS adopts the final fiscal year IPPS wage index on a calendar year 
basis. We use both the OPD fee schedule increase factor and the budget 
neutrality adjustment which accounts for the effects of adopting the 
new fiscal year IPPS wage index on a calendar year basis in the 
calculation of the OPPS conversion factor. Therefore, the reduction of 
0.25 percentage point applied to the OPD fee schedule increase factor 
of 2.1 percent and the revised wage index budget neutrality factor of 
0.9997 required us to recalculate the CY 2010 OPPS conversion factor. 
We note that none of the other components of the conversion factor 
calculation, specifically the adjustment to account for estimated cost 
of pass through drugs and non-implantable biologicals, and device 
categories and the proportion of estimated total OPPS payments for 
outlier payments changed as a result of the provisions of Affordable 
Care Act. The budget neutrality adjustment for the rural adjustment 
continues to be 1.0000 because we did not propose and the Affordable 
Care Act did not authorize any changes to the rural adjustment. 
Therefore, the only changes to the conversion factor, and thus to the 
CY 2010 OPPS payment rates, that are reflected in this Notice are 
caused by the statutorily required reduction applied to the OPD fee 
schedule increase factor and the statutory changes to the wage index.
    To calculate the revised OPPS conversion factor for CY 2010 that is 
effective for covered OPD services furnished on or after January 1, 
2010 through December 31, 2010, we used the same methodology that was 
used in the CY 2010 OPPS/ASC final rule (74 FR 60419). We first 
increased the CY 2009 conversion factor of $66.059 by the revised OPD 
fee schedule increase factor of 1.85 percent (2.1 percent which is the 
full inpatient operating market basket percentage increase applicable 
to hospital discharges under section 1886(b)(3)(B)(iii) of the Act less 
the 0.25 percentage point reduction) for CY 2010. We further adjusted 
the conversion factor to ensure that any revisions we made to our 
updates accounting for the statutorily required changes to the wage 
index were made on a budget neutral basis. We calculated an overall 
budget neutrality adjustment 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, as adjusted by the Affordable Care Act 
(see discussion in section I.A.4.), to those payments using the final 
FY 2009 IPPS wage index values and multiplied this by the conversion 
factor which already was adjusted to reflect the revised OPD fee 
schedule increase factor. For purposes of calculating the overall 
budget neutrality adjustment for wage index changes, we created a 
single CY 2010 average wage index with 50 percent of the wage index in 
effect between January 1, 2010 and June 30, 2010 and 50 percent of the 
wage index in effect between July 1, 2010 and December 31, 2010. We 
note that the wage index adjustment of 0.9997 that we recalculated 
using the wage index values that resulted from the Affordable Care Act 
provisions is identical (when rounded to the 4th decimal) to the wage 
index adjustment that we calculated for the CY 2010 OPPS conversion 
factor that we published on November 20, 2009. Next, we multiplied the 
wage adjusted conversion factor by the budget neutrality factor for the 
rural adjustment of 1.0000 that was finalized in the CY 2010 OPPS/ASC 
final rule (74 FR 60419). Therefore, the final revised full conversion 
factor for CY 2010 resulting from the above-described steps is $67.241 
for services furnished on and after January 1, 2010 and before January 
1, 2011. We then adjusted the CY 2009 conversion factor to reflect 
changes in our estimate of total OPPS expenditures that would be 
dedicated to pass-through payments in CY 2010 that were finalized in 
the CY 2010 OPPS/ASC final rule (74 FR 60419). Finally, estimated 
payments for outliers remained at 1.0 percent of total OPPS payments 
for CY 2010 (74 FR 60419).
    To calculate the revised final 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 
used the same methodology and adjustments discussed above, except that 
we used a reduced OPD fee schedule increase factor of negative 0.15 
percent (that is, the revised OPD fee schedule increase factor of 1.85 
percent minus 2.0 percentage points). This resulted in a final reduced 
conversion factor for CY 2010 of $65.921 for those hospitals that fail 
to meet the HOP QDRP requirement effective for covered OPD services 
furnished on or after January 1, 2010 through December 31, 2010. To 
calculate the reduced payment for these hospitals in our claims 
processing systems we apply a reduction ratio, that we refer to as the 
``reporting ratio'' of 0.980, which remains unchanged from the 
reporting ratio we published on November 20, 2009 (74 FR 60641), 
notwithstanding the changes to the hospital operating market basket and 
wage index values for some hospitals required by the Affordable Care 
Act.
    The recalculated CY 2010 final conversion factor of $67.241 is 
reflected in the revised CY 2010 OPPS payment rates and rate dependent 
files that are posted on the CMS Web site at http://www.cms.gov/HospitalOutpatientPPS/. Because the conversion factor was revised, we 
were required to recalculate a number of aspects of the CY 2010 OPPS 
using our established methodologies as set forth in the CY 2010 OPPS/
ASC final rule (74 FR

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60316) using the revised conversion factor, including the OPPS payment 
rates that rely on the conversion factor and other components of the 
payment system that depend on OPPS payment rates for CY 2010 OPPS using 
our established methodologies to take this revision into account.
    These include CY 2010 OPPS APC payment rates that are printed in 
Addenda A and B of this Notice. We use the conversion factor to 
calculate OPPS payment rates for services in APCs with the following 
status indicators, ``P'', ``Q1'', ``Q2'', ``Q3'', ``R'', ``S'', ``T'', 
``V'', ``X'', and ``U''. The components of the payment system that are 
impacted by these changes include: The offset amounts for devices 
(devices and implantable biologicals), ``policy packaged'' drugs 
(diagnostic radiopharmaceuticals and contrast agents), and ``threshold 
packaged'' drugs (drugs and non-implantable biologicals that maybe 
packaged under the drug packaging threshold) that are used for 
assessment of pass-through applications and reductions to payment for 
certain device-dependent procedures, nuclear medicine procedures, or 
other imaging procedures using contrast agents, when a diagnostic 
radiopharmaceutical, device or implantable biological, or contrast 
agent is receiving pass through payment (74 FR 60462 through 60463, and 
60480 through 60484). The revised offset amounts are not published as 
addenda to OPPS update rules but are available at www.cms.hhs.gov/HospitalOutpatientPPS/ under ``Annual Policy Files.'' These revisions 
are effective for covered OPD services furnished on or after January 1, 
2010 through December 31, 2010.
    The offset amount for each group of items, devices, ``threshold 
packaged'' drugs and nonimplantable biologicals, and ``policy 
packaged'' drugs and biologicals, are calculated using the same 
methodology. For a discussion of the methodology we use for devices and 
implantable biologicals, see our CY 2008 final rule with comment period 
(72 FR 66751 through 66752 and 74 FR 60463), and for our discussion of 
the methodology we use for diagnostic radiopharmaceuticals and contrast 
agents, see our CY 2010 final rule with comment period discussion at 74 
FR 60482. We use these offset amounts in our cost significance 
calculation when evaluating an application for pass-through payment for 
both drugs and nonimplantable biologicals, and devices including 
implantable biologicals. Finally, for a subset of the device-dependent 
procedures, we reduce OPPS payment by the device offset amount when a 
hospital furnishes a device received at no cost or full credit and by 
half of the device offset amount when a hospital furnishes a device 
received for partial credit (74 FR 60464 through 60466).
4. Revision of Hospital Wage Index Values for CY 2010 as Required by 
Section 3137(a) of Affordable Care Act
    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 
copayment, that is attributable to labor and labor-related cost. This 
adjustment must be made in a budget neutral manner. The OPPS labor-
related share is 60 percent of the national OPPS payment. The OPPS has 
consistently adopted the final fiscal year IPPS wage indices as the 
wage index values for adjusting the OPPS standard payment amounts for 
labor market differences. Thus, the wage index that applies to a 
particular acute care short-stay hospital under the IPPS would also 
apply to that hospital under the OPPS. We discuss our wage index policy 
in the CY 2010 OPPS/ASC final rule with comment (74 FR 60419).
    In accordance with section 1886(d)(3)(E) of the Act, the IPPS wage 
index is updated annually. The IPPS wage index values that we adopted 
in the CY 2010 OPPS included all reclassifications that were approved 
by the Medicare Geographic Classification Review Board (MGCRB) for FY 
2010. Reclassifications under section 508 of Public Law 108-173 (MMA) 
and the assignment of certain special exception wage indices that were 
extended by section 106(a) of Public Law 109-432 (MIEA-TRHCA), section 
117(a)(1) of Public Law 110-173 (MMSEA), and section 124 of Public Law 
110-275 (MIPPA) were set to terminate on 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), we expected hospitals with section 508 
reclassifications to 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 after 
section 508 reclassifications expired. We also extended the assignment 
of certain special exceptions wage indices for certain hospitals from 
January 1, 2009 through December 31, 2009, under the OPPS, in order to 
give these hospitals their special exception wage index 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 index values 
as required by section 124 of Public Law 110-275 (73 FR 57888). Because 
the provisions of section 124 of Public Law 110-275 expired in 2009 and 
because the Affordable Care Act had not yet passed, we did not propose 
to recognize section 508 reclassifications and wage indices for certain 
special exceptions hospitals for the OPPS wage indices for CY 2010 (74 
FR 60419).
    Section 3137(a), as amended by section 10317, of the Affordable 
Care Act extended the wage index reclassifications originally 
designated under section 508 of Public Law 108-173 and certain special 
exception wage indices effective for services furnished on and after 
October 1, 2009 through September 30, 2010. We will implement the 
section 508 wage indices for OPPS payments for fiscal year 2010 under 
the OPPS. As indicated, the extended section 508 reclassifications will 
expire on September 30, 2010. Hospitals with a section 508 
reclassification wage index will revert to their home area wage index, 
with out-migration adjustment if applicable, or a current MGCRB 
reclassification, from October 1, 2010 to December 31, 2010 after the 
section 508 reclassifications expire on September 30, 2010.
    Further, as we did for CY 2009, the OPPS will recognize the special 
exception wage indices for certain hospitals from January 1, 2010 
through December 31, 2010, under the OPPS, in order to give these 
hospitals the special exception wage index values under the OPPS for 
the same time period as under the IPPS. Finally, provisions of section 
3137(a) required us to recalculate wage indices for certain areas to 
exclude the wage data of section 508 and special exception hospitals in 
certain circumstances. This recalculation resulted in revised wage 
indices beginning on April 1, or midway through the fiscal year. To 
implement the same policy on a calendar year basis, the OPPS will adopt 
these revised wage indices midway through the calendar year beginning 
July 1, 2010. The revised wage indices that would apply for all 
providers that are paid under the OPPS are on public display on the CMS 
Web site at http://www.cms.gov/AcuteInpatientPPS/WIFN/itemdetail.asp. 
The revised wage indices also have been published by CMS in the June 2, 
2010 Federal Register (75 FR 31147). We used these wage indices along 
with the wage indices that we finalized in our CY 2010 OPPS/ASC final 
rule with comment

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period and in effect in the OPPS between January 1, 2010 and June 30, 
2010 to calculate the budget neutrality adjustment for CY 2010 to the 
conversion factor discussed in I.A.3.above. As a result of the changes 
to the wage indices that are required by section 3137, we estimate a 
budget neutrality adjustment for the revised wage index of 0.9997 that 
we used for calculating the revised CY 2010 OPPS conversion factor of 
$67.241.
    We also note that section 3137(a), as amended by Section 10317, 
specifies that if the Section 508 or special exception hospital's wage 
index applicable for the period beginning on October 1, 2009, and 
ending on March 31, 2010, is lower than for the period beginning on 
April 1, 2010, and ending on September 30, 2010, the hospital shall be 
paid an additional amount that reflects the difference between the wage 
indices. To apply this provision to both inpatient and outpatient 
hospital payments we compared the two wage index values applicable for 
the period beginning on October 1, 2009, and ending on March 31, 2010, 
and for the period beginning on April 1, 2010, and ending on September 
30, 2010 and assigned each Section 508 and special exception hospital 
the higher of the two wage index values. Consistent with our typical 
application of the wage index for these two sets of providers, we 
assigned the Section 508 providers their higher FY 2010 wage index from 
October 1, 2009 through September 30, 2010 and assigned the special 
exception providers their higher FY 2010 wage index from January 1, 
2010 through December 31, 2010.
5. Extension of Transitional Outpatient Payments (TOPs) for Small Rural 
Hospitals That Are Not Sole Community Hospitals and That Have 100 or 
Fewer Beds and Extension of TOPs to All SCHs (Including EACHs), 
Irrespective of the 100 Bed Limitation
    Section 5105 of the Deficit Reduction Act of 2005 (DRA) 
reinstituted 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 sole community hospitals (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 these two amounts for CY 2006, by 90 percent in CY 
2007, and 85 percent in CY 2008. Section 147 of the Medicare 
Improvements for Patients and Providers Act of 2008 (MIPPA) extended 
the period of TOPs for small rural hospitals with 100 or fewer beds 
through December 31, 2009; when the OPPS payment was less than the 
provider's pre-BBA amount, the amount of payment was increased by 85 
percent of the amount of the difference between these two amounts for 
CY 2009. Section 147 also provided 85 percent of the hold harmless 
amount from January 1, 2009 through December 31, 2009 to sole community 
hospitals (SCHs) including essential access community hospitals (EACHs) 
with 100 or fewer beds. We note that EACHs 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.
    Section 3121 of the Affordable Care Act extends the hold harmless 
provision for small rural hospitals with 100 or fewer beds and that are 
not sole community hospitals (as defined in section 1886(d)(5)(iii) of 
the Social Security Act) for an additional year through December 31, 
2010, at 85 percent of the hold harmless amount. Thus, for covered OPD 
services furnished on or after January 1, 2010 through December 31, 
2010, for which the PPS amount is less than the pre-BBA amount, the 
amount of payment shall be increased by 85 percent of the amount of the 
difference between these two amounts for CY 2010. In addition, section 
3121 of the Affordable Care Act extended for an additional year the 
period of TOPs payments for SCHs (as defined in section 1886(d)(5)(iii) 
of the Act). As stated previously, EACHs fall within the definition of 
an SCH as set forth in 1886(d)(5)(iii) of the Act. Further, section 
3121(b) of the Affordable Care Act amended section 
1833(t)(7)(D)(i)(III) of the Act to provide that in the case of covered 
OPD services furnished on or after January 1, 2010 and before January 
1, 2011, the 100-bed limitation will not be applied for SCHs (including 
EACHs) under 1833(t)(3)(D)(i)(III) of the Act. Therefore, under section 
1833(t)(3)(D)(i)(III) of the Act, payment will be increased under 
section 1833(t) of the Act to SCHs (including EACHs) for covered OPD 
services furnished on or after January 1, 2010 through December 31, 
2010, by 85 percent of the amount of the difference between these two 
amounts when the PPS amount is less that the pre-BBA amount without 
regard to the 100-bed limitation. Cancer and children's hospitals are 
permanently held harmless under section 1833(t)(7)(D)(ii) of the Social 
Security Act and continue to receive TOPs payments in CY 2010.

B. Ambulatory Surgical Center Payment System

1. Background
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60596), we updated and finalized the CY 2010 ASC rates and lists of 
covered surgical procedures and covered ancillary services. We also 
corrected some of those ASC rates in a correction notice published in 
the Federal Register on December 31, 2009 (74 FR 69502). In that 
correction notice, we revised the ASC rates to reflect changes in the 
Medicare Physician Fee Schedule (MPFS) conversion factor and practice 
expense (PE) relative value units (RVUs) listed for some CPT codes in 
Addendum B to the CY 2010 MPFS final rule with comment period (74 FR 
62017), which were incorrect due to certain technical errors and, 
consequently, were corrected in a correction notice to that final rule 
(74 FR 65449). We are also publishing a second correction notice in the 
Federal Register around the same time as this Notice to address changes 
to the ASC rates resulting from corrections to the PE RVUs and to the 
MPFS conversion factor identified subsequent to publication of the 
December 31, 2009 correction notice. In this Notice, we discuss changes 
to the ASC payment rates due to changes to the OPPS and MPFS under the 
Affordable Care Act. The rates in this Notice also reflect technical 
corrections to the CY 2010 ASC payment rates published in the CY 2010 
OPPS/ASC final rule with comment period as corrected by the two 
correction notices. None of these changes affected ASC payment 
methodologies or policies.
2. Changes to the CY 2010 Ambulatory Surgical Center Payment System 
Required by the Changes to the Hospital Outpatient Prospective Payment 
System and the Medicare Physician Fee Schedule
    Under the revised ASC payment system, for most covered surgical 
procedures, we use the OPPS APCs to group services paid under the ASC 
payment system and we use the APC relative payment weights developed 
under the OPPS as the basis for ASC relative payment weights for 
calculating ASC payment rates. Specifically, we multiply an ASC 
relative payment weight derived from the OPPS APC relative weight by a 
budget neutral ASC conversion factor to calculate national unadjusted 
ASC payment rates each year. We refer to this as the standard 
ratesetting methodology for the ASC payment system. We transitioned to 
the standard ratesetting methodology over a

[[Page 45773]]

four-year period for procedures on the CY 2007 list of covered surgical 
procedures. CY 2010 is the third year of this four-year transition to 
fully implementing the standard ratesetting methodology. ASC payment 
rates for CY 2010 are a transitional blend of 25 percent of the CY 2007 
ASC payment rate for a covered surgical procedure on the CY 2007 ASC 
list of surgical procedures and 75 percent of the payment rate for the 
procedure calculated under the standard ratesetting methodology. We 
discuss the standard ratesetting methodology and our transition to the 
full implementation of the standard ratesetting methodology in our 
August 2, 2007 ASC final rule (72 FR 42491 through 42493, 42519 through 
42521). We update the ASC relative payment weights annually using the 
OPPS relative payment weights for that calendar year. Because the 
standard ratesetting methodology adopts the OPPS relative payment 
weights (not rates), reductions to OPPS payments created by the 
Affordable Care Act as discussed in section I.A.3. above do not impact 
payment made under the standard ratesetting methodology as the 
Affordable Care Act did not change any OPPS APC relative weights for CY 
2010.
    However, the ASC payment system establishes the payment rates for 
several services using other methodologies that are impacted by the 
Affordable Care Act. Specifically, the calculation of device-intensive 
services, brachytherapy services, and bone density scans (a type of 
covered ancillary radiology service) under the ASC payment system rely 
directly on the actual payment rates under the OPPS and MPFS, which are 
impacted by the provisions of the Affordable Care Act discussed above 
and below. The Affordable Care Act changed the OPPS payment rates for 
any service where the OPPS conversion factor is used in its 
calculation, because the Affordable Care Act revised the CY 2010 OPD 
fee schedule increase factor (see I.A.3. of this Notice). This change 
impacted payments for device-intensive services and brachytherapy 
services, which are dependent on payments established under the OPPS.
    We use a modified ASC methodology based on OPPS data to establish 
payment rates for the device-intensive procedures under the ASC payment 
system. ASC device-intensive services are covered surgical procedures 
that are assigned to the OPPS device-dependent APCs with a device 
offset percentage (i.e., the proportion of the APC relative weight 
attributable to devices under the OPPS) greater than 50 percent of the 
APC cost under the OPPS. Under the ASC payment system, we sum the 
device portion and the service portion to derive the ASC payment rate 
for each service's device dependent APC. The device portion is equal to 
the device offset amount multiplied by the OPPS payment rate, which is 
the OPPS conversion factor multiplied by the OPPS relative payment 
weight, for each service's device dependent APC. The service portion is 
equal to the ASC standard ratesetting methodology (or blended payment 
rates during the transition period) applied to the service portion of 
the OPPS relative payment weight (72 FR 42503 through 42508). Because 
CY 2010 OPPS APC payment rates have changed as a result of the 
Affordable Care Act, the device offset amount, and therefore the device 
portion of the ASC payment rate for device-intensive services also 
changed.
    The ASC Payment System also employs a modification to the standard 
ratesetting methodology to establish payment for brachytherapy sources. 
As discussed in our August 2, 2007 ASC final rule (72 FR 42498 to 
42499), we finalized a policy to pay for brachytherapy services at the 
OPPS payment rates if OPPS rates were available, and if unavailable, to 
pay at contractor-priced rates. The CY 2010 OPPS established payment 
rates for brachytherapy sources based on a relative weight and the OPPS 
conversion factor, which has changed as a result of the Affordable Care 
Act. Because the ASC payment system adopts the final payment rate from 
the OPPS, these payment rates have changed for the ASC payment system.
    Finally, payment for bone density scans under the ASC payment 
system is impacted by the changes made to the MPFS under section 3111 
of the Affordable Care Act. Under the ASC payment system, payment for 
covered ancillary radiology services, which includes bone density 
scans, is capped at the lesser of the MPFS non-facility practice 
expense payment amount (calculated by multiplying the non-facility 
practice expense RVU by the MPFS conversion factor) or the ASC rate 
developed according to the ASC standard ratesetting methodology. 
Section 3111 of the Affordable Care Act requires that, for CY 2010, 
payment under the MPFS for certain bone density scans be established at 
70 percent of the product of the CY 2006 MPFS relative value units for 
the service, the CY 2006 MPFS conversion factor and the CY 2010 
geographic adjustment factor for the service. Therefore, the final 
payment rate for these bone density scans depends on both the ASC 
payment and the MPFS non-facility practice expense payment amount, 
which changed under the Affordable Care Act.
    In addition to the changes made under the Affordable Care Act, the 
ASC payment rates in this Notice reflect the technical corrections to 
the CY 2010 ASC payment rates published in the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60316), and as corrected in a December 
31, 2009 correction notice and a second correction notice that will be 
published around the same time as this Notice to address changes to 
covered office-based and covered ancillary radiology services payment 
rates resulting from technical corrections to the MPFS non-facility 
practice expense payment amounts for CY 2010. Office-based procedures 
are procedures 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 and are paid 
based on the same methodology as covered ancillary radiology services 
(i.e., the lesser of the MPFS rate or the ASC rate under the standard 
methodology). We have already implemented the changes made by these 
correction notices.
    We note that the Department of Defense Appropriations Act, 2010 
(Pub. L. 111-118), the Temporary Extension Act of 2010 (Pub. L. 111-
144), and the Continuing Extension Act of 2010 (Pub. L. 111-157) 
extended a zero percent update for the MPFS from January 1, 2010 
through May 31, 2010. Because the Affordable Care Act changes are 
effective January 1, 2010, and because the public laws listed above 
authorize a zero percent update for the MPFS for CY 2010 through May 
31, 2010, this Notice incorporates a zero percent update for MPFS 
payment. On June 25, 2010 the Preservation of Access to Care for 
Medicare Beneficiaries and Pension Relief Act of 2010 (Pub L. 111-192) 
authorized a 2.2 percent update for the MPFS from June 1, 2010 through 
November 30, 2010. As is our standard practice, we will recalculate the 
revised ASC CY 2010 payment rates based on CY 2010 MPFS payment rates 
using the 2.2 percent update factor, and we will make these revised 
payment rates available on our Web site under ``Addenda Updates'' at 
http://www.cms.gov/ASCPayment/11_Addenda_Updates.asp#TopOfPage.
    Because of these changes to payment for device-intensive services, 
brachytherapy sources, and bone density scans created by the Affordable 
Care Act, and changes to MPFS non-facility practice expense payment 
amounts and the MPFS conversion factor for covered office-based 
services

[[Page 45774]]

and ancillary radiology services created by technical corrections that 
we explained in the correction notices, we recalculated budget 
neutrality for the CY 2010 ASC payment system as part of this Notice.
    We discuss our budget neutrality methodology in the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60625 through 60629). Using 
updated payment amounts for the OPPS and MPFS for the services affected 
by the Affordable Care Act and additional changes to the CY 2010 MPFS 
non-facility practice expensive payment amounts based on the correction 
notices, we followed our standard scaling methodology to take into 
account the changes in the OPPS and MPFS payment amounts. We used the 
same claims data and scaling methodology described in the CY 2010 OPPS/
ASC final rule with comment period to calculate a revised CY 2010 ASC 
payment weight scalar of 0.9556. (We previously finalized a CY 2010 ASC 
payment weight scalar of 0.9567 (74 FR 60628)). After scaling the 
weights, we calculated a wage index adjustment of 0.9996 and a final 
ASC conversion factor of $41.873. Both of these numbers did not change 
from what we previously finalized for CY 2010 (74 FR 60629). The 
Affordable Care Act did not impact the pre-floor, pre-reclassification 
wage indices that we adopt in the ASC payment system or the CPI-U. 
Therefore, the wage index adjustment and the final ASC conversion 
factor remained the same. We note that the technical corrections in the 
second correction notice impacted covered office-based procedures and 
covered ancillary radiology services with payment indicators of ``P3'' 
and ``Z3''. When we recalculated budget neutrality to address 
Affordable Care Act changes in this Notice, we also reflected the 
technical changes made in previous correction notices; therefore, the 
CY 2010 payment for many covered office-based procedures and covered 
ancillary radiology services changed at least modestly.
    We historically also have reported the payment weight scalar that 
we would have calculated if we proposed to fully implement the ASC 
payment system in the coming calendar year without further transition. 
In the CY 2010 OPPS/ASC final rule, we published a fully implemented CY 
2010 ASC payment weight scalar of 0.9338 (74 FR 60674). Using the same 
claims data and budget neutrality methodology, including adjusting for 
changes in the wage index, and updating the OPPS and MPFS inputs, we 
calculated a revised fully implemented CY 2010 ASC payment weight 
scalar of 0.9326.
    Using the revised scaled ASC payment weights and the conversion 
factor of $41.873, the revised OPPS payment amounts, and the revised 
MPFS non-facility practice expense payment amounts, we recalculated the 
revised CY 2010 ASC payment rates for all services, including device-
intensive services, brachytherapy sources, and office-based and 
ancillary radiology services, appearing in Addenda AA and BB of this 
notice. These payment rates are effective for services furnished on and 
after January 1, 2010 through December 31, 2010. These files also may 
be viewed as supporting documentation to this Notice at http://www.cms.gov/ASCPayment.
    For purposes of applying the policy to reduce ASC payment for 
procedures involving devices furnished without cost or at reduced cost 
(74 FR 60613 through 60618), the revised offset amounts of the ASC 
payment are not published as addenda to the ASC update rules but are 
available at http://www.cms.gov/ASCPayment under ``Annual Policy 
Files.''

C. Elimination of Sunset for Reimbursement for All Medicare Part B 
Services in Hospitals and Clinics Operated by the Indian Health 
Service, Indian Tribes, or Tribal Organizations

    Section 2902 of the Affordable Care Act indefinitely extends 
Section 630 of the MMA, retroactive to January 1, 2010. The specific 
Part B services are:
     Ambulance services;
     Clinical laboratory services;
     Part B drugs processed by the J4 A/B MAC and the DME MACs;
     Influenza and pneumonia vaccinations;
     Durable medical equipment;
     Therapeutic shoes;
     Prosthetics and orthotics;
     Surgical dressings, splints, and casts; and
     Screening and preventive services not covered prior to the 
implementation of section 630 of the MMA
    Section 2902 of the Affordable Care Act indefinitely extends 
section 630 of the MMA to provide coverage for all Medicare Part B 
services listed above that were previously not covered under the Social 
Security Act. Hospitals operated by the Indian Health Service, Indian 
Tribes, or Tribal Organizations, however, will continue to be paid for 
Part B services under an all inclusive rate for hospital outpatient 
services rather than under the OPPS.

II. Other Required Information

A. Collection of Information Requirements

    This document does not impose information collection and 
recordkeeping requirements. Consequently, it need not be reviewed by 
the Office of Management and Budget under the authority of the 
Paperwork Reduction Act of 1995.

B. Waiver of Proposed Rulemaking

    We ordinarily publish a Notice of proposed rulemaking in the 
Federal Register and invite public comment prior to a rule taking 
effect in accordance with section 553(b) of the Administrative 
Procedures Act (APA) and section 1871 of the Act. In addition in 
accordance with section 553(d) of the APA and section 1871(e)(1)(B)(i) 
of the Act, we ordinarily provide a 30-day delay to a substantive 
rule's effective date. For substantive rules that constitute major 
rules, in accordance with 5 U.S.C. 801, we ordinarily provide a 60-day 
delay in the effective date.
    None of the above processes or effective date requirements apply, 
however, when the rule in question is interpretive, a general statement 
of policy or a rule of agency organization, procedure or practice. They 
also do not apply when Congress, itself, has created the rules that are 
to be applied, leaving no discretion or gaps for an agency to fill in 
through rulemaking.
    In addition, an agency may waive notice and comment rulemaking, as 
well as any delay in effective date, when the agency for good cause 
finds that notice and public comment on the rule, as well as the 
effective date, are impracticable, unnecessary or contrary to the 
public interest. In cases where an agency finds good cause, the agency 
must incorporate a statement of this finding and its reason in the rule 
issued.
    The policies being publicized in this Notice do not constitute 
agency rulemaking. Rather, Congress, in the Affordable Care Act, has 
already required that the agency make these changes and we are simply 
notifying the public of the statutory requirements and their effect on 
payments made under the CY 2010 OPPS and ASC payment system. 
Specifically, we are notifying the public of the changes to payments 
for the CY 2010 OPPS that result from the reduction to the OPD fee 
schedule increase factor and the changes to the wage indices required 
by the Affordable Care Act. We are also notifying the public of the 
extension of section 508 reclassifications and special exception wage 
indices for FY 2010 (which apply to the OPPS for CY 2010), as well as 
the

[[Page 45775]]

wage Indices resulting from Congress' requirement that certain 
reclassification wage indices be recalculated (effective April 1, 2010) 
to account for such extensions. We are also notifying the public that 
Congress extended transitional outpatient payments (TOPs) for a rural 
hospital that has not more than 100 beds and that is not a sole 
community hospital as well as for sole community hospitals such that 
the sole community hospital need not satisfy the 100-bed limitation for 
covered OPD service furnished on or after January 1, 2010 and before 
January 1, 2011. We are notifying the public that Congress extended 
Medicare payments to the Indian Health Service, Indian Tribes, or 
Tribal Organizations for selected Part B services. We are notifying the 
public of changes made to ASC payment rates due to changes to the OPPS 
conversion factor under the Affordable Care Act. Lastly, we are 
notifying the public that Congress has changed payment for bone density 
scans under the MPFS, which may impact payment for these services 
furnished in ASCs on or after January 1, 2010. As this Notice merely 
informs the public of these required modifications to the CY 2010 
payment rates under the OPPS and, indirectly, to the ASC payment 
system, it is not a rule and does not require any notice and comment 
rulemaking. Additionally, for the ASC payment system, the payment rates 
announced in this Notice reflect technical corrections made to the MPFS 
that impact the ASC payment rates that we addressed in prior ASC 
correction notices; we are simply notifying the public of the effect on 
payment made under the CY 2010 ASC payment system based on these prior 
correction notices. To the extent that any of the policies articulated 
in this Notice constitute interpretations of Congress's requirements or 
procedures that will be used to implement Congress's directives, they 
are interpretative rules, general statements of policy and/or rules of 
agency procedure or practice, which are not subject to notice and 
comment rulemaking or a delayed effective date.
    However, to the extent that notice and comment rulemaking or a 
delay in effective date or both would otherwise apply, we find good 
cause to waive such requirements. Specifically, we find it unnecessary 
to undertake notice and comment rulemaking in this instance because the 
provisions of the Affordable Care Act are self-implementing, and 
further many are already effective and have been implemented. 
Therefore, we would be unable to change any of the policies governing 
the OPPS and ASC payment systems for CY 2010, or the other changes made 
by the Affordable Care in response to public comment on this Notice. As 
the changes outlined in this Notice have already taken effect and are a 
result of the statutory effective dates, it would also be impracticable 
to undertake notice and comment rulemaking. Additionally, this Notice 
does not make any changes to the policies and payment methodologies for 
the OPPS and ASC payment system that were finalized in the CY 2010 
OPPS/ASC final rule with comment period. Further, we believe it is in 
the public interest to have the accurate information and to have it as 
soon as possible and not delay its dissemination. For these reasons, we 
also find that a waiver of any delay in effective date, if it were 
otherwise applicable, is necessary to comply with the requirements of 
sections 2902, 3111, 3121, 3137, 3401 and 10319 of the Patient 
Protection and Affordable Care Act and section 1105 of the Health Care 
and Education Reconciliation Act of 2010. Therefore we find good cause 
to waive notice and comment procedures as well as any delay in 
effective date, if such procedures or delays are required at all.

III. Regulatory Impact Statement or Analysis

A. Overall Impact

    Although this Notice merely announces provisions of the Affordable 
Care Act, and does not constitute a substantive rule, we are 
nevertheless preparing this impact analysis in the interest of ensuring 
that the impact of these changes are fully understood. The changes in 
this Notice are already in effect, with changes made to the OPPS pricer 
and the ASC payment system and have been announced through a Joint 
Signature Memorandum of instruction to Medicare contractors. We have, 
nevertheless, examined the impacts of this Notice 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)).
    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.
    We estimate that the effects of the OPPS provisions that are 
announced in this Notice will not result in expenditures exceeding $100 
million in any 1 year and therefore are not economically significant. 
We estimate the difference between CY 2010 OPPS expenditures required 
by or resulting from the Affordable Care Act that are announced in this 
Notice, when compared to the estimated expenditures announced in our 
November 20, 2009 CY 2010 final rule, (74 FR 60316) to be a decrease of 
approximately $98 million. Because this Notice is not a major rule, and 
because, furthermore, the expected change in expenditures resulting 
from the Affordable Care Act does not reach the $100 million threshold 
for a RIA, we are not required to provide a regulatory impact analysis.
    However, because the changes required by the Affordable Care Act 
for the CY 2010 OPPS affect payment, we have prepared a regulatory 
impact analysis of changes to the OPPS payment system that, to the best 
of our ability, presents the costs and benefits of this Notice. Table I 
of this Notice displays the redistributional impact of the CY 2010 
changes required by the Affordable Care Act on OPPS payment. The 
provisions of the Affordable Care Act result in a change in OPPS 
payments for CY 2010 as announced in this Notice compared to the CY 
2010 payments established under the CY 2010 OPPS/ASC final rule 
appearing in the November 20, 2009 Federal Register. Table I presents 
only the changes in CY OPPS 2010 payments that result from the 
Affordable Care Act. We estimate that the effects of the changes to the 
CY 2010 OPPS and the non-facility MPFS PE RVUs resulting from the 
Affordable Care Act on the ASC payment system that are announced by 
this Notice will not exceed $100 million in any 1 year and, therefore, 
are not economically significant. Overall, we observe no change in 
aggregate expenditures under the CY 2010 ASC Payment System resulting 
from changes to the CY 2010 OPPS and MPFS as required by the Affordable 
Care Act and by technical changes implemented by prior correction 
notices.

[[Page 45776]]

    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 to the SBA's Web site at: 
http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (refer to the 620000 series).)
    For purposes of the RFA, we have determined that many hospitals and 
most ASCs would be considered small entities according to the SBA size 
standards. Individuals and States are not included in the definition of 
a small entity. Therefore, the Secretary has determined that this 
Notice will have a significant impact on a substantial number of small 
entities. We acknowledge that many of the affected entities are small 
entities. The discussion presented in this Notice and the impact 
analysis presented in Table I constitute our regulatory flexibility 
analysis of the impact of the provisions of the Affordable Care Act on 
small entities.
    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 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 announced by this Notice 
affect both a substantial number of rural hospitals as well as other 
classes of hospitals and that the effects on some may be significant. 
Therefore, the Secretary has determined that this Notice has a 
significant impact on the operations of a substantial number of small 
rural hospitals. Specifically, section 3121 of the Affordable Care Act 
extends TOPs payment for small rural hospitals that are not sole 
community hospitals and that have 100 or fewer beds and payments for 
SCHs (including EACHs), that meet applicable requirements regardless of 
the 100-bed limitation for covered OPD services furnished on and after 
January 1, 2010 through December 31, 2010. See our discussion of this 
change in section I.A.5 above. In addition, section 3137 as amended by 
section 10317 of the Affordable Care Act extends section 508 
reclassifications and special exception wage index values from October 
1, 2009 through September 30. It also resulted in the recalculation of 
wage index values to exclude the wage data of section 508/special 
exception hospitals in certain circumstances, thereby changing the 
final wage index values, effective April 1 for IPPS and July 1 for 
OPPS. These wage index changes affect some small rural hospitals. See 
section I.A.4 of this Notice for a discussion of the wage index changes 
required by Affordable Care Act. We also anticipate that Affordable 
Care Act changes impacting ASC payment in general will impact payment 
to rural ASCs.
    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 Notice will not 
mandate any requirements for State, local, or tribal governments, nor 
will it affect private sector costs.
    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 provisions included in this Notice 
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.
    The following analysis, in conjunction with the remainder of this 
document, demonstrates that this Notice is consistent with the 
regulatory philosophy and principles identified in Executive Order 
12866, the RFA, and section 1102(b) of the Act. The changes to the 
payment amounts under CY 2010 OPPS that are required by the Affordable 
Care Act and that are announced in this Notice 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.
    The impact analysis presented in the CY 2010 OPPS/ASC final rule 
(74 FR 60662 through 60673) showed the estimated impact of changes to 
payments for CY 2010 OPPS compared to the estimated payments for CY 
2009 OPPS. In contrast, the impact analysis presented in this Notice 
shows the estimated impact of changes to payment for CY 2010 as a 
result of the implementation of the changes required by the Affordable 
Care Act. The Affordable Care Act changed payments for services for 
which the payment is calculated using the conversion factor. In 
addition, we note that none of the APC relative weights changed because 
the relative weight calculations are not made using the conversion 
factor. For an assessment of distributional impact of changes to the 
relative weights between CY 2009 and CY 2010 please see the CY 2010 
OPPS/ASC final rule (74 FR 60667 through 60672). Therefore, the 
decrease of 0.1 percent reflects changes to the total OPPS payment that 
would have been made in CY 2010 absent the provisions of the Affordable 
Care Act (This impact does not include the impact of changes to TOPs). 
However, we note that hospitals continue to receive a positive payment 
increase relative to CY 2009. When we compare the estimated total 
payments for the CY 2010 OPPS, including the provisions of the 
Affordable Care Act, to the estimated total payments for the CY 2009 
OPPS, we find that for CY 2010, we expect that hospitals will see an 
aggregate increase in total OPPS payment of approximately $500 million, 
compared to CY 2009.
Effects of OPPS Changes in This Notice
    This Notice announces changes to the OPPS and ASC payments for 
services furnished in CY 2010 that are required as a result of Sections 
3121, 3401, 3137 and 10319 of the Patient Protection and Affordable 
Care Act and section 1105 of the Health Care and Education 
Reconciliation Act of 2010. These changes are discussed in detail in 
I.A of this Notice. Under the recalculated OPPS payment rates announced 
in this Notice, we estimate that the revised update to the conversion 
factor and other adjustments as provided by the statute will decrease 
total OPPS

[[Page 45777]]

payments by 0.1 percent in CY 2010 compared to payment rates under the 
November 20, 2009 CY 2010 OPPS/ASC final rule.
    The distributional impacts presented here are the projected effects 
of changes to the CY 2010 payments on various hospital groups, 
comparing the estimated CY 2010 OPPS payments under this Notice to the 
estimated payments under the November 20, 2009 CY 2010 OPPS/ASC final 
rule. We post on the CMS Web site our hospital-specific estimated 
payments for CY 2010 with the other supporting documentation for this 
Notice. To view the hospital-specific estimates of CY 2010 OPPS 
payments that we calculated including the effects of the changes made 
by the Affordable Care Act, we refer readers to the CMS Web site at: 
http://www.cms.gov/HospitalOutpatientPPS/. Select ``regulations and 
Notices'' from the left side of the page and then select ``CMS-1504-N'' 
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 Notice of changes to the CY 2010 
payment rates. We show hospital-specific data only for hospitals whose 
claims were used for modeling the impacts shown in Table I 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 the CY 2010 OPPS 
final rule (75 FR 60347) 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.
    Table 1 below shows the estimated impact of the changes on 
hospitals' CY 2010 OPPS payment as a result of the Affordable Care Act. 
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 CY 2010 weight 
scaler estimate discussed in our November 20, 2009 CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60408).
    We present separate impacts for CMHCs in Table 1 because CMHCs are 
paid under only two APCs for services under the OPPS: APC 0172 (Level 1 
Partial Hospitalization (3 units of service)) and APC 0173 (Level II 
Partial Hospitalization (4 or more units of service)). We note that 
CMHCs are also a different provider type.
    The estimated decrease in the total payments made under the CY 2010 
OPPS is a result of the decrease in the OPD fee schedule update factor 
as required by sections 3401 and 10319 of the Patient Protection and 
Affordable Care Act and section 1105 of the Health Care and Education 
Reconciliation Act of 2010, and the influence of the changes to the 
wage index required by section 3137 as amended by section 10317 of the 
Affordable Care Act. 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 index for specific hospitals reclassified under section 508. 
Section 3137 as amended by section 10317 of the Affordable Care Act 
extended these section 508 reclassifications for October 1, 2009 
through September 30, 2010. The amounts attributable to these 
reclassifications are incorporated into the CY 2010 estimates in the 
final column of Table 1.
    Table 1 shows the estimated redistribution of hospital and CMHC 
payments among providers between payments under the November 20, 2009 
CY 2010 OPPS/ASC final rule published for CY 2010 and the CY 2010 
payments announced in this Notice as a result of APC reconfiguration 
and recalibration (Column 2; which remain unchanged from the 
publication of the CY 2010 OPPS on November 20, 2009 because there were 
no changes made by the Affordable Care Act to the assignment of 
services to APCs or the median costs from which the scaled relative 
weights are derived); wage index changes (Column 3; which reflect the 
changes made by section 3137 (amended by section 10317) of the 
Affordable Care Act)); the combined impact of the APC recalibration, 
wage index effects, and the reduction applied to the OPD fee schedule 
increase factor (which is revised as required by sections 3401 and 
10319 of the Patient Protection and Affordable Care Act and section 
1105 of the Health Care and Education Reconciliation Act of 2010) which 
is used to update the conversion factor (Column 4); and, finally, 
estimated redistribution considering all payments for CY 2010 under 
this Notice relative to all CY 2010 payments under the November 20, 
2009 CY 2010 OPPS/ASC final rule (Column 5). Because the reduction that 
applies to the OPD fee schedule increase factor as required by the 
Affordable Care Act, is applied uniformly across services for which the 
conversion factor is used to calculate OPPS payment, observed 
redistributions of payments in the impact table for hospitals largely 
depend on the impact of the wage index changes under section 3137 
including changes to the wage index for the second half of the year and 
the extension of the section 508 reclassifications for part of CY 2010. 
However, total payments made under this system and the extent to which 
the changes required by Affordable Care Act would redistribute money 
during implementation also depend on volume, practice patterns, and the 
mix of services billed by various groups of hospitals, which CMS cannot 
forecast.
    Overall, the revised CY 2010 OPPS rates are expected to have a 
negative effect for providers paid under the OPPS, resulting in a 0.1 
percent estimated decrease in Medicare payments compared to CY 2010 
OPPS rates announced in the November 20, 2009 final rule with comment 
period. Removing cancer and children's hospitals, because their 
payments are held harmless to the pre-BBA ratio between payment and 
cost, and CMHCs because they are a different provider type paid under 
two specific APCs, suggests that the required changes will continue to 
result in a 0.1 percent estimated decrease in Medicare payments to all 
other hospitals.
    Table 1 contains the standard content that is provided in every 
OPPS impact table published in the Federal Register. Specifically, 
Column 1 contains the number of hospitals in total and by category for 
which we calculated an impact. These are the same hospitals whose 
claims were used for ratesetting and modeling of impacts for the CY 
2010 OPPS that was published on November 20, 2010. Column 2 displays 
the CY 2010 APC changes due to the reassignment and recalibration under 
this Notice, relative to the November 20, 2009 CY 2010 OPPS/ASC final 
rule (74 FR 60431). Because nothing in the Affordable Care Act changed 
APC assignment or calibration, there are no changes in this column. 
Column 3 displays the effect of the new wage index changes required by 
the Affordable Care Act compared to the previous FY 2010 wage index 
adopted in the November 20, 2009 CY 2010 OPPS/ASC final rule. Although 
there are changes to the wage indices for some

[[Page 45778]]

hospitals for half of the year because of changes made by the 
Affordable Care Act, the impact does not rise to a tenth of a percent 
for any category of provider. Column 4 displays the effect of the 
budget neutrality changes between the November 20, 2009 CY 2010 OPPS/
ASC final rule and the payment rates for CY 2010 as announced by this 
Notice, specifically the reduction applied to the OPD fee schedule 
update factor as a result of the Affordable Care Act. Because not all 
OPPS payments are based on the conversion factor (e.g. separately paid 
drugs and biologicals are paid at ASP+4 percent for CY 2010), the 
impact of the 0.25 percentage point reduction to the OPD fee schedule 
update factor does not affect payment for all services and therefore 
the impact of the reduction is slightly less than 0.25. Column 5 
displays the combined impact of all changes made for CY 2010, including 
changes in the section 508 reclassification wage index as required by 
the Affordable Care Act relative to payments announced in the November 
20, 2009 CY2010 OPPS/ASC final rule. Therefore it incorporates the 
changes in payment that are outside of budget neutrality for section 
508 and certain special exception hospitals. The increase in payment 
outside budget neutrality for section 508 hospitals is present 
throughout column 5 and is isolated as a 1.8 percent increase in the 
last row of Table 1.
BILLING CODE 4120-01-P

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5. Estimated Effect of This Notice 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. In all 
cases, the statute limits beneficiary liability for copayment for a 
procedure to the hospital inpatient deductible for the applicable year. 
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. We estimate, using the claims of the 4,222 hospitals and 
CMHCs on which our modeling is based, that total beneficiary liability 
for copayments continues to be 22.6 percent, as estimated in the 
November 20, 2009 CY 2010 OPPS/ASC final rule (74 FR 60673). To assess 
whether there are changes to the aggregate percentage of beneficiary 
liability, we recalculated the percentage using the revised conversion 
factor and wage indices on which the revised payments being announced 
in this Notice are based.
6. Conclusion
    The changes announced in this Notice will affect all classes of 
hospitals and CMHCs. We estimated that most classes of hospitals will 
experience minor losses or remain neutral and that all classes of 
hospitals will experience negative updates in OPPS payments in CY 2010 
compared to the payments announced in the November 20, 2009 CY 2010 
OPPS/ASC final rule as a result of the provisions of the Affordable 
Care Act.
    Table 1 demonstrates the estimated distributional impact of the 
OPPS budget neutrality requirements that are expected to result in a 
0.1 percent decrease in payments for all services paid under the OPPS 
in CY 2010 under this Notice when compared to the November 20, 2009 CY 
2010 OPPS/ASC final rule, after considering the OPD fee schedule 
increase factor (revised by the Affordable Care Act), wage index 
changes (including the effects of the extension of the section 508 
reclassifications), estimated payment for outliers (which did not 
change as a result of the Affordable Care Act), and changes to the 
pass-through payment estimate (which did not change as a result of the 
Affordable Care Act). The accompanying discussion, in combination with 
the rest of this Notice, 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 2, we have 
prepared an accounting statement showing the CY 2010 estimated hospital 
OPPS incurred benefit impact associated with the changes to the CY 2010 
OPD fee schedule increase factor and budget neutral wage index changes 
(as revised by the Affordable Care Act) shown in this Notice based on 
the baseline for the 2010 Medicare Trustees Report. All estimated 
impacts are classified as transfers.

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(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program; No. 93.773 Medicare--Hospital Insurance Program; 
and No. 93.774, Medicare--Supplementary Medical Insurance Program)

    Dated: June 18, 2010.
 Marilyn Tavenner,
Acting Administrator and Chief Operating Officer, Centers for Medicare 
& Medicaid Services.
    Approved: June 30, 2010.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-16400 Filed 7-2-10; 2:30 pm]
BILLING CODE 4120-01-C