Federal Register, Volume 76 Issue 137 (Monday, July 18, 2011)

[Federal Register Volume 76, Number 137 (Monday, July 18, 2011)]
[Proposed Rules]
[Pages 42170-42393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-16949]

[[Page 42169]]

Vol. 76

Monday,

No. 137

July 18, 2011

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 416 et al.

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Medicare and Medicaid Programs: Hospital Outpatient Prospective
Payment; Ambulatory Surgical Center Payment; Hospital Value-Based
Purchasing Program; Physician Self-Referral; and Provider Agreement
Regulations on Patient Notification Requirements; Proposed Rule

Federal Register / Vol. 76, No. 137 / Monday, July 18, 2011 /
Proposed Rules

[[Page 42170]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 416, 419, 489, and 495

[CMS-1525-P]
RIN 0938-AQ26

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital
outpatient prospective payment system (OPPS) to implement applicable
statutory requirements and changes arising from our continuing
experience with this system. In this proposed rule, we describe the
proposed changes to the amounts and factors used to determine the
payment rates for Medicare hospital outpatient services paid under the
OPPS. These proposed changes would be applicable to services furnished
on or after January 1, 2012.
In addition, this proposed rule would update the revised Medicare
ambulatory surgical center (ASC) payment system to implement applicable
statutory requirements and changes arising from our continuing
experience with this system. In this proposed rule, we set forth the
proposed relative payment weights and payment amounts for services
furnished in ASCs, specific HCPCS codes to which these proposed changes
would apply, and other proposed ratesetting information for the CY 2012
ASC payment system. These proposed changes would be applicable to
services furnished on or after January 1, 2012.
We are proposing to revise the requirements for the Hospital
Outpatient Quality Reporting (IQR) Program, add new requirements for
ASC Quality Reporting System, and make additional changes to provisions
of the Hospital Inpatient Value-Based Purchasing (VBP) Program.
We also are proposing to allow eligible hospitals and CAHs
participating in the Medicare Electronic Health Record (EHR) Incentive
Program to meet the clinical quality measure reporting requirement of
the EHR Incentive Program for payment year 2012 by participating in the
2012 Medicare EHR Incentive Program Electronic Reporting Pilot.
In addition, we are proposing to make changes to the rules
governing the whole hospital and rural provider exceptions to the
physician self-referral prohibition for expansion of facility capacity
and changes to provider agreement regulations on patient notification
requirements.

DATES: Comment Period: To be assured consideration, comments on all
sections of this proposed rule must be received at one of the addresses
provided in the ADDRESSES section no later than 5 p.m. EST on August
30, 2011.

ADDRESSES: In commenting, please refer to file code CMS-1525-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (no duplicates,
please):
1. Electronically. You may (and we encourage you to) submit
electronic comments on this regulation to http://www.regulations.gov.
Follow the instructions under the ``submit a comment'' tab.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-1525-P, P.O. Box 8013,
Baltimore, MD 21244-1850.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments via
express or overnight mail to the following address ONLY: Centers for
Medicare & Medicaid Services, Department of Health and Human Services,
Attention: CMS-1525-P, Mail Stop C4-26-05, 7500 Security Boulevard,
Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC-- Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey 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. For delivery in Baltimore, MD-- Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call the telephone number (410) 786-7195 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.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
For information on viewing public comments, we refer readers to the
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION, CONTACT:
Paula Smith, (410) 786-0378, Hospital outpatient prospective payment
issues.
Char Thompson, (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 Hospital Outpatient Quality
Reporting (OQR) and ASC Quality Reporting Program issues.
Teresa Schell, (410) 786-8651, Physician Ownership and Investment in
Hospitals issues.
Georganne Kuberski, (410) 786-0799, Patient Notification Requirements
issues.
James Poyer, (410) 786-2261, and Ernessa Brawley (410) 786-2075,
Hospital Value-Based Purchasing (VBP) Program issues.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have

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been received: http://www.regulations.gov. Follow the search
instructions on that Web site to view public comments.
Comments received timely will also be available for public
inspection, generally beginning approximately 3 weeks after publication
of the rule, 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 Federal Digital System (FDsys), a
service of the U.S. Government Printing Office. This database can be
accessed via the Internet at http://www.gpo.gov/fdsys/.

Addenda Available Only Through the Internet on the CMS Web Site

In the past, a majority of the Addenda referred to throughout the
preamble of our OPPS/ASC proposed and final rules were published in the
Federal Register as part of the annual rulemakings. However, beginning
with this CY 2012 rule, all of the Addenda will no longer appear in the
Federal Register as part of the annual OPPS/ASC proposed and final
rules to decrease administrative burden and reduce costs associated
with publishing lengthy tables. Instead, these Addenda will be
published and available only on the CMS Web site. The Addenda relating
to the OPPS are available at: http://www.cms.hhs.gov/HospitalOutpatientPPS. The Addenda relating to the ASC payment system
are available at: http://www/cms.hhs.gov/ASCPayment/. For complete
details on the availability of the Addenda referenced in this proposed
rule, we refer readers to section XVII. Readers who experience any
problems accessing any of the Addenda that are posted on the CMS Web
site identified above should contact Charles Braver at (410) 786-0378.

Alphabetical List of Acronyms Appearing in This Federal Register
Document

ACEP American College of Emergency Physicians
AHA American Hospital Association
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
AMA American Medical Association
AMP Average Manufacturer Price
AOA American Osteopathic Association
APC Ambulatory Payment Classification
ARRA American Recovery and Reinvestment Act of 2009, Pub. L. 111-5
ASC Ambulatory Surgical Center
ASP Average Sales Price
AWP Average Wholesale Price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L.
106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, Pub. L. 106-554
BLS Bureau of Labor Statistics
CAH Critical Access Hospital
CAP Competitive Acquisition Program
CBSA Core-Based Statistical Area
CCN CMS Certification Number
CCR Cost-to-Charge Ratio
CDC Centers for Disease Control
CERT Comprehensive Error Rate Testing
CLFS Clinical Laboratory Fee Schedule
CMHC Community Mental Health Center
CMS Centers for Medicare & Medicaid Services
CPT [Physicians'] Current Procedural Terminology, Fourth Edition,
2009, copyrighted by the American Medical Association
CQM Clinical Quality Measure
CR Cardiac Rehabilitation
CY Calendar Year
DFO Designated Federal Official
DHS Designated Health Service
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
DSH Disproportionate Share Hospital
EACH Essential Access Community Hospital
E/M Evaluation and Management
EHR Electronic Health Record
ESRD End-Stage Renal Disease
FACA Federal Advisory Committee Act, Pub. L. 92-463
FAR Federal Acquisition Regulations
FDA Food and Drug Administration
FFS Fee-for-Service
FSS Federal Supply Schedule
FY Fiscal Year
GAO Government Accountability Office
HAC Hospital-Acquired Condition
HAI Healthcare-Associated Infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and
Systems
HCERA Health Care and Education Reconciliation Act of 2010, Pub. L.
111-152
HCP Healthcare Personnel
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,
Pub. L. 104-191
HOPD Hospital OutPatient Department
Hospital OQR Hospital Outpatient Quality Reporting
ICR Intensive Cardiac Rehabilitation
IDE Investigational Device Exemption
IHS Indian Health Service
I/OCE Integrated Outpatient Code Editor
IOL Intraocular Lens
IPPS [Hospital] Inpatient Prospective Payment System
MAC Medicare Administrative Contractor
MedPAC Medicare Payment Advisory Commission
MIEA-TRHCA Medicare Improvements and Extension Act under Division B,
Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008,
Pub. L. 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, Pub. L. 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L.
110-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NHSN National Healthcare Safety Network
NCD National Coverage Determination
NQF National Quality Forum
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
OQR Outpatient Quality Reporting
PBD Provider-Based Department
PHP Partial Hospitalization Program
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
Hospital IQR Hospital Inpatient Quality Reporting
Hospital OQR Hospital Outpatient Quality Reporting
RHHI Regional Home Health Intermediary
SBA Small Business Administration
SCH Sole Community Hospital
SDP Single Drug Pricer
SI Status Indicator
TEP Technical Expert Panel
TOPs Transitional Outpatient Payments
VBP Value-Based Purchasing
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 Ambulatory Surgical Center (ASC) payment system. In addition, we
are proposing to make changes to the rules governing limitations on
certain physician referrals to hospitals in which physicians have an
ownership or investment interest, the provider agreement regulations on
patient notification requirements, and the rules governing the Hospital
Inpatient Value-Based Purchasing (VBP) Program. The provisions relating
to the OPPS are included in sections I. through XII. and

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section XIV. and sections XVII. through XXI. of this proposed rule.
Addenda A, B, C, D1, D2, E, L, M, and N, which relate to the OPPS, are
referenced in section XVII. of this proposed rule and are available via
the Internet on the CMS Web site at the URL indicated in section XVII.
The provisions related to the ASC payment system are included in
sections XIII., XIV., and XVII. through XXI. of this proposed rule.
Addenda AA, BB, DD1, DD2, and EE, which relate to the ASC payment
system, are referenced in section XVII. of this proposed rule and are
available via the Internet on the CMS Web site at the URL indicated in
section XVII. The provisions relating to physician referrals to
hospitals in which physicians have an ownership or investment interest
and to the provider agreement regulations on patient notification
requirements are included in section XV., and the provisions relating
to the Hospital Inpatient VBP Program are included in section XVI. of
this proposed rule.

Table of Contents

I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule
A. Legislative and Regulatory Authority for the Hospital
Outpatient Perspective 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. Summary of the Major Contents of This Proposed Rule
1. Proposed Updates Affecting OPPS Payments
2. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies
3. Proposed OPPS Payment for Devices
4. Proposed OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
5. Proposed Estimate of OPPS Transitional Pass-Through Spending
for Drugs, Biologicals, Radiopharmaceuticals, and Devices
6. Proposed OPPS Payment for Hospital Outpatient Visits
7. Proposed Payment for Partial Hospitalization Services
8. Proposed Procedures That Would Be Paid Only as Inpatient
Procedures
9. Proposed OPPS Policy Changes Relating to Supervision of
Hospital Outpatient Services
10. Proposed OPPS Payment Status and Comment Indicators
11. OPPS Policy and Payment Recommendations
12. Proposed Updates to the Ambulatory Surgical Center (ASC)
Payment System
13. Reporting Quality Data for Annual Payment Rate Updates
14. Proposed Changes to EHR Incentive Program for Eligible
Hospitals and CAHs Regarding Electronic Submission of Clinical
Quality Measures (CQMs)
15. Proposed Changes to Provisions Relating to Physician Self-
Referral Prohibition and Provider Agreement Regulations on Patient
Notification Requirements
16. Proposed Changes to the Hospital IQR Program Hospital
Inpatient VBP Program
17. Economic and Federalism Analyses
F. Public Comments Received on the CY 2011 OPPS/ASC Final Rule
With Comment Period
II. Proposed Updates Affecting OPPS Payments
A. Proposed Recalibration of APC Relative Weights
1. Database Construction
a. Database Source and Methodology
b. Proposed Use of Single and Multiple Procedure Claims
c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
2. Proposed Data Development Process and Calculation of Median
Costs
a. Claims Preparation
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure
Claims
(1) Splitting Claims
(2) Creation of ``Pseudo'' Single Procedure Claims
c. Completion of Claim Records and Median Cost Calculations
d. Proposed Calculation of Single Procedure APC Criteria-Based
Median Costs
(1) Device-Dependent APCs
(2) Blood and Blood Products
(3) Allergy Tests (APCs 0370 and 0381)
(4) Hyperbaric Oxygen Therapy (APC 0659)
(5) Payment for Ancillary Outpatient Services When Patient
Expires (APC 0375)
(6) Endovascular Revascularization of the Lower Extremity (APCs
0083, 0229, and 0319)
(7) Non-Congenital Cardiac Catheterization (APC 0080)
(8) Cranial Neurostimulator and Electrodes (APC 0318)
(9) Brachytherapy Sources
e. Proposed Calculation of Composite APC Criteria-Based Median
Costs
(1) Extended Assessment and Management Composite APCs (APCs 8002
and 8003)
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC
(APC 8001)
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite
APC (APC 8000)
(4) Mental Health Services Composite APC (APC 0034)
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006,
8007, and 8008)
(6) Cardiac Resynchronization Therapy Composite APC (APCs 0108,
0418, 0655, and 8009)
3. Proposed Changes to Packaged Services
a. Background
b. Packaging Issues
(1) CMS Presentation of Findings Regarding Expanded Packaging at
the February 28-March 1, 2011 APC Panel
(2) Packaging Recommendations of the APC Panel at Its February
28-March 1, 2011 Meeting
(3) Other Packaging Proposals for CY 2012
4. Proposed Calculation of OPPS Scaled Payment Weights
B. Proposed Conversion Factor Update
C. Proposed Wage Index Changes
D. Proposed Statewide Average Default CCRs
E. Proposed OPPS Payment to Certain Rural and Other Hospitals
1. Hold Harmless Transitional Payment Changes Made by Pub. L.
110-275 (MIPPA)
2. Proposed Adjustment for Rural SCHs and EACHs under Section
1833(t)(13)(B) of the Act
F. Proposed OPPS Payments to Certain Cancer Hospitals Described
by Section 1886(d)(1)(B)(v) of the Act
1. Background
2. Study of Cancer Hospital Costs Relative to Other Hospitals
3. CY 2011 Proposed Payment Adjustment for Certain Cancer
Hospitals
4. Proposed CY 2011 Cancer Hospital Payment Adjustment That Was
Not Finalized
5. Proposed Payment Adjustment for Certain Cancer Hospitals for
CY 2012
G. Proposed Hospital Outpatient Outlier Payments
1. Background
2. Proposed Outlier Calculation
3. Proposed Outlier Reconciliation
H. Proposed Calculation of an Adjusted Medicare Payment From the
National Unadjusted Medicare Payment
I. Proposed Beneficiary Copayments
1. Background
2. Proposed OPPS Copayment Policy
3. Proposed Calculation of an Adjusted Copayment Amount for an
APC Group
III. Proposed OPPS Ambulatory Payment Classification (APC) Group
Policies
A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes
1. Proposed Treatment of New Level II HCPCS Codes and Category I
CPT Vaccine Codes and Category III CPT Codes for Which We Are
Soliciting Public Comment in this CY 2012 Proposed Rule
2. Proposed Process for New Level II HCPCS Codes and Category I
and Category III CPT Codes for Which We Will Be Soliciting Public
Comments on the CY 2012 OPPS/ASC Final Rule With Comment Period
B. Proposed OPPS Changes--Variations Within APCs
1. Background
2. Application of the 2 Times Rule
3. Proposed Exceptions to the 2 Times Rule
C. Proposed New Technology APCs
1. Background
2. Proposed Movement of Procedures From New Technology APCs to
Clinical APCs
D. Proposed OPPS APC-Specific Policies
1. Revision/Removal of Neurostimulator Electrodes (APC 0687)
2. Computed Tomography of Abdomen and Pelvis (APCs 0331 and
0334)
3. Placement of Amniotic Membrane (APCs 0233 and 0244)

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4. Upper Gastrointestinal Services (APCs 0141, 0419, and 0422)
5. Pulmonary Rehabilitation (APC 0102)
6. Insertion/Replacement/Repair of AICD Leads, Generator, and
Pacing Electrodes (APC 0108)
IV. Proposed OPPS Payment for Devices
A. Proposed Pass-Through Payments for Devices
1. Expiration of Transitional Pass-Through Payments for Certain
Devices
a. Background
b. Proposed CY 2012 Policy
2. Proposed Provisions for Reducing Transitional Pass-Through
Payments To Offset Costs Packaged Into APC Groups
a. Background
b. Proposed CY 2012 Policy
B. Proposed Adjustment to OPPS Payment for No Cost/Full Credit
and Partial Credit Devices
1. Background
2. Proposed APCs and Devices Subject to the Adjustment Policy
V. Proposed OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
A. Proposed OPPS Transitional Pass-Through Payment for
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals
1. Background
2. Proposed Drugs and Biologicals With Expiring Pass-Through
Status in CY 2012
3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With
New or Continuing Pass-Through Status in CY 2012
4. Proposed Provisions for Reducing Transitional Pass-Through
Payments for Diagnostic Radiopharmaceuticals and Contrast Agents To
Offset Costs Packaged into APC Groups
a. Background
b. Proposed Payment Offset Policy for Diagnostic
Radiopharmaceuticals
c. Proposed Payment Offset Policy for Contrast Agents
B. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals Without Pass-Through Status
1. Background
2. Proposed Criteria for Packaging Payment for Drugs,
Biologicals, and Radiopharmaceuticals
a. Background
b. Proposed Cost Threshold for Packaging of Payment for HCPCS
Codes That Describe Certain Drugs, Nonimplantable Biologicals, and
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
c. Proposed Packaging Determination for HCPCS Codes That
Describe the Same Drug or Biological But Different Dosages
d. Proposed Packaging of Payment for Diagnostic
Radiopharmaceuticals, Contrast Agents, and Implantable Biologicals
(``Policy-Packaged'' Drugs and Devices)
3. Proposed Payment for Drugs and Biologicals Without Pass-
Through Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs
(SCODs) and Other Separately Payable and Packaged Drugs and
Biologicals
b. Proposed Payment Policy
c. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
4. Proposed Payment for Blood Clotting Factors
5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital
Claims Data
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for
Drugs, Biologicals, Radiopharmaceuticals, and Devices
A. Background
B. Proposed Estimate of Pass-Through Spending
VII. Proposed OPPS Payment for Hospital Outpatient Visits
A. Background
B. Proposed Policies for Hospital Outpatient Visits
1. Clinic Visits: New and Established Patient Visits
2. Emergency Department Visits
3. Visit Reporting Guidelines
VIII. Proposed Payment for Partial Hospitalization Services
A. Background
B. Proposed PHP APC Update for CY 2012
C. Proposed Separate Threshold for Outlier Payments to CMHCs
IX. Proposed Procedures That Would Be Paid Only as Inpatient
Procedures
A. Background
B. Proposed Changes to the Inpatient List
X. Proposed Policies on the Supervision Standards for Outpatient
Services in Hospitals and CAHs
A. Background
B. Issues Regarding the Supervision of Hospital Outpatient
Therapeutic Services Raised by Hospitals and Other Stakeholders
1. Independent Review Process
2. Conditions of Payment and Hospital Outpatient Therapeutic
Services Described by Different Benefit Categories
C. Proposed Policies on Supervision Standards for Outpatient
Therapeutic Services in Hospitals and CAHs
1. Selection of Review Entity
2. Review Process
3. Evaluation Criteria
4. Conditions of Payment and Hospital Outpatient Therapeutic
Services Described by Different Benefit Categories
5. Technical Corrections to the Supervision Standards for
Hospital Outpatient Therapeutic Services Furnished in Hospitals or
CAHs
6. Summary
XI. Proposed OPPS Payment Status and Comment Indicators
A. Proposed OPPS Payment Status Indicator Definitions
1. Proposed Payment Status Indicators To Designate Services That
Are Paid Under the OPPS
2. Proposed Payment Status Indicators To Designate Services That
Are Paid Under a Payment System Other Than the OPPS
3. Proposed Payment Status Indicators To Designate Services That
Are Not Recognized Under the OPPS But That May Be Recognized by
Other Institutional Providers
4. Proposed Payment Status Indicators To Designate Services That
Are Not Payable by Medicare on Outpatient Claims
B. Proposed Comment Indicator Definitions
XII. OPPS Policy and Payment Recommendations
A. MedPAC Recommendations
B. APC Panel Recommendations
C. OIG Recommendations
XIII. Proposed Updates to the Ambulatory Surgical Center (ASC)
Payment System
A. Background
1. Legislative Authority for the ASC Payment System
2. Prior Rulemaking
3. Policies Governing Changes to the Lists of Codes and Payment
Rates for ASC Covered Surgical Procedures and Covered Ancillary
Services
B. Proposed Treatment of New Codes
1. Proposed Process for Recognizing New Category I and Category
III CPT Codes and Level II HCPCS Codes
2. Proposed Treatment of New Level II HCPCS Codes and Category
III CPT Codes Implemented in April and July 2011
3. Proposed Process for New Level II HCPCS Codes and Category I
and Category III CPT Codes for Which We Will Be Soliciting Public
Comments in the CY 2012 OPPS/ASC Final Rule With Comment Period
C. Proposed Update to the List of ASC Covered Surgical
Procedures and Covered Ancillary Services
1. Covered Surgical Procedures
a. Proposed Additions to the List of ASC Covered Surgical
Procedures
b. Proposed Covered Surgical Procedures Designated as Office-
Based
(1) Background
(2) Proposed Changes for CY 2012 to Covered Surgical Procedures
Designated as Office-Based
c. Proposed ASC Covered Surgical Procedures Designated as
Device-Intensive
(1) Background
(2) Proposed Changes to List of Covered Surgical Procedures
Designated as Device-Intensive for CY 2012
d. ASC Treatment of Surgical Procedures Proposed for Removal
from the OPPS Inpatient List for CY 2012
2. Covered Ancillary Services
D. Proposed ASC Payment for Covered Surgical Procedures and
Covered Ancillary Services
1. Proposed Payment for Covered Surgical Procedures
a. Background
b. Proposed Update to ASC-Covered Surgical Procedure Payment
Rates for CY 2012
c. Proposed Adjustment to ASC Payments for No Cost/Full Credit
and Partial Credit Devices
d. Proposed Payment for the Cardiac Resynchronization Therapy
Composite
2. Proposed Payment for Covered Ancillary Services
a. Background
b. Proposed Payment for Covered Ancillary Services for CY 2012

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E. New Technology Intraocular Lenses (NTIOLs)
1. NTIOL Cycle and Evaluation Criteria
2. NTIOL Application Process for Payment Adjustment
3. Requests To Establish New NTIOL Classes for CY 2012 and
Deadline for Public Comments
4. Proposed Payment Adjustment
F. Proposed ASC Payment and Comment Indicators
1. Background
2. Proposed ASC Payment and Comment Indicators
G. ASC Policy and Payment Recommendations
H. Calculation of the Proposed ASC Conversion Factor and the
Proposed ASC Payment Rates
1. Background
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2012 and
Future Years
b. Updating the ASC Conversion Factor With Application of a
Productivity Adjustment to the Update Factor
3. Display of Proposed CY 2012 ASC Payment Rates
XIV. Hospital Outpatient Quality Reporting Program Updates and ASC
Quality Reporting
A. Background
1. Overview
2. Statutory History of Hospital Outpatient Quality Reporting
(Hospital OQR) Program
3. Technical Specification Updates and Data Publication
a. Maintenance of Technical Specifications for Quality Measures
b. Publication of Hospital OQR Program Data
B. Proposed Revision to Measures Previously Adopted for the
Hospital OQR Program for the CY 2012, CY 2013, and CY 2014 Payment
Determinations
1. Background
2. Proposed Revision to Hospital OQR Program Measures Previously
Adopted for the CY 2013 Payment Determination
C. Proposed New Quality Measures for the CY 2014 and CY 2015
Payment Determinations
1. Considerations in Expanding and Updating Quality Measures
Under Hospital OQR Program
2. Proposed New Hospital OQR Program Quality Measures for the CY
2014 Payment Determination
a. Proposed New National Healthcare Safety Network (NHSN)
Healthcare Associated Infection (HAI) Measure for the CY 2014
Payment Determination: Surgical Site Infection (NQF 0299)
b. Proposed New Chart--Abstracted Measures for CY 2014 Payment
Determination
(1) Diabetes: Hemoglobin A1c Management (NQF 0059)
(2) Diabetes Measure Pair: A. Lipid Management: Low Density
Lipoprotein Cholesterol (LDL-C) <130, B. Lipid Management: LDL-C
<100 (NQF 0064)
(3) Diabetes: Blood Pressure Management (NQF 0061)
(4) Diabetes: Eye Exam (NQF 0055)
(5) Diabetes: Urine Protein Screening (NQF 0062)
(6) Cardiac Rehabilitation: Patient Referral From an Outpatient
Setting (NQF 0643)
c. Proposed New Structural Measures
(1) Safe Surgery Checklist Use
(2) Submission of Hospital Outpatient Department Volume for
Selected Outpatient Surgical Procedures
3. Proposed Hospital OQR Program Measures for the CY 2015
Payment Determination
a. Proposed Retention of CY 2014 Hospital OQR Measures for the
CY 2015 Payment Determination
b. Proposed New NHSN HAI Measure for the CY 2015 Payment
Determination
D. Possible Quality Measures Under Consideration for Future
Inclusion in the Hospital OQR Program
E. Proposed Payment Reduction for Hospitals That Fail To Meet
the Hospital OQR Requirements for the CY 2012 Payment Update
1. Background
2. Proposed Reporting Ratio Application and Associated
Adjustment Policy for CY 2012
F. Extraordinary Circumstances Extension or Waiver for CY 2012
and Subsequent Years
G. Proposed Requirements for Reporting of Hospital OQR Data for
CY 2013 and Subsequent Years
1. Administrative Requirements for CY 2013 and Subsequent Years
2. Form, Manner, and Timing of Data Submission for CY 2013 and
Subsequent Years
a. Proposed CY 2013 and CY 2014 Data Submission Requirements for
Chart-Abstracted Data Submission
b. Proposed Encounter Threshold for Allowance of Sampling for CY
2013 and Subsequent Years
c. Proposed Population and Sampling Data Requirements Beginning
With the CY 2013 Payment Determination
d. Proposed Claims-Based Measure Data Requirements for the CY
2013 Payment Determination
e. Proposed Structural Measure Data Requirements for the CY 2013
and CY 2014 Payment Determinations
f. Proposed Data Submission Deadlines for the Proposed NHSN HAI
Surgical Site Infection Measure for the CY 2014 Payment
Determination
g. Proposed Data Submission Requirements for ED--Patient Left
Before Being Seen Measure Data for the CY 2013 and CY 2014 Payment
Determinations
3. Hospital OQR Validation Requirements for Chart-Abstracted
Data Submitted Directly to CMS: Proposed Data Validation Approach
for the CY 2013 Payment Determination
a. Randomly Selected Hospitals
b. Proposed Use of Targeting Criteria for Data Validation
Selection for CY 2013
(1) Background
(2) Proposed Targeting Criteria for Data Validation Selection
for CY 2013
c. Encounter Selection
d. Validation Score Calculation
4. Additional Data Validation Conditions Under Consideration for
CY 2014 and Subsequent Years
H. Proposed Hospital OQR Reconsideration and Appeals Procedures
for CY 2013 and Subsequent Years
I. Electronic Health Records (EHRs)
J. 2012 Medicare EHR Incentive Program Electronic Reporting
Pilot for Hospitals and CAHs
1. Background
2. Proposed Medicare EHR Incentive Program Electronic Reporting
Pilot for Eligible Hospitals and CAHs
3. CQM Reporting Under the Electronic Reporting Pilot
K. Proposed ASC Quality Reporting Program
1. Background
2. ASC Quality Reporting Program Measure Selection
a. Proposed Timetable for Selecting ASC Quality Measures
b. Considerations in the Selection of Measures for the ASC
Quality Reporting Program
3. Proposed Quality Measures for ASCs for CY 2014 Payment
Determination
a. Proposed Claims-Based Measures Requiring Submission of
Quality Data Codes (QDCs) Beginning January 1, 2012
(1) Patient Burns (NQF 0263)
(2) Patient Falls (NQF 0266)
(3) Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure,
Wrong Implant (NQF 0267)
(4) Hospital Transfer/Admission (NQF 0265)
(5) Prophylactic IV Antibiotic Timing (NQF 0264)
(6) Ambulatory Patient with Appropriate Method of Surgical Hair
Removal (NQF 0515)
(7) Prophylactic Antibiotic Selection for Surgical Patients (NQF
0528)
b. Surgical Site Infection Rate (NQF 0299)
4. Proposed ASC Quality Measures for the CY 2015 Payment
Determination
a. Retention of Measures Adopted for the CY 2014 Payment
Determination in the CY 2015 Payment Determination
b. Proposed Structural Measures for the CY 2015 Payment
Determination
(1) Safe Surgery Checklist Use
(2) ASC Facility Volume Data on Selected ASC Surgical Procedures
5. Proposed ASC Quality Measures for the CY 2016 Payment
Determination
a. Retention of Measures Adopted for the CY 2015 Payment
Determination in the CY 2016 Payment Determination
b. Proposed HAI Measure: Influenza Vaccination Coverage among
Healthcare Personnel (HCP) (NQF 0431)
6. ASC Measure Topics for Future Considerations
7. Technical Specification Updates and Data Publication for the
CY 2014 Payment Determination
a. Maintenance of Technical Specifications for Quality Measures
b. Publication of ASC Quality Reporting Program Data
8. Proposed Requirements for Reporting of ASC Quality Data for
the CY 2014 Payment Determination

[[Page 42175]]

a. Proposed Data Collection and Submission Requirements for the
Proposed Claims-Based Measures
b. Proposed Data Submission Deadlines for the Proposed Surgical
Site Infection Rate Measure
XV. Proposed Changes to Whole Hospital and Rural Provider Exceptions
to the Physician Self-Referral Prohibition: Exception for Expansion
of Facility Capacity; and Proposed Changes to Provider Agreement
Regulations on Patient Notification Requirements
A. Background
B. Changes Made by the Affordable Care Act
1. Changes Relating to Exception to Ownership and Investment
Prohibition (Section 6001(a) of the Affordable Care Act)
2. Provisions of Section 6001(a)(3) of the Affordable Care Act
C. Proposed Changes Relating to the Process for an Exception to
the Prohibition on Expansion of Facility Capacity
1. Applicable Hospital
a. Percentage Increase in Population
b. Inpatient Admissions
c. Nondiscrimination
d. Bed Capacity
e. Bed Occupancy
2. High Medicaid Facility
a. Number of Hospitals in County
b. Inpatient Admissions
c. Nondiscrimination
3. Procedures for Submitting a Request
4. Community Input
5. Permitted Increase
a. Amount of Permitted Increase
b. Location of Permitted Increase
6. Decisions
7. Limitation on Review
8. Frequency of Request
D. Proposed Changes Related to Provider Agreement Regulations on
Patient Notification Requirements
XVI. Additional Proposals for the Hospital Inpatient Value-Based
Purchasing (Hospital VBP) Program
A. Hospital VBP Program
1. Legislative Background
2. Overview of the Hospital Inpatient VBP Program Final Rule
3. Proposed Additional FY 2014 Hospital VBP Program Measures
4. Proposed Minimum Number of Cases and Measures for the Outcome
Domain for the FY 2014 Hospital VBP Program
a. Background
b. Proposed Minimum Number of Cases for Mortality Measures, AHRQ
Composite Measures, and HAC Measures
c. Proposed Minimum Number of Measures for Outcome Domain
5. Proposed Performance Periods and Baseline Periods for FY 2014
Measures
a. Proposed Clinical Process of Care Domain and Patient
Experience of Care Domain Performance Periods and Baseline Periods
b. Proposed Outcome Domain Performance Periods and Baseline
Periods
6. Proposed Performance Standards for the FY 2014 Hospital VBP
Program
a. Background
(1) Mortality Measures
(2) Proposed Medicare Spending per Beneficiary
b. Proposed Clinical Process of Care and Patient Experience of
Care FY 2014 Performance Standards
c. AHRQ Measures
d. HAC Measures
7. Proposed FY 2014 Hospital VBP Program Scoring Methodology
a. Proposed FY 2014 Domain Scoring Methodology
b. Proposed HAC Measure Scoring Methodology
8. Ensuring HAC Reporting Accuracy
9. Proposed Domain Weighting for FY 2014 Hospital VBP Program
B. Proposed Review and Correction Process under the Hospital VBP
Program
1. Background
2. Proposed Review and Correction of Data Submitted to the QIO
Clinical Warehouse on Chart-Abstracted Process of Care Measures and
Measure Rates
3. Proposed Review and Correction Process for Hospital Consumer
Assessment of Healthcare Providers and Systems (HCAHPS)
a. Phase One: Review and Correction of HCAHPS Data Submitted to
the QIO Clinical Warehouse
b. Phase Two: Review and Correction of the HCAHPS Scores for the
Hospital VBP Program
XVII. Files Available to the Public via the Internet
A. Information in Addenda Related to the Proposed CY 2012
Hospital OPPS
B. Information in Addenda Related to the Proposed CY 2012 ASC
Payment System
XVIII. Collection of Information Requirements
A. Legislative Requirements for Solicitation of Comments
B. Requirements in Regulation Text
1. ICRs Regarding Basic Commitments of Providers (Sec. 489.20)
2. ICRs Regarding Exceptions Process Related to the Prohibition
of Expansion of Facility Capacity (Sec. 411.362)
C. Proposed Associated Information Collections Not Specified in
Regulatory Text
1. Hospital Outpatient Quality Reporting (Hospital OQR) Program
2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY
2014, and CY 2015 Payment Determinations
a. Previously Adopted Hospital OQR Program Measures for the CY
2012, CY 2013, and CY 2014 Payment Determinations
b. Additional Proposed Hospital OQR Program Measures for CY 2014
c. Proposed Hospital OQR Program Measures for CY 2015
3. Proposed Hospital OQR Program Validation Requirements for CY
2013
4. Proposed Hospital OQR Program Reconsideration and Appeals
Procedures
5. ASC Quality Reporting Program
6. Proposed 2012 Medicare EHR Incentive Program Electronic
Reporting Pilot for Hospitals and CAHs
7. Additional Topics
XIX. Response to Comments
XX. Economic Analysis
A. Regulatory Impact Analysis
1. Introduction
2. Statement of Need
3. Overall Impacts for Proposed OPPS and ASC Provisions
4. Detailed Economic Analysis
a. Effects of Proposed OPPS Changes in This Proposed Rule
(1) Limitations of Our Analysis
(2) Estimated Effects of This Proposed Rule on Hospitals
(3) Estimated Effects of This Proposed Rule on CMHCs
(4) Estimated Effect of This Proposed Rule on Beneficiaries
(5) Estimated Effects on Other Providers
(6) Estimated Effects on the Medicare and Medicaid Programs
(7) Alternative Considered
b. Effects of Proposed ASC Payment System Changes in This
Proposed Rule
(1) Limitations of Our Analysis
(2) Estimated Effects of This Proposed Rule on Payments to ASCs
(3) Estimated Effect of This Proposed Rule on Beneficiaries
(4) Alternatives Considered
c. Accounting Statements and Tables
d. Effect of Proposed Requirements for the Hospital Outpatient
Quality Reporting (OQR) Program
e. Effects of Proposed Changes to Physician Self-Referral
Regulations
f. Effects of Proposed Changes to Provider Agreement Regulations
on Patient Notification Requirements
g. Effect of Additional Proposed Changes to the Hospital VBP
Program Requirements
h. Effects of Proposed Medicare EHR Incentive Program Reporting
Pilot
B. Regulatory Flexibility Act (RFA) Analysis
C. Unfunded Mandates Reform Act Analysis
D. Conclusion
XXI. Federalism Analysis

Regulation Text

I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule

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 of 1997 (BBA) (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,

[[Page 42176]]

2000. Implementing regulations for the OPPS are located at 42 CFR part
419.
The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of
1999 (BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS.
The following Acts made additional changes to the OPPS: the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA) (Pub. L. 106-554); the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (MMA) (Pub. L. 108-173); the Deficit
Reduction Act of 2005 (DRA) (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 of 2006 (MIEA-TRHCA)
(Pub. L. 109-432), enacted on December 20, 2006; the Medicare,
Medicaid, and SCHIP Extension Act of 2007 (MMSEA) (Pub. L. 110-173),
enacted on December 29, 2007; the Medicare Improvements for Patients
and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), enacted on July
15, 2008; and most recently the Patient Protection and Affordable Care
Act (Pub. L. 111-148), enacted on March 23, 2010, as amended by the
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152),
enacted on March 30, 2010. (These two public laws are collectively
known as the Affordable Care Act, and most recently the Medicare and
Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309).)
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) (which include
certain Current Procedural Terminology (CPT) codes) to identify and
group the services within each APC group. The OPPS includes payment for
most hospital outpatient services, except those identified in section
I.B. of this proposed rule. Section 1833(t)(1)(B) 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.
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, 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, 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. It
also excludes screening mammography, diagnostic mammography, and
effective January 1, 2011, an annual wellness visit providing
personalized prevention plan services. 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 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 42 CFR 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 (IHS) 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.gov/HospitalOutpatientPPS/. The CY 2011 OPPS/ASC final rule
with comment period appears in the November 24,

[[Page 42177]]

2010 Federal Register (75 FR 71800). 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 2011 OPPS on the
basis of claims data from January 1, 2009, through December 31, 2009,
and to implement certain provisions of the Affordable Care Act. In
addition, we responded to public comments received on the provisions of
the CY 2010 final rule with comment period (74 FR 60316) pertaining to
the APC assignment of HCPCS codes identified in Addendum B to that rule
with the new interim (``NI'') comment indicator, and public comments
received on the August 3, 2010 OPPS/ASC proposed rule for CY 2011 (75
FR 46170).

D. Advisory Panel on Ambulatory Payment Classification (APC) Groups

1. Authority of the Advisory Panel on Ambulatory Payment Classification
(APC) Groups (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 APC Panel, discussed under section I.D.2. of
this proposed rule, fulfills these requirements. The APC Panel is not
restricted to using data compiled by CMS, and it may use data collected
or developed by organizations outside the Department in conducting its
review.
2. Establishment of the APC Panel
On November 21, 2000, the Secretary signed the initial charter
establishing the APC Panel. This expert panel, which may be composed of
up to 15 representatives of providers (currently employed full-time,
not as consultants, in their respective areas of expertise) subject to
the OPPS, reviews clinical data and advises CMS about the clinical
integrity of the APC groups and their payment weights. The APC Panel is
technical in nature, and it is governed by the provisions of the
Federal Advisory Committee Act (FACA). Since its initial chartering,
the Secretary has renewed the APC Panel's charter five times: on
November 1, 2002; on November 1, 2004; on November 21, 2006; on
November 2, 2008 and November 12, 2010. 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 Official (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 multiple meetings, with the
last meeting taking place on February 28-March 1, 2011. 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
Subcommittee for APC Groups and Status Indicator (SI) Assignments
(previously known as 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
Subcommittee for APC Groups and SI Assignments advises the Panel on the
following issues: the appropriate SIs to be assigned to HCPCS codes,
including but not limited to whether a HCPCS code or a category of
codes should be packaged or separately paid; and the appropriate APCs
to be assigned to HCPCS codes regarding services for which separate
payment is made.
Each of these subcommittees was established by a majority vote from
the full APC Panel during a scheduled APC Panel meeting, and the APC
Panel recommended that the subcommittees continue at the February/March
2011 APC Panel meeting. 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 February/March 2011 APC Panel meeting are included in the sections
of this proposed rule that are specific to each recommendation. For
discussions of earlier APC Panel meetings and recommendations, we refer
readers to previously published hospital OPPS/ASC proposed and final
rules, the CMS Web site mentioned earlier in this section, and the FACA
database at: http://fido.gov/facadatabase/public.asp.

E. Summary of the Major Contents of This CY 2012 OPPS/ASC Proposed Rule

In this proposed rule, we set forth proposed changes to the
Medicare hospital OPPS for CY 2012 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 2012, including proposed updated payment weights,
covered surgical procedures, and covered ancillary items and services
based on the proposed OPPS update. In addition, we are proposing to
make changes to the rules governing limitations on certain physician
referrals to hospitals in which physicians have an ownership or
investment interest, provider agreement regulations on patient
notification requirements, and the rules governing the Hospital
Inpatient Value-Based Purchasing (VBP) Program.
The following is a summary of the major changes that we are
proposing to make for CY 2012:
1. Proposed Updates Affecting OPPS Payments
In section II. of this proposed rule, we set forth--
The methodology used to recalibrate the proposed APC
relative payment weights.
The proposed changes to packaged services.
The proposed update to the conversion factor used to
determine payment rates under the OPPS. In this section, we are
proposing 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

[[Page 42178]]

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, extended
by section 3121 of the Affordable Care Act.
The proposed payment adjustment for rural SCHs.
The proposed calculation of the hospital outpatient
outlier payment.
The calculation of the proposed national unadjusted
Medicare OPPS payment.
The proposed beneficiary copayments for OPPS services.
2. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies
In section III. of this proposed rule, we discuss--
The proposed additions of new HCPCS codes to APCs.
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. Proposed OPPS Payment for Devices
In section IV. of this proposed rule, we discuss 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. Proposed OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals
In section V. of this proposed rule, we discuss the proposed CY
2012 OPPS payment for drugs, biologicals, and radiopharmaceuticals,
including the proposed payment for drugs, biologicals, and
radiopharmaceuticals with and without pass-through status.
5. Proposed Estimate of OPPS Transitional Pass-Through Spending for
Drugs, Biologicals, Radiopharmaceuticals, and Devices
In section VI. of this proposed rule, we discuss the estimate of CY
2012 OPPS transitional pass-through spending for drugs, biologicals,
and devices.
6. Proposed OPPS Payment for Hospital Outpatient Visits
In section VII. of this proposed rule, we set forth our proposed
policies for the payment of clinic and emergency department visits and
critical care services based on claims data.
7. Proposed Payment for Partial Hospitalization Services
In section VIII. of this proposed rule, we set forth our proposed
payment for partial hospitalization services, including the proposed
separate threshold for outlier payments for CMHCs.
8. Proposed Procedures That Would Be Paid Only as Inpatient Procedures
In section IX. of this proposed rule, we discuss the procedures
that we are proposing to remove from the inpatient list and assign to
APCs for payment under the OPPS.
9. Proposed Policies on Supervision Standards for Outpatient Services
in Hospitals and CAHs
In section X. of this proposed rule, we discuss proposed policy
changes relating to the supervision of outpatient services furnished in
hospitals and CAHs.
10. Proposed OPPS Payment Status and Comment Indicators
In section XI. of this proposed rule, we discuss our proposed
changes to the definitions of status indicators assigned to APCs and
present our proposed comment indicators.
11. OPPS Policy and Payment Recommendations
In section XII. of this proposed rule, we address recommendations
made by the Medicare Payment Advisory Commission (MedPAC) in its March
2011 report to Congress, by the Office of Inspector General (OIG), and
by the APC Panel regarding the OPPS for CY 2012.
12. Proposed Updates to the Ambulatory Surgical Center (ASC) Payment
System
In section XIII. of this proposed rule, we discuss the proposed
updates of the revised ASC payment system and payment rates for CY
2012.
13. Reporting Quality Data for Annual Payment Rate Updates
In section XIV. of this proposed rule, we discuss the proposed
measures for reporting hospital outpatient quality data for the OPD fee
schedule increase factor for CY 2013 and subsequent calendar years; set
forth the requirements for data collection and submission; and discuss
the reduction to the OPPS OPD fee schedule increase factor for
hospitals that fail to meet the Hospital OQR Program requirements. We
also discuss proposed measures for reporting ASC quality data for the
annual payment update factor for CYs 2014, 2015, and 2016; and set
forth the requirements for data collection and submission for the
annual payment update.
14. Proposed Changes to EHR Incentive Program for Eligible Hospitals
and CAHs Regarding Electronic Submission of Clinical Quality Measures
(CQMs)
In section XIV.J. of this proposed rule, we are proposing to allow
eligible hospitals and CAHs participating in the Medicare EHR Incentive
Program to meet the CQM reporting requirement of the EHR Incentive
Program for payment year 2012 by participating in the 2012 Medicare EHR
Incentive Program Electronic Reporting Pilot.
15. Proposed Changes to Provisions Relating to Physician Self-Referral
Prohibition and Provider Agreement Regulations on Patient Notification
Requirements
In section XV. of this proposed rule, we present our proposed
exception process for expansion of facility capacity under the whole
hospital and rural provider exceptions to the physician self-referral
law, and proposed changes to the provider agreement regulations on
patient notification requirements.
16. Additional Proposed Changes Relating to the Hospital Inpatient VBP
Program
In section XVI. of this proposed rule, we present our proposed
requirements for the FY 2014 Hospital Inpatient VBP Program.
17. Economic and Federalism Analyses
In sections XX. and XXI. of this proposed rule, we set forth an
analysis of the regulatory and federalism impacts that the proposed
changes would have on affected entities and beneficiaries.

F. Public Comments Received on the CY 2011 OPPS/ASC Final Rule With
Comment Period

We received approximately 43 timely pieces of correspondence on the
CY 2011 OPPS/ASC final rule with comment period that appeared in the
Federal Register on November 24, 2010 (75 FR 71800), some of which
contained multiple comments on the interim APC assignments and/or
status indicators of HCPCS codes identified with comment indicator
``NI'' in Addendum B to that final rule with comment period. We will

[[Page 42179]]

present summaries of those public comments on topics open to comment in
the CY 2012 OPPS/ASC final rule with comment period and our responses
to them under appropriate headings.

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Weights

1. Database Construction
a. Database Source and Methodology
Section 1833(t)(9)(A) of the Act requires that the Secretary review
and revise the relative payment weights for APCs at least annually. In
the April 7, 2000 OPPS final rule with comment period (65 FR 18482), we
explained in detail how we calculated the relative payment weights that
were implemented on August 1, 2000 for each APC group.
For the CY 2012 OPPS, we are proposing to recalibrate the APC
relative payment weights for services furnished on or after January 1,
2012, and before January 1, 2013 (CY 2012), using the same basic
methodology that we described in the CY 2011 OPPS/ASC final rule with
comment period. That is, we are proposing to recalibrate the relative
payment weights for each APC based on claims and cost report data for
hospital outpatient department (HOPD) services, using the most recent
available data to construct a database for calculating APC group
weights. For the purpose of recalibrating the proposed APC relative
payment weights for CY 2012, we used approximately 138 million final
action claims (claims for which all disputes and adjustments have been
resolved and payment has been made) for hospital outpatient department
services furnished on or after January 1, 2010, and before January 1,
2011. (For exact counts of claims used, we refer readers to the claims
accounting narrative under supporting documentation for this proposed
rule on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/.)
Of the 138 million final action claims for services provided in
hospital outpatient settings used to calculate the proposed CY 2012
OPPS payment rates for this proposed rule, approximately 105 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 105 million claims, approximately 3
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 approximately 102 million claims, we created approximately
100 million single records, of which approximately 67 million were
``pseudo'' single or ``single session'' claims (created from
approximately 23 million multiple procedure claims using the process we
discuss later in this section). Approximately 888,000 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 proposed rule, our data development process is designed with the
goal of using appropriate cost information in setting the APC relative
weights. The bypass process is described in section II.A.1.b. of this
proposed rule. This section discusses how we develop ``pseudo'' single
procedure claims (as defined below), 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 are proposing to only
use claims (or portions of each claim) that are appropriate for
ratesetting purposes. Ultimately, we were able to use for CY 2012
ratesetting some portion of approximately 94 percent of the CY 2010
claims containing services payable under the OPPS.
The proposed APC relative weights and payments for CY 2012 in
Addenda A and B to this proposed rule (which are referenced in section
XVII. of this proposed rule and available via the Internet on the CMS
Web site) were calculated using claims from CY 2010 that were processed
before January 1, 2011, and continue to be based on the median hospital
costs for services in the APC groups. Under the proposed methodology,
we select claims for services paid under the OPPS and match 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 2012 payment
rates.
b. Proposed Use of Single and Multiple Procedure Claims
For CY 2012, in general, we are proposing to continue to use single
procedure claims to set the medians on which the APC relative payment
weights would be based, with some exceptions as discussed below in this
section. We generally use single procedure claims to set the median
costs for APCs because we believe that the OPPS relative weights on
which payment rates are based should be derived from the costs of
furnishing one unit of 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.
It is generally desirable to use the data from as many claims as
possible to recalibrate the APC relative payment weights, including
those claims for multiple procedures. As we have for several years, we
are proposing to continue 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
enabled us to create multiple ``pseudo'' single procedure 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
procedure claims. The history of our use of a bypass list to generate
``pseudo'' single procedure claims is well documented, most recently in
the CY 2011 OPPS/ASC final rule with comment period (75 FR 71811
through 71822). In addition, for CY 2008, we increased packaging and
created the first composite APCs. We have continued our packaging
policies and the creation of composite APCs for CY 2009, 2010, and
2011, and we are proposing to continue them for CY 2012. Increased
packaging and creation of composite APCs 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

[[Page 42180]]

the number of bills we were able to use to calculate APC median costs.
We have continued the composite APCs for multiple imaging services for
CYs 2010 and 2011, and we are proposing to continue to create them for
CY 2012. We refer readers to section II.A.2.e. of this proposed rule
for discussion of the use of claims to establish median costs for
composite APCs.
We are proposing to continue to apply these processes to enable us
to use as much claims data as possible for ratesetting for the CY 2012
OPPS. This methodology enabled us to create, for this proposed rule,
approximately 67 million ``pseudo'' single procedure claims, including
multiple imaging composite ``single session'' bills (we refer readers
to section II.A.2.e.(5) of the proposed rule for further discussion),
to add to the approximately 33 million ``natural'' single procedure
claims. For this proposed rule, ``pseudo'' single procedure and
``single session'' procedure bills represented approximately 67 percent
of all single procedure bills used to calculate median costs.
For CY 2012, we are proposing to bypass 460 HCPCS codes for CY 2012
that are identified in Addendum N to this proposed rule (which is
referenced in section XVII. of this proposed rule and available via the
Internet on the CMS Web site). Since the inception of the bypass list,
which is the list of codes to be bypassed to convert multiple procedure
claims to ``pseudo'' single procedure claims, 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 updated year's data (for CY 2012, data
available for the February 28-March 1, 2011 APC Panel meeting from CY
2010 claims processed through September 30, 2010, and CY 2009 claims
data processed through June 30, 2010, used to model the payment rates
for CY 2011) to determine whether it would be appropriate to propose to
add additional codes to the previous year's bypass list. For CY 2012,
we are proposing to continue to bypass all of the HCPCS codes on the CY
2011 OPPS bypass list because they continue to meet the established
empirical criteria for the bypass list. We updated HCPCS codes on the
CY 2011 bypass list that were mapped to new HCPCS codes for CY 2012
ratesetting by evaluating data for the replacement codes under the
empirical criteria described below and also removing the HCPCS codes
that we are proposing to be deleted for CY 2012, which are listed in
Table 1 of this proposed rule. We also are proposing to remove HCPCS
codes that are not separately paid under the OPPS because the purpose
of the bypass list is to obtain more data for those codes relevant to
ratesetting. None of these deleted codes were ``overlap bypass codes''
(those HCPCS codes that are both on the bypass list and are members of
the multiple imaging composite APCs). We also are proposing to add to
the bypass list for CY 2012 all HCPCS codes not on the CY 2011 bypass
list that, using either the CY 2011 final rule data (CY 2009 claims) or
the February 28-March 1, 2011 APC Panel data (first 9 months of CY 2010
claims), met the empirical criteria for the bypass list that are
summarized below. The entire list proposed for CY 2012 (including the
codes that remain on the bypass list from prior years) is open to
public comment. 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 assumed that the representation of
packaging on ``natural'' single procedure claims for any given code is
comparable to packaging for that code in the multiple procedure claims.
The proposed criteria for the bypass list are:
There are 100 or more ``natural'' single procedure claims
for the code. This number of single procedure 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 procedure
claims for the code have packaged costs on that single procedure 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 procedure claims is equal to or less than $55. This criterion
also limits the amount of error in redistributed costs. During the
assessment of claims against the bypass criteria, we do not know the
dollar value of the packaged cost that should be appropriately
attributed to the other procedures on the claim. Therefore, 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.
In response to comments to the CY 2010 OPPS/ASC proposed rule
requesting that the packaged cost threshold be updated, we considered
whether it would be appropriate to update the $50 packaged cost
threshold for inflation when examining potential bypass list additions.
As discussed in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60328), the real value of this packaged cost threshold criterion has
declined due to inflation, making the packaged cost threshold more
restrictive over time when considering additions to the bypass list.
Therefore, adjusting the threshold by the market basket would prevent
continuing decline in the threshold's real value. For CY 2011, based on
CY 2009 claims data, we proposed to apply the final market basket of
3.6 percent published in the CY 2009 OPPS/ASC final rule with comment
period (73 FR 26584) to the $50 packaged cost threshold used in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60325). This
calculation led us to a proposed packaged cost threshold for bypass
list additions for CY 2011 of $50 ($51.80 rounded to $50). We stated
that we believe that applying the market basket from the year of claims
data to the packaged cost threshold, rounded to the nearest $5
increment, would appropriately account for the effects of inflation
when considering additions to the bypass list because the market basket
increase percentage reflects the extent to which the price of inputs
for hospital services has increased compared to the price of inputs for
hospital services in the prior year. We are proposing for CY 2012,
based on the same rationale described for the CY 2011 OPPS/ASC final
rule with comment period (75 CFR 71812), to continue to update the
packaged cost threshold by the market basket. By applying the final CY
2011 market basket increase of 1.85 percent to the prior non-rounded
dollar threshold of $51.80 (75 FR 71812), we determined that the
threshold increases for CY 2012 to $55 ($52.76 rounded to $55, the
nearest $5 increment). Therefore, we are proposing to set the median
packaged cost threshold on the CY 2010 claims at $55 for a code to be
considered for addition to the CY 2012 OPPS bypass list.
The code is not a code for an unlisted service.
In addition, we are proposing to continue to include, on the bypass
list, HCPCS codes that CMS medical advisors believe have minimal
associated packaging based on their clinical assessment of the complete
CY 2012 OPPS proposal. Some of these

[[Page 42181]]

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. We also are proposing to
continue to include on the bypass list certain HCPCS codes in order to
purposefully direct the assignment of packaged costs to a companion
code where services always appear together and where there would
otherwise be few single procedure 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, the program logic for creating ``pseudo''
single procedure claims from bypassed codes that are also members of
multiple imaging composite APCs changed. When creating the set of
``pseudo'' single procedure claims, claims that contain ``overlap
bypass codes'' (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 procedure claims. (We refer readers to section
II.A.2.b. of this proposed rule for further discussion of the treatment
of ``overlap bypass codes.'') This process also created multiple
imaging composite ``single session'' bills that could be used for
calculating composite APC median costs. ``Overlap bypass codes'' that
are members of the proposed multiple imaging composite APCs are
identified by asterisks (*) in Addendum N to this proposed rule (which
is referenced in section XVII. of this proposed rule and available via
the Internet on the CMS Web site).
Addendum N to this proposed rule includes the proposed list of
bypass codes for CY 2012. The list of bypass codes contains codes that
were reported on claims for services in CY 2010 and, therefore,
includes codes that were in effect in 2010 and used for billing but
were deleted for CY 2011. We retained these deleted bypass codes on the
proposed CY 2012 bypass list because these codes existed in CY 2010 and
were covered OPD services in that period, and CY 2010 claims data are
used to calculate 2012 payment rates. Keeping these deleted bypass
codes on the bypass list potentially allowed us to create more
``pseudo'' single procedure claims for ratesetting purposes. ``Overlap
bypass codes'' that were members of the proposed multiple imaging
composite APCs are identified by asterisks (*) in the third column of
Addendum N to this proposed rule. HCPCS codes that we are proposing to
add for CY 2012 are identified by asterisks (*) in the fourth column of
Addendum N.
Table 1 below contains the list of codes that we are proposing to
remove from the CY 2012 bypass list because these codes were either
deleted from the HCPCS before CY 2010 (and therefore were not covered
OPD services in CY2010) or were not separately payable codes under the
proposed CY 2012 OPPS because these codes are not used for ratesetting
(and therefore would not need to be bypassed). None of these proposed
deleted codes were ``overlap bypass'' codes.

Table 1--HCPCS Codes Proposed To Be Removed From the CY 2012 Bypass List
------------------------------------------------------------------------
HCPCS Code HCPCS Short descriptor
------------------------------------------------------------------------
29220........................... Strapping of low back
78350........................... Bone mineral, single photon
90816........................... Psytx, hosp, 20-30 min
90818........................... Psytx, hosp, 45-50 min
90826........................... Intac psytx, hosp, 45-50 min
99241........................... Office consultation
99242........................... Office consultation
99243........................... Office consultation
99244........................... Office consultation
99245........................... Office consultation
0144T........................... CT heart wo dye; qual calc
------------------------------------------------------------------------

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
For CY 2012, we are proposing to continue to use the hospital-
specific overall ancillary and departmental CCRs to convert charges to
estimated costs through application of a revenue code-to-cost center
crosswalk. To calculate the APC median costs on which the proposed CY
2012 APC payment rates are based, we calculated hospital-specific
overall ancillary CCRs and hospital-specific departmental CCRs for each
hospital for which we had CY 2010 claims data from the most recent
available hospital cost reports, in most cases, cost reports beginning
in CY 2009. For the CY 2012 OPPS proposed rates, we used the set of
claims processed during CY 2010. 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.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage.
To ensure the completeness of the revenue code-to-cost center
crosswalk, we reviewed changes to the list of revenue codes for CY 2010
(the year of the claims data we used to calculate the proposed CY 2012
OPPS payment rates). For CY 2010, the National Uniform Billing
Committee added revenue codes 860 (Magnetoencephalography (MEG);
general classification) and 861 (Magnetoencephalography (MEG)). For
purposes of applying a CCR to charges reported under revenue codes 860
and 861, we are proposing to use nonstandard Medicare cost report cost
center 3280 (Electrocardiogram (EKG) and Electroencephalography (EEG))
as the primary cost center and to use standard cost center 5400
(Electroencephalography (EEG)) as the secondary cost center. We believe
that MEG, which evaluates brain activity, is similar to EEG, which also
evaluates brain activity, and that the few hospitals that furnish MEG
are likely to furnish it in the same department of the hospital in
which they furnish EEG services. Therefore, we believe that the CCRs
that we apply to the EEG revenue codes are more likely to result in a
more accurate estimated cost for MEG than would the application of the
hospital-specific overall ancillary CCR. For hospitals that report
charges under revenue code 860 or 861 but do not report costs on their
cost report under cost center 3280 or 5400, we are proposing to apply
the hospital-specific overall CCR to the charges reported under revenue
code 860 or 861 for purposes of estimating the cost of these services.
We note that revenue codes with effective dates in CY 2011 are not
relevant to this process because these new revenue codes were not
applicable to claims for services furnished during CY 2010.
In accordance with our longstanding policy, 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.

[[Page 42182]]

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). One longstanding exception
to this general methodology for calculation of CCRs used for converting
charges to costs on each claim is the calculation of median blood
costs, as discussed in section II.A.2.d.(2) of this proposed rule and
which has been our standard policy since the CY 2005 OPPS.
For the CCR calculation process, we used the same general approach
that we used in developing the final APC rates for CY 2007 and
thereafter, 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 2010 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 (HCRIS). We used the most recent available cost
report data, in most cases, cost reports with cost reporting periods
beginning in CY 2009. For this proposed rule, we are using the most
recently submitted cost reports to calculate the CCRs to be used to
calculate median costs for the proposed CY 2012 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 this section II.A.1.c. of this
proposed rule for all purposes that require use of an overall ancillary
CCR. We are proposing to continue this longstanding methodology for the
calculation of median costs for CY 2012.
Since the implementation of the OPPS, some commenters have raised
concerns about potential bias in the OPPS cost-based weights due to
``charge compression,'' which is the practice of applying a lower
charge markup to higher cost services and a higher charge markup to
lower cost services. As a result, the cost-based weights may reflect
some 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.
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 cost-based relative weights, particularly with
regard to the impact on inpatient diagnosis-related group (DRG)
payments, and to consider methods to better capture the variation in
cost and charges for individual services when calculating costs for the
IPPS relative weights across services in the same cost center. RTI
issued a report in March 2007 with its findings on charge compression,
which is available on the CMS Web site at: http://www.cms.gov/reports/downloads/Dalton.pdf. Although this report was focused largely on
charge compression in the context of the IPPS cost-based relative
weights, because several of the findings were relevant to the OPPS, we
discussed that report in the CY 2008 OPPS/ASC proposed rule (72 FR
42641 through 42643) and discussed those findings again in the CY 2008
OPPS/ASC final rule with comment period (72 FR 66599 through 66602).
In August 2007, we contracted with RTI to evaluate the cost
estimation process for the OPPS relative weights because its 2007
report had concentrated on IPPS DRG cost-based relative weights. The
results of RTI's analyses had implications for both the OPPS APC cost-
based relative weights and the IPPS MS-DRG (Medicare severity) cost-
based 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).
We addressed the RTI finding that there was aggregation bias in
both the IPPS and the OPPS cost estimation of expensive and inexpensive
medical supplies in the FY 2009 IPPS final rule. Specifically, we
finalized our proposal for 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,'' essentially splitting
the then current CCR for ``Medical Supplies and Equipment'' into one
CCR for low-cost medical supplies and another CCR for high-cost
implantable devices in order to mitigate some of the effects of charge
compression. Accordingly, in Transmittal 20 of the Provider
Reimbursement Manual, Part II (PRM-II), Chapter 36, Form CMS-2552-96,
which was issued in July 2009, we created a new subscripted Line 55.01
on Worksheet A for the ``Implantable Devices Charged to Patients'' cost
center. This new subscripted cost center, placed under the standard
line for ``Medical Supplies Charged to Patients,'' is available for use
for cost reporting periods beginning on or after May 1, 2009. A
subscripted cost center is the addition of a separate new cost center
line and description which bears a logical relationship to the standard
cost center line and is located immediately following a standard cost
center line. Subscripting a cost center line adds flexibility and cost
center expansion capability to the cost report. For example, Line 55 of
Worksheet A on Form CMS 2552-96 (the Medicare hospital cost report) is
``Medical Supplies Charged to Patients.'' The additional cost center,
which isolates the costs of ``Implantable Medical Supplies Charged to
Patients'', was created by adding subscripted Line 55.01 to Worksheet A
and is defined 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 investigations devices) (73
FR 48458).
In preparation for the FY 2012 IPPS proposed rule and this CY 2012
OPPS proposed rule, we have assessed the availability of data in the
``Implantable Devices Charged to Patients'' cost center. In order to
develop a robust analysis regarding the use of cost data from the
``Implantable Devices Charged to Patients'' cost center, we believe
that it is necessary to have a critical mass of cost reports filed with
data in this cost center. The cost center for ``Implantable Devices
Charged to Patients'' is effective for cost reporting periods beginning
on or after May 1, 2009. We have checked the availability of CY 2009
cost reports in the December 31, 2010 quarter ending update of HCRIS,
which is the latest upload of CY 2009 cost report data that we could
use for this proposed rule. We have determined that there are only 437
hospitals that have completed the ``Implantable Devices Charged to
Patients'' cost center (out of approximately 3,500 IPPS hospitals). We
do not believe this is a sufficient

[[Page 42183]]

amount of data from which to generate a meaningful analysis. Therefore,
we are not proposing to use data from the ``Implantable Devices Charged
to Patients'' cost center to create a distinct CCR for Implantable
Devices Charged to Patients for use in calculating the OPPS relative
weights for CY 2012. We will reassess the availability of data for the
``Implantable Devices Charged to Patients'' cost center for the CY 2013
OPPS rulemaking cycle. Because there is approximately a 3-year lag in
the availability of cost report data for IPPS and OPPS ratesetting
purposes in a given calendar year, we believe we may be able to use
data from the revised Medicare hospital cost report form to estimate
costs from charges for implantable devices for the CY 2013 OPPS
relative weights. For a complete discussion of the rationale for the
creation of the new cost center for ``Implantable Devices Charged to
Patients,'' public comments, and our responses, we refer readers to the
FY 2009 IPPS final rule (73 FR 48458 through 45467).
In the CY 2009 OPPS/ASC final rule with comment period, we
indicated that we would be making some other OPPS-specific changes in
response to the RTI report recommendations. Specifically, these changes
included modifications to the cost reporting software and the addition
of three new nonstandard cost centers. With regard to modifying the
cost reporting preparation software in order to offer additional
descriptions for nonstandard cost centers to improve the accuracy of
reporting for nonstandard cost centers, we indicated that the change
would be made for the next release of the cost report software. These
changes have been made to the cost reporting software with the
implementation of CMS Transmittal 21, under Chapter 36 of the PRM-II,
available on the CMS Web site at: http://www.cms.hhs.gov/Manuals/PBM/ PBM/,
which is effective for cost reporting periods ending on or after
October 1, 2009.
We also indicated that we intended to add new nonstandard cost
centers for ``Cardiac Rehabilitation,'' ``Hyperbaric Oxygen Therapy,''
and ``Lithotripsy.'' We note that, in January 2010, CMS issued
Transmittal 21 which updated the PRM-II, Chapter 36, Form CMS-2552-96.
One of the updates in this transmittal established nonstandard cost
centers for ``Cardiac Rehabilitation,'' ``Hyperbaric Oxygen Therapy,''
and ``Lithotripsy'' for use on Worksheet A. These three new nonstandard
cost centers became available for cost reporting periods ending on or
after October 1, 2009, and are included in the revenue code to cost
center crosswalk we are proposing to use for calculating payment rates
for CY 2012 OPPS. Specifically, the nonstandard cost centers are: 3120
(Cardiac Catheterization Laboratory); 3230 (CAT Scan); 3430 (Magnetic
Resonance Imaging (MRI)). The revenue code to cost center crosswalk
that we are proposing to use for purposes of estimating the median
costs of items and services for the CY 2012 OPPS is available for
review and continuous comment (outside of comment on this proposed
rule) on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/03_crosswalk.asp#TopOfPage.
Furthermore, in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075
through 50080), we finalized our proposal to create new standard cost
centers for ``Computed Tomography (CT),'' ``Magnetic Resonance Imaging
(MRI),'' and ``Cardiac Catheterization,'' and to require that hospitals
report the costs and charges for these services under new cost centers
on the revised Medicare cost report Form CMS 2552-10. As we discussed
in the FY 2009 IPPS/LTCH PPS and CY 2009 OPPS/ASC proposed and final
rules, RTI found that the costs and charges of CT scans, MRI, and
cardiac catheterization differ significantly from the costs and charges
of other services included in the standard associated cost center. RTI
also concluded that both the IPPS and OPPS relative weights would
better estimate the costs of those services if CMS were to add standard
costs centers for CT scans, MRI, and cardiac catheterization in order
for hospitals to report separately the costs and charges for those
services and in order for CMS to calculate unique CCRs to estimate the
cost from charges on claims data. (We refer readers to the FY 2011
IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more
detailed discussion on the reasons for the creation of standard cost
centers for CT scans, MRI, and cardiac catheterization.) The new
standard cost centers for MRI, CT scans, and cardiac catheterization
are effective for cost report periods beginning on or after May 1,
2010, on the revised cost report Form CMS-2552-10. CMS issued the new
hospital cost report Form CMS-2552-10 on December 30, 2010. The new
cost report form can be accessed at the CMS Web site at: https://www.cms.gov/Manuals/PBM/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=1&sortOrder=ascending&itemID=CMS021935&intNumPerPage=10.
Once at this Web site, users should double click on ``Chapter 40.''
We believe that improved cost report software, the incorporation of
new standard and nonstandard cost centers, and the 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. We will continue our standard practice of examining ways in
which we can improve the accuracy of our cost estimation processes.
2. Proposed Data Development Process and Calculation of Median Costs
In this section of this proposed rule, we discuss the use of claims
to calculate proposed OPPS payment rates for CY 2012. The hospital OPPS
page on the CMS Web site on which this proposed rule is posted provides
an accounting of claims used in the development of the proposed payment
rates at: http://www.cms.gov/HospitalOutpatientPPS. The accounting of
claims used in the development of this proposed rule is included on the
CMS Web site under supplemental materials for this CY 2012 OPPS/ASC
proposed rule. That accounting provides additional detail regarding the
number of claims derived at each stage of the process. In addition,
below in this section we discuss the file of claims that comprises the
data set that is available for purchase under a CMS data use agreement.
Our CMS Web site, http://www.cms.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 2010 claims that
were used to calculate the proposed payment rates for the CY 2012 OPPS.
We used the methodology described in sections II.A.2.a. through
II.A.2.e. of this proposed rule to calculate the median costs we use to
establish the relative weights used in calculating the proposed OPPS
payment rates for CY 2012 shown in Addenda A and B to this proposed
rule (which are referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site). We refer readers to
section II.A.4. of this proposed rule for a discussion of the
conversion of APC median costs to scaled payment weights.
a. Claims Preparation
For this proposed rule, we used the CY 2010 hospital outpatient
claims

[[Page 42184]]

processed before January 1, 2011, to calculate the median costs of APCs
that underpin the proposed relative weights for CY 2012. To begin the
calculation of the relative weights for CY 2012, we pulled all claims
for outpatient services furnished in CY 2010 from the national claims
history file. This is not the population of claims paid under the OPPS,
but all outpatient claims (including, for example, critical access
hospital (CAH) claims and hospital claims for clinical laboratory
services for persons who are neither inpatients nor outpatients of the
hospital).
We then excluded claims with condition codes 04, 20, 21, and 77
because these are claims that providers submitted to Medicare knowing
that no payment would be made. For example, providers submit claims
with a condition code 21 to elicit an official denial notice from
Medicare and document that a service is not covered. We then excluded
claims for services furnished in Maryland, Guam, the U.S. Virgin
Islands, American Samoa, and the Northern Mariana Islands because
hospitals in those geographic areas are not paid under the OPPS, and,
therefore, we do not use claims for services furnished in these areas
in ratesetting.
We divided the remaining claims into the three groups shown below.
Groups 2 and 3 comprise the 105 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).
To convert charges on the claims to estimated cost, we multiplied
the charges on each claim by the appropriate hospital-specific CCR
associated with the revenue code for the charge as discussed in section
II.A.1.c. of this proposed rule. We then flagged and excluded 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
0.0001); 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 as the default CCR. 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.gov/HospitalOutpatientPPS. Revenue
codes that we do not use to set medians or to model impacts are
identified with an ``N'' in the revenue code-to-cost center crosswalk.
We applied the 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.
We note that the separate file containing partial hospitalization
claims is included in the files that are available for purchase as
discussed above.
We then excluded claims without a HCPCS code. We moved to another
file claims that contained nothing but influenza and pneumococcal
pneumonia (PPV) vaccines. Influenza and PPV vaccines are paid at
reasonable cost and, therefore, these claims are not used to set OPPS
rates.
We next copied line-item costs for drugs, blood, and brachytherapy
sources to a separate file (the lines stay on the claim, but are copied
onto another 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 and
nonimplantable biologicals, 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.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR
60517), we first adopted a policy to redistribute some portion of total
cost of packaged drugs and biologicals to the separately payable drugs
and biologicals as acquisition and pharmacy overhead and handling
costs. As discussed further in section V.B.3. of this proposed rule, we
are proposing to continue this policy for CY 2012. Therefore, we used
the line-item cost data for drugs and biologicals for which we had a
HCPCS code with ASP pricing information to calculate the ASP+X values,
first for all drugs and biologicals with HCPCS codes, whether
separately paid or packaged, and then for separately payable drugs and
biologicals and for packaged drugs and biologicals, respectively, by
taking the ratio of total claim cost for each group relative to total
ASP dollars (per unit of each drug or biological HCPCS code's April
2011 ASP amount multiplied by total units for each drug or biological
in the CY 2010 claims data). These values are ASP+11 percent (for all
drugs and biologicals with HCPCS codes, whether separately paid or
packaged), ASP-2 percent (for drugs and biologicals that are separately
paid), and ASP+188 percent (for drugs and biologicals that have HCPCS
codes and that are packaged), respectively. As we discuss in section
V.B.3. of this proposed rule, we are proposing to redistribute $161
million of the total cost in our claims data for coded packaged drugs
and biologicals with an ASP to payment for separately payable drugs and
biologicals. We also are proposing to redistribute an additional $54
million from the cost of uncoded packaged drugs billed under pharmacy
revenue code series 025X (Pharmacy (also see 063X, an extension of
025X)), 026X (IV Therapy), and 063X (Pharmacy--Extension of 025X). 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 hospital cost
report. Our CY 2012 proposal to redistribute $215 million in estimated
costs from coded and uncoded packaged drugs to separately payable drugs
represents the $200 million in total packaged drug costs

[[Page 42185]]

redistributed from the CY 2011 OPPS/ASC final rule with comment period
(75 FR 71967), updated by the PPI for Pharmaceuticals for Human Use.
Redistributing a total of $161 million in pharmacy overhead cost
from packaged drugs and biologicals reduces the $705 million cost of
packaged drugs and biologicals with HCPCS codes and ASPs to $544
million, approximately a 23-percent reduction. Redistributing $54
million from the cost of uncoded packaged drugs and biologicals reduces
the $502 million cost of uncoded drugs and biologicals to $448 million,
approximately an 11-percent reduction. To implement our proposed CY
2012 policy to redistribute $161 million from the pharmacy overhead
cost of coded packaged drugs and biologicals to separately payable
drugs and biologicals and $54 million from the cost of uncoded packaged
drugs, we multiplied the cost of each packaged drug or biological with
a HCPCS code and ASP pricing information in our CY 2010 claims data by
0.77, and we multiplied all uncoded packaged pharmacy drug costs in our
CY 2010 claims data, excluding those for diagnostic
radiopharmaceuticals, by 0.89. We also added the redistributed $215
million to the total cost of separately payable drugs and biologicals
in our CY 2010 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 from ASP-2 percent to ASP+4
percent. We refer readers to section V.B.3. of this proposed rule for a
complete discussion of our proposed policy to pay for separately paid
drugs and biologicals and pharmacy overhead for CY 2012.
We then removed 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 that
were not paid during claims processing in the claim year, but have a
status indicator of ``S,'' ``T,'' ``V,'' or ``X'' in the proposed
year's 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 proposed year, such as services newly
proposed to come off the inpatient list for CY 2011 that were assigned
status indicator ``C'' in the claim year. It also preserves charges for
packaged services so that the costs can be included in the cost of the
services with which they are reported, even if the CPT codes for the
packaged services were not paid because the service is part of another
service that was reported on the same claim or the code otherwise
violates claims processing edits.
For CY 2012, we are proposing to continue the policy we implemented
for CY 2011 to exclude line-item data for pass-through drugs and
biologicals (status indicator ``G'' for CY 2010) and nonpass-through
drugs and biologicals (status indicator ``K'' for CY 2010) where the
charges reported on the claim for the line were either denied or
rejected during claims processing. Removing lines that were eligible
for payment but were not paid ensures that we are using appropriate
data. The trim avoids using cost data on lines that we believe were
defective or invalid because those rejected or denied lines did not
meet the Medicare requirements for payment. For example, edits may
reject a line for a separately paid drug because the number of units
billed exceeded the number of units that would be reasonable and,
therefore, is likely a billing error (for example, a line reporting 55
units of a drug for which 5 units is known to be a fatal dose). As with
our trimming in the CY 2011 OPPS/ASC final rule with comment period (75
FR 71828) of line items with a status indicator of ``S,'' ``T,'' ``V,''
or ``X,'' we believe that unpaid line-items represent services that are
invalidly reported and, therefore, should not be used for ratesetting.
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 mean unit costs for use in the
ASP+X calculation described in section V.B.3. of this proposed rule
with comment period.

b. Splitting Claims and Creation of ``Pseudo'' Single Procedure
Claims
(1) Splitting Claims
We then split the remaining claims into five groups: single majors;
multiple majors; single minors; multiple minors; and other claims.
(Specific definitions of these groups follow below.) For CY 2012, we
are proposing to continue our current policy of defining major
procedures as any HCPCS code having a status indicator of ``S,'' ``T,''
``V,'' or ``X;'' defining minor procedures as any code having a status
indicator of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' ``U,'' or ``N,''
and classifying ``other'' procedures as any code having a status
indicator other than one that we have classified as major or minor. For
CY 2012, we are proposing to continue assigning status indicator ``R''
to blood and blood products; status indicator ``U'' to brachytherapy
sources; status indicator ``Q1'' to all ``STVX-packaged codes;'' status
indicator ``Q2'' to all ``T-packaged codes;'' and status indicator
``Q3'' to all codes that may be paid through a composite APC based on
composite-specific criteria or paid separately through single code APCs
when the criteria are not met. As discussed in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68709), we established status
indicators ``Q1,'' ``Q2,'' and ``Q3'' to facilitate identification of
the different categories of codes. We are proposing to treat these
codes in the same manner for data purposes for CY 2012 as we have
treated them since CY 2008. Specifically, we are proposing to continue
to evaluate whether the criteria for separate payment of codes with
status indicator ``Q1'' or ``Q2'' are met in determining whether they
are treated as major or minor codes. 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 procedure claims for
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 procedure major claims is discussed in
section II.A.2.e. of this proposed rule.
Specifically, we divided the remaining claims into the following
five groups:
1. Single Procedure 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.

[[Page 42186]]

2. Multiple Procedure 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 Procedure 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 Procedure Minor Claims: Claims with multiple HCPCS
codes that are assigned status indicator ``F,'' ``G,'' ``H,'' ``K,''
``L,'' ``R,'' ``U,'' or ``N;'' claims that contain more than one code
with status indicator ``Q1'' (``STVX-packaged'') or more than one unit
of a code with status indicator ``Q1'' but no codes with status
indicator ``S,'' ``T,'' ``V,'' or ``X'' on the same date of service; or
claims that contain more than one code with status indicator ``Q2'' (T-
packaged), or ``Q2'' and ``Q1,'' or more than one unit of a code with
status indicator ``Q2'' but no code with status indicator ``T'' on the
same date of service.
5. Non-OPPS Claims: Claims that contain no services payable under
the OPPS (that is, all status indicators other than those listed for
major or minor status). These claims were excluded from the files used
for the OPPS. Non-OPPS claims have codes paid under other fee
schedules, for example, durable medical equipment or clinical
laboratory tests, and do not contain a code for a separately payable or
packaged OPPS service. Non-OPPS claims include claims for therapy
services paid sometimes under the OPPS but billed, in these non-OPPS
cases, with revenue codes indicating that the therapy services would be
paid under the Medicare Physician Fee Schedule (MPFS).
The claims listed in numbers 1, 2, 3, and 4 above are included in
the data file that can be purchased as described above. Claims that
contain codes to which we have assigned status indicators ``Q1''
(``STVX-packaged'') and ``Q2'' (``T-packaged'') appear in the data for
the single major file, the multiple major file, and the multiple minor
file used in this proposed rule. Claims that contain codes to which we
have assigned status indicator ``Q3'' (composite APC members) appear in
both the data of the single and multiple major files used in this
proposed rule, depending on the specific composite calculation.
(2) Creation of ``Pseudo'' Single Procedure Claims
To develop ``pseudo'' single procedure claims for this proposed
rule, we examined both the multiple procedure major claims and the
multiple procedure minor claims. We first examined the multiple major
procedure 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 in Addendum N to this proposed
rule (which is referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site) and discussed in
section II.A.1.b. of this proposed rule to remove separately payable
procedures which we determined contained limited or no packaged costs
or that were otherwise suitable for inclusion on the bypass list from a
multiple procedure bill. As discussed above, we ignore the ``overlap
bypass codes,'' that is, those HCPCS codes that are both on the bypass
list and are members of the multiple imaging composite APCs, in this
initial assessment for ``pseudo'' single procedure claims. The proposed
CY 2012 ``overlap bypass codes'' are listed in Addendum N to this
proposed rule (which is referenced in section XVII. of this proposed
rule and available via the Internet on the CMS Web site). 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 procedure 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 procedure 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 proposed rule, were met. Where the criteria for the imaging
composite APCs were met, we created a ``single session'' claim for the
applicable imaging composite service and determined whether we could
use the claim in ratesetting. For HCPCS codes that are both
conditionally packaged and are members of a multiple imaging composite
APC, we first assessed whether the code would be packaged and, if so,
the code ceased to be available for further assessment as part of the
composite APC. Because the packaged code would not be a separately
payable procedure, we considered it to be unavailable for use in
setting the composite APC median cost. Having identified ``single
session'' claims for the imaging composite APCs, we reassessed the
claim to determine if, after removal of all lines for bypass codes,
including the ``overlap bypass codes,'' a single unit of a single
separately payable code remained on the claim. If so, we attributed the
packaged costs on the claim to the single unit of the single remaining
separately payable code other than the bypass code to create a
``pseudo'' single procedure claim. We also identified line-items of
overlap bypass codes as a ``pseudo'' single procedure claim. This
allowed us to use more claims data for ratesetting purposes.
We also examined the multiple procedure 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

[[Page 42187]]

2011 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 2011
relative weight to create a ``pseudo'' single procedure claim for that
code: Additional units of the status indicator ``Q1'' HCPCS code with
the highest CY 2011 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 the selected code 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 procedure 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
2011 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 2011
relative weight to create a ``pseudo'' single procedure claim for that
code: Additional units of the status indicator ``Q2'' HCPCS code with
the highest CY 2011 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.
Where a multiple procedure minor claim contained multiple codes
with status indicator ``Q2'' (``T-packaged'') and status indicator
``Q1'' (``STVX-packaged''), we selected the T-packaged status indicator
``Q2'' HCPCS code that had the highest relative weight for CY 2011 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
procedure claim for that code: Additional units of the status indicator
``Q2'' HCPCS code with the highest CY 2011 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 2011 relative weights.
If a status indicator ``Q1'' HCPCS code had a higher CY 2011 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 then applied our process for creating ``pseudo'' single
procedure claims to the conditionally packaged codes that do not meet
the criteria for packaging, which enabled us to create single procedure
claims from them, where they meet the criteria for single procedure
claims. Conditionally packaged codes are identified using status
indicators ``Q1'' and ``Q2,'' and are described in section XI.A.1. of
this proposed rule.
Lastly, we excluded those claims that we were not able to convert
to single procedure claims even after applying all of the techniques
for creation of ``pseudo'' single procedure claims to multiple
procedure major claims and to multiple procedure 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 hospitals billed the code with a unit of one.
We are proposing to continue to apply this methodology for the
purpose of creating pseudo single procedure claims for CY 2012 OPPS.
c. Completion of Claim Records and Median Cost Calculations
We then packaged the costs of packaged HCPCS codes (codes with
status indicator ``N'' listed in Addendum B to this proposed rule
(which is referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site) and the costs of those
lines for codes with status indicator ``Q1'' or ``Q2'' when they are
not separately paid), and the costs of the services reported under
packaged revenue codes in Table 2 below that appeared on the claim
without a HCPCS code into the cost of the single major procedure
remaining on the claim.
As noted in the CY 2008 OPPS/ASC final rule with comment period (72
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation
that CMS should review the final list of packaged revenue codes for
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, we will continue to
compare the final list of packaged revenue codes that we adopt for CY
2012 to the revenue codes that the I/OCE will package for CY 2012 to
ensure consistency.
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 changing the proposed list of revenue codes. In the CY 2010
OPPS/ASC final rule with comment period (74 FR 60362 through 60363), we
finalized changes to the packaged revenue code list based on our
examination of the updated NUBC codes and public comment to the CY 2010
proposed list of packaged revenue codes. For CY 2012, as we did for CY
2011, we reviewed the changes to revenue codes that were effective
during CY 2010 for purposes of determining the charges reported with
revenue codes but without HCPCS codes that we would propose to package
for the CY 2012 OPPS. We believe that the charges reported under the
revenue codes listed in Table 2 below continue to reflect ancillary and
supportive services for which hospitals report charges without HCPCS
codes. Therefore, for CY 2012, we are proposing to continue to package
the costs that we derive from the charges reported without HCPCS code
under the revenue codes displayed in Table 2 below for purposes of
calculating the median costs on which the CY 2012 OPPS are based.

[[Page 42188]]

Table 2--Proposed CY 2012 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.
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 Services; Observation Hours.
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.

[[Page 42189]]

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 accordance with our longstanding policy, we are proposing to
continue to exclude: (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 less than $1.01 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. We are proposing to continue these processes
for the CY 2012 OPPS.
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. The claims accounting that we provide for the proposed and final
rule contains the formula we use to standardize the total cost for the
effects of the wage index. As has been our policy since the inception
of the OPPS, we are proposing to use the pre-reclassified wage indices
for standardization because we believe that they better reflect the
true costs of items and services in the area in which the hospital is
located than the post-reclassification wage indices and, therefore,
would result in the most accurate unadjusted median costs.
In accordance with our longstanding practice, we also excluded
single and pseudo single procedure claims for which the total cost on
the claim was 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 102 million
claims were left. Using these 102 million claims, we created
approximately 100 million single and ``pseudo'' single procedure
claims, of which we used slightly more than 99.5 million single bills
(after trimming out approximately 888,000 claims as discussed above in
this section) in the proposed CY 2012 median development and
ratesetting.
We used these claims to calculate the proposed CY 2012 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). We note that, for purposes of identifying significant HCPCS for
examination in the 2 times rule, we consider codes that have more than
1,000 single major claims or codes that have both greater than 99
single major claims and contribute at least 2 percent of the single
major claims used to establish the APC median cost to be significant
(75 FR 71832). This longstanding definition of when a HCPCS code is
significant for purposes of the 2 times rule was selected because we
believe that a subset of 1,000 claims is negligible within the set of
approximately 100 million single procedure or single session claims we
use for establishing median costs. Similarly, a HCPCS code for which
there are fewer than 99 single bills and which comprises less than 2
percent of the single major claims within an APC will have a negligible
impact on the APC median. Unlisted codes are not used in establishing
the percent of claims contributing to the APC, nor are their costs used
in the calculation of the APC median. Finally, we reviewed the median
costs for the services for which we are proposing to pay separately
under this proposed rule, and we reassigned HCPCS codes to different
APCs where it was necessary to ensure clinical and resource homogeneity
within the APCs. Section III. of this proposed rule includes a
discussion of many of the HCPCS code assignment changes that resulted
from examination of the median costs 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 procedure claims.
As we discuss in sections II.A.2.d. and II.A.2.e. and in section
VIII.B. of this proposed rule, in some cases, APC median costs are
calculated using variations of the process outlined above.
Specifically, section II.A.2.d. of this proposed rule addresses the
proposed calculation of single APC criteria-based median costs. Section
II.A.2.e. of this proposed rule discusses the proposed calculation of
composite APC criteria-based median costs. Section VIII.B. of this
proposed rule addresses the methodology for calculating the proposed
median costs for partial hospitalization services.
APC Panel Recommendations Regarding Data Development: At the
February 28-March 1, 2011 APC Panel Meeting, we provided the APC Panel
Data Subcommittee with a list of all APCs fluctuating by greater than
10 percent when comparing the CY 2011

[[Page 42190]]

OPPS final rule median costs based on CY 2009 claims processed through
June 30, 2010, to those based on CY 2010 OPPS/ASC final rule data (CY
2008 claims processed through June 30, 2009). We included explanatory
data where possible to allow the Data Subcommittee to focus on APC
median changes that required more investigation, based on its request
(75 FR 71834). The APC Panel Data Subcommittee reviewed the
fluctuations in the APC median costs but did not express particular
concerns with the median cost changes.
We also provided the APC Panel Data Subcommittee with a summary of
cost and CCR data related to the Myocardial Positron Emission
Tomography (PET) imaging APC, APC 0307, as well as the associated
diagnostic radiopharmaceutical, Rb82 rubidium, based on a request for
data related to the decline in the APC median cost from the CY 2010
OPPS final rule to the CY 2011 OPPS proposed rule. The Data
Subcommittee noted a decline in the CCRs associated with the HCPCS
codes in APC 0307, as well as declines in the line-item costs of the
associated diagnostic radiopharmaceutical.
At the February 28-March 1, 2011 APC Panel Meeting, the APC Panel
made a number of recommendations related to the data process. The
Panel's recommendations and our responses follow.
Recommendation 1: The Panel commends the CMS staff for responding
to the data requests of the Data Subcommittee.
CMS Response to Recommendation 1: We appreciate this
recommendation.
Recommendation 2: The Panel recommends that the work of the Data
Subcommittee continue.
CMS Response to Recommendation 2: We are accepting this
recommendation.
Recommendation 3: The Panel recommends that Agatha Nolen, D.Ph.,
M.S., F.A.S.H.P., serve as acting chairperson for the winter 2011
meeting of the Data Subcommittee.
CMS Response to Recommendation 3: We are accepting this
recommendation.
d. Proposed Calculation of Single Procedure APC Criteria-Based Median
Costs
(1) Device-Dependent APCs
Device-dependent APCs are populated by HCPCS codes that usually,
but not always, require that a device be implanted or used to perform
the procedure. For a full history of how we have calculated payment
rates for device-dependent APCs in previous years and a detailed
discussion of how we developed the standard device-dependent APC
ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66739 through 66742). Overviews of the
procedure-to-device edits and device-to-procedure edits used in
ratesetting for device-dependent APCs are available in the CY 2005 OPPS
final rule with comment period (69 FR 65761 through 65763) and the CY
2007 OPPS/ASC final rule with comment period (71 FR 68070 through
68071).
For CY 2012, we are proposing to use the standard methodology for
calculating median costs for device-dependent APCs that was finalized
in the CY 2011 OPPS/ASC final rule with comment period (75 FR 71834
through 71837). (We refer readers to sections II.D.6. and II.A.e.6. of
this proposed rule for detailed explanations of the proposed
nonstandard methodology regarding cardiac resynchronization therapy.)
This methodology utilizes claims data that generally represent the full
cost of the required device. Specifically, we are proposing to
calculate the median costs for device-dependent APCs for CY 2012 using
only the subset of single procedure claims from CY 2010 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 procedure-to-
device edits require that when a particular procedural HCPCS code is
billed, the claim must also contain an appropriate device code, while
the device-to-procedure edits require that a claim that contains one of
a specified set of device codes also contain an appropriate procedure
code. We continue to believe the standard methodology for calculating
median costs for device-dependent APCs gives us the most appropriate
median costs for device-dependent APCs in which the hospital incurs the
full cost of the device.
Table 3 below lists the APCs for which we are proposing to use our
standard device-dependent APC ratesetting methodology (as explained in
the CY 2011 OPPS/ASC final rule with comment period (75 FR 71834
through 71837)) for CY 2012. We note that there are five proposed
device-dependent APC title changes and one proposed deletion for CY
2012. As discussed in detail in section II.A.2.d.(6) of this proposed
rule, we are proposing to change the title of APC 0083 from ``Coronary
or Non-Coronary Angioplasty and Percutaneous Valvuloplasty'' to ``Level
I Endovascular Revascularization of the Lower Extremity''; the title of
APC 0229 from ``Transcatheter Placement of Intravascular Shunt and
Stents'' to ``Level II Endovascular Revascularization of the Lower
Extremity''; and the title of APC 0319 from ``Endovascular
Revascularization of the Lower Extremity'' to ``Level III Endovascular
Revascularization of the Lower Extremity.'' We also are proposing to
change the title of APC 0040 from ``Percutaneous Implantation of
Neurostimulator Electrodes'' to ``Level I Implantation/Revision/
Replacement of Neurostimulator Electrodes,'' and the title of APC 0061
from ``Laminectomy, Laparoscopy, or Incision for Implantation of
Neurostimulator Electrodes'' to ``Level II Implantation/Revision/
Replacement of Neurostimulator Electrodes,'' as discussed in section
III.D.1. of this proposed rule. In addition, as discussed in section
II.A.2.e.(6) of this proposed rule, we are proposing to delete APC 0418
(Insertion of Left Ventricular Pacing Electrode) for CY 2012.
As we discuss in detail in section III.D.6. of this proposed rule,
we are proposing to limit the payment for services that are assigned to
APC 0108 to the proposed IPPS standardized payment amount for MS-DRG
227 (Cardiac Defibrillator Implant without Cardiac Catheterization and
without Medical Complications and Comorbidities) because we do not
believe that it would be equitable to pay more under the OPPS for
services assigned to APC 0108 than under the IPPS. In other words, we
are proposing to pay APC 0108 at the lesser of the APC 0108 median cost
or the IPPS standardized payment rate for MS-DRG 227. We are proposing
to continue to apply the device edits and other standard features of
the device-dependent APCs to APC 0108, but we are proposing to limit
the payment amount under the OPPS to the amount of payment established
for MS-DRG 227 under the IPPS.
We refer readers to Addendum A to this proposed rule (which is
referenced in section XVII. of this proposed rule and available via the
Internet on the CMS Web site) for the proposed payment rates for these
APCs for CY 2012.

[[Page 42191]]

Table 3--Proposed CY 2012 Device-Dependent APCS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY 2012
Proposed CY 2012 APC status indicator Proposed CY 2012 APC title
--------------------------------------------------------------------------------------------------------------------------------------------------------
0039............................... S Level I Implantation of Neurostimulator Generator.
0040............................... S Level I Implantation/Revision/Replacement of Neurostimulator Electrodes.
0061............................... S Level II Implantation/Revision/Replacement of Neurostimulator Electrodes.
0082............................... T Coronary or Non-Coronary Atherectomy.
0083............................... T Level I Endovascular Revascularization of the Lower Extremity.
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 AICD Leads, Generator, and Pacing Electrodes.
0115............................... T Cannula/Access Device Procedures.
0202............................... T Level VII Female Reproductive Procedures.
0227............................... T Implantation of Drug Infusion Device.
0229............................... T Level II Endovascular Revascularization of the Lower Extremity.
0259............................... T Level VII ENT Procedures.
0293............................... T Level V Anterior Segment Eye Procedures.
0315............................... S Level II Implantation of Neurostimulator Generator.
0318............................... S Implantation of Cranial Neurostimulator Pulse Generator and Electrode.
0319............................... T Level III Endovascular Revascularization of the Lower Extremity.
0384............................... T GI Procedures with Stents.
0385............................... S Level I Prosthetic Urological Procedures.
0386............................... S Level II Prosthetic Urological Procedures.
0425............................... T Level II Arthroplasty or Implantation with Prosthesis.
0427............................... T Level II Tube or Catheter Changes or Repositioning.
0622............................... T Level II Vascular Access Procedures.
0623............................... T Level III Vascular Access Procedures.
0648............................... T Level IV Breast Surgery.
0652............................... T Insertion of Intraperitoneal and Pleural Catheters.
0653............................... T Vascular Reconstruction/Fistula Repair with Device.
0654............................... T Insertion/Replacement of a Permanent Dual Chamber Pacemaker.
0655............................... T Insertion/Replacement/Conversion of a Permanent Dual Chamber Pacemaker.
0656............................... T Transcatheter Placement of Intracoronary Drug-Eluting Stents.
0674............................... T Prostate Cryoablation.
0680............................... S Insertion of Patient Activated Event Recorders.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* OPPS CY 2012 payment for APC 0108 is proposed to be paid at the lesser of the APC 0108 median cost or the standardized payment rate for MS-DRG 227
under the IPPS. We refer readers to section III.D.6. of this proposed rule for more information.

(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.
For CY 2012, we are proposing to continue to establish payment
rates for blood and blood products using our blood-specific CCR
methodology, which utilizes actual or simulated CCRs from the most
recently available hospital cost reports to convert hospital charges
for blood and blood products to costs. This methodology has been our
standard ratesetting methodology for blood and blood products since CY
2005. It was developed in response to data analysis indicating that
there was a significant difference in CCRs for those hospitals with and
without blood-specific cost centers, and past public comments
indicating that the former OPPS policy of defaulting to the overall
hospital CCR for hospitals not reporting a blood-specific cost center
often resulted in an underestimation of the true hospital costs for
blood and blood products. Specifically, in order to address the
differences in CCRs and to better reflect hospitals' costs, we are
proposing to continue to simulate blood CCRs for each hospital that
does not report a blood cost center by calculating the ratio of the
blood-specific CCRs to hospitals' overall CCRs for those hospitals that
do report costs and charges for blood cost centers. We would then apply
this mean ratio to the overall CCRs of hospitals not reporting costs
and charges for blood cost centers on their cost reports in order to
simulate blood-specific CCRs for those hospitals. We calculated the
median costs upon which the proposed CY 2012 payment rates for blood
and blood products are based using the actual blood-specific CCR for
hospitals that reported costs and charges for a blood cost center and a
hospital-specific

[[Page 42192]]

simulated blood-specific CCR for hospitals that did not report costs
and charges for a blood cost center.
We continue to believe the hospital-specific, blood-specific CCR
methodology best 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 hospital, we believe
that it yields more accurate estimated costs for these products. We
believe that continuing with this methodology in CY 2012 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.
We refer readers to Addendum B to this proposed rule (which is
referenced in section XVII. of this proposed rule and available via the
Internet on the CMS Web site) for the proposed CY 2012 payment rates
for blood and blood products (which are identified with status
indicator ``R''). For a 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) Allergy Tests (APCs 0370 and 0381)
We are proposing to continue with our methodology of
differentiating single allergy tests (``per test'') from multiple
allergy tests (``per visit'') by assigning these services to two
different APCs to provide accurate payments for these tests in CY 2012.
Multiple allergy tests are currently assigned to APC 0370 (Allergy
Tests), with a median cost calculated based on the standard OPPS
methodology. For CY 2012, we are proposing to continue to use the
standard OPPS methodology to set the APC payment rate for APC 0370,
which has a proposed APC median cost of approximately $97 based on 283
claims.
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 (as defined in the CPT code descriptor)
of these CPT codes to describe all of the tests provided. Services
assigned to APC 0381 (Single Allergy Tests) reflect the CPT codes that
describe single allergy tests in which CPT instructions direct
providers to specify the number of tests performed, whereas the
procedures in APC 0370 describe multiple allergy tests per encounter;
therefore, for these procedures, only one unit of the service is billed
even if multiple tests are performed. Our CY 2010 claims data available
for this proposed rule for APC 0381 do not reflect improved and more
consistent hospital billing practices of ``per test'' for single
allergy tests. The median cost of APC 0381 calculated for this proposed
rule according to the standard single claims OPPS methodology, is
approximately $51, significantly higher than the CY 2011 OPPS/ASC final
rule median cost of approximately $33 that was 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 calculated a proposed
``per unit'' median cost for APC 0381, based upon 601 claims containing
multiple units or multiple occurrences of a single CPT code. The
proposed CY 2012 median cost for APC 0381 using the ``per unit''
methodology is approximately $34. For a full discussion of the ``per
unit'' methodology for APC 0381, we refer readers to the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66737).
(4) Hyperbaric Oxygen Therapy (APC 0659)
Since the implementation of 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
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. Our
rationale for using the hospital's overall CCR can be found in the CY
2005 OPPS final rule with comment period (69 FR 65758 through 65759).
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 several
years.
For CY 2012, we are proposing to continue using the same
methodology to estimate a ``per unit'' median cost for HCPCS code
C1300. This methodology results in a proposed APC median cost of
approximately $107 using 370,519 claims with multiple units or multiple
occurrences for HCPCS code C1300 for CY 2012.
(5) Payment for Ancillary Outpatient Services When Patient Expires (APC
0375)
In the November 1, 2002 final rule with comment period (67 FR
66798), we discussed the creation of the new HCPCS modifier ``-CA'' 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. HCPCS modifier ``-
CA'' is defined as a procedure payable only in the inpatient setting
when performed emergently on an outpatient who expires prior to
admission. 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 final rule with comment period (71 FR 68157 through 68158).
For CY 2012, we are proposing to continue to use our established
ratesetting methodology for calculating the median cost of APC 0375
(Ancillary Outpatient Services When Patient Expires) and to continue to
make one payment under APC 0375 for the

[[Page 42193]]

services that meet the specific conditions for using HCPCS modifier ``-
CA.'' That is, we are proposing to calculate the relative payment
weight for APC 0375 by using all claims reporting a status indicator
``C'' (inpatient procedures)appended with HCPCS modifier ``-CA.'' For
the history and detailed explanation of the methodology, we refer
readers to the CY 2004 OPPS final rule (68 FR 63467 through 63468), We
continue to believe that this established ratesetting 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 HCPCS modifier ``-CA''
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. We note that the median cost for APC 0375 has decreased
based on the CY 2010 OPPS claims data used for the development of the
proposed rates for CY 2012 compared to that for CY 2011. 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 HCPCS modifier ``-CA'' appended to an inpatient only 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 HCPCS modifier ``-CA.'' Table 4 below shows the number
of claims, and the median costs for APC 0375 for CYs 2007, 2008, 2009,
2010, and 2011, and the proposed median cost for APC 0375 for CY 2012.
For CY 2012, we are proposing a median cost of approximately $5,711 for
APC 0375 based on 155 claims.

TABLE 4--Claims for Ancillary Outpatient Services When Patient Expires (-
CA Modifier) for CYs 2007 Through 2012
------------------------------------------------------------------------
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
CY 2011....................................... 168 6,304
CY 2012....................................... 155 5,711*
------------------------------------------------------------------------
*Proposed median cost.

(6) Endovascular Revascularization of the Lower Extremity (APCs 0083,
0229, and 0319)
For the CY 2011 update, the AMA's CPT Editorial Panel created 16
new CPT codes in the Endovascular Revascularization section of the 2011
CPT code book to describe endovascular revascularization procedures of
the lower extremity performed for occlusive disease. In the CY 2011
OPPS/ASC final rule with comment period (75 FR 71841 through 71845), we
discussed the process and methodology by which we assigned the new CY
2011 endovascular revascularization CPT codes to APCs that we believe
are comparable with respect to clinical characteristics and resources
required to furnish the services. Specifically, we were able to use the
existing CY 2009 hospital outpatient claims data and most recent cost
report data to create simulated medians for 12 of the 16 new separately
payable codes for CY 2011. Because the endovascular revascularization
CPT codes are new for CY 2011, we used our CY 2009 single and
``pseudo'' single claims data to simulate the new CY 2011 CPT code
definitions. As shown in Table 7 of the CY 2011 OPPS/ASC final rule
with comment period (75 FR 71844), many of the new endovascular
revascularization CPT codes were previously reported using a
combination of CY 2009 CPT codes. In order to simulate median costs, we
selected claims that we believe meet the definition for each of the new
endovascular revascularization CPT codes. Table 7 showed the criteria
we applied to select a claim to be used in the calculation of the
median cost for the new codes (shown in Column A). As we stated in the
CY 2011 OPPS/ASC final rule with comment period (75 FR 71842), we
developed these criteria based on our clinicians' understanding of
services that were reported by CY 2009 CPT codes that, in various
combinations, reflect the services provided that are described by the
new CPT codes for CY 2011.
After determining the simulated median costs for the procedures, we
assigned each CPT code to appropriate APCs based on their clinical
homogeneity and resource use. Of the 16 new codes, we assigned 9 CPT
codes to APC 0083 (Coronary or Non-Coronary Angioplasty and
Percutaneous Valvuloplasty) and 5 CPT codes to APC 0229 (Transcatheter
Placement of Intravascular Shunts), and created new APC 0319
(Endovascular Revascularization of the Lower Extremity) for 2 CPT
codes. Table 8 of the CY 2011 OPPS/ASC final rule with comment period
displayed their final CY 2011 APC assignments and CPT median costs (75
FR 71845). We noted that because these CPT codes are new for CY 2011,
they are identified with comment indicator ``NI'' in Addendum B to the
CY 2011 OPPS/ASC final rule with comment period to identify them as a
new interim APC assignment for the new year and subject to public
comment. We specifically requested public comment on our methodology
for simulating the median costs for these new CY 2011 CPT codes in
addition to public comments on the payment rates themselves (75 FR
71845).
At its February 28-March 1, 2011 meeting, the APC Panel recommended
that CMS provide data to allow the Panel to investigate and monitor the
APC weights for the lower extremity revascularization procedures in
light of CPT coding changes for CY 2011. We are accepting the APC
Panel's recommendation and will provide additional data to the Panel at
an upcoming meeting.
For CY 2012, we are proposing to continue with the CY 2011
methodology that was described previously in this section in
determining the APC assignments for the CPT codes that describe
endovascular revascularization of the lower extremity. The predecessor
endovascular revascularization CPT codes were in existence prior to CY
2011 and were assigned to APCs based on claims data and cost report
data. Given that these data are available for the services described by
the predecessor endovascular revascularization CPT codes, we are
proposing to continue for CY 2012 to use the existing hospital
outpatient claims and cost report data from the previous endovascular
revascularization CPT codes to simulate an estimated median cost for
the new endovascular revascularization CPT codes in determining the
appropriate APC assignments. As has been our practice since the
implementation of the OPPS in 2000, we review our latest claims data
for ratesetting and, if necessary, revise the APC assignments for the
upcoming year. In this case, review of the procedures with significant
claims data in APC 0083 showed a 2 times rule violation. Specifically,
APC 0083, as it was initially configured, showed that the range of the
CPT median costs for the procedures with significant claims data was
approximately between $3,252 (for CPT code 35476 (Transluminal balloon
angioplasty, percutaneous; venous)) and $7,174 (for CPT code 37221
(Revascularization, endovascular, open or percutaneous, iliac artery,
unilateral, initial vessel; with

[[Page 42194]]

transluminal stent placement(s), includes angioplasty within the same
vessel, when performed)), resulting in a 2 times rule violation.
Because of its median cost, we believe that CPT code 37221 would be
more appropriately placed in APC 0229, which had an initial estimated
median cost of approximately $8,606, based on the clinical and resource
characteristics of other procedures also assigned to APC 0229.
Therefore, for CY 2012, we are proposing to revise the APC assignment
for CPT code 37221, from APC 0083 to APC 0229, to accurately reflect
the cost and clinical feature of the procedure. This proposed
reassignment of CPT code 37221 from APC 0083 to APC 0029 eliminates the
2 times rule violation for APC 0083 noted above. Based on this
reconfiguration, the CY 2010 claims data available for this proposed
rule were used to calculate a median cost of approximately $4,683 for
APC 0083, approximately $8,218 for APC 0229, and approximately $14,556
for APC 0319. All three proposed median costs for CY 2012 are
significantly greater than the CY 2011 OPPS/ASC final rule median costs
of approximately $3,740 for APC 0083, approximately $7,940 for APC
0229, and approximately $13,751 for APC 0319.
In addition, we are proposing to revise the APC titles for APCs
0083, 0229, and 0319 to better describe the procedures assigned to
these APCs. Specifically, we are proposing to revise the APC title for
APC 0083 from ``Coronary or Non-Coronary Angioplasty and Percutaneous
Valvuloplasty'' to ``Level I Endovascular Revascularization of the
Lower Extremity''; for APC 0229, from ``Transcatheter Placement of
Intravascular Shunt and Stents'' to ``Level II Endovascular
Revascularization of the Lower Extremity''; and for APC 0319, from
``Endovascular Revascularization of the Lower Extremity'' to ``Level
III Endovascular Revascularization of the Lower Extremity.''
We are soliciting public comments on the proposed status indicators
and APC assignments for the endovascular revascularization of the lower
extremity CPT codes. Table 5 below lists the endovascular
revascularization of the lower extremity CPT codes along with their
proposed status indicator and APC assignments for CY 2012.

Table 5--Proposed APCS To Which Endovascular Revascularization of the Lower Extremity CPT Codes Would Be Assigned for CY 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY
CY 2011 HCPCS code CY 2011 short descriptor CY 2011 SI CY 2011 APC Proposed CY 2012 SI 2012 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
37220............................... Iliac revasc.................... T 0083 T 0083
37221............................... Iliac revasc w/stent............ T 0083 T 0229
37222............................... Iliac revasc add-on............. T 0083 T 0083
37223............................... Iliac revasc w/stent add-on..... T 0083 T 0083
37224............................... Fem/popl revas w/tla............ T 0083 T 0083
37225............................... Fem/popl revas w/ather.......... T 0229 T 0229
37226............................... Fem/popl revasc w/stent......... T 0229 T 0229
37227............................... Fem/popl revasc stnt & ather.... T 0319 T 0319
37228............................... Tib/per revasc w/tla............ T 0083 T 0083
37229............................... Tib/per revasc w/ather.......... T 0229 T 0229
37230............................... Tib/per revasc w/stent.......... T 0229 T 0229
37231............................... Tib/per revasc stent & ather.... T 0319 T 0319
37232............................... Tib/per revasc add-on........... T 0083 T 0083
37233............................... Tibper revasc w/ather add-on.... T 0229 T 0229
37234............................... Revsc opn/prq tib/pero stent.... T 0083 T 0083
37235............................... Tib/per revasc stnt & ather..... T 0083 T 0083
--------------------------------------------------------------------------------------------------------------------------------------------------------

(7) Non-Congenital Cardiac Catheterization (APC 0080)
For CY 2011, the AMA CPT Editorial Panel deleted 19 non-congenital
cardiac catheterization-related CPT codes and replaced them with 20 new
CPT codes in the Cardiac Catheterization and Injection-Related section
of the 2011 CPT Code Book to describe more precisely the specific
services provided during cardiac catheterization procedures. In
particular, the CPT Editorial Panel deleted 19 non-congenital cardiac
catheterization-related CPT codes from the 93500 series and created 14
new CPT codes in the 93400 series and 6 in the 93500 series. We
discussed these coding changes in detail in the CY 2011 OPPS/ASC final
rule with comment period, along with the process by which we assigned
the new CPT codes to APCs that we believe are comparable with respect
to clinical characteristics and resources required to furnish the
cardiac catheterization services described by the new CPT codes (75 FR
71846 through 71849). As discussed in the final rule with comment
period, we were able to use the existing CY 2009 hospital outpatient
claims data and the most recent cost report data to create simulated
medians for the new separately payable CPT codes for CY 2011.
Specifically, to estimate the hospital costs associated with the 20 new
non-congenital cardiac catheterization-related CPT codes based on their
CY 2011 descriptors, we used claims and cost report data from CY 2009.
Because of the substantive coding changes associated with the new non-
congenital cardiac catheterization-related CPT codes for CY 2011, we
used our CY 2009 single and ``pseudo'' single claims data to simulate
the new CY 2011 CPT code definitions. We stated that many of the new
CPT codes were previously reported using multiple CY 2009 CPT codes,
and we provided a crosswalk of the new CY 2011 cardiac catheterization
CPT codes mapped to the CY 2009 cardiac catheterization CPT codes in
Table 11 of the CY 2011 OPPS/ASC final rule with comment period (75 FR
71849). Table 11 showed the criteria we applied to select a claim to be
used in the calculation of the median cost for the new codes (shown in
column A). As we stated in the CY 2011 OPPS/ASC final rule with comment
period (75 FR 71847 through 71848), we developed these criteria based
on our clinicians' understanding of services that were reported by CY
2009 CPT codes that, in various combinations, reflect the services
provided that are described in the new CPT codes. We used approximately
175,000 claims for the new non-congenital catheterization-related CPT
codes, together with the single and ``pseudo'' single procedure claims
for the remaining congenital

[[Page 42195]]

catheterization-related CPT codes in APC 0080, to calculate CPT level
median costs and the median cost for APC 0080 of approximately $2,698.
We noted that, because the CPT codes listed in Table 11 are new for CY
2011, they were identified with comment indicator ``NI'' in Addendum B
of that final rule with comment period to identify them as subject to
public comment. We specifically requested public comment on our
methodology for simulating the median costs for these new CY 2011 CPT
codes, in addition to public comments on the payment rates themselves
(75 FR 71848).
For CY 2012, we are proposing to continue with the CY 2011
methodology in determining the APC assignments for the cardiac
catheterization CPT codes. The predecessor cardiac catheterization CPT
codes were in existence prior to CY 2011 and were assigned to APC 0080
based on claims data and cost report data. Given that these data are
available for the services described by the predecessor cardiac
catheterization CPT codes, for CY 2012, we are proposing to continue to
use the existing hospital outpatient claims and cost report data from
the predecessor cardiac catheterization CPT codes to simulate an
estimated median cost for the new cardiac catheterization CPT codes in
determining the appropriate APC assignments. As has been our practice
since the implementation of the OPPS in 2000, we review our latest
claims data for ratesetting and, if necessary, revise the APC
assignments for the upcoming year. Based on analysis of the CY 2010
claims data available for this proposed rule, the proposed median cost
for APC 0080 is approximately $2,822 for CY 2012, which is slightly
greater than the median cost of approximately $2,698 for the CY 2011
OPPS/ASC final rule with comment period. For CY 2012, we are not
proposing any changes to the CY 2011 APC assignments of any of the
codes assigned to APC 0080 because the claims data available for this
proposed rule support continuation of these APC assignments.
We are soliciting public comments on the proposed status indicators
and the APC assignments for the CY 2012 cardiac catheterization CPT
codes. Table 6 below lists the CY 2011 cardiac catheterization CPT
codes along with their proposed status indicators, APC assignments, and
payment rates for CY 2012.

Table 6--Proposed APCs To Which Non- Congenital Cardiac Catheterization CPT Codes Would Be Assigned for CY 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Proposed CY
CY 2011 HCPCS Code CY 2011 short descriptor CY 2011 SI CY 2011 APC Proposed CY 2012 SI 2012 APC
--------------------------------------------------------------------------------------------------------------------------------------------------------
93451............................... Right heart cath................ T 0080 T 0080
93452............................... Left hrt cath w/ventrclgrphy.... T 0080 T 0080
93453............................... R&l hrt cath w/ventriclgrphy.... T 0080 T 0080
93454............................... Coronary artery angio s&i....... T 0080 T 0080
93455............................... Coronary art/grft angio s&i..... T 0080 T 0080
93456............................... R hrt coronary artery angio..... T 0080 T 0080
93457............................... R hrt art/grft angio............ T 0080 T 0080
93458............................... L hrt artery/ventricle angio.... T 0080 T 0080
93459............................... L hrt art/grft angio............ T 0080 T 0080
93460............................... R&l hrt art/ventricle angio..... T 0080 T 0080
93461............................... R&l hrt art/ventricle angio..... T 0080 T 0080
93462............................... L hrt cath trnsptl puncture..... T 0080 T 0080
93463............................... Drug admin & hemodynmic meas.... N NA N NA
93464............................... Exercise w/hemodynamic meas..... N NA N NA
93563............................... Inject congenital card cath..... N NA N NA
93564............................... Inject hrt congntl art/grft..... N NA N NA
93565............................... Inject l ventr/atrial angio..... N NA N NA
93566............................... Inject r ventr/atrial angio..... N NA N NA
93567............................... Inject suprvlv aortography...... N NA N NA
93568............................... Inject pulm art hrt cath........ N NA N NA
--------------------------------------------------------------------------------------------------------------------------------------------------------

(8) Cranial Neurostimulator and Electrodes (APC 0318)
For CY 2011, the AMA CPT Editorial Panel created a new CPT code
64568 (Incision for implantation of cranial nerve (e.g., vagus nerve)
neurostimulator electrode array and pulse generator) and indicates that
it describes the services formerly included in the combinations of (1)
CPT code 64573 (Incision for implantation of neurostimulator
electrodes; cranial nerve) and CPT code 61885 (Insertion or replacement
of cranial neurostimulator pulse generator or receiver, direct or
inductive coupling; with connection to a single electrode array); or
(2) CPT code 64573 and 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).
As we discussed in the CY 2011 OPPS/ASC final rule with comment period
(75 FR 71850), our standard process for assigning new CPT codes to APCs
is to assign the code to the APC that we believe contains services that
are comparable with respect to clinical characteristics and resources
required to furnish the service. A new CPT code is given a comment
indicator of ``NI'' to identify it as a new interim APC assignment for
the first year and the APC assignment for the new code is then open to
public comment. In some, but not all, cases, we are able to use the
existing data from established codes to simulate an estimated median
cost for the new code to guide us in the assignment of the new code to
an APC. For CY 2011, in the case of the new neurostimulator electrode
and pulse generator implantation CPT code, we were able to use the
existing CY 2009 claims and most current cost report data to create a
simulated median cost.
Specifically, to estimate the hospital costs of CPT code 64568
based on its CY 2011 descriptor, we used CY 2009 claims and the most
recent cost report data, using the single and ``pseudo'' single claims
within this data set to simulate the definition of this service. We
selected claims with CPT code 64573 on which CPT code 61885 or 61886
was also present and consistent

[[Page 42196]]

with the description of the new CPT code 64568. We treated the summed
costs on these claims as if they were a single procedure claim for CPT
code 64568. We created an estimated median cost of approximately
$22,562 for CPT code 64568 from 298 single claims to set a final
payment rate for CY 2011 for the new code. We created APC 0318
(Implantation of Cranial Neurostimulator Pulse Generator and Electrode)
for CY 2011, to which CPT code 64568 is the only procedure assigned.
APC 0225 (Implantation of Neurostimulator Electrodes, Cranial Nerve),
which contained only the predecessor CPT code 64573, was deleted
effective January 1, 2011. We noted that, because CPT code 64568 is new
for CY 2011, it was identified with comment indicator ``NI'' in
Addendum B of the CY 2011 OPPS/ASC final rule with comment period to
identify it as subject to public comment. We specifically requested
public comment on our methodology for simulating the median costs for
this new CY 2011 CPT code, in addition to public comments on the
payment rate itself (75 FR 71850).
For CY 2012, we are proposing to use the same methodology we used
in CY 2011 to estimate the hospital costs of CPT code 64568. We created
an estimated median cost of approximately $24,267 for CPT code 64568
from 332 single claims to set a proposed payment rate for APC 0318 for
CY 2012. We are proposing to maintain CPT code 64568 as the only code
assigned to APC 0318 for CY 2012. We continue to request public comment
on our proposed methodology for simulating the median cost for this CPT
code introduced in CY 2011, in addition to public comments on the
proposed payment rate itself.
(9) 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 in which payment is based on
charges adjusted to cost. 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.
Subsequent to the MMA, various amendments to the Act were made that
resulted in the extension of the payment period for brachytherapy
sources based on a hospital's charges adjusted to cost through December
31, 2009. The CY 2011 OPPS/ASC final rule with comment period
summarizes these amendments to the Act and our proposals to pay for
brachytherapy sources at prospective payment rates based on their
source specific median costs from CY 2007 through CY 2009 (75 FR 71977
through 71981).
In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60533
through 60537), we adopted for CY 2010 the general OPPS prospective
payment methodology for brachytherapy sources, consistent with section
1833(t)(2)(C) of the Act, with payment rates based on source-specific
median costs. For CY 2011, we continued to use the general OPPS
prospective payment methodology for brachytherapy sources, consistent
with section 1833(t)(2)(C) of the Act (75 FR 71980). We also finalized
our proposals to continue the policy we first implemented in the CY
2010 OPPS/ASC final rule with comment period (74 FR 60537 and 75 FR
71980) regarding payment for new brachytherapy sources for which we
have no claims data, based on the same reasons we discussed in the 2008
OPPS/ASC final rule with comment period (72 FR 66786; which was
superseded by section 142 of Pub. L. 110-275). 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, for CYs 2010 and 2011, we finalized proposals 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 (75 FR 71980
through 71981 and 75 FR 60537). Hospitals could receive outlier
payments for brachytherapy sources if the costs of furnishing
brachytherapy sources meet the criteria for outlier payment. In
addition, as noted in the CY 2010 and CY 2011 OPPS/ASC final rules with
comment period (74 FR 60534 and 75 FR 71978 and 71979, respectively),
implementation of prospective payments for brachytherapy sources
provided opportunities for eligible hospitals to receive additional
payments in CY 2010 and CY 2011 under certain circumstances through the
7.1 percent rural adjustment, as described in section II.E. of this
final rule with comment period.
(B) Proposed OPPS Payment Policy
As we have stated previously (72 FR 66780, 73 FR 41502, 74 FR 60533
through 60534, and 75 FR 71978), we believe that adopting the general
OPPS prospective payment methodology for brachytherapy sources is
appropriate for a number of reasons. The general OPPS payment
methodology uses median costs based on claims data to set the relative
payment weights for hospital outpatient services. This payment
methodology results in more consistent, predictable, and equitable
payment amounts per source across hospitals by eliminating some of the
extremely high and low payment amounts resulting from payment based on
hospitals' charges adjusted to cost. We believe that the OPPS
prospective payment methodology, as opposed to payment based on
hospitals' charges adjusted to cost, 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.
For CY 2012, we are proposing to use the median costs from CY 2010
claims data for setting the proposed CY 2012 payment rates for
brachytherapy sources, as we are proposing for most other items and
services that will be paid under the CY 2012 OPPS. We are proposing to
continue the other payment policies for brachytherapy sources we
finalized and first implemented in the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60537). We are proposing to pay for the stranded
and non-stranded NOS codes, HCPCS codes C2698 and C2699, at a rate
equal to the lowest stranded or non-stranded prospective payment rate
for such sources, respectively, on a per source basis (as opposed, for
example, to a per mCi), which is based on the policy we established in
the CY 2008 OPPS/ASC final rule with comment

[[Page 42197]]

period (72 FR 66785). The proposed payment methodology for NOS sources
would provide payment to a hospital for new sources and, at the same
time, encourage interested parties to quickly bring new sources to our
attention so that specific coding and payment could be established.
We also are proposing to continue the policy we first implemented
in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537)
regarding payment for new brachytherapy sources for which we have no
claims data, based on the same reasons we discussed in the CY 2008
OPPS/ASC final rule with comment period (72 FR 66786; which was
superseded for a period of time by section 142 of Public Law 110-275).
That policy is intended to enable us to assign 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, as we did for CY 2011, we are proposing to subject
brachytherapy sources to outlier payments under section 1833(t)(5) of
the Act, and also to subject brachytherapy source payment weights to
scaling for purposes of budget neutrality. Hospitals can receive
outlier payments for brachytherapy sources if the costs of furnishing
brachytherapy sources meet the criteria for outlier payment. In
addition, as noted in the CY 2010 and CY 2011 OPPS/ASC final rules with
comment period (74 FR 60534 and 75 FR 71978 through 71979,
respectively), implementation of prospective payments for brachytherapy
sources would provide opportunities for eligible hospitals to receive
additional payments in CY 2012 under certain circumstances through the
7.1 percent rural adjustment, as described in section II.E. of this
proposed rule.
Therefore, we are proposing to pay for brachytherapy sources at
prospective payment rates based on their source-specific median costs
for CY 2012. We refer readers to Addendum B to this proposed rule
(which is referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site) for the proposed CY
2012 payment rates for brachytherapy sources, identified with status
indicator ``U.'' For more detailed discussion of the legislative
history surrounding brachytherapy sources and our proposed and final
policies for CY 2004 through CY 2011, we refer readers to the CY 2011
OPPS/ASC final rule with comment period (75 FR 71977 through 71981).
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.
e. Proposed Calculation of Composite APC Criteria-Based Median Costs
As discussed in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66613), we believe it is important that the OPPS enhance
incentives for hospitals to provide only necessary, high quality care
and to provide that care as efficiently as possible. For CY 2008, we
developed composite APCs to provide a single payment for groups of
services that are typically performed together during a single clinical
encounter and that result in the provision of a complete service.
Combining payment for multiple independent services into a single OPPS
payment in this way enables hospitals to manage their resources with
maximum flexibility by monitoring and adjusting the volume and
efficiency of services themselves. An additional advantage to the
composite APC model is that we can use data from correctly coded
multiple procedure claims to calculate payment rates for the specified
combinations of services, rather than relying upon single procedure
claims which may be low in volume and/or incorrectly coded. Under the
OPPS, we currently have composite APC policies for extended assessment
and management services, low dose rate (LDR) prostate brachytherapy,
cardiac electrophysiologic evaluation and ablation services, mental
health services, and multiple imaging services. We refer readers to the
CY 2008 OPPS/ASC final rule with comment period for a full discussion
of the development of the composite APC methodology (72 FR 66611
through 66614 and 66650 through 66652).
For CY 2012, we are proposing to continue, with some modifications,
our established composite APC policies for extended assessment and
management, LDR prostate brachytherapy, cardiac electrophysiologic
evaluation and ablation, mental health services, and multiple imaging
services, as discussed in sections II.A.2.e.(1), II.A.2.e.(2),
II.A.2.e.(3), II.A.2.e.(4), and II.A.2.e.(5), respectively, of this
proposed rule. We also are proposing to create a new composite APC for
cardiac resynchronization therapy services, as discussed in section
II.A.2.e.(6) of this proposed rule.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and
8003)
For CY 2012, we are proposing to continue to include composite APC
8002 (Level I Extended Assessment and Management Composite) and
composite APC 8003 (Level II Extended Assessment and Management
Composite) in the OPPS. For CY 2008, we created these two 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 (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

[[Page 42198]]

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 2012 median costs for these composite APCs. We are not
proposing to change these criteria for the CY 2012 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 also issued guidance
clarifying the correct method for reporting the starting time for
observation services (sections 290.2.2 through 290.5 in the Medicare
Claims Processing Manual (Pub. 100-4), Chapter 4, through Transmittal
1745, Change Request 6492, issued May 22, 2009 and implemented July 6,
2009). We are not proposing to change these reporting requirements for
the CY 2012 OPPS.
For CY 2012, we are proposing to continue the extended assessment
and management composite APC payment methodology for APCs 8002 and
8003. We continue to believe that the composite APCs 8002 and 8003 and
related policies provide the most appropriate means of paying for these
services. We are proposing to calculate the median costs for APCs 8002
and 8003 using all single and ``pseudo'' single procedure claims for CY
2010 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 procedure
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 eight 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 HCPCS code G0378; or CPT code 99205 (Office or other
outpatient visit for the evaluation and management of a new patient
(Level 5)); or CPT code 99215 (Office or other outpatient visit for the
evaluation and management of an established patient (Level 5)) provided
on the same date of service or one day before the date of service for
HCPCS code G0378.
In the case of composite APC 8003, CPT code 99284
(Emergency department visit for the evaluation and management of a
patient (Level 4)); CPT code 99285 (Emergency department visit for the
evaluation and management of a patient (Level 5)); CPT code 99291
(Critical care, evaluation and management of the critically ill or
critically injured patient; first 30-74 minutes); or HCPCS code G0384
(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 added HCPCS code G0384 to the eligibility criteria for
composite APC 8003 for CY 2009.)
As discussed further in section VII. of this proposed rule, and
consistent with our CY 2008, CY 2009, CY 2010, and CY 2011 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 2012.
At its February 28-March 1, 2011 meeting, the APC Panel recommended
that CMS consider expanding the extended assessment and management
composite APCs for CY 2012. We are accepting this recommendation.
Consistent with our acceptance of the APC Panel's recommendation,
we have examined various ways of potentially expanding the current
extended assessment and management composite APCs to further limit the
possibility that total beneficiary copayments would exceed the
inpatient deductible during extended observation encounters. At this
time, we have decided not to pursue for CY 2012 the expanded extended
assessment and management composite APCs that we analyzed because,
while the composites that we modeled would serve to further limit the
number of beneficiaries with copayments that exceeded the inpatient
deductible, the modeled composites also had the effect of possibly
increasing copayments by a small amount for the majority of
beneficiaries undergoing extended observation. In addition, expanded
assessment and management composite APCs do not address certain
concerns about extended observation services raised by stakeholders at
CMS' observation listening session last year (that is, observation time
not counting towards the 3-day prior hospitalization requirement for
the skilled nursing facility benefit). We will continue our efforts to
model other composite structures for a possible new extended assessment
and management composite structure for CY 2013.
In summary, for CY 2012, we are proposing to continue to include
composite APCs 8002 and 8003 in the OPPS. We are proposing to continue
the extended assessment and management composite APC payment
methodology and criteria that we finalized for CYs 2009, 2010, and
2011. We also are proposing to calculate the median costs for APCs 8002
and 8003 using the same methodology that we used to calculate the
medians for composite APCs 8002 and 8003 for the CY 2008 OPPS (72 FR
66649). That is, we used all single and ``pseudo'' single procedure
claims from CY 2010 that met the criteria for payment of each composite
APC and applied the standard packaging and trimming rules to the claims
before calculating the proposed CY 2012 median costs. The proposed CY
2012 median cost resulting from this methodology for composite APC 8002
is approximately $395, which was calculated from 16,770 single and
``pseudo'' single bills that met the required criteria. The proposed CY
2012 median cost for composite APC 8003 is approximately $735, which
was calculated from 225,874 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

[[Page 42199]]

codes are used to report the composite treatment service because there
are separate codes that describe placement of the needles/catheters and
the application of the brachytherapy sources: CPT code 55875
(Transperineal placement of needles or catheters into prostate for
interstitial radioelement application, with or without cystoscopy) and
CPT code 77778 (Interstitial radiation source application; complex).
Generally, the component services represented by both codes are
provided in the same operative session in the same hospital on the same
date of service to the Medicare beneficiary being treated with LDR
brachytherapy for prostate cancer. As discussed in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66653), OPPS payment rates for
CPT code 77778, in particular, had fluctuated over the years. We were
frequently informed by the public that reliance on single procedure
claims to set the median costs for these services resulted in use of
mainly 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 began providing 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 based 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 have continued to receive separate payments for the
individual services. We refer readers to the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66652 through 66655) for a full history
of OPPS payment for LDR prostate brachytherapy and a detailed
description of how we developed the LDR prostate brachytherapy
composite APC.
For CY 2012, we are proposing to continue paying for LDR prostate
brachytherapy services using the composite APC methodology proposed and
implemented for CY 2008 through CY 2011. That is, we are proposing to
use CY 2010 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 through CY
2011 practice, we are proposing 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 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 2010 claims data available for this CY 2012
proposed rule, we were able to use 556 claims that contained both CPT
codes 55875 and 77778 to calculate the median cost upon which the
proposed CY 2012 payment for composite APC 8001 is based. The proposed
median cost for composite APC 8001 for CY 2012 is approximately $3,364.
This is an increase compared to the CY 2011 final median cost for this
composite APC of approximately $3,195 based on 849 single bill claims
from a full year of CY 2009 claims data. The proposed CY 2012 median
cost for this composite APC is slightly less than $3,555, the sum of
the proposed median costs for APCs 0163 and 0651 ($2,658 + $897), the
APCs to which CPT codes 55875 and 77778 map if one service is billed on
a claim without the other. We believe the proposed CY 2012 median cost
for composite APC 8001 of approximately $3,364, calculated from claims
we believe to be correctly coded, would result in a reasonable and
appropriate payment rate for this service in CY 2012.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC
(APC 8000)
Cardiac electrophysiologic evaluation and ablation services
frequently are performed in varying combinations with one another
during a single episode of care in the hospital outpatient setting.
Therefore, correctly coded claims for these services often include
multiple codes for component services that are reported with different
CPT codes and that, prior to CY 2008, were always paid separately
through different APCs (specifically, APC 0085 (Level II
Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm
Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)).
As a result, there would never be many single bills for cardiac
electrophysiologic evaluation and ablation services, and those that are
reported as single bills would often represent atypical cases or
incorrectly coded claims. As described in the CY 2008 OPPS/ASC final
rule with comment period (72 FR 66655 through 66659), the APC Panel and
the public expressed persistent concerns regarding the limited and
reportedly unrepresentative single bills available for use in
calculating the median costs for these services according to our
standard OPPS methodology.
Effective January 1, 2008, we established APC 8000 (Cardiac
Electrophysiologic Evaluation and Ablation Composite) to pay for a
composite service made up of at least one specified electrophysiologic
evaluation service and one specified electrophysiologic ablation
service. Calculating a composite APC for these services allowed us to
utilize many more claims than were available to establish the
individual APC median costs for these services, and we also saw this
composite APC as an opportunity to advance our stated goal of promoting
hospital efficiency through larger payment bundles. In order to
calculate the median cost upon which the payment rate for composite APC
8000 is based, we used multiple procedure claims that contained at
least one CPT code from group A for evaluation services and at least
one CPT code from group B for ablation services reported on the same
date of service on an individual claim. Table 9 in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66656) identified the CPT codes
that are 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

[[Page 42200]]

for a code in group B for the same beneficiary, payments are made under
the appropriate single procedure APCs and the composite APC does not
apply.
For CY 2012, we are proposing to continue to pay for cardiac
electrophysiologic evaluation and ablation services using the composite
APC methodology proposed and implemented for CY 2008 through CY 2011.
Consistent with our CY 2008 through CY 2011 practice, we are proposing
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.
For CY 2012, using a partial year of CY 2010 claims data available
for this proposed rule, we were able to use 11,156 claims containing a
combination of group A and group B codes and calculate a proposed
median cost of approximately $11,598 for composite APC 8000. This is an
increase compared to the CY 2011 final median cost for this composite
APC of approximately $10,673 based on a full year of CY 2009 claims
data. We believe the proposed median cost of $11,598 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 7 below list the groups of procedures upon which we based
proposed composite APC 8000 for CY 2012.

Table 7--Proposed Groups of Cardiac Electrophysiologic Evaluation and Ablation Procedures Upon Which Composite
APC 8000 is Based
----------------------------------------------------------------------------------------------------------------
Proposed
Codes used in combinations: At least one in Group A CY 2011 CPT single code Proposed CY 2012 SI
and one in Group B Code CY 2012 APC (composite)
----------------------------------------------------------------------------------------------------------------
Group A:
Comprehensive electrophysiologic evaluation 93619 0085 Q3
with right 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 93620 0085 Q3
including 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 93650 0085 Q3
atrioventricular node function,
atrioventricular conduction for creation of
complete heart block, with or without
temporary pacemaker placement.
Intracardiac catheter ablation of 93651 0086 Q3
arrhythmogenic focus; for 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 93652 0086 Q3
arrhythmogenic focus; for treatment of
ventricular tachycardia.
----------------------------------------------------------------------------------------------------------------

(4) Mental Health Services Composite APC (APC 0034)
For CY 2012, we are proposing to continue our longstanding policy
of limiting the aggregate payment for specified less resource-intensive
mental health services furnished on the same date to the payment for a
day of partial hospitalization, which we consider to be the most
resource-intensive of all outpatient mental health treatment for CY
2012. We refer readers to the April 7, 2000 OPPS final rule with
comment period (65 FR 18452 through 18455) for the initial discussion
of this longstanding policy. We continue to believe that the costs
associated with administering a partial hospitalization program
represent the most resource-intensive of all outpatient mental health
treatment. Therefore, we do not believe that we should pay more for a
day of individual mental health services under the OPPS than the
partial hospitalization per diem payment.
As discussed in detail in section VIII. of this proposed rule, for
CY 2012, we are proposing to continue using a provider-specific two
tiered payment approach for partial hospitalization services that
distinguishes payment made for services furnished in a CMHC from
payment made for services furnished in a hospital. Specifically, we are
proposing one APC for partial hospitalization program days with three
services furnished in a CMHC (APC 0172, (Level I Partial
Hospitalization (3 services) for CMHCs) and one APC for days with four
or more services furnished in a CMHC (APC 0173, Level II Partial
Hospitalization (4 or more services) for CMHCs). We are proposing that
the payment rates for these two APCs be based upon the median per diem
costs calculated using data only from CMHCs. Similarly, we are
proposing one APC for partial hospitalization program days with three
services furnished in a hospital (APC 0175, Level I Partial
Hospitalization (3 services) for Hospital-Based PHPs), and one APC for
days with four or more services furnished in a hospital (APC 0176,
Level II Partial Hospitalization (4 or more services) for Hospital-
Based PHPs). We are proposing that the payment rates for these two APCs
be based on the median per diem costs calculated using data only from
hospitals.
Because our longstanding policy of limiting the aggregate payment
for specified less resource-intensive mental health services furnished
on the same date to the payment rate for the most

[[Page 42201]]

resource-intensive of all outpatient mental health treatment, we are
proposing to continue to set the CY 2012 payment rate for APC 0034
(Mental Health Services Composite) at the same rate as we are proposing
for APC 0176, which is the maximum partial hospitalization per diem
payment. We believe this APC payment rate would provide the most
appropriate payment for composite APC 0034, taking into consideration
the intensity of the mental health services and the differences in the
HCPCS codes for mental health services that could be paid through this
composite APC compared with the HCPCS codes that could be paid through
partial hospitalization APC 0176. When the aggregate payment for
specified mental health services provided by one hospital to a single
beneficiary on one date of service based on the payment rates
associated with the APCs for the individual services exceeds the
maximum per diem partial hospitalization payment, we are proposing that
those specified mental health services would be assigned to APC 0034.
We are proposing that APC 0034 would have the same payment rate as APC
0176 and that the hospital would continue to be paid one unit of APC
0034. The I/OCE currently determines, and we are proposing for CY 2012
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 0176 per diem rate for partial hospitalization for
all of the specified mental health services furnished by the hospital
on that single date of service.
(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: (1) Ultrasound; (2) computed
tomography (CT) and computed tomographic angiography (CTA); and (3)
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 13 of the CY 2011
OPPS/ASC final rule with comment period (75 FR 71859 through 71860).
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).
At its February 2010 meeting, the APC Panel recommended that CMS
continue providing analysis on an ongoing basis of the impact on
beneficiaries of the multiple imaging composite APCs as data become
available. In the CY 2011 OPPS/ASC proposed rule, we indicated that we
were accepting this recommendation and would provide the requested
analysis to the APC Panel at a future meeting (75 FR 46212). At the
February 28-March 1, 2011 APC Panel meeting, CMS staff provided an
updated analysis of the multiple imaging composite APCs to the Panel,
comparing partial year CY 2010 imaging composite cost and utilization
data to comparable CY 2009 data in order to meet the APC Panel request
that we provide analysis of the impact on beneficiaries of the multiple
imaging composite APCs.
For CY 2012, we are proposing to continue paying for all multiple
imaging procedures within an imaging family performed on the same date
of service using the multiple imaging composite payment methodology.
The proposed CY 2012 payment rates for the five multiple imaging
composite APCs (APC 8004, APC 8005, APC 8006, APC 8007, and APC 8008)
are based on median costs calculated from the partial year CY 2010
claims available for this proposed rule that qualified for composite
payment under the current policy (that is, those claims with more than
one procedure within the same family on a single date of service). To
calculate the proposed median costs, we used the same methodology that
we used to calculate the final CY 2011 median costs for these composite
APCs. That is, we removed any HCPCS codes in the OPPS imaging families
that overlapped with codes on our bypass list (``overlap bypass
codes'') to avoid splitting claims with multiple units or multiple
occurrences of codes in an OPPS imaging family into new ``pseudo''
single claims. The imaging HCPCS codes that we removed from the bypass
list for purposes of calculating the proposed multiple imaging
composite APC median costs appear in Table 9 of this proposed rule. (We
note that, consistent with our proposal in section II.A.1.b. of this
proposed rule to add CPT code 71550 (Magnetic resonance (e.g., proton)
imaging, chest (e.g., for evaluation of hilar and mediastinal
lymphadenopathy); without contrast material(s)) to the list of bypass
codes for CY 2012, we also are proposing to add CPT code 71550 to the
list of proposed OPPS imaging family services overlapping with HCPCS
codes on the

[[Page 42202]]

proposed CY 2012 bypass list.) We integrated the identification of
imaging composite ``single session'' claims, that is, claims with
multiple imaging procedures within the same family on the same date of
service, into the creation of ``pseudo'' single procedure 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.''
As discussed in detail in section III.D.2. of this proposed rule,
we are proposing to establish two APCs to which we would propose to
assign the codes created for CY 2011 by the AMA's CPT Editorial Board
for combined abdominal and pelvis CT services. Specifically, we are
proposing to create new APC 0331 (Combined Abdominal and Pelvis CT
Without Contrast), to which we are proposing to assign CPT code 74176
(Computed tomography, abdomen and pelvis; without contrast material);
and we are proposing to create new APC 0334 (Combined Abdominal and
Pelvis CT With Contrast), to which we are proposing to assign CPT codes
74177 (Computed tomography, abdomen and pelvis; with contrast
material(s)) and 74178 (Computed tomography, abdomen and pelvis;
without contrast material in one or both body regions, followed by
contrast material(s) and further sections in one or both body regions)
for the CY 2012 OPPS. As noted and listed in section III.D.2. of this
proposed rule, we selected claims of predecessor codes of new CPT codes
74176, 74177, and 74178 to calculate the costs of proposed new APCs
0331 and 0334, respectively. Therefore, we are proposing not to use
those claims listed in Table 21 in section III.D.2. of this proposed
rule in calculating the costs of APCs 8005 and 8006.
We were able to identify 1 million ``single session'' claims out of
an estimated 2 million potential composite cases from our ratesetting
claims data, or approximately half of all eligible claims, to calculate
the proposed CY 2012 median costs for the multiple imaging composite
APCs. We list in Table 8 below the HCPCS codes that would be subject to
the proposed multiple imaging composite policy, the approximate
proposed median costs for the imaging composite APCs, and their
respective families for CY 2012. The HCPCS codes listed in Table 8 are
assigned status indicated ``Q3''' in Addendum B to this proposed rule
(which is referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site) to identify their
status as potentially payable through a composite APC. Their proposed
composite APC assignment is identified in Addendum M to this proposed
rule (which is referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site). Table 9 below lists
the OPPS imaging family services that overlap with HCPCS codes on the
proposed CY 2012 bypass list.

Table 8--Proposed OPPS Imaging Families and Multiple Imaging Procedure
Composite APCs
------------------------------------------------------------------------

------------------------------------------------------------------------
Family 1--Ultrasound
------------------------------------------------------------------------
Proposed CY 2012 APC 8004 Proposed CY 2012
(Ultrasound Composite).................... Approximate APC Median Cost
= $197
------------------------------------------------------------------------
76604..................................... Us exam, chest.
76700..................................... Us exam, abdom, complete.
76705..................................... Echo exam of abdomen.
76770..................................... Us exam abdo back wall,
comp.
76775..................................... Us exam abdo back wall, lim.
76776..................................... Us exam k transpl w/Doppler.
76831..................................... Echo exam, uterus.
76856..................................... Us exam, pelvic, complete.
76870..................................... Us exam, scrotum.
76857..................................... Us exam, pelvic, limited.
------------------------------------------------------------------------
Family 2--CT and CTA With and Without Contrast
------------------------------------------------------------------------
Proposed CY 2012 APC 8005 Proposed CY 2012
(CT and CTA Without Contrast Composite)*.. Approximate APC Median Cost
= $445
------------------------------------------------------------------------
70450..................................... Ct head/brain w/o dye.
70480..................................... Ct orbit/ear/fossa w/o dye.
70486..................................... Ct maxillofacial w/o dye.
70490..................................... Ct soft tissue neck w/o dye.
71250..................................... Ct thorax w/o dye.
72125..................................... Ct neck spine w/o dye.
72128..................................... Ct chest spine w/o dye.
72131..................................... Ct lumbar spine w/o dye.
72192..................................... Ct pelvis w/o dye.
73200..................................... Ct upper extremity w/o dye.
73700..................................... Ct lower extremity w/o dye.
74150..................................... Ct abdomen w/o dye.
74261..................................... Ct colonography, w/o dye.
74176..................................... Ct angio abd & pelvis.
------------------------------------------------------------------------
Proposed CY 2012 APC 8006 Proposed CY 2012
(CT and CTA With Contrast Composite)...... Approximate APC Median Cost
= $744
------------------------------------------------------------------------
70487..................................... Ct maxillofacial w/dye.
70460..................................... Ct head/brain w/dye.
70470..................................... Ct head/brain w/o & w/dye.
70481..................................... Ct orbit/ear/fossa w/dye.
70482..................................... Ct orbit/ear/fossa w/o & w/
dye.
70488..................................... Ct maxillofacial w/o & w/
dye.
70491..................................... Ct soft tissue neck w/dye.
70492..................................... Ct sft tsue nck w/o & w/dye.
70496..................................... Ct angiography, head.
70498..................................... Ct angiography, neck.
71260..................................... Ct thorax w/dye.
71270..................................... Ct thorax w/o & w/dye.
71275..................................... Ct angiography, chest.
72126..................................... Ct neck spine w/dye.
72127..................................... Ct neck spine w/o & w/dye.
72129..................................... Ct chest spine w/dye.
72130..................................... Ct chest spine w/o & w/dye.
72132..................................... Ct lumbar spine w/dye.
72133..................................... Ct lumbar spine w/o & w/dye.
72191..................................... Ct angiograph pelv w/o & w/
dye.
72193..................................... Ct pelvis w/dye.
72194..................................... Ct pelvis w/o & w/dye.
73201..................................... Ct upper extremity w/dye.
73202..................................... Ct uppr extremity w/o & w/
dye.
73206..................................... Ct angio upr extrm w/o & w/
dye.
73701..................................... Ct lower extremity w/dye.
73702..................................... Ct lwr extremity w/o & w/
dye.
73706..................................... Ct angio lwr extr w/o & w/
dye.
74160..................................... Ct abdomen w/dye.
74170..................................... Ct abdomen w/o & w/dye.
74175..................................... Ct angio abdom w/o & w/dye.
74262..................................... Ct colonography, w/dye.
75635..................................... Ct angio abdominal arteries.
74177..................................... Ct angio abd & pelv w/
contrast.
74178..................................... Ct angio abd & pelv 1+
regns.
------------------------------------------------------------------------
* If a ``without contrast'' CT or CTA procedure is performed during the
same session as a ``with contrast'' CT or CTA procedure, the I/OCE will
assign APC 8006 rather than APC 8005..
------------------------------------------------------------------------
Family 3--MRI and MRA With and Without Contrast
------------------------------------------------------------------------
Proposed CY 2012 APC 8007 Proposed CY 2012
(MRI and MRA Without Contrast Composite)*. Approximate APC Median Cost
= $718
------------------------------------------------------------------------
70336..................................... Magnetic image, jaw joint.

[[Page 42203]]

70540..................................... Mri orbit/face/neck w/o dye.
70544..................................... Mr angiography head w/o dye.
70547..................................... Mr angiography neck w/o dye.
70551..................................... Mri brain w/o dye.
70554..................................... Fmri brain by tech.
71550..................................... Mri chest w/o dye.
72141..................................... Mri neck spine w/o dye.
72146..................................... Mri chest spine w/o dye.
72148..................................... Mri lumbar spine w/o dye.
72195..................................... Mri pelvis w/o dye.
73218..................................... Mri upper extremity w/o dye.
73221..................................... Mri joint upr extrem w/o
dye.
73718..................................... Mri lower extremity w/o dye.
73721..................................... Mri jnt of lwr extre w/o
dye.
74181..................................... Mri abdomen w/o dye.
75557..................................... Cardiac mri for morph.
75559..................................... Cardiac mri w/stress img.
C8901..................................... MRA w/o cont, abd.
C8904..................................... MRI w/o cont, breast, uni.
C8907..................................... MRI w/o cont, breast, bi.
C8910..................................... MRA w/o cont, chest.
C8913..................................... MRA w/o cont, lwr ext.
C8919..................................... MRA w/o cont, pelvis.
C8932..................................... MRA, w/o dye., spinal canal.
C8935..................................... MRA, w/o dye., upper extr.
------------------------------------------------------------------------
Proposed CY 2012 APC 8008 Proposed CY 2012
(MRI and MRA with Contrast Composite)..... Approximate APC Median Cost
= $1,032
------------------------------------------------------------------------
70549..................................... Mr angiograph neck w/o & w/
dye.
70542..................................... Mri orbit/face/neck w/dye.
70543..................................... Mri orbt/fac/nck w/o & w/
dye.
70545..................................... Mr angiography head w/dye.
70546..................................... Mr angiograph head w/o & w/
dye.
70548..................................... Mr angiography neck w/dye.
70552..................................... Mri brain w/dye.
70553..................................... Mri brain w/o & w/dye.
71551..................................... Mri chest w/dye.
71552..................................... Mri chest w/o & w/dye.
72142..................................... Mri neck spine w/dye.
72147..................................... Mri chest spine w/dye.
72149..................................... Mri lumbar spine w/dye.
72156..................................... Mri neck spine w/o & w/dye.
72157..................................... Mri chest spine w/o & w/dye.
72158..................................... Mri lumbar spine w/o & w/
dye.
72196..................................... Mri pelvis w/dye.
72197..................................... Mri pelvis w/o & w/dye.
73219..................................... Mri upper extremity w/dye.
73220..................................... Mri uppr extremity w/o & w/
dye.
73222..................................... Mri joint upr extrem w/dye.
73223..................................... Mri joint upr extr w/o & w/
dye.
73719..................................... Mri lower extremity w/dye.
73720..................................... Mri lwr extremity w/o & w/
dye.
73722..................................... Mri joint of lwr extr w/dye.
73723..................................... Mri joint lwr extr w/o & w/
dye.
74182..................................... Mri abdomen w/dye.
74183..................................... Mri abdomen w/o & w/dye.
75561..................................... Cardiac mri for morph w/dye.
75563..................................... Card mri w/stress img & dye.
C8900..................................... MRA w/cont, abd.
C8902..................................... MRA w/o fol w/cont, abd.
C8903..................................... MRI w/cont, breast, uni.
C8905..................................... MRI w/o fol w/cont, brst,
un.
C8906..................................... MRI w/cont, breast, bi.
C8908..................................... MRI w/o fol w/cont, breast.
C8909..................................... MRA w/cont, chest.
C8911..................................... MRA w/o fol w/cont, chest.
C8912..................................... MRA w/cont, lwr ext.
C8914..................................... MRA w/o fol w/cont, lwr ext.
C8918..................................... MRA w/cont, pelvis.
C8920..................................... MRA w/o fol w/cont, pelvis.
C8931..................................... MRA, w/dye., spinal canal.
C8933..................................... MRA, w/o & w/dye., spinal
canal.
C8934..................................... MRA, w/dye., upper
extremity.
C8936..................................... MRA, w/o & w/dye., upper
extr.
------------------------------------------------------------------------
* If a ``without contrast'' MRI or MRA procedure is performed during the
same session as a ``with contrast'' MRI or MRA procedure, the I/OCE
will assign APC 8008 rather than 8007..
------------------------------------------------------------------------

Table 9--Proposed OPPS Imaging Family Services Overlapping With HCPCS
Codes on the Proposed CY 2012 Bypass List
------------------------------------------------------------------------

------------------------------------------------------------------------
Family 1--Ultrasound
------------------------------------------------------------------------
76700............................ Us exam, abdom, complete.
76705............................ Echo exam of abdomen.
76770............................ Us exam abdo back wall, comp.
76775............................ Us exam abdo back wall, lim.
76776............................ Us exam k transpl w/Doppler.
76856............................ Us exam, pelvic, complete.
76870............................ Us exam, scrotum.
76857............................ Us exam, pelvic, limited.
------------------------------------------------------------------------
Family 2--CT and CTA with and without contrast
------------------------------------------------------------------------
70450............................ Ct head/brain w/o dye.
70480............................ Ct orbit/ear/fossa w/o dye.
70486............................ Ct maxillofacial w/o dye.
70490............................ Ct soft tissue neck w/o dye.
71250............................ Ct thorax w/o dye.
72125............................ Ct neck spine w/o dye.
72128............................ Ct chest spine w/o dye.
72131............................ Ct lumbar spine w/o dye.
72192............................ Ct pelvis w/o dye.
73200............................ Ct upper extremity w/o dye.
73700............................ Ct lower extremity w/o dye.
74150............................ Ct abdomen w/o dye.
------------------------------------------------------------------------
Family 3--MRI and MRA with and without contrast
------------------------------------------------------------------------
70336............................ Magnetic image, jaw joint.
70544............................ Mr angiography head w/o dye.
70551............................ Mri brain w/o dye.
71550............................ Mri chest w/o dye.
72141............................ Mri neck spine w/o dye.
72146............................ Mri chest spine w/o dye.
72148............................ Mri lumbar spine w/o dye.
73218............................ Mri upper extremity w/o dye.
73221............................ Mri joint upr extrem w/o dye.
73718............................ Mri lower extremity w/o dye.
73721............................ Mri jnt of lwr extre w/o dye.
------------------------------------------------------------------------

(6) Cardiac Resynchronization Therapy Composite APC (APCs 0108, 0418,
0655, and 8009)
Cardiac resynchronization therapy (CRT) uses electronic devices to
sequentially pace both sides of the heart to improve its output. CRT
utilizes a pacing electrode implanted in combination with either a
pacemaker or an implantable cardioverter defibrillator (ICD). CRT
performed by the implantation of an ICD along with a pacing electrode
is referred to as ``CRT-D.'' CRT performed by the implantation of a
pacemaker along with a pacing electrode is referred to as ``CRT-P.''
CRT-D procedures are described by combinations of CPT codes for the
insertion of pulse generators and the insertion of the leads associated
with ICDs, along with the insertion of the pacing electrode. For the
implantation of a pulse generator, hospitals may use CPT code 33240
(Insertion of single or dual chamber pacing cardioverter-defibrillator
pulse generator), which is the only CPT code assigned to APC 0107
(Insertion of Cardioverter-Defibrillator) for CY 2011. For the
implantation of a pulse generator and leads, hospitals may use CPT code
33249 (Insertion or repositioning of electrode lead(s) for single or
dual chamber pacing cardioverter-defibrillator and insertion of pulse
generator), which is the only CPT code assigned to APC 0108 (Insertion/
Replacement/Repair of Cardioverter-Defibrillator Leads) for CY 2011.
For CRT-P, hospitals may use CPT codes 33206 (Insertion or
replacement of permanent pacemaker with transvenous electrode(s);
atrial) and 33207 (Insertion or replacement of permanent pacemaker with
transvenous electrode(s); ventricular), which are

[[Page 42204]]

assigned to APC 0089 (Insertion/Replacement of Permanent Pacemaker and
Electrodes) for CY 2011. Hospitals also may use CPT code 33208
(Insertion or replacement of permanent pacemaker with transvenous
electrode(s); atrial and ventricular), for the implantation of a
pacemaker with leads, which is assigned to APC 0655 (Insertion/
Replacement/Conversion of a Permanent Dual Chamber Pacemaker).
When CRT-P is provided, hospitals would report CPT code 33206,
33207, or 33208 codes for ICD or pacemaker insertion, along with CPT
code 33225 (Insertion of pacing electrode, cardiac venous system, for
left ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (including upgrade to dual
chamber system)), for implantation of the pacing electrode, which is
assigned to APC 0418 (Insertion of Left Ventricular Pacing Electrode)
for CY 2011.
A number of commenters who responded to prior OPPS proposed rules,
as well as public presenters to the APC Panel, have recommended that
CMS establish new composite APCs for CRT-D, citing significant
fluctuations in the median cost for CPT code 33225 and the payment rate
for APC 0418. The commenters and presenters have pointed out that,
because the definition of CPT code 33225 specifies that the pacing
electrode is inserted at the same time as an ICD or pacemaker, CMS
would not have many valid single or pseudo single claims upon which to
calculate an accurate median cost. These commenters and presenters also
asserted that claims data for these services demonstrate that the
percentage of single claims available for use in CRT ratesetting is
very low compared to the total number of claims submitted for CRT-D or
CRT-P services. The APC Panel at its February and August 2009 meetings
recommended that CMS evaluate the implications of the creation of a new
composite APC for CRT-D and recommended that CMS reconsider creating a
composite APC or group of composite APCs for CRT-D and CRT-P. While we
did not propose any new composite APCs for CY 2010 or CY 2011, we
accepted both of these APC Panel recommendations (75 FR 71852).
In response to the APC Panel recommendations and the comments we
have received, we have evaluated the implications of creating four
composite APCs for CRT, which would include the ICD and pacemaker
insertion procedures listed previously in this section (described by
CPT codes 33240, 33249, 33206, 33207, and 33208) performed in
combination with the insertion of a pacing electrode (described by CPT
code 33225). Table 10 below outlines the four potential composite APCs
that we modeled. Specifically, we provide a description of each
potential composite APC, the combination of CPT codes that we used to
define the potential composite APC, the frequency of claims that met
the definition of the potential composite APC that could be used to
calculate a median cost for the potential composite APC, and the median
cost calculated for the potential composite APC. Table 10 below
contains the results from our calculations for the four potential
composite APCs using CY 2010 claims data available for this proposed
rule, that is, those claims processed between January 1 and December
31, 2010.

Table 10--Potential Composite APCs
----------------------------------------------------------------------------------------------------------------
CY 2012
Potential composite Description Component CPT codes CY 2010 payment
APC APCs frequency estimate
----------------------------------------------------------------------------------------------------------------
A.................... Cardiac Resynchronization Therapy-- 0418 33225 21 $35,623
ICD Pulse Generator and Leads. 0107 33240
B.................... Cardiac Resynchronization Therapy-- 0418 33225 2,358 38,854
ICD Pulse Generator. 0108 33249
C.................... Cardiac Resynchronization Therapy-- 0418 33225 84 17,306
Pacemaker Pulse Generator, and Leads 0089 33206
(Atrial or Ventricular). 33207
D.................... Cardiac Resynchronization Therapy-- 0418 33225 314 18,705
Pacemaker Pulse Generator, and Leads 0655 33208
(Atrial and Ventricular).
----------------------------------------------------------------------------------------------------------------

For CY 2012, under the authority of section 1833(t)(1)(B) of the
Act, we are proposing to create a new composite APC 8009 (Cardiac
Resynchronization Therapy with Defibrillator Composite), listed as
potential composite APC ``B'' in Table 10 above, for CRT-D services.
This proposed composite APC is the only modeled composite in the study
as shown above in Table 10, with significant claims volume, and would
combine a procedure currently in APC 0418 with a procedure currently in
APC 0108 (Insertion/Replacement/Repair of Cardioverter-Defibrillator
Leads) when performed on the same date of service. Specifically, we are
proposing to create composite APC 8009, which would be used when CPT
33249 and CPT 33225 are performed on the same day, in order to
recognize the inherent challenges in calculating accurate median costs
for CPT code 33225 based on single procedure claims utilized in
standard OPPS ratesetting methodology, and to address commenters'
concerns regarding the fluctuations in median costs for APC 0418. We
believe a composite payment methodology is appropriate for these
services and would result in more accurate payment for these services
because such a methodology is specifically designed to provide payment
for two or more procedures when they are provided in the same
encounter, thus enabling us to use more claims data and to use claims
data that more accurately represents the full cost of the services when
they are furnished in the same encounter. We also believe that there is
sufficient claims volume for CPT 33249 and CPT 33225 provided in the
same encounter to warrant creation of the composite APC. In addition,
we believe that the claims volume for CPT 33249 and CPT 33225 is
sufficient to demonstrate that these services are commonly performed
together. While the other combinations of CRT procedures listed in
Table 10 may also be performed together, we are not proposing to
implement composite APCs for these services because of the low
frequency with which CPT code 33225 is reported with other CPT codes
for ICD and pacemaker insertion in the claims data. As we have stated
previously (74 FR 60392), because of the complex claims processing and
ratesetting logic involved, in the past, we have explored composite
APCs only for combinations of services that are commonly performed
together. Because

[[Page 42205]]

of the low frequency of the other combinations of CRT procedures listed
in Table 10, we do not consider them to be commonly performed together.
Under the authority of section 1833(t)(2)(E) of the Act, we also
are proposing to cap the payment rate for composite APC 8009 at the
most comparable Medicare-severity diagnosis-related group (MS-DRG)
payment rate established under the IPPS that would be provided to acute
care hospitals for providing CRT-D services to hospital inpatients.
Specifically, we are proposing to pay APC 8009 at the lesser of the APC
8009 median cost or the IPPS payment rate for MS-DRG 227 (Cardiac
Defibrillator Implant without Cardiac Catheterization without Major
Complication or Comorbidity), as adopted in the FY 2012 IPPS/LTCH PPS
final rule. We would establish the OPPS payment amount at the FY 2012
IPPS standardized payment amount for MS-DRG 227. In the FY 2012 IPPS/
LTCH proposed rule, this amount is $26,364.93. We calculated the
standardized payment rate for MS-DRG 227 ($26,364.93) by multiplying
the normalized weight from Table 5 of the FY 2012 IPPS/LTCH PPS
proposed rule (5.1370) by the sum of the nonlablor and labor-related
shares of the proposed FY 2012 IPPS operating standardized amount
(nonwage-adjusted) ($5,132.36) which were obtained from Table 1B. For
further detail on the calculation of the IPPS proposed FY 2012 payments
rates, we refer readers to the FY 2012 IPPS/LTCH PPS proposed rule (76
FR 26028 through 26029).
We consider the standardized payment rate for MS-DRG 227 to
represent appropriate payment for a comparable package of services
furnished to outpatients. We believe that, because this MS-DRG includes
defibrillator implantation for those inpatients without major
complications or comorbidities, it represents the payment made for
hospital inpatients who are most similar to patients who would receive
CRT-D on an outpatient basis, because hospital outpatients are
generally less sick than hospital inpatients and because patients who
had complications or comorbitities would be most likely to be admitted
to inpatient status to receive CRT-D therapy. Similar to the proposed
payment rate for composite APC 8009, the proposed payment rate for MS-
DRG 227 includes the device costs associated with CRT-D along with the
service costs associated with CPT codes 33249 and 33225, which are the
procedures that are reported for implanting those devices. We believe
that we should not pay more for these services under the proposed OPPS
composite APC payment than under the IPPS because the OPPS payment
would, by definition, include fewer items and services than the
corresponding IPPS MS-DRG payment. For example, the IPPS MS-DRG payment
includes payment for drugs and diagnostic tests that would be
separately payable under the OPPS. A payment cap is necessary,
therefore, to ensure that we do not create an inappropriate payment
incentive to provide CRT-D services in one setting of care over another
by paying more for CRT-D in the outpatient setting compared to the
inpatient setting. We also believe that limiting payment for CRT-D
services under the OPPS to the IPPS MS-DRG payment will ensure
appropriate and equitable payment to hospitals because patients who
receive these services in the hospital outpatient setting are not as
sick as patients who have been admitted to receive this same service in
the hospital inpatient setting. Therefore, we expect it would be less
costly to provide care for these patients, who would also spend less
time in the facility. For more detail and how this payment rate was
calculated, we refer readers to section III. D. 6 of this proposed
rule.
In order to ensure that hospitals correctly code for CRT services
in the future, we are proposing to create claim processing edits that
would return claims to providers unless CPT code 33225 is billed in
conjunction with one of the following CPT codes, as specified by AMA in
the CPT code book:
33206 (Insertion or replacement of permanent pacemaker
with transvenous electrode(s); atrial);
33207 (Insertion or replacement of permanent pacemaker
with transvenous electrode(s); ventricular);
33208 (Insertion or replacement of permanent pacemaker
with transvenous electrode(s); atrial and ventricular);
33212 (Insertion or replacement of pacemaker pulse
generator only; single chamber, atrial or ventricular);
33213 (Insertion or replacement of pacemaker pulse
generator only; dual chamber, atrial or ventricular);
33214 (Upgrade of implanted pacemaker system, conversion
of single chamber system to dual chamber system (includes removal of
previously placed pulse generator, testing of existing lead, insertion
of new lead, insertion of new pulse generator));
33216 (Insertion of a single transvenous electrode,
permanent pacemaker or cardioverter-defibrillator);
33217 (Insertion of 2 transvenous electrodes, permanent
pacemaker or cardioverter-defibrillator);
33222 (Revision or relocation of skin pocket for
pacemaker), 33233 (Removal of permanent pacemaker pulse generator);
33234 (Removal of transvenous pacemaker electrode(s);
single lead system, atrial or ventricular);
33235 (Removal of transvenous pacemaker electrode(s); dual
lead system, atrial or ventricular);
33240 (Insertion of single or dual chamber pacing
cardioverter-defibrillator pulse generator); or
33249 (Insertion or repositioning of electrode lead(s) for
single or dual chamber pacing cardioverter-defibrillator and insertion
of pulse generator).
Finally, in order to reduce the extent to which payment rates for
the two services currently assigned to APC 0418, described by CPT codes
33224 and 33225, might continue to fluctuate, we also are proposing to
move CPT 33225 from APC 0418 to APC 0108. We believe that moving these
codes to APCs that have higher volumes of services to which they are
more similar in clinical characteristics and median costs will increase
the stability of the payments for these services from year to year. In
general, a higher volume of services across multiple procedures within
an APC results in more stable APC median costs and, therefore, in the
payment rate from one year to the next. We also are proposing to change
the name of APC 0108 from ``Insertion/Replacement/Repair of
Cardioverter-Defibrillator Leads'' to ``Insertion/Replacement/Repair of
AICD Leads, Generator, and Pacing Electrodes.'' Similarly, we are
proposing to move CPT 33224 from APC 0418 to APC 0655 and to change the
name of APC 0655 from ``Insertion/Replacement/Conversion of a Permanent
Dual Chamber Pacemaker'' to ``Insertion/Replacement/Conversion of a
Permanent Dual Chamber Pacemaker or Pacing Electrode.'' We believe that
moving CPT code 33224 into APC 0655 will promote stability in payment
for CPT code 33224 because CPT code 33224 would then be in an APC with
similar median costs but with a higher volume of services and,
therefore, will benefit from the stability in APC median cost and
payment rate that generally results as the volume of services within an
APC increases. Because these proposed actions would result in APC 0418
containing no CPT codes, we are proposing to delete APC 0418.
In summary, for CY 2012, we are proposing to create a composite for
CRT-D services billed with CPT code 33225 and CPT code 33249 on the
same date of service (Composite APC 8009

[[Page 42206]]

(Cardiac Resynchronization Therapy--ICD Pulse Generator and Leads)),
for which we are proposing that payment would be capped at the IPPS
payment rate for MS-DRG 227. In other words, we would pay APC 8009 at
the lesser of the APC 8009 median cost or the IPPS standardized payment
for MS-DRG 227. We also are proposing to implement claims processing
edits that would return to providers incorrectly coded claims on which
a pacing electrode insertion (CPT code 33225) is billed without an ICD
or pacemaker insertion. Finally, we are proposing to delete APC 0418,
and to redistribute its component CPT codes (33225 and 33224) to APCs
0108 and 0655. The proposed changes would all be made in a budget
neutral manner, in the same way that payment for other composite APCs
and the reassignment of codes to APCs are budget neutral within the
OPPS. We refer readers to section II.A.4 of this proposed rule for a
discussion of the scaling of payment weights for budget neutrality.
3. Proposed Changes to Packaged Services
a. Background
The OPPS, like other prospective payment systems, relies on the
concept of averaging, where the payment may be more or less than the
estimated cost of providing a service or bundle of services for a
particular patient, but with the exception of outlier cases, the
payment is adequate to ensure access to appropriate care. Packaging
payment for multiple interrelated services into a single payment
creates 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. Packaging payments into larger
payment bundles promotes the stability of payment for services over
time. Finally, packaging 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. For these reasons, packaging payment for services that are
typically ancillary and supportive to a primary service has been a
fundamental part of the OPPS since its implementation in August 2000.
We assign status indicator ``N'' to those HCPCS codes that we
believe are always integral to the performance of the primary modality;
therefore, we always package their costs into the costs of the
separately paid primary services with which they are billed. Services
assigned status indicator ``N'' are unconditionally packaged.
We assign status indicator ``Q1'' (``STVX-Packaged Codes''), ``Q2''
(``T-Packaged Codes''), or ``Q3'' (Codes that may be paid through a
composite APC) to each conditionally packaged HCPCS code. An ``STVX-
packaged code'' describes a HCPCS code whose payment is packaged when
one or more separately paid primary services with the status indicator
of ``S,'' ``T,'' ``V,'' or ``X'' are furnished in the hospital
outpatient encounter. A ``T-packaged code'' describes a code whose
payment is packaged when one or more separately paid surgical
procedures with the status indicator of ``T'' are provided during the
hospital outpatient 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 codes'' are conditionally packaged. We refer
readers to section XI.A.1. of this proposed rule and Addenda D1 (which
is referenced in section XVII. of this proposed rule and available via
the Internet on the CMS Web site) with other Addenda, for a complete
listing of proposed status indicators and the meaning of each.
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. 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.''
Hospitals include HCPCS codes and 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. The appropriateness of the OPPS
payment rates depends on the quality and completeness of the claims
data that hospitals submit for the services they furnish to our
Medicare beneficiaries.
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 seven categories 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: (1) Guidance services; (2) image processing services; (3)
intraoperative services; (4) imaging supervision and interpretation
services; (5) diagnostic radiopharmaceuticals; (6) contrast media; and
(7) 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 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.
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

[[Page 42207]]

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: (1) APC 8004 (Ultrasound Composite); (2) APC 8005
(CT and CTA without Contrast Composite); (3) APC 8006 (CT and CTA with
Contrast Composite); (4) APC 8007 (MRI and MRA without Contrast
Composite); and (5) APC 8008 (MRI and MRA with Contrast Composite). We
discuss composite APCs in more detail in section II.A.2.e. of this
proposed rule.
We recognize that 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. Therefore, we invite public
comments regarding our packaging proposals for the CY 2012 OPPS.
b. Packaging Issues
(1) CMS Presentation of Findings Regarding Expanded Packaging at the
February 28-March 1, 2011 APC Panel Meeting
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 I.D. of this proposed rule, the APC Panel
advises CMS on the clinical integrity of payment groups and their
weights, and the APC Panel has had a Packaging Subcommittee that is now
renamed the Subcommittee for APC Groups and Status Indicator (SI)
Assignments to reflect that its function has expanded to include
assisting CMS with assignment of HCPCS codes to APCs. As part of its
function, the APC Panel 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. The APC
Panel has considered packaging issues at several earlier meetings. For
discussions of earlier APC Panel meetings and recommendations, we refer
readers to previously published hospital OPPS/ASC proposed and final
rules on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/list.asp.
(2) Packaging Recommendations of the APC Panel at Its February 28-March
1, 2011 Meeting
During the February 28-March 1, 2011 APC Panel meeting, the APC
Panel accepted the report of the Subcommittee for APC Groups and Status
Indicator (SI) Assignment, heard several public presentations related
to packaged services, discussed the deliberations of the subcommittee,
and made five recommendations related to packaging and to the function
of the subcommittee. The Report of the February 28-March 1, 2011
meeting of the APC Panel may be found at the Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
To summarize, the APC Panel made five recommendations regarding the
packaging of payment under the CY 2012 OPPS. Below we present each of
these five packaging recommendations and our responses to those
recommendations. One recommendation that evolved from the discussions
of the APC Groups and Status Indicator Subcommittee that is specific to
HCPCS codes is discussed in section III.D. of this proposed rule.
APC Panel Recommendation 4: That HCPCS code 31627 (Bronchoscopy,
rigid or flexible, including fluoroscopic guidance, when performed;
with computer-assisted, image-guided navigation (List separately in
addition to code for primary procedure[s])) continue to be assigned a
status indicator of ``N.'' The Panel further recommended that CMS
continue to collect claims data for HCPCS code 31627.
CMS Response to Recommendation 4: HCPCS code 31627 was new for CY
2010, and we assigned a new interim status indicator of ``N'' in our CY
2010 OPPS/ASC final rule with comment period based on our policy of
packaging guidance and intraoperative services that are ancillary and
dependent upon an independent separately paid procedure. At the APC
Panel's February 2010 meeting, the manufacturer of the electromagnetic
navigation bronchoscopy (ENB) technology, one of several technologies
that can be used to perform the service described by HCPCS code 31627,
asserted that use of the ENB technology during a bronchoscopy procedure
enables access to distal lesions that are otherwise not accessible
without use of the ENB technology. The manufacturer also stated that
without separate payment for the ENB technology, hospitals would likely
not adopt the technology and the population that would likely benefit
from the ENB technology would not have access to this technology. In
response to the manufacturer's presentation at the February 2010 Panel
meeting, the APC Panel asked CMS to consider whether HCPCS code 31627
should be packaged or paid separately; and if it should be paid
separately, the APC Panel asked CMS to investigate the appropriate APC
assignment. The report of the February 2010 APC Panel meeting is
available at http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
We stated in the CY 2011 OPPS/ASC proposed rule (75 FR 46223) that
we considered and analyzed the information available to us for HCPCS
code 31627 and believed that the code described a procedure that is
supportive of and ancillary to the primary diagnostic or therapeutic
modality. Therefore, we proposed to package payment for HCPCS code
31627. We stated that, by proposing to package payment for this
procedure, we would be treating it in the same manner as similar
computer-assisted, navigational diagnostic procedures that are
supportive of and ancillary to a primary diagnostic or therapeutic
modality.
At its August 23-24, 2010 meeting, the APC Panel listened to
discussions regarding whether HCPCS code 31627 should remain packaged
for CY 2011. After hearing presentations from the public, the APC Panel
recommended that CMS continue to package payment for HCPCS code 31627
into payment for the major separately paid procedure with which it is
performed and asked that CMS bring claims data on the cost of HCPCS
code 31627 to the APC Panel's winter 2011 meeting for review. After
consideration of all of the information provided by commenters on this
issue, and hearing the discussion of the issue by the APC Panel at its
August 23-24, 2010 meeting, we accepted the APC Panel's recommendation
to continue to package payment for HCPCS code 31627 into the payment
for the major separately paid procedure with which it is reported for
CY 2011. In addition, we also accepted the APC Panel's recommendation
that CMS bring claims data [for HCPCS code 31627 to the winter 2011 APC
Panel meeting. The report of the August 2010 APC Panel meeting is
available at http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
At its meeting on February 28-March 1, 2011, the APC Panel listened
to a public presentation in which the manufacturer of the ENB
technology requested that HCPCS code 31627 be paid separately on the
basis that the cost

[[Page 42208]]

of the technology is substantially higher than the OPPS payment for APC
0076 (Level I Endoscopy Lower Airway), the APC to which most
bronchoscopy codes are assigned and into which payment for HCPCS code
31627 is packaged. The manufacturer stated that if CMS does not pay
HCPCS code 31627 separately, hospitals will not furnish the procedure
to hospital outpatients.
In response to the request of the APC Panel at its August 2010
meeting, we presented the available data on HCPCS code 31627 that could
be derived from the hospital outpatient claims that were paid under the
OPPS for services on and after January 1, 2010 through and including
September 30, 2010, as processed through the CMS common working file by
December 31, 2010. Specifically, using the limited set of APC Panel
data, CMS found that 119 hospitals billed for 573 units of HCPCS code
31627, and that HCPCS code 31627 had a median cost of approximately
$329 per unit. We also found that HCPCS code 31627 is reported on 0 to
4 percent of the claims for bronchoscopy codes with which CPT guidance
states that it is permissible to report HCPCS code 31627, with the
exception of HCPCS code 31626 (Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when performed; with placement of
fiducial markers, single or multiple). HCPCS code 31627 was reported on
approximately 52% of claims for HCPCS code 31626 in the APC Panel data.
The APC Panel considered this information in its formulation of
Recommendation 4 that CMS continue to package payment for HCPCS code
31627 into the payment for the bronchoscopy code with which HCPCS code
31627 is reported. Subsequent to the APC Panel meeting, examination and
analysis of the CY 2012 proposed rule data found that 149 hospitals
reported 867 units of HCPCS code 31627, and that HCPCS code 31627 has a
proposed rule median cost of approximately $344 per unit.
After considering the public presentation and the information
presented by CMS staff, the APC Panel recommended that HCPCS code 31627
continue to be assigned a status indicator of ``N.'' The Panel further
recommended that CMS continue to collect claims data for HCPCS code
31627. We are proposing to accept both of the APC Panel's
recommendations for the CY 2012 OPPS. Specifically, we are proposing to
assign HCPCS code 31627 to status indicator ``N'' for the CY 2012 OPPS
and, therefore, are proposing to package payment for the procedure into
payment for the bronchoscopy to which we believe that it is ancillary
and supportive. As with all packaged items and services, the cost we
calculate for CPT code 31627 will be added to the costs on the single
bill for the bronchoscopy code with which the service reported by CPT
code 31627 is furnished, and therefore, the cost of CPT code 31627 will
be incorporated into the payment for the APC to which that bronchoscopy
code is assigned. We continue to believe that HCPCS code 31627, for
which there are several different technologies, describes a service
that is supportive and ancillary to the primary bronchoscopy procedure
with which it must be reported, as defined by CPT. HCPCS code 31627
describes a computer assisted image guided navigation service that is
not furnished without a bronchoscopy. As defined by CPT, HCPCS code
31627 may only be furnished in addition to a bronchocsopy service and
therefore we believe that it is ancillary and supportive to the
bronchsocopy service with which it must be reported. We agree to
provide further claims information on HCPCS code 31627 to the APC Panel
when it becomes available.
APC Panel Recommendation 5: That CMS consider a more appropriate
APC assignment for HCPCS code 31626 (Bronchoscopy, rigid or flexible,
including fluoroscopic guidance, when performed; with placement of
fiducial markers), the most common code with which HCPCS code 31627 was
billed in 2010.
CMS Response to Recommendation 5: We are accepting this
recommendation, and therefore are proposing to reassign HCPCS code
31626 (which has a proposed CY 2012 APC median cost of approximately
$2,708) from APC 0076 (which has a proposed CY 2012 APC median cost of
approximately $751) to APC 0415 (Level II Endoscopy Lower Airway),
which has a proposed CY 2012 APC median cost of approximately $2,007.
We agree with the APC Panel that it appears that the proposed APC
median cost of HCPCS code 31626 of $2,708 justifies placement in an APC
that has a median cost that is more similar to the APC median cost for
this code. We believe that APC 0415 is the most appropriate clinically
similar APC because the proposed CY 2012 median cost for APC 0415 of
$2,007 is more similar in clinical resource for HCPCS code 31626 than
the proposed CY 2012 median cost for APC 0076 of $715.
APC Panel Recommendation 6: That Judith Kelly, R.H.I.T., R.H.I.A.,
C.C.S., continue to chair the APC Groups and Status Indicator (SI)
Assignments Subcommittee for 2011.
CMS Response to Recommendation 6: We are accepting the APC Panel's
recommendation that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S. continue
to chair the APC Groups and Status Indicator Assignments Subcommittee
for 2011.
APC Panel Recommendation 7: That CMS furnish the results of its
investigation of claims that contain the following unconditionally
packaged codes without separately paid procedures:
HCPCS code G0177 (Training and educational services
related to the care and treatment of patient's disabling mental health
problems per session (45 minutes or more));
HCPCS code G0378 (Hospital observation service, per hour);
HCPCS code 75940 (Percutaneous placement of IVC filter,
radiological supervision and interpretation);
HCPCS code 76937 (Ultrasound guidance for vascular access
requiring ultrasound evaluation of potential access sites,
documentation of selected vessel patency, concurrent realtime
ultrasound visualization of vascular needle entry, with permanent
recording and reporting (List separately in addition to code for
primary procedure)).
CMS Response to Recommendation 7: We are accepting the APC Panel's
recommendation that CMS furnish the results of its investigation of
claims that contain the unconditionally packaged codes: HCPCS code
G0177, HCPCS code G0378, HCPCS code 75940, and HCPCS code 76937 at a
future APC Panel meeting.
APC Panel Recommendation 8: That the work of the APC Groups and
Status Indicator (SI) Assignments Subcommittee continue.
CMS Response to Recommendation 8: We are accepting the APC Panel's
recommendation that the work of the APC Groups and Status Indicator
Assignments Subcommittee continue.
(3) Other Packaging Proposals for CY 2012
The HCPCS codes for which we are proposing that payment be packaged
into payment for the separately paid procedures with which the codes
are reported either unconditionally (for which we are proposing to
continue to assign status indicator ``N''), or conditionally (for which
we are proposing to continue to assign status indicators ``Q1'',
``Q2'', or ``Q3'') are displayed in Addendum B of this proposed rule
(which is referenced in section XVIII. of this proposed rule and
available via the Internet on the CMS Web site). The supporting
documents

[[Page 42209]]

for this CY 2012 OPPS/ASC proposed rule, including but not limited to
Addendum B, are available at http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD. To view the proposed status indicators by
HCPCS code in Addendum B, select CMS 1525-P and then select the folder
labeled ``2012 OPPS Proposed Rule Addenda'' from the list of supporting
files. Open the zipped file and select Addendum B, which is available
as both an Excel file and a text file.
The proposed continuation of our standard policy regarding
packaging of drugs and biologicals, implantable biologicals, contrast
agents and diagnostic radiopharmaceuticals is discussed in section V.B.
of this proposed rule. We note that an implantable biological that is
surgically inserted or implanted through a surgical incision or a
natural orifice is commonly referred to throughout this proposed rule
as an ``implantable biological.''
The proposed creation of a new composite APC for CY 2012 for
payment of the insertion of cardiac resynchronization devices is
discussed in section II.A.2.e.(6) of this proposed rule.
4. Proposed Calculation of OPPS Scaled Payment Weights
Using the APC median costs discussed in sections II.A.1. and
II.A.2. of this proposed rule, we calculated the proposed relative
payment weights for each APC for CY 2012 shown in Addenda A and B to
this proposed rule (which are referenced in section XVIII. of this
proposed rule and available via the Internet on the CMS Web site). 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 2012, to maintain consistency in using a median for
calculating unscaled weights representing the median cost of some of
the most frequently provided services, we are proposing to continue to
use the median cost of the mid-level clinic visit APC (APC 0606) to
calculate unscaled weights. Following our standard methodology, but
using the proposed CY 2012 median cost for APC 0606, for CY 2012 we
assigned APC 0606 a relative payment weight of 1.00 and divided the
median cost of each APC by the proposed median cost for APC 0606 to
derive the proposed unscaled relative payment weight for each APC. The
choice of the APC on which to base the proposed relative weights for
all other APCs does not affect the payments made under the OPPS because
we scale the weights for budget neutrality.
Section 1833(t)(9)(B) of the Act requires that APC reclassification
and recalibration changes, wage index changes, and other adjustments be
made in a budget neutral manner. Budget neutrality ensures that the
estimated aggregate weight under the OPPS for CY 2012 is neither
greater than nor less than the estimated aggregate weight that would
have been made without the changes. To comply with this requirement
concerning the APC changes, we are proposing to compare the estimated
aggregate weight using the CY 2011 scaled relative weights to the
estimated aggregate weight using the proposed CY 2012 unscaled relative
weights. For CY 2011, we multiplied the CY 2011 scaled APC relative
weight applicable to a service paid under the OPPS by the volume of
that service from CY 2010 claims to calculate the total weight for each
service. We then added together the total weight for each of these
services in order to calculate an estimated aggregate weight for the
year. For CY 2012, we performed the same process using the proposed CY
2012 unscaled weights rather than scaled weights. We then calculated
the weight scaler by dividing the CY 2011 estimated aggregate weight by
the proposed CY 2012 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.gov/HospitalOutpatientPPS/. We
included payments to CMHCs in our comparison of estimated unscaled
weight in CY 2012 to estimated total weight in CY 2011 using CY 2010
claims data, holding all other components of the payment system
constant to isolate changes in total weight. Based on this comparison,
we adjusted the unscaled relative weights for purposes of budget
neutrality. The proposed CY 2012 unscaled relative payment weights were
adjusted by multiplying them by a proposed weight scaler of 1.4647 to
ensure that the proposed CY 2012 relative weights are budget neutral.
Section 1833(t)(14) of the Act provides the payment rates for
certain ``specified covered outpatient drugs.'' That section 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.'' Therefore, the cost
of those specified covered outpatient drugs (as discussed in section
V.B.3. of this proposed rule) was included in the proposed budget
neutrality calculations for the CY 2012 OPPS.
The proposed scaled relative payment weights listed in Addenda A
and B to this proposed rule (which are referenced in section XVII. of
this proposed rule and available via the Internet on the CMS Web site)
incorporate the proposed recalibration adjustments discussed in
sections II.A.1. and II.A.2. of this proposed rule.

B. Proposed Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires us to update the
conversion factor used to determine payment rates under the OPPS on an
annual basis by applying the OPD fee schedule increase factor. For
purposes of section 1833(t)(3)(C)(iv) of the Act, subject to sections
1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee schedule increase
factor is equal to the hospital inpatient market basket percentage
increase applicable to hospital discharges under section
1886(b)(3)(B)(iii) of the Act. In the FY 2012 IPPS/LTCH PPS proposed
rule (76 FR 25949), consistent with current law, based on IHS Global
Insight, Inc.'s first quarter 2011 forecast of the FY 2012 market
basket increase, we proposed that the FY 2012 IPPS market basket update
would be 2.8 percent. However, sections 1833(t)(3)(F) and
1833(t)(3)(G)(ii) of the Act, as added by section 3401(i) of the Pub.
L. 111-148 and as amended by section 10319(g) of such law and further
amended by section 1105(e) of Public Law 111-152, provide adjustments
to the OPD fee schedule update for CY 2012.
Specifically, section 1833(t)(3)(F) requires that the OPD fee
schedule increase factor under subparagraph (C)(iv) be reduced by the
adjustments described in section 1833(t)(3)(F) of the

[[Page 42210]]

Act. Specifically, section 1833(t)(3)(F)(i) of the Act requires that
the OPD fee schedule increase factor under subparagraph (C)(iv) be
reduced by the productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act for 2012 and subsequent years. Section
1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as
equal to the 10-year moving average of changes in annual economy-wide,
private nonfarm business multifactor productivity (MFP) (as projected
by the Secretary for the 10-year period ending with the applicable
fiscal year, year, cost reporting period, or other annual period) (the
``MFP adjustment''). We refer readers to the FY 2012 IPPS/LTCH PPS
proposed rule (76 FR 25949 through 25951) for a discussion of the
calculation of the MFP adjustment. The proposed MFP adjustment for FY
2012 is estimated to be 1.2 percentage points.
We are proposing to reduce the OPD fee schedule increase factor for
CY 2012 by the proposed MFP adjustment of 1.2 percentage points for FY
2012. Since the OPD fee schedule increase factor is based on the IPPS
hospital inpatient market basket percentage increase, we believe that
it is appropriate to apply the same MFP adjustment that is used to
reduce the IPPS market basket increase to the OPD fee schedule increase
factor. Consistent with the FY 2012 IPPS/LTCH PPS proposed rule, we are
also proposing that if more recent data are subsequently available (for
example, a more recent estimate of the market basket and MFP
adjustment), we would use such data, if appropriate, to determine the
FY 2012 market basket update and MFP adjustment in the CY 2012 final
rule. We believe that it is appropriate to apply the MFP adjustment,
which is calculated on a fiscal year basis, to the OPD fee schedule
increase factor, which is used to update the OPPS payment rates on a
calendar year basis, because we believe that it is appropriate for the
numbers associated with both components of the calculation (the
underlying OPD fee schedule increase factor and the productivity
adjustment) to be aligned so that changes in market conditions are
aligned.
In addition, section 1833(t)(3)(F)(ii) of the Act requires that the
OPD fee schedule increase factor under subparagraph (C)(iv) be reduced
by the adjustment described in subparagraph (G) for each of 2010
through 2019. For CY 2012, section 1833(t)(3)(G)(ii) of the Act
provides a 0.1 percentage point reduction to the OPD fee schedule
increase factor under subparagraph (C)(iv). Therefore, we are proposing
to apply a 0.1 percentage point reduction to the OPD fee schedule
increase factor.
We note that section 1833(t)(F) of the Act provides that
application of this subparagraph may result in the increase factor
under subparagraph (C)(iv) 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.
As described in further detail below, we are proposing an OPD fee
schedule increase factor of 1.5 percent for the CY 2012 OPPS (2.8
percent, which is the proposed estimate of the hospital market basket
increase, less the proposed 1.2 percentage points MFP adjustment, less
the 0.1 percentage point additional adjustment).
We are proposing to revise 42 CFR 419.32 to reflect the requirement
in section 1833(t)(3)(F)(i) of the Act that, for CY 2012, we reduce the
OPD fee schedule increase factor by the multifactor productivity
adjustment as determined by CMS, and to reflect the requirement in
section 1833(t)(3)(G)(ii) of the Act, as required by section
1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule
increase factor by 0.1 percentage point for CY 2012. We also are
proposing to amend Sec. 419.32 (iv)(A) to indicate that the hospital
inpatient market basket percentage increase applicable under section
1886(b)(3)(B)(iii) of the Act is further reduced by the adjustments
necessary to satisfy the requirements in sections 1833(t)(3)(F) and
(t)(3)(G) of the Act.
Hospitals that fail to meet the reporting requirements of the
Hospital OQR Program would continue to be subject to a further
reduction of additional 2.0 percentage points from the OPD fee schedule
increase factor adjustment to the conversion factor that would be used
to calculate the OPPS payment rates made for their services as required
by section 1833(t)(17) of the Act. For a complete discussion of the
Hospital OQR requirements and the payment reduction for hospitals that
fail to meet those requirements, we refer readers to section XIV. of
this proposed rule.
To set the OPPS conversion factor for CY 2012, we are proposing to
increase the CY 2011 conversion factor of $68.876 by 1.5 percent. In
accordance with section 1833(t)(9)(B) of the Act, we are proposing to
further adjust the conversion factor for CY 2012 to ensure that any
revisions we make to the updates for a revised wage index and rural
adjustment are made on a budget neutral basis. We calculated a proposed
overall budget neutrality factor of 1.0003 for wage index changes by
comparing total estimated payments from our simulation model using the
FY 2012 IPPS proposed wage indices to those payments using the current
(FY 2011) IPPS wage indices, as adopted on a calendar year basis for
the OPPS. For CY 2012, we are not proposing to make a change to our
rural adjustment policy. Therefore, the proposed budget neutrality
factor for the rural adjustment would be 1.0000. For CY 2012, we are
proposing a cancer hospital payment adjustment policy, as discussed in
section II.F. of this proposed rule, and, therefore, we applied a
proposed budget neutrality adjustment of 0.9927 to adjust the
conversion factor for that proposed policy. We calculated the proposed
cancer hospital budget neutrality factor of 0.9927 by comparing total
estimated payments from our simulation model for CY 2012 including the
proposed payment adjustment for cancer hospitals to total estimated
payments from our simulation model for CY 2012 without the proposed
payment adjustment for cancer hospitals.
For this proposed rule, we estimate that pass-through spending for
both drugs and biologicals and devices for CY 2012 would equal
approximately $64.5 million, which represents 0.15 percent of total
projected CY 2012 OPPS spending. Therefore, the conversion factor would
also be adjusted by the difference between the 0.15 percent estimate of
pass-through spending for CY 2011 and the 0.15 percent estimate of CY
2012 pass-through spending. Finally, estimated payments for outliers
remain at 1.0 percent of total OPPS payments for CY 2012.
The proposed OPD fee schedule increase factor of 1.5 percent for CY
2012 (that is, the estimate of the hospital market basket increase of
2.8 percent less the 1.2 percentage points MFP adjustment and less the
0.1 percentage point adjustment which are necessary in order to comply
with the requirements of the Affordable Care Act), the required
proposed wage index budget neutrality adjustment of approximately
1.0003, the proposed cancer hospital payment adjustment of 0.9927, and
the proposed adjustment of 0.00 percent of projected OPPS spending for
the difference in the pass-through spending result in a proposed
conversion factor for CY 2012 of $69.420, which reflects the full OPD
fee schedule increase, after including the adjustments necessary to
comply with the requirements of the Affordable Care Act.
To calculate the proposed CY 2012 reduced market basket conversion
factor for those hospitals that fail to meet the requirements of the
Hospital OQR Program for the full CY 2012 payment

[[Page 42211]]

update, we are proposing to make all other adjustments discussed above,
but would use a proposed reduced OPD fee schedule update factor of -0.5
percent (that is, the proposed OPD fee schedule increase factor further
reduced by 2.0 percentage points as required by section
1833(t)(17)(A)(i) of the Act for failure to comply with the Hospital
OQR requirements). This resulted in a proposed reduced conversion
factor for CY 2012 of $68.052 for those hospitals that fail to meet the
Hospital OQR requirements (a difference of -$1.368 in the proposed
conversion factor relative to those hospitals that met the Hospital OQR
requirements).
In summary, for CY 2012, we are proposing to use a conversion
factor of $69.420 in the calculation of the national unadjusted payment
rates for those items and services for which payment rates are
calculated using median costs. We are proposing to amend Sec.
419.32(b)(1)(iv)(B) by adding a new paragraph (3) to reflect the
reductions to the OPD fee schedule increase factor that are required
for CY 2012 in order to satisfy the statutory requirements of sections
1833(t)(3)(F) and (t)(3)(G)(ii) of the Act. We also are proposing to
amend Sec. 419.32(b)(1)(iv)(A) to indicate that the hospital inpatient
market basket percentage increase is reduced by the adjustments
described in Sec. 419.32(b)(1)(iv)(B). We are proposing to use a
reduced conversion factor of $68.052 in the calculation of payments for
hospitals that fail to comply with the Hospital OQR requirements to
reflect the reduction to the OPD fee schedule increase factor that is
required by section 1833(t)(17) of the Act for these hospitals.

C. Proposed Wage Index Changes

Section 1833(t)(2)(D) of the Act requires the Secretary to
determine a wage adjustment factor to adjust, for geographic wage
differences, the portion of the OPPS payment rate, which includes the
copayment standardized amount, that is attributable to labor and labor-
related cost. This portion of the OPPS payment rate is called the OPPS
labor-related share. This adjustment must be made in a budget neutral
manner and budget neutrality is discussed in section II.B. of this
proposed rule.
The OPPS labor-related share is 60 percent of the national OPPS
payment. This labor-related share is based on a regression analysis
that determined that, for all hospitals, 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 appropriate during our regression analysis for the payment
adjustment for rural hospitals in the CY 2006 OPPS final rule with
comment period (70 FR 68553). Therefore, we are not proposing to revise
this policy for the CY 2012 OPPS. We refer readers to section II.H. of
this proposed rule for a description and example of how the proposed
wage index for a particular hospital is used to determine the proposed
payment for the hospital.
As discussed in section II.A.2.c. of this proposed rule, for
estimating national median APC costs, we standardize 60 percent of
estimated claims costs for geographic area wage variation using the
same proposed FY 2012 pre-reclassified wage index 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 fiscal year IPPS wage index as the calendar year wage index for
adjusting the OPPS standard payment amounts for labor market
differences. Thus, the wage index that applies to a particular acute
care short-stay hospital under the IPPS would also apply to that
hospital under the OPPS. As initially explained in the September 8,
1998 OPPS proposed rule, we believed 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.
The Affordable Care Act contains provisions that affect the
proposed FY 2012 IPPS wage index values, including revisions to the
reclassification wage comparability criteria that were finalized in the
FY 2009 IPPS final rule (73 FR 48568 through 48570), and the
application of rural floor budget neutrality on a national, rather than
State-specific, basis through a uniform, national adjustment to the
area wage index (76 FR 26021). In addition, section 10324 of the
Affordable Care Act requires CMS to establish an adjustment to create a
wage index floor of 1.00 for hospitals located in States determined to
be frontier States.
Section 10324 specifies that, for services furnished beginning CY
2011, the wage adjustment factor applicable to any hospital outpatient
department that is located in a frontier State (as defined in section
1886(d)(3)(E)(iii)(II) of the Act) may not be less than 1.00. Further,
section 10324 states that this adjustment to the wage index for these
outpatient departments should not be made in a budget neutral manner.
As such, for the CY 2012 OPPS, we are proposing to continue to adjust
the FY 2012 IPPS wage index, as adopted on a calendar year basis for
the OPPS, for all hospitals paid under the OPPS, including non-IPPS
hospitals (providers that are not paid under the IPPS) located in a
frontier State, to 1.00 in instances where the proposed FY 2012 wage
index (that reflects Medicare Geographic Classification Review Board
(MGCRB) reclassifications, the application of the rural floor, and the
rural floor budget neutrality adjustment) for these hospitals is less
than 1.00. Similar to our current policy for HOPDs that are affiliated
with multicampus hospital systems, we fully expect that the HOPD would
receive a wage index based on the geographic location of the specific
inpatient hospital with which it is associated. Therefore, if the
associated hospital is located in a frontier State, the wage index
adjustment applicable for the hospital would also apply for the
affiliated HOPD. We refer readers to the FY 2011 IPPS/LTCH PPS final
rule (75 FR 50160) for a detailed discussion regarding this provision,
including our methodology for identifying which areas meet the
definition of frontier States as provided for in section
1886(d)(3)(E)(iii)(II)) of the Act.
In addition to the changes required by the Affordable Care Act, we
note that the proposed FY 2012 IPPS wage indices continue to reflect a
number of adjustments implemented over the past few years, including,
but not limited to, reclassification of hospitals to different
geographic areas, the rural floor provisions, an adjustment for
occupational mix, and an adjustment to the wage index based on
commuting patterns of employees (out-migration adjustment). We refer
readers to the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25880 through
25888) for a detailed discussion of all proposed changes to the FY 2012
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.
Section 3137 of the Affordable Care Act extended, through FY 2010,
section 508 reclassifications as well as certain special exceptions.
The most recent extension of the provision was included in section 102
of the Medicare and Medicaid Extender Act, which extends,

[[Page 42212]]

through FY 2011, section 508 reclassifications as well as certain
special exceptions. The latest extension of these provisions expires on
September 30, 2011, and will no longer be applicable effective with FY
2012. As we did for CY 2010, we revised wage index values for certain
special exception hospitals from January 1, 2011 through December 31,
2011, 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. In addition, because the OPPS pays on a calendar year basis,
the effective date under OPPS for all other non-section 508 and non-
special exception providers is July 1, 2011, instead of April 1, 2011,
so that these providers may also receive a full 6 months of payment
under the revised wage index comparable to IPPS.
For purposes of the OPPS, we are proposing to continue our policy
in CY 2012 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 (section 505 of the Medicare Prescription Drug,
Improvement, and Modernization Act of 2003 (MMA)). We note that,
because non-IPPS hospitals cannot reclassify, they are eligible for the
out-migration wage adjustment. Table 4J listed in the FY 2012 IPPS/LTCH
PPS proposed rule (and made available via the Internet on the CMS Web
site at: http://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp)
identifies counties eligible for the proposed out-migration adjustment
and providers proposed to receive the adjustment for FY 2012. We note
that, beginning with FY 2012, we proposed under the IPPS that an
eligible hospital that waives its Lugar status in order to receive the
out-migration adjustment has effectively waived its deemed urban status
and, thus, is rural for all purposes under the IPPS, including being
considered rural for the disproportionate share hospital (DSH) payment
adjustment, effective for the fiscal year in which the hospital
receives the out-migration adjustment. We refer readers to the FY 2012
IPPS/LTCH PPS proposed rule (76 FR 25885) for more detailed discussion
on the proposed Lugar redesignation waiver for the out-migration
adjustment). As we have done in prior years, we are reprinting Table 4J
as Addendum L to this proposed rule with the addition of non-IPPS
hospitals that would receive the section 505 out-migration adjustment
under the CY 2012 OPPS. Addendum L is referenced in section XVII. of
this proposed rule and available via the Internet on the CMS Web site.
As stated earlier in this section, our longstanding policy for OPPS
has been to adopt the final wage index used in IPPS. Therefore, for
calculating proposed OPPS payments in CY 2012, we use the proposed FY
2012 IPPS wage indices. However, section 1833(t)(2)(D) of the Act
confers broad discretionary authority upon the Secretary in determining
the wage adjustment factor used under the OPPS. Specifically, this
provision provides that ``subject to paragraph (19), the Secretary
shall determine a wage adjustment factor to adjust the portion of
payment and coinsurance attributable to labor-related costs for
relative differences in labor and labor-related costs across geographic
regions. * * *'' In other prospective payment systems, we do not adopt
the adjustments applied to the IPPS wage index, such as the
outmigration adjustment, reclassifications, and the rural floor. For
the OPPS, using the hospital IPPS wage index as the source of an
adjustment factor for geographic wage differences has in the past been
both reasonable and logical, given the inseparable, subordinate status
of the outpatient department within the hospital overall.
However, in recent years, we have become concerned that hospitals
converting status significantly inflates wage indexes across a State,
in a manner that was not intended by the Congress. In the FY 2008 IPPS
final rule (72 FR 47324 and 47325), we discussed a situation where a
CAH may have converted back to IPPS status in order to increase the
rural floor.
The FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26060) shows the
impact of the CAH conversion. Hospitals in one State can expect an
approximate 8-percent increase in IPPS payments due to the conversion
and resulting increase of the rural floor. Our concern is that the
manipulation of the rural floor is of sufficient magnitude that it
requires all hospital wage indexes to be reduced approximately 0.62
percent as a result of nationwide budget neutrality for the rural floor
(or more than a 0.4 percent total payment reduction to all IPPS
hospitals).
In addition to the CAH conversion, we recently received two
requests from urban hospitals to convert to rural hospital status under
section 1886(d)(8)(E) of the Act, which would inflate other States'
rural floors, through the conversion of what would otherwise be urban
hospitals to rural status. While we recognize that conversions from
urban-to-rural status are permitted under section 1886(d)(8)(E) of the
Act, we do not believe Congress anticipated individual urban to rural
conversion allowing payment redistributions of this magnitude.
We believe the above discussions demonstrate that, as a result of
hospital actions not envisioned by Congress, the rural floor is
resulting in significant disparities in wage index and, in some cases,
resulting in situations where all hospitals in a State receive a wage
index higher than that of the single highest wage index urban hospital
in the State. As stated above, the statute does not require the
Secretary to use the IPPS wage adjustment factor to wage adjust OPPS
payments and copayments, nor to apply to OPPS payment and copayment
calculation the same adjustment that the law requires be applied to the
IPPS wage adjustment factor.
We are considering adopting a policy that would address situations
where IPPS wage index adjustments, such as the rural floor, are
resulting in significant fluctuations in the wage index. One option
would be to not apply the rural floor wage index at all in the OPPS
where the rural floor is set by a snall number of hospitals and results
in a rural floor that benefits all hospitals in the State.
Alternatively, we could apply within State rural budget neutrality to
the OPPS wage index as we did for both the IPPS and OPPS wage index
beginning in FY 2009. We are seeking public comment on whether to: (1)
Adopt the IPPS wage index for the OPPS in its entirety including the
rural floor, geographic reclassifications and all other wage index
adjustments; (2) adopt the IPPS wage index for the OPPS in its entirety
except when a small number of hospitals set the rural floor for the
benefit of all other hospitals in the State; (3) adopt the IPPS wage
index for the OPPS in its entirety except apply rural floor budget
neutrality within each State instead of nationally; or (4) adopt
another decision rule for when the rural floor should not be applied in
the OPPS when we have concerns about disproportionate impact.
We also are requesting public comments on an option that we are
considering adopting for both the IPPS and the OPPS, where we would
determine the applicable rural wage index floor using only data from
those hospitals geographically rural under OMB and the Census Bureau's
MSA designations, and without including wage data associated with
hospitals reclassified from urban to rural status under section
1886(d)(8)(E) of the Act. Such a policy would eliminate the incentive
to reclassify from urban to rural status primarily to increase rural
floors across a State, and would ensure

[[Page 42213]]

that the rural floor is based upon hospitals located in rural areas.
With the exception of the proposed out-migration wage adjustment
table (Addendum L to this proposed rule, which is available via the
Internet on the CMS Web site), which includes non-IPPS hospitals paid
under the OPPS, we are not reprinting the proposed FY 2012 IPPS wage
indices referenced in this discussion of the wage index. We refer
readers to the CMS Web site for the OPPS at: http://www.cms.gov/HospitalOutpatientPPS/. At this link, readers will find a link to the
proposed FY 2012 IPPS wage index tables.

D. Proposed Statewide Average Default CCRs

In addition to using CCRs to estimate costs from charges on claims
for ratesetting, CMS uses 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 in which the most recent cost report reflects an all-
inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04),
Chapter 4, Section 10.11). In this proposed rule, we are proposing to
update the default ratios for CY 2012 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 2012, we are proposing to continue to use 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 proposed CY 2012 OPPS relative weights.
Table 11 below lists the proposed CY 2012 default urban and rural CCRs
by State and compares them to last year's default CCRs. These proposed
CCRs represent the ratio of total costs to total charges for those cost
centers relevant to outpatient services from each hospital's most
recently submitted cost report, weighted by Medicare Part B charges. We
also are proposing to adjust ratios from submitted cost reports to
reflect final settled status by applying the differential between
settled to submitted overall CCRs for the cost centers relevant to
outpatient services from the most recent pair of final settled and
submitted cost reports. We then weight 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 2012 OPPS/ASC proposed rule, approximately 87 percent
of the submitted cost reports utilized in the default ratio
calculations represented data for cost reporting periods ending in CY
2009 and 13 percent were for cost reporting periods ending in CY 2008.
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. The
weighted CCR is used for Maryland because it takes into account each
hospital's volume, rather than treating each hospital equally. We refer
readers to the CY 2005 OPPS final rule with comment period (69 FR
65822) for further discussion and the rationale for our longstanding
policy of using the national average CCR for Maryland. In general,
observed changes in the statewide average default CCRs between CY 2011
and CY 2012 are modest and the few significant changes are associated
with areas that have a small number of hospitals.
Table 11 below lists the proposed statewide average default CCRs
for OPPS services furnished on or after January 1, 2012.

Table 11--Proposed CY 2012 Statewide Average CCRs
----------------------------------------------------------------------------------------------------------------
Previous
Proposed CY default CCR
State Urban/rural 2012 default (CY 2011 OPPS
CCR final rule)
----------------------------------------------------------------------------------------------------------------
ALASKA........................................ RURAL........................... 0.487 0.479
ALASKA........................................ URBAN........................... 0.321 0.315
ALABAMA....................................... RURAL........................... 0.213 0.212
ALABAMA....................................... URBAN........................... 0.191 0.193
ARKANSAS...................................... RURAL........................... 0.225 0.223
ARKANSAS...................................... URBAN........................... 0.274 0.282
ARIZONA....................................... RURAL........................... 0.236 0.231
ARIZONA....................................... URBAN........................... 0.193 0.202
CALIFORNIA.................................... RURAL........................... 0.189 0.195
CALIFORNIA.................................... URBAN........................... 0.202 0.205
COLORADO...................................... RURAL........................... 0.345 0.350
COLORADO...................................... URBAN........................... 0.225 0.233
CONNECTICUT................................... RURAL........................... 0.356 0.356
CONNECTICUT................................... URBAN........................... 0.292 0.291
DISTRICT OF COLUMBIA.......................... URBAN........................... 0.301 0.313
DELAWARE...................................... RURAL........................... 0.280 0.279
DELAWARE...................................... URBAN........................... 0.347 0.362

[[Page 42214]]

FLORIDA....................................... RURAL........................... 0.183 0.185
FLORIDA....................................... URBAN........................... 0.170 0.172
GEORGIA....................................... RURAL........................... 0.241 0.246
GEORGIA....................................... URBAN........................... 0.214 0.220
HAWAII........................................ RURAL........................... 0.320 0.356
HAWAII........................................ URBAN........................... 0.306 0.308
IOWA.......................................... RURAL........................... 0.297 0.252
IOWA.......................................... URBAN........................... 0.272 0.288
IDAHO......................................... RURAL........................... 0.416 0.419
IDAHO......................................... URBAN........................... 0.378 0.384
ILLINOIS...................................... RURAL........................... 0.245 0.251
ILLINOIS...................................... URBAN........................... 0.240 0.239
INDIANA....................................... RURAL........................... 0.298 0.302
INDIANA....................................... URBAN........................... 0.268 0.270
KANSAS........................................ RURAL........................... 0.282 0.286
KANSAS........................................ URBAN........................... 0.209 0.215
KENTUCKY...................................... RURAL........................... 0.223 0.220
KENTUCKY...................................... URBAN........................... 0.245 0.244
LOUISIANA..................................... RURAL........................... 0.256 0.256
LOUISIANA..................................... URBAN........................... 0.226 0.235
MARYLAND...................................... RURAL........................... 0.280 0.284
MARYLAND...................................... URBAN........................... 0.251 0.256
MASSACHUSETTS................................. URBAN........................... 0.320 0.314
MAINE......................................... RURAL........................... 0.440 0.460
MAINE......................................... URBAN........................... 0.460 0.450
MICHIGAN...................................... RURAL........................... 0.313 0.312
MICHIGAN...................................... URBAN........................... 0.314 0.320
MINNESOTA..................................... RURAL........................... 0.482 0.483
MINNESOTA..................................... URBAN........................... 0.326 0.311
MISSOURI...................................... RURAL........................... 0.248 0.258
MISSOURI...................................... URBAN........................... 0.267 0.264
MISSISSIPPI................................... RURAL........................... 0.226 0.229
MISSISSIPPI................................... URBAN........................... 0.186 0.182
MONTANA....................................... RURAL........................... 0.434 0.444
MONTANA....................................... URBAN........................... 0.398 0.399
NORTH CAROLINA................................ RURAL........................... 0.256 0.254
NORTH CAROLINA................................ URBAN........................... 0.264 0.264
NORTH DAKOTA.................................. RURAL........................... 0.322 0.351
NORTH DAKOTA.................................. URBAN........................... 0.429 0.360
NEBRASKA...................................... RURAL........................... 0.323 0.328
NEBRASKA...................................... URBAN........................... 0.252 0.259
NEW HAMPSHIRE................................. RURAL........................... 0.323 0.323
NEW HAMPSHIRE................................. URBAN........................... 0.292 0.290
NEW JERSEY.................................... URBAN........................... 0.221 0.221
NEW MEXICO.................................... RURAL........................... 0.266 0.277
NEW MEXICO.................................... URBAN........................... 0.286 0.307
NEVADA........................................ RURAL........................... 0.242 0.269
NEVADA........................................ URBAN........................... 0.169 0.178
NEW YORK...................................... RURAL........................... 0.410 0.415
NEW YORK...................................... URBAN........................... 0.350 0.375
OHIO.......................................... RURAL........................... 0.324 0.327
OHIO.......................................... URBAN........................... 0.241 0.241
OKLAHOMA...................................... RURAL........................... 0.248 0.260
OKLAHOMA...................................... URBAN........................... 0.220 0.208
OREGON........................................ RURAL........................... 0.302 0.306
OREGON........................................ URBAN........................... 0.327 0.340
PENNSYLVANIA.................................. RURAL........................... 0.270 0.275
PENNSYLVANIA.................................. URBAN........................... 0.200 0.210
PUERTO RICO................................... URBAN........................... 0.490 0.505
RHODE ISLAND.................................. URBAN........................... 0.287 0.284
SOUTH CAROLINA................................ RURAL........................... 0.222 0.222
SOUTH CAROLINA................................ URBAN........................... 0.217 0.227
SOUTH DAKOTA.................................. RURAL........................... 0.309 0.316
SOUTH DAKOTA.................................. URBAN........................... 0.253 0.251
TENNESSEE..................................... RURAL........................... 0.212 0.221
TENNESSEE..................................... URBAN........................... 0.201 0.204
TEXAS......................................... RURAL........................... 0.239 0.245
TEXAS......................................... URBAN........................... 0.210 0.216

[[Page 42215]]

UTAH.......................................... RURAL........................... 0.385 0.386
UTAH.......................................... URBAN........................... 0.359 0.362
VIRGINIA...................................... RURAL........................... 0.238 0.241
VIRGINIA...................................... URBAN........................... 0.257 0.263
VERMONT....................................... RURAL........................... 0.415 0.411
VERMONT....................................... URBAN........................... 0.365 0.365
WASHINGTON.................................... RURAL........................... 0.366 0.367
WASHINGTON.................................... URBAN........................... 0.317 0.327
WISCONSIN..................................... RURAL........................... 0.407 0.412
WISCONSIN..................................... URBAN........................... 0.327 0.334
WEST VIRGINIA................................. RURAL........................... 0.283 0.291
WEST VIRGINIA................................. URBAN........................... 0.335 0.337
WYOMING....................................... RURAL........................... 0.385 0.393
WYOMING....................................... URBAN........................... 0.302 0.296
----------------------------------------------------------------------------------------------------------------

E. Proposed OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes Made by Pub. L. 110-275
(MIPPA)
When the OPPS was implemented, every provider was eligible to
receive an additional payment adjustment (called either transitional
corridor payments or transitional outpatient payments (TOPs)) if the
payments it received for covered OPD services under the OPPS were less
than the payments it would have received for the same services under
the prior reasonable cost-based system (referred to as the pre-BBA
amount). Section 1833(t)(7) of the Act provides that the transitional
corridor payments are temporary payments for most providers and were
intended to ease their transition from the prior reasonable cost-based
payment system to the OPPS system. There are two exceptions to this
provision, cancer hospitals and children's hospitals, and those
hospitals receive the transitional corridor payments on a permanent
basis. Section 1833(t)(7)(D)(i) of the Act originally provided for
transitional corridor payments to rural hospitals with 100 or fewer
beds for covered OPD services furnished before January 1, 2004.
However, section 411 of Public Law 108-173 amended section
1833(t)(7)(D)(i) of the Act to extend these payments through December
31, 2005, for rural hospitals with 100 or fewer beds. Section 411 also
extended the transitional corridor payments to sole community hospitals
(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 ending 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 amounts 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 amounts 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.
For CY 2010, we made 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 now indicates that
the adjustment applies to small SCHs, rather than to rural SCHs.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR
60425), we

[[Page 42216]]

stated that, effective for services provided on or after January 1,
2010, rural hospitals and SCHs (including EACHs) having 100 or fewer
beds would no longer be eligible for TOPs, in accordance with section
147 of Public Law 110-275. However, subsequent to issuance of the CY
2010 OPPS/ASC final rule with comment period, section 3121(a) of the
Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act by
extending the period of TOPs to rural hospitals that are not SCHs with
100 beds or fewer for 1 year, for services provided before January 1,
2011. Section 3121(a) of the Affordable Care Act amended section
1833(t)(7)(D)(i)(III) of the Act and extended the period of TOPs to
SCHs (including EACHs) for 1 year, for services provided before January
1, 2011, with section 3121(b) of the Affordable Care Act removing the
100-bed limitation applicable to such SCHs for covered OPD services
furnished on and after January 1, 2010, and before January 1, 2011. In
accordance with section 3121 of the Affordable Care Act, 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 amounts for CY 2010. Accordingly, in the CY
2011 OPPS/ASC final rule with comment period (75 FR 71882), we updated
Sec. 419.70(d) of the regulations to reflect the TOPs extensions and
amendments described in section 3121 of the Affordable Care Act.
Section 108 of the Medicare and Medicaid Extenders Act of 2010
(MMEA) (Pub. L. 111-309) extended for one year the hold harmless
provision for a rural hospital with 100 or fewer beds that is not an
SCH (as defined in section 1886(d)(5)(D)(iii). Therefore, for such a
hospital, for services furnished before January 1, 2012, when the PPS
amount 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 payments. In addition, section 108 of the MMEA also
extended for one year the hold harmless provision for an SCH (as
defined in section 1886(d)(5)(D)(iii) of the Act (including EACHs)
removing the 100-bed limit applicable to such SCHs for covered OPD
services furnished on or after January 1, 2010 and before January 1,
2012. Therefore, for such hospitals, for services furnished before
January 1, 2012, when the PPS amount 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 payments. We are proposing to
revise our regulations at Sec. 419.70(d) to conform the regulation
text to the self-implementing provisions of section 108 of the MMEA
described above.
2. Proposed Adjustment for Rural SCHs and EACHs Under Section
1833(t)(13)(B) of the Act
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, three 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 CYs 2008 through 2011. Further, in the CY 2009 OPPS/ASC
final rule with comment period (73 FR 68590), we updated the
regulations at Sec. 419.43(g)(4) to specify, in general terms, that
items paid at charges adjusted to costs by application of a hospital-
specific CCR are excluded from the 7.1 percent payment adjustment.
For the CY 2012 OPPS, we are proposing to continue our policy of a
budget neutral 7.1 percent payment adjustment for rural SCHs, including
EACHs, for all services and procedures paid under the OPPS, excluding
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs (75
FR 46232). 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.

F. Proposed OPPS Payments to Certain Cancer Hospitals Described by
Section 1886(d)(1)(B)(v) of the Act

1. Background
Since the inception of the OPPS, which was authorized by the
Balanced Budget Act of 1997 (BBA), Medicare has paid cancer hospitals
identified in section 1886(d)(1)(B)(v) of the Act (cancer hospitals)
under the OPPS for covered outpatient hospital services. There are 11
cancer hospitals that meet the classification criteria in section
1886(d)(1)(B)(v) of the Act. These 11 cancer hospitals are exempted
from payment under the IPPS. With the Medicare, Medicaid and SCHIP
Balanced Budget Refinement Act of 1999, Congress created section
1833(t)(7) of the Act, ``Transitional Adjustment to Limit Decline in
Payment,'' to serve as a permanent payment floor by limiting cancer
hospitals' potential losses under the OPPS. Through section
1833(t)(7)(D)(ii) of the Act, a cancer hospital receives the full
amount of the difference between payments for covered outpatient
services under the OPPS and a ``pre-BBA'' amount. That is, cancer
hospitals are permanently held harmless to their ``pre-BBA'' amount,
and they receive Transitional Outpatient Payments (TOPs) to ensure that
they do not receive a payment that is lower under the OPPS than the
payment they would have received before implementation of the OPPS, as
set forth in section 1833(t)(7)(F) of the Act. The ``pre-BBA'' payment
amount is an amount equal to the product of the reasonable cost of the
hospital for covered outpatient services for the portions of the
hospital's cost

[[Page 42217]]

reporting period (or periods) occurring in the current year and the
base payment-to-cost ratio (PCR) for the hospital. The ``pre-BBA''
amount, including the determination of the base PCR, are defined at 42
CFR 419.70(f). TOPs are calculated on Worksheet E, Part B, of the
Hospital and Hospital Health Care Complex Cost Report (Form CMS-2552-96
or Form CMS-2552-10, as applicable) each year. Section 1833(t)(7)(I) of
the Act exempts TOPs from budget neutrality calculations. Almost all of
the 11 cancer hospitals receive TOPs each year. The volume weighted
average payment-to-cost ratio (PCR) for the cancer hospitals is 0.83,
or outpatient payment with TOPs to cancer hospitals is 83 percent of
reasonable cost.
Section 3138 of the Affordable Care Act instructs the Secretary to
conduct a study to determine if, under the OPPS, outpatient costs
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of
the Act with respect to ambulatory payment classification (APC) groups
exceed the costs incurred by other hospitals furnishing services under
section 1833(t) of the Act as determined appropriate by the Secretary.
In addition, section 3138 of the Affordable Care Act requires the
Secretary to take into consideration the cost of drugs and biologicals
incurred by such hospitals when studying cancer hospital costliness.
Further, section 3138 of the Affordable Care Act provides that if the
Secretary determines that cancer hospitals' costs with respect to APC
groups are determined to be greater than the costs of other hospitals
furnishing services under section 1833(t) of the Act, the Secretary
shall provide an appropriate adjustment to reflect these higher costs.
Cancer hospitals described in section 1886(d)(1)(B)(v) of the Act
remain eligible for TOPs (which are not budget neutral) and outlier
payments (which are budget neutral).
2. Study of Cancer Hospitals' Costs Relative to Other Hospitals
It has been our standard analytical approach to use a combination
of explanatory and payment regression models to assess the costliness
of a class of hospitals while controlling for other legitimate
influences of costliness, such as ability to achieve economies of
scale, to ensure that costliness is due to the type of hospital and to
identify appropriate payment adjustments. We used this approach in our
CY 2006 OPPS final rule with comment period to establish the 7.1
percent payment adjustment for rural SCHs (70 FR 68556 through 68561).
In our discussion for the CY 2006 OPPS proposed rule, we stated that a
simple comparison of unit costs would not be sufficient to assess the
costliness of a class of hospitals because the costs faced by
individual hospitals, whether urban or rural, are a function of many
varying factors, including local labor supply and the complexity and
volume of services provided (70 FR 42699).
In constructing our analysis of cancer hospitals' costs with
respect to APC groups relative to other hospitals, we considered
whether our standard analytical approach to use a combination of
explanatory and payment regression models would lead to valid results
for this particular study, or whether we should develop a different or
modified analytic approach. We note that the analyses presented in the
CY 2006 OPPS proposed and final rules were designed to establish an
adjustment for a large class of rural hospitals. In contrast, section
3138 of the Affordable Care Act is specifically limited to identifying
an adjustment for 11 cancer hospitals to the extent their costs with
respect to APC groups exceeded those costs incurred by other hospitals
furnishing services under section 1833(t) of the Act. With such a small
sample size (11 out of approximately 4,000 hospitals paid under the
OPPS), we were concerned that the standard explanatory and payment
regression models used to establish the rural hospital adjustment would
lead to imprecise estimates of payment adjustments for this small group
of hospitals. Further, section 3138 of the Affordable Care Act
specifies explicitly that cost comparisons between classes of hospitals
must include the cost of drugs and biologicals. In our CY 2006 analysis
of rural hospitals, we excluded the cost of drugs and biologicals in
our model because the extreme units associated with proper billing for
some drugs and biologicals can bias the calculation of a service mix
index, or volume weighted average APC relative weight, for each
hospital (70 FR 42698). Therefore, we chose not to pursue our standard
combination of explanatory and payment regression modeling to determine
a proposed cancer hospital adjustment.
As discussed in the CY 2011 OPPS/ASC proposed rule (75 FR 46235),
while we chose not to use our standard models to calculate a proposed
cancer hospital adjustment, we determined it still would be appropriate
to construct our usual provider-level analytical dataset consisting of
variables related to assessing costliness with respect to APC groups,
including average cost per unit for a hospital and the hospital's
average APC relative weight as an indicator of the hospital's resource
intensity, as measured by the APC relative weights. We used these
variables to calculate univariate statistics that describe the
costliness with respect to APC groups and related aspects of cancer
hospitals and other hospitals paid under the OPPS. While descriptive
statistics cannot control for the myriad factors that contribute to
observed costs, we believed that stark differences in cost between
cancer hospitals and other hospitals paid under the OPPS that would be
observable by examining descriptive univariate statistics would provide
some indication of relative costliness. We began our analysis of the
cancer hospitals by creating an analytical dataset of hospitals billing
under the OPPS for CY 2009 (a total of 3,933) that were included in our
claims dataset for establishing the CY 2011 OPPS proposed APC relative
weights. This analytical dataset included the 3,933 OPPS hospitals'
total estimated cost (including packaged cost), total lines, total
discounted units as modeled for CY 2011 OPPS payment, and the average
weight of their separately payable services (total APC weight divided
by total units) as modeled for the CY 2011 OPPS. We then summarized
estimated utilization and payment for each hospital (``hospital-
level''). These files consist of hospital-level aggregate costs
(including the cost of packaged items and services), total estimated
discounted units under the modeled proposed CY 2011 OPPS, total
estimated volume of number of occurrences of separately payable HCPCS
codes under the modeled proposed CY 2011 OPPS, and total relative
weight of separately payable services under the modeled proposed CY
2011 OPPS. After summarizing modeled payment to the hospital-level, we
removed 48 hospitals in Puerto Rico from our dataset because we did not
believe that their cost structure reflected the costs of most hospitals
paid under the OPPS and because they could bias the calculation of
hospital-weighted statistics. We then removed an additional 66
hospitals with a cost per unit of more than 3 standard deviations from
the geometric mean (mean of the natural log) because including outliers
in hospital-weighted descriptive statistics also could bias those
statistics. This resulted in a dataset with 11 cancer hospitals and
3,808 other hospitals.
We included the following standard hospital-level variables that
describe hospital costliness in our analysis file: outpatient cost per
discounted unit

[[Page 42218]]

under the modeled CY 2011 OPPS (substituting a cost per administration,
rather than a cost per unit, for drugs and biologicals); each
hospital's proposed CY 2011 wage index as a measure of relative labor
cost; the service mix index, or volume-weighted average proposed CY
2011 APC relative weight (including a simulated weight for drugs and
biologicals created by dividing the CY 2010 April ASP-based payment
amount at ASP+6 percent appearing in Addendum A and B of the proposed
rule by the proposed conversion factor of $68.267); outpatient volume
based on number of occurrences of HCPCS codes in the CY 2009 claims
data; and number of beds. We used these variables because they are key
indicators of costliness with respect to APC groups under the modeled
OPPS system, and they allowed us to assess the relative costliness of
classes of hospitals under the proposed CY 2011 OPPS. A hospital's
service mix index is a measure of resource intensity of the services
provided by the hospital as measured by the proposed CY 2011 OPPS
relative weights, and standardizing the cost per discounted unit by the
service mix index creates an adjusted cost per unit estimate that
reflects the remaining relative costliness of a hospital remaining
after receiving the estimated payments that we proposed to make under
the CY 2011 OPPS. In short, if a class of hospitals demonstrates higher
cost per unit after standardization by service mix, it is an early
indication that the class of hospitals may be significantly more costly
in the regression models. We used these data to calculate the
descriptive univariate statistics for cancer hospitals appearing in
Table 12 below. We note that because drugs and biologicals are such a
significant portion of the services that the cancer hospitals provide,
and because section 3138 of the Affordable Care Act explicitly requires
us to consider the cost of drugs and biologicals, we included the cost
of these items in our total cost calculation for each hospital,
counting each occurrence of a drug in the modeled proposed CY 2011 data
(based on units in CY 2009 claims data). That is, we sought to treat
each administration of a drug or biological as one unit.
In reviewing these descriptive statistics, we observed that cancer
hospitals had a standardized cost per discounted unit of $150.12
compared to a standardized cost per discounted unit of $94.14 for all
other hospitals. That is, cancer hospitals' average cost per discounted
unit remained high even after accounting for payment under the modeled
proposed CY 2011 payment system, which is not true for all other
hospitals. Observing such differences in standardized cost per
discounted unit led us to conclude that cancer hospitals are more
costly with respect to APC groups than other hospitals furnishing
services under the OPPS, even without the inferential statistical
models that we typically employ.

Table 12--Means and Standard Deviations for Key Variables by Cancer and Non-Cancer OPPS Hospitals
----------------------------------------------------------------------------------------------------------------
Cancer hospitals Non-cancer hospitals
---------------------------------------------------------------
Variable Standard Standard
Mean deviation Mean deviation
----------------------------------------------------------------------------------------------------------------
Outpatient Cost per Unit *...................... $344.20 (64.68) $264.11 (165.86)
Unit Cost Standardized by Service Mix Wage $150.12 (31.64) $94.14 (81.19)
Indices........................................
Wage Index...................................... 1.10 (0.13) 0.98 (0.16)
Service Mix Index *............................. 2.19 (0.26) 3.18 (2.25)
Outpatient Volume............................... 192,197 (186,063) 34,578 (43,094)
Beds............................................ 173 (162.33) 173 (171.46)
Number of Hospitals............................. 11 .............. 3,808 ..............
----------------------------------------------------------------------------------------------------------------
* Includes drugs and biologicals based on per administration rather than per unit.

3. CY 2011 Proposed Payment Adjustment for Certain Cancer Hospitals
Having reviewed the cost data from the standard analytic database
and determined that cancer hospitals are more costly with respect to
APC groups than other hospitals furnishing services under the OPPS
system, we decided to examine hospital cost report data from Worksheet
E, Part B (where TOPs are calculated on the Hospital and Hospital
Health Care Complex Cost Report each year) in order to determine
whether our findings were further supported by cost report data and to
determine an appropriate proposed payment adjustment methodology for CY
2011 based on cost report data. Analyses on our standard analytic
database and descriptive statistics presented in Table 12 above did not
consider TOPs in assessing costliness of cancer hospitals relative to
other hospitals furnishing services under section 1833(t) of the Act.
There were several reasons for this. One, TOPs have no associated
relative weight that could be included in an assessment of APC-based
payment. TOPs are paid at cost report settlement on an aggregate basis,
not on a per service basis, and we would have no way to break these
payments down into a relative weight to incorporate these retrospective
aggregate payments in the form of a relative weight. In addition,
section 3138 of the Affordable Care Act requires that any cancer
adjustment be made within the budget neutral system, and TOPs are not
part of the budget neutral payment system. The cost report data we
selected for the analysis were limited to the OPPS-specific payment and
cost data available on Worksheet E, Part B. These data include
aggregate OPPS payments, including outlier payments and the cost of
medical and other health services. These aggregate measures of cost and
payment also include the cost and payment for drugs and biologicals and
other adjustments that we typically include in our regression modeling,
including wage index adjustment and rural adjustment, if applicable.
While these cost report data cannot provide an estimate of cost per
unit after controlling for other potential factors that could influence
cost per unit, we used this aggregate cost and payment data to examine
the cancer hospitals' OPPS PCR and OPPS PCR with TOPs, and compare
these to the OPPS PCR for other hospitals. PCRs calculated from the
most recent cost report data available at the time of the CY 2011 OPPS/
ASC proposed rule also indicated that costs relative to payments at
cancer hospitals were higher than those at other hospitals paid under
the OPPS (that is, cancer hospitals have lower PCRs). In order to
calculate PCRs for hospitals paid under the OPPS (including cancer
hospitals), we used the same extract of cost report data from the
Hospital Cost Report Information System (HCRIS) that we used to
calculate the CCRs that were used to estimate median costs for the CY
2011

[[Page 42219]]

OPPS. We limited the dataset to the hospitals with CY 2009 claims data
that we used to model the CY 2011 proposed APC relative weights.
We estimated that, on average, the OPPS payments to the 11 cancer
hospitals, not including TOPs, were approximately 62 percent of
reasonable cost (that is, we calculated a PCR of 0.615 for the cancer
hospitals), whereas we estimated that, on average, the OPPS payments to
other hospitals furnishing services under the OPPS were approximately
87 percent of reasonable cost (resulting in a PCR of 0.868). When TOPS
were included in the calculation of the PCR, cancer hospitals, as a
group, received payments that were approximately 83 percent of
reasonable cost, which was still lower than the average PCR of other
OPPS hospitals of approximately 87 percent of reasonable cost.
Based on our findings that cancer hospitals, as a class, have a
significantly lower volume weighted average PCR than the volume
weighted PCR of other hospitals furnishing services under the OPPS and
our findings that the cancer hospitals cost per discounted unit
standardized for service mix remains much higher than the standardized
cost per discounted unit of all other hospitals, we proposed an
adjustment for cancer hospitals to reflect these higher costs,
effective January 1, 2011. For purposes of calculating a proposed
adjustment, we chose to rely on this straightforward assessment of
payments and costs from the cost report data because of the concerns
outlined above with respect to the small number of hospitals, and
because of the challenges associated with accurately including drug and
biological costs in our standard regression models. We believed that an
appropriate adjustment would redistribute enough payments from other
hospitals furnishing services under the OPPS to the cancer hospitals to
give cancer hospitals a PCR that was comparable to the average PCR for
other hospitals furnishing services under the OPPS. Therefore, we
proposed a hospital-specific payment adjustment determined as the
percentage of additional payment needed to raise each cancer hospital's
PCR to the weighted average PCR for other hospitals furnishing services
under the OPPS (0.868) in the CY 2011 dataset. This would be
accomplished by adjusting each cancer hospital's OPPS payment by the
percentage difference between the hospital's individual PCR (without
TOPs) and the weighted average PCR of the other hospitals furnishing
services under the OPPS. This cancer hospital payment adjustment
proposed for CY 2011 would have resulted in an estimated aggregate
increase in OPPS payments to cancer hospitals of 41.2 percent and a net
increase in total payments, including TOPs, of 5 percent for CY 2011.
4. Proposed CY 2011 Cancer Hospital Payment Adjustment That Was Not
Finalized
The public comments associated with the cancer hospital adjustment
that we proposed for CY 2011 are detailed in the CY 2011 OPPS/ASC final
rule with comment period (75 FR 71886 through 71887). Many commenters
urged CMS to consider TOPs when calculating the cancer hospital payment
adjustment stating that the proposed methodology results, largely, in a
change in the form of outpatient payments to cancer hospitals by
shifting payment from hold harmless payment under the TOPs provision to
APC payments. Noting that the majority of cancer care provided in the
country is provided by the non-cancer hospitals that would experience a
payment reduction under the CY 2011 proposal, commenters also suggested
that the associated budget neutral payment reduction of 0.7 percent was
not appropriate or equitable to other OPPS hospitals. Commenters also
expressed concern that the proposed payment adjustment would increase
beneficiary copayments. That is, they believed that the proposed cancer
hospital adjustment would increase APC payments and, because
beneficiary copayment is a percentage of the APC payment, Medicare
beneficiaries seeking services at the 11 designated cancer hospitals
would experience higher copayments due to the proposed methodology.
These commenters strongly encouraged CMS to implement the adjustment in
a way that does not increase beneficiary copayments. These commenters
also indicated that CMS should have taken into account the
concentration of outpatient services at the designated cancer
hospitals, as compared to other OPPS hospitals, and adjust the PCR
benchmark higher. The commenters argued that other PPS hospitals have
the ability to improve their Medicare margins through other payment
systems, but that cancer hospitals receive the majority of their
Medicare payments through the OPPS. One commenter suggested that the
CMS analysis was inadequate to conclude that costs are higher in cancer
hospitals and that an adjustment is warranted. As indicated in the CY
2011 OPPS/ASC final rule with comment period (75 FR 71887), because the
many public comments we received identified a broad range of very
important issues and concerns associated with the proposed cancer
hospital payment adjustment, we determined that further study and
deliberation was necessary and, therefore, we did not finalize the CY
2011 proposed payment adjustment for certain cancer hospitals.
5. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2012
During our deliberations that occurred subsequent to the CY 2011
OPPS/ASC final rule, we reconfirmed that TOPs could not be included
when establishing the PCR target given the current statutory language
in section 1833(t)(18) of the Act that was to capture costliness with
respect to APC groups. Specifically, section 1833(t)(18)(A) of the Act
requires the Secretary to determine if, under the OPPS, costs incurred
by cancer hospitals with respect to APC groups exceed those costs
incurred by other hospitals furnishing services under the OPPS. As
discussed in the CY 2011 OPPS/ASC proposed rule and final rule with
comment period, TOPs payments are not paid on a service specific basis,
and we have no way to break these payments down into a relative weight
that could be included in an assessment of an APC-based payment.
Because section 1833(t)(18)(A) of the Act ties the assessment of the
costs incurred by the 11 cancer hospitals to APC groups, we cannot
include TOPs, which are not tied to APC groups, in such assessment. In
addition, section 1833(t)(7)(D)(ii) of the Act (the hold harmless
provision for cancer hospitals) provides that this adjustment is
applied for covered OPD services for which the ``PPS amount'' is less
than the ``pre-BBA'' amount. The ``PPS amount'' means, with respect to
covered OPD services, ``the amount payable under this title [Title 18]
for such services (determined without regard to this paragraph) * * *''
(See section 1833(t)(7)(E) of the Act). Under this provision, the
cancer adjustment must be included in the calculation of the ``PPS
amount'' because it is an integral component of ``the amount payable
under this title.'' Further, we note that the Affordable Care Act
requires that any cancer hospital payment adjustment be made within the
budget neutral system. We note that TOPs are not part of the budget
neutral payment system.
In addition, we have revisited the issue of whether payments
associated with the cancer hospital payment adjustment can be excluded
from the amount of payment on which the copayment amount is determined.
We continue to believe that the statute requires such payment to be
included in

[[Page 42220]]

the amount of payment upon which the copayment amount is determined.
Specifically, section 1833(t)(8) of the Act sets forth the methodology
for calculating the copayment amount under section 1833(t). Section
1833(t)(8)(A) of the Act states the following: ``Except as provided in
subparagraphs (B) and (C), the copayment amount under this subsection
is the amount by which the amount described in paragraph (4)(B) exceeds
the amount of payment determined under paragraph (4)(C).'' We note that
the amount in paragraph (4)(B) incorporates the amount calculated under
subparagraph (A) of section 1833(t)(4) of the Act which provides that
the ``Medicare OPD fee schedule amount (computed under paragraph
(3)(D)) for the service or group and year is adjusted for relative
differences in the cost of labor and other factors determined by the
Secretary, as computed under paragraphs (2)(D) and (2)(E).'' The
reference to ``factors computed under paragraphs* * * (2)(E)'' includes
a cancer hospital payment adjustment because it is required to be
provided under paragraph (2)(E). Therefore, the statute is clear that
the cancer hospital payment adjustment is a component of the payment
amount upon which the beneficiary copayment is determined.
Finally, though commenters suggested that CMS take into account the
cancer hospitals' significant Medicare outpatient concentration
relative to that of other OPPS hospitals when establishing an
appropriate PCR benchmark, we believe it is inappropriate to
incorporate the payments associated with other Medicare payment systems
when determining a payment adjustment under the OPPS.
After a thorough review and deliberation of the issues associated
with the cancer hospital payment adjustment proposed for CY 2011, we
continue to believe a straightforward and appropriate method to adjust
payments of cancer hospitals described in section 1886(d)(1)(B)(v) of
the Act in order to reflect their higher costs with respect to APC
groups is to propose to redistribute enough payments from other
hospitals furnishing services under the OPPS to the cancer hospitals to
give each cancer hospital a PCR that is comparable to the weighted
average PCR for other hospitals furnishing services under section
1833(t) of the Act. Therefore, as explained in more detail below, for
services furnished on and after January 1, 2012, we are proposing that,
for a cancer hospital with an individual PCR (as determined by the
Secretary) below the weighted average PCR for other hospitals
furnishing services under section 1833(t) of the Act (as determined by
the Secretary) (Target PCR), we would make a hospital-specific payment
adjustment by adjusting the wage-adjusted OPPS payment for covered OPD
services (except for devices receiving pass-through status as defined
in 42 CFR 419.66) by the percent difference between the hospital's
individual PCR and the weighted average PCR of other hospitals
furnishing services under section 1833(t) of the Act in the CY 2012
dataset. With respect to such hospitals, for devices receiving pass-
through status as defined in 42 CFR 419.66 which are furnished on and
after January 1, 2012, we are proposing a zero percent adjustment. For
a cancer hospital with an individual PCR (as determined by the
Secretary) above the weighted average PCR for other hospitals
furnishing services under section 1833(t) of the Act (as determined by
the Secretary), we are proposing a zero percent adjustment for covered
hospital outpatient services furnished on and after January 1, 2012.
In order to calculate PCRs for hospitals furnishing services under
the OPPS (including cancer hospitals) for the proposed CY 2012 cancer
hospital payment adjustment, we used the same extract of cost report
data from HCRIS, as discussed in section II.A of this proposed rule,
used to estimate median costs for the proposed CY 2012 OPPS. Using
these cost report data, we included data from Worksheet E, Part B, for
each hospital, using data from each hospital's most recent cost report,
whether as submitted or settled. We then limited the data set to the
hospitals with CY 2010 claims data that we use to model the impact of
the CY 2012 proposed APC relative weights (4,009 hospitals) because it
is appropriate to use the same set of hospitals that we are using to
calibrate the modeled proposed CY 2012 OPPS. The cancer hospitals in
this dataset largely had cost report data from cost reporting periods
ending in FY 2009 and FY 2010. The cost report data for the other
hospitals were from cost report periods with fiscal year ends ranging
from 2008 to 2010. We then removed the cost report data for 47
hospitals from Puerto Rico from our data set because we do not believe
that their cost structure reflects the costs of most hospitals paid
under the OPPS and therefore their inclusion may bias the calculation
of hospital-weighted statistics. We also removed 206 hospitals with
cost report data that were not complete (missing OPPS payments,
including outliers, missing aggregate cost data, or both), so that all
cost reports in the study would have both the payment and cost data
necessary to calculate a PCR for each hospital, leading to a final
analytic file of 3,756 hospitals with cost report data. We believe that
the costs and PPS payments reported on Worksheet E, Part B, for the
hospitals included in our CY 2012 modeling should be sufficiently
accurate for assessing the hospital's relative costliness because all
of the key elements that we believe are necessary for the analysis
(payment and cost) are contained on this worksheet.
Using this smaller dataset of cost report data, we estimate that,
on average, the OPPS payments to the 11 cancer hospitals, not including
TOPs, are approximately 65 percent of reasonable cost (that is, we
calculated a PCR of 0.647 for the cancer hospitals), whereas, we
estimate that, on average, the OPPS payments to other hospitals
furnishing services under the OPPS are approximately 90 percent of
reasonable cost (resulting in a PCR of 0.901). Individual cancer
hospitals' OPPS PCRs range from approximately 0.56 to approximately
0.82.
As indicated above, we are proposing that, for a cancer hospital
with an individual PCR below the weighted average PCR for other
hospitals furnishing services under the OPPS in the CY 2012 dataset, we
would make a hospital-specific payment adjustment by adjusting the
wage-adjusted OPPS payment for covered OPD services (except devices
receiving pass-through status because these items and services are
always paid at the estimated full cost and, therefore, no payment
adjustment is necessary) furnished on and after January 1, 2012, by the
percent difference between the hospital's individual PCR and the
weighted average PCR of other hospitals furnishing services under the
OPPS in the CY 2012 dataset. This proposed methodology would result in
the proposed percentage payment adjustments for the 11 cancer hospitals
appearing in Table 13 below. In addition, we note that we are proposing
to amend 42 CFR 419.43 by adding a new paragraph (i). Proposed new
paragraph (i)(1) would specify that CMS provides for a payment
adjustment for covered hospital outpatient services furnished on or
after January 1, 2012, by cancer hospitals described in section
1886(d)(1)(B)(v) of the Act. Proposed new paragraph (i)(2) would
specify how the amount of the payment adjustment to cancer hospitals is
established. Proposed new paragraph (i)(3) would specify that this
payment adjustment would be budget neutral, consistent

[[Page 42221]]

with section 1833(t)(18)(B) of the Act. Proposed new paragraph (i)(4)
would specify the services or groups that are excluded from qualifying
for the cancer hospital payment adjustment. In the event that a cancer
hospital has a PCR that is higher than the weighted average PCR for
other OPPS hospitals furnishing services under the OPPS, we are
proposing that the specific hospital would receive a zero percent
adjustment. We believe that this would indicate that the cancer
hospital's costs do not exceed the costs incurred by other hospitals
furnishing services under the OPPS and, therefore, a payment adjustment
above zero percent would not be necessary.
We note that the proposed payment adjustment for all cancer
hospitals would result in an estimated aggregate increase in OPPS
payments to cancer hospitals of 39 percent for CY 2012 and an estimated
net increase in total payments, including TOPs, of 9 percent, based on
cost report data. The dataset of hospital cost report data that we used
to model this proposed payment adjustment for cancer hospitals is
available under supporting documentation for this proposed rule on the
CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/HORD/.

Table 13--Proposed CY 2012 Hospital-Specific Payment Adjustment for
Cancer Hospitals Without Regard to TOPS and Outlier Payments
------------------------------------------------------------------------
Percent
increase
Provider number Hospital name without TOPs
or outlier
payment
------------------------------------------------------------------------
050146................. City of Hope Helford Clinical 10.1
Research Hospital.
050660................. USC Kenneth Norris Jr. Cancer 15.7
Hospital.
100079................. University of Miami Hospital & 27.6
Clinic.
100271................. H. Lee Moffitt Cancer Center & 21.6
Research Institute.
220162................. Dana-Farber Cancer Institute... 54.4
330154................. Memorial Hospital for Cancer 39.4
and Allied Diseases.
330354................. Roswell Park Cancer Institute.. 24.3
360242................. James Cancer Hospital & Solove 30.1
Research Institute.
390196................. Hospital of the Fox Chase 15.3
Cancer Center.
450076................. University of Texas M. D. 61.8
Anderson Cancer Center.
500138................. Seattle Cancer Care Alliance... 43.7
Proposed Aggregate Payment Adjustment 39.3
------------------------------------------------------------------------

Because section 7101 of the Affordable Care Act expanded the 340B
drug program to include certain cancer hospitals, we believe that the
PCRs and any cancer hospital payment adjustment should be recalculated
annually. The 340B drug program allows certain hospitals to purchase
certain outpatient drugs at reduced prices. The Affordable Care Act
provision was effective for drugs purchased on or after January 1,
2010. Inclusion of cancer hospitals in the 340B drug program should
lower drug costs at these cancer hospitals going forward and,
therefore, may cause significant changes in each cancer hospital's PCR
compared to the previous year's calculation. Therefore, we are
proposing to recalculate the PCR of each cancer hospital and the
weighted average PCR of the other hospitals furnishing services under
1833(t) on an annual basis in order to determine an appropriate
hospital specific payment adjustment to cancer hospitals each year.
We note that the changes made by section 3138 of the Affordable
Care Act do not affect the existing statutory provisions that provide
for outlier payment for all hospitals paid under the OPPS, including
cancer hospitals and TOPs for cancer hospitals. Because outlier
payments are made within budget neutrality, outlier payments are
assessed after all budget neutral payments for an individual service
have been made, including the cancer hospital payment adjustment. The
TOPs are assessed after all payments have been made for a cost
reporting period. Further, both outlier payments and TOPs serve as a
safety net for hospitals, although outliers are budget neutral and TOPs
are not, and TOPs are limited to certain hospitals. Outliers and TOPs
are assessed after final payments have been made. If this proposed
payment adjustment is finalized, we estimate that there would be no
cancer hospitals that would continue to receive TOPs. We are proposing
to update the hospital-specific cancer hospital payment adjustments in
Table 13 using the more recent cost reports that will become available
for the CY 2012 OPPS/ASC final rule with comment period.

G. Proposed Hospital Outpatient Outlier Payments

1. Background
Currently, the OPPS pays outlier payments on a service-by-service
basis. For CY 2011, 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 $2,025
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. Our current estimate of
total outlier payments as a percent of total CY 2010 OPPS payment,
using available CY 2010 claims and the revised OPPS expenditure
estimate for the Presidential Budget for FY 2012, is

[[Page 42222]]

approximately 1.11 percent of the total aggregated OPPS payments.
Therefore, for CY 2010, we estimate that we paid at 0.11 percent above
the CY 2010 outlier target of 1.0 percent of total aggregated OPPS
payments.
As explained in the CY 2011 OPPS/ASC final rule with comment period
(75 FR 71887 through 71889), we set our projected target for aggregate
outlier payments at 1.0 percent of the estimated aggregate total
payments under the OPPS for CY 2011. The outlier thresholds were set so
that estimated CY 2011 aggregate outlier payments would equal 1.0
percent of the total estimated aggregate payments under the OPPS. Using
CY 2010 claims data and CY 2011 payment rates, we currently estimate
that the aggregate outlier payments for CY 2011 would be approximately
1.06 percent of the total CY 2011 OPPS payments. The difference between
1.0 percent and 1.06 percent is reflected in the regulatory impact
analysis in section XX. of this proposed rule. We note that we provide
estimated CY 2012 outlier payments for hospitals and CMHCs with claims
included in the claims data that we used to model impacts in the
Hospital-Specific Impacts--Provider-Specific Data file on the CMS Web
site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/.
2. Proposed Outlier Calculation
We are proposing for CY 2012 to continue our policy of estimating
outlier payments to be 1.0 percent of the estimated aggregate total
payments under the OPPS for outlier payments. We are proposing that a
portion of that 1.0 percent, specifically 0.14 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 VIII.C. of this proposed rule, for CMHCs, we
are proposing to continue our longstanding policy that if a CMHC's cost
for partial hospitalization services, paid under either APC 0172 (Level
I Partial Hospitalization (3 services) for CMHCs) or APC 0173 (Level II
Partial Hospitalization (4 or more services) for CMHCs), 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 VIII.C. of this proposed rule.
To ensure that the estimated CY 2012 aggregate outlier payments
would equal 1.0 percent of estimated aggregate total payments under the
OPPS, we are proposing that the hospital outlier threshold be set so
that outlier payments would be triggered when the cost of furnishing a
service or procedure by a hospital exceeds 1.75 times the APC payment
amount and exceeds the APC payment rate plus a $2,100 fixed-dollar
threshold. This proposed threshold reflects the methodology discussed
below in this section, as well as the proposed APC recalibration for CY
2012.
We calculated the proposed fixed-dollar threshold for this proposed
rule using largely the same methodology as we did in CY 2011 (75 FR
71887 through 71889). For purposes of estimating outlier payments for
the proposed rule, we used the hospital-specific overall ancillary CCRs
available in the April 2011 update to the Outpatient Provider-Specific
File (OPSF). The OPSF contains provider-specific data, such as the most
current CCR, which are maintained by the Medicare contractors and used
by the OPPS Pricer to pay claims. The claims that we use to model each
OPPS update lag by 2 years. For this proposed rule, we used CY 2010
claims to model the CY 2012 OPPS. In order to estimate the proposed CY
2012 hospital outlier payments for this proposed rule, we inflated the
charges on the CY 2010 claims using the same inflation factor of 1.0908
that we used to estimate the IPPS fixed-dollar outlier threshold for
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26024). We used an
inflation factor of 1.0444 to estimate CY 2011 charges from the CY 2010
charges reported on CY 2010 claims. The methodology for determining
this charge inflation factor is discussed in the FY 2012 IPPS/LTCH PPS
proposed rule (76 FR 26024). As we stated in the CY 2005 OPPS final
rule with comment period (69 FR 65845), we believe that the use of
these charge inflation factors are appropriate for the OPPS because,
with the exception of the inpatient routine service cost centers,
hospitals use the same ancillary and outpatient cost centers to capture
costs and charges for inpatient and outpatient services.
As noted in the CY 2007 OPPS/ASC final rule with comment period (71
FR 68011), we are concerned that we could systematically overestimate
the OPPS hospital outlier threshold if we did not apply a CCR inflation
adjustment factor. Therefore, we are proposing to apply the same CCR
inflation adjustment factor that we are proposing to apply for the FY
2012 IPPS outlier calculation to the CCRs used to simulate the proposed
CY 2012 OPPS outlier payments that determine the fixed-dollar
threshold. Specifically, for CY 2012, we are proposing to apply an
adjustment of 0.9850 to the CCRs that were in the April 2011 OPSF to
trend them forward from CY 2011 to CY 2012. The methodology for
calculating this proposed adjustment is discussed in the FY 2012 IPPS/
LTCH PPS proposed rule (76 FR 26024 through 26025).
Therefore, to model hospital outlier payments for this CY 2012
OPPS/ASC proposed rule, we applied the overall CCRs from the April 2011
OPSF file after adjustment (using the proposed CCR inflation adjustment
factor of 0.9850 to approximate CY 2012 CCRs) to charges on CY 2010
claims that were adjusted (using the proposed charge inflation factor
of 1.0908 to approximate CY 2012 charges). We simulated aggregated CY
2012 hospital outlier payments using these costs for several different
fixed-dollar thresholds, holding the 1.75 multiple threshold constant
and assuming that outlier payments 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 2012 OPPS
payments. We estimate that a proposed fixed-dollar threshold of $2,100,
combined with the proposed multiple threshold of 1.75 times the APC
payment rate, would allocate 1.0 percent of aggregated total OPPS
payments to outlier payments. We are proposing to continue to make an
outlier payment that equals 50 percent of the amount by which the cost
of furnishing the service exceeds 1.75 times the APC payment amount
when both the 1.75 multiple threshold and the proposed fixed-dollar
threshold of $2,100 are met. For CMHCs, we are proposing that, if a
CMHC's cost for partial hospitalization services, paid under either APC
0172 or APC 0173, exceeds 3.40 times the payment for APC 0173, the
outlier payment would be calculated as 50 percent of the amount by
which the cost exceeds 3.40 times the APC 0173 payment rate.
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

[[Page 42223]]

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 Hospital
OQR requirements. For hospitals that fail to meet the Hospital OQR
requirements, we are proposing to continue our policy that we
implemented in CY 2010 that the hospitals' costs would be compared to
the reduced payments for purposes of outlier eligibility and payment
calculation. For more information on the Hospital OQR Program, we refer
readers to section XIV. of this proposed rule.
3. Outlier Reconciliation
In the CY 2009 OPPS/ASC final rule with comment period (73 CFR
68599), we adopted as final policy a process to reconcile hospital or
CMHC outlier payments at cost report settlement for services furnished
during cost reporting periods beginning in CY 2009. OPPS outlier
reconciliation more fully ensures accurate outlier payments for those
facilities that have CCRs that fluctuate significantly relative to the
CCRs of other facilities, and that receive a significant amount of
outlier payments (73 FR 68598). As under the IPPS, we do not adjust the
fixed-dollar threshold or the amount of total OPPS payments set aside
for outlier payments for reconciliation activity because such action
would be contrary to the prospective nature of the system. Our proposed
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, as we have previously discussed in the CY
2009 OPPS/ASC final rule with comment period (73 FR 68596), we are not
proposing to incorporate any assumptions about the effects of
reconciliation into our calculation of the OPPS fixed-dollar outlier
threshold.

H. Proposed Calculation of an Adjusted Medicare Payment From the
National Unadjusted Medicare Payment

The basic methodology for determining prospective payment rates for
HOPD services under the OPPS is set forth in existing regulations at 42
CFR Part 419, subparts C and D. For this proposed rule, the payment
rate for most services and procedures for which payment is made under
the OPPS is the product of the proposed conversion factor calculated in
accordance with section II.B. of this proposed rule and the proposed
relative weight determined under section II.A. of this proposed rule.
Therefore, the proposed national unadjusted payment rate for most APCs
contained in Addendum A to this proposed rule (which is referenced in
section XVII. of this proposed rule and available via the Internet on
the CMS Web site) and for most HCPCS codes to which separate payment
under the OPPS has been assigned in Addendum B to this proposed rule
(which is referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site) was calculated by
multiplying the proposed CY 2012 scaled weight for the APC by the
proposed CY 2012 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, incur a reduction of 2.0
percentage points 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 Reporting (OQR) Program
(formerly referred to as 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
Hospital OQR Program, we refer readers to section XVI.D. of this
proposed rule.
We demonstrate in the steps below how to determine the APC payments
that will be made in a calendar year under the OPPS to a hospital that
fulfills the Hospital OQR Program requirements and to a hospital that
fails to meet the Hospital OQR Program requirements for a service that
has any of the following status indicator assignments: ``P,'' ``Q1,''
``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' or ``X'' (as defined
in Addendum D1 to this proposed rule), in a circumstance in which the
multiple procedure discount does not apply, the procedure is not
bilateral, and conditionally packaged services (status indicator of
``Q1'' and ``Q2'') qualify for separate payment. We note that, although
blood and blood products with status indicator ``R'' and brachytherapy
sources with status indicator ``U'' are not subject to wage adjustment,
they are subject to reduced payments when a hospital fails to meet the
Hospital OQR Program requirements.
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 proposed
rule (which are referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site) should follow the
formulas presented in the following steps. For purposes of the payment
calculations below, we refer to the proposed national unadjusted
payment rate for hospitals that meet the requirements of the Hospital
OQR Program 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 Hospital OQR Program as the ``reduced''
national unadjusted payment rate. The reduced national unadjusted
payment rate is calculated by multiplying the reporting ratio of 0.980
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
Hospital OQR Program requirements in order to receive the full CY 2012
OPPS fee schedule increase factor of 1.50 percent.
Step 1. Calculate 60 percent (the labor-related portion) of the
proposed national unadjusted payment rate. Since the initial
implementation of the OPPS, we have used 60 percent to represent our
estimate of that portion of costs attributable, on average, to labor.
We refer readers to the April 7, 2000 OPPS final rule with comment
period (65 FR 18496 through 18497) for a detailed discussion of how we
derived this percentage. We confirmed that this labor-related share for
hospital outpatient services is appropriate during our regression
analysis for the payment adjustment for rural hospitals in the CY 2006
OPPS final rule with comment period (70 FR 68553).
The formula below is a mathematical representation of Step 1 and
identifies the labor-related portion of a specific payment rate for a
specific service.
X is the labor-related portion of the national unadjusted payment
rate.

X = .60 * (national unadjusted payment rate)

Step 2. Determine the wage index area in which the hospital is
located and identify the wage index level that applies to the specific
hospital. The wage index values assigned to each area reflect the
geographic statistical areas (which are based upon OMB standards)

[[Page 42224]]

to which hospitals are assigned for FY 2012 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 sections 3137 and 10317 of the Affordable Care Act,
expired on September 30, 2010. Section 102 of the Medicare and Medicaid
Extenders Act of 2010 extends Section 508 and certain additional
special exception hospital reclassifications from October 1, 2010
through September 30, 2011. Therefore, these reclassifications will not
apply to the CY 2012 OPPS. (For further discussion of the changes to
the FY 2012 IPPS wage indices, as applied to the CY 2012 OPPS, we refer
readers to section II.C. of this proposed rule.) We are proposing to
continue applying a wage index floor of 1.00 to frontier states, in
accordance with section 10324 of the Affordable Care Act.
Step 3. Adjust the wage index of hospitals located in certain
qualifying counties that have a relatively high percentage of hospital
employees who reside in the county, but who work in a different county
with a higher wage index, in accordance with section 505 of Public Law
108-173. Addendum L to this proposed rule (which is referenced in
section XVII. of this proposed rule and available via the Internet on
the CMS Web site) contains the qualifying counties and the associated
proposed wage index increase developed for the FY 2012 IPPS and listed
as Table 4J in the FY 2012 IPPS/LTCH PPS proposed rule and available
via the Internet on the CMS Web site at: http://www.cms.hhs.gov/AcuteInpatientPPS/01_overview.asp. 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 proposed total payment.
The formula below is a mathematical representation of Step 6 and
applies the rural adjustment for rural SCHs.

Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment *
1.071

We have provided examples below of the calculation of both the
proposed full and reduced national unadjusted payment rates that would
apply to certain outpatient items and services performed by hospitals
that meet and that fail to meet the Hospital OQR Program requirements,
using the steps outlined above. For purposes of this example, we use a
provider that is located in Brooklyn, New York that is assigned to CBSA
35644. This provider bills one service that is assigned to APC 0019
(Level I Excision/Biopsy). The proposed CY 2012 full national
unadjusted payment rate for APC 0019 is $338.51. The proposed reduced
national unadjusted payment rate for a hospital that fails to meet the
Hospital OQR Program requirements is $331.74. This reduced rate is
calculated by multiplying the reporting ratio of 0.980 by the full
unadjusted payment rate for APC 0019.
The proposed FY 2012 wage index for a provider located in CBSA
35644 in New York is 1.3190. The proposed labor-related portion of the
full national unadjusted payment is $267.90 (.60 * $338.51 *1.3190).
The proposed labor-related portion of the reduced national unadjusted
payment is $262.54 (.60 * $331.74 * 1.3190). The proposed nonlabor-
related portion of the full national unadjusted payment is $135.40 (.40
* $338.51). The proposed nonlabor-related portion of the reduced
national unadjusted payment is $132.70 (.40 * $331.74). The sum of the
labor-related and nonlabor-related portions of the full national
adjusted payment is $403.30 ($267.90 + $135.40). The sum of the reduced
national adjusted payment is $395.24 ($262.54 + $132.70).

I. Proposed Beneficiary Copayments

1. Background
Section 1833(t)(3)(B) of the Act requires the Secretary to set
rules for determining the unadjusted copayment amounts to be paid by
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of
the Act specifies that the Secretary must reduce the national
unadjusted copayment amount for a covered OPD service (or group of such
services) furnished in a year in a manner so that the effective
copayment rate (determined on a national unadjusted basis) for that
service in the year does not exceed a specified percentage. As
specified in section 1833(t)(8)(C)(ii)(V) of the Act, for all services
paid under the OPPS in CY 2010, and in calendar years thereafter, the
percentage is 40 percent of the APC payment rate.
Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered
OPD service (or group of such services) furnished in a year, the
national unadjusted copayment amount cannot be less than 20 percent of
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the
Act limits the amount of beneficiary copayment that may be collected to
the amount of the inpatient deductible. Section 4104 of the Affordable
Care Act eliminated the Part B coinsurance for preventive services
furnished on and after January 1, 2011 that meet certain requirements,
including flexible sigmoidoscopies and screening colonscopies, and
waived the Part B deductible for screening colonoscopies that become
diagnostic during the procedure. Our discussion of the changes made by
the Affordable Care Act with regard to copayments for preventive
services furnished on and after January 1, 2011 may be found in section
XII.B. of the CY 2011 OPPS final rule (75 FR 72013).
2. Proposed OPPS Copayment Policy
For CY 2012, we are proposing to determine copayment amounts for
new and revised APCs using the same methodology that we implemented
beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS
final rule with comment period (68 FR 63458).) In

[[Page 42225]]

addition, we are proposing to use the same standard rounding principles
that we have historically used in instances where the application of
our standard copayment methodology would result in a copayment amount
that is less than 20 percent and cannot be rounded, under standard
rounding principles, to 20 percent. (We refer readers to the CY 2008
OPPS/ASC final rule with comment period (72 FR 66687) in which we
discuss our rationale for applying these rounding principles.) The
proposed national unadjusted copayment amounts for services payable
under the OPPS that would be effective January 1, 2012, are shown in
Addenda A and B to this proposed rule (which are referenced in section
XVII. of this proposed rule and available via the Internet on the CMS
Web site). As discussed in section XIV.E. of this proposed rule, for CY
2012, the proposed Medicare beneficiary's minimum unadjusted copayment
and national unadjusted copayment for a service to which a reduced
national unadjusted payment rate applies would equal the product of the
reporting ratio and the national unadjusted copayment, or the product
of the reporting ratio and the minimum unadjusted copayment,
respectively, for the service.
3. Proposed Calculation of an Adjusted Copayment Amount for an APC
Group
Individuals interested in calculating the national copayment
liability for a Medicare beneficiary for a given service provided by a
hospital that met or failed to meet its Hospital OQR Program
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, $67.71 is 20 percent of the full national
unadjusted payment rate of $338.51. For APCs with only a minimum
unadjusted copayment in Addenda A and B of this proposed rule (which
are referenced in section XVII. of this proposed rule and available via
the Internet on the CMS Web site), the beneficiary payment percentage
is 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.H. of this proposed rule. Calculate the rural
adjustment for eligible providers as indicated in Step 6 under section
II.H. of this proposed rule.
Step 3. Multiply the percentage calculated in Step 1 by the payment
rate calculated in Step 2. The result is the wage-adjusted copayment
amount for the APC.
The formula below is a mathematical representation of Step 3 and
applies the beneficiary percentage to the adjusted payment rate for a
service calculated under section II.H. of this proposed rule, with and
without the rural adjustment, to calculate the adjusted beneficiary
copayment for a given service.

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

Step 4. For a hospital that failed to meet its Hospital OQR Program
requirements, multiply the copayment calculated in Step 3 by the
reporting ratio of 0.980.
The proposed unadjusted copayments for services payable under the
OPPS that would be effective January 1, 2012, are shown in Addenda A
and B to this proposed rule (which are referenced in section XVII. of
this proposed rule and available via the Internet on the CMS Web site).
We note that the proposed national unadjusted payment rates and
copayment rates shown in Addenda A and B to this proposed rule reflect
the proposed full CY 2012 OPD fee schedule increase factor discussed in
section XIV.E. of this proposed rule.
Also as noted above, section 1833(t)(8)(C)(i) of the Act limits the
amount of beneficiary copayment that may be collected to the amount of
the inpatient deductible.

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

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

CPT and Level II HCPCS codes are used to report procedures,
services, items, and supplies under the hospital OPPS. Specifically,
CMS recognizes the following codes on OPPS claims: (1) Category I CPT
codes, which describe medical services and procedures; (2) Category III
CPT codes, which describe new and emerging technologies, services, and
procedures; and (3) Level II HCPCS codes, which are used primarily to
identify products, supplies, temporary procedures, and services not
described by CPT codes. CPT codes are established by the American
Medical Association (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. In Table 14 below, we summarize our proposed
process for updating codes through our OPPS quarterly update CRs,
seeking public comments, and finalizing their treatment under the OPPS.
We note that because of the timing of the publication of this proposed
rule, the codes that will be implemented through the July 2011 OPPS
quarterly update are not included in Addendum B of this proposed rule
(which is referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site), while those codes
based upon the April 2011 OPPS quarterly update are included in
Addendum B.

[[Page 42226]]

Table 14--Comment Timeframe for New or Revised HCPCS Codes
----------------------------------------------------------------------------------------------------------------
OPPS quarterly update CR Type of code Effective date Comments sought When finalized
----------------------------------------------------------------------------------------------------------------
April l, 2011................... Level II HCPCS April 1, 2011..... CY 2012 OPPS/ASC CY 2012 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
July 1, 2011.................... Level II HCPCS July 1, 2011...... CY 2012 OPPS/ASC CY 2012 OPPS/ASC
Codes. proposed rule. final rule with
comment period.
Category I July 1, 2011...... CY 2012 OPPS/ASC CY 2012 OPPS/ASC
(certain vaccine proposed rule. final rule with
codes) and III comment period.
CPT codes.
October 1, 2011................. Level II HCPCS October 1, 2011... CY 2012 OPPS/ASC CY 2013 OPPS/ASC
Codes. final rule with final rule with
comment period. comment period.
January 1, 2012................. Level II HCPCS January 1, 2012... CY 2012 OPPS/ASC CY 2013 OPPS/ASC
Codes. final rule with final rule with
comment period. comment period.
Category I and III January 1, 2012... CY 2012 OPPS/ASC CY 2013 OPPS/ASC
CPT Codes. final rule with final rule with
comment period. comment period.
----------------------------------------------------------------------------------------------------------------

This process is discussed in detail below. We have separated our
discussion into two sections based on whether we are proposing to
solicit public comments in this CY 2012 OPPS/ASC proposed rule or
whether we will be soliciting public comments in the CY 2012 OPPS/ASC
final rule with comment period. We note that we sought public comment
in the CY 2011 OPPS/ASC final rule with comment period on the new CPT
and Level II HCPCS codes that were effective January 1, 2011. We also
sought public comments in the CY 2011 OPPS/ASC final rule with comment
period on the new Level II HCPCS codes effective October 1, 2010. These
new codes, with an effective date of October 1, 2010, or January 1,
2011, 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 2011 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 2011 OPPS/ASC
final rule with comment period. We will respond to public comments and
finalize our proposed OPPS treatment of these codes in the CY 2012
OPPS/ASC final rule with comment period.
1. Proposed Treatment of New Level II HCPCS Codes and Category I CPT
Vaccine Codes and Category III CPT Codes for Which We Are Soliciting
Public Comments in This CY 2012 Proposed Rule
Through the April 2011 OPPS quarterly update CR (Transmittal 2174,
Change Request 7342, dated March 18, 2011) and the July 2011 OPPS
quarterly update CR (Transmittal 2234, Change Request 7443, dated May
27, 2011), we recognized several new HCPCS codes for separate payment
under the OPPS. Effective April 1 and July 1 of CY 2011, we made
effective a total of 22 new Level II HCPCS codes and 14 Category III
CPT codes. Specifically, 5 new Level II HCPCS codes were effective for
the April 2011 update and another 17 new Level II HCPCS codes were
effective for the July 2011 update for a total of 22. Fourteen new
Category III CPT codes were effective for the July 2011 update. Of the
22 new Level II HCPCS codes, we recognized for separate payment 16 of
these codes, and of the 14 new Category III CPT codes, we recognized
for separate payment 12 of these codes, for a total of 28 new HCPCS
codes that are recognized for separate payment for CY 2012.
Through the April 2011 OPPS quarterly update CR, we allowed
separate payment for each of the five new Level II HCPCS codes.
Specifically, as displayed in Table 15 below, we provided separate
payment for the following HCPCS codes:
HCPCS code C9280 (Injection, eribulin mesylate, 1 mg)
HCPCS code C9281 (Injection, pegloticase, 1 mg)
HCPCS code C9282 (Injection, ceftaroline fosamil, 10 mg)
HCPCS code Q2040 (Injection, incobotulinumtoxin A, 1 unit)
HCPCS code C9729 (Percutaneous laminotomy/laminectomy
(intralaminar approach) for decompression of neural elements, (with
ligamentous resection, discectomy, facetectomy and/or foraminotomy,
when performed) any method under indirect image guidance, with the use
of an endoscope when performed, single or multiple levels, unilateral
or bilateral; lumbar)
We note that HCPCS code Q2040 replaced HCPCS code C9278 (Injection,
incobotulinumtoxin A, 1 unit) beginning April 1, 2010. HCPCS code C9278
was effective January 1, 2011, and deleted March 30, 2011, because it
was replaced with HCPCS code Q2040. HCPCS code C9278 was assigned to
pass-through status beginning January 1, 2011, when the code was
implemented. Because HCPCS code Q2040 describes the same drug as HCPCS
code C9278, we are continuing its pass-through status and assigning the
HCPCS Q-code to the same APC and status indicator as its predecessor
HCPCS C-code, as shown in Table 15 below. Specifically, HCPCS code
Q2040 is assigned to APC 9278 and status indicator ``G.''
We are proposing to assign the Level II HCPCS codes listed in Table
15 to the specific proposed APCs and status indicators set forth in
this proposed rule.

Table 15--LEVEL II HCPCS Codes With a Change in OPPS Status Indicator or
Newly Implemented in April 2011
------------------------------------------------------------------------
Proposed CY
CY 2011 HCPCS code CY 2011 long descriptor 2012 status Proposed CY
indicator 2012 APC
------------------------------------------------------------------------
C9280............. Injection, eribulin G 9280
mesylate, 1 mg.

[[Page 42227]]

C9281............. Injection, pegloticase, 1 G 9281
mg.
C9282............. Injection, ceftaroline G 9282
fosamil, 10 mg.
C9729............. Percutaneous laminotomy/ T 0208
laminectomy (intralaminar
approach) for
decompression of neural
elements, (with
ligamentous resection,
discectomy, facetectomy
and/or foraminotomy, when
performed) any method
under indirect image
guidance, with the use of
an endoscope when
performed, single or
multiple levels,
unilateral or bilateral;
lumbar.
Q2040*............ Injection, G 9278
incobotulinumtoxin A, 1
unit.
------------------------------------------------------------------------
*Level II HCPCS code C9278 was deleted March 31, 2011, and replaced with
HCPCS code Q2040 effective April 1, 2011.

Through the July 2011 OPPS quarterly update CR, which included
HCPCS codes that were made effective July 1, 2011, we allowed separate
payment for 11 of the 17 new Level II HCPCS codes. Specifically, as
displayed in Table 16 of this proposed rule, we provided separate
payment for the following HCPCS codes:
HCPCS code C9283 (Injection, acetaminophen, 10 mg)
HCPCS code C9284 (Injection, ipilimumab, 10 mg)
HCPCS code C9285 (Lidocaine 70 mg/tetracaine 70 mg, per
patch)
HCPCS code C9365 (Oasis Ultra Tri-Layer matrix, per square
centimeter)
HCPCS code C9406 (Iodine I-123 ioflupane, diagnostic, per
study dose, up to 5 millicuries)
HCPCS code C9730 (Bronchoscopic bronchial thermoplasty
with imaging guidance (if performed), radiofrequency ablation of airway
smooth muscle, 1 lobe)
HCPCS code C9731 (Bronchoscopic bronchial thermoplasty
with imaging guidance (if performed), radiofrequency ablation of airway
smooth muscle, 2 or more lobes)
HCPCS code Q2041 (Injection, von willebrand factor complex
(human), Wilate, 1 i.u. vwf:rco)
HCPCS code Q2042 (Injection, hydroxyprogesterone caproate,
1 mg)
HCPCS code Q2043 (Sipuleucel-t, minimum of 50 million
autologous cd54+ cells activated with pap-gm-csf, including
leukapheresis and all other preparatory procedures, per infusion)
HCPCS code Q2044 (Injection, belimumab, 10 mg)
We note that two of the Level II HCPCS Q-codes that were made
effective July 1, 2011, were previously described by a HCPCS J-code and
a C-code that were assigned to pass-through status under the hospital
OPPS. Specifically, HCPCS code Q2041 replaced HCPCS code J7184
(Injection, von willebrand factor complex (human), Wilate, per 100 iu
vwf:rco) beginning July 1, 2011. HCPCS code J7184 was assigned to pass-
through status when it was made effective January 1, 2011; however, the
code is ``Not Payable by Medicare'' because HCPCS code J7184 is
replaced with HCPCS code Q2041 effective July 1, 2011. Therefore, HCPCS
code J7184 was reassigned to status indicator ``E'' effective July 1,
2011. Because HCPCS code J7184 describes the same drug as HCPCS code
Q2041, we continued its pass-through status and assigned HCPCS code
Q2041 to status indicator ``G'' effective July 1, 2011. However,
because the dosage descriptor for HCPCS code Q2041 is not the same as
HCPCS code J7184, we reassigned HCPCS code Q2041 to a new APC to
maintain data consistency for future rulemaking. Specifically, HCPCS
code Q2041 was assigned to APC 1352 effective July 1, 2011. In
addition, HCPCS code Q2043 replaced HCPCS code C9273 (Sipuleucel-t,
minimum of 50 million autologous cd54+ cells activated with pap-gm-csf,
including leukapheresis and all other preparatory procedures, per
infusion) beginning July 1, 2011. HCPCS code C9273 was assigned to
pass-through status when it was made effective October 1, 2010. Because
HCPCS code Q2043 describes the same product as HCPCS code C9273, we
continued its pass-through status and assigned HCPCS code Q2043 to
status indicator ``G'' as well as assigned it to the same APC,
specifically APC 9273, effective July 1, 2011.
Of the 17 HCPCS codes that were made effective July 1, 2011, we did
not recognize for separate payment 6 HCPCS codes that describe durable
medical equipment (DME) because DME is paid under the Durable Medical
Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Fee Schedule
and not the OPPS. These codes are listed in Table 16 below, and are
assigned to either status indicator ``Y'' or ``A'' effective July 1,
2011.
Table 16 below includes a complete list of the Level II HCPCS codes
that were made effective July 1, 2011, with their proposed status
indicators, APC assignments, and payment rates for CY 2012.

TABLE 16--New Level II HCPCS Codes Implemented in July 2011
----------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY
CY 2011 HCPCS code CY 2011 long descriptor 2012 status Proposed CY 2012 payment
indicator 2012 APC rate
----------------------------------------------------------------------------------------------------------------
C9283...................... Injection, acetaminophen, 10 mg.... G 9283 $0.11
C9284...................... Injection, ipilimumab, 1 mg........ G 9284 127.20
C9285...................... Lidocaine 70 mg/tetracaine 70 mg, G 9285 13.57
per patch.
C9365...................... Oasis Ultra Tri-Layer matrix, per G 9365 10.60
square centimeter.
C9406...................... Iodine I-123 ioflupane, diagnostic, G 9406 1,908.00
per study dose, up to 5
millicuries.
C9730...................... Bronchoscopic bronchial T 0415 1,971.77
thermoplasty with imaging guidance
(if performed), radiofrequency
ablation of airway smooth muscle,
1 lobe.
C9731...................... Bronchoscopic bronchial T 0415 1,971.77
thermoplasty with imaging guidance
(if performed), radiofrequency
ablation of airway smooth muscle,
2 or more lobes.

[[Page 42228]]

K0741...................... Portable gaseous oxygen system, Y NA NA
rental, includes portable
container, regulator, flowmeter,
humidifier, cannula or mask, and
tubing, for cluster headaches.
K0742...................... Portable oxygen contents, gaseous, Y NA NA
1 month's supply = 1 unit, for
cluster headaches, for initial
months supply or to replace used
contents.
K0743...................... Suction pump, home model, portable, Y NA NA
for use on wounds.
K0744...................... Absorptive wound dressing for use A NA NA
with suction pump, home model,
portable, pad size 16 square
inches or less.
K0745...................... Absorptive wound dressing for use A NA NA
with suction pump, home model,
portable, pad size more than 16
square inches but less than or
equal to 48 square inches.
K0746...................... Absorptive wound dressing for use A NA NA
with suction pump, home model,
portable, pad size greater than 48
square inches.
Q2041...................... Injection, von willebrand factor G 1352 0.88
complex (human), Wilate, 1 i.u.
vwf:rco.
Q2042...................... Injection, hydroxyprogesterone K 1354 2.90
caproate, 1 mg.
Q2043...................... Sipuleucel-t, minimum of 50 million G 9273 32,860.00
autologous cd54+ cells activated
with pap-gm-csf, including
leukapheresis and all other
preparatory procedures, per
infusion.
Q2044...................... Injection, belimumab, 10 mg........ G 1353 39.15
----------------------------------------------------------------------------------------------------------------

For CY 2012, we are proposing to continue our established policy of
recognizing Category I CPT vaccine codes for which FDA approval is
imminent and Category III CPT codes that the AMA releases in January of
each year for implementation in July through the OPPS quarterly update
process. Under the OPPS, Category I vaccine codes and Category III CPT
codes that are released on the AMA Web site in January are made
effective in July of the same year through the July quarterly update
CR, consistent with the AMA's implementation date for the codes.
Through the July 2011 OPPS quarterly update CR, we allow separate
payment for 12 of the 14 new Category III CPT codes effective July 1,
2011. Specifically, as displayed in Table 17 of this proposed rule, we
allow separate payment for the following CPT codes:
CPT code 0263T (Intramuscular autologous bone marrow cell
therapy, with preparation of harvested cells, multiple injections, one
leg, including ultrasound guidance, if performed; complete procedure
including unilateral or bilateral bone marrow harvest)
CPT code 0264T (Intramuscular autologous bone marrow cell
therapy, with preparation of harvested cells, multiple injections, one
leg, including ultrasound guidance, if performed; complete procedure
excluding bone marrow harvest)
CPT code 0265T (Intramuscular autologous bone marrow cell
therapy, with preparation of harvested cells, multiple injections, one
leg, including ultrasound guidance, if performed; unilateral or
bilateral bone marrow harvest only for intramuscular autologous bone
marrow cell therapy)
CPT code 0267T (Implantation or replacement of carotid
sinus baroreflex activation device; lead only, unilateral (includes
intra-operative interrogation, programming, and repositioning, when
performed))
CPT code 0268T (Implantation or replacement of carotid
sinus baroreflex activation device; pulse generator only (includes
intra-operative interrogation, programming, and repositioning, when
performed))
CPT code 0269T (Revision or removal of carotid sinus
baroreflex activation device; total system (includes generator
placement, unilateral or bilateral lead placement, intra-operative
interrogation, programming, and repositioning, when performed))
CPT code 0270T (Revision or removal of carotid sinus
baroreflex activation device; lead only, unilateral (includes intra-
operative interrogation, programming, and repositioning, when
performed))
CPT code 0271T (Revision or removal of carotid sinus
baroreflex activation device; pulse generator only (includes intra-
operative interrogation, programming, and repositioning, when
performed))
CPT code 0272T (Interrogation device evaluation (in
person), carotid sinus baroreflex activation system, including
telemetric iterative communication with the implantable device to
monitor device diagnostics and programmed therapy values, with
interpretation and report (e.g., battery status, lead impedance, pulse
amplitude, pulse width, therapy frequency, pathway mode, burst mode,
therapy start/stop times each day))
CPT code 0273T (Interrogation device evaluation (in
person), carotid sinus baroreflex activation system, including
telemetric iterative communication with the implantable device to
monitor device diagnostics and programmed therapy values, with
interpretation and report (e.g., battery status, lead impedance, pulse
amplitude, pulse width, therapy frequency, pathway mode, burst mode,
therapy start/stop times each day); with programming)
CPT 0274T (Percutaneous laminotomy/laminectomy
(intralaminar approach) for decompression of neural elements, (with or
without ligamentous resection, discectomy, facetectomy and/or
foraminotomy) any method under indirect image guidance (e.g.,
fluoroscopic, CT), with or without the use of an endoscope, single or
multiple levels, unilateral or bilateral; cervical or thoracic)
CPT 0275T (Percutaneous laminotomy/laminectomy
(intralaminar approach) for decompression of neural elements, (with or
without ligamentous resection, discectomy, facetectomy and/or
foraminotomy) any method under indirect image guidance (e.g.,
fluoroscopic, CT), with or without the use of an endoscope, single or
multiple levels, unilateral or bilateral; lumbar) (As published in the
July 2011 OPPS quarterly update CR, CPT code 0275T replaced Level II
HCPCS code C9729 effective July 1, 2011.)
We note that Category III CPT codes 0262T (Implantation of
catheter-delivered prosthetic pulmonary valve, endovascular approach)
and 0266T (Implantation or replacement of carotid sinus baroreflex
activation device; total system (includes generator placement,
unilateral or bilateral lead placement,

[[Page 42229]]

intra-operative interrogation, programming, and repositioning, when
performed)) are assigned to status indicator ``C'' (Inpatient
Procedures) under the hospital OPPS beginning July 1, 2011. We believe
these procedures should only be paid when provided in the inpatient
setting because of the clinical circumstances under which these
procedures are performed. There are no new Category I Vaccine CPT codes
for the July 2011 update.
Table 17 below lists the Category III CPT codes that were
implemented in July 2011 for which we are proposing to allow separate
payment, along with their proposed status indicators, proposed APC
assignments, and proposed payment rates for CY 2012.

Table 17--Category III CPT Codes Implemented in July 2011
----------------------------------------------------------------------------------------------------------------
Proposed CY
CY 2011 CPT code CY 2011 long descriptor Proposed CY 2012 Proposed CY 2012 payment
status indicator 2012 APC rate
----------------------------------------------------------------------------------------------------------------
0262T.......................... Implantation of C NA NA
catheter-delivered
prosthetic pulmonary
valve, endovascular
approach.
0263T.......................... Intramuscular S 0112 $2,166.33
autologous bone marrow
cell therapy, with
preparation of
harvested cells,
multiple injections,
one leg, including
ultrasound guidance,
if performed; complete
procedure including
unilateral or
bilateral bone marrow
harvest.
0264T.......................... Intramuscular S 0112 2,166.33
autologous bone marrow
cell therapy, with
preparation of
harvested cells,
multiple injections,
one leg, including
ultrasound guidance,
if performed; complete
procedure excluding
bone marrow harvest.
0265T.......................... Intramuscular S 0112 2,166.33
autologous bone marrow
cell therapy, with
preparation of
harvested cells,
multiple injections,
one leg, including
ultrasound guidance,
if performed;
unilateral or
bilateral bone marrow
harvest only for
intramuscular
autologous bone marrow
cell therapy.
0266T.......................... Implantation or C NA NA
replacement of carotid
sinus baroreflex
activation device;
total system (includes
generator placement,
unilateral or
bilateral lead
placement, intra-
operative
interrogation,
programming, and
repositioning, when
performed).
0267T.......................... Implantation or T 0687 1,496.15
replacement of carotid
sinus baroreflex
activation device;
lead only, unilateral
(includes intra-
operative
interrogation,
programming, and
repositioning, when
performed).
0268T.......................... Implantation or S 0039 14,743.58
replacement of carotid
sinus baroreflex
activation device;
pulse generator only
(includes intra-
operative
interrogation,
programming, and
repositioning, when
performed).
0269T.......................... Revision or removal of T 0221 2,567.33
carotid sinus
baroreflex activation
device; total system
(includes generator
placement, unilateral
or bilateral lead
placement, intra-
operative
interrogation,
programming, and
repositioning, when
performed).
0270T.......................... Revision or removal of T 0687 1,496.15
carotid sinus
baroreflex activation
device; lead only,
unilateral (includes
intra-operative
interrogation,
programming, and
repositioning, when
performed).
0271T.......................... Revision or removal of T 0688 2,003.33
carotid sinus
baroreflex activation
device; pulse
generator only
(includes intra-
operative
interrogation,
programming, and
repositioning, when
performed).
0272T.......................... Interrogation device S 0218 80.78
evaluation (in
person), carotid sinus
baroreflex activation
system, including
telemetric iterative
communication with the
implantable device to
monitor device
diagnostics and
programmed therapy
values, with
interpretation and
report (e.g., battery
status, lead
impedance, pulse
amplitude, pulse
width, therapy
frequency, pathway
mode, burst mode,
therapy start/stop
times each day).
0273T.......................... Interrogation device S 0218 80.78
evaluation (in
person), carotid sinus
baroreflex activation
system, including
telemetric iterative
communication with the
implantable device to
monitor device
diagnostics and
programmed therapy
values, with
interpretation and
report (e.g., battery
status, lead
impedance, pulse
amplitude, pulse
width, therapy
frequency, pathway
mode, burst mode,
therapy start/stop
times each day); with
programming.
0274T.......................... Percutaneous laminotomy/ T 0208 3,535.92
laminectomy
(intralaminar
approach) for
decompression of
neural elements, (with
or without ligamentous
resection, discectomy,
facetectomy and/or
foraminotomy) any
method under indirect
image guidance (e.g.,
fluoroscopic, CT),
with or without the
use of an endoscope,
single or multiple
levels, unilateral or
bilateral; cervical or
thoracic.
0275T.......................... Percutaneous laminotomy/ T 0208 3,535.92
laminectomy
(intralaminar
approach) for
decompression of
neural elements, (with
or without ligamentous
resection, discectomy,
facetectomy and/or
foraminotomy) any
method under indirect
image guidance (e.g.,
fluoroscopic, CT),
with or without the
use of an endoscope,
single or multiple
levels, unilateral or
bilateral; lumbar.
----------------------------------------------------------------------------------------------------------------

[[Page 42230]]

We are soliciting public comments on the CY 2012 proposed status
indicators and the proposed APC assignments and payment rates, if
applicable, for the Level II HCPCS codes and the Category III CPT codes
that are newly recognized in April or July 2011 through the respective
OPPS quarterly update CRs. These codes are listed in Tables 15, 16, and
17 of this proposed rule. We are proposing to finalize their status
indicators and their APC assignments and payment rates, if applicable,
in the CY 2012 OPPS/ASC final rule with comment period. Because the
July 2011 OPPS quarterly update CR is issued close to the publication
of this proposed rule, the Level II HCPCS codes and the Category III
CPT codes implemented through the July 2011 OPPS quarterly update CR
could not be included in Addendum B to this proposed rule, but these
codes are listed in Tables 16 and 17, respectively. We are proposing to
incorporate these codes into Addendum B to the CY 2012 OPPS/ASC final
rule with comment period, which is consistent with our annual OPPS
update policy. The Level II HCPCS codes implemented or modified through
the April 2011 OPPS update CR and displayed in Table 15 are included in
Addendum B to this proposed rule (which is referenced in section XVII.
of this proposed rule and available via the Internet on the CMS Web
site), where their proposed CY 2012 payment rates also are shown.
2. Proposed Process for New Level II HCPCS Codes and Category I and
Category III CPT Codes for Which We Will Be Soliciting Public Comments
on the CY 2012 OPPS/ASC Final Rule With Comment Period
As has been our practice in the past, we incorporate those new
Category I and III CPT codes and new Level II HCPCS codes that are
effective January 1 in the final rule with comment period updating the
OPPS for the following calendar year. These codes are released to the
public via the CMS HCPCS (for Level II HCPCS codes) and AMA Web sites
(for CPT codes), and also through the January OPPS quarterly update
CRs. In the past, we also have released new Level II HCPCS codes that
are effective October 1 through the October OPPS quarterly update CRs
and incorporated these new codes in the final rule with comment period
updating the OPPS for the following calendar year. All of these codes
are flagged with comment indicator ``NI'' in Addendum B to the OPPS/ASC
final rule with comment period to indicate that we are assigning them
an interim payment status which is subject to public comment.
Specifically, the status indicator and the APC assignment and payment
rate, if applicable, for all such codes flagged with comment indicator
``NI'' are open to public comment in the final rule with comment
period, and we respond to these comments in the OPPS/ASC final rule
with comment period for the next calendar year's OPPS/ASC update. We
are proposing to continue this process for CY 2012. Specifically, for
CY 2012, we are proposing to include in Addendum B (which is available
via the Internet on the CMS Web site) to the CY 2012 OPPS/ASC final
rule with comment period the new Category I and III CPT codes effective
January 1, 2012 (including the Category III CPT codes that were
released by the AMA in July 2011) that would be incorporated in the
January 2012 OPPS quarterly update CR and the new Level II HCPCS codes,
effective October 1, 2011, or January 1, 2012, that would be released
by CMS in its October 2011 and January 2012 OPPS quarterly update CRs.
These codes would be flagged with comment indicator ``NI'' in Addendum
B to the CY 2012 OPPS/ASC final rule with comment period to indicate
that we have assigned them an interim OPPS payment status for CY 2012.
Their status indicators and their APC assignments and payment rates, if
applicable, would be open to public comment in the CY 2012 OPPS/ASC
final rule with comment period and would be finalized in the CY 2013
OPPS/ASC final rule with comment period. We note that the Category III
CPT codes that were released by the AMA in July 2011 that are subject
to comment in this CY 2012 OPPS/ASC proposed rule, and are listed in
Table 17, will not be assigned to comment indicator ``NI'' in Addendum
B because comments about these codes will be addressed in the CY 2012
OPPS/ASC final rule with comment period.

B. Proposed OPPS Changes--Variations Within APCs

1. Background
Section 1833(t)(2)(A) of the Act requires the Secretary to develop
a classification system for covered hospital outpatient department
services. Section 1833(t)(2)(B) of the Act provides that the Secretary
may establish groups of covered OPD services within this classification
system, so that services classified within each group are comparable
clinically and with respect to the use of resources. In accordance with
these provisions, we developed a grouping classification system,
referred to as Ambulatory Payment Classifications (APCs), as set forth
in Sec. 419.31 of the regulations. We use Level I and Level II HCPCS
codes to identify and group the services within each APC. The APCs are
organized such that each group is homogeneous both clinically and in
terms of resource use. Using this classification system, we have
established distinct groups of similar services. We also have developed
separate APC groups for certain medical devices, drugs, biologicals,
therapeutic radiopharmaceuticals, and brachytherapy devices.
We have packaged into payment for each procedure or service within
an APC group the costs associated with those items or services that are
directly related to, and supportive of, performing the main independent
procedures or furnishing the services. Therefore, we do not make
separate payment for these packaged items or services. For example,
packaged items and services include: (1) use of an operating,
treatment, or procedure room; (2) use of a recovery room; (3)
observation services; (4) anesthesia; (5) medical/surgical supplies;
(6) pharmaceuticals (other than those for which separate payment may be
allowed under the provisions discussed in section V. of this proposed
rule); (7) incidental services such as venipuncture; and (8) guidance
services, image processing services, intraoperative services, imaging
supervision and interpretation services, diagnostic
radiopharmaceuticals, and contrast media. Further discussion of
packaged services is included in section II.A.3. of this proposed rule.
In CY 2008, we implemented composite APCs to provide a single
payment for groups of services that are typically performed together
during a single clinical encounter and that result in the provision of
a complete service (72 FR 66650 through 66652). Under CY 2011 OPPS
policy, we provide composite APC payment for certain extended
assessment and management services, low dose rate (LDR) prostate
brachytherapy, cardiac electrophysiologic evaluation and ablation,
mental health services, and multiple imaging services. Further
discussion of composite APCs is included in section II.A.2.e. of this
proposed rule.
Under the OPPS, we generally pay for hospital outpatient services
on a rate-per-service basis, where the service may be reported with one
or more HCPCS codes. Payment varies according to the APC group to which
the independent service or combination of services is assigned. Each
APC weight represents the hospital median cost of the services included
in that APC, relative to the

[[Page 42231]]

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 hospital clinic visit APC (the Level 3 hospital
clinic visit CPT code out of five levels), and because middle level
hospital 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,
on a recurring basis occurring no less than annually and revise the
groups, the relative payment weights, and the wage and other
adjustments 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; the Act further requires us to repeat
this process on a basis that is not less often than annually. Section
1833(t)(9)(A) of the Act also requires the Secretary, beginning in CY
2001, to consult with an expert outside advisory panel composed of an
appropriate selection of representatives of providers 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 2012 OPPS and our responses to them
are discussed in the relevant specific sections throughout this
proposed rule).
Finally, section 1833(t)(2) of the Act provides that, subject to
certain exceptions, the items and services within an APC group cannot
be considered comparable with respect to the use of resources if the
highest median cost (or mean cost as elected by the Secretary) for an
item or service in the group is more than 2 times greater than the
lowest median cost (or mean cost, if so elected) for an item or service
within the same group (referred to as the ``2 times rule''). We use the
median cost of the item or service in implementing this provision. The
statute authorizes the Secretary to make exceptions to the 2 times rule
in unusual cases, such as low-volume items and services (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 making this
determination, we consider only those HCPCS codes that are significant
based on the number of claims. We note that, for purposes of
identifying significant HCPCS for examination in the 2 times rule, we
consider codes that have more than 1,000 single major claims or codes
that have both greater than 99 single major claims and contribute at
least 2 percent of the single major claims used to establish the APC
median cost to be significant (75 FR 71832). This longstanding
definition of when a HCPCS code is significant for purposes of the 2
times rule was selected because we believe that a subset of 1,000
claims is negligible within the set of approximately 100 million single
procedure or single session claims we use for establishing median
costs. Similarly, a HCPCS code for which there are fewer than 99 single
bills and which comprises less than 2 percent of the single major
claims within an APC will have a negligible impact on the APC median.
In this proposed rule, we are proposing to make exceptions to this
limit on the variation of costs within each APC group in unusual cases,
such as low volume items and services for CY 2012.
During the APC Panel's February 2011 meeting, we presented median
cost and utilization data for services furnished during the period of
January 1, 2010, through September 30, 2010, about which we had
concerns or about which the public had raised concerns regarding their
APC assignments, status indicator assignments, or payment rates. The
discussions of most service-specific issues, the APC Panel
recommendations, if any, and our proposals for CY 2012 are contained
mainly in sections III.C. and III.D. of this proposed rule.
In addition to the assignment of specific services to APCs that we
discussed with the APC Panel, we also identified APCs with 2 times
violations that were not specifically discussed with the APC Panel but
for which we are proposing changes to their HCPCS codes' APC
assignments in Addendum B (available via the Internet) to this proposed
rule. In these cases, to eliminate a 2 times violation or to improve
clinical and resource homogeneity, we are proposing to reassign the
codes to APCs that contain services that are similar with regard to
both their clinical and resource characteristics. We also are proposing
to rename existing APCs or create new clinical APCs to complement
proposed HCPCS code reassignments. In many cases, the proposed HCPCS
code reassignments and associated APC reconfigurations for CY 2012
included in this proposed rule are related to changes in median costs
of services that are observed in the CY 2010 claims data newly
available for CY 2012 ratesetting. We also are proposing changes to the
status indicators for some codes that are not specifically and
separately discussed in this proposed rule. In these cases, we are
proposing to change the status indicators for some codes because we
believe that another status indicator would more accurately describe
their payment status from an OPPS perspective based on the policies
that we are proposing for CY 2012.
Addendum B to this proposed rule (which is referenced in section
XVII. of this proposed rule and available via the Internet on the CMS
Web site) identifies with comment indicator ``CH'' those HCPCS codes
for which we are proposing a change to the APC assignment or status
indicator that were initially assigned in the April 2011 Addendum B
update (via Transmittal 2174, Change Request 7342, dated March 18,
2011).
3. Proposed Exceptions to the 2 Times Rule
As discussed earlier, we may make exceptions to the 2 times limit
on the variation of costs within each APC group in unusual cases such
as low-volume items and services. Taking into account the APC changes
that we are proposing for CY 2012 based on the APC Panel
recommendations that are discussed mainly in sections III.C. and III.D.
of this proposed rule, the other proposed changes to status indicators
and APC assignments as identified in Addendum B to this proposed rule
(which is referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site), and the use of CY 2010
claims data to calculate the median costs of procedures classified in
the APCs, we reviewed all the APCs to determine which APCs would not
satisfy the 2 times rule. We used the following criteria to decide
whether to propose exceptions to the 2 times rule for affected APCs:
Resource homogeneity;
Clinical homogeneity;
Hospital outpatient setting;
Frequency of service (volume); 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 and
18458).

[[Page 42232]]

Table 18 of this proposed rule lists 17 APCs that we are proposing
to exempt from the 2 times rule for CY 2012 based on the criteria cited
above and based on claims data processed from January 1, 2010, through
September 30, 2010. For the final rule with comment period, we plan to
use claims data for dates of service between January 1, 2010, and
December 31, 2010, that were processed on or before June 30, 2011, and
updated CCRs, if available. Based on our analysis of CY 2010 claims
data in preparation for this proposed rule, we found 17 APCs with 2
times rule violations. We applied the criteria as described earlier to
identify the APCs that we are proposing as exceptions to the 2 times
rule for CY 2012, and identified 17 APCs that meet the criteria for
exception to the 2 times rule for this proposed rule. These proposed
APC exceptions are listed in Table 18 below. 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 2010 claims data used to
determine the APC payment rates that we are proposing for CY 2012. The
proposed median costs for hospital outpatient services for these and
all other APCs that were used in the development of this proposed rule
can be found on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp.

Table 18--Proposed APC Exceptions to the 2 Times Rule for CY 2012
------------------------------------------------------------------------
Proposed CY 2012 APC Proposed CY 2012 APC title
------------------------------------------------------------------------
0016........................... Level IV Debridement & Destruction.
0057........................... Bunion Procedures.
0058........................... Level I Strapping and Cast Application.
0060........................... Manipulation Therapy.
0080........................... Diagnostic Cardiac Catheterization.
0105........................... Repair/Revision/Removal of Pacemakers,
AICDs, or Vascular Devices.
0235........................... Level I Posterior Segment Eye
Procedures.
0245........................... Level I Cataract Procedures without IOL
Insert.
0263........................... Level I Miscellaneous Radiology
Procedures.
0340........................... Minor Ancillary Procedures.
0347........................... Level III Transfusion Laboratory
Procedures.
0367........................... Level I Pulmonary Test.
0369........................... Level III Pulmonary Tests.
0432........................... Health and Behavior Services.
0604........................... Level 1 Hospital Clinic Visits.
0660........................... Level II Otorhinolaryngologic Function
Tests.
0667........................... Level II Proton Beam Radiation Therapy.
------------------------------------------------------------------------

C. Proposed 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 an appropriate clinical 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 to $2,000 in increments of $100, and from $2,000 to $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.
Every year we receive many requests for higher payment amounts
under our New Technology APCs for specific procedures under the OPPS
because they require the use of expensive equipment. We are taking this
opportunity to reiterate our response in general to the issue of
hospitals' capital expenditures as they relate to the OPPS and
Medicare.
Under the OPPS, one of our goals is to make payments that are
appropriate for the services that are necessary for the treatment of
Medicare beneficiaries. The OPPS, like other Medicare payment systems,
is budget neutral and increases are limited to the annual hospital
inpatient market basket increase. We believe that our payment rates
generally reflect the costs that are associated with providing care to
Medicare beneficiaries in cost-efficient settings, and we believe that
our rates are adequate to ensure access to services.
For many emerging technologies, there is a transitional period
during which utilization may be low, often because providers are first
learning about the techniques and their clinical utility. Quite often,
parties request that Medicare make higher payment amounts under our New
Technology APCs for new procedures in that transitional phase. These
requests, and their accompanying estimates for expected total patient
utilization, often reflect very low rates of patient use of expensive
equipment, resulting in high per use costs for which requesters believe
Medicare should make full payment. Medicare does not, and we believe
should not, assume responsibility for more than its share of the costs
of procedures based on Medicare beneficiary projected utilization and
does not set its payment rates based on initial projections of low
utilization for services that require expensive capital equipment. For
the OPPS, we rely on hospitals to make informed business decisions
regarding the acquisition of high cost capital equipment, taking into
consideration their knowledge about their entire patient base (Medicare
beneficiaries included) and an understanding of Medicare's and other
payers' payment policies.
We note that, in a budget neutral environment, payments may not
fully cover hospitals' costs in a particular

[[Page 42233]]

circumstance, including those for the purchase and maintenance of
capital equipment. We rely on hospitals to make their decisions
regarding the acquisition of high cost equipment with the understanding
that the Medicare program must be careful to establish its initial
payment rates, including those made through New Technology APCs, for
new services that lack hospital claims data based on realistic
utilization projections for all such services delivered in cost-
efficient hospital outpatient settings. As the OPPS acquires claims
data regarding hospital costs associated with new procedures, we
regularly examine the claims data and any available new information
regarding the clinical aspects of new procedures to confirm that our
OPPS payments remain appropriate for procedures as they transition into
mainstream medical practice.
2. Proposed Movement of Procedures From New Technology APCs to Clinical
APCs
As we explained in the November 30, 2001 final rule (66 FR 59902),
we generally keep a procedure in the New Technology APC to which it is
initially assigned until we have collected sufficient data to enable us
to move the procedure to a clinically appropriate APC. However, in
cases where we find that our original New Technology APC assignment was
based on inaccurate or inadequate information (although it was the best
information available at the time), or where the New Technology APCs
are restructured, we may, based on more recent resource utilization
information (including claims data) or the availability of refined New
Technology APC cost bands, reassign the procedure or service to a
different New Technology APC that most appropriately reflects its cost.
Consistent with our current policy, we are proposing for CY 2012 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 claims data are available. It also allows us to
retain a service in a New Technology APC for more than 2 years if
sufficient claims data upon which to base a decision for reassignment
have not been collected. Table 19 below lists the HCPCS codes and
associated status indicators that we are proposing to reassign from a
New Technology APC to a clinically appropriate APC or to a different
New Technology APC for CY 2012.
Currently, in CY 2011, there are three procedures described by a
HCPCS G-code receiving payment through a New Technology APC.
Specifically, HCPCS code G0417 (Surgical pathology, gross and
microscopic examination for prostate needle saturation biopsy sampling,
21-40 specimens) is assigned to New Technology APC 1506 (New
Technology--Level VI ($400-$500)); HCPCS code G0418 (Surgical
pathology, gross and microscopic examination for prostate needle
saturation biopsy sampling, 41-60 specimens) is assigned to New
Technology APC 1511 (New Technology--Level XI ($900-$1,000)); and HCPCS
code G0419 (Surgical pathology, gross and microscopic examination for
prostate needle saturation biopsy sampling, greater than 60 specimens)
is assigned to New Technology APC 1513 (New Technology--Level XIII
($1,100-$1,200)).
Analysis of our hospital outpatient data for claims submitted for
CY 2010 indicates that prostate saturation biopsy procedures are rarely
performed on Medicare patients. For OPPS claims submitted from CY 2009
through CY 2010, our claims data show that there were only five claims
submitted for HCPCS code G0417 in CY 2009 and only one in CY 2010 with
a proposed median cost of approximately $532. Our claims data did not
show any hospital outpatient claims for HCPCS codes G0418 and G0419
from either CY 2009 or CY 2010.
While we believe that these procedures will always be low volume,
given the number of specimens being collected, we believe that we
should continue their New Technology payments for another year for
HCPCS codes G0417, G0418, and G0419 to see if more claims data become
available. For CY 2012, we are proposing to revise the APC assignments
for these procedures and continue the New Technology APC payments for
HCPCS G-codes G0417, G0418, and G0419. Specifically, we are proposing
to reassign HCPCS code G0417 from APC 1506 to APC 1505 (New Technology-
Level V ($300-$400)), HCPCS code G0418 from APC 1511 to APC 1506 (New
Technology--Level VI ($400-$500)), and HCPCS G0419 code from APC 1513
to APC 1508 (New Technology--Level VIII ($600-$700)). We believe that
the proposed revised APC assignments would more appropriately reflect
the procedures described by these three HCPCS G-codes, based on
clinical and resource considerations. These procedures and their
proposed APC assignments are displayed in Table 19.

Table 19--Proposed Reassignment of Procedures Assigned to New Technology APCs for CY 2012
----------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY
CY 2011 HCPCS code CY 2011 short descriptor CY 2011 SI CY 2011 APC 2012 SI 2012 APC
----------------------------------------------------------------------------------------------------------------
G0417...................... Sat biopsy prostate 21-40...... S 1506 S 1505
G0418...................... Sat biopsy prostate 41-60...... S 1511 S 1506
G0419...................... Sat biopsy prostate: >60....... S 1513 S 1508
----------------------------------------------------------------------------------------------------------------

D. Proposed OPPS APC-Specific Policies

1. Revision/Removal of Neurostimulator Electrodes (APC 0687)
For CY 2011, we continued to assign CPT codes 63661 (Removal of
spinal neurostimulator electrode percutaneous array(s), including
fluoroscopy, when performed), 63662 (Removal of spinal neurostimulator
electrode plate/paddle(s) placed via laminotomy or laminectomy,
including fluoroscopy, when performed), 63663 (Revision, including
replacement, when performed, of spinal neurostimulator electrode
percutaneous array(s), including fluoroscopy, when performed), and
63664 (Revision, including replacement, when performed, of spinal
neurostimulator electrode plate/paddle(s) placed via laminotomy or
laminectomy, including fluoroscopy, when performed) to APC 0687
(Revision/Removal of Neurostimulator Electrodes), which had a CY 2011
final rule median cost of approximately $1,480. These codes were
created effective for services performed

[[Page 42234]]

on or after January 1, 2010, when the AMA CPT Editorial Board deleted
CPT code 63660 (Revision or removal of spinal neurostimulator electrode
percutaneous array(s) or plate/paddle(s)) and created new CPT codes
63661, 63662, 63663, and 63664 to differentiate between revision and
removal procedures, and to also differentiate between percutaneous
leads (arrays) and surgical leads (plates/paddles).
As discussed in the CY 2011 OPPS/ASC final rule with comment period
(75 FR 71913), we have received several comments objecting to the
placement of CPT codes 63663 and 63664 in APC 0687 because, the
commenter stated, these codes are used to report both revision and
replacement of neurostimulator electrodes. The commenters believed that
the use of hospital resources is substantially greater when
neurostimulator electrodes are being replaced rather than revised. We
responded to these comments by stating that we did not have CY 2009
claims data on the cost of these codes upon which to make an assessment
of whether there is a meaningful difference between the cost of
revising the electrodes or replacing them, and that we were not
convinced by the commenters stating that the use of the CPT codes for
these services and the assignment of the codes for revision/replacement
of neurostimulator electrodes to APC 0687 was inappropriate. We further
stated that the OPPS is a payment system of averages in which the
payment for a service is based on the estimated relative cost of the
service, including a range of supply and other input costs, as well as
other services in the same APC that are comparable in resource cost and
clinical homogeneity. We noted that we expect that hospital charges for
a service, which are derived from the cost of a service, can vary
across individual patients. Therefore, we expect variability in the
estimated cost of a service, across cases in a hospital and among
hospitals, to be reflected at some level in the final APC relative
payment weight. We indicated that we would examine estimated costs for
these CPT codes in the CY 2010 claims data that we would use to model
the CY 2012 proposed rule when these data became available.
At its February 28-March 1, 2011 meeting, the APC Panel recommended
that CMS provide more data on CPT codes 63663, 63664, and 64569
(Revision or replacement of cranial nerve (e.g., vagus nerve)
neurostimulator electrode array, including connection to existing pulse
generator) to determine whether they represent primarily device
replacements or device revisions. We are accepting this recommendation
and have examined the CY 2010 claims data available for this proposed
rule to compare the frequency of claims containing CPT codes 63663 or
63664 that were billed with HCPCS C1778 (Lead, neurostimulator
(implantable)) or C1897 (Lead, neurostimulator test kit (implantable))
to the frequency of claims with CPT codes 63663 or 63664 billed without
HCPCS codes C1778 and C1897, in order to determine whether they
represent primarily device replacements or device revisions. We found
that 61 percent of claims containing CPT codes 63663 or 63664 did not
contain HCPCS code C1778 or C1897, while 39 percent of claims with CPT
codes 63663 or 63664 did contain HCPCS code C1778 or C1897. Because the
majority of the claims did not contain HCPCS code C1778 or C1897, these
findings suggest that these CPT codes are used to describe mainly
device revision procedures, although there are a significant number of
cases of device replacement procedures in the claims data. We will
present the requested data for CPT code 64569 at a future meeting of
the APC Panel.
We also have completed an examination of the estimated costs for
CPT codes 63661, 63662, 63663, and 63664 now that claims data for these
CPT codes are available for the first time since they became effective
on January 1, 2010. Based on the partial year claims data available for
this proposed rule, the proposed median costs for CPT codes 63661 and
63662 are approximately $1,167 and $2,190, respectively. The claims
data show a median cost of approximately $4,316 for CPT code 63663 and
a median cost of approximately $4,883 for CPT code 63664, which
constitute a 2 times rule violation within APC 0687.
In order to resolve the 2 times rule violation in APC 0687, we are
proposing to move CPT codes 63663 and 63664 from APC 0687 to APC 0040
(Percutaneous Implantation of Neurostimulator Electrodes), which has a
CY 2012 proposed median cost of approximately $4,516 that is more
consistent with the median costs for CPT codes 63663 and 63664. We also
are proposing to change the title of APC 0040 to ``Level I
Implantation/Revision/Replacement of Neurostimulator Electrodes'' to
reflect that the APC would include revision and replacement procedures
beginning in CY 2012, and to change the title of APC 0061 from
``Laminectomy, Laparoscopy, or Incision for Implantation of
Neurostimulator Electrodes'' to ``Level II Implantation/Revision/
Replacement of Neurostimulator Electrodes'' to be consistent with the
APC 0040 title change. We believe that CPT codes 63661 and 63662
continue to be placed appropriately in APC 0687 because their CY 2012
proposed CPT median costs of approximately $1,167 and $2,190,
respectively, are consistent with the overall proposed APC 0687 median
cost of approximately $1,492 and because they describe only device
removal procedures.
2. Computed Tomography of Abdomen and Pelvis (APCs 0331 and 0334)
The AMA CPT Editorial Panel created three new codes for computed
tomography (CT) of abdominal and pelvis that were effective January 1,
2011: CPT code 74176 (Computed tomography, abdomen and pelvis; without
contrast material); CPT code 74177 (Computed tomography, abdomen and
pelvis; with contrast material(s)); and CPT code 74178 (Computed
tomography, abdomen and pelvis; without contrast material in one or
both body regions, followed by contrast material(s) and further
sections in one or both body regions). As with all new CPT codes for CY
2011, these new codes were announced through the publication of the CY
2011 CPT in November 2010, effective on January 1, 2011.
In accordance with our longstanding policy, we made an interim APC
assignment for each new code for CY 2011 based on our understanding of
the resources required to furnish the service as the service was
defined in the new code (75 FR 71898). Specifically, for CY 2011, we
assigned new CPT code 74176 to APC 0332 (Computed Tomography Without
Contrast), which has a CY 2011 payment rate of approximately $194; we
assigned CPT code 74177 to APC 0283 (Computed Tomography With
Contrast), which has a CY 2011 payment rate of $300; and we assigned
CPT code 74178 to CPT code 0333 (Computed Tomography Without Contrast
Followed by With Contrast), which has a CY 2011 payment rate of $334.
For CY 2011, we also made these codes eligible for composite payment
under the multiple imaging composite APC methodology when they are
furnished with other CT procedures to the same patient on the same day.
As is our standard practice each year, our clinicians review each
of the many CPT code changes that will be effective in the forthcoming
year and make a decision regarding status indicator and/or APC
assignment based on their understanding of the nature of the services
furnished. We are unable to

[[Page 42235]]

include a proposed status indicator and/or APC assignment in the
proposed rule for codes that are not announced by the AMA CPT Editorial
Board prior to the proposed rule. Therefore, in accordance with our
longstanding policy, we include, in the final rule with comment period,
an interim status indicator and/or APC assignment for all new CPT codes
that are announced by the AMA CPT Editorial Board subsequent to the
OPPS/ASC proposed rule to enable payment to be made for new services as
soon as the code is effective. In accordance with our longstanding
practice, we identified the new codes for abdominal/pelvis CT for CY
2011 in Addendum B of the CY 2011 OPPS/ASC final rule with comment
period as having new interim APC assignments by showing a comment
indicator of ``NI,'' and we provided a public comment period. As we do
with all new CPT codes, we will respond to the public comments in the
OPPS/ASC final rule with comment period for CY 2012. This longstanding
process enables us to pay for new services as soon as the new CPT codes
for them go into effect, despite the fact that they first become
publicly available at the same time the final rule with comment period
for the upcoming year is made public.
At its February 28-March 1, 2011 meeting, the APC Panel heard
public presentations on this issue and recommended that CMS provide
more data on the new CPT codes for combined abdomen and pelvis CT as
soon as these data are available. We are accepting this recommendation,
and we will provide claims data as soon as the data are available. We
note that because these codes were effective January 1, 2011, the first
available claims data for these codes will be the APC Panel claims data
for the CY 2013 OPPS rulemaking. These data will be for dates of
service January 1, 2011 through and including September 30, 2011, as
processed through the Common Working File on or before September 30,
2011.
In general, stakeholders who provided comments on the interim
assignment of these codes for CY 2011 stated that the most appropriate
approach to establishing payment for these new codes is to assign these
procedures to APCs that recognize that each of the new codes reflects
the reporting under a single code of two services that were previously
reported under two separate codes and that, therefore, payments would
be more accurate and better reflective of the relative cost of the
services under the OPPS if we were to establish payment rates for the
codes for CY 2012 using claim data that reflect the combined cost of
the two predecessor codes. They noted that when these services were
reported in CY 2010 using two CPT codes, rather than a single code, the
services that are being reported under CPT code 74176 were assigned to
imaging composite APC 8005 (CT and CTA without Contrast) for which the
CY 2010 payment was $419.45. Similarly, the services being reported
under CPT code 74177 or CPT code 74178 were assigned to composite APC
8006 (CT and CTA with Contrast) for which the CY 2010 payment was
$628.49. They indicated that they believed that simulating the median
cost for CPT codes 74176, 74177, and 74178 using historic claims data
from the predecessor codes in a manner similar to that used to create
the composite APC medians would result in the best estimates of costs
for these codes and, therefore, the most accurate payment rate for
these codes.
After considering the presentations at the APC Panel meeting, the
views of stakeholders who met with us to discuss this issue, and the
comments in response to the CY 2011 final rule with public comment
period, and after examining our claims data for the predecessor codes,
we believe that establishment of payment rates for these services based
on historic claims data for the combinations of predecessor codes that
are now reported by CPT codes 74176, 74177, and 74178 would result in a
more accurate and appropriate payment for these services for CY 2012
because it would take into account the full cost of both services that
are now reported by a single CPT code. We believe that the best way to
secure the most appropriate payments for CY 2012 is to use the claims
data from the predecessor codes under which the new codes were reported
for CY 2010 to simulate median costs for the new codes and to create
APCs that are appropriate to the services. To do so should reflect both
the full cost of the service as reported by the new code and should
also reflect the efficiencies of reporting the service represented by
the single new code. Therefore, we are proposing to establish two APCs
to which we would propose to assign the combined abdominal and pelvis
CT services. Specifically, we are proposing to create new APC 0331
(Combined Abdominal and Pelvis CT Without Contrast), to which we are
proposing to assign CPT code 74176 and for which we are proposing to
base the CY 2012 OPPS payment rate on a median cost of approximately
$417. We also are proposing to create new APC 0334 (Combined Abdominal
and Pelvis CT With Contrast), to which we are proposing to assign CPT
codes 74177 and 74178 for the CY 2012 OPPS and for which we are
proposing to base the CY 2012 OPPS payment rate on a median cost of
approximately $592. We are proposing to create two new APCs to which to
assign these codes, rather than one, because CPT code 74176 is
furnished without contrast, while CPT codes 74177 and 74178 are
furnished with contrast. Section 1833(t)(2)(G) of the Act requires that
services with contrast may not be assigned to APCs that contain
services without contrast, and therefore, we could not assign CPT code
74176, which does not require contrast, to the same APC as CPT codes
74177 and 74178, which require contrast.
We are proposing to create new APC 0331 to which we would assign
CPT code 74176 and to create new APC 0334 to which we would assign CPT
codes 74177 and 74178 because the proposed methodology for simulating
the median costs for CPT codes 74176, 74177, and 74178, which uses
claims data for the predecessor codes is unique to these CPT codes.
Therefore, we believe that it is appropriate to create APCs comprised
only of services for which we calculated medians using claims data for
the predecessor codes. To the extent this policy is finalized, we would
reassess whether it continues to be appropriate to pay these codes
under APCs 0331 and 0334 once the median costs for the proposed CY 2013
OPPS are calculated using our standard methodology, based on hospitals'
CY 2011 charges for CPT codes 74176, 74177, and 74178.
To calculate the median costs for proposed APCs 0331 and 0334 for
CY 2012, we selected claims that contained one unit of both of the
predecessor CPT codes that appear in the CY 2011 CPT for CPT codes
74676, 74677, and 74678. The predecessor codes are limited to the codes
in Table 20 below.

Table 20--CPT Codes That Were Combined To Create New Abdominal and
Pelvis CPT Codes for CY 2011
------------------------------------------------------------------------
CPT Code Descriptor
------------------------------------------------------------------------
72192......................... Computed tomography, pelvis; without
contrast material.
72193......................... Computed tomography, pelvis; with
contrast material(s).
72194......................... Computed tomography, pelvis; without
contrast material, followed by contrast
material(s) and further sections.
74150......................... Computed tomography, abdomen; without
contrast material.

[[Page 42236]]

74160......................... Computed tomography, abdomen; with
contrast material(s).
74170......................... Computed tomography, abdomen; without
contrast material, followed by contrast
material(s) and further sections.
------------------------------------------------------------------------

For purposes of selecting claims to be used to calculate simulated
median costs, we selected only claims that contained one (and only one)
unit of each of the predecessor codes in the allowed combinations
identified in Table 21 below. We used only claims that contained one
and only one unit of each of the code combinations because we believe
that it represents the best simulation of the definition of the new
codes. Where more than one unit of either or both codes were reported,
the claim would be paid under an imaging composite APC, not under APC
0331 or 0334. For median calculation, claims that contained more than
one unit of either or both codes were assigned to the applicable
imaging composite APC. We refer readers to section II.A.2.e.5 of this
proposed rule for discussion of the imaging composite APCs.

Table 21--Combinations of Predecessor CPT Codes Used To Simulate Median Costs for the Combined Abdominal and
Pelvis CT Codes That Are New for CY 2011
----------------------------------------------------------------------------------------------------------------
Predecessor CT
abdomen Predecessor CT Predecessor CT Predecessor CT
Combined abdominal and pelvis CT code without pelvis without abdomen with pelvis with
contrast contrast contrast contrast
----------------------------------------------------------------------------------------------------------------
74176........................................... 74150 72192 .............. ..............
74177........................................... .............. .............. 74160 72193
74178........................................... 74150 .............. .............. 72193
74178........................................... 74150 .............. .............. 72194
74178........................................... .............. 72192 74160 ..............
74178........................................... .............. .............. 74160 72194
74178........................................... .............. 72192 74170 ..............
74178........................................... .............. .............. 74170 72193
74178........................................... .............. .............. 74170 72194
----------------------------------------------------------------------------------------------------------------

After we selected the claims that contained one and only one unit
of each code in each combination, we deleted claims that contained
other separately paid HCPCS codes if those codes did not appear on the
bypass list (we refer readers to section II.A.1.b. of this proposed
rule and to Addendum N, which is referenced in section XVII. of this
proposed rule and available via the Internet on the CMS Web site). We
bypassed the costs for codes that appeared on the bypass list to create
simulated single procedure claims for CPT codes 74178, 74177, and
74178. Using the remaining simulated single procedure claims for the
combined abdominal and pelvis CT services, we applied our standard
trimming, packaging, and wage standardization methodology to calculate
the median cost for each combined abdominal and pelvis CT code for the
two proposed APCs. We refer readers to section II.A.2.c. of this
proposed rule for discussion of our standard trimming, packaging, and
wage standardization methodology.
We found that using this proposed methodology resulted in a
simulated median cost for CPT code 74176 of approximately $417, and
that, because we are proposing that CPT code 74176 would be the only
HCPCS code assigned to APC 0331, the simulated median cost for APC 0331
also would be approximately $417. We found that using this proposed
methodology, the simulated median cost for CPT code 74177 was
approximately $570 and the simulated median cost for CPT code 74178 was
approximately $638, and that the simulated median cost for proposed APC
0334 was approximately $592. We are proposing to use this simulation
methodology to establish proposed median costs for proposed APCs 0331
and 0334 for the CY 2012 OPPS.
We also are proposing that, in cases where CPT code 74176 is
reported with CT codes that describe CT services for other regions of
the body other than the abdomen and pelvis in which contrast is not
used, it would be assigned to imaging composite APC 8005 (CT and CTA
Without Contrast), for which we are proposing a median cost of
approximately $445 for the CY 2012 OPPS. In cases where CPT code 74177
or 74178 is reported with CT codes that describe CT services for
regions of the body other than abdomen and pelvis in which contrast is
used, we are proposing that the code would be assigned to APC 8006 (CT
and CTA With Contrast), for which we are proposing a median cost of
approximately $744 for the CY 2012 OPPS. We are proposing to assign CPT
codes 74176 to imaging composite APC 8005 and to assign CPT codes 74177
and 74178 to imaging composite APC 8006 because the predecessor codes
for CPT codes 74176, 74177 and 74178 (identified in Table 20), continue
to be reported when either abdominal CT or pelvis CT (but not both) is
furnished, and we are proposing to continue to assign them to imaging
composite APCs 8005 and 8006. We believe that it would be inconsistent
with our proposed imaging composite policy if we did not propose to
assign CPT codes 74176, 74177, and 74178 to the applicable imaging
composite APC for CY 2012. We refer readers to section II.A.2.e.(5) of
this proposed rule for the discussion of the calculation of our
proposed median costs for APCs 8005 and 8006 for CY 2012.
In summary, we are proposing to establish new APCs 0331 and 0334 to
which we would assign the abdominal and pelvis CT codes that were
created by the AMA CPT Editorial Panel for CY 2011 and to use the
simulation methodology we describe above to establish simulated median
costs on which we would base the CY 2012 payment rates because we
believe that to do so would result in relative payment weights for
these new services that will more accurately reflect the resources
required to furnish these services as defined by CPT than would be true
of continued assignment of the codes to the single service APCs to
which we made interim assignments for

[[Page 42237]]

CY 2011. We note that claims and cost data for these services will be
available for the CY 2013 OPPS rulemaking, and we will reassess the
payment policy for these codes based on the cost data that are used to
establish the CY 2013 OPPS median cost and payment rates.
3. Placement of Amniotic Membrane (APCs 0233 and 0244)
For the CY 2011 update, the AMA CPT Editorial Panel revised the
long descriptor for CPT code 65780 (Ocular surface reconstruction;
amniotic membrane transplantation, multiple layers) to include the
words ``multiple layers'' to further clarify the code descriptor. In
addition, the AMA CPT Editorial Panel created two new CPT codes that
describe the placement of amniotic membrane on the ocular surface
without reconstruction; one describing the placement of a self-
retaining (non-sutured/non-glued) device on the surface of the eye, and
the other describing a single layer of amniotic membrane sutured to the
surface of the eye. Specifically, the AMA CPT Editorial Panel created
CPT codes 65778 (Placement of amniotic membrane on the ocular surface
for wound healing; self-retaining) and 65779 (Placement of amniotic
membrane on the ocular surface for wound healing; single layer,
sutured), effective January 1, 2011.
As has been our practice since the implementation of the OPPS in
2000, we carefully review all new procedures before assigning them to
an APC. In determining the APC assignments for CPT codes 65778 and
65779, we took into consideration the clinical and resource
characteristics involved with placement of amniotic membrane products
on the eye for wound healing via a self-retaining device and a sutured,
single-layer technique. In the CY 2011 OPPS/ASC final rule with comment
period (75 FR 72402), we assigned CPT code 65780 to APC 0244 (Corneal
and Amniotic Membrane Transplant) with a CY 2011 payment rate of
approximately $2,681. We assigned CPT code 65778 to APC 0239 (Level II
Repair and Plastic Eye Procedures) with a payment rate of approximately
$559, and CPT code 65779 to APC 0255 (Level II Anterior Segment Eye
Procedures) with a payment rate of approximately $519. In addition, we
assigned both CPT codes 65778 and 65779 to comment indicator ``NI'' in
Addendum B of the CY 2011 OPPS/ASC final rule with comment period to
indicate that both codes were new codes for CY 2011 with an interim APC
assignment subject to public comment. We will address any public
comments on issues regarding these new codes in the CY 2012 OPPS/ASC
final rule with comment period.
At the APC Panel at the February 28-March 1, 2011 meeting, a
presenter requested the reassignment of both new CPT codes 65778 and
65779 to APC 0244, which is the same APC to which CPT code 65780 is
assigned. The presenter indicated that prior to CY 2011, the procedures
described by CPT codes 65578 and 65779 were previously reported under
the original version of CPT code 65780, which did not specify
``multiple layers,'' and as such these new codes should continue to be
assigned to APC 0244. Further, the presenter stated that the costs of
the new procedures described by CPT codes 65778 and 65779 are very
similar to the procedure described by CPT code 65780.
The APC Panel recommended that CMS reassign both CPT codes 65778
and 65779 to APC 0233 (Level III Anterior Segment Eye Procedures),
citing clinical similarity to procedures already in APC 0233. Based on
clinical as well as resource similarity to the other procedures
currently assigned to APC 0233, we are proposing to accept the APC
Panel's recommendations to reassign CPT code 65778 from APC 0239 to APC
0233 and to reassign CPT code 65779 from APC 0255 to APC 0233. However,
based upon our further review and analysis of the clinical
characteristics of the procedure described by CPT code 65778, we also
are proposing to conditionally package CPT code 65778. The service
described by CPT code 65778 would rarely be provided as a separate,
stand-alone service in the HOPD; it would almost exclusively be
provided in addition to another procedure or service. Our medical
advisors indicate that the procedure described by CPT code 65778 is not
significantly different than placing a bandage contact lens on the
surface of the eye to cover a corneal epithelial defect. CPT code 65778
describes the simple placement of a special type of bandage (a self-
retaining amniotic membrane device) on the surface of the eye, which
would most commonly be used in the HOPD to cover the surface of the eye
after a procedure that results in a corneal epithelial defect. Given
the characteristics of this procedure and its likely use in the HOPD,
we are proposing to conditionally package CPT code 65778 for CY 2012
and reassign its status indicator from ``T'' to ``Q2'' to indicate that
the procedure is packaged when it is billed on the same date with
another procedure or service that is also assigned to status indicator
``T.'' Otherwise, separate payment would be made for the procedure.
In summary, for CY 2012, we are proposing to reassign CPT code
65778 from APC 0239 to APC 0233 with a conditionally packaged status,
to reassign CPT code 65779 from APC 0255 to APC 0233, which has a
proposed median cost of approximately $1,214, and to continue to assign
CPT code 65780 to APC 0244, which has a proposed median cost of
approximately $2,767.
As has been our practice since the implementation of the OPPS, we
annually review all the items and services within an APC group to
determine, with respect to comparability of the use of resources, for
any 2 times violations. In making this determination, we review our
claims data and determine whether we need to make changes to the
current APC assignments for the following year. Because CPT codes 65778
and 65779 are new for CY 2011, and we have no claims data for the CY
2012 update, we will again reevaluate the status indicator and APC
assignments for CPT codes 65778, 65779, and 65780 in CY 2012 for the CY
2013 OPPS rulemaking cycle. The amniotic membrane procedures and their
CY 2012 proposed APC assignments are displayed in Table 22 below.

Table 22--Proposed APC Assignment for the Amniotic Membrane Procedures for CY 2012
----------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY
CY 2011 HCPCS code CY 2011 short descriptor CY 2011 SI CY 2011 APC 2012 SI 2012 APC
----------------------------------------------------------------------------------------------------------------
65778....................... Cover eye w/membrane.......... T 0239 Q2 0233
65779....................... Cover eye w/membrane suture... T 0255 T 0233
65780....................... Ocular reconst transplant..... T 0244 T 0244
----------------------------------------------------------------------------------------------------------------

[[Page 42238]]

4. Upper Gastrointestinal Services (APCs 0141, 0419, and 0422)
For CY 2011, there are two upper gastrointestinal (GI) procedure
APCs, APC 0141 (Level I Upper GI Procedures), which has a CY 2011
national unadjusted payment rate of $611.73, and APC 0422 (Level II
Upper GI Procedures), which has a CY 2011 national unadjusted payment
rate of $1,148.75. In the CY 2011 OPPS/ASC proposed rule, we proposed
to reconfigure APCs 0141 (Level I Upper GI Procedures) and APC 0442
(Level II Upper GI Procedures) by moving several CPT codes from APC
0141 to APC 0422. We received public comments on the proposed rule
objecting to our proposal on the basis that the reconfiguration would
reduce the median cost and, therefore, the payment for services to
which APC 0422 was assigned and would not maintain the clinical
homogeneity of these services. Instead commenters, including the
applicable medical specialty societies, asked that we reconfigure APCs
0141 and 0422 to create three APCs by adding a new APC for upper GI
procedures. They also recommended a HCPCS configuration that they
believed would provide payment rates that would more accurately reflect
the median costs of the services in APCs 0141 and 0422. We finalized
our proposed changes to APCs 0141 and 0422 for CY 2011 without
establishing a third APC for upper GI procedures for the reasons
discussed in the CY 2011 OPPS/ASC final rule with public comment period
(75 FR 71907).
However, when we developed the median costs for APCs 0141 and 0422
using CY 2010 claims data for discussion at the APC Panel meeting of
February 28-March 1, 2011, we observed that there was a 2 times
violation for APC 0141 that had not existed for CY 2010 OPPS. For the
APC Panel meeting, we simulated the HCPCS and APC median costs that
would result from the reconfiguration that was recommended by the
stakeholders in their comments on the CY 2011 OPPS/ASC final rule with
comment period, and we discussed the results with the APC Panel. The
APC Panel recommended that CMS create an intermediate level upper GI
procedures APC (APC Panel Recommendation 13). The APC Panel
recommendations and report may be found at the APC Panel Web site,
located at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
For the reasons we discuss below, we are accepting the APC Panel
recommendation to propose to establish three levels of upper GI
procedure APCs and to propose to adopt the reconfiguration recommended
by stakeholders because we believe that the proposed reconfiguration
will provide payments that are more closely aligned with the median
costs of the services. Creating an intermediate APC for upper GI
procedures provides APC median costs that are more closely aligned with
the median costs for the many CPT codes for upper GI procedures, and
therefore, the APC median costs better reflect the resources required
to provide these services as defined by the CPT codes for them.
Moreover, the proposed reconfiguration resolves the 2 times rule
violation that would result in APC 0141 if we were to apply the CY 2011
APC configuration to the CY 2012 proposed rule data. Therefore, we
believe that we would need to propose to reassign HCPCS codes
regardless of whether we created the intermediate APC for CY 2012. We
believe that the proposed reconfiguration to create the intermediate
APC is the most appropriate means of avoiding a 2 times violation that
would otherwise exist for CY 2012 and that the resulting median costs
will provide payments that are more reflective of the relative costs of
the services being furnished.
Therefore, for CY 2012, we are proposing to create new APC 0419
(Level II Upper GI Procedures), as recommended by the stakeholders, and
we are proposing to reassign HCPCS codes previously assigned to APCs
0141 and 0422 to the three APC configuration. Table 23 below contains
the proposed HCPCS reassignments for CY 2012 using the proposed three
APC reconfiguration. We believe that this proposed reconfiguration
classifies upper GI CPT codes in groups that demonstrate the best
clinical and resource homogeneity. For APC 0141, we calculated a
proposed rule median cost for CY 2012 of approximately $603. For
proposed new APC 0419, we calculated a proposed rule median cost of
approximately $904. For APC 0422, we calculated a proposed rule median
cost of approximately $1,833.

Table 23--Proposed Reconfiguration of Upper GI Procedure Codes for CY 2012
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent
APC HCPCS SI Description Median Single bill single Total
frequency bills frequency
--------------------------------------------------------------------------------------------------------------------------------------------------------
0141............................... ........... ........................... Level I Upper GI $602.59 ........... ........... ...........
Procedures.
43831 T Place gastrostomy 0.00 0 ........... 0
tube.
43510 T Surgical opening of 186.33 1 ........... 1
stomach.
43999 T Stomach surgery 238.68 1,732 ........... 2,128
procedure.
43204 T Esoph scope w/ 361.50 2 ........... 6
sclerosis inj.
43761 T Reposition 496.12 361 ........... 602
gastrostomy tube.
43235 T Uppr gi endoscopy 538.38 70,885 20 124,837
diagnosis.
43200 T Esophagus endoscopy.. 592.17 1,016 ........... 5,513
43239 T Upper gi endoscopy 618.39 260,422 73 516,015
biopsy.
43202 T Esophagus endoscopy 619.63 461 ........... 1,244
biopsy.
43248 T Uppr gi endoscopy/ 621.09 16,548 5 37,741
guide wire.
43234 T Upper gi endoscopy 644.39 510 ........... 872
exam.
43247 T Operative upper GI 656.88 5,028 1 16,489
endoscopy.
43236 T Uppr gi scope w/ 660.41 3,369 1 8,141
submuc inj.
43600 T Biopsy of stomach.... 666.46 5 ........... 14
43243 T Upper gi endoscopy & 748.56 161 ........... 326
inject.
43241 T Upper GI endoscopy 782.08 164 ........... 462
with tube.
43499 T Esophagus surgery 2,158.45 528 ........... 1,375
procedure.
0419............................... ........... ........................... Level II Upper GI 903.97 ........... ........... ...........
Procedures.
91111 T Esophageal capsule 730.21 69 ........... 79
endoscopy.
43250 T Upper GI endoscopy/ 730.67 949 1 3,083
tumor.
43201 T Esoph scope w/ 760.79 99 ........... 256
submucous inj.
43251 T Operative upper GI 793.29 2,976 3 10,936
endoscopy.
43237 T Endoscopic us exam 796.01 369 ........... 696
esoph.

[[Page 42239]]

43259 T Endoscopic ultrasound 811.70 13,234 15 21,312
exam.
43246 T Place gastrostomy 814.37 15,205 17 20,923
tube.
43231 T Esoph endoscopy w/us 822.22 346 ........... 455
exam.
43244 T Upper GI endoscopy/ 875.56 5,100 6 6,916
ligation.
43215 T Esophagus endoscopy.. 881.45 220 ........... 858
43255 T Operative upper GI 882.09 3,810 4 7,517
endoscopy.
43458 T Dilate esophagus..... 890.28 145 ........... 1,305
43217 T Esophagus endoscopy.. 890.36 24 ........... 104
49446 T Change g-tube to g-j 891.78 389 ........... 681
perc.
43205 T Esophagus endoscopy/ 894.22 121 ........... 142
ligation.
43249 T Esoph endoscopy 897.83 19,351 22 50,173
dilation.
49440 T Place gastrostomy 899.69 1,770 2 2,823
tube perc.
43245 T Uppr gi scope dilate 919.77 2,489 3 5,401
strictr.
43226 T Esoph endoscopy 925.45 741 1 1,138
dilation.
43240 T Esoph endoscope w/ 953.86 32 ........... 85
drain cyst.
49441 T Place duod/jej tube 976.70 136 ........... 232
perc.
43220 T Esoph endoscopy 1,011.56 593 1 908
dilation.
43232 T Esoph endoscopy w/us 1,017.09 351 ........... 425
fn bx.
44100 T Biopsy of bowel...... 1,028.66 5 ........... 22
43238 T Uppr gi endoscopy w/ 1,115.06 383 ........... 539
us fn bx.
43242 T Uppr gi endoscopy w/ 1,125.47 12,260 14 16,443
us fn bx.
43258 T Operative upper GI 1,138.38 5,654 6 10,278
endoscopy.
43227 T Esoph endoscopy 1,405.46 25 ........... 39
repair.
43830 T Place gastrostomy 1,721.16 150 ........... 288
tube.
0422............................... ........... ........................... Level III Upper GI 1,833.15 ........... ........... ...........
Procedures.
43216 T Esophagus endoscopy/ 1,416.11 12 ........... 31
lesion.
43870 T Repair stomach 1,651.04 95 4 153
opening.
43257 T Uppr gi scope w/thrml 1,724.95 46 2 62
txmnt.
43228 T Esoph endoscopy 1,829.56 2,518 93 3,022
ablation.
C9724 T EPS gast cardia plic. 5,957.92 38 1 69
--------------------------------------------------------------------------------------------------------------------------------------------------------

5. Pulmonary Rehabilitation (APC 0102)
Section 144(a)(1) of Public Law 110-275 (MIPPA) added section
1861(fff) to the Act to provide Medicare Part B coverage and payment
for a comprehensive program of pulmonary rehabilitation services
furnished to beneficiaries with chronic obstructive pulmonary disease,
effective January 1, 2010. Accordingly, in the CY 2010 OPPS/ASC final
rule with comment period, we established a policy to pay for pulmonary
rehabilitation services furnished as a part of the comprehensive
pulmonary rehabilitation program benefit (74 FR 60567). There was and
continues to be no single CPT code that fully and accurately describes
the comprehensive pulmonary rehabilitation benefit provided in section
1861(fff) of the Act. Moreover, there were no alphanumeric HCPCS codes
that described the comprehensive pulmonary rehabilitation benefit in
effect for CY 2008 (on which the CY 2010 OPPS was based) or CY 2009 (on
which the CY 2011 OPPS was based). Therefore, for CY 2010, we created
new HCPCS code G0424 (Pulmonary rehabilitation, including exercise
(includes monitoring), one hour, per session, up to two sessions per
day) and assigned the code to APC 0102 (Level II Pulmonary Treatment),
which we also created for CY 2010 OPPS. Because none of the pulmonary
treatment codes for which there were charges for CY 2008 or CY 2009
accurately described the comprehensive pulmonary rehabilitation service
for which MIPPA provided coverage, we did not assume that the charge
reported on any one of the previously existing HCPCS codes under which
pulmonary treatments were reported would represent the full charge for
the comprehensive pulmonary rehabilitation service.
Instead, for the CY 2010 OPPS, which was based on claims for
services in CY 2008, we calculated a median ``per session'' cost that
we simulated from historical hospital claims data for pulmonary therapy
services that were billed in combination with one another, much like we
create composite APC median costs by summing the costs of multiple
procedures that are typically provided on the same date. Our
methodology for calculating the ``per session'' median cost that we
used as the basis for the CY 2010 OPPS payment rate for HCPCS code
G0424 and APC 0102 is discussed in detail in the CY 2010 OPPS final
rule with comment period (74 FR 60567 through 60570).
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
(Therapeutic procedures to improve respiratory function or increase
strength or endurance of respiratory muscles, two or more individuals
(includes monitoring), the group code that is without limitation on
time duration, and one unit of HCPCS code G0237 (Therapeutic procedures
to increase strength or endurance of respiratory muscles, one on one,
face to face, per 15 minutes (includes monitoring) or HCPCS code 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), the individual, face-to-face
codes that report 15 minutes of service, on the same date of service.
We reasoned that patients in a pulmonary rehabilitation program would
typically receive individual and group services in each session of
approximately 1 hour in duration. This was consistent with public
comments that suggested that pulmonary rehabilitation is often provided
in group sessions in the HOPD, although patients commonly require
additional one-on-one care in order to fully participate in

[[Page 42240]]

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 pulmonary rehabilitation would be 1 hour based on public
comments that indicated that a session of pulmonary rehabilitation 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 (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), 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 pulmonary rehabilitation 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 believed that the
simulated median cost for HCPCS code G0424, constructed to include the
costs of these services where furnished, was our best estimate of the
expected hospital cost of a pulmonary rehabilitation session, given
that we did not have hospital charges for the comprehensive pulmonary
rehabilitation service provided by MIPPA for which we created HCPCS
code G0424.
We used the resulting simulated median ``per session'' cost of
approximately $50 as the basis for the payment for pulmonary
rehabilitation service for CY 2010, the first year in which the
comprehensive pulmonary rehabilitation benefit was covered. For CY
2011, which was based on claims for services furnished in CY 2009, we
continued to assign HCPCS code G0424 to APC 0102 and to apply the
simulation methodology that we used in CY 2010 to claims for services
in CY 2009 to calculate a median ``per session'' cost simulated from
historical hospital claims data for similar pulmonary therapy services
for the CY 2011 OPPS. The CY 2011 OPPS final rule median cost of
approximately $62 resulted in a national unadjusted payment rate for CY
2011 of approximately $63.
For the CY 2012 OPPS, however, we have a very robust set of claims
for HCPCS code G0424 on which hospitals reported the charges for the
comprehensive pulmonary rehabilitation service for which MIPPA provided
the pulmonary rehabilitation benefit beginning on January 1, 2010.
Specifically, the CY 2012 OPPS proposed rule data, based on CY 2010
claims, contained a total frequency of 393,056 lines of HCPCS code
G0424, of which we were able to use 391,901 single procedure bills or
almost 100 percent of the claims submitted for HCPCS code G0424. This
is an extremely robust volume of single procedure bills containing
charges for HCPCS code G0424 on which to base a median cost. In
general, we have found that higher volumes of single bills both in
absolute numbers and as a percentage of total frequency provide very
stable estimates of hospital costs.
Therefore, we are proposing that the payment rate for HCPCS code
G0424 and, therefore, for APC 102, would be based on the median cost
for the service as derived from claims for services furnished in CY
2010 and the most current available cost report information, using our
longstanding process for estimating the median cost of a service
described by a HCPCS code. We refer readers to section II. of this
proposed rule for a description of our longstanding standard process
for calculating the median costs on which the OPPS payment rates are
based. Using our standard median calculation process for HCPCS code
G0424 results in a proposed median cost of approximately $38 for HCPCS
code G0424 and, therefore, for APC 0102. Given that the volume of
claims in the CY 2012 OPPS proposed rule data is so robust for HCPCS
code G0424, we believe that the proposed median cost we calculated for
HCPCS code G0424 is a valid reflection of the relative cost of the
comprehensive pulmonary rehabilitation service described by HCPCS code
G0424 and that the proposed median cost for HCPCS code G0424 is an
appropriate basis on which to establish the proposed national
unadjusted payment rate for APC 0102.
We recognize that there is a significant difference between our
simulated median cost for CY 2011 and the CY 2012 proposed rule median
cost of approximately $38 that is derived from application of our
standard median calculation process to hospital claims data for CY
2010. We believe that this difference arises because the median
simulation methodology we used for CY 2010 and CY 2011 selected claims
that contained multiple procedures and packaged the costs of numerous
services into the ``per session'' cost for the simulated code where
numerous services appeared on the same date of service. Our simulation
methodology assumed that hospitals would include the charges for these
additional services in their CY 2010 charges for HCPCS code G0424
because the services are included in the definition of comprehensive
pulmonary rehabilitation.
In response to the CY 2012 OPPS proposed median of approximately
$38 for HCPCS code G0424, we looked at our claims data in more depth.
We found that 1,048 hospitals, approximately 25 percent of hospitals
paid under the OPPS, reported HCPCS code G0424 and that the median line
item median cost (exclusive of packaging) was approximately $38,
virtually no different from the median cost per unit that we derived
from the single bills. We also examined the charges that were submitted
for HCPCS code G0424 in CY 2010 and the CCRs that were applied to the
charges for HCPCS code G0424 to calculate the estimated median cost for
the code for this CY 2012 proposed rule. We also looked at the revenue
codes under which charges for HCPCS code G0424 were reported and the
percentage of cost that was associated with packaged costs, such as
oxygen, drugs, and medical supplies. We found that the median line item
charge for HCPCS code G0424 in the CY 2012 proposed rule data was
approximately $150 and that the median CCR was 0.29. We also found that
the most frequently reported revenue code for HCPCS code G0424 was
revenue code 410 (Respiratory therapy), approximately 108,000 single
bills, and with revenue code 948 (Pulmonary Rehabilitation),
approximately 81,000 single bills, being the second most commonly
reported revenue code for HCPCS code G0424. We found that only

[[Page 42241]]

0.02 percent of the cost of HCPCS code G0424 was packaged cost (for
example, oxygen, drugs, and supplies). In general, our detailed
examination of total and line item charges for pulmonary
rehabilitation, the CCRs used to reduce the charges to estimated costs
on the single bills, the revenue codes reported, and the absence of
packaging on the single bills supports the proposed median cost of $38
per unit as a valid estimate of the relative cost of one unit of HCPCS
code G0424.
In summary, our examination of the claims and cost data for HCPCS
code G0424 causes us to believe that the proposed median cost that we
calculated from claims data for HCPCS code G0424 was calculated
correctly according to our longstanding standard median cost
calculation methodology. Therefore, we are proposing to base the CY
2012 OPPS payment rate for HCPCS code G0424 and APC 0102 on the median
cost that we derive from applying our standard median calculation
methodology to the CY 2010 charges and cost data for HCPCS code G0424.
6. Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing
Electrodes (APC 0108)
For CY 2011, only HCPCS code 33249 (Insertion or repositioning of
electrode lead(s) for single or dual chamber pacing cardioverter-
defibrillator and insertion of pulse generator) is assigned to APC 0108
(Insertion/Replacement/Repair of Cardioverter Defibrillator Leads).
HCPCS code 33249, and therefore APC 0108, has a CY 2011 OPPS median
cost of $26,543.91 on which the CY 2011 national unadjusted payment
rate is based. For CY 2011, there are two HCPCS codes assigned to APC
0418: CPT code 33225 (Insertion of pacing electrode, cardiac venous
system, for left ventricular pacing, at time of insertion of pacing
cardioverter-defibrillator or pacemaker pulse generator (including
upgrade to dual chamber system) (List separately in addition to code
for primary procedure)), and CPT code 33224 (Insertion of pacing
electrode, cardiac venous system, for left ventricular pacing, with
attachment to previously placed pacemaker or pacing cardioverter-
defibrillator pulse generator (including revision of pocket, removal,
insertion, and/or replacement of generator)). APC 0418 is titled
``Insertion of left ventricular pacing electrode'' for CY 2011. APC
0418 has a CY 2011 median cost of $10,516.97 on which the CY 2011
payment rate for HCPCS codes 33225 and 33224 are based. Both APCs 0108
and 0418 are device-dependent APCs for which the criteria and process
used for calculating the median costs are discussed in section
II.A.2.d.1. of this proposed rule.
In the CY 2010 claims data used for this CY 2012 proposed rule,
HCPCS code 33249 has a median cost of approximately $27,020 based on
6,139 single bills; HCPCS code 33225 has a median cost of approximately
$34,018 based on 458 single bills, and HCPCS code 33224 has a median
cost of approximately $12,418 based on 201 single bills. We are
proposing to retain HCPCS code 33249 in APC 0108 but to reassign HCPCS
code 33225 to APC 0108 on the basis that these codes are similar in
clinical characteristics and median cost. We are proposing to revise
the title of APC 0108 to read ``Insertion/Replacement/Repair of AICD
Leads, Generator, and Pacing Electrodes'' for CY 2012. Under our
standard methodology, using CY 2010 claims data, we calculated a median
cost of approximately $27,361 for APC 0108.
We also are proposing to assign HCPCS code 33224 to APC 0655
because it is similar in clinical characteristics and median costs to
the other services in APC 0655, and to revise the title of APC 0655 to
read ``Insertion/Replacement/Conversion of a Permanent Dual Chamber
Pacemaker or Pacing Electrode.'' We are proposing a CY 2012 OPPS median
cost for APC 0655 of approximately $9,785 upon which we are proposing
to base the CY 2012 OPPS payment rate. We are proposing the changes to
the titles of APCs 0108 and 0655 to better describe the proposed
content of the APCs. Because the reassignment of HCPCS code 33225 to
APC 0108 and HCPCS 33244 to APC 0655 would result in APC 0418
containing no HCPCS codes, we are proposing to delete APC 0418.
As we discuss in detail in section III.D. of this proposed rule, we
are proposing that HCPCS codes 33249 and 33225 would be paid under APC
0108 only if they are not reported on the same date of service. We are
proposing that, when HCPCS codes 33249 and 33225 are reported on the
same date of service, they would be paid through proposed new composite
APC 8009 (Cardiac Resynchronization Therapy with Defibrillator
Composite) and that the payment rate for proposed composite APC 8009
would be limited to the proposed IPPS standardized payment amount for
MS-DRG 227 (Cardiac Defibrillator Implant without Cardiac
Catheterization and without Medical Complications and Comorbidities),
which is currently estimated to be $26,364.93. In other words, we are
proposing to pay APC 8009 at the lesser of the APC 8009 median cost or
the IPPS standardized payment rate for MS-DRG 227. We calculated the
standardized payment rate for MS-DRG 227 ($26,364.93) by multiplying
the normalized weight from Table 5 of the FY 2012 IPPS/LTCH PPS
proposed rule (5.1370) by the sum of the nonlabor and labor-related
shares of the proposed FY 2012 IPPS operating standardized amount
(nonwage-adjusted) labor-related share $3,182.06 + nonlabor-related
share $1,950.30 = $5,132.36) which were obtained from Table1B. For
further detail on the calculation of the IPPS proposed FY 2012 payment
rates, we refer readers to the FY 2012 IPPS/LTCH PPS proposed rule (76
FR 26028 through 26029).
In addition, under the authority of section 1833(t)(2)(E) of the
Act, which gives the Secretary the authority to make adjustments to
ensure equitable payments, we are proposing to limit the payment for
services that are assigned to APC 0108, to the proposed IPPS
standardized payment amount for MS-DRG 227. In other words, we are
proposing to pay APC 0108 at the lesser of the APC 0108 median cost or
the IPPS standardized payment rate for MS-DRG 227. We believe that MS-
DRG 227 is the most comparable DRG to APC 0108 because, like APC 0108,
MS-DRG 227 includes implantation of a defibrillator in patients who do
not have medical complication or comorbidities. If we were to base
payment for APC 0108 on our calculated median cost of approximately
$27,361, it would result in a payment under the CY 2012 OPPS that would
exceed our proposed standardized payment under the IPPS for MS-DRG 227
of $26,364.93. We do not believe that it would be equitable to pay more
for the implantation of a cardioverter defibrillator or implantation of
a left ventricular pacing electrode for an outpatient encounter, which,
by definition, includes fewer items and services than an inpatient stay
during which the patient has the same procedure. In contrast, the
amount Medicare would pay for an inpatient stay includes continuous
skilled nursing care, room and board, all medications, and all
diagnostic tests for an average of 3 days.
We believe that limiting OPPS payment for the services described by
HCPCS codes 33249 and 33225 to the IPPS MS-DRG payment will ensure
sufficient, appropriate, and equitable payment to hospitals because
patients who receive these services in the hospital outpatient setting
are not as sick as patients who have been admitted to receive this same
service in the hospital inpatient setting. Therefore, we

[[Page 42242]]

expect it would be less costly to care for these patients as
outpatients, who would also spend less time in the facility and receive
fewer services. In addition, we believe that a payment cap is necessary
to ensure that we do not create an inappropriate payment incentive to
implant ICDs and left ventricular leads in one setting of care over
another by paying more in the outpatient setting compared to the
inpatient setting.
We are proposing to continue all other standard policies that apply
to device-dependent procedures, including the procedure-to-device edits
that were established beginning in the CY 2005 OPPS for claims
processing and median calculation; and calculation of and application
of device offset amounts when pass-through devices are used and when an
``FB'' or ``FC'' modifier is attached to the line for either CPT code
33249 or 33225. However, for CY 2012, we are proposing that if the APC
0108 median cost that we will calculate for the CY 2012 OPPS/ASC final
rule exceeds the FY 2012 IPPS standardized payment rate for MS-DRG 227,
as adopted in the FY 2012 IPPS/LTCH PPS final rule, we would establish
the OPPS payment amount at the IPPS standardized payment rate for MS-
DRG 227 for FY 2012. In the FY 2012 IPPS/LTCH PPS proposed rule, this
amount is $26,364.93. If the median cost for APC 0108 as calculated
using the CY 2012 OPPS/ASC final rule data is less than the FY 2012
IPPS standardized payment rate for MS-DRG 227, we would base the
payment for APC 0108 on the CY 2012 OPPS/ASC final rule median cost for
APC 0108. These proposed changes would be made in a budget neutral
manner, in the same way that payment for other APCs is budget neutral
within the OPPS.

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
Section 1833(t)(6)(B)(iii) of the Act requires that, under the
OPPS, a category of devices be eligible for transitional pass-through
payments for at least 2, but not more than 3, years. This 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 date for a device
category on the date on which pass-through payment is effective for the
category. The date on which a pass-through 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 that are 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 is one new device category eligible for pass-
through payment, described by HCPCS code C1749 (Endoscope, retrograde
imaging/illumination colonoscope device (implantable), which we
announced in the October 2010 OPPS Update (Transmittal 2050, Change
Request 7117, dated September 17, 2010). There are no categories for
which we proposed expiration of pass-through status in CY 2011. If we
create new device categories for pass-through payment status during the
remainder of CY 2011, 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.
b. Proposed CY 2012 Policy
As stated above, 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. Device pass-through category C1749 was established for pass-
through payments on October 1, 2010, and will have been eligible for
pass-through payments for more than 2 years but less than 3 years as of
the end of CY 2012. Therefore, we are proposing an expiration date for
pass-through payment for device category C1749 of December 31, 2012.
Therefore, under our proposal, beginning January 1, 2013, device
category C1749 will no longer be eligible for pass-through payments.
2. Proposed Provisions for Reducing Transitional Pass-Through Payments
to Offset Costs Packaged into APC Groups
a. Background
We have an established policy to estimate the portion of each APC
payment rate that could reasonably be attributed to the cost of the
associated devices that are eligible for pass-through payments (66 FR
59904). We deduct from the pass-through payments for identified device
categories eligible for pass-through payments an amount that reflects
the portion of the APC payment amount that we determine is associated
with the cost of the device, defined as the device APC offset amount,
as required by section 1833(t)(6)(D)(ii) of the Act. We have
consistently employed an established methodology to estimate the
portion of each APC payment rate that could reasonably be attributed to
the cost of an associated device eligible for pass-through payment,
using claims data from the period used for the most recent
recalibration of the APC rates (72 FR 66751 through 66752). We
establish and update the applicable device APC offset amounts for
eligible pass-through device categories through the transmittals that
implement the quarterly OPPS updates.
We currently have published a list of all procedural APCs with the
CY 2011 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.gov/HospitalOutpatientPPS/01_overview.asp. The dollar amounts are used as
the device APC offset amounts. In addition, in accordance with our
established practice, the device APC offset amounts in a related APC
are used in order to evaluate whether the cost of a device in an
application for a new device category for pass-through payment is not
insignificant in relation to the APC payment amount for the service
related to the category of devices, as specified in our regulations at
Sec. 419.66(d).
As of CY 2009, the costs of implantable biologicals without pass-
through status are packaged into the payment for the procedures in
which they are inserted or implanted because implantable biologicals
without pass-through status are not separately paid (73 FR 68633
through 68636). For CY 2010, we finalized a new policy to specify 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; also
referred to as ``implantable

[[Page 42243]]

biologicals'') 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. As a result, for CY 2010, we
included implantable biologicals in our calculation of the device APC
offset amounts (74 FR 60476). We calculated and set the device APC
offset amount for a newly established device pass-through category,
which could include 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 are considered devices
rather than drugs for purposes of pass-through evaluation and payment
under our established policy, the device APC offset amounts include the
costs of implantable biologicals. For CY 2010, we also finalized a
policy to utilize the 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, for CY 2010, we no longer used 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 (74 FR 60463).
For CY 2011, we continued our 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 status beginning on or after January 1, 2010, be the
device pass-through process and payment methodology only.
b. Proposed CY 2012 Policy
We are proposing to continue our policy, for CY 2012, 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. The
rationale for this policy is provided in the CY 2010 OPPS/ASC final
rule with comment period (74 FR 60471 through 60477). We also are
proposing to continue our established policies for calculating and
setting the device APC offset amounts for each device category eligible
for pass-through payment. In addition, we are proposing to continue to
review each new device category on a case-by-case basis to determine
whether device costs associated with the new category are already
packaged into the existing APC structure. If device costs packaged into
the existing APC structure are associated with the new category, we
would deduct the device APC offset amount from the pass-through payment
for the device category. As stated earlier, these device APC offset
amounts also would be used in order to evaluate whether the cost of a
device in an application for a new device category for pass-through
payment is not insignificant in relation to the APC payment amount for
the service related to the category of devices (Sec. 419.66(d)).
For CY 2012, we also are proposing to continue our policy
established in CY 2010 to include implantable biologicals in our
calculation of the device APC offset amounts. In addition, we are
proposing to continue 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 2012 using the same methodology
we have historically used to calculate and set device APC offset
amounts for device categories eligible for pass-through payment, and to
include the costs of implantable biologicals in the calculation of the
device APC offset amounts, as we first finalized and implemented for CY
2010.
In addition, we are proposing to update, on the CMS Web site at
http://www.cms.gov/HospitalOutpatientPPS, the list of all procedural
APCs with the final CY 2012 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 2012 device pass-through payment applications and by CMS in
reviewing those applications.
In summary, for CY 2012, consistent with the policy established for
CY 2010, we are proposing to continue the following policies related to
pass-through payment for devices: (1) treating 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 on or after January 1, 2010, as devices for purposes of the OPPS
pass-through evaluation process and payment methodology; (2) including
implantable biologicals in calculating the device APC offset amounts;
(3) using the device APC offset amounts to evaluate whether the cost of
a device (defined to include implantable biologicals) 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; and (4) reducing 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.

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

1. Background
In recent years, there have been several field actions on and
recalls of medical devices as a result of implantable device failures.
In many of these cases, the manufacturers have offered devices without
cost to the hospital or with credit for the device being replaced if
the patient required a more expensive device. In order to ensure that
payment rates for procedures involving devices reflect only the full
costs of those devices, our standard ratesetting methodology for
device-dependent APCs uses only claims that contain the correct device
code for the procedure, do not contain token charges, do not contain
the ``FB'' modifier signifying that the device was furnished without
cost or with a full credit, and do not contain the ``FC'' modifier
signifying that the device was furnished with partial credit. As
discussed in section II.A.2.d.(1) of this proposed rule, we are
proposing to continue to use our standard ratesetting methodology for
device-dependent APCs for CY 2012.
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

[[Page 42244]]

cost or with full credit, the hospital is instructed to report a token
device charge of less than $1.01. In cases in which the device being
inserted is an upgrade (either of the same type of device or to a
different type of device) with a full credit for the device being
replaced, the hospital is instructed to report as the device charge the
difference between its usual charge for the device being implanted and
its usual charge for the device for which it received full credit. In
CY 2008, we expanded this payment adjustment policy to include cases in
which hospitals receive partial credit of 50 percent or more of the
cost of a specified device. Hospitals are instructed to append the
``FC'' modifier to the procedure code that reports the service provided
to furnish the device when they receive a partial credit of 50 percent
or more of the cost of the new device.
We reduce the OPPS payment for the implantation procedure by 100
percent of the device offset for no cost/full credit cases when both a
specified device code is present on the claim and the procedure code
maps to a specified APC. Payment for the implantation procedure is
reduced by 50 percent of the device offset for partial credit cases
when both a specified device code is present on the claim and the
procedure code maps to a specified APC. Beneficiary copayment is based
on the reduced payment amount when either the ``FB'' or the ``FC''
modifier is billed and the procedure and device codes appear on the
lists of procedures and devices to which this policy applies. We refer
readers to the CY 2008 OPPS/ASC final rule with comment period for more
background information on the ``FB'' and ``FC'' payment adjustment
policies (72 FR 66743 through 66749).
2. Proposed APCs and Devices Subject to the Adjustment Policy
For CY 2012, we are proposing to continue the existing policy of
reducing OPPS payment for specified APCs by 100 percent of the device
offset amount when a hospital furnishes a specified device without cost
or with a full credit and by 50 percent of the device offset amount
when the hospital receives partial credit in the amount of 50 percent
or more of the cost for the specified device. Because the APC payments
for the related services are specifically constructed to ensure that
the full cost of the device is included in the payment, we continue to
believe it is appropriate to reduce the APC payment in cases in which
the hospital receives a device without cost, with full credit, or with
partial credit, in order to provide equitable payment in these cases.
(We refer readers to section II.A.2.d.(1) of this proposed rule for a
description of our standard ratesetting methodology for device-
dependent APCs.) Moreover, the payment for these devices comprises a
large part of the APC payment on which the beneficiary copayment is
based, and we continue to believe it is equitable that the beneficiary
cost sharing reflects the reduced costs in these cases.
For CY 2012, we also are proposing to continue using the three
criteria established in the CY 2007 OPPS/ASC final rule with comment
period for determining the APCs to which this policy applies (71 FR
68072 through 68077). Specifically: (1) all procedures assigned to the
selected APCs must involve implantable devices that would be reported
if device insertion procedures were performed; (2) the required devices
must be surgically inserted or implanted devices that remain in the
patient's body after the conclusion of the procedure (at least
temporarily); and (3) the device offset amount must be significant,
which, for purposes of this policy, is defined as exceeding 40 percent
of the APC cost. We also are proposing to continue to restrict the
devices to which the APC payment adjustment would apply to a specific
set of costly devices to ensure that the adjustment would not be
triggered by the implantation of an inexpensive device whose cost would
not constitute a significant proportion of the total payment rate for
an APC. As we stated in the CY 2011 OPPS/ASC final rule with comment
period (75 FR 71925), 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.
We examined the offset amounts calculated from the CY 2012 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 applied in CY 2011 continue to meet the criteria for
CY 2012, and to determine whether other APCs to which the policy did
not apply in CY 2011 would meet the criteria for CY 2012. Based on the
CY 2010 claims data available for this proposed rule, we are not
proposing any changes to the APCs and devices to which this policy
applies. However, as discussed in section II.A.2.e.(6) of this proposed
rule, we are proposing to delete APC 0418 (Insertion of Left
Ventricular Pacing Electrode) for CY 2012 and, therefore, are proposing
to remove this APC from the list of APCs to which the no cost/full
credit and partial credit device adjustment policy would apply in CY
2012.
Table 24 below lists the proposed APCs to which the payment
adjustment policy for no cost/full credit and partial credit devices
would apply in CY 2012 and displays the proposed payment adjustment
percentages for both no cost/full credit and partial credit
circumstances. We are proposing that the no cost/full credit adjustment
for each APC to which this policy would continue to apply would be the
device offset percentage for the APC (the estimated percentage of the
APC cost that is attributable to the device costs that are packaged
into the APC). We also are proposing that the partial credit device
adjustment for each APC would continue to be 50 percent of the no cost/
full credit adjustment for the APC.
Table 25 below lists the proposed devices to which the payment
adjustment policy for no cost/full credit and partial credit devices
would apply in CY 2012. In the CY 2012 OPPS/ASC final rule with comment
period, we will update the lists of APCs and devices to which the no
cost/full credit and partial credit device adjustment policy would
apply for CY 2012, consistent with the three selection criteria
discussed earlier in this section, based on the final CY 2010 claims
data available for the final rule with comment period.
We are proposing, for CY 2012, that OPPS payments for implantation
procedures to which the ``FB'' modifier is appended be reduced by 100
percent of the device offset for no cost/full credit cases when both a
device code listed in Table 25 below, is present on the claim and the
procedure code maps to an APC listed in Table 24 below. We are also
proposing that 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 25 is present on the
claim and the procedure code maps to an APC listed in Table 24.
Beneficiary copayment is based on the reduced amount when either the
``FB'' modifier 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.

[[Page 42245]]

Table 24--Proposed APCs to Which the No Cost/Full Credit and Partial
Credit Device Adjustment Policy Would Apply in CY 2012
------------------------------------------------------------------------
Proposed CY Proposed CY
2012 device 2012 device
Proposed CY Proposed CY 2012 APC offset offset
2012 APC title percentage for percentage for
no cost/full partial credit
credit case case
------------------------------------------------------------------------
0039........... Level I Implantation of 85% 43%
Neurostimulator
Generator.
0040........... Level I Implantation/ 54% 27%
Revision/Replacement
of Neurostimulator
Electrodes.
0061........... Level II Implantation/ 64% 32%
Revision/Replacement
of Neurostimulator
Electrodes.
0089........... Insertion/Replacement 71% 35%
of Permanent Pacemaker
and Electrodes.
0090........... Insertion/Replacement 73% 37%
of Pacemaker Pulse
Generator.
0106........... Insertion/Replacement 43% 21%
of Pacemaker Leads and/
or Electrodes.
0107........... Insertion of 88% 44%
Cardioverter-
Defibrillator.
0108........... Insertion/Replacement/ 87% 43%
Repair of Cardioverter-
Defibrillator Leads.
0227........... Implantation of Drug 81% 40%
Infusion Device.
0259........... Level VII ENT 83% 41%
Procedures.
0315........... Level II Implantation 88% 44%
of Neurostimulator
Generator.
0318........... Implantation of Cranial 86% 43%
Neurostimulator Pulse
Generator and
Electrode.
0385........... Level I Prosthetic 61% 30%
Urological Procedures.
0386........... Level II Prosthetic 70% 35%
Urological Procedures.
0425........... Level II Arthroplasty 60% 30%
or Implantation with
Prosthesis.
0648........... Level IV Breast Surgery 44% 22%
0654........... Insertion/Replacement 74% 37%
of a permanent dual
chamber pacemaker.
0655........... Insertion/Replacement/ 73% 37%
Conversion of a
permanent dual chamber
pacemaker.
0680........... Insertion of Patient 72% 36%
Activated Event
Recorders.
------------------------------------------------------------------------

Table 25--Proposed Devices to Which the No Cost/Full Credit and Partial
Credit Device Adjustment Policy Would Apply In CY 2012
------------------------------------------------------------------------
CY 2012 Device HCPCS code CY 2012 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. Proposed OPPS Payment Changes for Drugs, Biologicals, and
Radiopharmaceuticals

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

1. Background
Section 1833(t)(6) of the Act provides for temporary additional
payments or ``transitional pass-through payments'' for certain drugs
and biologicals (also referred to as biologics). 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 biologicals and brachytherapy
sources used for the treatment of cancer; and current
radiopharmaceutical drugs and biologicals. For those drugs and
biologicals 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 biologicals 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 a period of at least 2 years, but not more than 3 years, after
the product's first payment as a hospital outpatient service under
Medicare Part B. Proposed CY 2012 pass-through drugs and biologicals
and their designated APCs are assigned status indicator ``G'' in
Addenda A and B to this proposed rule, which are referenced in section
XVII. of this proposed rule and available via the Internet.
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 for the
drug or biological exceeds the portion of the otherwise applicable
Medicare OPD fee

[[Page 42246]]

schedule that the Secretary determines is associated with the drug or
biological. If the drug or biological is covered under a competitive
acquisition contract under section 1847B of the Act, the pass-through
payment amount is 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. As we noted in the CY 2009
OPPS/ASC final rule with comment period (73 FR 68633), the Part B drug
CAP program was postponed beginning in CY 2009 (Medicare Learning
Network (MLN) Matters Special Edition 0833, available via the Web site:
http://www.cms.gov). As of publication of this proposed rule, the
postponement of the Part B drug CAP program remains in effect, and
there is no effective CAP program rate for pass-through drugs and
biologicals as of January 1, 2009. Consistent with what we indicated in
the CY 2011 OPPS/ASC final rule with comment period (75 FR 71928), if
the program is reinstituted during CY 2012 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 all drugs and biologicals
with pass-through status.
This methodology for determining the pass-through payment amount is
set forth in regulations at 42 CFR 419.64, which specify 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 average sales price (ASP) methodology, which is used
for payment for drugs and biologicals described in section
1842(o)(1)(C) of the Act 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, the wholesale acquisition cost
(WAC), and the average wholesale price (AWP). In this proposed rule,
the term ``ASP methodology'' and ``ASP-based'' are inclusive of all
data sources and methodologies described therein. Additional
information on the ASP methodology can be found on the CMS Web site at:
http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice.
For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through
payment amount for drugs and biologicals to be zero based on our
interpretation that the ``otherwise applicable Medicare OPD fee
schedule'' amount was equivalent to the amount to be paid for pass-
through drugs and biologicals under section 1842(o) of the Act (or
section 1847B of the Act, if the drug or biological is covered under a
competitive acquisition contract). We concluded for those years that
the resulting difference between these two rates would be zero. For CYs
2008 and 2009, we estimated the OPPS pass-through payment amount for
drugs and biologicals to be $6.6 million and $23.3 million,
respectively. For CY 2010, we estimated the OPPS pass-through payment
estimate for drugs and biologicals to be $35.5 million. For CY 2011, we
estimated the OPPS pass-through payment for drugs and biologicals to be
$15.5 million. Our proposed OPPS pass-through payment estimate for
drugs and biologicals in CY 2012 is $19 million, which is discussed in
section VI.B. of this proposed rule.
The pass-through application and review process for drugs and
biologicals is explained on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.
2. Proposed Drugs and Biologicals With Expiring Pass-Through Status in
CY 2012
We are proposing that the pass-through status of 19 drugs and
biologicals would expire on December 31, 2011, as listed in Table 26
below. All of these drugs and biologicals will have received OPPS pass-
through payment for at least 2 years and no more than 3 years by
December 31, 2011. These drugs and biologicals were approved for pass-
through status on or before January 1, 2010. With the exception of
those groups of drugs and biologicals that are always packaged when
they do not have pass-through status, specifically diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals, our
standard methodology for providing payment for drugs and biologicals
with expiring pass-through status in an upcoming calendar year is to
determine the product's estimated per day cost and compare it with the
OPPS drug packaging threshold for that calendar year (which is proposed
at $80 for CY 2012), as discussed further in section V.B.2. of this
proposed rule. If the drug's or biological's estimated per day cost is
less than or equal to the applicable OPPS drug packaging threshold, we
would package payment for the drug or biological into the payment for
the associated procedure in the upcoming calendar year. If the
estimated per day cost 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 proposed at
ASP+4 percent for CY 2012, as discussed further in section V.B.3. of
this proposed rule). Section V.B.2.d. of this proposed rule discusses
the packaging of all nonpass-through contrast agents, diagnostic
radiopharmaceuticals, and implantable biologicals.

Table 26--Proposed Drugs and Biologicals for Which Pass-Through Status
Will Expire December 31, 2011
------------------------------------------------------------------------
Proposed CY 2012 Proposed CY Proposed CY
HCPCS code CY 2012 long descriptor 2012 SI 2012 APC
------------------------------------------------------------------------
A9582.............. Iodine I-123 iobenguane, N N/A
diagnostic, per study
dose, up to 15
millicuries.
A9583.............. Injection, gadofosveset N N/A
trisodium, 1 ml.
C9250.............. Human plasma fibrin K 9250
sealant, vapor-heated,
solvent-detergent
(Artiss), 2 ml.
C9360.............. Dermal substitute, K 9360
native, non-denatured
collagen, neonatal
bovine origin (SurgiMend
Collagen Matrix), per
0.5 square centimeters.
C9361.............. Collagen matrix nerve N N/A
wrap (NeuroMend Collagen
Nerve Wrap), per 0.5
centimeter length.
C9362.............. Porous purified collagen N N/A
matrix bone void filler
(Integra Mozaik
Osteoconductive Scaffold
Strip), per 0.5 cc.
C9363.............. Skin substitute, Integra K 9363
Meshed Bilayer Wound
Matrix, per square
centimeter.
C9364.............. Porcine implant, N N/A
Permacol, per square
centimeter.
J0598.............. Injection, C-1 esterase K 9251
inhibitor (human),
Cinryze, 10 units.
J0641.............. Injection, levoleucovorin K 1236
calcium, 0.5 mg.

[[Page 42247]]

J0718.............. Injection, certolizumab K 9249
pegol, 1 mg.
J1680.............. Injection, human K 1290
fibrinogen concentrate,
100 mg.
J2426.............. Injection, paliperidone K 9255
palmitate, 1 mg.
J2562.............. Injection, plerixafor, 1 K 9252
mg.
J7312.............. Injection, dexamethasone K 9256
intravitreal implant,
0.1 mg.
J8705.............. Topotecan, oral, 0.25 mg. K 1238
J9155.............. Injection, degarelix, 1 K 1296
mg.
J9328.............. Injection, temozolomide, K 9253
1 mg.
Q0138.............. Injection, Ferumoxytol, K 1297
for treatment of iron
deficiency anemia, 1 mg.
------------------------------------------------------------------------

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals With New or
Continuing Pass-Through Status in CY 2012
We are proposing to continue pass-through status in CY 2012 for 33
drugs and biologicals. None 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, 2011. These drugs and biologicals, which
were approved for pass-through status between April 1, 2010 and July 1,
2011, are listed in Table 27 below. The APCs and HCPCS codes for these
drugs and biologicals approved for pass-through status through April 1,
2011, are assigned status indicator ``G'' in Addenda A and B, which are
referenced in section XVIII of this proposed rule and available via the
Internet.
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 propose to continue to provide
payment for drugs and biologicals with pass-through status at a rate of
ASP+6 percent in CY 2012, the amount that drugs and biologicals receive
under section 1842(o) of the Act. Thus, for CY 2012, we are proposing
to pay for pass-through drugs and biologicals at ASP+6 percent,
equivalent to the rate these drugs and biologicals would receive in the
physician's office setting in CY 2012. Therefore, the difference
between ASP+4 percent that we are proposing to pay for nonpass-through
separately payable drugs under the CY 2012 OPPS and ASP+6 percent would
be the CY 2012 pass-through payment amount for these drugs and
biologicals. In the case of pass-through contrast agents and diagnostic
radiopharmaceuticals, 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. We
note that we are proposing to expire pass-through status for the
remaining three implantable biologicals approved on or before January
1, 2010, under pass-through status as a drug or biological. Therefore,
as described in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60476) and as proposed in this proposed rule, implantable
biologicals that are surgically inserted or implanted (through a
surgical incision or a natural orifice) would be evaluated under the
device pass-through process and paid according to the device payment
methodology. Payment for nonpass-through implantable biologicals would
continue to be packaged into the payment for the associated procedure
as described in section V.B.2.d. of this proposed rule.
In addition, we are proposing to continue to update pass-through
payment rates on a quarterly basis on the CMS Web site during CY 2012
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. For a
full description of this policy, we refer readers to the CY 2006 OPPS/
ASC final rule with comment period (70 FR 42722 and 42723). If the Part
B drug CAP is reinstated during CY 2012, and a drug or biological that
has been granted pass-through status for CY 2012 becomes covered under
the Part B drug CAP, we are proposing to provide pass-through payment
at the Part B drug CAP rate and to make the 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.
In CY 2012, as is consistent with our CY 2011 policy for diagnostic
and therapeutic radiopharmaceuticals, we are proposing to provide
payment for both diagnostic and therapeutic radiopharmaceuticals that
are granted pass-through status based on the ASP methodology. As stated
above, for purposes of pass-through payment, we consider
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a
diagnostic or therapeutic radiopharmaceutical receives pass-through
status during CY 2012, we are proposing to follow the standard ASP
methodology to determine the pass-through payment rate that drugs
receive under section 1842(o) of the Act, which is ASP+6 percent. If
ASP data are not available for a radiopharmaceutical, we are proposing
to provide pass-through payment at WAC+6 percent, the equivalent
payment provided to pass-through drugs and biologicals without ASP
information. If WAC information is also not available, we are proposing
to provide payment for the pass-through radiopharmaceutical at 95
percent of its most recent AWP.
As discussed in more detail in section V.B.2.d. of this proposed
rule, over the last 4 years, we implemented a policy whereby payment
for all nonpass-through diagnostic

[[Page 42248]]

radiopharmaceuticals, contrast agents, and implantable biologicals is
packaged into payment for the associated procedure. We are proposing to
continue the packaging of these items, regardless of their per day
cost, in CY 2012. 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)) 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 APC offset amount for the associated
clinical APC in which the drug or biological is utilized. The
calculation of the ``policy-packaged'' drug APC offset amounts are
described in more detail in section IV.A.2. of this proposed rule. 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, as we did in CY 2011, we are proposing to
continue to set the associated copayment amount for pass-through
diagnostic radiopharmaceuticals and contrast agents that would
otherwise be packaged if the item did not have pass-through status to
zero for CY 2012. The separate OPPS payment to a hospital for the pass-
through diagnostic radiopharmaceutical or contrast agent, after taking
into account any applicable payment offset for the item due to the
device or ``policy-packaged'' APC offset policy, is the item's pass-
through payment, which is not subject to a copayment according to the
statute. Therefore, we are proposing to not publish a copayment amount
for these items in Addenda A and B to the proposed rule (which are
referenced in section XVII. of this proposed rule and available via the
Internet on the CMS Web site).
The 33 drugs and biologicals that we are proposing to continue on
pass-through status for CY 2012 or that have been granted pass-through
status as of July 2011 are displayed in Table 27. We note that, for CY
2010 and the first two quarters of CY 2011, HCPCS code J1572
(Injection, immune globulin, (flebogamma/flebogamma dif), intravenous,
non-lyophilized (e.g. liquid), 500 mg) was assigned a status indicator
of ``K,'' meaning that this product was paid separately as a nonpass-
through separate payable drug. Beginning on July 1, 2011, HCPCS code
J1572 is assigned a status indicator of ``G'' and will be given pass-
through status for at least 2, but not more than 3, years. The payment
rate reflecting a pass-through payment amount of ASP+6 percent is not
included in Addenda A and B of this proposed rule because these Addenda
solely reflect codes and prices effective as of the second quarter of
CY 2011, or April 2011.

Table 27--Proposed Drugs and Biologicals With Pass-Through Status in CY
2012
------------------------------------------------------------------------
Proposed CY 2012 Proposed CY Proposed CY
HCPCS code CY 2012 long descriptor 2012 SI 2012 APC
------------------------------------------------------------------------
C9270.............. Injection, immune G 9270
globulin (Gammaplex),
intravenous, non-
lyophilized (e.g.
liquid), 500 mg.
C9272.............. Injection, denosumab, 1 G 9272
mg.
C9274.............. Crotalidae polyvalent G 9274
immune fab (ovine), 1
vial.
C9275.............. Injection, G 9275
hexaminolevulinate
hydrochloride, 100 mg,
per study dose.
C9276.............. Injection, cabazitaxel, 1 G 9276
mg.
C9277.............. Injection, alglucosidase G 9277
alfa (Lumizyme), 1 mg.
C9279.............. Injection, ibuprofen, 100 G 9279
mg.
C9280.............. Injection, eribulin G 9280
mesylate, 1 mg.
C9281.............. Injection, pegloticase, 1 G 9281
mg.
C9282.............. Injection, ceftaroline G 9282
fosamil, 10 mg.
C9283 **........... Injection, acetaminophen, G 9283
10 mg.
C9284 **........... Injection, ipilimumab, 1 G 9284
mg.
C9285 **........... Lidocaine 70 mg/ G 9285
tetracaine 70 mg, per
patch.
C9365 **........... Oasis Ultra Tri-Layer G 9365
Matrix, per square
centimeter.
C9367.............. Skin substitute, Endoform G 9367
Dermal Template, per
square centimeter.
C9406 **........... Iodine I-123 ioflupane, G 9406
diagnostic, per study
dose, up to 5
millicuries.
J0597.............. Injection, C-1 Esterase G 9269
inhibitor (human),
Berinert, 10 units.
J0775.............. Injection, collagenase G 1340
clostridium
histolyticum, 0.01 mg.
J1290.............. Injection, ecallantide, 1 G 9263
mg.
J1572 ***.......... Injection, immune G 0947
globulin, (flebogamma/
flebogamma dif),
intravenous, non-
lyophilized (e.g.
liquid), 500 mg.
J3095.............. Injection, telavancin, 10 G 9258
mg.
J3262.............. Injection, tocilizumab, 1 G 9624
mg.
J3357.............. Injection, ustekinumab, 1 G 9261
mg.
J3385.............. Injection, velaglucerase G 9271
alfa, 100 units.
J7335.............. Capsaicin 8% patch, per G 9268
10 square centimeters.
J8562.............. Fludarabine phosphate, G 1339
oral, 10 mg.
J9302.............. Injection, ofatumumab, 10 G 9260
mg.
J9307.............. Injection, pralatrexate, G 9259
1 mg.
J9315.............. Injection, romidepsin, 1 G 9625
mg.

[[Page 42249]]

Q2040.............. Injection, G 9278
incobotulinumtoxin A, 1
unit.
Q2041 **........... Injection, von willebrand G 1352
factor complex (human),
Wilate, 1 i.u. vwf:rco.
Q2043 *............ Sipuleucel-T, minimum of G 9273
50 million autologous
CD54+ cells activated
with PAP-GM-CSF,
including leukapheresis
and all other
preparatory procedures,
per infusion.
Q2044 **........... Injection, belimumab, 10 G 1353
mg.
------------------------------------------------------------------------
* HCPCS code C9273 was deleted June 30, 2011, and replaced with HCPCS
code Q2043 effective July 1, 2011.
** These HCPCS codes are effective July 1, 2011, and are not included in
the Addenda to this proposed rule.
*** HCPCS code J1572 has a status indicator of ``G,'' effective July 1,
2011.

4. Proposed Provisions for Reducing Transitional Pass-Through Payments
for Diagnostic Radiopharmaceuticals and Contrast Agents To Offset Costs
Packaged into APC Groups
a. Background
Prior to CY 2008, diagnostic radiopharmaceuticals and contrast
agents were paid separately under the OPPS if their mean per day costs
were greater than the applicable year's drug packaging threshold. In CY
2008 (72 FR 66768), we began a policy of packaging payment for all
nonpass-through diagnostic radiopharmaceuticals and contrast agents as
ancillary and supportive items and services into their associated
nuclear medicine procedures. Therefore, beginning in 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. For CY 2012, we are proposing to
continue to package payment for all nonpass-through diagnostic
radiopharmaceuticals and contrast agents, as discussed in section
V.B.2.d. of this proposed rule.
b. Proposed 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) of the Act
(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 C9406 (Iodine I-123
ioflupane, diagnostic, per study dose, up to 5 millicuries). HCPCS code
C9406 was granted pass-through status beginning July 1, 2011, and is
proposed to continue receiving pass-through status in CY 2012. We
currently apply the established radiopharmaceutical payment offset
policy to pass-through payment for this product. As described earlier
in section V.A.3. of this proposed rule, we are proposing that new
pass-through diagnostic radiopharmaceuticals would be paid at ASP+6
percent, while those without ASP information would be paid at WAC+6
percent or, if WAC is not available, payment would be based on 95
percent of the product's most recently published AWP.
Because a payment offset is necessary in order to provide an
appropriate transitional pass-through payment, we deduct from the pass-
through payment for radiopharmaceuticals an amount reflecting 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). In the CY 2010 OPPS/ASC final
rule with comment period (74 FR 60480 through 60484), we finalized a
policy to redefine ``policy-packaged'' drugs as only nonpass-through
diagnostic radiopharmaceuticals and contrast agents, as a result of the
policy discussed in sections V.A.4. and V.B.2.d. of the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60471 through 60477 and 60495
through 60499, respectively) that treats 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.
Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final
rule with comment period (75 FR 71934 through 71936), we finalized a
policy to require hospitals to append modifier ``FB'' to specified
nuclear medicine procedures when the diagnostic radiopharmaceutical is
received at no cost/full credit. These instructions are contained
within the I[sol]OCE CMS specifications on the CMS Web site at http://www.cms.gov/OutpatientCodeEdit/02_OCEQtrReleaseSpecs.asp#TopOfPage.
For CY 2012 and future years, we are proposing to continue to require
hospitals to append modifier ``FB'' to specified nuclear medicine
procedures when the diagnostic radiopharmaceutical is received at no
cost/full credit. In addition, we are proposing to continue to require
that when a hospital bills with an ``FB'' modifier with the nuclear
medicine scan, the payment amount for procedures in the APCs listed in
Table

[[Page 42250]]

28 of this proposed rule would be reduced by the full ``policy-
packaged'' offset amount appropriate for diagnostic
radiopharmaceuticals. Finally, we also are proposing to continue to
require hospitals to report a token charge of less than $1.01 in cases
in which the diagnostic radiopharmaceutical is furnished without cost
or with full credit.
For CY 2011, we finalized a policy to apply the diagnostic
radiopharmaceutical offset policy to payment for pass-through
diagnostic radiopharmaceuticals, as described above. For CY 2012, we
are proposing to continue to apply the diagnostic radiopharmaceutical
offset policy to payment for pass-through diagnostic
radiopharmaceuticals. Table 28 displays the proposed APCs to which
nuclear medicine procedures would be assigned in CY 2012 and for which
we expect that an APC offset could be applicable in the case of
diagnostic radiopharmaceuticals with pass-through status.

Table 28--Proposed APCs To Which Nuclear Medicine Procedures Would Be
Assigned for CY 2012
------------------------------------------------------------------------
Proposed CY 2012 APC CY 2012 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 II Tumor/Infection Imaging.
0414...................... Level II Tumor/Infection Imaging.
------------------------------------------------------------------------

c. Proposed Payment Offset Policy for Contrast Agents
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) of the Act
(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 C9275 (Injection,
hexaminolevulinate hydrochloride, 100 mg, per study dose). HCPCS code
C9275 was granted pass-through status beginning January 1, 2011, and is
proposed to continue with pass-through status in CY 2012. As described
earlier in section V.A.3. of this proposed rule, new pass-through
contrast agents would be paid at ASP+6 percent, while those without ASP
information would be paid at WAC+6 percent or, if WAC is not available,
payment would be based on 95 percent of the product's most recently
published AWP.
We believe that a payment offset is necessary in order to provide
an appropriate transitional pass-through payment for contrast agents,
because all of these items are packaged when they do not have pass-
through status. In accordance with our standard offset methodology, we
are proposing for CY 2012 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 2010, we established a policy to estimate the portion of each
APC payment rate that could reasonably be attributed to the cost of
predecessor contrast agents when considering new contrast agents for
pass-through payment (74 FR 60482 through 60484). For CY 2012, as we
did in CY 2011, we are proposing to continue to apply this same policy
to contrast agents. Specifically, we are proposing to utilize the
``policy-packaged'' drug offset fraction for clinical APCs calculated
as 1 minus (the cost from single procedure claims in the APC after
removing the cost for ``policy-packaged'' drugs divided by the cost
from single procedure claims in the APC). In CY 2010, we finalized a
policy to redefine ``policy-packaged'' drugs as only nonpass-through
diagnostic radiopharmaceuticals and contrast agents (74 FR 60495
through 60499). To determine the actual APC offset amount for pass-
through contrast agents that takes into consideration the otherwise
applicable OPPS payment amount, we are proposing to multiply the
``policy-packaged'' drug offset fraction by the APC payment amount for
the procedure with which the pass-through contrast agent is used and,
accordingly, reduce the separate OPPS payment for the pass-through
contrast agent by this amount. We are proposing to continue to apply
this methodology for CY 2012 to recognize that when a contrast agent
with pass-through status is billed with any procedural APC listed in
Table 29, a specific offset based on the procedural APC would be
applied to payments for the contrast agent to ensure that duplicate
payment is not made for the contrast agent.
We are proposing to continue to post annually on the CMS Web site
at http://www.cms.gov/HospitalOutpatientPPS a file that contains the
APC offset amounts that will be used for that year for purposes of both
evaluating cost

[[Page 42251]]

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.
Proposed procedural APCs for which we expect a contrast 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 28 above and these APCs are displayed in Table 29 below. The
methodology used to determine a proposed threshold cost for application
of a contrast agent offset policy is described in detail in the CY 2010
OPPS/ASC final rule with comment period (70 FR 60483 through 60484).
For CY 2012, we are proposing to continue to recognize that when a
contrast agent with pass-through status is billed with any procedural
APC listed in Table 29, a specific offset based on the procedural APC
would be applied to payment for the contrast agent to ensure that
duplicate payment is not made for the contrast agent.

Table 29--Proposed APCs to Which a Contrast Agent Offset May Be
Applicable for CY 2012
------------------------------------------------------------------------
Proposed CY 2012 APC Proposed CY 2012 APC title
------------------------------------------------------------------------
0080............................ Diagnostic Cardiac Catheterization.
0082............................ Coronary or Non-Coronary Atherectomy.
0083............................ Coronary or Non-Coronary Angioplasty
and Percutaneous Valvulopasty.
0093............................ Vascular Reconstruction/Fistula Repair
without Device.
0104............................ Transcathether Placement of
Intracoronary Stents.
0128............................ Echocardiogram with Contrast.
0152............................ Level I Percutaneous Abdominal and
Biliary Procedures.
0229............................ Transcathether 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.
0334............................ Combined Abdomen and Pelvis CT with
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. Proposed OPPS Payment for Drugs, Biologicals, and
Radiopharmaceuticals Without Pass-Through Status
1. Background
Under the CY 2011 OPPS, we currently pay for drugs, biologicals,
and radiopharmaceuticals that do not have pass-through status in one of
two ways: as a packaged payment included in the payment for the
associated service; or as a 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 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 did not have pass-through status was established at $60.
For CY 2010, the packaging threshold for drugs, biologicals, and
radiopharmaceuticals that were not new and did not have pass-through
status was established at $65. For CY 2011, the packaging threshold for
drugs, biologicals, and radiopharmaceuticals that were not new and did
not have pass-through status was established at $70. The methodology
used to establish the $55

[[Page 42252]]

threshold for CY 2007, the $60 threshold for CYs 2008 and 2009, the $65
threshold for CY 2010, the $70 threshold for CY 2011, and our proposed
approach for CY 2012 are discussed in more detail in section V.B.2.b.
of this proposed rule.
2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and
Radiopharmaceuticals
a. Background
As indicated in section V.B.1. of this proposed rule, in accordance
with section 1833(t)(16)(B) of the Act, the threshold for establishing
separate APCs for payment of drugs and biologicals was set to $50 per
administration during CYs 2005 and 2006. In CY 2007, we used the four
quarter moving average Producer Price Index (PPI) levels for
Pharmaceutical Preparations (Prescription) 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.
For CY 2010, we set the packaging threshold at $65; and for CY 2011, we
set the packaging threshold at $70.
Following the CY 2007 methodology, for CY 2012, we used updated
four quarter moving average PPI levels to trend the $50 threshold
forward from the third quarter of CY 2005 to the third quarter of CY
2012 and again rounded the resulting dollar amount ($77.63) to the
nearest $5 increment, which yielded a figure of $80. In performing this
calculation, we used the most recent forecast of the quarterly index
levels for the PPI for Pharmaceuticals for Human Use (Prescription)
(Bureau of Labor Statistics (BLS) series code WPUSI07003) from CMS'
Office of the Actuary (OACT). We note that we are not proposing a
change to the PPI that is used to calculate the threshold for CY 2012;
however, this change in terminology reflects a change to the BLS naming
convention for this series. We refer to this series generally as the
PPI for Prescription Drugs below. We chose this PPI as it reflects
price changes associated with the average mix of all pharmaceuticals in
the overall economy. In addition, we chose this price series because it
is publicly available and regularly published, improving public access
and transparency. Forecasts of the PPI for Prescription Drugs are
developed by IHS Global Insight, Inc., a nationally recognized economic
and financial forecasting firm. As actual inflation for past quarters
replaced forecasted amounts, the PPI estimates for prior quarters have
been revised (compared with those used in the CY 2007 OPPS/ASC final
rule with comment period) and have been incorporated into our
calculation. Based on the calculations described above, we are
proposing a packaging threshold for CY 2012 of $80. (For a more
detailed discussion of the OPPS drug packaging threshold and the use of
the PPI for Prescription Drugs, we refer readers to the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68085 through 68086).)
b. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes
That Describe Certain Drugs, Nonimplantable Biologicals, and
Therapeutic Radiopharmaceuticals (``Threshold-Packaged Drugs'')
To determine their proposed CY 2012 packaging status for this
proposed rule, we calculated on a HCPCS code-specific basis (with the
exception of those drugs and biologicals with multiple HCPCS codes that
include different dosages as described in section V.B.2.c. of this
proposed rule and excluding diagnostic radiopharmaceuticals, contrast
agents, and implantable biologicals that we are proposing to continue
to package in CY 2012, as discussed in section V.B.2.d. of this
proposed rule) the per day cost of all drugs, nonimplantable
biologicals, and therapeutic radiopharmaceuticals (collectively called
``threshold-packaged'' drugs) that had a HCPCS code in CY 2010 and were
paid (via packaged or separate payment) under the OPPS, using CY 2010
claims data processed before January 1, 2011. In order to calculate the
per day costs for drugs, nonimplantable biologicals, and therapeutic
radiopharmaceuticals to determine their proposed packaging status in CY
2012, 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 2012 proposed rule per day costs, we used an
estimated payment rate for each drug and nonimplantable biological
HCPCS code of ASP+4 percent (which is the payment rate we are proposing
for separately payable drugs and nonimplantable biologicals for CY
2012, as discussed in more detail in section V.B.3.b. of this proposed
rule). We used the manufacturer submitted ASP data from the fourth
quarter of CY 2010 (data that were used for payment purposes in the
physician's office setting, effective April 1, 2011) to determine the
proposed rule per day cost.
As is our standard methodology, for CY 2012, we are proposing to
use payment rates based on the ASP data from the fourth quarter of CY
2010 for budget neutrality estimates, packaging determinations, impact
analyses, and completion of Addenda A and B to this proposed rule
(which are referenced in section XVII. of this proposed rule and
available via the Internet) because these are the most recent data
available for use at the time of development of this proposed rule.
These data were also the basis for drug payments in the physician's
office setting, effective April 1, 2011. For items that did not have an
ASP-based payment rate, such as some therapeutic radiopharmaceuticals,
we used their mean unit cost derived from the CY 2010 hospital claims
data to determine their per day cost. We are proposing to package items
with a per day cost less than or equal to $80 and identified items with
a per day cost greater than $80 as separately payable. Consistent with
our past practice, we crosswalked historical OPPS claims data from the
CY 2010 HCPCS codes that were reported to the CY 2011 HCPCS codes that
we display in Addendum B of this proposed rule (which is referenced in
section XVII. of this proposed rule and available via the Internet) for
payment in CY 2012.
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 will be
subject to quarterly updates. For our calculation of per day costs of
HCPCS codes for drugs and nonimplantable biologicals in the CY 2012
OPPS/ASC final rule with comment period, we are proposing to use ASP
data from the first quarter of CY 2011, 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, 2011, along
with

[[Page 42253]]

updated hospital claims data from CY 2010. We note that we also are
proposing to use these data for budget neutrality estimates and impact
analyses for the CY 2012 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 the final
rule with comment period will be based on ASP data from the second
quarter of CY 2011, which will be the basis for calculating payment
rates for drugs and biologicals in the physician's office setting using
the ASP methodology, effective October 1, 2011. These rates would then
be updated in the January 2012 OPPS update, based on the most recent
ASP data to be used for physician's office and OPPS payment as of
January 1, 2012. For items that do not currently have an ASP-based
payment rate, we are proposing to recalculate their mean unit cost from
all of the CY 2010 claims data and updated cost report information
available for the CY 2012 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 2012 OPPS/ASC proposed rule may be different from the same drug
HCPCS code's packaging status determined based on the data used for the
final rule with comment period. Under such circumstances, we are
proposing to continue to follow 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
proposed CY 2012 OPPS drug packaging threshold and the drug's payment
status (packaged or separately payable) in CY 2011. Specifically, for
CY 2012, we are proposing to apply the following policies to these
HCPCS codes for drugs, nonimplantable biologicals, and therapeutic
radiopharmaceuticals whose relationship to the proposed $80 drug
packaging threshold changes:
HCPCS codes for drugs and nonimplantable biologicals that
were paid separately in CY 2011 and that are proposed for separate
payment in CY 2012, and that then have per day costs equal to or less
than $80, based on the ASPs and hospital claims data used for this CY
2012 proposed rule, would continue to receive separate payment in CY
2012.
HCPCS codes for drugs and nonimplantable biologicals that
were packaged in CY 2011 and that are proposed for separate payment in
CY 2012, and that then have per day costs equal to or less than $80,
based on the ASPs and hospital claims data used for this CY 2012
proposed rule, would remain packaged in CY 2012.
HCPCS codes for drugs and nonimplantable biologicals for
which we are proposing packaged payment in CY 2012 but then have per
day costs greater than $80, based on the ASPs and hospital claims data
used for this CY 2012 proposed rule, would receive separate payment in
CY 2012.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60485
through 60489), we implemented a policy to treat oral and injectable
forms of 5-HT3 antiemetics comparably to all other threshold packaged
drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals
under our standard packaging methodology of packaging drugs with a per
day cost less than $65. We are proposing for CY 2012 to continue our
policy of not exempting these 5-HT3 antiemetic products from our
standard packaging methodology. For CY 2012, we are proposing to
package payment for all of the 5-HT3 antiemetics except palonosetron
hydrochloride, which for CY 2012 has a estimated per day cost, from the
CY 2010 claims data, above the proposed CY 2012 drug packaging
threshold. Our rationale for this policy is outlined in the CY 2010
OPPS/ASC final rule with comment period (74 FR 60487 through 60488).
c. Proposed Packaging Determination for HCPCS Codes That Describe the
Same Drug or Biological but Different Dosages
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS
codes reporting different dosages for the same covered Part B drugs or
biologicals in order to reduce hospitals' administrative burden by
permitting them to report all HCPCS codes for drugs and biologicals. In
general, prior to CY 2008, the OPPS recognized for payment only the
HCPCS code that described the lowest dosage of a drug or biological. We
extended this recognition to multiple HCPCS codes for several other
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009,
we applied a policy that assigned the status indicator of the
previously recognized HCPCS code to the associated newly recognized
code(s), reflecting the packaged or separately payable status of the
new code(s). 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.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60490
through 60491), we finalized a policy 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. We analyzed
CY 2008 claims data for the HCPCS codes describing different dosages of
the same drug or biological that were newly recognized in CY 2008 and
found that our claims data would result in several different packaging
determinations for different codes describing the same drug or
biological. Furthermore, we found that our claims data would include
few units and days for a number of 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. Based on these findings from our first available claims data for
the newly recognized HCPCS codes, we believed 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. For CY 2012, 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, we
are proposing to continue our policy to make packaging determinations
on a

[[Page 42254]]

drug-specific basis, rather than an HCPCS code-specific basis, for
those HCPCS codes that describe the same drug or biological but
different dosages in CY 2012.
For CY 2012, 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 2010 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. All HCPCS codes
listed in Table 30 below had ASP pricing information available for this
CY 2012 OPPS/ASC proposed rule. Therefore, we multiplied the weighted
average ASP+4 percent per unit 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 $80 (whereupon all HCPCS codes for the same drug
or biological would be packaged) or greater than $80 (whereupon all
HCPCS codes for the same drug or biological would be separately
payable). The proposed packaging status of each drug and biological
HCPCS code to which this methodology would apply is displayed in Table
30 below.

Table 30.--Proposed Hcpcs Codes To Which the CY 2012 Drug--Specific Packaging Determination Methodology Would
Apply
----------------------------------------------------------------------------------------------------------------
Proposed CY 2012 HCPCS code Proposed CY 2012 long descriptor Proposed CY 2012 SI
----------------------------------------------------------------------------------------------------------------
C9257................................ Injection, bevacizumab, 0.25 mg.................. K
J9035................................ Injection, bevacizumab, 10 mg.................... K
J1020................................ Injection, methylprednisolone acetate, 20 mg..... N
J1030................................ Injection, methylprednisolone acetate, 40 mg..... N
J1040................................ Injection, methylprednisolone acetate, 80 mg..... N
J1070................................ Injection, testosterone cypionate, up to 100 mg.. N
J1080................................ Injection, testosterone cypionate, 1 cc, 200 mg.. N
J1440................................ Injection, filgrastim (g-csf), 300 mcg........... K
J1441................................ Injection, filgrastim (g-csf), 480 mcg........... K
J1460................................ Injection, gamma globulin, intramuscular, 1 cc... K
J1560................................ Injection, gamma globulin, intramuscular over 10 K
cc.
J1642................................ Injection, heparin sodium, (heparin lock flush), N
per 10 units.
J1644................................ Injection, heparin sodium, per 1000 units........ N
J1850................................ Injection, kanamycin sulfate, up to 75 mg........ N
J1840................................ Injection, kanamycin sulfate, up to 500 mg....... N
J2270................................ Injection, morphine sulfate, up to 10 mg......... N
J2271................................ Injection, morphine sulfate, 100mg............... N
J2788................................ Injection, rho d immune globulin, human, K
minidose, 50 micrograms (250 i.u.).
J2790................................ Injection, rho d immune globulin, human, full K
dose, 300 micrograms (1500 i.u.).
J2920................................ Injection, methylprednisolone sodium succinate, N
up to 40 mg.
J2930................................ Injection, methylprednisolone sodium succinate, N
up to 125 mg.
J3120................................ Injection, testosterone enanthate, up to 100 mg.. N
J3130................................ Injection, testosterone enanthate, up to 200 mg.. N
J3471................................ Injection, hyaluronidase, ovine, preservative N
free, per 1 usp unit (up to 999 usp units).
J3472................................ Injection, hyaluronidase, ovine, preservative N
free, per 1000 usp units.
J7050................................ Infusion, normal saline solution , 250 cc........ N
J7040................................ Infusion, normal saline solution, sterile (500 N
ml=1 unit).
J7030................................ Infusion, normal saline solution , 1000 cc....... N
J7515................................ Cyclosporine, oral, 25 mg........................ N
J7502................................ Cyclosporine, oral, 100 mg....................... N
J8520................................ Capecitabine, oral, 150 mg....................... K
J8521................................ Capecitabine, oral, 500 mg....................... K
J9250................................ Methotrexate sodium, 5 mg........................ N
J9260................................ Methotrexate sodium, 50 mg....................... N
Q0164................................ Prochlorperazine maleate, 5 mg, oral, FDA N
approved prescription anti-emetic, for use as a
complete therapeutic substitute for an IV anti-
emetic at the time of chemotherapy treatment,
not to exceed a 48-hour doseage regimen.
Q0165................................ Prochlorperazine maleate, 10 mg, oral, FDA N
approved prescription anti-emetic, for use as a
complete therapeutic substitute for an IV anti-
emetic at the time of chemotherapy treatment,
not to exceed a 48-hour doseage regimen.
Q0167................................ Dronabinol, 2.5 mg, oral, FDA approved N
prescription anti-emetic, for use as a complete
therapeutic substitute for an IV anti-emetic at
the time of chemotherapy treatment, not to
exceed a 48-hour dosage regimen.
Q0168................................ Dronabinol, 5 mg, oral, FDA approved prescription N
anti-emetic, for use as a complete therapeutic
substitute for an IV anti-emetic at the time of
chemotherapy treatment, not to exceed a 48-hour
dosage regimen.
Q0169................................ Promethazine hydrochloride, 12.5 mg, oral, FDA N
approved prescription anti-emetic, 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.
Q0170................................ Promethazine hydrochloride, 25 mg, oral, FDA N
approved prescription anti-emetic, 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.

[[Page 42255]]

Q0171................................ Chlorpromazine hydrochloride, 10 mg, oral, FDA N
approved prescription 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.
Q0172................................ Chlorpromazine hydrochloride, 25 mg, oral, FDA N
approved prescription anti-emetic, for use as a
complete therapeutic substitute for an IV anti-
emetic at the time of chemotheapy treatment, not
to exceed a 48-hour dosage regimen.
Q0175................................ Perphenazine, 4 mg, oral, FDA approved N
prescription anti-emetic, for use as a complete
therapeutic substitute for an IV anti-emetic at
the time of chemotherapy treatment, not to
exceed a 48-hour dosage regimen.
Q0176................................ Perphenazine, 8 mg, oral, FDA approved N
prescription anti-emetic, for use as a complete
therapeutic substitute for an IV anti-emetic at
the time of chemotherapy treatment, not to
exceed a 48-hour dosage regimen.
Q0177................................ Hydroxyzine pamoate, 25 mg, oral, FDA approved N
prescription anti-emetic, for use as a complete
therapeutic substitute for an IV anti-emetic at
the time of chemotherapy treatment, not to
exceed a 48-hour dosage regimen.
Q0178................................ Hydroxyzine pamoate, 50 mg, oral, FDA approved N
prescription anti-emetic, for use as a complete
therapeutic substitute for an IV anti-emetic at
the time of chemotherapy treatment, not to
exceed a 48-hour dosage regimen.
----------------------------------------------------------------------------------------------------------------

d. Proposed Packaging of Payment for Diagnostic Radiopharmaceuticals,
Contrast Agents, and Implantable Biologicals (``Policy-Packaged'' Drugs
and Devices)
Prior to CY 2008, the methodology of calculating a product's
estimated per day cost and comparing it to the annual OPPS drug
packaging threshold was used to determine the packaging status of
drugs, biologicals, and radiopharmaceuticals under the OPPS (except for
our 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 implantable biologicals as devices
because, in CY 2010, we began to treat implantable biologicals as
devices for all OPPS payment purposes.
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.
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 statutorily required OPPS
drug packaging threshold 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 believe it is appropriate to continue to treat diagnostic
radiopharmaceuticals and contrast agents differently from other SCODs
for CY 2012. Therefore, we are proposing to continue packaging payment
for all contrast agents and diagnostic radiopharmaceuticals,
collectively referred to as ``policy-packaged'' drugs, regardless of
their per day costs, for CY 2012. We also are proposing to continue to
package the payment for diagnostic radiopharmaceuticals into the
payment for the associated nuclear medicine procedure and to package
the payment for contrast agents into the payment of the associated
echocardiography imaging procedure, regardless of whether the agent met
the OPPS drug packaging threshold. We refer readers to the CY 2010
OPPS/ASC final rule with comment period for a detailed discussion of
nuclear medicine and echocardiography services (74 FR 35269 through
35277).
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 packaged payment for all implantable
nonbiological devices without pass-

[[Page 42256]]

through status. We finalized a policy in CY 2010 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, considering them to be devices. For CY 2012, we are proposing to
continue to package payment for nonpass-through implantable biologicals
that are surgically inserted or implanted (through a surgical incision
or a natural orifice) into the body, considering them to be devices.
Three of the products with expiring pass-through status for CY 2012 are
biologicals that, according to their FDA-approved indications, are only
surgically implanted. These products are described by HCPCS codes 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),
and C9364 (Porcine implant, Permacol, per square centimeter). Like the
two implantable biologicals with expiring pass-through status in CY
2011 that were discussed in the CY 2011 OPPS/ASC final rule with
comment period (75 FR 71948 through 71950), we believe that the three
biologicals specified above with expiring pass-through status for CY
2012 differ from other biologicals paid under the OPPS in that they
specifically function as surgically implanted devices. As a result of
our proposed packaged payment methodology for nonpass-through
implantable biologicals, we are proposing to package payment for HCPCS
codes C9361, C9362, and C9364 and assign them status indicator ``N''
for CY 2012. 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 2012. 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.
3. Proposed Payment for Drugs and Biologicals Without Pass-Through
Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and
Other Separately Payable and Packaged Drugs and Biologicals
Section 1833(t)(14) of the Act defines certain separately payable
radiopharmaceuticals, drugs, and biologicals and mandates specific
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a
``specified covered outpatient drug'' is a covered outpatient drug, as
defined in section 1927(k)(2) of the Act, for which a separate APC has
been established and that either is a radiopharmaceutical agent or is a
drug or biological for which payment was made on a pass-through basis
on or before December 31, 2002.
Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and
biologicals are designated as exceptions and are not included in the
definition of ``specified covered outpatient drugs,'' known as SCODs.
These exceptions are--
A drug or biological for which payment is first made on or
after January 1, 2003, under the transitional pass-through payment
provision in section 1833(t)(6) of the Act.
A drug or biological for which a temporary HCPCS code has
not been assigned.
During CYs 2004 and 2005, an orphan drug (as designated by
the Secretary).
Section 1833(t)(14)(A)(iii) of the Act requires that payment for
SCODs in CY 2006 and subsequent years be equal to the average
acquisition cost for the drug for that year as determined by the
Secretary, subject to any adjustment for overhead costs and taking into
account the hospital acquisition cost survey data collected by the
Government Accountability Office (GAO) in CYs 2004 and 2005, and later
periodic surveys conducted by the Secretary as set forth in the
statute. 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. Most physician Part B drugs are paid at ASP+6 percent
pursuant to section 1842(o) and section 1847A of the Act.
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 related expenses and to
make recommendations to the Secretary regarding whether, and if so how,
a payment adjustment should be made to compensate hospitals for
overhead and related expenses. 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 through 42731), 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 that utilize drugs, biologicals, or
radiopharmaceuticals with different handling costs.
As a result of these findings, MedPAC developed seven drug
categories for pharmacy and nuclear medicine handling costs based on
the estimated level of hospital resources used to prepare the products
(70 FR 42729). Associated with these categories were two
recommendations for accurate payment of pharmacy overhead under the
OPPS.
1. CMS should establish separate, budget neutral payments to cover
the costs hospitals incur for handling separately payable drugs,
biologicals, and radiopharmaceuticals.
2. CMS should define a set of handling fee APCs that group drugs,
biologicals, and radiopharmaceuticals based on attributes of the
products that affect handling costs; CMS should instruct hospitals to
submit charges for these APCs and base payment rates for the handling
fee APCs on submitted charges reduced to costs.
In response to the MedPAC findings, in the CY 2006 OPPS proposed
rule (70 FR 42729), we discussed our belief that, because of the varied
handling resources required to prepare different forms of drugs, it
would be impossible to exclusively and appropriately assign a drug to a
certain overhead category that would apply to all hospital outpatient
uses of the drug. Therefore, our CY 2006 OPPS proposal included a
proposal to establish three distinct Level II HCPCS

[[Page 42257]]

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 regarding pharmacy overhead 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 an
acceptable 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 and awaited the
accumulation of CY 2006 data as discussed in the prior year's rule.
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 while continuing our
efforts to improve the available data. 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. We also continued to explore mechanisms to improve
the available data. 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. 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 data 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 by hospitals about the
associated administrative burden. Instead, we indicated in the CY 2009
OPPS/ASC final rule with comment period (73 FR 68659) that we would
continue to explore other potential approaches to improve our drug cost
estimation methodology, thereby increasing payment accuracy for
separately payable drugs and biologicals.
In response to the CMS proposals for the CY 2008 and CY 2009 OPPS,
a group of pharmacy stakeholders (hereinafter referred to as the
pharmacy stakeholders), including some cancer hospitals, some
pharmaceutical manufacturers, and some hospital and professional
associations, commented that CMS should pay an acquisition cost of
ASP+6 percent for separately payable drugs, should substitute ASP+6
percent for the packaged cost of all packaged drugs and biologicals on
procedure claims, and should redistribute the difference between the
aggregate estimated packaged drug cost in claims and payment for all
drugs, including packaged drugs at ASP+6 percent, as separate pharmacy
overhead payments for separately payable drugs. They indicated that
this approach would preserve the aggregate drug cost observed in the
claims data, while

[[Page 42258]]

significantly increasing payment accuracy for individual drugs and
procedures by redistributing drug cost from 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.
In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we
acknowledged the limitations of our data and our availability to find a
method to improve that data in a way that did not impose unacceptable
administrative burdens on providers. Accepting that charge compression
was a reasonable but unverifiable supposition, we proposed to
redistribute between one-third and one-half of the estimated overhead
cost associated with coded packaged drugs and biologicals with an ASP,
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. We calculated
estimated overhead cost for coded packaged drugs and biologicals by
determining the difference between the aggregate claims cost for coded
packaged drugs and biologicals with an ASP and the ASP dollars (ASP
multiplied by the drug's or biological's units in the claims data) for
those same coded drugs and biologicals; this difference was our
estimated overhead cost for coded packaged drugs and biologicals. In
our rationale described in the CY 2010 OPPS/ASC proposed rule (74 FR
35326 through 35333), we stated that we believed that approximately
$150 million of the estimated $395 million total in pharmacy overhead
cost, specifically between one-third and one-half of that cost,
included in our claims data for coded packaged drugs and biologicals
with reported ASP data should be attributed to separately payable drugs
and biologicals and that the $150 million serves as the adjustment for
the pharmacy overhead costs of separately payable drugs and
biologicals. As a result, we also proposed to reduce the costs of coded
drugs and biologicals that are packaged into 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 the 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 that we calculate based on the charges
and costs reported by hospitals on claims and cost reports. As a result
of this approach, no redistribution of cost would occur from other
services to drugs and biologicals or vice versa.
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 the standard methodology
for establishing payment for separately payable drugs and biologicals,
we would have paid for those 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.
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 stated that we believed some portion, but not all, of the total
overhead cost that is associated with coded packaged drugs and
biologicals (the difference between aggregate cost for those drugs and
biologicals on the claims and ASP dollars for the same drugs and
biologicals), based on our standard drug payment methodology, should,
at least for CY 2010, be attributed to separately payable drugs and
biologicals.
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 reported ASP data in the CY 2010
claims data may be too high (74 FR 35327 and 35328). In addition, we
stated that we believed that the pharmacy stakeholders' recommendation
to set packaged drug and biological 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. Further, we indicated that
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 indicated that we believed
that 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. We also explained that layered on these indirect
costs are 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.
Therefore, we stated that a middle ground would represent the most
accurate redistribution of pharmacy overhead cost. Our assumption was
that approximately one-third to one-half of the total pharmacy overhead
cost currently associated with coded packaged drugs and biologicals in
the CY 2008 claims data 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
packaged drugs and biologicals was $132 million, whereas one-half was
$198 million.
Within the one-third to one-half parameters, we proposed that

[[Page 42259]]

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. Based on this redistribution,
we proposed a CY 2010 payment rate for separately payable drugs and
biologicals of ASP+4 percent. Redistributing $150 million represented a
reduction in cost of coded packaged drugs and biologicals with reported
ASP data in the CY 2010 proposed rule claims data of 27 percent.
We also 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). 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
hospitals that participate in the 340B program would be paid the same
amounts for separately payable drugs and biologicals as hospitals that
do not participate in the 340B program (74 FR 35332 through 35333).
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 (74 FR 35333).
In the CY 2010 OPPS final rule with comment period, we adopted a
transitional payment rate of ASP+4 percent based on a pharmacy overhead
adjustment methodology for CY 2010 that redistributed $200 million from
packaged drug and biological cost to separately payable drug cost. This
$200 million included the proposed $150 million redistribution from the
pharmacy overhead cost of coded packaged drugs and biologicals for
which an ASP is reported and an additional $50 million dollars from the
total uncoded drug and biological cost to separately payable drugs and
biologicals as a conservative estimate of the pharmacy overhead cost of
uncoded packaged drugs and biologicals that should be appropriately
associated with the cost of separately payable drugs and biologicals
(74 FR 60517). We believed that our proposal to reallocate $150 million
of costs from coded packaged drugs and biologicals, or one-third of the
pharmacy overhead costs of these products, based upon the claims data
available for the CY 2010 final rule, to separately payable drugs and
biologicals was appropriate (74 FR 60511). We also acknowledged that,
to some unknown extent, there are pharmacy overhead costs being
attributed to the items and services reported under the pharmacy
revenue code without HCPCS codes that are likely pharmacy overhead for
separately payable drugs. Therefore, we reallocated $50 million or 8
percent of the total cost of uncoded packaged 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. This was an
intentionally conservative estimate as we could not identify definitive
evidence that uncoded packaged drug and biological cost included a
pharmacy overhead amount comparable to that of coded packaged drugs and
biologicals with an ASP. We stated that we could not know the amount of
overhead associated with these drugs without making significant
assumptions about the amount of pharmacy overhead cost associated with
the drug and biologicals captured by these uncoded packaged drug costs
(74 FR 60511 through 60513).
We noted that our final CY 2010 payment policy for separately
payable drugs and biologicals at ASP+4 percent fell within the range of
ASP-3 percent (that would have resulted from no pharmacy overhead cost
redistribution from packaged to separately payable drugs and
biologicals), to ASP+7 percent (that would have resulted from
redistribution of pharmacy overhead cost based on expansive assumptions
about the nature of uncoded packaged drug and biological cost). We
finalized a policy of redistributing pharmacy overhead cost 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). We also reiterated our
commitment to continue in our efforts to refine our analyses.
For CY 2011, we continued the CY 2010 pharmacy overhead adjustment
methodology (74 FR 60500 through 60512). We determined the total cost
of separately payable drugs using CY 2009 claims data and compared
these costs to the ASP dollars (April 2010 ASP quarterly payment rates
multiplied by units for the separately payable drugs and biologicals in
the claims data) for the same drugs and biologicals. We determined that
the total estimated payment for separately payable drugs and
biologicals (status indicators ``K'' and ``G''), including acquisition
and pharmacy overhead costs, was ASP-1 percent, which also would be the
ASP-based payment rate under the standard methodology that we
established in CY 2006 (75 FR 46275). Additionally, we determined that
the total estimated aggregate cost for packaged drugs and biologicals
with a HCPCS code for which manufacturers report ASP data (status
indicator ``N''), including acquisition and pharmacy overhead costs,
was equivalent to ASP+296 percent. Finally, we determined that the
total estimated cost for both packaged drugs and biologicals with a
HCPCS code and separately payable drugs and biologicals (status
indicators ``N,'' ``K,'' and ``G'') for which we also have ASP data,
including acquisition and pharmacy overhead costs, was ASP+13 percent.
Consistent with our supposition that the combined payment for average
acquisition and pharmacy overhead costs under our standard methodology
may understate the cost of separately payable drugs and biologicals and
related pharmacy overhead for those drugs and biologicals, we
redistributed $150 million from the pharmacy overhead cost of coded
packaged drugs and biologicals with an ASP and redistributed $50
million from the cost of uncoded packaged drugs and biologicals, for a
total redistribution of $200 million from costs for coded and uncoded
packaged drugs to separately payable drugs and biologicals, with the
result that we pay separately paid drugs and biologicals at ASP+5
percent for CY 2011. The redistribution amount of $150 million in
overhead cost from coded packaged drugs and biologicals with an ASP and
$50 million in costs from uncoded packaged drugs and biologicals
without an ASP were within the parameters established in the CY 2010
OPPS/ASC final rule. In addition, as in prior years, we described some
of our work to improve our analyses during the preceding year, and
reiterated our commitment to continue to refine our drug pricing
methodology.
b. Proposed Payment Policy
Section 1833(t)(14)(A)(iii) of the Act, as described above,
continues to be applicable to determining payments for SCODs for CY
2012. This provision requires that payment for SCODs be equal to the
average acquisition cost for

[[Page 42260]]

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
and later periodic surveys conducted by the Secretary as set forth in
the statute. If hospital acquisition cost data are not available,
section 1833(t)(14)(A)(iii)(II) of the Act requires that payment be
equal to payment rates established under the methodology described in
section 1842(o) of the Act, section 1847A of the Act (ASP+6 percent as
paid for physician Part B drugs), or section 1847B of the Act (CAP), as
the case may be, as calculated and adjusted by the Secretary as
necessary. In accordance with sections 1842(o) and 1847A of the Act,
payments for most Medicare non-OPPS Part B drugs furnished on or after
January 1, 2005, are paid based on the ASP methodology. Medicare Part B
drugs generally fall into three categories: physician-administered
drugs (drugs furnished incident to a physician's service), drugs
delivered through DME (drugs furnished under the durable medical
equipment benefit), and drugs specifically covered by a statutory
provision (certain oral anti-cancer and immunosuppressive drugs).
Section 1833(t)(14)(E)(ii) of the Act authorizes, but does not require,
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. As discussed in V.B.3.a. of this
proposed rule, since CY 2006, we have used ASP data and costs estimated
from charges on hospital claims data as a proxy for the sum of the
average hospital acquisition cost that the statute requires for payment
of SCODs and the associated pharmacy overhead cost in order to
establish a combined payment rate for acquisition cost and pharmacy
overhead. Prior to CY 2010, we applied this methodology to payment for
all separately payable drugs and biologicals without pass-through
status, including both SCODs and other drugs and biologicals that do
not meet the statutory definition of SCODs.
For the CY 2010 OPPS, as part of our ongoing efforts to improve the
validity of our payments, we revised the standard methodology to
include an adjustment for pharmacy overhead. As explained previously,
we have acknowledged, and continue to believe, that the established
method of converting billed charges to costs had the potential to
``compress'' the calculated costs to some degree. 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. To some unknown
extent, we believe that some pharmacy overhead costs attributed to
packaged drugs and biologicals may include pharmacy overhead costs for
separately payable drugs.
For this CY 2012 OPPS/ASC proposed rule, we are proposing to
continue to use our standard methodology for determining the total cost
of separately payable drugs and biologicals in our CY 2010 claims data
and comparing these costs to the ASP dollars (April 2011 ASP quarterly
payment rates multiplied by units for the separately payable drugs and
biologicals in the claims data) for the same drugs and biologicals. We
determined that the total estimated payment for separately payable
drugs and biologicals (status indicators ``K'' and ``G''), including
acquisition and pharmacy overhead costs, is ASP-2 percent, which also
would be the ASP-based payment rate under the standard methodology that
we established in CY 2006 (75 FR 46275). Additionally, we determined
that the total estimated aggregate cost for packaged drugs and
biologicals with a HCPCS code for which manufacturers report ASP data
(status indicator ``N''), including acquisition and pharmacy overhead
costs, is equivalent to ASP+188 percent. Finally, we determined that
the total estimated cost for both packaged drugs and biologicals with a
HCPCS code and separately payable drugs and biologicals (status
indicators ``N,'' ``K,'' and ``G'') for which we also have ASP data,
including acquisition and pharmacy overhead costs, is ASP+11 percent.
Table 31 below displays our findings with regard to the percentage of
ASP in comparison to the cost for packaged coded drugs and biologicals
and for separately payable coded drugs and biologicals before
application of the proposed overhead adjustment methodology.

Table 31--CY 2012 Proposed Rule Data: Asp+X Calculation Under Standard Methodology
----------------------------------------------------------------------------------------------------------------
Total ASP Total cost of
dollars for drugs and
drugs and biologicals in Ratio of cost
biologicals in claims data to ASP (column ASP+X percent
claims data (in 3/column 2)
(in millions)* millions)**
----------------------------------------------------------------------------------------------------------------
Uncoded Packaged Pharmaceutical Revenue Code Unknown * * *$502 Unknown Unknown
Costs..........................................
Coded Packaged Drugs and Biologicals with a $244 705 2.88 ASP+188
reported ASP...................................
Separately Payable Drugs and Biologicals with a 3,536 3,476 0.98 ASP-2
reported ASP...................................
All Coded Drugs and Biologicals with a reported 3,780 4,181 1.11 ASP+11
ASP............................................
----------------------------------------------------------------------------------------------------------------
* Total April 2011 ASP dollars (ASP multiplied by drug or biologicals units in CY 2010 claims) for drugs and
biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2010 claims data for drugs and biologicals.
*** Pharmacy revenue code costs without HCPCS codes.

We acknowledge that the combined payment for average acquisition
and pharmacy overhead costs under our standard methodology may
understate the cost of separately payable drugs and biologicals and
related pharmacy overhead for those drugs and biologicals.
Specifically, we recognize that payment at ASP-2 percent for such costs
may not be sufficient. We also acknowledge that ASP +188 percent may
overstate the combined acquisition and pharmacy overhead cost of
packaged drugs and biologicals. Therefore, given this issue, for CY
2012, we are proposing to continue the CY 2010 and CY 2011 overhead
adjustment methodology, which redistributes $200 million in cost from
packaged drugs with an ASP and uncoded packaged drugs, as first
implemented in the CY 2010 OPPS/ASC final rule with comment period (74
FR 60501 through 60517).
For CY 2012, because we are proposing to continue to make an
overhead adjustment for another year,

[[Page 42261]]

we believe it is appropriate to account for inflation that has occurred
since the overhead redistribution amount of $200 million was applied in
CY 2011. Therefore, we are proposing to apply an inflation allowance to
account for inflation and changes in the prices of pharmaceuticals in
the overall economy. We are proposing to adjust the overhead
redistribution amount of $200 million using the PPI for Pharmaceuticals
for Human Use. The PPI for Pharmaceuticals for Human Use (Prescription)
(Bureau of Labor Statistics (BLS) series code WPUSI07003), provided
through CMS' Office of the Actuary (OACT) is a price series that
reflects price changes associated with the average mix of all
pharmaceuticals in the overall economy. We refer to this series
generally as the PPI for Prescription Drugs. We believe that this price
series is appropriate to use to update the overhead redistribution
amount because the PPI for Prescription Drugs is publicly available and
regularly published and because we have successfully utilized the PPI
for Prescription Drugs for the past 5 years to update the drug
packaging threshold as described in section V.B.2.a. of this proposed
rule.
In order to apply the inflation allowance to the overhead
redistribution amount for CY 2012, we used the most recent forecast of
yearly index levels provided in the PPI for Prescription Drugs to
calculate an updated overhead redistribution amount. After adjusting
the $200 million overhead redistribution amount for inflation using the
PPI for Prescription Drugs, we determined that $161 million would need
to be redistributed from coded packaged drugs and biologicals with
reported ASP data and $54 million would need to be redistributed from
the cost of uncoded packaged drugs and biologicals without an ASP to
separately payable drugs and biologicals. The proposed redistribution
amount of $161 million in overhead cost from coded packaged drugs and
biologicals is within the redistribution parameters established in the
CY 2010 OPPS/ASC final rule with comment period of roughly one-third to
one-half of overhead cost in coded packaged drugs and biologicals. The
total proposed redistribution amount from both coded and uncoded
packaged drugs and biologicals to separately paid drugs and biologicals
would therefore be $215 million. Having determined to redistribute
overhead, we also continue to believe that the methodology to
redistribute a portion of drug overhead cost from packaged coded and
uncoded drugs and biologicals to separately payable drugs and
biologicals while keeping the total cost of drugs and biologicals in
the claims data constant continues to be appropriate for the reasons
set forth in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60501 through 60517). Therefore, for CY 2012, we are proposing to
redistribute a total overhead redistribution amount, adjusted for
inflation, of $215 million from coded and uncoded packaged drugs and
biologicals to separately payable drugs and biologicals.
In the CY 2010 OPPS/ASC final rule with comment period, we
reallocated $150 million in overhead cost from coded packaged drugs and
biologicals with an ASP to separately payable drugs and biologicals
with an ASP, or one-third of the pharmacy overhead cost of these
products based upon the claims data available for the CY 2010 final
rule. In addition, we noted that some of the cost associated with
uncoded packaged drugs and biologicals was appropriate to redistribute
to separately payable drugs and biologicals. Therefore, we made a
conservative estimate, as compared with the case of coded packaged
drugs and biologicals with an ASP for which we had a specific pharmacy
overhead cost estimate in relationship to their known ASPs, and
reallocated $50 million, or 8 percent of the total cost of uncoded
packaged drugs and biologicals with no ASP. We made the assumption that
whatever pharmacy overhead cost inappropriately associated with uncoded
packaged drugs and biologicals would not be less than 8 percent of
total uncoded drugs and biologicals cost.
For this CY 2012 OPPS/ASC proposed rule, we note that continuing to
redistribute $200 million (or $215 million with the adjustment for
inflation) falls within the parameters originally established in the CY
2010 OPPS/ASC final rule with comment period. A redistribution amount
of $161 million in overhead cost from coded packaged drugs and
biologicals with an ASP or approximately 35 percent falls within one-
third to one-half of the estimated pharmacy overhead cost. In addition,
we note that a redistribution amount of $54 million in overhead cost
from uncoded packaged drugs and biologicals, or approximately 11
percent, is not less than 8 percent of the total cost of uncoded
packaged drugs and biologicals. Therefore, our proposal to redistribute
$215 million is consistent with the overhead adjustment methodology
first implemented in CY 2010. We continue to believe that a middle
ground of approximately one-third to one-half of the total pharmacy
overhead cost currently associated with coded packaged drugs and
biologicals in the CY 2010 claims data represents the most accurate
redistribution of pharmacy overhead cost.
We estimate the overhead cost for coded packaged drugs to be $544
million ($705 million in total cost for coded packaged drugs and
biologicals with a reported ASP, less $161 million in total ASP dollars
for coded packaged drugs and biologicals with a reported ASP). As we
did in CY 2010 and CY 2011, we are proposing for CY 2012 that any
redistribution of pharmacy overhead cost would occur only among drugs
and biologicals in our claims data, that no redistribution of cost
would occur from other services to drugs and biologicals or vice versa.
We believe that redistributing $215 million from packaged to separately
payable drugs and biologicals, which includes an adjustment for
inflation, is an appropriate redistribution of pharmacy overhead costs
to address any charge compression in the standard methodology. This
would result in a proposed CY 2012 payment rate for separately payable
drugs and biologicals of ASP+4 percent. We note that, in past years,
the proposed ASP+X amount decreased by at least 1 percentage point when
we updated the ASP data, claims data, and cost report data between the
proposed rule and the final rule with comment period. Therefore, it is
possible that the proposed methodology would result in an ASP+X amount
that is different from ASP+4.
As indicated in Table 31 above, if we were to propose to establish
payment for separately payable drugs and biologicals under the standard
methodology established in CY 2006 without applying a pharmacy overhead
adjustment, we would have to propose to pay for separately payable
drugs and biologicals at ASP-2 percent. However, because we are
concerned about the possibility of underpaying for separately payable
drugs and biologicals, we believe that a pharmacy overhead adjustment
using a redistribution methodology for determining the amount of
payment for drugs and biologicals, as we did for CY 2011, is
appropriate for CY 2012. We acknowledge that the observed ASP-2 percent
may reflect some amount of charge compression and variability
attributable to the choice of a packaging threshold.

[[Page 42262]]

Table 32--CY 2012 Proposed Pharmacy Overhead Adjustment Payment Methodology: 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 (column ASP+X percent
claims Data after 3/column 2)
(in millions) adjustment (in
* millions) * *
----------------------------------------------------------------------------------------------------------------
Uncoded Packaged Pharmaceutical Revenue Code Unknown * * * $448 Unknown Unknown
Costs..........................................
Coded Packaged Drugs and Biologicals with a 244 544 2.23 ASP+123
reported ASP...................................
Separately Payable Drugs and Biologicals with a 3,536 3,691 1.04 ASP+4
reported ASP...................................
All Coded Drugs and Biologicals with a reported 3,780 4,181 1.11 ASP+11
ASP............................................
----------------------------------------------------------------------------------------------------------------
* Total April 2011 ASP dollars (ASP multiplied by drug or biological units in CY 2010 claims) for drugs and
biologicals with a HCPCS code and ASP information.
** Total cost in the CY 2010 claims data for drugs and biologicals.
*** Pharmacy revenue code costs without HCPCS codes.

We note that although it is CMS' longstanding policy under the OPPS
to refrain from instructing hospitals on the appropriate revenue code
to use to charge for specific services, we continue to encourage
hospitals to bill all drugs and biologicals with HCPCS codes,
regardless of whether they are separately payable or packaged, and to
ensure that drug costs are completely reported, using appropriate
revenue codes. We note that we make packaging determinations for drugs
and biologicals annually based on cost information reported under HCPCS
codes, and the OPPS ratesetting is best served when hospitals report
charges for all items and services with HCPCS codes when they are
available, whether or not Medicare makes separate payment for the items
and services.
In summary, for the reasons set forth above and considering the
data limitations we have previously discussed, we are proposing to
continue our prior CY 2010 and CY 2011 acquisition cost proxy
methodology and pharmacy overhead redistribution methodology. In
addition, we are proposing to adjust the $200 million redistribution
amount finalized in CY 2011 for inflation. Therefore, we are proposing
to redistribute $161 million in overhead costs from coded packaged
drugs and biologicals and $54 million in overhead costs from uncoded
packaged drugs and biologicals to result in $215 million in costs
redistributed from packaged coded and uncoded drugs and biologicals to
separately payable drugs and biologicals for CY 2012. The proposed
redistribution amount of $161 million in overhead cost from coded
packaged drugs and biologicals is within the redistribution parameters
established in the CY 2010 OPPS/ASC final rule with comment period of
roughly one-third to one-half of overhead cost in coded packaged drugs
and biologicals. Approximately 11 percent of drug cost in uncoded
packaged drugs and biologicals would be redistributed to separately
payable drugs for CY 2012, and therefore, this amount continues to be
no less than 8 percent of the total uncoded drug and biological cost.
The result of this proposed methodology when applied using April 2011
ASPs, data for claims for services furnished during CY 2010 and
processed through the Common Working File before January 1, 2010, and
the most current submitted cost reports as of January 1, 2011, is a
proposed ASP+4 percent amount for CY 2012.
Further, we are proposing to continue to include the claims data
for 340B hospitals in the calculation of payment for drugs and
biologicals under the CY 2012 OPPS because we believe 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 or biologicals from
payment for other services under the OPPS. Furthermore, we do not
believe it would be appropriate to exclude claims from this subset of
hospitals in the context of a proposed CY 2012 drug and biological
payment policy that pays all hospitals the same rate for separately
payable drugs and biologicals (74 FR 60517). In addition, we are
proposing that 340B hospitals continue to be paid the same amounts for
separately payable drugs and biologicals as hospitals that do not
participate in the 340B program for CY 2012 because commenters have
generally opposed differential payment for hospitals based on their
340B participation status. In addition, we are proposing to include
claims from 340B hospitals in our assessment of average acquisition
cost under section 1833(t)(14)(A)(iii) of the Act. We are proposing
that the estimated payments for separately payable drugs and
biologicals 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.
We note that we continue to pursue the most appropriate methodology
for establishing payment for drugs and biologicals under the OPPS.
Because we are always trying to improve the integrity of our data, we
have previously proposed multiple mechanisms to improve the cost data
available to us, but have not implemented those proposals due to
hospital concerns about the administrative burden. We continue to be
interested in developing mechanisms that improve the cost data
available to us while minimizing to the extent possible the
administrative burden on hospitals. For the past 3 years, we have
proposed an internal adjustment to redistribute an amount from packaged
coded and uncoded drugs and biologicals to separately payable drugs and
biologicals, because the results of our standard drug payment
methodology are unlikely to accurately reflect the full cost of
acquisition and pharmacy overhead for separately payable and packaged
drugs and biologicals due to hospital charging practices and our use of
an annual drug packaging threshold. As we continue to work to refine
our payment systems, a goal to which we have been consistently
committed over the past several years, we encourage public input on
determining alternative cost-based methodologies to aid in our ongoing
evaluation of alternative cost-based methodologies that could improve
upon the current methodology.
c. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
Beginning in the CY 2005 OPPS final rule with comment period, we

[[Page 42263]]

exempted radiopharmaceutical manufacturers from reporting ASP data for
all radiopharmaceuticals 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 OPPS ratesetting until
we began collecting ASP for nonpass-through separately paid therapeutic
radiopharmaceuticals for CY 2010. 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. 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. 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.
In CY 2008, we packaged payment for all diagnostic
radiopharmaceuticals and we proposed and finalized a methodology to
provide prospective payment for therapeutic radiopharmaceuticals
(defined as those Level II HCPCS codes that include the term
``therapeutic'' along with a radiopharmaceutical in their long code
descriptors) using mean costs derived from the CY 2006 claims data,
where the costs were determined using our standard methodology of
applying hospital-specific departmental CCRs to radiopharmaceutical
charges, defaulting to hospital-specific overall CCRs only if
appropriate departmental CCRs were unavailable (72 FR 66772). Following
issuance 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(a) of the Medicare, Medicaid, and SCHIP Extension Act of
2007 (Pub. L. 110-173), to further extend the payment period for
therapeutic radiopharmaceuticals based on hospitals' charges adjusted
to cost through December 31, 2009. Therefore, for CY 2009, we finalized
a policy to continue to pay hospitals for therapeutic
radiopharmaceuticals at charges adjusted to cost through the end of CY
2009.
For CY 2010, we proposed and finalized a policy to pay for
separately paid therapeutic radiopharmaceuticals under the ASP
methodology adopted for separately payable drugs and biologicals. We
allowed manufacturers to submit the ASP data in a patient-specific dose
or patient-ready form in order to properly calculate the ASP amount for
a given HCPCS code. This resulted in payment for nonpass-through
separately paid therapeutic radiopharmaceuticals at ASP+4 percent for
CY 2010 for products for which the manufacturer submitted ASP. We also
finalized a policy to base therapeutic radiopharmaceutical payment on
CY 2008 mean unit cost data derived from hospital claims if ASP
information was unavailable. For CY 2011, we continued to pay for
nonpass-through separately paid therapeutic radiopharmaceuticals under
the ASP methodology adopted for separately payable drugs and
biologicals, resulting in a payment rate for nonpass-through separately
paid therapeutic radiopharmaceuticals of ASP+5 percent. We also
continued to base therapeutic radiopharmaceutical payment on CY 2009
mean unit cost data derived from hospital claims if ASP information was
unavailable.
We believe that the rationale outlined in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60524 through 60525) for applying
the principles of separately payable drug pricing to therapeutic
radiopharmaceuticals continues to be appropriate for nonpass-through
separately payable therapeutic radiopharmaceuticals in CY 2012.
Therefore, we are proposing to continue to pay all nonpass-through,
separately payable therapeutic radiopharmaceuticals under the ASP+X
payment level established using the proposed pharmacy overhead
adjustment based on a redistribution methodology to set payment for
separately payable drugs and biologicals (proposed at ASP+4 percent, as
discussed in section V.B.3.b. of this proposed rule) based on ASP
information, if available, for a ``patient ready'' dose and updated on
a quarterly basis for products for which manufacturers report ASP data.
For a full discussion of how a ``patient ready'' dose is defined, we
refer readers to the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60520 through 60521). We also are proposing to rely on CY 2010
mean unit cost data derived from hospital claims data for payment rates
for therapeutic radiopharmaceuticals for which ASP data are unavailable
and to update the payment rates for separately payable therapeutic
radiopharmaceuticals, 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.
The proposed CY 2012 payment rates for nonpass-through separately
payable therapeutic radiopharmaceuticals are included in Addenda A and
B to this proposed rule (which is referenced in section XVII. of this
proposed rule and available via the Internet).
4. Proposed Payment for Blood Clotting Factors
For CY 2011, we provided payment for blood clotting factors under
the same methodology as other nonpass-through separately payable drugs
and biologicals under the OPPS and continued paying an updated
furnishing fee. That is, for CY 2011, we provided payment for blood
clotting factors under the OPPS at ASP+5 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 2011 updated furnishing fee is $0.176 per unit.
For CY 2012, we are proposing to pay for blood clotting factors at
ASP+4 percent, consistent with our proposed payment policy for other
nonpass-through separately payable drugs and biologicals, and to
continue our policy for payment of the furnishing fee using an updated
amount. Our rationale for this proposed policy was first articulated in
the CY 2006 OPPS final rule with comment period (70 FR 68661) and then
later discussed in the CY 2008 OPPS/ASC final rule with comment period
(72 FR 66765). The proposed 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. Because
the Bureau of Labor Statistics releases the applicable CPI data after
the MPFS and OPPS/ASC proposed rules are published, we are not able to
include the actual updated furnishing fee in the proposed rules.
Therefore, in accordance with our policy, as finalized in the CY 2008
OPPS/ASC final rule with comment period (72 FR 66765), we would
announce the actual figure for the percent change in the applicable CPI

[[Page 42264]]

and the updated furnishing fee calculated based on that figure through
applicable program instructions and posting on the CMS Web site at:
http://www.cms.hhs.gov/McrPartBDrugAvgSalesPrice/.
5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and
Radiopharmaceuticals with HCPCS Codes, but without OPPS Hospital Claims
Data
The Medicare Prescription Drug, Improvement, and Modernization Act
of 2003 (Pub. L. 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
diagnostic radiopharmaceuticals) 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. For CY 2010, we continued to provide payment for new drugs
(excluding contrast agents), and nonimplantable biologicals with HCPCS
codes that do not have pass-through status and are without OPPS
hospital claims data, at ASP+4 percent, consistent with the CY 2010
payment methodology for other separately payable nonpass-through drugs,
and nonimplantable biologicals. We also finalized a policy to extend
the CY 2009 payment methodology to new therapeutic radiopharmaceutical
HCPCS codes, consistent with our final policy in the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60581 through 60526), providing
separate payment for therapeutic radiopharmaceuticals that do not
crosswalk to CY 2009 HCPCS codes, do not have pass-through status, and
are without OPPS hospital claims data, at ASP+4 percent. This policy
was continued in the CY 2011 OPPS/ASC final rule with comment period
(75 FR 71970 through 71973), paying for new drugs, nonimplantable
biologicals and radiopharmaceuticals that do not crosswalk to CY 2010
HCPCS codes, do not have pass-through status, and are without OPPS
hospital claims data at ASP+5 percent.
For CY 2012, we are proposing to continue our payment policies for
new drugs (excluding contrast agents and diagnostic
radiopharmaceuticals), nonimplantable biologicals, and therapeutic
radiopharmaceuticals that have HCPCS codes that do not crosswalk to CY
2011 HCPCS codes, do not have pass-through status, and are without OPPS
hospital claims data. We are proposing to provide payment for new CY
2012 drugs (excluding contrast agents and diagnostic
radiopharmaceuticals), nonimplantable biologicals, and therapeutic
radiopharmaceuticals, at ASP+4 percent, consistent with the proposed CY
2012 payment methodology for other separately payable nonpass-through
drugs, nonimplantable biologicals, and therapeutic
radiopharmaceuticals. We believe this proposed policy would ensure that
new nonpass-through drugs, nonimplantable biologicals and therapeutic
radiopharmaceuticals would be treated like other drugs, nonimplantable
biologicals, and therapeutic radiopharmaceuticals under the OPPS,
unless they are granted pass-through status. Only if they are pass-
through drugs, nonimplantable biologicals, or therapeutic
radiopharmaceuticals would they receive a different payment for CY
2012, 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 also are proposing to continue our CY 2011 policy of packaging
payment for all new nonpass-through diagnostic radiopharmaceuticals,
contrast agents, and implantable biologicals with HCPCS codes but
without claims data (those new CY 2012 diagnostic radiopharmaceuticals,
contrast agents, and implantable biological HCPCS codes that do not
crosswalk to predecessor HCPCS codes), consistent with the proposed
packaging of all existing nonpass-through diagnostic
radiopharmaceuticals, contrast agents and implantable biologicals, as
discussed in more detail in section V.B.2.d. and IV.A.2. of this
proposed rule.
In accordance with the OPPS ASP methodology, in the absence of ASP
data, for CY 2012, we are proposing to continue the policy we
implemented beginning in CY 2005 of using the WAC for the product to
establish the initial payment rate for new nonpass-through drugs and
biologicals with HCPCS codes, but which are without OPPS claims data.
However, we note that if the WAC is also unavailable, we would make
payment at 95 percent of the product's most recent AWP. We also are
proposing to assign status indicator ``K'' (separately paid nonpass-
through drugs and nonimplantable biologicals, including therapeutic
radiopharmaceuticals) to HCPCS codes for new drugs and nonimplantable
biologicals without OPPS claims data and for which we have not granted
pass-through status. With respect to new, nonpass-through drugs,
nonimplantable biologicals, and therapeutic radiopharmaceuticals, for
which we do not have ASP data, we are proposing that once their ASP
data become available in later quarterly 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 2012 at ASP+4 percent) for items that have not been
granted pass-through status. This proposed policy, which is consistent
with prior years' policies for these items, 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

[[Page 42265]]

2012, generally equivalent to the payment these drugs and biologicals
would receive in the physician's office setting, consistent with the
requirements of the statute.
Similarly, we are proposing to continue our CY 2011 policy to base
the initial payment for new therapeutic radiopharmaceuticals with HCPCS
codes, but which do not have pass-through status and are without claims
data, on the WACs for these products if ASP data for these therapeutic
radiopharmaceuticals are not available. If the WACs are also
unavailable, we are proposing to make payment for new therapeutic
radiopharmaceutical at 95 percent of the products' most recent AWP
because we would not have mean costs from hospital claims data upon
which to base payment. As we are proposing with new drugs and
biologicals, we are proposing to continue our policy of assigning
status indicator ``K'' to HCPCS codes for new therapeutic
radiopharmaceuticals without OPPS claims data for which we have not
granted pass-through status.
Consistent with other ASP-based payment, for CY 2012 we are
proposing to announce any changes to the payment amounts for new drugs
and biologicals in the CY 2012 OPPS/ASC final rule with comment period
and also on a quarterly basis on the CMS Web site during CY 2012 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 2012 HCPCS codes for drugs,
biologicals and therapeutic radiopharmaceuticals are not available at
the time of development of this proposed rule. However, these agents
will be included in Addendum B to the CY 2012 OPPS/ASC final rule with
comment period where they will be assigned comment indicator ``NI''
(which is referenced in section XVII. of this proposed rule and
available via the Internet on the CMS Web site) to reflect that their
interim final OPPS treatment is open to public comment on the CY 2012
OPPS/ASC final rule with comment period.
There are several nonpass-through drugs and biologicals that were
payable in CY 2010 and/or CY 2011 for which we do not have CY 2010
hospital claims data available for this proposed rule and for which
there are no other HCPCS codes that describe different doses of the
same drug, but which have pricing information available for the ASP
methodology. We note that there are currently no therapeutic
radiopharmaceuticals in this category. In order to determine the
packaging status of these products for CY 2012, we calculated an
estimate of the per day cost of each of these items by multiplying the
payment rate of 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 day in the hospital
outpatient setting. This rationale was first adopted in the CY 2006
OPPS/ASC final rule with comment period (70 FR 68666 and 68667). We are
proposing to package items for which we estimated the per day
administration cost to be less than or equal to $80, which is the
general packaging threshold that we are proposing for drugs,
nonimplantable biologicals, and therapeutic radiopharmaceuticals in CY
2012. We are proposing to pay separately for items with an estimated
per day cost greater than $80 (with the exception of diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals,
which we are proposing to continue to package regardless of cost as
discussed in more detail in section V.B.2.d. of this proposed rule) in
CY 2012. We are proposing that the CY 2012 payment for separately
payable items without CY 2010 claims data would be ASP+4 percent,
similar to payment for other separately payable nonpass-through drugs
and biologicals under the OPPS. In accordance with the ASP methodology
paid in the physician's office setting, in the absence of ASP data we
are proposing to use the WAC for the product to establish the initial
payment rate. However, we note that if the WAC is also unavailable, we
would make payment at 95 percent of the most recent AWP available.
The proposed estimated units per day and status indicators for
these items are displayed in Table 33 below.

Table 33--Drugs and Biologicals Without CY 2010 Claims Data
----------------------------------------------------------------------------------------------------------------
Estimated
average number Proposed CY Proposed CY
CY 2012 HCPCS Code CY 2012 Long descriptor of units per 2012 SI 2012 APC
day
----------------------------------------------------------------------------------------------------------------
J0205................................. Injection, alglucerase, 420 K 0900
per 10 units.
J0364................................. Injection, apomorphine 12 N N/A
hydrochloride, 1 mg.
J0630................................. Injection, calcitonin 1.5 N N/A
salmon, up to 400 units.
J1680................................. Injection, human 49 K 1290
fibrinogen concentrate,
100 mg.
J2513................................. Injection, pentastarch, 4 K 1222
10% solution, 100 ml.
J2724................................. Injection, protein c 1540 K 1139
concentrate,
intravenous, human, 10
iu.
J3355................................. Injection, 2 K 1741
urofollitropin, 75 IU.
J9216................................. Injection, interferon, 1 K 0838
gamma 1-b, 3 million
units.
Q0515................................. Injection, sermorelin 70 K 3050
acetate, 1 microgram.
----------------------------------------------------------------------------------------------------------------

Finally, there were five drugs and biologicals, shown in Table 34
below, that were payable in CY 2010, but for which we lacked CY 2010
claims data and any other pricing information for the ASP methodology
for the CY 2012 OPPS/ASC proposed rule. In CY 2009, for similar items
without CY 2007 claims data and without pricing information for the ASP
methodology, we previously 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 finalized a policy to change the status indicator
for drugs and biologicals previously assigned a payable status
indicator to status indicator ``E'' (Not paid by Medicare when
submitted on outpatient claims (any outpatient bill type)) whenever we
lacked claims data and pricing information and were unable to determine
the per day cost. In addition, we noted that we would provide separate
payment for these drugs and biologicals if pricing information
reflecting recent sales becomes available mid-year in CY 2010 for the
ASP

[[Page 42266]]

methodology. If pricing information became available, we would assign
the products status indicator ``K'' and pay for them separately for the
remainder of CY 2010. In the CY 2011 OPPS/ASC final rule with comment
period (75 FR 71973), for CY 2011, we continued our CY 2010 policy to
assign status indicator ``E'' to drugs and biologicals that lacked CY
2009 claims data and pricing information for the ASP methodology. We
also continued our policy to change the status indicator for these
products to ``K'' if pricing information became available and pay for
them separately for the remainder of CY 2011.
For CY 2012, we are proposing to continue our CY 2011 policy to
assign status indicator ``E'' to drugs and biologicals that lack CY
2010 claims data and pricing information for the ASP methodology. All
drugs and biologicals without CY 2010 hospital claims data and data
based on the ASP methodology that are assigned status indicator ``E''
on this basis at the time of this proposed rule for CY 2012 are
displayed in Table 34 below. If pricing information becomes available,
we are proposing to assign the products status indicator ``K'' and pay
for them separately for the remainder of CY 2012.

Table 34--Drugs and Biologicals Without CY 2010 Claims Data and Without
Pricing Information for the ASP Methodology
------------------------------------------------------------------------
CY 2012 long
CY 2012 HCPCS code descriptor Proposed CY 2012 SI
------------------------------------------------------------------------
J2940....................... Injection, somatrem, E
1 mg.
J3305....................... Injection, E
trimetrexate
glucuronate, per 25
mg.
J8650....................... Nabilone, oral, 1 mg E
J9165....................... Injection, E
diethylstilbestrol
diphosphate, 250 mg.
J9213....................... Injection, E
interferon, alfa-
2a, recombinant, 3
million units.
------------------------------------------------------------------------

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

A. Background

Section 1833(t)(6)(E) of the Act limits the total projected amount
of transitional pass-through payments for drugs, biologicals,
radiopharmaceuticals, and categories of devices for a given year to an
``applicable percentage'' (currently 2.0 percent, as stated below) of
total program payments estimated to be made for all covered services
under the hospital OPPS furnished for that year. For a year (or portion
of a year) before CY 2004, the applicable percentage was 2.5 percent;
for CY 2004 and subsequent years, the applicable percentage is a
percentage specified by the Secretary up to (but not to exceed) 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 prospective 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 pro rata 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
2012 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 will continue to be eligible
for pass-through payment in CY 2012. 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 may be newly eligible, for device pass-through payment in the
remaining quarters of CY 2011 or beginning in CY 2012. 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 surgically inserted or
implanted (through a surgical incision or a natural orifice; also
referred to herein as ``implantable biologicals'') is the device pass-
through process and payment methodology only (74 FR 60476). For CY
2012, we are proposing that the estimate of pass-through spending for
implantable biologicals newly eligible for pass-through payment
beginning in CY 2012 be included in the pass-through spending estimate
for this second group of device categories. The sum of the CY 2012
pass-through estimates for these two groups of device categories would
equal the total CY 2012 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 payment
amount as the amount by which the hospital's charges for the device,
adjusted to cost, exceeds the portion of the otherwise applicable OPPS
fee schedule payment that the Secretary determines is associated with
the device. As discussed in section IV.A.2. of this proposed rule, we
deduct from the pass-through payment for an identified device category
eligible for pass-through payment an amount that reflects the portion
of the APC payment amount that we determine is associated with the cost
of the device, defined as the device APC offset amount, when we believe
that the 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 implantable
biologicals from CY 2010 forward, 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 the 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
is 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

[[Page 42267]]

amount by which the amount authorized under section 1842(o) of the Act
(or, if the drug or biological is covered under a competitive
acquisition contract under section 1847B of the Act, an amount
determined by the Secretary equal to the average price for the drug or
biological for all competitive acquisition areas and year established
under such section as calculated and adjusted by the Secretary) exceeds
the portion of the otherwise applicable fee schedule amount that the
Secretary determines is associated with the drug or biological. Because
we are proposing to pay for most nonpass-through separately payable
drugs and nonimplantable biologicals under the CY 2012 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 proposing to pay for CY 2012 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 2012 would not be zero, as discussed below.
Furthermore, payment for certain drugs, specifically diagnostic
radiopharmaceuticals, contrast agents, and implantable biologicals
without pass-through status, will always be packaged into payment for
the associated procedures because these products will never be
separately paid. However, all pass-through diagnostic
radiopharmaceuticals and contrast agents with pass-through status
approved prior to CY 2012 would be 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 with pass-through
status approved prior to CY 2012 is also not zero. We note that there
are no implantable biologicals proposed to continue on pass-through
status for CY 2012 and, therefore, we are not proposing to include
implantable biologicals in our estimate of pass-through payment.
Payment for nonpass-through implantable biologicals will continue to be
packaged into the payment for the associated procedure as described in
section V.B.2.d of this proposed rule.
In section V.A.4. of this proposed rule, we discuss our proposed
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, we are proposing to offset the
amount of pass-through payment for diagnostic radiopharmaceuticals and
contrast agents. For these drugs, the APC offset amount would be the
portion of the APC payment for the specific procedure 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 would reduce our estimate of pass-through payment for these drugs by
this amount.
We note that the Part B drug CAP program has been postponed
beginning January 1, 2009. We refer readers to the Medicare Learning
Network (MLN) Matters Special Edition article SE0833 for more
information, available via the CMS Web site at: http://www.cms.gov/MLNMattersArticles/downloads/SE0833.pdf. As of the publication of this
proposed rule, the postponement of the Part B drug CAP program is still
in effect. As in past years, for this proposed rule, we do not have an
effective Part B drug CAP rate for pass-through drugs and biologicals.
Similar to pass-through estimates for devices, the first group of
drugs and nonimplantable biologicals requiring a pass-through payment
estimate consists of those products that were recently made eligible
for pass-through payment and that will continue to be eligible for
pass-through payment in CY 2012. The second group contains drugs and
nonimplantable biologicals that we know are newly eligible, or project
will be newly eligible, in the remaining quarters of CY 2011 or
beginning in CY 2012. The sum of the CY 2012 pass-through estimates for
these two groups of drugs and biologicals would equal the total CY 2012
pass-through spending estimate for drugs and biologicals with pass-
through status.

B. Proposed Estimate of Pass-Through Spending

We are proposing to set the applicable pass-through payment
percentage limit at 2.0 percent of the total projected OPPS payments
for CY 2012, consistent with our OPPS policy from CY 2004 through CY
2011 (75 FR 71975).
For the first group of devices for pass-through payment estimate
purposes, there currently is one device category, C1749 (Endoscope,
retrograde imaging/illumination colonoscope device (implantable)) that
became effective October 1, 2010, has been paid as a pass-through
device for CY 2011, and will continue to be eligible for CY 2012. We
estimate that CY 2012 pass-through expenditures related to C1749 will
be approximately $35 million.
In estimating our proposed CY 2012 pass-through spending for device
categories in the second group, which also includes any estimate for
implantable biologicals that are eligible for pass-through payment, we
include: Device categories that we know at the time of the development
of this proposed rule would be newly eligible for pass-through payment
in CY 2012 (of which there are none); additional device categories
(including categories that describe implantable biologicals) that we
estimate could be approved for pass-through status subsequent to the
development of this proposed rule and before January 1, 2012; and
contingent projections for new device categories (including categories
that describe implantable biologicals) established in the second
through fourth quarters of CY 2012. We are proposing to use the general
methodology described in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66778), while also taking into account recent OPPS
experience in approving new pass-through device categories. For this
proposed rule, the estimate of CY 2012 pass-through spending for this
second group of device categories is $10 million. Using our established
methodology, the total estimated pass-through spending for device
categories for CY 2012 (spending for the first group of device
categories ($35 million) plus spending for the second group of device
categories ($10 million)) equals $45 million.
To estimate CY 2012 proposed pass-through spending for drugs and
nonimplantable biologicals in the first group, specifically those drugs
(including radiopharmaceuticals and contrast agents) and nonimplantable
biologicals recently made eligible for pass-through payment and
continuing on pass-through status for CY 2012, we are proposing to
utilize the most recent Medicare physician's office data regarding
their utilization, information provided in the respective pass-through
applications, historical hospital claims data, pharmaceutical industry
information, and clinical information regarding those drugs or
nonimplantable

[[Page 42268]]

biologicals, to project the CY 2012 OPPS utilization of the products.
For the known drugs and nonimplantable biologicals (excluding
diagnostic radiopharmaceuticals and contrast agents) that would be
continuing on pass-through status in CY 2012, we estimate the proposed
pass-through payment amount as the difference between ASP+6 percent or
the Part B drug CAP rate, as applicable, and the proposed payment rate
for nonpass-through drugs and nonimplantable biologicals that would be
separately paid at ASP+4 percent, aggregated across the projected CY
2012 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
are proposing to include in the proposed CY 2012 pass-through estimate
the difference between payment for the drug or nonimplantable
biological at ASP+6 percent (or WAC+6 percent, or 95 percent of AWP, if
ASP or WAC information is not available) and the ``policy-packaged''
drug APC offset amount, if we have determined that the diagnostic
radiopharmaceutical or contrast agent approved for pass-through payment
resembles predecessor diagnostic radiopharmaceuticals or contrast
agents already included in the costs of the APCs that would be
associated with the drug receiving pass-through payment. For this
proposed rule, we are proposing to continue to use the methodology used
in CY 2011 to calculate a proposed spending estimate for this first
group of drugs and biologicals to be approximately $5.7 million.
To estimate CY 2012 pass-through spending for drugs and
nonimplantable biologicals in the second group (that is, drugs and
nonimplantable biologicals that we know at the time of development of
this proposed rule would be newly eligible for pass-through payment in
CY 2012, additional drugs and nonimplantable biologicals that we
estimate could be approved for pass-through status subsequent to the
development of this proposed rule and before January 1, 2012, 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 2012), we are proposing to use utilization
estimates from pass-through applicants, pharmaceutical industry data,
clinical information, recent trends in the per unit ASPs of hospital
outpatient drugs, and projected annual changes in service volume and
intensity as our basis for making the CY 2012 proposed pass-through
payment estimate. We are also considering the most recent OPPS
experience in approving new pass-through drugs and nonimplantable
biologicals. Using our proposed methodology for estimating CY 2012
pass-through payments for this second group of drugs, we calculated a
proposed spending estimate for this second group of drugs and
nonimplantable biologicals to be approximately $13.8 million.
As discussed in section V.A. of this proposed rule,
radiopharmaceuticals are considered drugs for pass-through purposes.
Therefore, we include radiopharmaceuticals in our proposed CY 2012
pass-through spending estimate for drugs and biologicals. Our proposed
CY 2012 estimate for total pass-through spending for drugs and
biologicals (spending for the first group of drugs and nonimplantable
biologicals ($5.7 million) plus spending for the second group of drugs
and nonimplantable biologicals ($13.8 million)) equals $19.5 million.
In summary, in accordance with the methodology described above in
this section, for this proposed rule, we estimate that total pass-
through spending for the device categories and the drugs and
nonimplantable biologicals that are continuing to receive pass-through
payment in CY 2012 and those device categories, drugs, and
nonimplantable biologicals that first become eligible for pass-through
payment during CY 2012 would be approximately $64.5 million
(approximately $45 million for device categories and approximately
$19.5 million for drugs and non-implantable biologicals), which
represents 0.15 percent of total OPPS projected total payments for CY
2012. We estimate that pass-through spending in CY 2012 would not
amount to 2.0 percent of total projected OPPS CY 2012 program spending.

VII. Proposed OPPS Payment for Hospital Outpatient Visits

A. Background

Currently, hospitals report visit HCPCS codes to describe three
types of OPPS services: Clinic visits; emergency department visits; and
critical care services. For OPPS purposes, we recognize clinic visit
codes as those codes defined in the CPT code book 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
code book. In Transmittal 1139, Change Request 5438, dated December 22,
2006, we stated that, under the OPPS, the time that can be reported as
critical care is the time spent by a physician and/or hospital staff
engaged in active face-to-face critical care of a critically ill or
critically injured patient. Under the OPPS, we also recognize HCPCS
code G0390 (Trauma response team associated with hospital critical care
service) for the reporting of a trauma response in association with
critical care services.
We are proposing to continue to recognize these CPT and HCPCS codes
describing clinic visits, Type A and Type B emergency department
visits, critical care services, and trauma team activation provided in
association with critical care services for CY 2012. These codes are
listed below in Table 35.

Table 35--Proposed HCPCS Codes Used To Report Clinic and Emergency
Department Visits and Critical Care Services
------------------------------------------------------------------------
CY 2012 HCPCS Code CY 2012 Descriptor
------------------------------------------------------------------------
Clinic Visit HCPCS Codes
------------------------------------------------------------------------
99201.................................. Office or other outpatient
visit for the evaluation and
management of a new patient
(Level 1).
99202.................................. Office or other outpatient
visit for the evaluation and
management of a new patient
(Level 2).
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).

[[Page 42269]]

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 28-March 1 2011 APC Panel meeting, the APC
Panel recommended that CMS continue to report claims data for clinic
and emergency department visits and observation, and, if CMS identifies
changes in patterns of utilization or cost, it bring those issues
before the Visits and Observation Subcommittee for future
consideration. The APC Panel also recommended that the work of the
Visits and Observation Subcommittee continue. We are accepting these
recommendations and will present the available requested data at an
upcoming meeting of the APC Panel.

B. Proposed Policies for Hospital Outpatient Visits

1. Clinic Visits: New and Established Patient Visits
As reflected in Table 35 hospitals use different CPT codes for
clinic visits based on whether the patient being treated is a new
patient or an established patient. Beginning in CY 2009, we refined the
definitions of a new patient and an established patient to reflect
whether or not the patient has been registered as an inpatient or
outpatient of the hospital within the past 3 years. A patient who has
been registered as an inpatient or outpatient of the hospital within
the 3 years prior to a visit would be considered to be an established
patient for that visit, while a patient who has not been registered as
an inpatient or outpatient of the hospital within the 3 years prior to
a visit would be considered to be a new patient for that visit. We
refer readers to the CY 2009 OPPS/ASC final rule with comment period
(73 FR 68677 through 68680) for a full discussion of the refined
definitions.
We continue to believe that defining new or established patient
status based on whether the patient has been registered as an inpatient
or outpatient of the hospital within the 3 years prior to a visit will
reduce hospitals' administrative burden associated with reporting
appropriate clinic visit CPT codes, as we stated in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68677 through 68680). For CY
2012, we are proposing to continue to recognize the refined definitions
of a new patient and an established patient, and applying our policy of
calculating median costs for clinic visits under the OPPS using
historical hospital claims data. As discussed in section II.A.2.e.(1)
of the this proposed rule and consistent with our CY 2011 policy, when
calculating the median costs for the clinic visit APCs (0604 through
0608), we are proposing to continue to utilize our methodology that
excludes those claims for visits that are eligible for payment through
the extended assessment and management composite APC 8002 (Level I
Extended Assessment and Management Composite). We continue to believe
that this approach results in the most accurate cost estimates for APCs
0604 through 0608 for CY 2012.
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 a Type A emergency department to
distinguish it from a Type B emergency department. 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
42 CFR 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

[[Page 42270]]

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 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
hospitals' 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.
As discussed in the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60548 through 60551), analyses of CY 2008 hospitals' cost data
from claims data used for CY 2010 ratesetting for the emergency
department HCPCS G-codes demonstrated that 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 data, 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. As
a result, for CY 2010, we finalized a policy to continue to pay Levels
1 through 4 Type B emergency department visits through four levels of
APCs, and to pay for Level 5 Type B emergency department visits through
new APC 0630 (Level 5 Type B Emergency Department Visit), to which the
Level 5 Type B emergency department visit HCPCS code is the only
service assigned.
As we noted in the CY 2011 OPPS/ASC final rule with comment period
(75 FR 71987), the pattern of relative cost differences between Type A
and Type B emergency department visits is consistent with the
distributions we observed in the CY 2008 claims data. Therefore, we
finalized our proposal to continue to pay for Type B emergency
department visits in CY 2011 based on their median costs through five
levels of APCs: APC 0626 (Level 1 Type B Emergency Department Visit),
APC 0627 (Level 2 Type B Emergency Department Visit), APC 0628 (Level 3
Type B Emergency Department Visit), APC 0629 (Level 4 Type B Emergency
Department Visit), and APC 0630.
For CY 2012, we continue to believe that this configuration pays
appropriately for each level of Type B emergency department visits
based on estimated resource costs from the most recent CY 2010 claims
data. Therefore, we are proposing to continue to pay for Type B
emergency department visits in CY 2012 based on their median costs
through the five levels of Type B emergency department APCs (APCs 0626
through 0630). We also note that, as discussed in section II.A.2.e.(1)
of this proposed rule and consistent with our CY 2011 policy, when
calculating the proposed median costs for the emergency department
visit and critical care APCs (0609 through 0617 and 0626 through 0630),
we are proposing to utilize our methodology that excludes those claims
for visits that are eligible for payment through the extended
assessment and management composite APC 8002. We believe that this
approach would result in the most accurate cost estimates for APCs 0604
through 0608 for CY 2012.
Table 36 below displays the proposed median costs for each level of
Type B emergency department visit APCs under the proposed CY 2012
configuration, compared to the proposed CY 2012 median costs for each
level of clinic visit APCs and each level of Type A emergency
department visit APCs.

[[Page 42271]]

Table 36--Comparison of Proposed Median Costs for Clinic Visit APCs, Type B Emergency Department Visit APCs, and
Type A Emergency Department Visit APCs
----------------------------------------------------------------------------------------------------------------
Proposed CY Proposed CY
Proposed CY 2012 Type B 2012 Type A
2012 clinic emergency emergency
Visit level visit department visit
approximate approximate approximate
APC median APC median APC median
cost cost cost
----------------------------------------------------------------------------------------------------------------
Level 1......................................................... $50 $41 $52
Level 2......................................................... 75 59 89
Level 3......................................................... 105 94 142
Level 4......................................................... 138 141 229
Level 5......................................................... 178 271 340
----------------------------------------------------------------------------------------------------------------

For CY 2010 and in prior years, the AMA CPT Editorial Panel defined
critical care CPT codes 99291 (Critical care, evaluation and management
of the critically ill or critically injured patient; first 30-74
minutes) and 99292 (Critical care, evaluation and management of the
critically ill or critically injured patient; each additional 30
minutes (List separately in addition to code for primary service)) to
include a wide range of ancillary services such as electrocardiograms,
chest X-rays and pulse oximetry. As we have stated in manual
instruction, we expect hospitals to report in accordance with CPT
guidance unless we instruct otherwise. For critical care in particular,
we instructed hospitals that any services that the CPT Editorial Panel
indicates are included in the reporting of CPT code 99291 (including
those services that would otherwise be reported by and paid to
hospitals using any of the CPT codes specified by the CPT Editorial
Panel) should not be billed separately. Instead, hospitals were
instructed to report charges for any services provided as part of the
critical care services. In establishing payment rates for critical care
services, and other services, CMS packages the costs of certain items
and services separately reported by HCPCS codes into payment for
critical care services and other services, according to the standard
OPPS methodology for packaging costs (Medicare Claims Processing
Manual, Pub. 100-04, Chapter 4, Section 160.1).
For CY 2011, the AMA CPT Editorial Panel revised its guidance for
the critical care codes to specifically state that, for hospital
reporting purposes, critical care codes do not include the specified
ancillary services. Beginning in CY 2011, hospitals that report in
accordance with the CPT guidelines should report all of the ancillary
services and their associated charges separately when they are provided
in conjunction with critical care. Because the CY 2011 payment rate for
critical care services is based on hospital claims data from CY 2009,
during which time hospitals would have reported charges for any
ancillary services provided as part of the critical care services, we
stated in the CY 2011 OPPS/ASC final rule with comment period that we
believe it is inappropriate to pay separately in CY 2011 for the
ancillary services that hospitals may now report in addition to
critical care services (75 FR 71988). Therefore, for CY 2011, we
continued to recognize the existing CPT codes for critical care
services and established a payment rate based on our historical data,
into which the cost of the ancillary services is intrinsically
packaged, and implemented claims processing edits that conditionally
package payment for the ancillary services that are reported on the
same date of service as critical care services in order to avoid
overpayment. We noted in the CY 2011 OPPS/ASC final rule with comment
period that the payment status of the ancillary services will not
change when they are not provided in conjunction with critical care
services. We assigned status indicator ``Q3'' (Codes That May Be Paid
Through a Composite APC) to the ancillary services to indicate that
payment for them is packaged into a single payment for specific
combinations of services and made through a separate APC payment or
packaged in all other circumstances, in accordance with the OPPS
payment status indicated for status indicator ``Q3'' in Addendum D1 to
the CY 2011 OPPS/ASC final rule with comment period. The ancillary
services that were included in the definition of critical care prior to
CY 2011 and that will be conditionally packaged into the payment for
critical care services when provided on the same date of service as
critical care services for CY 2011 were listed in Addendum M to that
final rule with comment period.
Because the proposed CY 2012 median costs for critical care
services are based upon CY 2010 claims data, which reflect the CPT
billing guidance that was in effect prior to CY 2011, we are proposing
to continue the methodology established in the CY 2011 OPPS/ASC final
rule with comment period of calculating a payment rate for critical
care services based on our historical data, into which the cost of the
ancillary services is intrinsically packaged. We are proposing to
continue to implement claims processing edits that conditionally
package payment for the ancillary services that are reported on the
same date of service as critical care services in order to avoid
overpayment.
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

[[Page 42272]]

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 anticipated 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. As we
have done since publication of the CY 2008 OPPS/ASC final rule with
comment period, we again examined the distribution of clinic and Type A
emergency department visit levels based upon updated CY 2010 claims
data available for the CY 2012 proposed rule. Analysis of this data
confirmed that we continue to observe a normal and relatively stable
distribution of clinic and emergency department visit levels in
hospital claims compared to CY 2009 data. We note that we have observed
a slight shift over time toward higher numbers of level 4 and level 5
visits relative to the lower level visits, when comparing the
distributions of Type A emergency department visit levels from CY 2005
claims data to those from CY 2010. We also note that, in aggregate,
hospitals' charges for these higher level emergency department visits
seem to be trending upward year over year. We welcome comment on
whether this is consistent with individual hospitals' experiences in
developing, implementing, and refining their own guidelines over the
last several years. We continue to believe that generally, hospitals
are billing in an appropriate and consistent manner that distinguishes
among different levels of visits based on their required hospital
resources. We are encouraging hospitals to continue to report visits
during CY 2012 according to their own internal hospital guidelines. 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 servicing fiscal
intermediary or MAC.

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

Partial hospitalization is an intensive outpatient program of
psychiatric services provided to patients as an alternative to
inpatient psychiatric care for individuals who have an acute mental
illness. Sections 1861(ff)(1) and (ff)(2) of the Act specify the items
and services that are defined as partial hospitalization services and
some conditions under which Medicare payment for the items and services
will be made. Section 1861(ff)(3) of the Act specifies that a partial
hospitalization program (PHP) is one that is furnished by a hospital or
community mental health center (CMHC) that meets the requirements
specified under that subsection of the Act.
In CY 2011, in accordance with section 1301(b) of the Health Care
and Education Reconciliation Act of 2010 (HCERA 2010), we amended the
description of a PHP in our regulations to specify that the program
must be a distinct and organized intensive ambulatory treatment program
offering less than 24-hour daily care ``other than in an individual's
home or in an inpatient or residential setting.'' In addition, in
accordance with section 1301(a) of HCERA 2010, we revised the
definition of a CMHC in the regulations to conform to the definition
set forth at section 1861(ff)(3)(B) of the Act. We discussed our
finalized policies for these two provisions of HCERA 2010 under section
X.C. of the CY 2011 OPPS/ASC final rule with comment period (75 FR
71990). Section 1833(t)(1)(B)(i) of the Act provides the Secretary with
the authority to designate the OPD services to be covered under the
OPPS. The existing Medicare regulations that implement this provision
specify, at 42 CFR 419.21, that payments under the OPPS will be made
for partial hospitalization services furnished by CMHCs as well as
those services furnished by hospitals to their outpatients. Section
1833(t)(2)(C) of the Act, in pertinent part, requires the Secretary to
``establish relative payment weights for covered OPD services (and any
groups of such services described in subparagraph (B)) based on median
(or, at the election of the Secretary, mean) hospital costs'' using
data on claims from 1996 and data from the most recent available cost
reports. In pertinent part, subparagraph (B) provides that the
Secretary may establish groups of covered OPD services, within a
classification system developed by the Secretary for covered OPD
services, so that services classified within each group are comparable
clinically and with respect to the use of resources. In accordance with
these provisions, CMS developed the APCs. Section 1833(t)(9)(A) of the
Act requires the Secretary to ``review not less often than annually and
revise the groups, the relative payment weights, and the wage and other
adjustments described in paragraph (2) 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.'' Because a
day of care is the unit that defines the structure and scheduling of
partial hospitalization services, we

[[Page 42273]]

established a per diem payment methodology for the PHP APCs, effective
for services furnished on or after August 1, 2000 (65 FR 18452 through
18455). Under this methodology, the median per diem costs are used to
calculate the relative payment weights for PHP APCs.
From CY 2003 through CY 2006, the median per diem cost for CMHCs
fluctuated significantly from year to year, while the median per diem
cost for hospital-based PHPs remained relatively constant. We were
concerned that CMHCs may have increased and decreased their charges in
response to Medicare payment policies. Therefore, we began efforts to
strengthen the PHP benefit through extensive data analysis and policy
and payment changes in the CY 2008 update (72 FR 66670 through 66676).
We made two refinements to the methodology for computing the PHP
median: the first remapped 10 revenue codes that are common among
hospital-based PHP claims to the most appropriate cost centers; and the
second refined our methodology for computing the PHP median per diem
costs by computing a separate per diem cost for each day rather than
for each bill. A complete discussion of these refinements can be found
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66671
through 66676).
In 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 services (APC 0172 (Level I
Partial Hospitalization)) and a higher amount for days with 4 or more
services (APC 0173 (Level II Partial Hospitalization)). We refer
readers to section X.C.2. of the CY 2009 OPPS/ASC final rule with
comment period (73 FR 68688 through 68693) for a full discussion of the
two-tiered payment system. 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.
Furthermore, for CY 2009, we revised the regulations at 42 CFR
410.43 to codify existing basic PHP patient eligibility criteria and to
add a reference to current physician certification requirements at 42
CFR 424.24 to conform our regulations to our longstanding policy (73 FR
68694 through 68695). We believe these changes have helped to
strengthen the PHP benefit. We also revised the partial hospitalization
benefit to include several coding updates. We refer readers to section
X.C.2. of the CY 2009 OPPS/ASC final rule with comment period (73 FR
68695 through 68697) for a full discussion of these requirements.
For CY 2010, we retained the two-tiered payment approach for PHP
services and used only hospital-based PHP data in computing the per
diem payment rates. We used only hospital-based PHP data because we
were 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 of the 2-year lag between data collection and
rulemaking, the changes we made in CY 2009 were reflected for the first
time in the claims data that we used to determine payment rates for the
CY 2011 rulemaking.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
71994), we established four separate PHP APC per diem payment rates,
two for CMHC PHPs (for Level I and Level II services for CMHCs) and two
for hospital-based PHPs (Level I and Level II services for hospital-
based PHPs). We proposed that CMHC PHP APC rates would be based only on
CMHC data and hospital-based PHP APC rates would be based only on
hospital-based PHP data (75 FR 46300). As stated in the CY 2011 OPPS/
ASC proposed rule (75 FR 46300) and final rule with comment period (75
FR 71991), for CY 2011, using CY 2009 cost data, CMHC costs had
significantly decreased again. We attributed the decrease to the lower
cost structure of CMHCs compared to hospitals, and not the impact of CY
2009 policies. CMHCs had a lower cost structure than hospital-based PHP
providers, in part because the data showed that CMHCs provide fewer PHP
services in a day and use less costly staff than hospital-based PHPs.
Therefore, it would be inappropriate to continue to treat CMHCs and
hospital-based providers in the same manner regarding payment,
particularly in light of such disparate differences in costs. We were
concerned that paying hospital-based PHP programs at a lower rate than
their cost structure reflects could lead to closures and possible
access problems for hospital-based programs for Medicare beneficiaries.
Creating the four payment rates (two for CMHC PHPs and two for
hospital-based PHPs) supported continued access to the PHP benefit,
including a more intensive level of care, while also providing
appropriate payment based on the unique cost structures of CMHC PHPs
and hospital-based PHPs. In addition, separation of cost data by
provider type was supported by several hospital-based PHP commenters
who responded to the CY 2011 OPPS/ASC proposed rule (75 FR 71992).
For CY 2011, we instituted a 2-year transition period for CMHC
providers to CMHC rates based solely on CMHC data for the two CMHC PHP
APC per diem payments. For the transition period, we calculated the
CMHC PHP APC Level I and Level II rates by taking 50 percent of the
difference between the CY 2010 final hospital-based medians and the CY
2011 final CMHC medians and then adding that number to the CY 2011
final CMHC medians. A 2-year transition under this methodology would
move us in the direction of our goal, which is to pay appropriately for
PHP services based on each provider type's cost data, while at the same
time allow providers time to adjust their business operations and
protect access to care for beneficiaries. We refer readers to section
X.B. of the CY 2011 OPPS/ASC final rule with comment period (75 FR
71991 through 71994) for a full discussion of these four payment rates.
After publication of the CY 2011 OPPS/ASC final rule with comment
period, in the case of Paladin Community Mental Health Center v.
Sebelius (No. 1:10-CV-00949-LY (W.D. Tex.)), a CMHC and one of its
outpatients challenged the OPPS rates for PHP services provided by
CMHCs in CY 2011 as adopted in the CY 2011 OPPS/ASC final rule with
comment period (75 FR 71995). Specifically, the plaintiffs in the case
challenged the use of cost data derived from both hospitals and CMHCs
in determining the relative payment weights for the OPPS rates for PHP
services furnished by CMHCs. The plaintiffs alleged that section
1833(t)(2)(C) of the Act requires that such relative payment weights be
based on cost data derived solely from hospitals. The Secretary has
filed a motion to dismiss in this case, which is pending before the
district court.
In addition to raising various jurisdictional defenses in the
Paladin case, the Secretary argued that the agency had permissibly
interpreted the statute in determining the relative payment weights for
the OPPS rates for PHP services for CMHCs in CY 2011 on the basis of
cost data derived from both hospitals and CMHCs. As discussed above,
section 1833(t)(2)(C) of the Act requires the Secretary to ``establish
relative payment weights for covered OPD services (and any groups of
such services * * *) * * * based on * * * hospital costs.'' Numerous
courts have held that ``based on'' does not mean ``based exclusively
on.'' Thus, it was reasonable to interpret the statute to permit the
use of cost data from CMHCs as well as from hospitals.
For CY 2012, as discussed in section VII.B. of this proposed rule,
we are

[[Page 42274]]

proposing to determine the relative payment weights for PHP services by
CMHCs based on cost data derived solely from CMHCs and the relative
payment weights for hospital-based PHP services based exclusively on
hospital cost data. We believe that, for purposes of this proposed rule
for CY 2012, the statute is reasonably interpreted to allow the
relative payment weights for the OPPS rates for PHP services provided
by CMHCs to be based solely on CMHC cost data, whereas the
corresponding relative payment weights for hospital-provided PHP
services would be based exclusively on hospital cost data. Section
1833(t)(2)(C) of the Act requires the Secretary to ``establish relative
payment weights for covered OPD services (and any groups of such
services described in subparagraph (B)) based on * * * hospital
costs.'' In pertinent part, subparagraph (B) provides that ``the
Secretary may establish groups of covered OPD services * * * so that
services classified within each group are comparable clinically and
with respect to the use of resources.'' In accordance with subparagraph
(B), CMS developed the APCs, as set forth in Sec. 419.31 of the
regulations (65 FR 18446 and 18447; 63 FR 47559 and 47560). As
discussed in section X.B. of this proposed rule, PHP services are
grouped into APCs.
Based on section 1833(t)(2)(C) of the Act, we believe that the word
``establish'' can be interpreted as applying to APCs at the inception
of the OPPS in 2000 or whenever a new APC is added to the OPPS. In
creating the original APC for PHP services (APC 0033), we did
``establish'' the initial relative payment weight for PHP services,
provided in hospital-based and CMHC-based settings, on the basis of
only hospital data. Subsequently, from CY 2003 through CY 2008, the
relative payment weights for PHP services were based on a combination
of hospital and CMHC data. Similarly, we subsequently established new
APCs for PHP services based exclusively on hospital costs. For CY 2009,
we adopted a two-tiered APC methodology (in lieu of the original APC
0033) under which CMS paid one rate for days with 3 services (APC 0172)
and a different payment rate for days with 4 or more services (APC
0173). These two new APCs were established using only hospital data.
For CY 2011, we added two new APCs (APCs 0175 and 0176) for PHP
services provided by hospitals and based the relative payment weights
for these APCs solely on hospital data. APCs 0172 and 0173 were
designated for PHP services provided by CMHCs and were based on a
mixture of hospital and CMHC data. As the Secretary argued in the
Paladin case, the courts have consistently held that the phrase ``based
on'' does not mean ``based solely on.'' Thus, the relative payment
weights for the two APCs for CMHC-provided PHP services in CY 2011 were
``based on'' hospital data, no less than the relative payment weights
for the two APCs for hospital-provided PHP services.
Although we used only hospital data to establish the original
relative payment weights for APC 0033 and later used hospital data to
establish four new relative payment weights for PHP services, we
believe that we have the authority to discontinue the use of hospital
data after the original establishment of the relative payment weights
for a given APC. Other parts of section 1833(t)(2)(C) of the Act make
plain that the data source for the relative payment weights is subject
to change from one period to another. Section 1833(t)(2)(C) of the Act
provides that, in establishing the relative payment weights, ``the
Secretary shall [ ] us[e] data on claims from 1996 and us[e] data from
the most recent available cost reports.'' However, we used 1996 data
(plus 1997 data) in determining only the original relative payment
weights for 2000; in the ensuing calendar year updates, we continually
used more recent cost report data.
Moreover, section 1833(t)(9)(A) of the Act requires the Secretary
to ``review not less often than annually and revise the groups, the
relative payment weights, and the wage and other adjustments described
in paragraph (2) 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.'' For purposes of the CY 2012
update, we exercised our authority under section 1833(t)(9)(A) of the
Act to change the data source for the relative payment weights for PHP
services by CMHCs based on ``new cost data, and other relevant
information and factors.''
B. Proposed PHP APC Update for CY 2012
To develop the proposed payment rates for the PHP APCs for CY 2012,
we used CY 2010 claims data and computed median per diem costs in the
following categories: (1) days with 3 services; and (2) days with 4 or
more services. These proposed median per diem costs were computed
separately for CMHC PHPs and hospital-based PHPs, as shown in Table 37
below.

Table 37--Proposed PHP Median Per Diem Costs for CMHC and Hospital-Based
PHPs, by Category, Based on CY 2010 Claims Data
------------------------------------------------------------------------
Hospital-based
Category CMHC PHPs PHPs
------------------------------------------------------------------------
Days with 3 services.................... $97.78 $162.34
Days with 4 or more services............ 113.62 189.87
------------------------------------------------------------------------

Using CY 2010 claims data and the refined methodology for computing
PHP per diem costs adopted in the CY 2008 OPPS/ASC final rule with
comment period (72 FR 66671 through 66676), we computed proposed median
per diem costs for CY 2012 for each provider type using its own claims
data. The data results indicate that, although both CMHCs and hospital-
based PHPs have decreased costs for Level I and Level II services from
CY 2011 to CY 2012, the median per diem costs for CMHC PHPs continue to
be substantially lower than the median per diem costs for hospital-
based PHPs, given the same units of service. The approximate median per
diem costs for 3 services are $98 for CMHC PHPs compared to $162 for
hospital-based PHPs. Furthermore, the approximate median per diem costs
for 4 or more services are $114 for CMHC PHPs compared to $190 for
hospital-based PHPs. The difference in costs between CMHC PHPs and
hospital-based PHPs underscores the need to pay each provider type
based on use of its own data.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
71991), we noted that CMHCs' costs decreased from $139 in CY 2009
(using CY 2007 data) to $118 for CY 2011 (using CY 2009 claims data)
for Level I services (3 services); and from $172 for CY 2009 to $123
for CY 2011 for Level II services (4 or more services). For this CY
2012 proposed rule, our analysis of claims data (using CY 2010 claims
data) shows

[[Page 42275]]

that CMHCs' approximate median per diem costs continue to decrease from
$118 for CY 2011 (using CY 2009 claims data) to $98 for CY 2012 for
Level I services (3 services), and from $123 for CY 2011 (using CY 2009
claims data) to $114 for CY 2012 for Level II services (4 or more
services). We can reasonably attribute some of the decrease in costs to
targeted fraud and abuse efforts implemented by the Department's Center
for Program Integrity and the Office of Inspector General, and by the
U.S. Department of Justice, collectively.
We note that hospital-based PHPs also show a decrease in costs for
CY 2012 (using CY 2010 claims data). Although hospital-based PHPs have
historically been consistent in their median costs since the inception
of the OPPS, the CY 2010 claims data indicated a decrease in their
median per diem costs since last year. Hospital-based PHPs' approximate
median per diem costs decreased from $184 for CY 2011 (using CY 2009
claims data) to $162 for CY 2012 (using CY 2010 claims data) for Level
I services (3 services), and from $236 for CY 2011 (using CY 2009
claims data) to $190 for CY 2012 (using CY 2010 claims data) for Level
II services (4 or more services). We can attribute this decrease in
costs to one provider whose costs inflated the CY 2011 hospital-based
cost data and increased the CY 2011 hospital-based PHP median for Level
II services by approximately $30. We included this provider in the CY
2011 ratesetting because this provider had paid claims in CY 2009.
Subsequently, this provider did not bill for PHP services during CY
2010 and, therefore, was not included in the proposed CY 2012
ratesetting.
Based on the results of our analysis of the CY 2010 claims data,
for CY 2012, we are proposing to calculate the proposed CMHC PHP APC
per diem payment rates for Level I and Level II services using only
CMHC data and calculating the proposed hospital-based PHPs APC per diem
payment rates for Level I and Level II services using only hospital-
based PHP data. Basing payment rates specific to each type of
provider's own data would continue to support access to the PHP
benefit, including a more intensive level of care, while also providing
appropriate payment commensurate with the cost structures of CMHC PHPs
and hospital-based PHPs. We invite public comments on our proposal to
calculate the CMHC PHP APC per diem payment rates using only CMHC
claims data and the hospital-based PHP APC per diem rates using only
hospital data.
We are proposing the following APC median per diem costs for PHP
services for CY 2012:

Table 38--Proposed CY 2012 Median Per Diem Costs for CMHC PHP Services
------------------------------------------------------------------------
Proposed
Proposed APC Group title median per
diem costs
------------------------------------------------------------------------
0172........................... Level I Partial $97.78
Hospitalization (3
services) for CMHCs.
0173........................... Level II Partial 113.62
Hospitalization (4 or
more services) for
CMHCs.
------------------------------------------------------------------------

Table 39--Proposed CY 2012 Median Per Diem Costs for Hospital-Based PHP
Services
------------------------------------------------------------------------
Proposed
Proposed APC Group title median per
diem costs
------------------------------------------------------------------------
0175........................... Level I Partial $162.34
Hospitalization (3
services) for hospital-
based PHPs.
0176........................... Level II Partial 189.87
Hospitalization (4 or
more services) for
hospital-based PHPs.
------------------------------------------------------------------------

C. Proposed Separate Threshold for Outlier Payments to CMHCs

In the CY 2004 OPPS final rule with comment period (68 FR 63469
through 63470), we indicated that, given the difference in PHP charges
between hospitals and CMHCs, we did not believe it was appropriate to
make outlier payments to CMHCs using the outlier percentage target
amount and threshold established for hospitals. Prior to that time,
there was a significant difference in the amount of outlier payments
made to hospitals and CMHCs for PHP services. In addition, further
analysis indicated that using the same OPPS outlier threshold for both
hospitals and CMHCs did not limit outlier payments to high-cost cases
and resulted in excessive outlier payments to CMHCs. Therefore,
beginning in CY 2004, we established a separate outlier threshold for
CMHCs. The separate outlier threshold for CMHCs has resulted in more
commensurate outlier payments.
The separate outlier threshold for CMHCs resulted in $1.8 million
in outlier payments to CMHCs in CY 2004 and $0.5 million in outlier
payments to CMHCs in CY 2005. 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.
We are proposing to continue our policy of identifying 1.0 percent
of the aggregate total payments under the OPPS for outlier payments for
CY 2012. We are proposing that a portion of that 1.0 percent, an amount
equal to 0.14 percent of outlier payments (or 0.0014 percent of total
OPPS payments), would be allocated to CMHCs for PHP outlier payments.
In section II.G. of this proposed rule, we are proposing to set a
dollar threshold in addition to an APC multiplier threshold for OPPS
outlier payments. However, because the PHP APCs are the only APCs for
which CMHCs may receive payment under the OPPS, we would not expect to
redirect outlier payments by imposing a dollar threshold. Therefore, we
are not proposing to set a dollar threshold for CMHC outlier payments.
We are proposing to set the outlier threshold for CMHCs for CY 2012 at
3.40 times the APC payment amount and the CY 2012 outlier payment
percentage applicable to costs in excess of the threshold at 50
percent. Specifically, we are proposing to establish 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.

[[Page 42276]]

IX. Proposed Procedures That Would 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 59884), 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 are proposing to be paid by Medicare in
CY 2012 only as inpatient procedures is included as Addendum E to this
proposed rule (which is referenced in section XVII. of this proposed
rule and available via the Internet on the CMS Web site).

B. Proposed Changes to the Inpatient List

For the CY 2012 OPPS, we are proposing to use the same methodology
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 two procedures
that met the criteria for potential removal from the inpatient list for
CY 2012. We then clinically reviewed these two 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 28-March 1, 2011 meeting of the APC Panel, we solicited the
APC Panel's input on the appropriateness of removing these two
procedures from the CY 2012 inpatient list: CPT codes 21346 (Open
treatment of nasomaxillary complex fracture (Lefort II type); with
wiring and/or local fixation) and 54411 (Removal and replacement of all
components of a multi-component inflatable penile prosthesis through an
infected field at the same operative session, including irrigation and
debridement of infected tissue).
As we indicated in the CY 2011 final rule with comment period (75
FR 71996), we solicited the APC Panel's input on the appropriateness of
removing the procedures described by CPT codes 35045 (Direct repair of
aneurysm, pseudoaneurysm, or excision (partial or total) and graft
insertion, with or without patch graft; for aneurysm, pseudoaneurysm,
and associated occlusive disease, radial or ulnar artery) and 54650
(Orchiopexy, abdominal approach, for intra-abdominal testis (eg,
Fowler-Stephens)), from the CY 2012 inpatient list. We also solicited
the APC Panel's input on the appropriateness of removing the following
procedures identified in a comment letter addressed to the APC Panel:
CPT codes 61154 (Burr hole(s) with evacuation and/or drainage of
hematoma, extradural or subdural); 61156 (Burr hole(s); with aspiration
of hematoma or cyst, intracerebral); and 61210 (Burr hole(s); for
implanting ventricular catheter, reservoir, eeg electrode(s), pressure
recording device, or other cerebral monitoring device (separate
procedure)). Following the discussion at its February 28-March 1, 2011
meeting, the APC Panel recommended that CMS remove from the CY 2012
inpatient list CPT codes 21346, 54411, 35045, 54650, and 61210. The APC
Panel made no recommendation regarding CPT codes 61154 and 61156.
Additionally, during the February 28-March 1, 2011 meeting of the
APC Panel, an APC Panel member requested removal of the following CPT
codes from the CY 2012 inpatient list: 22551 (Arthrodesis, anterior
interbody, including disc space preparation, discectomy,
osteophytectomy and decompression of spinal cord and/or nerve roots;
cervical below C2); 22552 (Arthrodesis, anterior interbody, including
disc space preparation, discectomy, osteophytectomy and decompression
of spinal cord and/or nerve roots; cervical below C2, each additional
interspace (List separately in addition to code for separate
procedure)); 22554 (Arthrodesis, anterior interbody technique,
including minimal discectomy to prepare interspace (other than for
decompression); cervical below C2); 22585 (Arthrodesis, anterior
interbody technique, including minimal discectomy to prepare interspace
(other than for decompression); cervical below C2, each additional
interspace (List separately in addition to code for primary
procedure)); 61107 (Twist drill hole(s) for subdural, intracerebral, or
ventricular puncture; for implanting ventricular catheter, pressure
recording device, or other intracerebral monitoring device); and 63267
(Laminectomy for excision or evacuation of intraspinal lesion other
than neoplasm, extradural; lumbar). Following the discussion at its
February 28-March 1, 2011 meeting, the APC Panel recommended that CMS
remove from the CY 2012 inpatient list CPT codes 22551, 22552, 22554,
22585, 61107, and 63267.
For CY 2012, we are proposing to accept the APC Panel's
recommendations to remove the procedures described by CPT codes 21346,
35045, and 54650 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, based upon the

[[Page 42277]]

evaluation criteria mentioned above. We also are proposing to not
accept the APC Panel's recommendations to remove the procedures
described by CPT codes 22551, 22552, 22554, 22585, 54411, 61107, 61210,
and 63267, because upon further clinical review subsequent to the
February 28-March 1, 2011 APC Panel meeting, we do not believe that
these procedures may be appropriately provided as hospital outpatient
procedures for some Medicare beneficiaries, based upon the evaluation
criteria mentioned above, due to the clinical intensity of services
provided. Furthermore, according to our utilization data, the
procedures described by CPT codes 22551, 22552, 22554, 22585, 54411,
61107, 61210, and 63267 have very low volume in the outpatient hospital
setting. We note that despite its low overall volume, CPT code 54411 is
performed a significant percentage of the time in the outpatient
hospital setting; however, we do not believe that the outpatient
procedures being performed are truly reflective of the intensity of
services requisite when performing the procedure as described by the
CPT code's long descriptor. We invite public comment on the inclusion
of CPT code 54411 on the CY 2012 inpatient list. The three procedures
we are proposing to remove from the inpatient list for CY 2012 and
their CPT codes, long descriptors, proposed APC assignments, and
proposed status indictors are displayed in Table 40 below.

Table 40--Procedures Proposed for Removal from the Inpatient List and Their Proposed APC Assignments for CY 2012
----------------------------------------------------------------------------------------------------------------
Proposed CY
HCPCS code Long descriptor 2012 APC Proposed CY 2012 status
assignment indicator
----------------------------------------------------------------------------------------------------------------
21346................................. Open treatment of 0254 T
nasomaxillary complex
fracture (Lefort II
type); with wiring and/
or local fixation.
35045................................. Direct repair of 0093 T
aneurysm,
pseudoaneurysm, or
excision (partial or
total) and graft
insertion, with or
without patch graft; for
aneurysm,
pseudoaneurysm, and
associated occlusive
disease, radial or ulnar
artery.
54650................................. Orchiopexy, abdominal 0154 T
approach, for intra-
abdominal testis (e.g.,
Fowler-Stephens).
----------------------------------------------------------------------------------------------------------------

X. Proposed Policies for the Supervision of Outpatient Services in
Hospitals and CAHs

A. Background

In the CY 2000 OPPS final rule with comment period, CMS established
the hospital OPPS and indicated that direct supervision is the standard
for all hospital outpatient therapeutic services covered and paid by
Medicare in hospitals and in provider-based departments (PBDs) of
hospitals (65 FR 18524 through 18526). Currently, as discussed in the
CY 2011 OPPS/ASC final rule with comment period (75 FR 72008), this
standard requires the supervisory practitioner to be immediately
available to furnish assistance and direction throughout the
performance of a hospital outpatient therapeutic service or procedure.
In the CY 2000 OPPS final rule with comment period, we established in
regulation at Sec. 410.28(e) that outpatient diagnostic services
furnished in PBDs of hospitals must be supervised at the level
indicated in the Medicare Physician Fee Schedule (MPFS) for each
service, that is, general, direct or personal supervision. Since that
time, we have clarified and refined these rules in several ways. In the
CY 2011 OPPS/ASC final rule with comment period (75 FR 71998 through
72001), we provided a comprehensive review of the history of the
supervision policies for both outpatient therapeutic and diagnostic
services from the inception of the OPPS through CY 2010. In this
section, we provide a more condensed overview of our supervision policy
during that time period, and present background on issues that have
arisen during the CY 2011 payment year.
By way of overview, we have defined supervision in the hospital
outpatient setting by drawing on the three levels of supervision that
CMS defined for the physician office setting at Sec. 410.32(b) prior
to establishment of the OPPS: General, direct, and personal
supervision. Over time, we have tailored these definitions as needed to
apply them in the hospital outpatient setting, so the definitions or
applications in the OPPS may differ slightly from those in the
physician office setting. This is the case in defining direct
supervision, where the MPFS requires presence ``in the office suite,''
and the OPPS currently does not require presence within any specific
physical boundary (in the past, the OPPS rules for direct supervision
required presence on the hospital campus or in the PBD) (75 FR 72008,
72012).
To date, for purposes of the hospital outpatient setting, we have
only defined direct and general supervision, and we have only defined
general supervision insofar as it applies to the provision of
nonsurgical extended duration therapeutic services (extended duration
services) for which we require direct supervision during an initiation
period, followed by a minimum standard of general supervision for the
duration of the service (75 FR 72012). Under the OPPS, general
supervision means that the service is furnished under the overall
direction and control of the physician or appropriate nonphysician
practitioner, but his or her physical presence is not required during
the performance of the service. Direct supervision means that the
physician or appropriate nonphysician practitioner is immediately
available to furnish assistance and direction throughout the
performance of a therapeutic service or procedure; however, he or she
does not have to be present in the room where the service or procedure
is being performed.
In the CY 2000 OPPS final rule with comment period (65 FR 18524
through 18526), we adopted physician supervision policies as a
condition of payment under the OPPS to ensure that Medicare pays for
high quality hospital outpatient services that are furnished in a safe
and effective manner and consistent with Medicare requirements. The
agency has long divided hospital outpatient services into the two
categories of ``diagnostic'' services and other ``therapeutic''
services that aid the physician in the treatment of patients (Section
3112 of the Medicare Part A Intermediary Manual (July 1987)). Thus, we
considered all nondiagnostic services to be ``therapeutic services''
which would include, but not be limited to, the services listed under
section 1861(s)(2)(B) of the Act as incident to the services of
physicians. As early as

[[Page 42278]]

1985, the agency defined therapeutic services as those services and
supplies (including the use of hospital facilities) which are incident
to the services of physicians in the treatment of patients (Section
3112.4 of the Medicare Part A Intermediary Manual (May 1985)). In
recognition of this historic classification of services, we established
a direct supervision standard for outpatient therapeutic services under
our regulation at Sec. 410.27, which establishes the conditions for
payment for outpatient hospital services provided ``incident to''
physicians' services. In the text of Sec. 410.27, we also established
standards requiring that these services be furnished either by or under
arrangements made by the participating hospital (Sec.
410.27(a)(1)(i)), either in the hospital or in a location that the
agency designates as a department of a provider under Sec. 413.65 of
the regulations (Sec. 410.27(a)(1)(iii)). Since 2000, we have
maintained the classification of services as either diagnostic or
therapeutic in our manual guidance that establishes the conditions of
payment for hospital outpatient services under the OPPS (Sections 20.4
and 20.5, Chapter 6 of the Medicare Benefit Policy Manual (Pub. 100-
02)). In the requirements for therapeutic services, in addition to the
direct supervision standard, we applied the requirements of Sec. Sec.
410.27(a)(1)(i) and (a)(1)(iii) regarding under arrangement and
provider-based site of service to all outpatient therapeutic services
that are paid under the OPPS (Section 20.5, Chapter 6 of the Medicare
Benefit Policy Manual (Pub. 100-02)).
In the CY 2000 OPPS final rule with comment period, we amended our
regulation at Sec. 410.27 to specify that direct supervision is
required for outpatient hospital services and supplies furnished
incident to a physician's service in a location we designate as a
department of a provider under Sec. 413.65 of our regulations. We
specified further in the regulation that direct supervision means the
physician must be present on the premises of the location and
immediately available to furnish assistance and direction throughout
the performance of the service or procedure. The requirement to be
``immediately available'' was included in the regulation, although at
that time we did not define the term. Although the regulation required
the physician to be present on the premises of the location where
services were being furnished, it specified that the physician did not
have to be present in the room when the procedure was performed. In the
CY 2000 OPPS final rule with comment period (65 FR 18525), we
emphasized the importance of establishing a supervision standard for
services furnished in departments of the hospital that are not located
on campus, indicating that our amendment applies to services furnished
at an entity that is located off the campus of a hospital that we
designate as having provider-based status in accordance with the
provisions of Sec. 413.65. In response to a commenter, we stated that,
in accordance with Section 3112.4(A) of the Intermediary Manual, we
assume the direct supervision standard is met when outpatient
therapeutic services are provided incident to a physician's service in
an on-campus department of a hospital.
In the CY 2000 OPPS final rule with comment period, we also defined
the supervision standards for outpatient hospital diagnostic services
furnished in PBDs of hospitals in Sec. 410.28(e) of our regulations.
The regulation at Sec. 410.28(e) provided that diagnostic services
furnished at facilities having provider-based status must be performed
under the level of supervision indicated for the diagnostic test under
the MPFS in accordance with the definitions in Sec. Sec.
410.32(b)(3)(i), (b)(3)(ii), and (b)(3)(iii). In the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60588 through 60591, and 60680),
we revised Sec. 410.28(e) to extend the supervision standards we had
established for outpatient diagnostic tests furnished in PBDs to also
apply to services furnished in the hospital setting or any other
location where diagnostic services may be provided under arrangement.
The supervision rules for diagnostic services under the regulation at
Sec. 410.28(e) explicitly apply to hospitals that are paid in
accordance with section 1833(t) of the Act, which is the statutory
authority for the OPPS. As noted in the CY 2010 OPPS/ASC final rule
with comment period, Medicare makes payments to CAHs in accordance with
section 1834(g) of the Act. Accordingly, CAHs are not subject to the
supervision requirements for outpatient diagnostic services at this
time. The supervision requirements for outpatient diagnostic services
were also set forth in Section 20.4, Chapter 6, of the Medicare Benefit
Policy Manual.
In the years following establishment of the initial OPPS
regulations, we began to receive inquiries from providers about the
supervision requirements. Many of these inquiries led us to believe
that some hospitals may have misunderstood our statement to the effect
that we assume physician supervision requirements are met for services
furnished on the hospital premises, and were providing either general
supervision or no supervision for therapeutic services furnished
incident to physicians' services in the outpatient setting and for
which we had established a requirement of direct supervision.
Therefore, 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 clarified and restated the various supervision
requirements for outpatient hospital therapeutic and diagnostic
services. We clarified that therapeutic services furnished in the
hospital and in all PBDs of the hospital, specifically both on-campus
and off-campus PBDs, must be provided under the direct supervision of
physicians. We also reiterated that all diagnostic services furnished
in PBDs, whether on or off the hospital's main campus, should be
supervised according to the levels assigned for the individual tests
under the MPFS. We received very few public comments regarding this
clarification and restatement during the comment period.
In response to concerns about our policy restatement articulated by
stakeholders after publication of the CY 2009 OPPS/ASC final rule with
comment period, we further refined our supervision policies in the CY
2010 OPPS/ASC proposed rule and final rule with comment period (74 FR
35365 and 74 FR 60679 through 60680, respectively). We established
rules for diagnostic services furnished in locations other than PBDs
(that is, in the hospital and under arrangement in nonhospital
facilities). Accordingly, we expanded and refined the regulatory
language regarding direct supervision of diagnostic services in those
locations to refer to presence of the supervisory practitioner in the
hospital or PBD (for services furnished in those locations) or in the
office suite (for services furnished under arrangement in nonhospital
space). For therapeutic services, we increased hospitals' flexibility
regarding the direct supervision requirement by allowing all
nonphysician practitioners whose services are those the practitioner is
legally authorized to perform under State law that ``would otherwise be
covered if furnished by a physician or as an incident to a physician's
service'' (``would be physicians' services'') to supervise outpatient
therapeutic services that are within their scope of practice under
State law and their hospital-granted or CAH-granted privileges
(sections 1861(s)(2)(K) through (N) of the Act; Sec. Sec. 410.71
through 410.77 of the regulations). However, in implementing the new

[[Page 42279]]

benefits for pulmonary rehabilitation (PR), cardiac rehabilitation (CR)
and intensive cardiac rehabilitation (ICR) services, we required that
direct supervision of those services furnished in the hospital
outpatient setting must be provided by a doctor of medicine or a doctor
of osteopathy because, as we discussed in the CY 2010 and CY 2011 OPPS/
ASC final rules with comment period (74 FR 60573 and 60582 and 75 FR
72009, respectively), the statute specifies that these services are
physician-supervised (section 144(a) of the Medicare Improvements for
Patients and Providers Act of 2008, Pub. L. 110-275). In addition, in
the CY 2011 OPPS/ASC final rule with comment period, we revised our
regulations at Sec. 410.27 to remove the physical boundary
requirements for direct supervision, and instead to allow the
supervisory practitioner simply to be ``immediately available,''
meaning physically present, interruptible, and able to furnish
assistance and direction throughout the performance of the procedure,
but without reference to any particular physical boundary.
In the CY 2010 OPPS/ASC final rule with comment period, we
finalized a technical correction to the regulation at Sec. 410.27 to
clarify that the direct supervision requirement under that section
applies to services furnished in CAHs as well as hospitals.
Specifically, we added the phrase ``or CAH'' in the title and
throughout the regulation text wherever the text referred only to
``hospital,'' to clarify that the requirements for payment of hospital
outpatient therapeutic services in that section apply to CAHs as well
as other types of hospitals. As we discussed in the CY 2011 OPPS/ASC
final rule with comment period (75 FR 72000), we viewed this as a
technical correction because the Act applies the same regulations to
hospitals and CAHs when appropriate (CAHs are included if ``the context
otherwise requires'' under section 1861(e) of the Act).
In response to our clarification that CAHs are subject to the
direct supervision standard for payment of outpatient therapeutic
services, CAHs and the hospital community at large suggested that CAHs
should be exempt from this requirement because the requirement is at
odds with longstanding and prevailing practices of many CAHs. For
example, commenters noted that, due to low volume of services, a
practitioner retained on the campus of a small rural hospital or CAH to
meet supervision requirements may not have other concurrent
responsibilities or patient care, which could lead to inefficiencies.
In their correspondence and discussion in public forums, CAHs and small
rural hospitals explicitly raised concerns about services that extend
after regular operating hours, especially observation services. They
asserted that direct supervision is not clinically necessary for some
services that have a significant monitoring component that is typically
performed by nursing or other auxiliary staff, including IV hydration,
blood transfusions, and chemotherapy. They stated that their facilities
have protocols to safely deliver all of these services, relying on
nursing or other hospital staff to provide the service and having a
physician or nonphysician practitioner available by phone to furnish
assistance and direction throughout the duration of the therapeutic
service.
We provided guidance regarding the flexibility that we believe
exists within our requirement for direct supervision for an emergency
physician or nonphysician practitioner, who would be the most likely
practitioners staffing a small rural hospital or CAH, to provide the
supervision, on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/05_OPPSGuidance.asp#TopOfPage. However, these
hospitals continued to express difficulty in meeting the standard.
Small rural hospitals and CAHs indicated that, regulations
notwithstanding, many of them did not have appropriate staff
arrangements to provide the required supervision of some services,
particularly services being provided after hours or consisting of a
significant monitoring component that last for an extended period of
time. In addition, the broader hospital community began requesting that
we modify our policy to permit a lower level of supervision for
therapeutic services for all hospitals.
After consideration of these requests, on March 15, 2010, we issued
a Federal Register notice of nonenforcement of the requirement for
direct supervision of outpatient therapeutic services in CAHs (which is
available on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/Downloads/CMS_1504FC_OPPS_2011_FR_Physician_Supervision_Nonenf_Notice.pdf). While CAHs remained
subject to the direct supervision standard, we instructed our
contractors not to evaluate or enforce the standard in CY 2010 until
the agency could revisit the supervision policy during the CY 2011
rulemaking cycle.
As indicated above, in the CY 2011 OPPS/ASC final rule with comment
period (75 FR 71998 through 72013), we further adjusted the direct
supervision standard to increase flexibility for hospitals while
maintaining an appropriate level of quality and safety and consistent
with the incident to statutory provision. Specifically, we redefined
direct supervision to remove all requirements that the supervisory
practitioner remain present within a particular physical boundary,
although we continued to require immediate availability. We also
established a new category of services, ``nonsurgical extended duration
therapeutic services'' (extended duration services), which have a
substantial monitoring component. We specified that direct supervision
is required for these services during an initiation period, but once
the supervising physician or nonphysician practitioner has determined
the patient is stable, the service can continue under general
supervision.
In addition, in response to concerns expressed by the industry
about appropriate levels of supervision for certain services furnished
in various settings (for example, chemotherapy administration, and
post-operative recovery services), we stated our intent to create
through the CY 2012 rulemaking cycle an independent advisory review
process for consideration of stakeholder requests for assignment of
supervision levels other than direct supervision for specific
outpatient hospital therapeutic services. We stated that the review
entity would evaluate services for assignment of both higher (personal)
and lower (general) levels of supervision because, in the course of
evaluating a given service, the review entity may find that personal
supervision is the most appropriate level (75 FR 72006). We also
indicated that, as an interim measure while we are in the process of
establishing an advisory review body, we would extend the
nonenforcement policy for direct supervision of outpatient therapeutic
services provided in CAHs for a second year through CY 2011 (which is
available at the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/Downloads/CMS_1504FC_OPPS_2011_FR_Physician_Supervision_Nonenf_Notice.pdf). In addition, we expanded
the nonenforcement notice to include small and rural hospitals that
have 100 or fewer beds, as defined by TOPs criteria, because we believe
that these hospitals experience resource constraints that are similar
to CAHs.
We indicated that we would consider the Federal Advisory Ambulatory
Payment Classification (APC) Panel as a potential candidate to serve as
the independent review entity to consider requests for alternative
service-specific

[[Page 42280]]

supervision standards, and we requested public comment both on that
idea and on other aspects of the review process, such as evaluation
criteria and the potential structure of the process. We suggested the
APC Panel could serve as the review entity because it is already funded
and established by law under the Federal Advisory Committee Act (FACA,
Pub. L. 92-463) to make independent recommendations to CMS. The APC
Panel membership is geographically diverse, and it includes members
with clinical as well as administrative, hospital billing, and coding
expertise. In response to our discussion in the CY 2011 OPPS/ASC final
rule with comment period, we received public comments and other
considerable input on these topics from the hospital and CAH community
and from rural stakeholders. In this proposed rule, we discuss these
comments and our proposals for the independent review process in CY
2012, taking into account the comments received in response to the CY
2011 OPPS/ASC final rule with comment period.
With respect to outpatient hospital diagnostic services, following
our revisions to the regulation at Sec. 410.28(e) in the CY 2010 OPPS/
ASC final rule with comment period described above, we have received
very few comments from stakeholders regarding our revised policy.
Therefore, we are not proposing any changes to those requirements in
this proposed rule.

B. Issues Regarding the Supervision of Hospital Outpatient Therapeutic
Services Raised by Hospitals and Other Stakeholders

1. Independent Review Process
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
72012), we stated our intent to develop an independent technical review
process through our CY 2012 rulemaking. Public comments that we
received on this statement of intent focused on three primary topics:
the potential nature of the review entity; the potential nature and
structure of the review process; and potential means of evaluating
services.
Commenters were generally favorable towards the establishment of an
independent review entity, including use of the APC Panel as that
entity, provided that CMS expand the APC Panel charter and its
membership to include representatives of CAHs. They also were concerned
that CMS ensure an adequate representation of clinicians on the Panel
to provide the appropriate clinical review of supervision levels. Some
commenters supported creation by law of a new committee comprised
solely of clinicians (at least 15 multi-specialty physicians and mid-
levels). Citing the potentially significant impact of the supervision
rules on rural and CAH providers, these commenters also recommended
that at least 50 percent of committee members be comprised of
representatives of CAHs and other providers from rural States, with
recommendations for supervision levels decided by majority vote. Other
commenters preferred use of an existing body (for example, the APC
Panel or the Relative Value Scale Update Committee (RUC)) and
emphasized inclusion of nonclinical professionals with expertise in
hospital/facility resource consumption in order to balance the panel's
expertise. Some commenters sought to assure that if the APC Panel were
selected, it would remain appropriately balanced and qualified to carry
out its current role in APC deliberations under section 1833(t)(9)(A)
of the Act. Commenters also were supportive of CMS using its authority
to convene a Technical Expert Panel (TEP) as the review entity, but
noted potential lack of available funding.
In considering these issues, we believe that the best course of
action is to obtain independent advice with the transparency, formality
and process associated with a Federal advisory committee. Stakeholders
may view the recommendations of a FACA Committee as having greater
legitimacy and, thus, its recommendations could be more useful to CMS
than the recommendations that would be offered by other types of groups
such as the American Medical Association's Relative Value Update
Committee or a TEP. A TEP might be more conducive to in-depth research
and data analysis, but unless the TEP complies with the Federal
Advisory Committee Act, the TEP as a group cannot provide advice to
CMS.
At this time, funding is not available to CMS to convene a new
entity; therefore, we believe the most realistic and appropriate option
is to use an existing body for reviewing supervision levels. We agree
with commenters that the review body should be representative of all
types of facilities that are subject to the supervision rules for
payment, but we disagree that it should be 50 percent representative of
a specific class of hospitals, particularly if those hospitals
represent a minority of hospital outpatient service volume and
payments. In addition, while we agree with commenters that clinical
expertise is critical to this review process, we believe that
additional perspectives should be represented, including those of
hospital administrators and coding representatives. Under the FACA,
committees and their subcommittees must have balanced membership with
respect to points of view represented and the topics that are under
their consideration; therefore, a Federal advisory review entity would
be required to have a balanced representation of geographic interests,
including those of CAHs and rural hospitals. It also would be required
to have a balanced representation of clinical as well as any other
relevant expertise.
With respect to structure of the actual review process, most
commenters requested that we subject the recommendations of the review
entity and CMS' decisions to notice and comment rulemaking. However,
most commenters also requested a ``real-time'' process that would be
more flexible than annual rulemaking and allow for continuous
evaluation of services. Commenters further requested that there be a
mechanism for reconsideration of CMS' decisions. In addition, they
requested that CMS not allow any information presented to the review
entity in the course of the review process to be used for enforcement
purposes.
We believe that employing a subregulatory process to establish CMS'
final decisions may best serve the interests of beneficiaries and also
meet the needs of other stakeholders. While rulemaking would arguably
provide some additional procedural protections to stakeholders in terms
of an opportunity for notice and comment, due to the time involved in
rulemaking, stakeholders would only be able to request changes in
supervision levels once a year. Similarly, if confined to annual
rulemaking, CMS would not be able to make swift changes to address any
problems associated with supervision levels, for example access to
care. Historically, CMS has used subregulatory processes rather than
rulemaking to issue changes in certain administrative specifications at
the level of individual CPT codes due to a need for agility in making
such changes. For example, CMS has used a subregulatory process to set
supervision levels for individual diagnostic services under the MPFS,
which are adopted for provision of those services in the hospital
outpatient setting. Given the strong stakeholder interest in policy
changes in supervision levels for outpatient hospital therapeutic
services, we believe we should provide an opportunity for public
comment on our proposed decisions (which would be based upon

[[Page 42281]]

the review entity's recommendations) prior to finalizing them.
We agree with commenters that there should be a means of requesting
reevaluation of CMS' decisions. However, because there is a potential
for significant administrative burden in reconsidering requests for
reevaluation, we believe that stakeholders should be required to
provide significant justification to support consideration of a request
for a change in supervision levels that has previously been considered,
such as new clinical evidence, new technology, or new techniques in how
patient care is furnished. In addition, we believe that new
consideration of previously considered requests should receive the same
independent evaluation as the initial request. Therefore, once we
decide to consider a decision, we would request a new review by the
independent review entity and follow the same process as a new request.
The review entity would then deliberate and make a new recommendation
to CMS, and CMS would then make another determination based on the new
recommendation.
We received substantial comment on how we might structure the
evaluation process. First, stakeholders continued to request that we
establish a default supervision standard of general supervision for all
therapeutic services, and assign direct supervision only as indicated
through the review process. Commenters believed it was important that
the review entity and CMS not consider services for assignment of
personal supervision because many services that might qualify for
personal supervision are already personally performed by a physician or
nonphysician practitioner. Commenters also noted that certain services
are not furnished personally by these practitioners and instead are
furnished personally by auxiliary personnel such as technicians or
registered nurses (RNs). However, commenters maintained that hospitals
currently furnish adequate supervision of those services by higher-
level practitioners. Further, they requested that any evaluation for
personal supervision be based on clinical evidence and evidence of a
current deficiency in the quality of care.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
72006), we expressed our belief that direct supervision is the most
appropriate level of supervision for most hospital outpatient
therapeutic services due to the ``incident to'' nature of most hospital
outpatient therapeutic services. We discussed how our historic
requirements for physician (or nonphysician practitioner) orders and
direct physician involvement in patient care stem from our
interpretation of the nature of incident to services under the law. We
reviewed our regulations and other guidance over the years which
reflect these beliefs and interpretations (75 FR 71999 and 72005).
We continue to believe that, while the statute does not explicitly
mandate direct supervision, direct supervision is the most appropriate
level of supervision for most hospital outpatient services that are
authorized for payment as ``incident to'' physicians' services unless
personal supervision is appropriate. We also believe that the
``incident to'' nature of hospital outpatient therapeutic services
under the law permits us to recognize specific circumstances in which
general supervision is appropriate, as we have for extended duration
services, and that CMS has authority to accept a recommendation by the
review entity of general supervision for a given service. However, we
continue to believe that direct supervision is the most appropriate
level of supervision for the great majority of hospital outpatient
therapeutic services and, as such, it is the proper choice for a
default supervision standard.
In the course of evaluating a stakeholder request for review of the
supervision level required for a given service, the independent review
entity may recommend that personal supervision is the most appropriate
level of supervision for the service. It may also be appropriate to
assign personal supervision to certain services to ensure that
auxiliary personnel or personnel in training (such as medical students)
are adequately supervised. As we indicated in last year's final rule
with comment period, our supervision policy is designed to preserve
both the quality and safety of purchased hospital outpatient services
for Medicare beneficiaries. Accordingly, we believe that the review
entity should have authority to recommend personal supervision for a
service if, in the course of its evaluation, it believes that personal
supervision is most appropriate and safe.
We believe that the review entity should base its recommendations
on any clinical evidence that is available. It should also take into
consideration any known impacts of supervision on the quality of care.
As we have previously noted (75 FR 72005), while literature or clinical
opinions may exist on the risk of adverse outcomes and susceptibility
to medical error associated with the provision of specific hospital
outpatient procedures when a physician is not present, we do not know
of any analyses that have directly examined levels of supervision and
patient outcomes in the hospital outpatient setting. This may be an
area for future study.
With respect to an initial agenda of services for the review
entity, commenters recommended that CMS begin evaluating services with
work Relative Value Units (RVUs) < 1.0 (approximately 160 services),
which they believe would include many extended duration services. They
also requested that CMS evaluate surgical procedures (especially minor
surgical procedures) and portions of the surgical recovery period for
general supervision. We continue to support direct supervision as the
default supervision level for all hospital outpatient therapeutic
services. We believe it would be appropriate to solicit services for
evaluation from stakeholders, in a process similar to that currently
used to solicit agenda items for the APC Panel meetings. Also, it will
be important for CMS to be able to place services on the Panel agenda
as issues arise, similar to the way the agency brings inpatient only
procedures before the APC Panel for consideration of removal from the
inpatient only list. If we received an unmanageable number of requests
during a particular period, we propose to prioritize requests according
to service volume, total expenditures for the service, frequency of
requests, and the repetition of requests from prior public comments. In
addition, we propose to require the submitter of a request to furnish a
justification for the request, supported to the extent possible with
clinical evidence. We would use the justifications to assist in
prioritizing agenda items.
Commenters suggested that evaluation criteria include the general
categories of risk, complexity, the type of professional and scope of
practice of the professional furnishing the service, and whether the
service is furnished in a CAH or rural facility, taking into
consideration the workforce typically available to those hospitals. We
agree with the suggested general parameters of risk and complexity, and
we offer several similar potential measures below for the public's
consideration. In recommending a level of supervision that would apply
for a particular service described by a CPT code, we also believe that
the review entity could take into consideration the varied environments
in which the service described by that code may be delivered. We
anticipate that representatives of different types of facilities on the
Panel will facilitate an

[[Page 42282]]

understanding of any potential variation in conditions at different
types of facilities.
Under the conditions of participation for hospitals at Sec.
482.11(a), hospitals must comply with applicable Federal law related to
the health and safety of patients. Under Sec. 482.11(c), hospitals
must also assure that personnel are licensed or meet other applicable
standards of State or local law. Registered nurses (RNs) are not
authorized to independently furnish services that would be physicians'
services if furnished by a physician as described in section
1861(s)(2)(K) of the Act. In addition, under their State scope of
practice, RNs are not licensed to independently furnish these services.
Under the condition of participation regulation at Sec. 482.11,
hospitals must comply with these Federal and State rules. Because under
the law RNs are not permitted to furnish ``would be'' physicians'
services, we do not believe RNs should be permitted to supervise those
services. Therefore, under the regulations at Sec. Sec. 410.27 and
482.11, RNs cannot supervise ``would be'' physicians' services that
they may not independently furnish (though they may furnish some of
them under the supervision of an appropriately higher level
practitioner), even in a CAH or rural facility that may be experiencing
difficulty obtaining a higher level practitioner to supervise or
furnish those services. In this case, the statute and the regulations
determine at the service level which nonphysician professionals can and
cannot supervise therapeutic services.
Furthermore, we note that we anticipate extending the notice of
nonenforcement for direct supervision of outpatient therapeutic
services in both CAHs and small rural hospitals another year through CY
2012, which we discuss in section X.C.2. of this proposed rule.
2. Conditions of Payment and Hospital Outpatient Therapeutic Services
Described by Different Benefit Categories
Another issue that has been raised to us is the applicability of
the payment conditions for hospital outpatient therapeutic services in
Sec. 410.27 to services described in paragraphs or subparagraphs of
section 1861(s) of the Act other than section 1861(s)(2)(B) of the Act,
which describes outpatient hospital services incident to physicians'
services. Over the years, and particularly in recent months, we have
received inquiries asking that we explain or clarify our application of
the payment conditions under our regulation at Sec. 410.27, which
explicitly applies to ``hospital services and supplies furnished
incident to a physician service to outpatients,'' to outpatient
therapeutic services other than those specified under section
1861(s)(2)(B) of the Act. For example, we have received inquiries as to
whether it is permissible for hospitals to furnish radiation therapy
(described under section 1861(s)(4) of the Act) or ambulatory surgical
center services (described under section 1832(a)(2)(F)(i) of the Act)
under arrangement in locations that are not provider-based. Some have
suggested that the language in Sec. 410.27 is not applicable to
services described by benefit categories in section 1861(s) of the Act
other than section 1861(s)(2)(B) of the Act because Sec. 410.27 only
refers to ``incident to'' services.
Although we acknowledge the language of Sec. 410.27 could be read
as limited to services and supplies described under section
1861(s)(2)(B) of the Act, hospital services incident to physicians'
services furnished to outpatients, we have not interpreted the
regulation so narrowly. For instance, in the CY 2010 OPPS/ASC final
rule with comment period, we noted that, long before the OPPS, we
required that hospital services and supplies furnished to outpatients
incident to a physician's service must be furnished ``on a physician's
order by hospital personnel and under a physician's supervision''
(section 3112.4 of the Medicare Intermediary Manual). We also clearly
treated all nondiagnostic services that are furnished to hospital
outpatients as ``incident to services'' (sections 3112 and 3112.4 of
the Medicare Intermediary Manual; Section 20.5, Chapter 6, of the
Medicare Benefit Policy Manual (Pub. 100-02)). While we have not
delineated this position as clearly in the regulations, and while the
regulation text of Sec. 410.27 only explicitly refers to ``incident
to'' services, we note that our policy is longstanding and, in fact,
predates the OPPS. In longstanding manual guidance, we have expressed
our view that direct supervision is required for hospital outpatient
therapeutic services, and suggested that this requirement stems from
the ``incident to'' nature of those services. In the CY 2010 OPPS/ASC
final rule with comment period, we stated, ``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 and practitioners in the
treatment of patients'' (74 FR 60584 through 60585). We indicated that
outpatient therapeutic services and supplies must be furnished under
the order of a physician or other appropriate nonphysician
practitioner, and by hospital personnel under the direct supervision of
a physician or appropriate nonphysician practitioner.
Thus, we have long maintained that all hospital outpatient
therapeutic services are, in some sense, furnished ``incident to'' a
physician's service even when described by benefit categories other
than the specific ``incident to'' provision in section 1861(s)(2)(B) of
the Act. Because hospital outpatient therapeutic services are furnished
``incident to'' a physician's professional service, we believe the
conditions for payment, including the direct supervision standard,
should apply to all of these services. As discussed above, because the
statute includes specific requirements for physician supervision of PR,
CR, and ICR, we believe that those statutory specifications take
precedence over the agency's general requirements.

C. Proposed Policies on Supervision Standards for Outpatient
Therapeutic Services in Hospitals and CAHs

In this proposed rule, we are proposing policies for the
independent review process, grouped under three key topics: selection
of a review body; structure of the review process; and evaluation
criteria.
1. Selection of Review Entity
We are proposing that the existing APC Panel serve as the
independent review entity. However, we would make some modifications to
the APC Panel scope and composition in order to create a body that is
prepared to address supervision standards and reflects the full range
of parties subject to the standards. Specifically, we would use the
discretionary authority in the Panel charter to expand its scope to
include the topic of supervision standards. We are proposing to add
several (2 to 4) representatives of CAHs as Panel members so that all
hospitals subject to the supervision rules for payment would be
represented. However, CAHs would not participate in deliberations about
APC assignments under the OPPS, as these assignments do not affect
CAHs. According to customary practice for the APC Panel, we are
proposing to create a supervision subcommittee on the Panel, with
balanced representation, that is charged to evaluate appropriate
supervision standards for individual services and present its
deliberations to the full Panel. Each member of the full

[[Page 42283]]

Panel would then vote to decide on the Panel's recommendation to CMS.
We are proposing to use the APC Panel for many reasons. As we
discussed above, funding is not available to CMS at this time to
convene a new entity. Also, it is not clear that the entire resources
of a new body are necessary to accomplish the consideration of service-
specific supervision standards, especially once initial determinations
are made regarding key services. We are also proposing to use the APC
Panel because we believe it is important to obtain advice that carries
the weight of a Federal advisory recommendation, which may have greater
legitimacy both with stakeholders and with CMS compared to the opinions
of other types of groups.
In addition to being already established and funded, the APC Panel
would necessarily be inclusive and well-balanced because it is subject
to the FACA rules. Consistent with stakeholders' requests that the
review entity have balanced representation from all hospitals that are
subject to the supervision rules, the Federal Advisory APC Panel would
be required by the FACA to have balanced membership on committees and
their subcommittees with respect to the topics--in this case,
supervision--that are under their consideration. In addition, the Panel
incorporates clinical as well as facility, administrative, and coding
perspectives. Commenters have been generally favorable towards
selection of the APC Panel, provided we make the changes to the APC
Panel that we are proposing in this proposed rule.
2. Review Process
We are proposing to issue agency decisions based on APC Panel
recommendations through sub-regulatory guidance. We would use a process
similar to the one currently used to set supervision levels for
diagnostic services under the MPFS, which are adopted for provision of
those services in the hospital outpatient setting. CMS' decisions
(which would be based upon the Panel's recommendations) would be posted
on the OPPS Web site for public review and comment, and would be
effective either in July or January following the most recent APC Panel
meeting, or only in January of the upcoming payment year. In setting
the diagnostic supervision levels under the MPFS, there is no provision
for public comment. However, given the strong stakeholder interest in
this topic and the extent of prior dialogue with the various
stakeholders, we believe it is important to provide some means of
notice and comment on our proposed decisions prior to finalizing them.
The flexibility of a subregulatory process in comparison to
rulemaking would allow stakeholders to submit requests for evaluations
of services on a more frequent basis (at least twice a year at APC
Panel meetings) rather than only annually, which most commenters
requested. It also would give CMS the ability to respond more rapidly
to any issues that may arise in access to care or patterns of care.
Subjecting CMS' decisions to notice and comment rulemaking would
provide a more structured, formal review of decisions, but changes
could only be requested or made once a year due to the annual OPPS/ASC
rulemaking cycle.
3. Evaluation Criteria
To begin evaluating services in CY 2012, we are proposing to use
the same APC Panel process that is used to solicit services or
categories of services from stakeholders to construct the agenda to
solicit potential services for consideration of a change in supervision
level. In addition, as discussed in section X.C.2. of this proposed
rule, we are proposing that CMS would have the ability independently to
ask the Panel to review the supervision level for one or more services
as necessary. If we receive an unmanageable number of requests, we are
proposing to prioritize requests by service volume, total expenditures
and/or frequency of requests. We also are proposing to prioritize
services requested for review through public comment on the CY 2010 and
CY 2011 OPPS/ASC proposed rules. We are proposing to require requests
to include justification for the change in supervision level that is
sought, supported to the extent possible with clinical evidence. We
also would consider these justifications in deciding which services to
forward to the APC Panel for evaluation.
We are proposing to charge the Panel with recommending a
supervision level (general, direct, or personal) to ensure an
appropriate level of quality and safety for delivery of a given
service, as defined by a CPT code. The Panel should take into
consideration the context in which the service is delivered, that is,
the clinical, payment, and quality context of a patient encounter. In
recommending a supervision level to CMS, we are proposing that the
Panel assess whether there is a significant likelihood that the
supervisory practitioner would need to reassess the patient and modify
treatment during or immediately following the therapeutic intervention,
or provide guidance or advice to the individual who provides the
service. In answering that question, the Panel would consider--
Complexity of the service;
Acuity of the patients receiving the service;
Probability of unexpected or adverse patient event; and
Expectation of rapid clinical changes during the
therapeutic service or procedure.
These criteria include, but extend well beyond, the likelihood of
the need to manage medical emergencies during or after the provision of
the service. As we have stated in previous rules (74 FR 60580 and 75 FR
72007 and 72010), the supervisory responsibility is more than the mere
capacity to respond to an emergency. It also includes being available
to reassess the patient and potentially modify treatment as needed on a
nonemergency basis. It includes the ability to redirect or take over
performance of the service and to issue any additional necessary
orders.
We are proposing that, in the event there has been a previous
consideration and decision on the supervision standard for a service,
we would consider the request and, as warranted, forward the request to
the APC Panel for its review. For requests for review of a service that
has already been considered, we are proposing to require the requestor
to submit new evidence to support a change in policy, for example,
evidence of a change in clinical practice patterns due to new
techniques or new technology. If sufficient new information was
provided with the request, CMS would send the request to the APC Panel,
and the Panel would reconsider the service and make another
recommendation to CMS, which could be the same or a different level of
supervision than the current level for the service.
Finally, in the interim period while we work toward establishing
the independent review process, we anticipate that we will extend the
notice of nonenforcement of the requirement for direct supervision in
CAHs and small rural hospitals as defined by the notice (available on
the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp) another year, through CY 2012. The purpose of this
proposed policy would continue to be to allow these facilities time to
meet the direct supervision standard while we continue to deliberate on
any policy alternatives. Under our current timeline, we would not
complete policy decisions on many key services until sometime in 2012.

[[Page 42284]]

We note that we have not yet defined the terms ``personal
supervision'' or ``general supervision'' for the hospital outpatient
setting, except, as explained above, for general supervision in
relation to extended duration services in Sec. 410.27(a)(1)(v)(A).
Because we are proposing to allow the independent review entity to
recommend that CMS assign either personal or general supervision to
other hospital outpatient therapeutic services, we are proposing to
define these terms in the regulations at proposed new Sec.
410.27(b)(1)(vi). We are proposing to use the definitions established
for purposes of the MPFS as specified at Sec. 410.32(b)(3).
Specifically, ``personal supervision'' would have the same meaning as
the definition specified at Sec. 410.32(b)(3)(iii) and ``general
supervision'' would have the same meaning as the definition specified
in Sec. 410.32(b)(3)(i), which is the same definition that we
established for the general supervision portion of an extended duration
service.
4. Conditions of Payment and Hospital Outpatient Therapeutic Services
Described by Different Benefit Categories
With respect to the issue of application of the payment conditions
in Sec. 410.27 to services described by benefit categories other than
section 1861(s)(2)(B) of the Act, we are proposing to amend our
regulations to clarify our policy. Therapeutic services and supplies
described by benefit categories other than the hospital outpatient
``incident to'' services under section 1861(s)(2)(B) of the Act are
nevertheless subject to the conditions of payment in Sec. 410.27 when
they are furnished to hospital outpatients and paid under the OPPS or
to CAHs under section 1834(g) of the Act.
We believe that this clarification could most readily be
accomplished by more specifically defining the services and supplies
described in the regulation text to which the requirements at Sec.
410.27 apply. Accordingly, we are proposing to revise the description
of the services and supplies addressed in Sec. 410.27(a) by adding the
term ``therapeutic'' so that paragraph (a) would read, ``Medicare Part
B pays for therapeutic hospital or CAH services and supplies furnished
incident to a physician's or nonphysician practitioner's service'' to
outpatients. We are proposing to define these services, similar to the
way they are currently defined in Section 20.5, Chapter 6, of the
Medicare Benefit Policy Manual, to mean ``all services and supplies
furnished to hospital or CAH outpatients that are not diagnostic
services and that aid the physician or practitioner in the treatment of
the patient.'' We would also add the term ``therapeutic'' to the title
of Sec. 410.27 so that it would read, ``Therapeutic outpatient
hospital or CAH services and supplies incident to a physician's or
nonphysician practitioner's service: Conditions.''
We believe it is important that we continue to apply the
requirements in Sec. 410.27 to all hospital outpatient therapeutic
services and supplies that are paid under the OPPS and to services
furnished in CAHs that are paid under section 1834(g) of the Act. In
addition to the supervision rules, the payment conditions in Sec.
410.27 include rules regarding services furnished under arrangements
and in PBDs. The goals of the ``under arrangements'' and PBD rules are
different from the safety and quality goals of the supervision rules.
They ensure clinical and financial integration between the main
hospital and any on-campus or off-campus departments of hospitals. In
particular, Sec. 410.27(a)(1)(iii) subjects hospital outpatient
services to the requirements in Sec. 413.65 for PBDs of hospitals. The
provider-based regulations in Sec. 413.65 govern numerous aspects of
PBD operations including quality assurance, accountability to hospital
medical director staff, licensure, personnel management, how far the
departments can be located from the main hospital, and assurance that
the departments are serving the same population as the main provider.
Section 410.27(e) subjects services to the ``under arrangement''
regulations at Sec. 410.42(a) which govern the liabilities of the
beneficiary and other parties when hospitals contract services out. It
is important to reiterate that Sec. 410.27 is applicable to all
hospital outpatient therapeutic services. We note, for example, that
ASCs are not permitted to enter into arrangements with hospitals to
furnish hospital outpatient services. We believe we should clarify and
reinforce our longstanding policy that hospitals are not permitted to
furnish therapeutic services or surgery under arrangement with ASCs
because under Sec. 413.65(a)(1)(ii)(A), CMS does not make provider-
based determinations regarding ASCs and under Sec. 410.27(a)(1)(iii)
therapeutic services must be furnished in provider-based space.
Moreover, a hospital is not permitted to furnish services to hospital
outpatients under arrangements with an ASC because ASCs are paid under
section 1833(i)(2)(D) of the Act (the ASC payment system), not under
section 1833(t) of the Act (the OPPS payment system). As a result, an
ASC could not be a provider-based department of a hospital for purposes
of Sec. 410.27. If Sec. 410.27 did not apply, an ASC could furnish
hospital outpatient therapeutic services under arrangements and obtain
payment at the OPPS rate rather than the ASC rate. This practice would
distort the financial incentives within those payment systems, and
would be contrary to the advice and determinations that have
historically been made by CMS and other enforcement bodies such as the
Office of the Inspector General.
In addition, Sec. 410.27(a)(1)(ii) subjects hospital outpatient
services to the incident to rules that CMS has historically applied to
all therapeutic services. As we discussed above, these rules ensure
that services are ordered by a physician (or appropriate nonphysician
practitioner) and that he or she is directly involved in the delivery
of care. Sections 410.27(b) and (c) subject services to other
significant rules governing drugs and biologicals and emergency
services.
Additionally, we believe that there is a similar level of clinical
risk in the therapeutic hospital outpatient services covered under
other benefit categories that are not explicitly defined as ``incident
to'' services. For example, stereotactic radiosurgery (a radiation
therapy service under section 1861(s)(4) of the Act) is a high risk and
technically demanding surgical procedure. We do not believe that the
current requirements under Sec. 410.27 regarding supervision, under
arrangement, provider-based, and other aspects of service, were
intended to apply only to a subset of hospital outpatient therapeutic
services and supplies, or that the agency ever intended to omit large
classes of services that are routinely furnished to hospital
outpatients from being governed by this regulation.
5. Technical Corrections to the Supervision Standards for Hospital
Outpatient Therapeutic Services Furnished in Hospitals or CAHs
We recently noted that the text of Sec. Sec. 410.27(b) and (c)
includes cross-references to section Sec. 410.168 of the regulations,
which is obsolete. We believe that Sec. 410.27(b) refers to Sec.
410.168 in error and should instead reference Sec. 410.29 (Limitations
on drugs and biologicals). We are proposing to correct Sec. 410.27(b)
so that it cross-references Sec. 410.29. It would then read, ``Drugs
and biological are also subject to the limitations specified in Sec.
410.29.'' In addition, we are proposing to update Sec. 410.27(c) to
cross-reference the

[[Page 42285]]

sections of the regulation that have replaced Sec. 410.168, that is,
Part 424, Subparts G and H. For this update, we are proposing to revise
paragraph (c) to read, ``Rules on emergency services furnished to
outpatients by nonparticipating hospitals are specified in subpart G of
Part 424 of this chapter'' and to add a new paragraph (d) to read,
``Rules on emergency services furnished to outpatients in a foreign
country are specified in subpart H of Part 424 of this chapter''.
Accordingly, we are proposing to redesignate the existing paragraphs
(d) through (f) of Sec. 410.27 as paragraphs (e) through (g),
respectively.
In addition, we noted that CAHs are not specifically named in the
definition of nonsurgical extended duration therapeutic services at
Sec. 410.27(a)(1)(iv)(E). We are making a technical correction to
insert the words ``or CAH'' after ``hospital'' in this paragraph. This
is the same technical correction that we made throughout Sec. 410.27
in the CY 2010 OPPS/ASC final rule with comment period, discussed
above. This technical correction clarifies that CAHs are subject to all
of the requirements of Sec. 410.27 in the same manner as all other
types of hospitals.
6. Summary
In summary, we are proposing to establish the Federal Advisory APC
Panel as an independent review body that would evaluate individual
outpatient therapeutic services for potential assignment by CMS of
general (lower) or personal (higher) supervision. We are proposing to
amend the APC Panel charter to render the Panel more appropriate for
this task by expanding its scope to include the topic of supervision.
We also are proposing to add two to four members to the Panel who would
be representative of CAHs, so that there is broad representation of the
types of hospitals that are subject to the supervision rules for
payment. We are proposing to use the standard APC Panel protocols with
respect to frequency of meetings and receiving requests for evaluation
and reconsideration of services. However, CMS' decisions based on the
Panel's recommendations would not be subject to notice and comment
rulemaking, in contrast to recommendations by the Panel on issues other
than supervision. We are proposing several means of prioritizing
requests for evaluations, particularly if the Panel agenda could not
accommodate all timely requests at a particular meeting. We also are
proposing clinical and other evaluation criteria that the Panel would
use in recommending a supervision level that would apply at the
individual CPT code level. As we have not yet defined personal
supervision or general supervision for all hospital outpatient
therapeutic services, we are proposing definitions for these terms in
this proposed rule.
We anticipate extending the notice of nonenforcement for direct
supervision in CAHs and small rural hospitals as defined by the notice
through CY 2012, because, even if the new APC Panel review process is
adopted, we likely will not have finalized our policy decisions on many
key services that are reviewed during that year. In addition, we are
proposing to clarify our policy that the requirements under Sec.
410.27 apply to outpatient therapeutic services and supplies furnished
in hospitals and in CAHs, which includes services and supplies
described by Medicare benefit categories other than section
1861(s)(2)(B) of the Act. To that end, we are proposing to redefine the
services described in that section to clarify the nature and scope of
the included services.

XI. Proposed OPPS Payment Status and Comment Indicators

A. Proposed 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 proposed CY 2012 status
indicator assignments for APCs and HCPCS codes are shown in Addendum A
and Addendum B, respectively on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS. We note that, in the past, a
majority of the Addenda referred to throughout the preamble of our
OPPS/ASC proposed and final rules appeared in the printed version of
the Federal Register as part of the annual rulemakings. However,
beginning with this CY 2012 proposed rule, the Addenda will no longer
appear in the printed version of the OPPS/ASC rules that are found in
the Federal Register. Instead, these Addenda will be published and
available only via the Internet on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.
For CY 2012, we are not proposing to make any changes to the
definitions of status indicators that were listed in Addendum D1 of the
CY 2011 OPPS/ASC final rule with comment period. The proposed CY 2012
status indicators and their definitions are listed in the tables under
sections XI.A.1., 2., 3., and 4. of this proposed rule.
1. Proposed Payment Status Indicators to Designate Services That Are
Paid under the OPPS

------------------------------------------------------------------------
Indicator Item/code/service OPPS payment status
------------------------------------------------------------------------
G............................. Pass-Through Paid under OPPS;
Drugs and separate APC
Biologicals. payment.
H............................. Pass-Through Separate cost-based
Device pass-through
Categories. payment; not subject
to copayment.
K............................. Nonpass-Through Paid under OPPS;
Drugs and separate APC
Nonimplantable payment.
Biologicals,
including
Therapeutic
Radiopharmaceuti
cals.
N............................. Items and Paid under OPPS;
Services payment is packaged
Packaged into into payment for
APC Rates. other services.
Therefore, there is
no separate APC
payment.
P............................. Partial Paid under OPPS; per
Hospitalization. diem APC payment.
Q1............................ STVX-Packaged Paid under OPPS;
Codes. 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.

[[Page 42286]]

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.
Q3............................ Codes that may be Paid under OPPS;
paid through a Addendum B displays
composite APC. 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
services.
(2) In all other
circumstances,
payment is made
through a separate
APC payment or
packaged into
payment for other
services.
R............................. Blood and Blood Paid under OPPS;
Products. separate APC
payment.
S............................. Significant Paid under OPPS;
Procedure, Not separate APC
Discounted When payment.
Multiple.
T............................. Significant Paid under OPPS;
Procedure, separate APC
Multiple payment.
Reduction
Applies.
U............................. Brachytherapy Paid under OPPS;
Sources. separate APC
payment.
V............................. Clinic or Paid under OPPS;
Emergency separate APC
Department Visit. payment.
X............................. Ancillary Paid under OPPS;
Services. separate APC
payment.
------------------------------------------------------------------------

We are not proposing any changes to the definitions of status
indicators listed above for the CY 2012 OPPS. The proposed CY 2012
status indicators and their definitions are displayed in both the table
above and in Addendum D1 on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.
2. Proposed Payment Status Indicators to Designate Services That Are
Paid under a Payment System Other Than the OPPS
We are not proposing to make any changes to the definitions of
status indicators listed below for the CY 2012 OPPS.

------------------------------------------------------------------------
Indicator Item/code/service OPPS payment status
------------------------------------------------------------------------
A................. Services furnished to a Not paid under OPPS. Paid
hospital outpatient that by fiscal intermediaries/
are paid under a fee MACs under a fee
schedule or payment schedule or payment
system other than OPPS, system other than OPPS.
for example. Services are subject to
the deductible and
coinsurance unless
indicated otherwise.
Ambulance .........................
Services
Clinical Not subject to deductible
Diagnostic Laboratory or coinsurance.
Services
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 deductible
Mammography or coinsurance.
C................. Inpatient Procedures..... Not paid under OPPS.
Admit patient. Bill as
inpatient.
F................. Corneal Tissue Not paid under OPPS. Paid
Acquisition; Certain at reasonable cost.
CRNA Services; and
Hepatitis B Vaccines.
L................. Influenza Vaccine; Not paid under OPPS. Paid
Pneumococcal Pneumonia at reasonable cost; not
Vaccine. 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.
------------------------------------------------------------------------

The proposed CY 2012 status indicators and their definitions
displayed in the table above are also displayed in Addendum D1 on the
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.
3. Proposed Payment Status Indicators to Designate Services That
Are Not Recognized under the OPPS But That May Be Recognized by Other
Institutional Providers
We are not proposing changes to the definitions of status
indicators listed below for the CY 2012 OPPS.

[[Page 42287]]

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

The proposed status indicators and their definitions listed in the
table above are also displayed in Addendum D1 on the CMS Web site at:
http://www.cms.hhs.gov/HospitalOutpatientPPS.
4. Proposed Payment Status Indicators to Designate Services That Are
Not Payable by Medicare on Outpatient Claims
We are not proposing changes to the definitions of payment status
indicators listed below for the CY 2012 OPPS.

The proposed CY 2012 payment status indicators and their
definitions listed in the table above are also displayed in Addendum D1
on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.

B. Proposed Comment Indicator Definitions

For the CY 2012 OPPS, we are proposing to use the same two comment
indicators that are in effect for the CY 2011 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 are using the ``CH'' indicator in this proposed rule to call
attention to proposed changes in the payment status indicator and/or
APC assignment for HCPCS codes for CY 2012 compared to their assignment
as of June 30, 2011. We believe that using the ``CH'' indicator in this
proposed rule will help facilitate the public's review of the changes
that we are proposing for CY 2012.
We are proposing to use the ``CH'' comment indicator in the CY 2012
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 2012 compared to their assignment as of December 31, 2011. We
believe that using the ``CH'' indicator in the CY 2012 OPPS/ASC final
rule with comment period will facilitate the public's review of the
changes that we will make for CY 2012. The use of the comment indicator
``CH'' in association with a composite APC indicates that the
configuration of the composite APC has changed from the CY 2012 OPPS/
ASC final rule with comment period.
We are proposing to continue our current policy regarding the use
of comment indicator ``NI.''
Any existing HCPCS code numbers with substantial revisions to the
code descriptors for CY 2012 compared to the CY 2011 descriptors will
be labeled with comment indicator ``NI'' in Addendum B to the CY 2012
OPPS/ASC final rule with comment period. However, in order to receive
the comment indicator ``NI,'' the CY 2012 revision to the code
descriptor (compared to the CY 2011 descriptor) must be significant
such that the new code descriptor describes a new service or procedure
for which the OPPS treatment may change. We use comment indicator
``NI'' to indicate that these HCPCS codes are open to comment on the CY
2012 OPPS/ASC 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 2013 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 2012 will also be labeled with comment
indicator ``NI'' in Addendum B to the CY 2012 OPPS/ASC final rule with
comment period.
Only HCPCS codes with comment indicator ``NI'' in the CY 2012 OPPS/
ASC final rule with comment period will be subject to comment. HCPCS
codes that do not appear with comment indicator ``NI'' in the CY 2012
OPPS/ASC final rule with comment period will not be open to public
comment, unless we specifically request additional comments elsewhere
in the final rule with comment period. The CY 2012 treatment of HCPCS
codes that appear in the CY 2012 OPPS/ASC final rule with comment
period to which comment indicator ``NI'' is not appended will be open
to public comment during the comment period

[[Page 42288]]

for this proposed rule, and we will respond to those comments in the CY
2012 OPPS/ASC final rule with comment period.
For the CY 2012 OPPS, we are not proposing any changes to the
definitions of the OPPS comment indicators for CY 2012. Their proposed
definitions are listed in Addendum D2 on the CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS.

XII. 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 contain its Medicare payment policy
recommendations. This section describes recent recommendations relevant
to the OPPS that have been made by MedPAC.
The March 1, 2011 MedPAC ``Report to Congress: Medicare Payment
Policy'' included the following recommendation relating to the Medicare
hospital IPPS and, in part, to the Medicare hospital OPPS:
Recommendation 3: ``The Congress should increase payment rates for
the acute care hospital inpatient and outpatient prospective payment
systems in 2012 by 1 percent. The Congress should also require the
Secretary of Health and Human Services to make adjustments to inpatient
payment rates in future years to fully recover all overpayments due to
documentation and coding improvements.'' (page 60)
MedPAC further stated that: ``For outpatient hospital services, the
Commission is concerned that significant payment disparities among
Medicare's ambulatory care settings (hospital outpatient departments,
ambulatory surgical centers, and physician offices) for similar
services are fostering undesirable financial incentives. Physician
practices and ambulatory surgical centers are being reorganized as
hospital outpatient entities in part to receive higher reimbursements.
The Commission believes that Medicare should seek to pay similar
amounts for similar services, taking into account differences in
quality of care and in the relative risks of the patient populations.
The Commission is concerned by the trend to reorganize for higher
reimbursement and will examine this issue. However, in the interim, the
modest update of 1 percent is warranted in the hospital outpatient
setting to slow the growing payment rate disparities among ambulatory
care settings.'' (page 61)
CMS Response: We note that MedPAC's recommendation is for the
Congress to increase IPPS and OPPS payment rates by 1 percent in 2010.
Absent action by Congress, we are proposing to follow the statutory
requirements that govern the amount of the annual OPD fee schedule
increase factor to the OPPS for CY 2012. We discuss the proposed CY
2012 OPD fee schedule increase factor in section II.B. of this proposed
rule.
We look forward to reviewing the results of MedPAC's examination of
what it perceives as a trend towards reorganization of ambulatory
surgical centers and physician offices as hospital outpatient
departments to maximize program payment.
The full March 2011 MedPAC report can be downloaded from MedPAC's
Web site at: http://www.medpac.gov/documents/Mar11_EntireReport.pdf.

B. APC Panel Recommendations

Recommendations made by the APC Panel meeting held on February 28
and March 1, 2011 are discussed in the sections of this proposed rule
that correspond to topics addressed by the APC Panel. The reports and
recommendations from the APC Panel's February 28 and March 1, 2011
meeting regarding payment under the OPPS for CY 2012 are available on
the CMS Web site at: http://www.cms.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.
On October 22, 2010, the OIG published a memorandum report entitled
``Payment for Drugs under the Hospital Outpatient Prospective Payment
System'' (OIG-03-09-00420). The report may be viewed on the Web site
at: http://oig.hhs.gov/oei/reports/oei-03-09-00420.pdf. The OIG did not
make any recommendations to CMS regarding Medicare payment for drugs
and biologicals under the OPPS.
CMS Response: We appreciate the work of the OIG regarding the
payment for drugs under the OPPS, and we will take the findings in its
report into consideration in the development of our proposed payment
policy for CY 2012.

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

A. Background

1. Legislative Authority for the ASC Payment System
Section 1832(a)(2)(F)(i) of the Act provides that benefits under
Medicare Part B include payment for facility services furnished in
connection with surgical procedures specified by the Secretary that are
performed in an Ambulatory Surgical Center (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 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)

[[Page 42289]]

of the Act by redesignating clause (iv) as clause (v) and adding a new
clause (iv) to paragraph (2)(D) and by adding new paragraph (7).
Section 1833(i)(2)(D)(iv) of the Act authorizes, but does not
require, the Secretary to implement the revised ASC payment system ''
in a manner so as to provide for a reduction in any annual update for
failure to report on quality measures in accordance with paragraph
(7).'' Section 1833(i)(7)(A) of the Act states that the Secretary may
provide that any ASC that does not submit quality measures to the
Secretary in accordance with paragraph (7) will incur a 2.0 percentage
point reduction to any annual increase provided under the revised ASC
payment system for such 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 subparagraphs (B) through (E) of section 1833(t)(17) of
the Act, added by section 109(a) of the MIEA-TRHCA, shall apply to ASCs
in a similar manner to the manner in which they apply under these
paragraphs to hospitals under the Hospital OQR Program.
Sections 4104 and 10406 of the Affordable Care Act, Public Law 111-
148, amended section 1833(a)(1) and (b)(1) of the Act to waive the
coinsurance and the Part B deductible for those preventive services
under section 1861(ddd)(3)(A) of the Act as described in section
1861(ww)(2) of the Act (excluding electrocardiograms) that are
recommended by the United States Preventive Services Task Force
(USPSTF) with a grade of A or B for any indication or population and
that are appropriate for the individual. Section 4104(c) of the
Affordable Care Act amended section 1833(b)(1) of the Act to waive the
Part B deductible for colorectal cancer screening tests that become
diagnostic. These provisions apply to these items and services
furnished in an ASC on or after January 1, 2011.
Section 3401(k) of the Affordable Care Act amended section
1833(i)(2)(D) of the Act to require that, effective for CY 2011 and
subsequent years, any annual update under the ASC payment system be
reduced by a productivity adjustment, which is equal to the 10-year
moving average of changes in annual economy-wide private nonfarm
business multi-factor productivity (as projected by the Secretary for
the 10-year period ending with the applicable fiscal year, year, cost
reporting period, or other annual period). Application of this
productivity adjustment to the ASC payment system may result in the
update to the ASC payment system being less than zero for a year and
may result in payment rates under the ASC payment system for a year
being less than such payment rates for the preceding year.
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''). In that 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. We also
established a policy for treating new and revised Healthcare Common
Procedure Coding System (HCPCS) and Current Procedural Terminology
(CPT) codes under the ASC payment system. This policy is consistent
with the OPPS to the extent possible (72 FR 42533).
In addition, we established a standard ASC ratesetting methodology
that bases payment for most services on the list of ASC covered
surgical procedures on the OPPS relative payment weight multiplied by
the ASC conversion factor. We also established modifications to this
methodology for subsets of services, such as device-intensive services
(where the estimated device portion of the ASC payment is the same as
that paid under the OPPS) and services that are predominantly performed
in the office setting and covered ancillary radiology services (where
ASC payment may be based on the MPFS non-facility practice expense (PE)
Relative Value Units (RVUs)). Additionally, we established a policy for
updating the conversion factor, the relative payment weights, and the
ASC payment rates on an annual basis. We also annually update the list
of procedures for which Medicare does not make an ASC payment.
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 non-
covered ASC procedures in ASCs based on the facility PE RVUs, to
exclude covered ancillary radiology services and covered ancillary
drugs and biologicals from the categories of designated health services
(DHS) that are subject to the physician self-referral prohibition, and
to reduce ASC payments for surgical procedures when the ASC receives
full or partial credit toward the cost of the implantable device.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68722), we updated and finalized the CY 2009 ASC rates and lists of
covered surgical procedures and covered ancillary services.
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
MPFS conversion factor and PE 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 methodological errors and were
subsequently corrected in a correction notice to that final rule with
comment period (74 FR 65449). We also published a second correction
notice in the Federal Register, to address changes to the ASC rates
resulting from corrections to the PE RVUs identified subsequent to
publication of the December 31, 2009 correction notice (75 FR 45700).
Finally, we published a notice in the Federal Register, to reflect
changes to CY 2010 ASC payment rates for certain ASC services due to
changes to the OPPS and MPFS under the Affordable Care Act and to
reflect technical changes to the ASC payment rates announced in prior
correction notices (75 FR 45769).
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
71800), we updated and finalized the CY 2011 ASC rates and lists of
covered surgical procedures and covered ancillary services. We
corrected some of the ASC rates that were published in Addenda AA and
BB, as well as errors in the preamble text, in a correction notice
published in the Federal Register on March 11, 2011 (76 FR 13292). The
corrections to the ASC Addenda were primarily due to changes to the
MPFS conversion factor and PE RVUs listed for some CPT codes in
Addendum B and Addendum C to the MPFS for CY 2011 which, in turn,
affected office-

[[Page 42290]]

based and ancillary radiology payment under the ASC payment system.
Following legislative changes to the MPFS for CY 2011 associated with
passage of section 101 of the Medicare and Medicaid Extenders Act of
2010 that occurred after publication of the CY 2011 OPPS/ASC and MPFS
final rules with comment periods, we posted revised ASC Addenda on our
Web site to reflect associated changes to office-based and ancillary
radiology payment under the ASC payment system.
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.
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.
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 the
ASC payment system (Sec. 416.173; 72 FR 42535). In addition, as
discussed in detail in section XIII.B. of this proposed rule, 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). The updates
are to implement newly created Level II HCPCS and Category III CPT
codes for ASC payment and to update the payment rates for separately
paid drugs and biologicals based on the most recently submitted ASP
data. New Category I CPT codes, except vaccine codes, are released only
once a year and, therefore, are implemented through the January
quarterly update. New Category I CPT vaccine codes are released twice a
year and thus are implemented through the January and July quarterly
updates.
In our annual updates to the ASC list of, and payment rates for,
covered surgical procedures and covered ancillary services, we
undertake a review of excluded surgical procedures (including all
procedures newly proposed for removal from the OPPS inpatient list),
new procedures, and procedures for which there is revised coding, to
identify any that we believe meet the criteria for designation as ASC
covered surgical procedures or covered ancillary services. Updating the
lists of covered surgical procedures and covered ancillary services, as
well as their payment rates, in association with the annual OPPS
rulemaking cycle is particularly important because the OPPS relative
payment weights and, in some cases, payment rates, are used as the
basis for the payment of covered surgical procedures and covered
ancillary services under the revised ASC payment system. This joint
update process ensures that the ASC updates occur in a regular,
predictable, and timely manner.

B. Proposed Treatment of New Codes

1. Proposed Process for Recognizing New Category I and Category III CPT
Codes and Level II HCPCS Codes
CPT and Level II HCPCS codes are used to report procedures,
services, items, and supplies under the ASC payment system.
Specifically, we recognize the following codes on ASC 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 American Medical Association (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 ASCs are addressed both through the ASC quarterly update
Change Requests (CRs) and through the annual rulemaking cycle. 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 are recognized on Medicare claims) outside of the
formal rulemaking process via ASC quarterly update CRs. This quarterly
process offers ASCs access to codes that may more accurately describe
items or services furnished and/or provides payment or more accurate
payment for these items or services in a more timely manner than if we
waited for the annual rulemaking process. We solicit comments on the
new codes recognized for ASC payment and finalize our proposals related
to these codes through our annual rulemaking process.
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 as covered surgical procedures and, if so, whether they are
office-based procedures (72 FR 42533 through 42535). In addition, we
identify new codes as ASC covered ancillary services based upon the
final payment

[[Page 42291]]

policies of the revised ASC payment system.
In Table 41 below, we summarize our proposed process for updating
the HCPCS codes recognized under the ASC payment system.

Table 41--Proposed Comment Timeframe for New HCPCS Codes
----------------------------------------------------------------------------------------------------------------
OPPS/ASC quarterly update CR Type of code Effective date Comments sought When finalized
----------------------------------------------------------------------------------------------------------------
April 1, 2011................... Level II HCPCS April 1, 2011..... CY 2012 OPPS/ASC CY 2012 OPPS/ASC
codes. proposed rule. final rule with
comment period.
July 1, 2011.................... Level II HCPCS July 1, 2011...... CY 2012 OPPS/ASC CY 2012 OPPS/ASC
codes. proposed rule. final rule with
comment period.
Category I July 1, 2011...... CY 2012 OPPS/ASC CY 2012 OPPS/ASC
(certain vaccine proposed rule. final rule with
codes) and III comment period.
CPT codes.
October 1, 2011................. Level II HCPCS October 1, 2011... CY 2012 OPPS/ASC CY 2013 OPPS/ASC
codes. final rule with final rule with
comment period. comment period.
January 1, 2012................. Level II HCPCS January 1, 2012... CY 2012 OPPS/ASC CY 2013 OPPS/ASC
codes. final rule with final rule with
comment period. comment period.
Category I and III January 1, 2012... CY 2012 OPPS/ASC CY 2013 OPPS/ASC
CPT Codes. final rule with final rule with
comment period. comment period.
----------------------------------------------------------------------------------------------------------------

This process is discussed in detail below. We have separated our
discussion into two sections based on whether we are proposing to
solicit public comments in this CY 2012 OPPS/ASC proposed rule (and
responding to those comments in the CY 2012 OPPS/ASC final rule with
comment period) or whether we will be soliciting public comments in the
CY 2012 OPPS/ASC final rule with comment period (and responding to
those comments in the CY 2013 OPPS/ASC final rule with comment period).
We note that we sought public comment in the CY 2011 OPPS/ASC final
rule with comment period on the new CPT and Level II HCPCS codes that
were effective January 1, 2011. We also sought public comments in the
CY 2011 OPPS/ASC final rule with comment period on the new Level II
HCPCS codes effective October 1, 2010. These new codes, with an
effective date of October 1, 2010, or January 1, 2011, were flagged
with comment indicator ``N1'' in Addendum AA and BB to the CY 2011
OPPS/ASC final rule with comment period to indicate that we were
assigning them an interim payment status and payment rate, if
applicable, which were subject to public comment following publication
of the CY 2011 OPPS/ASC final rule with comment period. We will respond
to public comments and finalize our proposed ASC treatment of these
codes in the CY 2012 OPPS/ASC final rule with comment period.
2. Proposed Treatment of New Level II HCPCS Codes and Category III CPT
Codes Implemented in April and July 2011 for Which We Are Soliciting
Public Comments in This CY 2012 OPPS/ASC Proposed Rule
In the April and July CRs, we made effective for April 1 or July 1,
2011, a total of 13 new Level II HCPCS codes and 6 new Category III CPT
codes that were not addressed in the CY 2011 OPPS/ASC final rule with
comment period. The 13 new Level II HCPCS codes describe covered
ancillary services.
In the April 2011 ASC quarterly update (Transmittal 2185, CR 7343,
dated March 25, 2011), we added four new drug and biological Level II
HCPCS codes to the list of covered ancillary services. Specifically, as
displayed in Table 42 below, these included HCPCS codes C9280
(Injection, eribulin mesylate, 1 mg), C9281 (Injection, pegloticase, 1
mg), C9282 (Injection, ceftaroline fosamil, 10 mg), and Q2040
(Injection, incobotulinumtoxin A, 1 unit). We note that HCPCS code
Q2040 replaced HCPCS code C9278 (Injection, incobotulinumtoxin A, 1
unit) beginning April 1, 2011. HCPCS code C9278 was effective January
1, 2011, and deleted for dates of service April 1, 2011 and forward,
because it was replaced with HCPCS code Q2040.
In the July 2011 quarterly update (Transmittal 2235, Change Request
7445, dated June 03, 2011), we added nine new drug and biological Level
II HCPCS codes to the list of covered ancillary services. Specifically,
as displayed in Table 43, we provided separate payment for HCPCS codes
C9283 (Injection, acetaminophen, 10 mg), C9284 (Injection, ipilimumab,
1 mg), C9285 (Lidocaine 70 mg/tetracaine 70mg, per patch), C9365 (Oasis
Ultra Tri-Layer matrix, per square centimeter), C9406 (Iodine I-123
ioflupane, diagnostic, per study dose, up to 5 millicuries), Q2041
(Injection, von willebrand factor complex (human), Wilate, 1 i.u.
vwf:rco), Q2042 (Injection, hydroxyprogesterone caproate, 1 mg), Q2043
(Sipuleucel-t, minimum of 50 million autologous cd54+ cells activated
with pap-gm-csf, including leukapheresis and all other preparatory
procedures, per infusion), and Q2044 (Injection, belimumab, 10 mg). We
note that HCPCS code Q2041 is replacing HCPCS code J7184 and HCPCS code
Q2043 is replacing HCPCS code C9273 beginning July 1, 2011.
We assigned payment indicator ``K2'' (Drugs and biologicals paid
separately when provided integral to a surgical procedure on the ASC
list; payment based on OPPS rate) to these 13 new Level II HCPCS codes
to indicate that they are separately paid when provided in ASCs. We are
soliciting public comment on the proposed CY 2012 ASC payment
indicators and payment rates for the drugs and biologicals, as listed
in Tables 42 and 43 below. Those HCPCS codes became payable in ASCs,
beginning in April or July 2011, respectively, and are paid at the ASC
rates posted for the appropriate calendar quarter on the CMS Web site
at http://www.cms.gov/ASCPayment/.
The HCPCS codes listed in Table 42 are included in Addendum BB to
this proposed rule. We note that all ASC addenda are referenced in
section XVII. of this proposed rule and are only available via the
Internet on the CMS Web site. Because HCPCS codes that became effective
for July (listed in Table 43) are not available to us in time for
incorporation into the Addenda to this 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 will be included in the appropriate
Addendum to the CY 2012 OPPS/ASC final rule with comment period. Thus,
the codes implemented by the July 2011 ASC quarterly update CR and
their proposed CY 2012 payment rates (based

[[Page 42292]]

on July 2011 ASP data) that are displayed in Table 43 are not included
in Addendum BB to this proposed rule. The final list of covered
ancillary services and the associated payment weights and payment
indicators will be included in Addendum BB to the CY 2012 OPPS/ASC
final rule with comment period, consistent with our annual update
policy.

Table 42--New Level II HCPCS Codes for Covered Ancillary Services
Implemented in April 2011
------------------------------------------------------------------------
Proposed CY
2012
CY 2011 HCPCS Code CY 2011 Long descriptor payment
indicator
------------------------------------------------------------------------
C9280....................... Injection, eribulin mesylate, K2
1 mg.
C9281....................... Injection, pegloticase, 1 mg. K2
C9282....................... Injection, ceftaroline K2
fosamil, 10 mg.
Q2040....................... Injection, incobotulinumtoxin K2
A, 1 unit.
------------------------------------------------------------------------

Table 43--New Level II HCPCS Codes for Covered Ancillary Services
Implemented in July 2011
------------------------------------------------------------------------
Proposed CY Proposed CY
CY 2011 HCPCS Code CY 2011 Descriptor 2012 payment 2012 ASC
indicator payment rate
------------------------------------------------------------------------
C9283............. Injection, K2 $0.11
acetaminophen, 10
mg.
C9284............. Injection, K2 127.20
ipilimumab, 1 mg.
C9285............. Lidocaine 70 mg/ K2 13.57
tetracaine 70mg,
per patch.
C9365............. Oasis Ultra Tri- K2 10.60
Layer matrix, per
square centimeter.
C9406............. Iodine I-123 K2 1,908.00
ioflupane,
diagnostic, per
study dose, up to 5
millicuries.
Q2041............. Injection, von K2 0.88
willebrand factor
complex (human),
Wilate, 1 i.u.
vwf:rco.
Q2042............. Injection, K2 2.90
hydroxyprogesterone
caproate, 1 mg.
Q2043............. Sipuleucel-t, K2 32,860.00
minimum of 50
million autologous
cd54+ cells
activated with pap-
gm-csf, including
leukapheresis and
all other
preparatory
procedures, per
infusion.
Q2044............. Injection, K2 39.15
belimumab, 10 mg.
------------------------------------------------------------------------

Through the July 2011 quarterly update CR, we also implemented ASC
payment for six new Category III CPT codes as ASC covered surgical
procedures, effective July 1, 2011. These codes are listed in Table 44
below, along with their proposed payment indicators and proposed
payment rates for CY 2011. Because new Category III CPT and Level II
HCPCS codes that become effective for July are not available to us in
time for incorporation into the Addenda to the OPPS/ASC proposed rule,
our policy is to include the codes, their proposed payment indicators,
and proposed payment rates in the preamble to the proposed rule but not
in the Addenda to the proposed rule. These codes and their final
payment indicators and rates will be included in Addendum AA to the CY
2012 OPPS/ASC final rule with comment period.
We are proposing to assign payment indicator ``G2'' (Non-office-
based surgical procedure added in CY 2008 or later; payment based on
OPPS relative payment weight) to all six of the new Category III CPT
codes to be implemented in July 2011. We believe that these procedures
would not pose a significant safety risk to Medicare beneficiaries or
would not require an overnight stay if performed in ASCs. We are
soliciting public comment on these proposed payment indicators and the
payment rates for the new Category III CPT codes that were newly
recognized as ASC covered surgical procedures in July 2011 through the
quarterly update CR, as listed in Table 44 below. We are proposing to
finalize their payment indicators and their payment rates in the CY
2012 OPPS/ASC final rule with comment period.

Table 44--New Category III CPT Codes Implemented in July 2011 as ASC Covered Surgical Procedures
----------------------------------------------------------------------------------------------------------------
Proposed CY
CY 2011 HCPCS Code CY 2011 Long descriptor Proposed CY 2012 payment 2012 ASC
indicator payment rate
----------------------------------------------------------------------------------------------------------------
0263T................................. Intramuscular autologous G2 $1,218.58
bone marrow cell
therapy, with
preparation of harvested
cells, multiple
injections, one leg,
including ultrasound
guidance, if performed;
complete procedure
including unilateral or
bilateral bone marrow
harvest.
0264T................................. Intramuscular autologous G2 1,218.58
bone marrow cell
therapy, with
preparation of harvested
cells, multiple
injections, one leg,
including ultrasound
guidance, if performed;
complete procedure
excluding bone marrow
harvest.
0265T................................. Intramuscular autologous G2 1,218.58
bone marrow cell
therapy, with
preparation of harvested
cells, multiple
injections, one leg,
including ultrasound
guidance, if performed;
unilateral or bilateral
bone marrow harvest only
for intramuscular
autologous bone marrow
cell therapy.
0269T................................. Revision or removal of G2 1,444.14
carotid sinus baroreflex
activation device; total
system (includes
generator placement,
unilateral or bilateral
lead placement, intra-
operative interrogation,
programming, and
repositioning, when
performed).

[[Page 42293]]

0270T................................. Revision or removal of G2 841.60
carotid sinus baroreflex
activation device; lead
only, unilateral
(includes intra-
operative interrogation,
programming, and
repositioning, when
performed).
0271T................................. Revision or removal of G2 1,126.88
carotid sinus baroreflex
activation device; pulse
generator only (includes
intra-operative
interrogation,
programming, and
repositioning, when
performed).
----------------------------------------------------------------------------------------------------------------

In summary, for CY 2011, we are soliciting public comments on the
proposed payment indicators and the payment rates, if applicable, for
the new Level II HCPCS codes and Category III CPT codes that were newly
recognized in April or July 2011 through the respective quarterly
update CRs. These codes are listed in Tables 42, 43 and 44 of this
proposed rule. We are proposing to finalize their payment indicators
and their payment rates, if applicable, in the CY 2012 OPPS/ASC final
rule with comment period.
3. Proposed Process for New Level II HCPCS Codes and Category I and III
CPT Codes for Which We Will Be Soliciting Public Comments in the CY
2012 OPPS/ASC Final Rule With Comment Period
As has been our practice in the past, we incorporate those new
Category I and Category III CPT codes and new Level II HCPCS codes that
are effective January 1 in the final rule with comment period updating
the ASC payment system 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 ASC
quarterly update CRs. In the past, we also have released new Level II
HCPCS codes that are effective October 1 through the October ASC
quarterly update CRs and incorporated these new codes in the final rule
with comment period updating the ASC payment system for the following
calendar year. All of these 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 them an interim payment status
which is subject to public comment. The payment indicator and payment
rate, if applicable, for all such codes flagged with comment indicator
``NI'' are open to public comment in the OPPS/ASC final rule with
comment period, and we respond to these comments in the final rule with
comment period for the next calendar year's OPPS/ASC update.
We are proposing to continue this process for CY 2012.
Specifically, for CY 2012, we are proposing to include in Addenda AA
and BB to the CY 2012 OPPS/ASC final rule with comment period the new
Category I and III CPT codes effective January 1, 2012 that would be
incorporated in the January 2012 ASC quarterly update CR and the new
Level II HCPCS codes, effective October 1, 2011 or January 1, 2012,
that would be released by CMS in its October 2011 and January 2012 ASC
quarterly update CRs. These codes would be flagged with comment
indicator ``NI'' in Addenda AA and BB to the CY 2012 OPPS/ASC final
rule with comment period to indicate that we have assigned them an
interim payment status. Their payment indicators and payment rates, if
applicable, would be open to public comment in the CY 2012 OPPS/ASC
final rule with comment period and would be finalized in the CY 2013
OPPS/ASC final rule with comment period.

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

1. Covered Surgical Procedures
a. Proposed Additions to the List of ASC Covered Surgical Procedures
We conducted a review of all HCPCS codes that currently are paid
under the OPPS, but not included on the ASC list of covered surgical
procedures, to determine if changes in technology and/or medical
practice changed the clinical appropriateness of these procedures for
the ASC setting. Upon review, we did not identify any procedures that
are currently excluded from the ASC list of procedures that met the
definition of a covered surgical procedure based on our expectation
that they would not pose a significant safety risk to Medicare
beneficiaries or would require an overnight stay if performed in ASCs.
Therefore, we are not proposing additions to the list of ASC covered
surgical procedures for CY 2012.
b. Proposed Covered Surgical Procedures Designated as Office-Based
(1) Background
In the August 2, 2007 ASC final rule, we finalized our policy to
designate as ``office-based'' those procedures that are added to the
ASC list of covered surgical procedures in CY 2008 or later years that
we determine are performed predominantly (more than 50 percent of the
time) in physicians' offices based on consideration of the most recent
available volume and utilization data for each individual procedure
code and/or, if appropriate, the clinical characteristics, utilization,
and volume of related codes. In that rule, we also finalized our policy
to exempt all procedures on the CY 2007 ASC list from application of
the office-based classification (72 FR 42512). The procedures that were
added to the ASC list of covered surgical procedures beginning in CY
2008 that we determined were office-based were identified in Addendum
AA to that rule by payment indicator ``P2'' (Office-based surgical
procedure added to ASC list in CY 2008 or later with MPFS non-facility
PE RVUs; payment based on OPPS relative payment weight); ``P3''
(Office-based surgical procedures added to ASC list in CY 2008 or later
with MPFS non-facility PE RVUs; payment based on MPFS non-facility PE
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in
CY 2008 or later without MPFS non-facility 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 non-facility PE RVU-
based 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 office-based,
permanently office-based, or non-

[[Page 42294]]

office-based, after taking into account updated volume and utilization
data.
(2) Proposed Changes for CY 2012 to Covered Surgical Procedures
Designated as Office-Based
In developing this proposed rule, we followed our policy to
annually review and update the surgical procedures for which ASC
payment is made and to identify new procedures that may be appropriate
for ASC payment, including their potential designation as office-based.
We reviewed CY 2010 volume and utilization data and the clinical
characteristics for all surgical procedures that are assigned payment
indicator ``G2'' in CY 2011, as well as for those procedures assigned
one of the temporary office-based payment indicators, specifically
``P2*,'' ``P3*,'' or ``R2*'' in the CY 2011 OPPS/ASC final rule with
comment period (75 FR 72033 through 72038).
Based on our review of the CY 2010 volume and utilization data, we
identified ten surgical procedures that we believe meet the criteria
for designation as office-based. The data indicate that the procedures
are performed more than 50 percent of the time in physicians' offices.
Our medical advisors believe the services are of a level of complexity
consistent with other procedures performed routinely in physicians'
offices. The 10 CPT codes we are proposing to permanently designate as
office-based are listed in Table 45 below.

Table 45--ASC Covered Surgical Procedures Proposed for Permanent Office-Based Designation for 2012
----------------------------------------------------------------------------------------------------------------
CY 2011 long CY 2011 ASC payment Proposed CY 2012 ASC
CY 2011 CPT code descriptor indicator payment indicator
----------------------------------------------------------------------------------------------------------------
0213T............................. Injection(s), G2 R2
diagnostic or
therapeutic agent,
paravertebral facet
(zygapophyseal)
joint (or nerves
innervating that
joint) with
ultrasound guidance,
cervical or
thoracic; single
level.
0214T............................. Injection(s), G2 R2
diagnostic or
therapeutic agent,
paravertebral facet
(zygapophyseal)
joint (or nerves
innervating that
joint) with
ultrasound guidance,
cervical or
thoracic; second
level (list
separately in
addition to code for
primary procedure).
0215T............................. Injection(s), G2 R2
diagnostic or
therapeutic agent,
paravertebral facet
(zygapophyseal)
joint (or nerves
innervating that
joint) with
ultrasound guidance,
cervical or
thoracic; third and
any additional
level(s) (list
separately in
addition to code for
primary procedure).
0216T............................. Injection(s), G2 R2
diagnostic or
therapeutic agent,
paravertebral facet
(zygapophyseal)
joint (or nerves
innervating that
joint) with
ultrasound guidance,
lumbar or sacral;
single level.
0217T............................. Injection(s), G2 R2
diagnostic or
therapeutic agent,
paravertebral facet
(zygapophyseal)
joint (or nerves
innervating that
joint) with
ultrasound guidance,
lumbar or sacral;
second level (list
separately in
addition to code for
primary procedure).
0218T............................. Injection(s), G2 R2
diagnostic or
therapeutic agent,
paravertebral facet
(zygapophyseal)
joint (or nerves
innervating that
joint) with
ultrasound guidance,
lumbar or sacral;
third and any
additional level(s)
(list separately in
addition to code for
primary procedure).
35475............................. Transluminal balloon G2 P3
angioplasty,
percutaneous;
brachiocephalic
trunk or branches,
each vessel.
35476............................. Transluminal balloon G2 P3
angioplasty,
percutaneous; venous.
41530............................. Submucosal ablation G2 P2
of the tongue base,
radiofrequency, one
or more sites, per
session.
69801............................. Labyrinthotomy, with G2 P3
or without
cryosurgery
including other
nonexcisional
destructive
procedures or
perfusion of
vestibuloactive
drugs (single or
multiple
perfusions);
transcanal.
----------------------------------------------------------------------------------------------------------------

We also reviewed CY 2010 volume and utilization data and other
information for the 23 procedures finalized for temporary office-based
status in the CY 2011 OPPS/ASC final rule with comment period (75 FR
72036 through 72038). Among these 23 procedures, there were very few
claims data for eight procedures: 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)); CPT code 0226T (Anoscopy,
high resolution (HRA) (with magnification and chemical agent
enhancement); diagnostic, including collection of specimen(s) by
brushing or washing when performed); CPT code 0227T (Anoscopy, high
resolution (HRA) (with magnification and chemical agent enhancement);
with biopsy(ies)); CPT code 0232T (Injection(s), platelet rich plasma,
any tissue, including image guidance, harvesting and preparation when
performed); CPT code C9800 (Dermal injection procedure(s) for facial
lipodystrophy syndrome (LDS) and provision of Radiesse or Sculptra
dermal filler, including all items and supplies); CPT code 37761
(Ligation of perforator vein(s), subfascial, open, including ultrasound
guidance, when performed, 1 leg); and CPT code 67229 (Treatment of
extensive or progressive retinopathy, one or more sessions; preterm
infant (less than 37 weeks gestation at birth), performed from birth up
to 1 year of age (e.g., retinopathy of prematurity), photocoagulation
or cryotherapy). Consequently, we are proposing to maintain their
temporary office-based designations for CY 2012.
As a result of our review of the remaining fifteen procedures that
have temporary office-based designations for CY 2011 for which we do
have claims data, we are proposing that none of the procedures be
designated as office-based in CY 2012. The 15 surgical procedure codes
are:
CPT code 21015 (Radical resection of tumor (e.g.,
malignant neoplasm), soft tissue of face or scalp; less than 2 cm);
CPT code 21555 (Excision, tumor, soft tissue of neck or
anterior thorax, subcutaneous; less than 3 cm);

[[Page 42295]]

CPT code 21930 (Excision, tumor, soft tissue of back or
flank, subcutaneous; less than 3 cm);
CPT code 23075 (Excision, tumor, soft tissue of shoulder
area, subcutaneous; less than 3 cm);
CPT code 24075 (Excision, tumor, soft tissue of upper arm
or elbow area, subcutaneous; less than 3 cm);
CPT code 25075 (Excision, tumor, soft tissue of forearm
and/or wrist area, subcutaneous; less than 3 cm);
CPT code 26115 (Excision, tumor or vascular malformation,
soft tissue of hand or finger, subcutaneous; less than 1.5 cm);
CPT code 27047 (Excision, tumor, soft tissue of pelvis and
hip area, subcutaneous; less than 3 cm);
CPT code 27327 (Excision, tumor, soft tissue of thigh or
knee area, subcutaneous; less than 3 cm);
CPT code 27618 (Excision, tumor, soft tissue of leg or
ankle area, subcutaneous; less than 3 cm);
CPT code 28039 (Excision, tumor, soft tissue of foot or
toe, subcutaneous; 1.5 cm or greater);
CPT code 28041 (Excision, tumor, soft tissue of foot or
toe, subfascial (e.g., intramuscular); 1.5 cm or greater);
CPT code 28043 (Excision, tumor, soft tissue of foot or
toe, subcutaneous; less than 1.5 cm);
CPT code 28045 (Excision, tumor, soft tissue of foot or
toe, subfascial (e.g., intramuscular); less than 1.5 cm); and
CPT code 28046 (Radical resection of tumor (e.g.,
malignant neoplasm), soft tissue of foot or toe; less than 3 cm).
The volume and utilization data for these CPT codes are sufficient
to indicate that these procedures are not performed predominantly in
physicians' offices and, therefore, should not be assigned an office-
based payment indicator in CY 2012.
The proposed CY 2012 payment indicator designations for the 23
procedures that were temporarily designated as office-based in CY 2011
are displayed in Table 46 below. The procedures for which the proposed
office-based designations for CY 2012 are temporary also are indicated
by asterisks in Addendum AA to this proposed rule (which is referenced
in section XVII. of this proposed rule and available via the Internet
on the CMS Web site).

Table 46--Proposed CY 2012 Payment Indicators for ASC Covered Surgical
Procedures Designated as Temporarily Office-Based in the CY 2011 OPPS/
ASC Final Rule With Comment Period
------------------------------------------------------------------------
Proposed CY
CY 2011 long CY 2011 ASC 2012 ASC
CY 2011 CPT code descriptor payment payment
indicator indicator **
------------------------------------------------------------------------
21015............. Radical resection of R2 * G2
tumor (e.g.,
malignant
neoplasm), soft
tissue of face or
scalp; less than 2
cm).
21555............. Excision, tumor, P3 * G2
soft tissue of neck
or anterior thorax,
subcutaneous; less
than 3 cm.
21930............. Excision, tumor, P3 * G2
soft tissue of back
or flank,
subcutaneous; less
than 3 cm.
23075............. Excision, tumor, P3 * G2
soft tissue of
shoulder area,
subcutaneous; less
than 3 cm.
24075............. Excision, tumor, P3 * G2
soft tissue of
upper arm or elbow
area, subcutaneous;
less than 3 cm.
25075............. Excision, tumor, P3 * G2
soft tissue of
forearm and/or
wrist area,
subcutaneous; less
than 3 cm.
26115............. Excision, tumor or P3 * G2
vascular
malformation, soft
tissue of hand or
finger,
subcutaneous; less
than 1.5 cm.
27047............. Excision, tumor, P3 * G2
soft tissue of
pelvis and hip
area, subcutaneous;
less than 3 cm.
27327............. Excision, tumor, P3 * G2
soft tissue of
thigh or knee area,
subcutaneous; less
than 3 cm.
27618............. Excision, tumor, P3 * G2
soft tissue of leg
or ankle area,
subcutaneous; less
than 3 cm.
28039............. Excision, tumor, P3 * G2
soft tissue of foot
or toe,
subcutaneous; 1.5
cm or greater.
28041............. Excision, tumor, R2 * G2
soft tissue of foot
or toe, subfascial
(e.g.,
intramuscular); 1.5
cm or greater.
28043............. Excision, tumor, P3 * G2
soft tissue of foot
or toe,
subcutaneous; less
than 1.5 cm.
28045............. Excision, tumor, P3 * G2
soft tissue of foot
or toe, subfascial
(e.g.,
intramuscular);
less than 1.5 cm.
28046............. Radical resection of R2 * G2
tumor (e.g.,
malignant
neoplasm), soft
tissue of foot or
toe; less than 3 cm.
37761............. Ligation of R2 * R2 *
perforator vein(s),
subfascial, open,
including
ultrasound
guidance, when
performed, 1 leg.
67229............. Treatment of R2 * R2 *
extensive or
progressive
retinopathy, one or
more sessions;
preterm infant
(less than 37 weeks
gestation at
birth), performed
from birth up to 1
year of age (e.g.,
retinopathy of
prematurity),
photocoagulation or
cryotherapy.
0099T............. Implantation of R2 * R2 *
intrastromal
corneal ring
segments.
0124T............. Conjunctival R2 * R2 *
incision with
posterior
extrascleral
placement of
pharmacological
agent (does not
include supply of
medication).
0226T............. Anoscopy, high R2 * R2 *
resolution (HRA)
(with magnification
and chemical agent
enhancement);
diagnostic,
including
collection of
specimen(s) by
brushing or washing
when performed.
0227T............. Anoscopy, high R2 * R2 *
resolution (HRA)
(with magnification
and chemical agent
enhancement); with
biopsy(ies).
0232T............. Injection(s), R2 * R2 *
platelet rich
plasma, any tissue,
including image
guidance,
harvesting and
preparation when
performed.
C9800............. Dermal injection R2 * R2 *
procedure(s) for
facial
lipodystrophy
syndrome (LDS) and
provision of
Radiesse or
Sculptra dermal
filler, including
all items and
supplies.
------------------------------------------------------------------------
* If designation is temporary.
** Payment indicators are based on a comparison of the proposed rates
according to the ASC standard ratesetting methodology and the MPFS
proposed rates. At the time this proposed rule is being finalized for
publication, current law authorizes a negative update to the MPFS
payment rates for CY 2012. For a discussion of those rates, we refer
readers to the CY 2012 MPFS proposed rule.

[[Page 42296]]

We invite public comment on these proposals.
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).
As discussed in section XIII.F.2. of this proposed rule, because
the 4-year transition to the ASC payment rates under the standard
methodology is complete and, therefore, identification of device-
intensive procedures that are subject to transitional payment
methodology is no longer necessary, we are proposing to delete payment
indicator ``H8'' (Device-intensive procedure on ASC list in CY 2007;
paid at adjusted rate). The device-intensive procedures for which the
device-intensive payment methodology will apply in CY 2012 or later
will be assigned payment indicator ``J8'' (Device-intensive procedure;
paid at adjusted rate).
(2) Proposed Changes to List of Covered Surgical Procedures Designated
as Device-Intensive for CY 2012
We are proposing to update the ASC list of covered surgical
procedures that are eligible for payment according to the device-
intensive procedure payment methodology for CY 2012, 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 2010 OPPS claims and
cost report data available for this proposed rule. The OPPS device-
dependent APCs are discussed further in section II.A.2.d.(1) of this
proposed rule.
The ASC covered surgical procedures that we are proposing to
designate as device-intensive and that would be subject to the device-
intensive procedure payment methodology for CY 2012 are listed in Table
47 below. The CPT code, the CPT code short descriptor, the proposed CY
2012 ASC payment indicator, the proposed CY 2012 OPPS APC assignment
and title, and the proposed CY 2012 OPPS APC device offset percentage
are also listed in Table 47 below. All of these procedures are included
in Addendum AA to this proposed rule (which is referenced in section
XVII. of this proposed rule and available via the Internet on the CMS
Web site).

Table 47--ASC Covered Surgical Procedures Proposed for Device-Intensive Designation for CY 2012
----------------------------------------------------------------------------------------------------------------
Proposed CY
Proposed CY Proposed CY 2012 device-
CPT Code Short descriptor Proposed CY 2012 ASC 2012 OPPS 2012 OPPS APC dependent
payment indicator APC title APC offset
percentage
----------------------------------------------------------------------------------------------------------------
24361........................ Reconstruct J8 0425 Level II 60
elbow joint. Arthroplasty
or
Implantation
with
Prosthesis.
24363........................ Replace elbow J8 0425 Level II 60
joint. Arthroplasty
or
Implantation
with
Prosthesis.
24366........................ Reconstruct head J8 0425 Level II 60
of radius. Arthroplasty
or
Implantation
with
Prosthesis.
25441........................ Reconstruct J8 0425 Level II 60
wrist joint. Arthroplasty
or
Implantation
with
Prosthesis.
25442........................ Reconstruct J8 0425 Level II 60
wrist joint. Arthroplasty
or
Implantation
with
Prosthesis.
25446........................ Wrist J8 0425 Level II 60
replacement. Arthroplasty
or
Implantation
with
Prosthesis.
27446........................ Revision of knee J8 0425 Level II 60
joint. Arthroplasty
or
Implantation
with
Prosthesis.
33206........................ Insertion of J8 0089 Insertion/ 71
heart pacemaker. Replacement of
Permanent
Pacemaker and
Electrodes.
33207........................ Insertion of J8 0089 Insertion/ 71
heart pacemaker. Replacement of
Permanent
Pacemaker and
Electrodes.
33208........................ Insertion of J8 0655 Insertion/ 73
heart pacemaker. Replacement/
Conversion of
a permanent
dual chamber
pacemaker.
33212........................ Insertion of J8 0090 Insertion/ 73
pulse generator. Replacement of
Pacemaker
Pulse
Generator.
33213........................ Insertion of J8 0654 Insertion/ 74
pulse generator. Replacement of
a permanent
dual chamber
pacemaker.
33214........................ Upgrade of J8 0655 Insertion/ 73
pacemaker Replacement/
system. Conversion of
a permanent
dual chamber
pacemaker.
33224........................ Insert pacing J8 0655 Insertion/ 73
lead & connect. Replacement/
Conversion of
a permanent
dual chamber
pacemaker.
33225........................ Lventric pacing J8 0108 Insertion/ 87
lead add-on. Replacement/
Repair of
Cardioverter-
Defibrillator
Leads.
33240........................ Insert pulse J8 0107 Insertion of 88
generator. Cardioverter-
Defibrillator.

[[Page 42297]]

33249........................ Eltrd/insert J8 0108 Insertion/ 87
pace-defib. Replacement/
Repair of
Cardioverter-
Defibrillator
Leads.
33282........................ Implant pat- J8 0680 Insertion of 72
active ht Patient
record. Activated
Event
Recorders.
53440........................ Male sling J8 0385 Level I 61
procedure. Prosthetic
Urological
Procedures.
53444........................ Insert tandem J8 0385 Level I 61
cuff. Prosthetic
Urological
Procedures.
53445........................ Insert uro/ves J8 0386 Level II 70
nck sphincter. Prosthetic
Urological
Procedures.
53447........................ Remove/replace J8 0386 Level II 70
ur sphincter. Prosthetic
Urological
Procedures.
54400........................ Insert semi- J8 0385 Level I 61
rigid Prosthetic
prosthesis. Urological
Procedures.
54401........................ Insert self- J8 0386 Level II 70
contd Prosthetic
prosthesis. Urological
Procedures.
54405........................ Insert multi- J8 0386 Level II 70
comp penis pros. Prosthetic
Urological
Procedures.
54410........................ Remove/replace J8 0386 Level II 70
penis prosth. Prosthetic
Urological
Procedures.
54416........................ Remv/repl penis J8 0386 Level II 70
contain pros. Prosthetic
Urological
Procedures.
55873........................ Cryoablate J8 0674 Prostate 57
prostate. Cryoablation.
61885........................ Insrt/redo J8 0039 Level I 85
neurostim 1 Implantation
array. of
Neurostimulato
r Generator.
61886........................ Implant J8 0315 Level II 88
neurostim Implantation
arrays. of
Neurostimulato
r Generator.
62361........................ Implant spine J8 0227 Implantation of 81
infusion pump. Drug Infusion
Device.
62362........................ Implant spine J8 0227 Implantation of 81
infusion pump. Drug Infusion
Device.
63650........................ Implant J8 0040 Level I 55
neuroelectrodes. Implantation/
Revision/
Replacement of
Neurostimulato
r Electrodes.
63655........................ Implant neuro- J8 0061 Level II 64
electrodes. Implantation/
Revision/
Replacement of
Neurostimulato
r Electrodes.
63663........................ Revise spine J8 0040 Level I 55
eltrd perq aray. Implantation/
Revision/
Replacement of
Neurostimulato
r Electrodes.
63664........................ Revise spine J8 0040 Level I 55
eltrd plate. Implantation/
Revision/
Replacement of
Neurostimulato
r Electrodes.
63685........................ Insrt/redo spine J8 0039 Level I 85
n generator. Implantation
of
Neurostimulato
r Generator.
64553........................ Implant neuro- J8 0040 Level I 55
electrodes. Implantation/
Revision/
Replacement of
Neurostimulato
r Electrodes.
64555........................ Implant neuro- J8 0040 Level I 55
electrodes. Implantation/
Revision/
Replacement of
Neurostimulato
r Electrodes.
64560........................ Implant neuro- J8 0040 Level I 55
electrodes. Implantation/
Revision/
Replacement of
Neurostimulato
r Electrodes.
64561........................ Implant neuro- J8 0040 Level I 55
electrodes. Implantation/
Revision/
Replacement of
Neurostimulato
r Electrodes.
64565........................ Implant neuro- J8 0040 Level I 55
electrodes. Implantation/
Revision/
Replacement of
Neurostimulato
r Electrodes.
64568........................ Implant neuro- J8 0318 Implantation of 86
electrodes. Neurostimulato
r Electrodes,
Cranial Nerve.
64575........................ Implant neuro- J8 0061 Laminectomy, 64
electrodes. Laparoscopy,
or Incision
for
Implantation
of
Neurostimulato
r Electr.
64577........................ Implant neuro- J8 0061 Laminectomy, 64
electrodes. Laparoscopy,
or Incision
for
Implantation
of
Neurostimulato
r Electr.
64580........................ Implant neuro- J8 0061 Laminectomy, 64
electrodes. Laparoscopy,
or Incision
for
Implantation
of
Neurostimulato
r Electr.
64581........................ Implant neuro- J8 0061 Laminectomy, 64
electrodes. Laparoscopy,
or Incision
for
Implantation
of
Neurostimulato
r Electr.
64590........................ Insrt/redo pn/ J8 0039 Level I 85
gastr stimul. Implantation
of
Neurostimulato
r Generator.
65770........................ Revise cornea J8 0293 Level VI 67
with implant. Anterior
Segment Eye
Procedures.
69714........................ Implant temple J8 0425 Level II 60
bone w/stimul. Arthroplasty
or
Implantation
with
Prosthesis.
69715........................ Temple bne J8 0425 Level II 60
implnt w/ Arthroplasty
stimulat. or
Implantation
with
Prosthesis.
69717........................ Temple bone J8 0425 Level II 60
implant Arthroplasty
revision. or
Implantation
with
Prosthesis.
69718........................ Revise temple J8 0425 Level II 60
bone implant. Arthroplasty
or
Implantation
with
Prosthesis.
69930........................ Implant cochlear J8 0259 Level VII ENT 83
device. Procedures.
----------------------------------------------------------------------------------------------------------------

[[Page 42298]]

We invite public comment on these proposals.
d. ASC Treatment of Surgical Procedures Proposed for Removal From the
OPPS Inpatient List for CY 2012
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 of the ASC list of covered surgical procedures, a review of
the procedures that are being proposed for removal from the OPPS
inpatient list for possible inclusion on the ASC list of covered
surgical procedures. We evaluated each of the three procedures we are
proposing to remove from the OPPS inpatient list for CY 2012 according
to the criteria for exclusion from the list of covered ASC surgical
procedures. We believe that these three procedures should continue to
be excluded from the ASC list of covered surgical procedures for CY
2012 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 are proposing to remove from the OPPS inpatient list for
CY 2012 may be found in section IX.B. of this proposed rule. The HCPCS
codes for these three procedures and their long descriptors are listed
in Table 48 below.

Table 48--Procedures Proposed for Exclusion From the ASC List of Covered
Procedures for CY 2012 That Are Proposed for Removal From the CY 2012
OPPS Inpatient List
------------------------------------------------------------------------
CPT Code Long descriptor
------------------------------------------------------------------------
21346............................. Open treatment of nasomaxillary
complex fracture (Lefort II type);
with wiring and/or local fixation.
35045............................. Direct repair of aneurysm,
pseudoaneurysm, or excision
(partial or total) and graft
insertion, with or without patch
graft; for aneurysm,
pseudoaneurysm, and associated
occlusive disease, radial or ulnar
artery.
54650............................. Orchiopexy, abdominal approach, for
intra-abdominal testis (e.g.,
Fowler-Stephens).
------------------------------------------------------------------------

We invite public comment on this proposal.
2. Covered Ancillary Services
Consistent with the established ASC payment system policy, we are
proposing to update the ASC list of covered ancillary services to
reflect the proposed payment status for the services under the CY 2012
OPPS. Maintaining consistency with the OPPS may result in proposed
changes to ASC payment indicators for some covered ancillary items and
services because of changes that are being proposed under the OPPS for
CY 2012. For example, a covered ancillary service that was separately
paid under the revised ASC payment system in CY 2011 may be proposed
for packaged status under the CY 2012 OPPS and, therefore, also under
the ASC payment system for CY 2012. Comment indicator ``CH,'' discussed
in section XIII.F. of this proposed rule, is used in Addendum BB to
this proposed rule (which is referenced in section XVII. of this
proposed rule and available via the Internet on the CMS Web site) to
indicate covered ancillary services for which we are proposing a change
in the ASC payment indicator to reflect a proposed change in the OPPS
treatment of the service for CY 2012.
Except for the Level II HCPCS codes listed in Table 43 of this
proposed rule, all ASC covered ancillary services and their proposed
payment indicators for CY 2012 are included in Addendum BB to this
proposed rule.

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

1. Proposed Payment for Covered Surgical Procedures
a. Background
Our ASC payment policies for covered surgical procedures under the
revised ASC payment system are fully described in the CY 2008 OPPS/ASC
final rule with comment period (72 FR 66828 through 66831). Under our
established policy for the revised ASC payment system, the ASC standard
ratesetting methodology of multiplying the ASC relative payment weight
for the procedure by the ASC conversion factor for that same year is
used to calculate the national unadjusted payment rates for procedures
with payment indicator ``G2.'' For procedures assigned payment
indicator ``A2,'' our final policy established blended rates to be used
during the transitional period and, beginning in CY 2011, ASC rates
calculated according to the ASC standard ratesetting methodology. The
rate calculation established for device-intensive procedures (payment
indicator ``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 2011 OPPS/ASC final rule with comment period (75 FR 72024 through
72064), we updated the CY 2010 ASC payment rates for ASC covered
surgical procedures with payment indicators of ``A2,'' ``G2,'' ``H8,''
and ``J8'' using CY 2009 data, consistent with the CY 2011 OPPS update.
Payment rates for device-intensive procedures also were updated to
incorporate the CY 2011 OPPS device offset percentages. Because
transitional payments were no longer required in CY 2011, we calculated
CY 2011 payments for procedures formerly subject to the transitional
payment methodology (payment indicators ``A2'' and ``H8'') using the
standard rate setting methodology, incorporating the device-intensive
methodology, as appropriate.
Payment rates for office-based procedures (payment indicators
``P2,'' ``P3,'' and ``R2'') are the lower of the MPFS non-facility PE
RVU-based amount (we refer readers to the CY 2012 MPFS proposed rule)
or the amount calculated using the ASC standard ratesetting methodology
for the procedure. In the CY 2011 OPPS/ASC final rule with comment
period (75 FR 72024 through 72064), 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 2011 rate for each of the office-based procedures,
calculated according to the ASC standard ratesetting methodology, to
the MPFS nonfacility PE RVU-based amount to determine which was lower
and, therefore, would be the CY 2011 payment rate for the procedure
according to the final policy of the revised ASC payment system (Sec.
416.171(d)).
b. Proposed Update to ASC-Covered Surgical Procedure Payment Rates for
CY 2012
We are proposing to update ASC payment rates for CY 2012 using the
established rate calculation methodologies under Sec. 416.171. Under
Sec. 416.171(c)(4), the transitional payment

[[Page 42299]]

rates are no longer used for CY 2011 and subsequent calendar years for
a covered surgical procedure designated in accordance with Sec.
416.166. Thus, we are proposing to calculate CY 2012 payments for
procedures formerly subject to the transitional payment methodology
(payment indicators ``A2'' and ``H8'') using the proposed CY 2012 ASC
rate calculated according to the ASC standard ratesetting methodology,
incorporating the device-intensive procedure methodology, as
appropriate. We are proposing to continue to use the amount calculated
under the ASC standard ratesetting methodology for procedures assigned
payment indicator ``G2.'' We are proposing to modify or delete the
payment indicators for procedures that were subject to transitional
payment prior to CY 2011 (we refer readers to our discussion in section
XIII.F.2. of this proposed rule).
We are proposing that payment rates for office-based procedures
(payment indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive
procedures that were not subject to transitional payment (payment
indicator ``J8'') be calculated according to our established policies,
incorporating the device-intensive procedure methodology as
appropriate. Thus, we are proposing to update the payment amounts for
device-intensive procedures based on the CY 2012 OPPS proposal that
reflects updated OPPS device offset percentages, and to make payment
for office-based procedures at the lesser of the CY 2012 proposed MPFS
non-facility PE RVU-based amount or the proposed CY 2012 ASC payment
amount calculated according to the standard ratesetting methodology.
c. Proposed Adjustment to ASC Payments for No Cost/Full Credit and
Partial Credit Devices
Our ASC policy with regard to payment for costly devices implanted
in ASCs at no cost or with full or partial credit as set forth in Sec.
416.179 is consistent with the OPPS policy. The proposed CY 2012 OPPS
APCs and devices subject to the adjustment policy are discussed in
section IV.B.2. of this proposed rule. The established ASC policy
includes adoption of the OPPS policy for reduced payment to providers
when a specified device is furnished without cost or with full or
partial credit for the cost of the device for those ASC covered
surgical procedures that are assigned to APCs under the OPPS to which
this policy applies. We refer readers to the CY 2009 OPPS/ASC final
rule with comment period for a full discussion of the ASC payment
adjustment policy for no cost/full credit and partial credit devices
(73 FR 68742 through 68745).
Consistent with the OPPS, we are proposing to update the list of
ASC covered device-intensive procedures and devices that would be
subject to the no cost/full credit and partial credit device adjustment
policy for CY 2012. Table 49 below displays the ASC covered device-
intensive procedures that we are proposing would be subject to the no
cost/full credit and partial credit device adjustment policy for CY
2012. Specifically, when a procedure that is listed in Table 49 is
performed to implant a device that is listed in Table 50 below, 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 continue to believe that the reduction of ASC payment in these
circumstances is necessary to pay appropriately for the covered
surgical procedure being furnished by the ASC.
We also are proposing to reduce the payment for implantation
procedures listed in Table 49 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 49 when the
facility receives a partial credit of 50 percent or more of the cost of
a device listed in Table 50 below. In order to report that they
received a partial credit of 50 percent or 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.

Table 49--Proposed CY 2012 Procedures to Which the No Cost/Full Credit and Partial Credit Device Adjustment
Policy Would Apply
----------------------------------------------------------------------------------------------------------------
Proposed
Proposed Proposed CY 2012
CY 2012 Proposed CY CY 2012 OPPS
CPT code Short descriptor ASC 2012 OPPS OPPS APC title OPPS full partial
payment APC APC offset APC offset
indicator percentage percentage
----------------------------------------------------------------------------------------------------------------
24361............ Reconstruct elbow J8 0425 Level II 60 30
joint. Arthroplasty or
Implantation with
Prosthesis.
24363............ Replace elbow joint. J8 0425 Level II 60 30
Arthroplasty or
Implantation with
Prosthesis.
24366............ Reconstruct head of J8 0425 Level II 60 30
radius. Arthroplasty or
Implantation with
Prosthesis.
25441............ Reconstruct wrist J8 0425 Level II 60 30
joint. Arthroplasty or
Implantation with
Prosthesis.
25442............ Reconstruct wrist J8 0425 Level II 60 30
joint. Arthroplasty or
Implantation with
Prosthesis.

[[Page 42300]]

25446............ Wrist replacement... J8 0425 Level II 60 30
Arthroplasty or
Implantation with
Prosthesis.
27446............ Revision of knee J8 0425 Level II 60 30
joint. Arthroplasty or
Implantation with
Prosthesis.
33206............ Insertion of heart J8 0089 Insertion/ 71 35
pacemaker. Replacement of
Permanent
Pacemaker and
Electrodes.
33207............ Insertion of heart J8 0089 Insertion/ 71 35
pacemaker. Replacement of
Permanent
Pacemaker and
Electrodes.
33208............ Insertion of heart J8 0655 Insertion/ 74 37
pacemaker. Replacement/
Conversion of a
permanent dual
chamber pacemaker.
33212............ Insertion of pulse J8 0090 Insertion/ 73 37
generator. Replacement of
Pacemaker Pulse
Generator.
33213............ Insertion of pulse J8 0654 Insertion/ 74 37
generator. Replacement of a
permanent dual
chamber pacemaker.
33214............ Upgrade of pacemaker J8 0655 Insertion/ 73 37
system. Replacement/
Conversion of a
permanent dual
chamber pacemaker.
33224............ Insert pacing lead & J8 0655 Insertion/ 73 37
connect. Replacement/
Conversion of a
permanent dual
chamber pacemaker.
33225............ Lventric pacing lead J8 0108 Insertion/ 87 43
add-on. Replacement/Repair
of Cardioverter-
Defibrillator
Leads.
33240............ Insert pulse J8 0107 Insertion of 88 44
generator. Cardioverter-
Defibrillator.
33249............ Eltrd/insert pace- J8 0108 Insertion/ 87 43
defib. Replacement/Repair
of Cardioverter-
Defibrillator
Leads.
33282............ Implant pat-active J8 0680 Insertion of 72 36
ht record. Patient Activated
Event Recorders.
53440............ Male sling procedure J8 0385 Level I Prosthetic 61 30
Urological
Procedures.
53444............ Insert tandem cuff.. J8 0385 Level I Prosthetic 61 30
Urological
Procedures.
53445............ Insert uro/ves nck J8 0386 Level II Prosthetic 70 35
sphincter. Urological
Procedures.
53447............ Remove/replace ur J8 0386 Level II Prosthetic 70 35
sphincter. Urological
Procedures.
54400............ Insert semi-rigid J8 0385 Level I Prosthetic 61 30
prosthesis. Urological
Procedures.
54401............ Insert self-contd J8 0386 Level II Prosthetic 70 35
prosthesis. Urological
Procedures.
54405............ Insert multi-comp J8 0386 Level II Prosthetic 70 35
penis pros. Urological
Procedures.
54410............ Remove/replace penis J8 0386 Level II Prosthetic 70 35
prosth. Urological
Procedures.
54416............ Remv/repl penis J8 0386 Level II Prosthetic 70 35
contain pros. Urological
Procedures.
61885............ Insrt/redo neurostim J8 0039 Level I 85 43
1 array. Implantation of
Neurostimulator
Generator.
61886............ Implant neurostim J8 0315 Level II 88 44
arrays. Implantation of
Neurostimulator
Generator.
62361............ Implant spine J8 0227 Implantation of 81 40
infusion pump. Drug Infusion
Device.
62362............ Implant spine J8 0227 Implantation of 81 40
infusion pump. Drug Infusion
Device.
63650............ Implant J8 0040 Level I 55 27
neuroelectrodes. Implantation/
Revision/
Replacement of
Neurostimulator
Electrodes.
63655............ Implant J8 0061 Level II 64 32
neuroelectrodes. Implantation/
Revision/
Replacement of
Neurostimulator
Electrodes.
63663............ Revise spine eltrd J8 0040 Level I 55 27
perq aray. Implantation/
Revision/
Replacement of
Neurostimulator
Electrodes.
63664............ Revise spine eltrd J8 0040 Level I 55 27
plate. Implantation/
Revision/
Replacement of
Neurostimulator
Electrodes.
63685............ Insrt/redo spine n J8 0039 Level I 85 43
generator. Implantation of
Neurostimulator
Generator.
64553............ Implant J8 0040 Level I 55 27
neuroelectrodes. Implantation/
Revision/
Replacement of
Neurostimulator
Electrodes.
64555............ Implant J8 0040 Level I 55 27
neuroelectrodes. Implantation/
Revision/
Replacement of
Neurostimulator
Electrodes.
64560............ Implant J8 0040 Level I 55 27
neuroelectrodes. Implantation/
Revision/
Replacement of
Neurostimulator
Electrodes.
64561............ Implant J8 0040 Percutaneous 55 27
neuroelectrodes. Implantation of
Neurostimulator
Electrodes.
64565............ Implant J8 0040 Percutaneous 55 27
neuroelectrodes. Implantation of
Neurostimulator
Electrodes.
64568............ Implant J8 0318 Implantation of 86 43
neuroelectrodes. Neurostimulator
Electrodes,
Cranial Nerve.

[[Page 42301]]

64575............ Implant J8 0061 Laminectomy, 64 32
neuroelectrodes. Laparoscopy, or
Incision for
Implantation of
Neurostimulator
Electr.
64577............ Implant J8 0061 Laminectomy, 64 32
neuroelectrodes. Laparoscopy, or
Incision for
Implantation of
Neurostimulator
Electr.
64580............ Implant J8 0061 Laminectomy, 64 32
neuroelectrodes. Laparoscopy, or
Incision for
Implantation of
Neurostimulator
Electr.
64581............ Implant J8 0061 Laminectomy, 64 32
neuroelectrodes. Laparoscopy, or
Incision for
Implantation of
Neurostimulator
Electr.
64590............ Insrt/redo pn/gastr J8 0039 Level I 85 43
stimul. Implantation of
Neurostimulator
Generator.
69714............ Implant temple bone J8 0425 Level II 60 30
w/stimul. Arthroplasty or
Implantation with
Prosthesis.
69715............ Temple bne implnt w/ J8 0425 Level II 60 30
stimulat. Arthroplasty or
Implantation with
Prosthesis.
69717............ Temple bone implant J8 0425 Level II 60 30
revision. Arthroplasty or
Implantation with
Prosthesis.
69718............ Revise temple bone J8 0425 Level II 60 30
implant. Arthroplasty or
Implantation with
Prosthesis.
69930............ Implant cochlear J8 0259 Level VII ENT 83 41
device. Procedures.
----------------------------------------------------------------------------------------------------------------

Table 50--Proposed Devices for Which the ``FB'' or ``FC'' Modifier Must
Be Reported With the Procedure Code in CY 2012 When Furnished at No Cost
or With Full or Partial Credit
------------------------------------------------------------------------
CY 2011 Device HCPCS code CY 2011 Short descriptor
------------------------------------------------------------------------
C1721............................. AICD, dual chamber.
C1722............................. AICD, single chamber.
C1762............................. Conn tiss, human(inc fascia).
C1763............................. Conn tiss, non-human.
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.
C1781............................. Mesh (implantable).
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.
C2618............................. Probe, cryoablation.
C2619............................. Pmkr, dual, non rate-resp.
C2620............................. Pmkr, single, non rate-resp.
C2621............................. Pmkr, other than sing/dual.
C2622............................. Prosthesis, penile, non-inf.
C2626............................. Infusion pump, non-prog, temp.
C2631............................. Rep dev, urinary, w/o sling.
L8614............................. Cochlear device/system.
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.
------------------------------------------------------------------------

We invite public comment on these proposals.
d. Waiver of Coinsurance and Deductible for Certain Preventive Services
Section 1833(a)(1) and (b)(1) of the Act waives the coinsurance and
the Part B deductible for those preventive services under section
1861(ddd)(3)(A) of the Act as described in section 1861(ww)(2) of the
Act (excluding electrocardiograms) that are recommended by the United
States Preventive Services Task Force (USPSTF) with a grade of A or B
for any indication or population and that are appropriate for the
individual. Section 1833(b) of the Act also waives the Part B
deductible for colorectal cancer screening tests that become
diagnostic. In the CY 2011 OPPS/ASC final rule with comment period, we
finalized our policies with respect to these provisions and identified
the ASC covered surgical and ancillary services that are preventive
services that are recommended by the USPSTF with a grade of A or B for
which the coinsurance and the deductible are waived. For a complete
discussion of our policies and identified services, please see the CY
2011 OPPS/ASC final rule with comment period (75 FR 72047 through
72049). We are proposing no changes to our policies or the list of
services. We have identified these services with a double asterisk in
Addenda AA and BB to this proposed rule.
e. Proposed Payment for the Cardiac Resynchronization Therapy Composite
Cardiac resynchronization therapy (CRT) uses electronic devices to
sequentially pace both sides of the heart to improve its output. CRT
utilizes a pacing electrode implanted in combination with either a
pacemaker or an implantable cardioverter defibrillator (ICD). CRT
performed by the implantation of an ICD along with a pacing electrode
is referred to as ``CRT-D.'' As detailed in section II.A.2.e.(6) of
this proposed rule, we are proposing to create an OPPS composite APC
(Composite APC 8009 (Cardiac Resynchronization Therapy--ICD Pulse
Generator and Leads)) which would be used when CPT code 33225
(Insertion of pacing electrode, cardiac venous system, for left
ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (including upgrade to dual

[[Page 42302]]

chamber system)) and CPT code 33249 (Insertion or repositioning of
electrode lead(s) for single or dual chamber pacing cardioverter-
defibrillator and insertion of pulse generator) are performed on the
same date of service. We also are proposing to cap the OPPS payment
rate for composite APC 8009 at the most comparable Medicare severity
diagnosis-related group (MS-DRG) payment rate established under the
IPPS that would be provided to acute care hospitals for providing CRT-D
services to hospital inpatients. In other words, we are proposing to
pay APC 8009 at the lesser of the APC 8009 median cost or the IPPS
standardized payment rate for MS-DRG 227 (Cardiac Defibrillator Implant
without Cardiac Catheterization without Major Complication or
Comorbidity). This would ensure appropriate and equitable payment to
hospitals and that we do not create an inappropriate payment incentive
to provide CRT-D services in one setting of care over another by paying
more for CRT-D in the outpatient setting compared to the inpatient
setting. Specifically, for the CY 2012 OPPS, we are proposing that if
the APC 8009 median cost that we will calculate for the CY 2012 OPPS/
ASC final rule with comment period exceeds the FY 2012 IPPS
standardized payment rate for MS-DRG 227, we would establish the OPPS
payment amount at the FY 2012 IPPS standardized payment amount for MS-
DRG 227 (currently estimated at $26,365).
Because CPT code 33225 and CPT code 33249 are on the list of ASC
covered surgical procedures, we are proposing to establish an ASC
payment rate that is based on the OPPS payment rate applicable to APC
8009 when these procedures are performed on the same date of service in
an ASC. Again, we do not want to create an inappropriate payment
incentive to provide CRT-D services in one setting of care over another
by paying more for CRT-D in ASCs compared to the hospital outpatient
setting. Because CPT codes 33225 and 33249 are on the proposed list of
device-intensive procedures for CY 2012, we are proposing to apply the
usual device-intensive methodology based on the OPPS payment rate
applicable to APC 8009 (which is the lesser of the APC 8009 median cost
that we will calculate for the CY 2012 OPPS/ASC final rule with comment
period or the FY 2012 IPPS standardized payment rate for MS-DRG 227).
We also are proposing to create a HCPCS Level II G-code so that ASCs
can properly report when the procedures described by CPT codes 33225
and 33249 are performed on the same date of service to receive the
appropriate CRT-D composite payment.
In a related issue, as detailed in section III.D.6 of this proposed
rule, CPT codes 33225 and 33249 are the only procedures proposed for
inclusion in APC 0108. We are proposing that these codes would be paid
under APC 0108 only if they are not reported on the same date of
service. Further, we are proposing to pay the OPPS payment rate for
services that are assigned to APC 0108 at the lesser of the APC 0108
median cost or the IPPS standardized payment rate for MS-DRG 227. For
ASC payment in CY 2012, we are proposing to apply the device-intensive
methodology to calculate payment for CPT codes 33225 and 33249 based on
the OPPS payment rate applicable to APC 0108 (which is the lesser of
the APC 0108 median cost that we will calculate for the CY 2012 OPPS/
ASC final rule with comment period or the FY 2012 IPPS standardized
payment rate for MS-DRG 227).
We invite public comment on these proposals.
2. Proposed 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). In all cases, in order
for those ancillary services also to be paid, ancillary items and
services must be provided integral to the performance of ASC covered
surgical procedures for which the ASC bills Medicare.
Our ASC payment policies provide separate payment for drugs and
biologicals that are separately paid under the OPPS at the OPPS rates,
while we generally pay for separately payable radiology services at the
lower of the MPFS non-facility PE RVU-based (or technical component)
amount or the rate calculated according to the ASC standard ratesetting
methodology (72 FR 42497). However, as finalized in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 72050), payment indicators
for all nuclear medicine procedures (defined as CPT codes in the range
of 78000 through 78999) that are designated as radiology services that
are paid separately when provided integral to a surgical procedure on
the ASC list are set to ``Z2'' so that payment is made based on the
OPPS relative payment weights rather than the MPFS non-facility RE RVU
amount, regardless of which is lower. This modification to the ASC
payment methodology for ancillary services was finalized in response to
a CY 2011 OPPS/ASC proposed rule comment that suggested it is
inappropriate to use the MPFS-based payment methodology for nuclear
medicine procedures because the associated diagnostic
radiopharmaceutical, though packaged under the ASC payment system, is
separately paid under the MFPS. We set the payment indicator to ``Z2''
for nuclear medicine procedures in the ASC setting so that payment for
these procedures would be based on the OPPS relative payment weight
rather than the MPFS non-facility PE RVU-based amount to ensure that
the ASC will be compensated for the cost associated with the diagnostic
radiopharmaceuticals.
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. After 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

[[Page 42303]]

the Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 110-
173) 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; Sec. 416.164(b)). Under the revised ASC
payment system, corneal tissue acquisition is paid based on the
invoiced costs for acquiring the corneal tissue for transplantation.
Devices that are eligible for pass-through payment under the OPPS are
separately paid under the ASC payment system. Currently, the only
device that is eligible for pass-through payment in the OPPS is
described by HCPCS code C1749 (Endoscope, retrograde imaging/
illumination colonoscope device (Implantable)). Payment for HCPCS code
C1749 under the ASC payment system is contractor priced.
b. Proposed Payment for Covered Ancillary Services for CY 2012
For CY 2012, we are proposing to update the ASC payment rates and
make changes to ASC payment indicators as necessary to maintain
consistency between the OPPS and ASC payment system regarding the
packaged or separately payable status of services and the proposed CY
2012 OPPS and ASC payment rates. The proposed CY 2012 OPPS payment
methodologies for separately payable drugs and biologicals and
brachytherapy sources are discussed in section II.A. and section V.B.
of this proposed rule, respectively, and we are proposing to set the CY
2012 ASC payment rates for those services equal to the proposed CY 2012
OPPS rates.
Consistent with established ASC payment policy (72 FR 42497), the
proposed CY 2012 payment for separately payable covered radiology
services is based on a comparison of the CY 2012 proposed MPFS non-
facility PE RVU-based amounts (we refer readers to the CY 2012 MPFS
proposed rule) and the proposed CY 2012 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 this proposed rule indicate
whether the proposed payment rates for radiology services are based on
the MPFS nonfacility PE RVU-based amount or the ASC standard
ratesetting methodology, or whether payment for a radiology service is
packaged into the payment for the covered surgical procedure (payment
indicator ``N1''). Radiology services that we are proposing to pay
based on the ASC standard ratesetting methodology are assigned payment
indicator ``Z2'' (Radiology service paid separately when provided
integral to a surgical procedure on ASC list; payment based on OPPS
relative payment weight) and those for which the proposed payment is
based on the MPFS non-facility PE RVU-based amount are assigned payment
indicator ``Z3'' (Radiology service paid separately when provided
integral to a surgical procedure on ASC list; payment based on MPFS
non-facility PE RVUs).
As finalized in the CY 2011 OPPS/ASC final rule with comment period
(75 FR 72050), payment indicators for all nuclear medicine procedures
(defined as CPT codes in the range of 78000 through 78999) that are
designated as radiology services that are paid separately when provided
integral to a surgical procedure on the ASC list are set to ``Z2'' so
that payment is made based on the OPPS relative payment weights rather
than the MPFS non-facility PE RVU-based amount, regardless of which is
lower. We are proposing to continue this modification to the payment
methodology and, therefore, set the payment indicator to ``Z2'' for
these nuclear medicine procedures in CY 2012. In addition, because the
same issue exists for radiology procedures that use contrast agents
(the contrast agent is packaged under the ASC payment system but is
separately paid under the MFPS), we are proposing to set the payment
indicator to ``Z2'' for radiology services that use contrast agents so
that payment for these procedures will be based on the OPPS relative
payment weight and will, therefore, include the cost for the contrast
agent. We have made proposed changes to the regulation text at Sec.
416.171(d) to reflect this proposal.
Most covered ancillary services and their proposed payment
indicators are listed in Addendum BB to this proposed rule (which is
referenced in section XVII. of this proposed rule and available via the
Internet on the CMS Web site).

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Cycle and Evaluation Criteria
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 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 an NTIOL class
that is qualified for a payment adjustment. Specifically, we
established the following process:
We announce annually in the proposed rule updating the ASC
and OPPS 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. In accordance
with 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 final rule updating the ASC and OPPS payment rates
for the following calendar year, we--
[cir] Provide a list of determinations made as a result of our
review of all new NTIOL 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 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 three major criteria set out at 42 CFR
416.195:
Criterion 1 (42 CFR 416.195(a)(1), (2)): 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;
Criterion 2 (42 CFR 416.195(a)(3)): The IOL is not
described by an active or expired NTIOL class; that is, it does not
share the predominant, class-defining characteristic associated with
the improved clinical outcome with designated members of an active or
expired NTIOL class; and
Criterion 3 (42 CFR 416.195(a)(4)): Evidence demonstrates
that use of the

[[Page 42304]]

IOL results in measurable, clinically meaningful, improved outcomes in
comparison with use of currently available IOLs. The statute requires
us to consider the following superior outcomes:
[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; or
[cir] Other comparable clinical advantages.
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
table entitled CMS Approved NTIOLs, with the associated qualifying IOL
models, posted on the CMS Web site at: http://www.cms.gov/ASCPayment/08_NTIOLs.asp#TopOfPage.
2. NTIOL Application Process for Payment Adjustment
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.gov/ASCPayment/08_NTIOLs.asp#TopOfPage. For each completed request for a new class that
is received by the established deadline, a determination is announced
annually in the final rule updating the ASC and OPPS payment rates for
the next calendar year.
We also summarize briefly in the final rule with comment period the
evidence that we reviewed, the public comments we received timely, and
the basis for our determinations in consideration of applications for
establishment of a new NTIOL class. 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 an improved clinical outcome. 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.
3. Requests to Establish New NTIOL Classes for CY 2012 and Deadline for
Public Comments
We received four requests for review to establish a new NTIOL class
for CY 2012 by the March 5, 2011 due date. Summaries of these requests
follow.
a. Requestor/Manufacturer: Alcon Laboratories, Inc. (Alcon).
Lens Model Numbers: Acrysof Natural IQ and Acrysof Natural IOLs,
Models SN60WF (aspheric optic, single piece), SN60AT (spherical optic,
single piece), MN60MA (spherical optic, multi-piece), MN60AC (spherical
optic, multi-piece).
Summary of the Request: Alcon submitted a request for CMS to
determine that its Acrysof Natural IOLs meet the criteria for
recognition as NTIOLs and to concurrently establish a new class of
NTIOLs for ``blue-light-filtering IOLs that improve driving safety
under glare conditions,'' with these IOLs as members of the class. We
reviewed a similar request by Alcon during the CY 2011 NTIOL
application cycle (75 FR 72052). As part of its CY 2012 request, Alcon
submitted descriptive information about the candidate IOLs as outlined
in the guidance document that is available on the CMS Web site for the
establishment of a new class of NTIOLs, as well as information
regarding approval of the candidate IOLs by the FDA. This information
included the approved labeling for the candidate IOLs, a summary of the
IOLs' safety and effectiveness, a copy of the FDA's approval
notifications, and instructions for their use.
In its CY 2012 request, Alcon asserts that its request is based on
studies demonstrating that the Acrysof Natural IOLs with a blue-light-
filtering chromophore filter light in a manner that approximates the
human crystalline lens in the 400-475 nm blue light wavelength range to
reduce glare that impairs the ability of the eye to differentiate
objects from the background. Alcon further states that glare reduction
can help beneficiaries avoid hazards that can be caused by glare. Alcon
also states that at present there are no active or expired NTIOL
classes that describe IOLs similar to the Acrysof Natural IOLs.
We established in the CY 2007 OPPS/ASC final rule with comment
period that when reviewing a request for recognition of an IOL as an
NTIOL and a concurrent request to establish a new class of NTIOLs, we
would base our determination on consideration of the three major
criteria at 42 CFR 416.195(a) and listed above. We have begun our
review of Alcon's request to recognize its Acrysof Natural IOLs as
NTIOLs and concurrently establish a new class of NTIOLs. We are
soliciting public comment on these candidate IOLs with respect to the
established three major NTIOL criteria.
First, for an IOL to be recognized as an NTIOL we require that 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 approved
labels for the Alcon IOLs all state the following: ``Alcon's
proprietary blue light filtering chromophore filters light in a manner
that approximates the human crystalline lens in the 400-475 nm blue
light wavelength range.'' The FDA labels for these IOLs do not
otherwise reference specific clinical benefits of blue light filtering.
We are interested in public comments on the clinical relevance of blue
light filtering in an IOL. Specifically, we are interested in public
comments regarding the assertion that the specific blue light filtering
properties associated with the candidate IOLs improve driving safety
via the reduction of glare disability.
Second, according to 42 CFR 416.195(a)(3), we also require that the
candidate IOL not be described by an active or expired NTIOL class;
that is, it does not share the predominant, class-defining
characteristic associated with improved clinical outcomes with
designated members of an active or expired NTIOL class. In the CY 2007
OPPS final rule, in response to a comment we explained our
interpretation of 42 CFR 416.195(a)(3) as follows:
``[R]evised Sec. 416.195(a)(3) does not preclude from
consideration as a member of a new class of NTIOL a lens that includes
as one of its characteristics a class-defining characteristic
associated with members of an active or expired class. Only if that
shared characteristic were the predominant characteristic of the lens
would it be precluded from approval as a new class of NTIOL. However,
if the lens featured other characteristics, one or more of which
predominated, that were clearly tied with improved clinical outcomes,
the lens would not be disqualified from consideration as an NTIOL just
because it also shared a characteristic with members of an active or
expired class.'' (71 FR 68178).
As noted above, 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

[[Page 42305]]

classes of NTIOLs: Multifocal and Reduction in Preexisting Astigmatism
classes, both of which were created in 2000 and expired in 2005, and
the Reduced Spherical Aberration class, which was created in 2006 and
expired on February 26, 2011. As mentioned above, a table entitled CMS
Approved NTIOLs, with the associated qualifying IOL models, is posted
on the CMS Web site at: http://www.cms.gov/ASCPayment/08_NTIOLs.asp#TopOfPage. The class-defining characteristic specific to
IOLs that are members of these three expired classes is evident in the
name assigned to the class. For example, IOLs recognized as members of
the reduced spherical aberration class are characterized by their
aspheric design that results in reduced spherical aberration. Based on
the information in the table entitled CMS Approved NTIOLs, a candidate
IOL's predominant characteristic may not be described by any of the
three expired NTIOL classes.
In the case of one of four of Alcon's candidate IOLs, the Acrysof
Natural IQ Aspheric IOL model SN60WF, it is a member of the expired
reduced spherical aberration NTIOL class (75 FR 72052). For the
purposes of satisfying Sec. 416.195(a)(3), CMS must be able to
determine which lens characteristic is predominant for Alcon's model
SN60WF, asphericity (resulting in reduced spherical aberration) or
blue-light filtering. If the predominant characteristic is asphericity,
then the model SN60WF IOL would be disqualified under Sec.
416.195(a)(3). This determination is particularly relevant given that
the clinical benefit attributed to both of these lens characteristics
is improved night driving. To our knowledge, Alcon has not compared the
IOL model SN60WF (a blue-light filtering aspheric IOL) to a non-blue-
light filtering aspheric IOL to determine if there are any night
driving benefits attributable to the blue-light filtering
characteristic in addition to the improved night driving attributable
to the aspheric optic. Such information would assist us in evaluating
whether blue-light filtering predominates or is subordinate to the
IOL's asphericity. We are soliciting public comments on whether blue-
light filtering can be considered the predominant IOL characteristic
for the model SN60WF IOL. We also welcome public comments that address
whether blue light-filtering and the associated clinical benefits of
the other three of Alcon's candidate IOLs (that is, SN60AT, MN60MA,
MN60AC) are described by any of the expired NTIOL classes.
Third, our NTIOL evaluation criteria also require that an applicant
submit evidence demonstrating that use of the IOL results in
measurable, clinically meaningful, improved outcomes in comparison to
currently available IOLs. We note that in the CY 2007 OPPS/ASC final
rule with comment period, we sought comments as to what constitutes
currently available IOLs for purposes of such comparisons, and we
received several comments in response to our solicitation (71 FR
68178). We agreed with commenters that we should remain flexible with
respect to our view of ``currently available lenses'' for purposes of
reviewing NTIOL requests, in order to allow for consideration of
technological advances in lenses over time. This means that we do not
expect that ``currently available lenses'' would remain static over
time and always necessarily default to the classic spherical monofocal
IOL for every candidate NTIOL class. Therefore, we believe that
``currently available lenses'' for purposes of reviewing NTIOL requests
should depend upon the class-defining characteristic and the associated
purported improved clinical outcome of the candidate NTIOL. For
example, for some candidate NTIOLs the most appropriate comparison IOL
would be a spherical monofocal IOL, while other candidate NTIOLs may be
more appropriately compared to aspheric IOLs.
For purposes of reviewing Alcon's request to establish a new NTIOL
class for CY 2012, we are proposing that aspheric monofocal IOLs
represent the currently available IOLs against which the candidate
NTIOLs should be compared in order to establish a new class. According
to publicly available data from Market Scope, LLC, IOLs with aspheric
optics accounted for over 86 percent of the IOLs implanted in the
United States during 2010. In addition, data submitted by Alcon shows
that the overwhelming majority of IOLs sold by Alcon have aspheric
optics. Furthermore, the aspheric design that results in reduced
spherical aberration was the class defining characteristic for IOLs
recognized as members of the expired reduced spherical aberration NTIOL
class. The primary clinical outcome associated with reduced spherical
aberration (for purposes of establishing it as an NTIOL class) was
safer night driving (71 FR 4588). Alcon asserts that what makes its
candidate IOLs superior to other currently available IOLs is improved
driving safety under glare conditions. Glare conditions during driving
primarily occur at night due to headlights from oncoming cars. The
primary improved clinical outcome from reduced spherical aberration
IOLs (an expired NTIOL class) was safer night driving and the purported
primary improved clinical outcome from Alcon's blue light-filtering
IOLs is also safer night driving. Therefore, the most relevant type of
currently available IOLs against which the Alcon blue filtering IOLs
should be compared is aspheric IOLs. In particular, the relevant
comparison would be the performance of an aspheric blue-light filtering
IOL versus an aspheric non-blue light filtering IOL. This comparison
would test the hypothesis of whether blue-light filtering improved
night driving in comparison to aspheric optics, which has been shown to
improve night driving. We seek public comment on our view of
``currently available lenses'' for the purposes of evaluating Alcon's
candidate IOLs against currently available IOLs.
We are reviewing the evidence submitted with Alcon's CY 2012
request. Although Alcon submitted various types of literature in
support of its application, it relies primarily on two studies in
support of its hypothesis that blue light filtering IOLs improve
driving safety under glare conditions as compared to currently
available IOLs. The first of these two submitted articles is: Hammond
B, et al. Contralateral comparison of blue-filtering intraocular
lenses: glare disability, heterochromic contrast, and photostress
recovery, Clinical Ophthalmology. 2010;4:1465-1473 (Hammond 2010). This
article compared visual performance (as measured by glare disability,
heterochromic contrast threshold, and photostress recovery time) in
eyes with blue-light-filtering IOLs versus contralateral eyes with IOLs
that do not filter blue light. The second article, which Alcon
describes as its ``pivotal study,'' is: Gray R, et al. Reduced effect
of glare disability on driving performance in patients with blue light-
filtering intraocular lenses, J Cataract Refract Surg. 2011;37:38-44.
This study compared the effects of glare on driving performance using a
driving simulator in patients who had implantation of a blue light-
filtering acrylic IOL and those who had implantation of an acrylic IOL
with no blue-light filter. Overall, the evidence submitted provides us
with important information that is critical to our review of this
request. However, in making our decision as to whether to establish a
new class of NTIOL based on the primary characteristic of the candidate
lenses, we are also interested in what other information the public

[[Page 42306]]

can contribute related to the asserted benefits of the blue light
filtering IOL. Specifically, we are seeking public comment and relevant
data on the following:
Are there other peer-reviewed studies or other information
that would support or disprove the claims of clinical benefit made by
Alcon?
How do you interpret the results of the Hammond 2010
study, given that the blue light-filtering group included patients with
spherical blue light filtering IOLs and patients with aspheric blue
light filtering IOLs?
Does the Maxwellian optical system that was employed in
the Hammond 2010 study mitigate the impact of the aspheric optics of
some of the study subjects in the blue light-filtering group?
Is the sample size used in both studies sufficient to
conclude that a blue light-filtering IOL would reduce glare disability
and improve driving safety in the Medicare population?
What kind of study design would be appropriate to prove
the claim of significant clinical benefit due to glare reduction on
which the new class would be based?
Are the submitted data enough to prove that the blue
filtering optic is responsible for reduction in glare disability as
asserted by applicant?
Did these studies use an appropriate comparator IOL?
Furthermore, in accordance with our established NTIOL review
process, we are also seeking public comments on all of the review
criteria for establishing a new NTIOL class that would be based on the
ability of the Acrysof Natural IOLs to filter blue light and
subsequently help beneficiaries avoid hazards that can be caused by
glare while driving. We will give all comments full consideration
regarding Alcon's candidate IOLs.
b. Requestor/Manufacturer: Bausch & Lomb, Inc. (B&L).
Lens Model Numbers: Xact Foldable Hydrophobic Acrylic Ultraviolet
Light-Absorbing Posterior Chamber Intraocular Lenses, Models X-60 and
X-70 (Xact IOLs).
Summary of the Request: B&L submitted a request for CMS to
determine that its Xact IOLs meet the criteria for recognition as
NTIOLs and to concurrently establish a new class of NTIOLs for
``glistening-free'' IOLs. Glistenings are fluid-filled microvacuoles
that can form within an IOL optic when the IOL is in an aqueous
environment. According to B&L, ``glistenings have been associated with
decreased contrast sensitivity, increased glare, decreased visual
acuity, and impaired fundus visualization.'' B&L further states that
``in some cases, this has led to IOL explantation and exchange, which
carries significant risks that increase the longer the IOL is
implanted.'' As part of its request, B&L submitted descriptive
information about the candidate IOLs as outlined in the guidance
document that is available on the CMS Web site for the establishment of
a new class of NTIOLs, as well as information regarding approval of the
candidate IOL by the FDA. This information included draft FDA labeling
for the Xact IOLs. Final FDA labeling is currently pending.
In its CY 2012 request, B&L asserts that because the Xact IOLs are
glistening-free, they eliminate the decreased contrast sensitivity,
increased glare, decreased visual acuity, and impaired fundus
visualization associated with glistenings, and may likewise decrease
the need for explantations associated with those conditions. B&L also
concludes that use of a glistening-free IOL results in measurable,
clinically meaningful, improved outcomes in comparison with currently
available IOLs. B&L also states that the glistening-free characteristic
is not described by a previously-approved NTIOL class.
As with the other CY 2012 NTIOL applications discussed in this
proposed rule, we will base our determination of the B&L application on
consideration of the three major evaluation criteria that are discussed
above. We have begun our review of B&L's request to recognize its Xact
IOLs as NTIOLs and concurrently establish a new class of NTIOLs. We are
soliciting public comment on these candidate IOLs with respect to the
established NTIOL criteria as discussed above.
First, for an IOL to be recognized as an NTIOL we require that 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 submitted
FDA label for the Xact IOLs states the following:
``In the IDE [investigational device exemption] clinical trial,
`glistenings' were observed in some cases. Glistenings, known to
sometimes occur in some other hydrophobic acrylic IOLs, are microscopic
vacuoles within the optic of the IOL that are visible through the slit
lamp as multiple small refractile specks. Analysis of the clinical data
confirmed no effect of glistenings on visual outcomes.'' [Emphasis
added.]
``Testing established that glistenings were eliminated by a change
in the IOL hydration solution from 10.0% saline to 0.9% saline. This
was confirmed in an additional clinical trial conducted outside of the
United States. In this study, 172 eyes of 142 patients were examined at
least once between 1 and 6 months, and 123 eyes of 101 patients were
examined at least once between 6 months and 2 years. No glistenings
were observed at any time.''
The FDA label for the Xact IOLs does not otherwise reference
specific clinical benefits of the glistening-free property. In fact,
the italicized sentence in the above-quoted language on the IDE study
from the FDA label states that an ``[a]nalysis of the clinical data
confirmed no effect of glistenings on visual outcomes.'' We are
interested in public comments on the clinical relevance of glistenings
in IOLs, and the incidence of glistenings severe enough to cause
measurable visual symptoms in recently pseudophakic Medicare
beneficiaries. In addition, we are interested in public comments
regarding the assertion by B&L that the glistening-free property
associated with the Xact IOLs would eliminate the decreased contrast
sensitivity, increased glare, decreased visual acuity, and impaired
fundus visualization associated with glistenings, and may likewise
decrease the need for explantations associated with those conditions.
Second, we also require that the candidate IOL not be described by
an active or expired NTIOL class; that is, it does not share the
predominant, class-defining characteristic associated with improved
clinical outcomes with designated members of an active or expired NTIOL
class. We refer readers to the discussion above for more information on
the three expired NTIOL classes. The proposed class-defining
characteristic and associated clinical benefits of the Xact IOLs,
specifically the glistening-free property, cannot be similar to the
class-defining characteristics and associated benefits of the three
expired NTIOL classes. We welcome public comments that address whether
the proposed class-defining characteristic and associated clinical
benefits of the candidate B&L IOLs are described by the expired NTIOL
classes.
Third, our NTIOL evaluation criteria also require that an applicant
submit evidence demonstrating that use of the IOL results in
measurable, clinically meaningful, improved outcomes in comparison to
currently available IOLs. As discussed above, we remain flexible with
respect to our view of ``currently available lenses'' for purposes of
reviewing NTIOL requests, in order to allow for consideration of
technological advances in lenses over time. We also

[[Page 42307]]

believe that ``currently available lenses'' for purposes of reviewing
NTIOL requests should depend upon the class-defining characteristic and
the associated purported improved clinical outcome of the candidate
NTIOL class. For purposes of reviewing B&L's request to establish a new
NTIOL class for CY 2012, we believe that the full spectrum of currently
available IOL materials should be represented in the comparator IOLs,
but that the particular design of the optic (for example, aspheric
versus spherical) is less critical to evaluating the benefits of
glistening-free IOLs as glistenings are related more to the IOL optic
material than to the optical surface characteristics of the IOL. We are
seeking public comment on our view of ``currently available lenses''
for the purposes of evaluating B&L's candidate IOLs against currently
available IOLs.
We are reviewing the evidence submitted with B&L's CY 2012 request.
B&L submitted a variety of articles including studies and case reports
focused on IOLs with glistenings. It is apparent from these articles
that glistenings are a real phenomenon and that glistenings are
primarily associated with acrylic hydrophobic IOLs, but they can also
occur to some degree in IOLs of other material types. However, there
are several significant questions with respect to glistenings, and we
solicit public comment on these questions as follows:
Is there a particular IOL material type that is more
likely to result in symptomatic glistenings relative to other material
types?
What is the clinical significance (from the patient's
perspective) of glistenings? More specifically, what evidence is
available to demonstrate that glistenings cause any of the following:
[cir] Decreased contrast sensitivity;
[cir] Increased glare disability;
[cir] Decreased visual acuity;
[cir] Impaired fundus visualization;
[cir] Symptoms resulting in IOL explantations.
What is the incidence of glistenings in IOLs currently
available in the United States?
If a certain level of severity of glistenings is required
before they cause symptoms, what is the incidence of glistenings of
this severity level in IOLs currently available in the United States?
c. Requestor/Manufacturer: Hoya Surgical Optics, Inc. (Hoya).
Lens Model Numbers: iSert IOL System, Model PY-60R.
Summary of the Request: Hoya submitted a request for CMS to
determine that its iSert IOL System satisfies the criteria for
recognition as an NTIOL and to concurrently establish a new class of
NTIOLs for ``aseptically integrated IOL and injector systems.'' The
iSert IOL System is an IOL preloaded in a plastic, sterile, disposable
injection system. According to Hoya, the iSert System provides a lens
injector with an integrated IOL inside it within a single, sterile
package for delivery to the operating field. According to Hoya, the
iSert System has the following benefits, in that compared to other IOLs
it:
Eliminates the risk of complications associated with
improper processing of reusable forceps or injectors used for all other
foldable IOLs;
Accelerates postoperative recovery through decreased risk
of ocular damage due to complications associated with improper
processing of reusable forceps or injectors used for other foldable
IOLs;
Provides a clinical advantage compared to existing IOLs by
allowing the IOL to be placed in the eye without contacting external
ocular tissues or reusable injection instruments; and
Improves overall safety of cataract/IOL surgery by
reducing the number of reusable instruments that must be properly
cleaned and sterilized between cases.
As part of its request, Hoya submitted descriptive information
about the iSert System as outlined in the guidance document described
above that is available on the CMS Web site for the establishment of a
new class of NTIOLs, as well as information regarding approval of the
candidate IOL by the FDA. This information included the FDA labeling,
the FDA letter of approval, and the summary of safety and effectiveness
for the iSert System.
As with the other CY 2012 NTIOL requests, we will base our
determination of the Hoya request on consideration of the three major
criteria that are discussed above. We have begun our review of Hoya's
request to recognize its iSert System as an NTIOL and concurrently
establish a new class of NTIOLs. We are soliciting public comment on
this candidate IOL with respect to the established NTIOL criteria.
First, for an IOL to be recognized as an NTIOL we require that 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 FDA label
for the iSert System states the following under the heading DEVICE
DESCRIPTION:
``The Hoya iSert\TM\ Model PY-60R Intraocular Lens (IOL) is an
ultraviolet absorbing posterior chamber intraocular lens designed to be
implanted posterior to the iris where the lens will replace the optical
function of the natural crystalline lens. However, accommodation will
not be replaced. PY-60R is loaded in a disposable injector consists
[sic] of Case, Tip, Body, Slider, Rod, Plunger, and Screw.''
The FDA label for the iSert System states the following under the
heading INDICATIONS:
``The Hoya iSert\TM\ Model PY-60R Intraocular Lens is indicated for
primary implantation in the capsular bag of the eye for the visual
correction of aphakia in adult patients in whom a cataractous lens has
been removed.''
The FDA label for the iSert\TM\ System does not otherwise reference
claims of specific clinical benefits and/or lens characteristics with
established clinical relevance in comparison with currently available
IOLs. Section 416.195(a)(2) requires that ``[c]laims of specific
clinical benefits and/or lens characteristics with established clinical
relevance in comparison with currently available IOLs are approved by
the FDA for use in labeling and advertising.'' The FDA label for the
iSert System lacks any such claims. The only statement in the above-
quoted language from the FDA label that is any different from the
typical device description and indications for a standard spherical
monofocal IOL is the statement that the ``PY-60R is loaded in a
disposable injector consists [sic] of Case, Tip, Body, Slider, Rod,
Plunger, and Screw.'' However, this statement merely describes the IOL
as loaded in a disposable injector. It does not appear to describe a
benefit or characteristic of the IOL itself. Therefore, it would appear
that the Hoya iSert System PY-60R IOL would not satisfy the
requirements of 42 CFR 416.195(a)(2). However, we are soliciting public
comments on this matter and will give all comments full consideration
regarding Hoya's candidate IOL.
d. Requestor/Manufacturer: Lenstec, Inc. (Lenstec)
Lens Model Numbers: Softec HD PS.
Summary of the Request: Lenstec submitted a request for CMS to
determine that its Softec HD PS meets the criteria for recognition as
an NTIOL and to concurrently establish a new class of NTIOLs that
result in a ``reduction of postoperative residual refractive error.''
According to Lenstec, the Softec HD PS IOL achieves a ``reduction of
postoperative residual refractive error'' by its availability in 0.25
diopter (D) increments with a tolerance of 0.11 D, while
all other

[[Page 42308]]

current monofocal IOLs are available in only 0.50 D increments with
tolerances allowed up to 0.40 D. According to Lenstec,
patients implanted with the Softec HD PS are much more likely to be
closer to the intended refractive outcome than those implanted with
IOLs available only in 0.50 D increments. This greater refractive
accuracy of the Softec HD PS is due to the chosen IOL power likely
being closer to the calculated (desired) IOL power and because the
tighter tolerance of the 0.25 D increment IOL results in the actual
power of the implanted IOL to be closer to the power that the surgeon
expects to implant into the patient. Lenstec also asserts that because
the 0.25 D increment IOL provides greater IOL power accuracy, patients
have less postoperative residual refractive error and hence reduced
postoperative blur. As part of its request, Lenstec submitted
descriptive information about the candidate IOLs as outlined in the
guidance document that is available on the CMS Web site for the
establishment of a new class of NTIOLs, as well as information
regarding approval of the candidate IOL by the FDA. This information
included the FDA labeling, FDA approval letter, and summary of safety
and effectiveness for the Softec HD PS IOL.
As with the other three CY 2012 NTIOL applications discussed above,
we will base our determination of the Lenstec application on
consideration of the three major evaluation criteria that are discussed
above. We have begun our review of Lenstec's request to recognize its
Softec HD PS IOL as an NTIOL and concurrently establish a new class of
NTIOLs. We are soliciting public comment on this candidate IOL with
respect to the established NTIOL criteria as discussed above.
First, for an IOL to be recognized as an NTIOL we require that 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 submitted
FDA label for the Softec HD PS IOL states under the heading DEVICE
DESCRIPTION that ``[t]he [LENSTEC Softec HD PS] IOL is offered in
quarter diopter increments from 15.0 to 25.0.'' The FDA label for the
Softec HD PS IOL does not otherwise reference claims of specific
clinical benefits and/or lens characteristics with established clinical
relevance in comparison with currently available IOLs. We are
interested in public comments on whether an IOL being offered in
quarter diopter increments can be considered a ``lens characteristic
with established clinical relevance in comparison with currently
available IOLs,'' as required by 42 CFR 416.195(a)(2), or whether IOL
availability quarter diopter increments is more appropriately
considered not a lens characteristic per se, but instead just a
manufacturer specification. We are also interested in public comments
on the clinical relevance of an IOL being available in quarter diopter
increments.
Second, as required by 42 CFR 416.195(a)(3), the candidate IOL must
not be described by an active or expired NTIOL class; that is, it does
not share the predominant, class-defining characteristic associated
with improved clinical outcomes with designated members of an active or
expired NTIOL class. Refer to the discussion above for more information
on the three expired NTIOL classes. Lenstec states the following in its
application:
``The Softec HD IOL, the parent to the Softec HD PS, was first
approved for marketing in the United States on April 17, 2010 and on
March 15, 2006 in the ``Outside the US'' (OUS) environment. This IOL is
included in the just-closed ``Reduced Spherical Aberration'' NTIOL
category. The Softec HD PS was approved for marketing by the FDA on
February 2, 2011. It is currently pending approval for OUS marketing.
Both IOLs are single piece, hydrophilic acrylic, aspheric, monofocal
IOLs. The difference between the two is that the Softec HD has
previously been available in whole, 0.50 and 0.25 diopter increments,
based on dioptric power. The Softec HD PS is offered only in the
dioptric range of 15.0 D to 25.0 D, in 0.25 diopter increments (each of
which is manufactured to a tolerance of 0.11D).''
Based on this statement by Lenstec, the Softec HD PS is the same
lens as the Softec HD, but the Softec HD PS is available only in 0.25 D
increments for a specific power range instead of being available (as is
the Softec HD) in 1.0, 0.5, and 0.25 D increments. The Softec HD was
included in the expired Reduced Spherical Aberration NTIOL class, and
both of these IOLs share the asphericity characteristic that defines
the expired Reduced Spherical Aberration NTIOL class. It appears to us
that the predominant characteristic of the Softec HD PS is asphericity,
as it affects the optical characteristics of the lens. Although the
availability of the Softec HD PS in 0.25 D increments allows more IOL
power choices for the surgeon, it does not appear to affect the
functionality of the IOL. We request comments regarding what
characteristic of the Softec HD PS is predominant, asphericity or
availability of the IOL in 0.25 D increments.
Third, our NTIOL evaluation criteria also require that an applicant
submit evidence demonstrating that use of the IOL results in
measurable, clinically meaningful, improved outcomes in comparison to
currently available IOLs. As discussed above, we remain flexible with
respect to our view of ``currently available lenses'' for purposes of
reviewing NTIOL requests, in order to allow for consideration of
technological advances in lenses over time. We also believe that
``currently available lenses'' for purposes of reviewing NTIOL requests
should depend upon the class-defining characteristic and the associated
purported improved clinical outcome of the candidate NTIOL class. For
purposes of reviewing Lenstec's request to establish a new NTIOL class
for CY 2012, we believe that the full spectrum of currently available
monofocal IOLs should be represented in the comparator IOLs. Lenstec
asserts that what makes its candidate IOL superior to other currently
available IOLs is improved IOL power accuracy as compared to IOLs
available in 0.50 D increments, and because the Softec HD PS provides
greater IOL power accuracy patients implanted with it have less
postoperative residual refractive error and hence reduced post-
operative blur.
We are reviewing the evidence submitted with Lenstec's CY 2012
request. Lenstec submitted information and reviewed the literature on
IOL optics related to the Softec HD PS. Lenstec relies primarily on one
study that is the subject of an article that is currently in press and
another unpublished study to support its hypothesis that the Softec HD
PS IOL results in less postoperative refractive error than other IOLs.
The first study submitted by Lenstec was the study that it conducted
under an IDE for FDA approval of the Softec HD PS IOL. This study is
being published in the journal, Contact Lens and Anterior Eye (Brown
DC, Gills JP 3rd,& et al. Prospective multicenter trial assessing
effectiveness, refractive predictability and safety of a new aberration
free, bi-aspheric intraocular lens. Cont Lens Anterior Eye. 2011 May
24. [Epub ahead of print]), and is available on the Internet at http://www.sciencedirect.com/science/article/pii/S1367048411000634. Refractive
accuracy was not a planned outcome variable in this study. There was no
control group in this study that would have allowed the investigators
to control for all of the variables that impact post-cataract surgery
refractive outcome and/or isolate the effect of the availability of the
Softec HD PS IOL in

[[Page 42309]]

quarter diopter increments. Lenstec compared the postoperative
refractive errors of these study subjects to the results from an
unrelated study performed outside of the United States (using IOLs that
were available only in 0.50 D increments) and concluded based on this
comparison that implantation of the Softec HD PS IOL, which is
available in quarter diopter increments, results in superior refractive
outcomes as compared to other IOLs.
The second study is a retrospective study of cataract cases with
aspheric monofocal IOL implantation between 2009 and 2011. Of the 118
eligible eyes, 67 were implanted with IOLs available in 0.25 D
increments and labeled with a manufacturing tolerance of 0.11D (the labeled group) and 51 were implanted with IOLs
available in 0.50 D increments without a labeled manufacturing
tolerance (the unlabeled group). Postoperative outcomes were assessed,
and prediction error was calculated and compared between groups. Mean
error of prediction was -0.03 (0.35) D for the labeled
group and -0.05 (0.46) D for the unlabeled group (p = 0.64)
post optimization. Mean absolute error of prediction was statistically
significantly smaller in the labeled group (0.26 0.23 D)
than the unlabeled group (0.37 0.28 D, p = 0.04). It was
observed that within 0.25 D prediction error was achieved
in 63 percent of the patients in the labeled group compared to 43
percent in the unlabeled group (p = 0.03), and for within 0.50 D, 84 percent and 69 percent (p = 0.06), respectively. We
request comments from the public regarding the Lenstec NTIOL request
and the evidence submitted by Lenstec, and in particular would like the
public to comment on the following:
What is the clinical significance (from the patient's
perspective) of a small amount of residual spherical refractive error
after cataract surgery?
What is the likelihood that a Medicare beneficiary
receiving a monofocal IOL will require some form of postoperative
refractive correction (that is, post-cataract surgery glasses), which
is a Medicare benefit?
If the overwhelming majority of Medicare beneficiaries
receiving a monofocal IOL will require some form of postoperative
refractive correction (that is, post-cataract surgery glasses), does
that lessen the clinical significance of reduced postoperative residual
refractive error?
Are the studies described above properly designed to test
Lenstec's hypothesis?
Do the studies described above adequately prove Lenstec's
hypothesis?
All comments on these requests must be received by August 1, 2011.
The announcement of CMS's determinations regarding these requests will
appear in the CY 2012 OPPS/ASC final rule with comment period. If a
determination of membership of the candidate IOLs in a new NTIOL class
is made, this determination will be effective 30 days following the
date that the final rule with comment period is published in the
Federal Register.
4. Proposed Payment Adjustment
The current payment adjustment for a five-year period from the
implementation date of a new NTIOL class is $50 per lens. Since
implementation of the process for adjustment of payment amounts for
NTIOLs in 1999, we have not revised the payment adjustment amount, and
we are not proposing to revise the payment adjustment amount for CY
2012.

F. Proposed ASC Payment and Comment Indicators

1. Background
In addition to the payment indicators that we introduced in the
August 2, 2007 final rule, 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, such as whether they were on the ASC list of
covered services prior to CY 2008; payment designation, such as device-
intensive or office-based, and the corresponding ASC payment
methodology; and their classification as separately payable ancillary
services including radiology services, brachytherapy sources, OPPS
pass-through devices, corneal tissue acquisition services, drugs or
biologicals, or NTIOLs.
We also created Addendum DD2 that lists the ASC comment indicators.
The ASC comment indicators used in Addenda AA and BB to the proposed
rules and final rules with comment period serve to identify, for the
revised ASC payment system, the status of a specific HCPCS code and its
payment indicator with respect to the timeframe when comments will be
accepted. The comment indicator ``NI'' is used in the OPPS/ASC final
rule with comment period to indicate new HCPCS codes for the next
calendar year for which the interim payment indicator assigned is
subject to comment. The comment indicator ``NI'' is also assigned to
existing codes with substantial revisions to their descriptors such
that we consider them to be describing new services, as discussed in
the CY 2010 OPPS/ASC final rule with comment period (74 FR 60622). In
the CY 2012 OPPS/ASC final rule with comment period, we will respond to
public comments and finalize the ASC treatment of all codes that are
labeled with comment indicator ``NI'' in ASC Addendum AA and BB for CY
2011. These addenda can be found in a file labeled ''January 2011 ASC
Approved HCPCS Code and Payment Rates to Reflect the Medicare and
Medicaid Extenders Act of 2010'' in the ASC Addenda Update section of
the CMS Web site.
The ``CH'' comment indicator is used in Addenda AA and BB to this
CY 2012 proposed rule (which are referenced in section XVII. of this
proposed rule and available via the Internet on the CMS Web site) to
indicate that a new payment indicator is proposed for assignment to an
active HCPCS code for the next calendar year; an active HCPCS code is
proposed for addition to the list of procedures or services payable in
ASCs; or an active HCPCS code is proposed for deletion at the end of
the current calendar year. The ``CH'' comment indicators that are
published in the final rule with comment period are provided to alert
readers that a change has been made from one calendar year to the next,
but do not indicate that the change is subject to comment. The full
definitions of the proposed payment indicators and comment indicators
are provided in Addenda DD1 and DD2 to this proposed rule (which are
referenced in section XVII. of this proposed rule and available via the
Internet on the CMS Web site).
2. Proposed ASC Payment and Comment Indicators
The revised ASC payment system included a four-year transition to
payment rates under the standard methodology for the procedures on the
ASC list in CY 2007. CY 2011 was the first year of full payment under
the standard methodology for the revised ASC payment system. Payment
indicators ``A2'' (Surgical procedure on ASC list in CY 2007, payment
based on OPPS relative payment weight) and ``H8'' (Device-intensive
procedure on

[[Page 42310]]

ASC list in CY 2007; paid at adjusted rate) were developed to identify
procedures that were included on the list of ASC covered surgical
procedures in CY 2007 and were, therefore, subject to transitional
payment prior to CY 2011.
Because the four-year transitional payment period has ended and it
is no longer necessary to identify device-intensive procedures that are
subject to transitional payments, we are proposing to delete the ASC
payment indicator ``H8.'' We are proposing that all device-intensive
procedures, for which the modified rate calculation methodology will
apply, be assigned payment indicator ``J8'' in CY 2012 and later. In
addition, we are proposing to modify the definition for payment
indicator ``J8'' by removing ``added to ASC list in CY 2008 or later''
as this distinction is no longer necessary.
Although payment indicator ``A2'' is no longer required to identify
surgical procedures subject to transitional payment, we are proposing
to retain payment indicator ``A2'' because it is used to identify
procedures that are exempted from application of the office-based
designation.
As detailed in section XIV.K. of this proposed rule, we are
proposing to establish an ASC Quality Reporting Program with the
collection of seven claims-based quality measures beginning in CY 2012.
We are proposing to require ASCs to report on ASC claims a quality data
code (QDC) to be used for reporting quality data. We are proposing that
an ASC would need to add a QDC to any claim involving a proposed
claims-based quality measure. CMS is in the process of developing QDCs
for each proposed claims-based quality measure. The QDC will be a CPT
Category II code or a HCPCS Level II G-code if an appropriate CPT code
is not available. More information on the QDCs that will be associated
with the proposed quality measures will be provided in the CY 2012
OPPS/ASC final rule with comment period. Additionally, CMS is proposing
to create a new ASC payment indicator ``M5'' (Quality measurement code
used for reporting purposes only; no payment made) for assignment to
the QDC to clarify that no payment is associated with the QDC for that
claim. We are proposing that this proposed payment indicator be
effective January 1, 2012.
We are not proposing any changes to the definitions of the ASC
comment indicators for CY 2012. We refer readers to Addenda DD1 and DD2
to this proposed rule (which are referenced in section XVII. of this
proposed rule and available via the Internet at the CMS Web site) for
the complete list of ASC payment and comment indicators proposed for
the CY 2012 update.
We invite public comment on these proposals.

G. ASC Policy and Payment Recommendations

MedPAC was established under section 1805 of the Act to advise
Congress on issues affecting the Medicare program. Subparagraphs (B)
and (D) of section 1805(b)(1) 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
and its examination of issues affecting the Medicare program,
respectively. The March 2011 MedPAC ``Report to the Congress: Medicare
Payment Policy'' included the following recommendation relating
specifically to the ASC payment system for CY 2012:
Recommendation 5: The Congress should implement a 0.5 percent
increase in payment rates for ambulatory surgical center services in
calendar year 2012 concurrent with requiring ambulatory surgical
centers to submit cost and quality data.
CMS Response: In the August 2, 2007 final rule (72 FR 42518 through
42519), we adopted a policy to update the ASC conversion factor for
consistency with section 1833(i)(2)(C) of the Act, which requires that,
if the Secretary has not updated the ASC payment amounts in a calendar
year, the payment amounts shall be increased by the percentage increase
in the Consumer Price Index for All Urban Consumers (CPI-U) as
estimated by the Secretary for the 12-month period ending with the
midpoint of the year involved. The statute set the update at zero for
CY 2008 and CY 2009. 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 would
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).
As we indicated in the CY 2010 OPPS/ASC final rule with comment
period (74 FR 60622), we did not require ASCs to submit cost data to
the Secretary for CY 2010. 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.
In 2009, MedPAC made a similar recommendation to that made in
Recommendation 5 above. In light of that 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 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.
In the CY 2010 OPPS/ASC final rule with comment period (74 FR
60623), we summarized and responded to these comments. As noted in that
final rule with comment period, commenters expressed varied opinions
regarding the feasibility of requiring ASCs to submit cost data to the
Secretary. Some commenters believed that requiring ASC to submit such
data would not be an insurmountable obstacle and pointed out that other
small facilities submit cost reports to CMS. They argued that ASC cost
reports are necessary to assess the adequacy of Medicare payments and
evaluate the ASC update. Other commenters, however, opposed the
requirement that ASCs submit cost data to CMS because they believed
such a requirement would be unnecessary and administratively
burdensome. Commenters generally supported a requirement that ASCs
report quality data. We refer readers to the CY 2010

[[Page 42311]]

OPPS/ASC final rule with comment period for a full discussion of the
comments we received on the feasibility of requiring ASCs to report
cost and quality data (74 FR 60623). Consistent with our CY 2010
policy, we proposed not to require ASCs to submit cost data to the
Secretary for CY 2011 (75 FR 46356 through 463557). We stated that we
continue to believe that our established methodology results in
appropriate payment rates for ASCs. For CY 2012, consistent with this
policy and for the same reasons, we are not proposing to require ASCs
to submit cost data.
Section 109(b) of the MIEA-TRHCA (Pub. L. 109-432) gives the
Secretary the authority to implement ASC quality measure reporting and
to reduce the payment update for ASCs that fail to report those
required measures. We are proposing to require ASCs to report seven
quality measures in CY 2012. Details associated with ASC quality
reporting proposed for CY 2012 are discussed in section XIV.K. of this
proposed rule.
Finally, we are not proposing to implement MedPAC's recommended CY
2012 ASC update of 0.5 percent. The annual update to the ASC payment
system is the CPI-U. Section 3401(k) of the Affordable Care Act
required that the annual ASC payment update be reduced by a
productivity adjustment. As discussed in section XIII.H.2.b. of this
proposed rule, the Secretary estimates that the CPI-U is 2.3 percent
and the MFP adjustment is 1.4 percent. Therefore, we are proposing a
0.9 percent update for CY 2012.

H. Calculation of the Proposed ASC Conversion Factor and the Proposed
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 (the ASC conversion factor is
multiplied by the relative payment weights calculated for many ASC
services in order to establish payment rates). 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 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 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, excluding nuclear
medicine procedures, the established policy is to set the relative
payment weights so that the national unadjusted ASC payment rate does
not exceed the MPFS unadjusted non-facility PE RVU-based amount.
Further, as discussed in the CY 2008 OPPS/ASC final rule with comment
period (72 FR 66841 through 66843), 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 at 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 OMB in June 2003. The
reclassification provision provided at section 1886(d)(10) of the Act
is specific to hospitals. We believe that using the most recently
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.
We note that in certain instances there might be urban or rural
areas for which there is no IPPS hospital whose wage index data would
be used to set the wage index for that area. For these areas, our
policy has been to use the average of the wage indices for CBSAs (or
metropolitan divisions as applicable) that are contiguous to the area
that has no wage index (where ``contiguous'' is defined as sharing a
border). We have applied a proxy wage index based on this methodology
to ASCs located in CBSA 25980 Hinesville-Fort Stewart, GA, and CBSA 22
Rural Massachusetts. In CY 2011, we identified another area,
specifically, CBSA 11340 Anderson, SC, for which there is no IPPS
hospital whose wage index data would be used to set the wage index for
that area. Generally, we would use the methodology described above;
however in this situation all of the areas contiguous to CBSA 11340
Anderson, SC, are rural. Therefore, in the CY 2011 OPPS/ASC final rule
with comment (75 FR 72058 through 72059), we finalized our proposal to
set the ASC wage index by calculating the average of all wage indices
for urban areas in the State when all contiguous areas to a CBSA are
rural and there is no IPPS hospital

[[Page 42312]]

whose wage index data could be used to set the wage index for that
area. In other situations, where there are no IPPS hospitals located in
a relevant labor market area, we will continue our current policy of
calculating an urban or rural area's wage index by calculating the
average of the wage indices for CBSAs (or metropolitan divisions where
applicable) that are contiguous to the area with no wage index.
2. Proposed Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2012 and Future
Years
We update the ASC relative payment weights each year using the
national OPPS relative payment weights (and MPFS non-facility PE RVU-
based amounts, as applicable) for that same calendar year and uniformly
scale the ASC relative payment weights for each update year to make
them budget neutral (72 FR 42531 through 42532). Consistent with our
established policy, we are proposing to scale the CY 2012 relative
payment weights for ASCs according to the following method. Holding ASC
utilization and the mix of services constant from CY 2010, we are
proposing to compare the total payment weight using the CY 2011 ASC
relative payment weights (calculated under the ASC standard ratesetting
methodology) with the total payment weight using the CY 2012 ASC
relative payment weights (calculated under the ASC standard ratesetting
methodology) to take into account the changes in the OPPS relative
payment weights between CY 2011 and CY 2012. We would use the ratio of
CY 2011 to CY 2012 total payment weight (the weight scaler) to scale
the ASC relative payment weights for CY 2012. The proposed CY 2012 ASC
scalar is 0.9373 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) would be scaled to eliminate any difference in the
total payment weight between the current year and the update year.
For any given year's ratesetting, we typically use the most recent
full calendar year of claims data to model budget neutrality
adjustments. We currently have available 98 percent of CY 2010 ASC
claims data.
To create an analytic file to support calculation of the weight
scaler and budget neutrality adjustment for the wage index (discussed
below), we summarized available CY 2010 ASC claims by provider and by
HCPCS code. We used the National Provider Identifier for the purpose of
identifying unique ASCs within the CY 2010 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 proposed rule, is posted on the CMS Web site at:
http://www.cms.gov/ASCPayment/01_Overview.asp#TopOfPage.
b. Updating the ASC Conversion Factor
Under the OPPS, we typically apply a budget neutrality adjustment
for provider level changes, most notably a change in the wage index
values for the upcoming year, to the conversion factor. Consistent with
our final ASC payment policy, for the CY 2012 ASC payment system, we
are proposing 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. For CY 2012, we
calculated this proposed adjustment for the ASC payment system by using
the most recent CY 2010 claims data available and estimating the
difference in total payment that would be created by introducing the
proposed CY 2012 pre-floor and pre-reclassified hospital wage indices.
Specifically, holding CY 2010 ASC utilization and service-mix and the
proposed CY 2012 national payment rates after application of the weight
scaler constant, we calculated the total adjusted payment using the CY
2011 pre-floor and pre-reclassified hospital wage indices and the total
adjusted payment using the proposed CY 2012 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 2011 pre-
floor and pre-reclassified hospital wage indices to the total adjusted
payment calculated with the proposed CY 2012 pre-floor and pre-
reclassified hospital wage indices and applied the resulting ratio of
1.0003 (the proposed CY 2012 ASC wage index budget neutrality
adjustment) to the CY 2011 ASC conversion factor to calculate the
proposed CY 2012 ASC conversion factor.
Section 1833(i)(2)(C)(i) 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 (U.S. city average) as estimated by
the Secretary for the 12-month period ending with the midpoint of the
year involved.'' Because the Secretary does update the ASC payment
amounts annually, we adopted a policy, which we codified at Sec.
416.171(a)(2)(ii), to update the ASC conversion factor using the CPI-U
for CY 2010 and subsequent calendar years. Therefore, the annual update
to the ASC payment system is the CPI-U (referred to as the CPI-U update
factor).
Section 3401(k) of the Affordable Care Act amended section
1833(i)(2)(D) of the Act by adding a new clause (v) which requires that
``any annual update under [the ASC payment] system for the year, after
application of clause (iv), shall be reduced by the productivity
adjustment described in section 1886(b)(3)(B)(xi)(II)'' (which we refer
to as the MFP adjustment) effective with the calendar year beginning
January 1, 2011. Clause (iv) authorizes the Secretary to provide for a
reduction in any annual update for failure to report on quality
measures. Clause (v) states that application of the MFP adjustment to
the ASC payment system may result in the update to the ASC payment
system being less than zero for a year and may result in payment rates
under the ASC payment system for a year being less than such payment
rates for the preceding year. In the CY 2011 OPPS/ASC final rule with
comment period (75 FR 72062 through 72064), we revised Sec. 416.160
and Sec. 416.171 to reflect this provision of the Affordable Care Act
(we note that these regulations do not reflect any reduction in the
annual update for failure to report on quality measures because CMS had
not implemented an ASC quality reporting program).
As discussed in section XIV.K. of this proposed rule, we are
proposing that ASCs begin submitting data on quality

[[Page 42313]]

measures in CY 2012 for the CY 2014 payment determination. Because any
reduction to the annual update under the ASC Quality Reporting Program
will not occur until CY 2014, we are not proposing any changes to the
payment methodology. We intend to address payment changes based on
failure to submit quality data under the ASC Quality Reporting Program
in a future rulemaking.
Without regard to the ASC Quality Reporting Program and in
accordance with section 1833(i)(2)(C)(i) of the Act, before applying
the MFP adjustment, the Secretary first determines the ``percentage
increase'' in the CPI-U, which we interpret cannot be a negative
number. Thus, in the instance where the percentage change in the CPI-U
for a year is negative, we are proposing to hold the CPI-U update
factor for the ASC payment system to zero. Section 1833(i)(2)(D)(v) of
the Act, as added by section 3401(k) of the Affordable Care Act, then
requires that the Secretary reduce the CPI-U update factor (which would
be held to zero if the CPI-U percentage change is negative) by the MFP
adjustment, and states that application of the MFP adjustment may
reduce this percentage change below zero. If the application of the MFP
adjustment to the CPI-U percentage increase would result in a MFP-
adjusted CPI-U update factor that is less than zero, then the annual
update to the ASC payment rates would be negative and payments would
decrease relative to the prior year. Illustrative examples of how the
MFP adjustment would be applied to the ASC payment system update are
found in the CY 2011 OPPS/ASC final rule with comment period (75 FR
72062 through 72064).
For this proposed rule, for the 12-month period ending with the
midpoint of CY 2012, the Secretary estimates that the CPI-U is 2.3
percent. The Secretary estimates that the MFP adjustment is 1.4
percentage points based on the methodology for calculating the MFP
adjustment finalized in the CY 2011 MPFS final rule with comment period
(75 FR 73391 through 73399) as revised by the proposal discussed in the
CY 2012 MPFS proposed rule. Therefore, we are proposing to reduce the
CPI-U of 2.3 percent by the MFP adjustment specific to this CPI-U of
1.4 percentage points, resulting in an MFP-adjusted CPI-U update factor
of 0.9 percent. Therefore, we are proposing to apply a 0.9 percent MFP-
adjusted update to the CY 2011 ASC conversion factor.
For CY 2012, we also are proposing to adjust the CY 2011 ASC
conversion factor ($41.939) by the wage adjustment for budget
neutrality of 1.0003 in addition to the MFP-adjusted update factor of
0.9 percent discussed above, which results in a proposed CY 2012 ASC
conversion factor of $42.329.
3. Display of Proposed CY 2012 ASC Payment Rates
Addenda AA and BB to this proposed rule (which are referenced in
section XVII. of this proposed rule and available via the Internet on
the CMS Web site) display the proposed updated ASC payment rates for CY
2012 for covered surgical procedures and covered ancillary services,
respectively. These addenda contain several types of information
related to the proposed CY 2012 payment rates. Specifically, in
Addendum AA, a ``Y'' in the column titled ``Subject to Multiple
Procedure Discounting'' indicates that the surgical procedure will 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 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 2012. Display of the comment 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 the final rule with
comment period.
The values displayed in the column titled ``CY 2012 Payment
Weight'' are the proposed relative payment weights for each of the
listed services for CY 2012. 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-based amount, separately payable covered ancillary
services that have a predetermined national payment amount, such as
drugs and biologicals that are separately paid under the OPPS, or
services that are contractor-priced or paid at reasonable cost in ASCs.
To derive the proposed CY 2012 payment rate displayed in the ``CY
2012 Payment'' column, each ASC payment weight in the ``CY 2012 Payment
Weight'' column is multiplied by the proposed CY 2012 conversion factor
of $42.329. The conversion factor includes a budget neutrality
adjustment for changes in the wage index values and the CPI-U update
factor as reduced by the productivity adjustment (as discussed in
section XV.H.2.b. of this proposed rule).
In Addendum BB, there are no relative payment weights displayed in
the ``CY 2012 Payment Weight'' column for items and services with
predetermined national payment amounts, such as separately payable
drugs and biologicals. The ``CY 2012 Payment'' column displays the
proposed CY 2012 national unadjusted ASC payment rates for all items
and services. The proposed CY 2012 ASC payment rates listed in Addendum
BB for separately payable drugs and biologicals are based on ASP data
used for payment in physicians' offices in April 2011.

XIV. Hospital Outpatient Quality Reporting Program Updates and ASC
Quality Reporting Program

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 Reporting (Hospital OQR) Program, formerly 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 known as the Hospital Inpatient Quality Reporting
(Hospital IQR) Program (formerly known as 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 System (formerly known as the Physician
Quality Reporting Initiative (PQRI)), have financial incentives for the
reporting of quality data to CMS. CMS also has 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 (ESRD) Quality

[[Page 42314]]

Incentive Program (76 FR 628 through 646) that links payment to
performance.
In implementing the Hospital OQR Program and other quality
reporting programs, we have focused on measures that have high impact
and support CMS and HHS priorities for improved quality and efficiency
of care for Medicare beneficiaries. Our goal is ultimately to align the
clinical quality measure requirements of the Hospital OQR Program and
various other programs, including the Hospital IQR Program, and the
proposed ASC Quality Reporting Program, with the reporting requirements
implemented under the Health Information Technology for Economic and
Clinical Health (HITECH) Act, so that the burden of reporting can be
reduced. In developing this and other quality reporting programs, as
well as the Hospital Inpatient Value-Based Purchasing (Hospital
Inpatient VBP) Program, we applied the following principles for the
development and use of measures:
Pay-for-reporting, public reporting, and value-based
purchasing programs should rely on a mix of standards, processes,
outcomes, and patient experience of care measures, including measures
of care transitions and changes in patient functional status. Across
all programs, we seek to move as quickly as possible to the use of
primarily outcome and patient experience of care measures. To the
extent practicable and appropriate, outcome and patient experience of
care measures should be adjusted for risk factors or other appropriate
patient population or provider characteristics.
To the extent possible and recognizing differences in
payment system maturity and statutory authorities, measures should be
aligned across public reporting and payment systems under Medicare and
Medicaid. The measure sets should evolve so that they include a focused
set of measures appropriate to the specific provider category that
reflects the level of care and the most important areas of service and
measures for that provider category.
The collection of information burden on providers should
be minimized to the extent possible. To this end, we continuously seek
to align our measures with the adoption of meaningful use standards for
health information technology (HIT), so that data can be submitted and
calculated via certified EHR technology with minimal burden.
To the extent practicable and feasible, and recognizing
differences in statutory authorities, measures used by CMS should be
endorsed by a national, multi-stakeholder organization. Measures should
be aligned with best practices among other payers and the needs of the
end users of the measures.
We invite public comment on these principles.

2. Statutory History of the Hospital Outpatient Quality Reporting
(Hospital OQR) Program

We refer readers to the CY 2011 OPPS/ASC final rule with comment
period (75 FR 72064) for a detailed discussion of the statutory history
of the Hospital OQR Program.
3. Technical Specification Updates and Data Publication
a. Maintenance of Technical Specifications for Quality Measures
Technical specifications for each Hospital OQR measure are listed
in the Hospital OQR 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 Hospital OQR
Specifications Manual and including detailed instructions and
calculation algorithms. In some cases where the specifications are
available elsewhere, we may include links to Web sites hosting
technical specifications. These resources are 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
through 68767), we established a subregulatory process for making
updates to the technical specifications that we use to calculate
Hospital OQR measures. This process is used when changes to the measure
specifications are necessary due to changes in scientific evidence,
treatment guidelines, or consensus among affected parties. Changes due
to these reasons may not coincide with the timing of our regulatory
actions, but nevertheless should be made so that the Hospital OQR
measures are calculated based on the most up-to-date scientific and
consensus standards. We indicated that notification of technical
changes to the measure specifications is made via the QualityNet Web
site, http://www.QualityNet.org, and in the Hospital OQR Specifications
Manual. The notification of changes to the measure technical
specifications occurs no less than 3 months before any changes become
effective for purposes of reporting under the Hospital OQR Program.
The Hospital OQR Specifications Manual is released every 6 months
and addenda are released as necessary. This release schedule provides
at least 3 months of advance notice for substantial changes such as
changes to ICD-9, CPT, NUBC, and HCPCS codes, and at least 6 months of
advance notice for changes to data elements that would require
significant systems changes.
b. Publication of Hospital OQR Program Data
Section 1833(t)(17)(E) of the Act requires that the Secretary
establish procedures to make data collected under Hospital OQR
available to the public. It also states that such procedures must
ensure that a hospital has the opportunity to review the data that are
to be made public with respect to the hospital prior to such data being
made public. To meet these requirements, data that a hospital has
submitted for the Hospital OQR Program are typically displayed on CMS
Web sites such as the Hospital Compare Web site, http://www.hospitalcompare.hhs.gov, after a preview period. The Hospital
Compare Web site is an interactive Web tool that assists beneficiaries
by providing information on hospital quality of care. This information
motivates beneficiaries to work with their doctors and hospitals to
discuss the quality of care hospitals provide to patients, providing
additional incentives to hospitals to improve the quality of care that
they furnish.
Under our current policy, we publish quality data by the
corresponding hospital CCN, and indicate instances where data from two
or more hospitals are combined to form the publicly reported measures
on the Hospital Compare Web site. This approach is consistent with the
approach taken under the Hospital IQR Program. Consistent with our
current policy, we make Hospital OQR data publicly available whether or
not the data have been validated for payment purposes.
In general, we strive to display hospital quality measures on the
Hospital Compare Web site as soon as possible after they have been
adopted and have been reported to CMS. However, if there are unresolved
display issues or pending design considerations, we may make the data
available on other, non-interactive, CMS Web sites such as http://www.cms.hhs.gov/HospitalQualityInits/. Publicly reporting the
information in this manner, though not on the interactive Hospital
Compare Web site, allows us to meet the requirement under section
1833(t)(17)(E) of the Act for establishing procedures to make quality
data submitted available to the public following a preview period. When
we display hospital quality information on

[[Page 42315]]

non-interactive CMS Web sites, affected parties would be notified via
CMS listservs, CMS e-mail blasts, national provider calls, and
QualityNet announcements regarding the release of preview reports
followed by the posting of data on a Web site other than Hospital
Compare.
We also require hospitals to complete and submit a registration
form (``participation form'') in order to participate in the Hospital
OQR Program. With submission of this participation form, participating
hospitals agree that they will allow CMS to publicly report the quality
measure data submitted under the Hospital IQR Program, including
measures that we calculate using Medicare claims.

B. Proposed Revision to Measures Previously Adopted for the Hospital
OQR Program for the CY 2012, CY 2013, and CY 2014 Payment
Determinations

1. Background
We refer readers to the following OPPS/ASC final rules with comment
periods for a history of measures adopted for the Hospital OQR Program,
including lists of: 11 measures adopted for the CY 2011 payment
determination (74 FR 60637); 15 measures adopted for the CY 2012
payment determination (75 FR 72083 through 72084); 23 measures adopted
for the CY 2013 payment determination (75 FR 72090); and 23 measures
adopted for the CY 2014 payment determination (75 FR 72094). The table
below also shows the 23 measures previously adopted for these payment
determinations:

Hospital OQR Program Measures Previously Adopted for the CY 2011, CY
2012, CY 2013, and CY 2014 *** Payment Determinations
------------------------------------------------------------------------

-------------------------------------------------------------------------
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.
OP-12: The Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their Qualified/Certified EHR System as
Discrete Searchable Data.*
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
Low Risk Surgery.*
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
Computed Tomography (CT).*
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache.*
OP-16: Troponin Results for Emergency Department acute myocardial
infarction (AMI) patients or chest pain patients (with Probable Cardiac
Chest Pain) Received Within 60 minutes of Arrival.**
OP-17: Tracking Clinical Results between Visits.**
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
Patients.**
OP-19: Transition Record with Specified Elements Received by Discharged
Patients.**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
Professional.**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture.**
OP-22: ED-Left Without Being Seen.**
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
Stroke who Received Head CT Scan Interpretation Within 45 minutes of
Arrival.**
------------------------------------------------------------------------
* New measure adopted beginning with the CY 2012 payment determination.
** New measure adopted beginning with the CY 2013 payment determination.
*** All 23 measures were adopted for the CY 2014 payment determination.

2. Proposed Revision to Hospital OQR Program Measures Previously
Adopted for the CY 2013 Payment Determination
In the CY 2011 OPPS/ASC final rule with comment period, we
finalized the adoption of the chart-abstracted measure OP-22--Left
Without Being Seen (75 FR 72088 through 72089). This measure was
endorsed (NQF 0499) as part of an NQF project entitled
``National Voluntary Consensus Standards for Emergency Care.'' This
measure assesses the percentage of patients who leave the Emergency
Department (ED) without being evaluated by qualified medical personnel,
which is an indication of ED overcrowding, and lack of timely access to
care. We are proposing that beginning with the CY 2013 payment
determination, hospitals would submit aggregate numerator and
denominator counts once a year using a Web-based form available through
the QualityNet Web site for this measure. This proposed process is
different from that which is used to collect other chart-abstracted
measures because it would not require hospitals to submit patient-level
information for this measure, and would not require quarterly
submission of data. We believe this proposed process will reduce the
potential data collection and submission burden for this measure.
We are proposing that for the CY 2013 payment determination, data
submission for this measure would occur between July 1, 2012 and August
15, 2012. We also are proposing that for the CY 2013 payment
determination, the aggregate counts for the numerator (the total number
of patients who left without being evaluated by a physician/advance
practice nurse/physician's assistant) and the denominator (total number
of patients who signed in to be evaluated for emergency services) would
be submitted by hospitals and would span the time period from January
1, 2011 through December 31, 2011. We invite public comment on this
proposed approach to data collection for OP-22 for the CY 2013 Hospital
OQR Program and subsequent payment determinations, and on the time
period to be assessed for this measure for the CY 2013 payment
determination. The updated specifications for this measure will be made
available in the July 2011 Hospital OQR Specifications Manual.

[[Page 42316]]

C. Proposed New Quality Measures for the CY 2014 and CY 2015 Payment
Determinations

1. Considerations in Expanding and Updating Quality Measures Under the
Hospital OQR Program
In general, when selecting measures for the Hospital OQR 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 Hospital OQR 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 Hospital OQR Program.
Specifically, we assign 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 used and continue to use these
criteria to guide our decisions regarding what measures to add to the
Hospital OQR Program measure set.
In the CY 2009 OPPS/ASC final rule with comment period, we adopted
four claims-based quality measures that do not require a hospital to
submit chart-abstracted clinical data (73 FR 68766). This supports our
goal of expanding the measures for the Hospital OQR Program 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 and EHRs as
alternative ways to collect data from hospitals.
A registry is a collection of clinical data for purposes of
assessing clinical performance, quality of care, and opportunities for
quality improvement. 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 Hospital OQR Program
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 Hospital OQR Program, and would be publicly reported
like other Hospital OQR Program quality measures, encouraging
improvements in the quality of care. In the CY 2010 OPPS/ASC final rule
with comment period (74 FR 60633), we responded to public comments on
such an approach.
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). When we refer to the term Qualified EHR, we intend
for it to have the same meaning as set forth by the Office of the
National Coordinator for Health Information Technology (ONC) (45 CFR
170.102) which has adopted the statutory definition of Qualified EHR
found in section 3000(13) of the Public Health Service Act. That
section defines a Qualified EHR as ``an electronic record of health-
related information on an individual that--(A) includes patient
demographic and clinical health information, such as medical history
and problem lists; and (B) has the capacity--(i) to provide clinical
decision support; (ii) to support physician order entry; (iii) to
capture and query information relevant to health care quality; and (iv)
to exchange electronic health information with, and integrate such
information from other sources.'' Additionally, when we refer to the
term, Certified EHR Technology, we intend for it to have the same
meaning as set forth by the ONC at 45 CFR 170.102 as follows:
``Certified EHR Technology'' means (1) A complete EHR that meets the
requirements included in the definition of a Qualified EHR and has been
tested and certified in accordance with the certification program
established by the National Coordinator as having met all applicable
certification criteria adopted by the Secretary; or (2) a combination
of EHR Modules in which each constituent EHR Module of the combination
has been tested and certified in accordance with the certification
program established by the National Coordinator as having met all
applicable certification criteria adopted by the Secretary, and the
resultant combination also meets the requirements included in the
definition of a Qualified EHR.
Establishing a data submission mechanism using EHRs will require
interoperability between EHRs and our 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 would enable us to expand the
Hospital OQR Program measure set with less cost and burden to
hospitals. In the CY 2010 OPPS/ASC final rule with comment period (74
FR 60633 through 60634), we responded to public comments on such an
approach.
Continuing to reduce our reliance on the chart-abstraction
mechanism would allow us and hospital outpatient departments to devote
available resources towards maximizing the potential of registries and
EHRs for quality measurement reporting. Both mechanisms hold the
promise of more sophisticated and timely reporting of clinical quality
measures. Clinical data registries allow the collection of more
detailed data, including outcomes. Registries can also provide feedback
and quality improvement information based on reported data. Finally,
clinical data registries can also receive data from EHRs, and
therefore, serve as an alternative means to reporting clinical quality
data extracted from an EHR.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071
through 72174), we added new measures over a three year period for the
CY 2012, CY 2013, and CY 2014 payment determinations. We believe this
process will assist hospitals in planning, meeting future reporting
requirements, and implementing quality improvement efforts. We will
also have more time to develop, align, and implement the infrastructure
necessary to collect data on the measures and make payment
determinations. The fact that we finalized measures for a three year
period of time (for example, for the CY 2012, CY 2013 and CY 2014
payment determinations in the CY 2011 OPPS/ASC final rule with comment
period) does not preclude us from proposing to adopt additional
measures or changing the list of measures for these payment
determinations through

[[Page 42317]]

subsequent rulemaking cycles that affect these future payment
determinations.
We have previously expanded the Hospital OQR Program measure set
dramatically by adopting measures over several payment determinations
in order to allow hospital outpatient departments adequate time to plan
and implement the reporting of quality data for the CY 2012, CY 2013
and CY 2014 payment determinations. In this proposed rule, we are
proposing to add new measures to the existing Hospital OQR measure set
for the CY 2014 payment determination and are proposing to add new
measures for the CY 2015 payment determination.
2. Proposed New Hospital OQR Program Quality Measures for the CY 2014
Payment Determination
As stated above, the CY 2014 measure set for the Hospital OQR
Program currently contains 23 measures that we adopted in the CY 2011
OPPS/ASC final rule with comment period (75 FR 72094). In this proposed
rule, we are proposing to adopt a number of additional measures for the
CY 2014 measure set.
a. Proposed New National Healthcare Safety Network (NHSN) Healthcare
Associated Infection (HAI) Measure for the CY 2014 Payment
Determination: Surgical Site Infection (NQF 0299)
Healthcare Associated Infections (HAIs) is a topic area widely
acknowledged by HHS, the Institute of Medicine (IOM), the National
Priorities Partnership, and others as a high priority requiring
measurement and improvement. HAIs are among the leading causes of death
in the United States. CDC estimates that as many as 2 million
infections are acquired each year in hospitals and result in
approximately 90,000 deaths.\1\ It is estimated that more Americans die
each year from HAIs than from auto accidents and homicides combined.
HAIs not only put the patient at risk, but also increase the days of
hospitalization required for patients and add considerable health care
costs. HAIs are largely preventable through interventions such as
better hygiene and advanced scientifically tested techniques for
surgical patients. Therefore, many health care consumers and
organizations are calling for public disclosure of HAIs, arguing that
public reporting of HAI rates provides the information health care
consumers need to choose the safest hospitals, and gives hospitals an
incentive to improve infection control efforts. This proposed measure
is currently collected by the National Healthcare Safety Network (NHSN)
as part of State-mandated reporting and surveillance requirements for
hospitals in some States. Additionally, data submission for this
measure through EHRs may be possible in the near future.
---------------------------------------------------------------------------

\1\ McKibben L., Horan, T.: Guidance on public reporting of
healthcare-associated infections: recommendations of the Healthcare
Infection Control Practices Advisory Committee. AJIC 2005; 33:217-
26.
---------------------------------------------------------------------------

The NHSN is a secure, Internet-based surveillance system maintained
and managed by the CDC, and can be utilized by all types of healthcare
facilities in the United States, including acute care hospitals, long
term acute care hospitals, psychiatric hospitals, rehabilitation
hospitals, outpatient dialysis centers, ambulatory surgery centers, and
long term care facilities. The NHSN is provided free of charge to
hospitals. The NHSN enables healthcare facilities to collect and use
data about HAIs, clinical practices known to prevent HAIs, the
incidence or prevalence of multidrug-resistant organisms within their
organizations, and other adverse events. Some States use the NHSN as a
means for healthcare facilities to submit data on HAIs mandated through
their specific State legislation. Currently, 21 States require
hospitals to report HAIs using the NHSN, and the CDC supports more than
4,000 hospitals that are using NHSN.
Increasingly, more surgical procedures are being performed in
hospital outpatient department settings and ASCs. Therefore, we have
determined that this measure is ``appropriate for the measurement of
the quality of care furnished by hospitals in outpatient settings'' as
required under section 1833(t)(17)(C)(i) of the Act. This proposed HAI
measure assesses the percentage of surgical site infections occurring
within 30 days after an NHSN-defined operative procedure if no implant
is left in place or within one year if an implant is in place, and the
infection appears to be related to the operative procedure. Infections
are identified on original admission or upon readmission to the
facility of original operative procedure within the relevant time frame
(30 days for no implants; within 1 year for implants). The
specifications for this proposed HAI measure can be found at http://www.cdc.gov/nhsn/psc.html.
We also believe that this measure meets the requirement under
section 1833(t)(17)(C)(i) of the Act that measures selected for the
Hospital OQR Program ``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 measure was
NQF-endorsed in 2007 and was adopted by the Hospital Quality Alliance
in 2008. We note that this measure also was adopted for the Hospital
IQR Program beginning with the FY 2014 payment determination (75 FR
50211) and its adoption into the Hospital OQR Program would further our
goal of aligning measures across programs where feasible.
We are proposing that submission of data for this proposed NHSN
measure for the CY 2014 payment determination would relate to infection
events occurring between January 1, 2013 and June 30, 2013. We are
proposing that hospital outpatient departments use the existing NHSN
infrastructure and protocols that already exist for this proposed
measure to report it for Hospital OQR Program purposes. We invite
public comment on our proposal to adopt this HAI measure into the
Hospital OQR Program for the CY 2014 payment determination.
b. Proposed New Chart-Abstracted Measures for the CY 2014 Payment
Determination
In the CY 2011 OPPS/ASC final rule with comment period, we stated
that we would not finalize five proposed NQF-endorsed diabetes care
measures because we were in the process of refining the chart-
abstracted numerator definitions for these measures (75 FR 72091). We
also stated that we intended to again propose to adopt these measures
for the CY 2014 payment determination. We now are proposing to adopt
these five diabetes care measures for the CY 2014 payment determination
as chart-abstracted measures. These five measures are: (1) Hemoglobin
A1c Management (NQF 0059); (2) Diabetes Measure Pair: A. Lipid
Management: Low Density Lipoprotein Cholesterol (LDL-C) < 130, B. Lipid
Management: LDL-C < 100 (NQF 0064); (3) Diabetes: Blood
Pressure Management (NQF 0061); (4) Diabetes: Eye Exam (NQF
0055); and (5) Diabetes: Urine Protein Screening (NQF
0062). We note that these five measures are electronically
specified. We hope to be able to collect such information via EHRs in
the future, and we solicit comments on using EHR for data collection in
the future. In addition, we are proposing to adopt another new chart-
abstracted measure, Cardiac Rehabilitation Patient Referral from an
Outpatient Setting (NQF 0643), for the CY 2014 payment
determination. Below are descriptions of each of these six proposed new
chart-abstracted measures.

[[Page 42318]]

(1) Proposed Diabetes Measure: Hemoglobin A1c Management (NQF
0059)
In general, diabetes mellitus is a chronic disease that impacts the
lives of a large portion of the population and consumes a significant
amount of U.S. healthcare dollars. With the prevalence of diabetes in
the Medicare-eligible population expected to double, costs are expected
to increase almost fourfold to $171 million.\2\ Uncontrolled diabetes
often leads to biochemical imbalances that can lead to acute life-
threatening events, such as diabetic ketoacidosis and hyperosmolar, or
nonketotic coma. In patients with insulin-dependent diabetes, the risk
of development or progression of retinopathy, nephropathy, and
neuropathy can be reduced by 50 to 75 percent by intensive outpatient
treatment of hyperglycemia compared to conventional treatment. Early
treatment may help slow or halt the progression of diabetic
complications, and following the guidelines for screening may assist
those patients with no outward sign of diabetic complications to be
identified earlier through regular screening tests. Some guidelines
recommend that the HgA1c level be tested during an initial assessment
and in follow-up assessments which should occur at no longer than 3-
month intervals.\3\ Other guidelines recommend that the HgA1c level be
tested at least twice a year in patients with stable glycemic control
and who are meeting treatment goals, and quarterly in patients whose
HgA1c level does not meet target glycemic goals.\4\
---------------------------------------------------------------------------

\2\ Huang, E.S., Basu, A., O'Grady, M., Capretta, J.C.:
Projecting the future diabetes population size and related costs for
the U.S. Diabetes Care. 2009;32 (12):2225-29.
\3\ The American Association of Clinical Endocrinologists
Medical Guidelines for the Management of Diabetes Mellitus: The AACE
System of Intensive Diabetes Self-Management--2002 Update.
\4\ American Diabetes Association. Standards of Medical Care in
Diabetes. Diabetes Care. 2008 Jan:31 (Suppl 1):S12-54.
---------------------------------------------------------------------------

Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
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. Because this measure is
NQF-endorsed, we believe that this measure meets the requirement of
reflecting consensus among affected parties. However, we note that
consensus among affected parties can be reflected through means other
than NQF endorsement. As discussed above, this measure is appropriate
for measuring quality of care in the hospital outpatient department
setting, in which many patients with diabetes are treated.
Lower HgA1c levels are associated with reduced microvascular and
neuropathic complications of diabetes. This NQF-endorsed measure
measures the percentage of adult patients with diabetes aged 18-75
years with a most recent HgA1c level greater than 9 percent (poor
control). The specifications for this measure are located in Appendix A
(beginning page A-60) of the 2008 NQF Report titled ``National
Voluntary Consensus Standards for Ambulatory Care--Part 1'' available
at the following link: http://www.qualityforum.org/Publications/2008/03/National_Voluntary_Consensus_Standards_for_Ambulatory_Care%E2%80%93Part_1.aspx.
Glycosylated hemoglobin (HA1c) assay measures average blood glucose
over the preceding two to three months, rather than just one point in
time. HgA1c values fluctuate less frequently than fasting glucose
values and give clinicians a better integrated view of the patient's
average blood sugar over time. High HgA1c is a more reliable indicator
of chronic high blood sugar. We invite public comment on this proposed
measure.
(2) Proposed Diabetes Measure Pair: A. Lipid Management: Low Density
Lipoprotein Cholesterol (LDL-C) < 130, B. Lipid Management: LDL-C < 100
(NQF 0064)
LDL-C measures the development of atherosclerotic plaque which
increases the cardiac events risk for diabetic patients, who already
face heart disease death rates that are about two to four times higher
than these rates are for non-diabetic patients.\5\ Improved
dyslipidemia management helps to mitigate the risk for cardiovascular
disease. Lipid-lowering therapy for diabetics has been a consistent
recommendation in several guidelines, prompted by randomized trials
supporting statin therapy to lower the risk of cardiovascular
involvement for this population. Despite the evidence basis and
guideline support, only a minority of patients with diabetes are
prescribed statin treatment or achieve target LDL-C goals.\6\
---------------------------------------------------------------------------

\5\ American Diabetes Association. Standards of Medical Care in
Diabetes. Diabetes Care. 2007 Jan;30 (Suppl 1):S8-15.
\6\ Das, S.R., Vaeth, P.A., Stanek, H.G., de Lemos, J.A.,
Dobbins, R.L., McGuire, D.K.: Increased cardiovascular risk
associated with diabetes in Dallas County. Am Heart J 2006;151:1087-
93.
---------------------------------------------------------------------------

Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
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. Because this measure is
NQF-endorsed, we believe that this measure meets the requirement of
reflecting consensus among affected parties. However, we note that
consensus among affected parties can be reflected through means other
than NQF endorsement. As discussed above, this measure is appropriate
for measuring quality of care in the hospital outpatient department
setting which serves many patients with diabetes who often have high
level of LDL-C.
Early treatment of hyperlipidemia as indicated by high level of
LDL-C may help to slow or halt the progression of cardiovascular
disease and impact the quality of the life of the diabetic patient,
affecting the patient's life expectancy and decreasing costs involved
in treating diabetic complications. This NQF-endorsed measure assesses:
(i) The percentage of adult patients with diabetes aged 18-75 years
whose most recent LDL-C test result was < 130 mg/dl; and (ii) the
percentage of adult patients with diabetes aged 18-75 years whose most
recent LDL-C test result during the measurement year was < 100 mg/dl.
The specifications for this measure are located in Appendix A
(beginning page A-60) of the 2008 NQF Report titled ``National
Voluntary Consensus Standards for Ambulatory Care--Part 1'' available
at the following link: http://www.qualityforum.org/Publications/2008/03/National_Voluntary_Consensus_Standards_for_Ambulatory_Care%E2%80%93Part_1.aspx. We invite public comment on this proposed
measure.
(3) Proposed Diabetes Measure: Blood Pressure Management (NQF
0061)
Blood pressure control reduces the risk of cardiovascular disease
and microvascular complications in patients with diabetes. Well-
controlled blood pressure impacts the quality of the life of the
diabetic patient, affects the patient's life expectancy, and decreases
the costs involved in treating diabetic complications.

[[Page 42319]]

\7\ Centers for Disease Control and Prevention. National
diabetes fact sheet: general information and national estimates on
diabetes in the United States, 20112007. Atlanta, GA: U.S.
Department of Health and Human Services, Centers for Disease Control
and Prevention, 20112008.
---------------------------------------------------------------------------

(4) Proposed Diabetes Measure: Eye Exam (NQF 0055)
A dilated eye exam helps to detect the risk for vision-threatening
diabetic retinopathy which is prevalent among people with diabetes.
Data from the 2011 National Diabetes Fact Sheet shows that diabetes is
the leading cause of new cases of blindness among adults aged 20-74
years.\8\ However, dilated eye exams for diabetic patients can prevent
retinopathy through early detection \9\ and stereoscopic retinal
photography is sometimes used to grade diabetic retinopathy severity.
---------------------------------------------------------------------------

\8\ Centers for Disease Control and Prevention. National
diabetes fact sheet: general information and national estimates on
diabetes in the United States, 20112007. Atlanta, GA: U.S.
Department of Health and Human Services, Centers for Disease Control
and Prevention, 20112008.
\9\ American Diabetes Association. Standards of medical care in
diabetes. Diabetes Care. 2007 Jan;30 (Suppl 1):S8-15.
---------------------------------------------------------------------------

Section 1833(t)(17)(C)(i) of the Act requires the Secretary to
develop measures appropriate for the measurement of the quality of care
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. Because this measure is
NQF-endorsed, we believe that this measure meets the requirement of
reflecting consensus among affected parties. However, we note that
consensus among affected parties can be reflected through means other
than NQF endorsement. This measure is appropriate for measuring quality
of care in the hospital outpatient departments which serve many
patients with diabetes who are at risk for diabetic retinopathy.
This NQF-endorsed measure measures the percentage of adult patients
with diabetes age 18 to 75 years who received a dilated eye exam or
seven standard field stereoscopic photos with interpretation by an
ophthalmologist or optometrist, or imaging to verify diagnosis from
stereoscopic photos during the reporting year, or during the prior
year, if the patient is at low risk for retinopathy. A patient is
considered low risk if the patient has no evidence of retinopathy in
the prior year. The specifications for this measure are located in
Appendix A (beginning page A-60) of the 2008 NQF Report titled
``National Voluntary Consensus Standards for Ambulatory Care--Part 1''
available at the following link: http://www.qualityforum.org/Publications/2008/03/National_Voluntary_Consensus_Standards_for_Ambulatory_Care%E2%80%93Part_1.aspx. We invite public comment on this
proposed measure.
(5) Proposed Diabetes Measure: Urine Protein Screening (NQF
0062)
Urine protein screening for microalbumin detects an abnormal amount
of protein albumin leaks in the urine by the capillaries of the kidney.
High levels of blood sugar in uncontrolled diabetes can cause damage to
the capillaries in the kidneys. Diabetics accounted for 44 percent of
new cases of kidney disease. In 2005, a total of 178,689 diabetics with
ESRD were on dialysis or received a kidney transplant in the United
States and Puerto Rico.\10\ In 2009, MedPAC reported costs for the
330,000 Medicare recipients receiving dialysis treatment for ESRD at
over $8 billion.\11\
---------------------------------------------------------------------------

\10\ Centers for Disease Control and Prevention. National
diabetes fact sheet: general information and national estimates on
diabetes in the United States, 2007. Atlanta, GA: U.S. Department of
Health and Human Services, Centers for Disease Control and
Prevention, 2008.
\11\ MedPAC. Outpatient dialysis service: assessing payment
adequacy and updating payments. Report to the Congress: Medicare
payment policy. 2009 Mar; 131-56.
---------------------------------------------------------------------------

[[Page 42320]]

morbidity and mortality.\12\ Despite these benefits, cardiac
rehabilitation is significantly underutilized by patients with heart
disease and there is significant geographical variation in referral
rates and lower use in women, non-whites, older patients and patients
on Medicaid.\13\ A recent study of Medicare beneficiaries, using 70,040
matched pairs of patients hospitalized for coronary conditions or
revascularization procedures, found that mortality rates were 21
percent to 34 percent lower in cardiac rehabilitation users compared to
nonusers.\14\ Evidence from registries which include a cardiac
rehabilitation performance measure indicated that only about 18 percent
of eligible patients were referred to cardiac rehabilitation.\15\ Under
our regulations, 42 CFR 410.49, cardiac rehabilitation is covered for
patients who have had one or more of the following: an acute myocardial
infarction within the preceding 12 months, current stable angina,
individuals who have undergone coronary bypass surgery, a percutaneous
coronary intervention or coronary stenting, heart valve repair or
replacement, or a heart-lung transplant.
---------------------------------------------------------------------------

\12\ Wenger, N.K.: Current status of cardiac rehabilitation. J.
Am Coll Cardiol 2008; 51:1619-1631.
\13\ Suaya, J.A., Shepard, D.S., Normand, S.L., et al.: Use of
cardiac rehabilitation by Medicare beneficiaries after myocardial
infarction or coronary bypass surgery. Circulation. 2007; 116:1653-
62.
\14\ Suaya, J.A., Stason, W.B.; Ades, P.A., et al.: Cardiac
rehabilitation and survival in older coronary patients. J. Am Coll
Cardiol. 2009;54:25-33.
\15\ Chan, P.S., Oetgen, W.J., Buchanan, D., Mitchell, K., et
al.: Cardiac performance measure compliance on outpatients: the
American College of Cardiology and National Cardiovascular Data
Registry's PINNACLE (Practice Innovation and Clinical Excellence)
program. J. Am Coll Cardiol 2010;561(1): 8-14.
---------------------------------------------------------------------------

In May 2010, the NQF endorsed two cardiac rehabilitation referral
performance measures as part of the call for care coordination
performance measures. These measures are: (1) Cardiac Rehabilitation:
Patient Referral From an Inpatient Setting (NQF 0642)--The
percentage of patients admitted to the hospital with a qualifying
cardiovascular disease (CVD) event who are referred to an early
outpatient cardiac rehabilitation/secondary prevention program; and (2)
Cardiac Rehabilitation: Patient Referral From an Outpatient Setting
(NQF 0643)--The percentage of patients evaluated in an
outpatient setting who in the previous 12 months experienced an acute
myocardial infarction or chronic stable angina or who have undergone
coronary artery bypass (CABG) surgery, a percutaneous coronary
intervention (PCI), cardiac valve surgery (CVS), or cardiac
transplantation who have not already participated in an early
outpatient cardiac rehabilitation/secondary prevention program for the
qualifying event and who are referred to an early outpatient cardiac
rehabilitation/secondary prevention program unless there is a
documented medical or patient oriented reason why a referral was not
made. We are proposing to adopt the second (NQF 0643) of these
measures for the CY 2014 Hospital OQR Program. The measure
specifications are located in Appendix A (Pages A4 and A5) of the 2010
NQF consensus report entitled '' Preferred Practices and Performance
Measures for Measuring and Reporting Care Coordination'' which is
available at the following link: http://www.qualityforum.org/Publications/2010/10/Preferred_Practices_and_Performance_Measures_for_Measuring_and_Reporting_Care_Coordination.aspx.
This proposed measure targets patients who have experienced a
qualifying cardiovascular event. These patients are commonly seen in
hospital outpatient departments and, for this reason, we believe that
the proposed measure is appropriate for the measurement of the quality
of care (including medication errors) furnished by hospitals in
outpatient settings as required under section 1833(t)(17)(C)(i) of the
Act. The measure also is NQF-endorsed, and therefore meets the
requirement that measures selected for the program ``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'' under section 1833(t)(17)(C)(i) of the
Act.
We are proposing to adopt the NQF-endorsed Cardiac Rehabilitation
Patient Referral from an Outpatient Setting measure for CY 2014 payment
determination. The goal of this measure is to improve the delivery of
cardiac care in order to reduce cardiovascular mortality and morbidity
and optimize the health of patients suffering from CVD.
We invite public comment on this proposed measure.
c. Proposed New Structural Measures
For the CY 2014 payment determination, we are proposing to add two
structural measures: 1) Safe Surgery Checklist Use; and 2) Hospital
Outpatient Volume for Selected Outpatient Surgical Procedures. In
general, structural measures assess the characteristics and capacity of
the provider to deliver quality health care.
(1) Proposed Safe Surgery Checklist Use Measure
This proposed structural measure assesses whether a hospital
outpatient department utilizes a Safe Surgery checklist that assesses
whether effective communication and safe practices are performed during
three distinct perioperative periods: (1) the period prior to the
administration of anesthesia; (2) the period prior to skin incision;
and (3) the period of closure of incision and prior to the patient
leaving the operating room. The use of such checklists has been
credited with dramatic decreases in preventable harm, complications and
post-surgical mortality.\16\ In November 2010, the New England Journal
of Medicine (NEJM) published a study concluding that surgical
complications were reduced by one-third, and mortality by nearly half,
when a safe surgery checklist was used.\17\
---------------------------------------------------------------------------

\16\ Haynes, A.B.; Weiser, T.G.; Berry, W.G. et. al (2009). ``A
Surgical Safety Checklist to Reduce Morbidity and Mortality in a
Global Population.''. New England Journal of Medicine. 360: 491-499.
\17\ de Vries En, Prins HA, Crolla RMPH, et al. Effect of a
comprehensive surgical safety system on patient outcomes. N Engl J
Med 2010;363: 1928-37.
---------------------------------------------------------------------------

We believe that effective communication and the use of safe
surgical practices during surgical procedures will significantly reduce
preventable surgical deaths and complications. For example, mistakes in
surgery can be prevented by ensuring that the correct surgery is
performed on the correct patient and at the correct place on the
patient's body.\18\ A safe surgery checklist would also reduce the
potential for human error, which we believe would increase the safety
of the surgical environment.
---------------------------------------------------------------------------

\18\ Hospital National Patient Safety Goals. The Joint
Commission Accreditation Hospital Manual, 2011. http://www.jointcommission.org/standards_information/npsgs.aspx
---------------------------------------------------------------------------

The safe surgery checklists of which we are aware typically include
safe surgery practices corresponding to three critical perioperative
periods: the period prior to the administration of anesthesia, the
period prior to skin incision, and the period of closure of incision
and prior to the patient leaving the operating room. Some examples of
safe surgery practices that can be performed during each of these three
perioperative periods are shown in the table below:

[[Page 42321]]

----------------------------------------------------------------------------------------------------------------
Third critical point (period of
First critical point (period prior Second critical point (period prior closure of incision and prior to
to administering anesthesia) to skin incision) patient leaving the operating room)
----------------------------------------------------------------------------------------------------------------
Verbal confirmation of Confirm surgical team Confirm the procedure.
patient identity. members and roles. Complete count of surgical
Mark surgical site. Confirm patient identity, instruments and accessories.
Check anesthesia machine/ procedure, and surgical incision Identify key patient
medication. site. concerns for recovery and
Assessment of allergies, Administration of management of the patient.
airway and aspiration risk. antibiotic prophylaxis within 60
minutes before incision.
Communication among
surgical team members of
anticipated critical events.
Display of essential
imaging as appropriate.
----------------------------------------------------------------------------------------------------------------

One example of a checklist that lists safe surgery practices during
each of these three perioperative periods is the World Health
Organization Surgical Safety Checklist, which was adopted by The World
Federation of Societies of Anesthesiologists as an international
standard of practice. This checklist can be found at: http://www.who.int/patientsafety/safesurgery/ss_checklist/en/index.html.
The adoption of a structural measure that assesses Safe Surgery
Checklist use would align our patient safety initiatives with those of
several surgical specialty societies including: The American College of
Surgeons' Nora Institute for Patient Safety, the American Society of
Anesthesiologists, The Joint Commission, the National Association for
Healthcare Quality and the Association of periOperative Registered
Nurses (AORN). For this proposed structural measure, a hospital
outpatient department would indicate whether or not it uses a safe
surgery checklist for its surgical procedures that includes safe
surgery practices during each of the three critical perioperative
periods discussed above. The measure would assess whether the hospital
uses a safe surgery checklist in the hospital outpatient department for
surgical procedures, but would not require a hospital to report whether
it uses a checklist in connection with any individual outpatient
procedures.
The proposed Safe Surgery Checklist structural measure is not NQF-
endorsed. However, we believe that consensus among affected parties can
be reflected through means other than NQF endorsement including:
consensus achieved during the measure development process; consensus
shown through broad acceptance and use of measures; and consensus
through public comment. The proposed safe surgery checklist measure
assesses the adoption of a best practice for surgical care that is
broadly accepted and in widespread use among affected parties. In
addition to being adopted by The World Federal of Societies of
Anesthesiologists, the use of a safe surgery checklist is one of the
safe surgery principles endorsed by the Council on Surgical and
Perioperative Safety, which is comprised of the American Association of
Nurse Anesthetists, American College of Surgeons, American Association
of Surgical Physician Assistants, American Society of
Anesthesiologists, American Society of PeriAnesthesia Nurses, AORN, and
Association of Surgical Technologists. Two State agencies (Oregon,
South Carolina), the Veterans Health Administration,\19\ numerous
hospital systems, State hospital associations (such as California, and
South Carolina), national accrediting organizations and large private
insurers have endorsed the use of a safe surgery checklist as a best
practice for reducing morbidity, mortality, and medical
errors.^{20, 21} Because the use of a safe surgery checklist is
a widely accepted best practice for surgical care, we believe that the
proposed structural measure of Safe Surgery Checklist use reflects
consensus among affected parties. We also note that The Joint
Commission has included safe surgery checklist practices among those to
be used to achieve National Patient Safety Goals adopted for 2011 for
surgeries performed in ambulatory settings and hospitals.
---------------------------------------------------------------------------

\19\ Neily, J; Mills, PD, Young-Xu, Y. (2010). ``Association
between implementation of a Medical Team Training Program and
Surgical Mortality''. JAMA. 304 (15): 1693-1700.
\20\ Haynes, AB; Weiser, TG; Berry, WR et al (2009) ``A Surgical
Safety Checklist to Reduce Morbidity and Mortality in a Global
Population''. NEJM. 360:491-499.
\21\ Birkmeyer, JD (2010) ``Strategies for Improving Surgical
Quality--Checklists and Beyond.'' NEJM. 363: 1963-1965.
---------------------------------------------------------------------------

For CY 2014 payment determination, we are proposing that data
collection for this structural measure for hospital outpatient
departments will be from July 1, 2013 through August 15, 2013 for the
time period January 1, 2012 through December 31, 2012. These data will
be collected via a Web-based tool available on the QualityNet Web site
that is currently employed for the collection of structural measures
for the Hospital IQR Program and the Hospital OQR Program. We invite
public comments on our proposal to add this new structural measure to
the CY 2014 Hospital OQR Program measure set.
(2) Proposed Hospital Outpatient Department Volume for Selected
Outpatient Surgical Procedures Measure
There is substantial evidence in recent peer-reviewed clinical
literature that volume of surgical procedures, particularly of high
risk surgical procedures, is related to better patient outcomes,
including decreased surgical errors and mortality
^{[1], [2], [3]}. This may be attributable to greater
experience and/or surgical skill, greater comfort with and, hence,
likelihood of application of standardized best practices, and increased
experience in monitoring and management of surgical patients for the
particular procedure. For this reason, the National Quality Forum has
previously endorsed measures of total all-patient surgical volume for
Isolated CABG and Valve Surgeries (NQF 0124), Percutaneous
Coronary Intervention (PCI) (NQF 0165), Pediatric Heart
Surgery (NQF 0340), Abdominal Aortic Aneurism Repair (NQF
357), Esophageal Resection (0361), and Pancreatic
Resection (NQF 0366). Additionally, many consumer-oriented Web
sites that display health care quality information required to be
reported under State law (California, New York, Texas, Washington,
Florida, Illinois, Michigan, Oregon) and private organizations
(Leapfrog Group, U.S. News & World Report) are reporting procedure
volume, in addition to provider performance on surgical process (SCIP
measures) and outcome measures (SSI, Patient Safety

[[Page 42322]]

Indicators, and Mortality), in order to provide more context to
consumers choosing a health care provider. The currently NQF-endorsed
measures of procedure volume (noted above) relate to surgeries
performed only in inpatient settings, and would not be applicable to
the types of procedures approved to be performed in HOPDs and ASCs.
---------------------------------------------------------------------------

\[1]\ Livingston, E.H.; Cao, J ``Procedure Volume as a Predictor
of Surgical Outcomes''. JAMA. 2010;304(1):95-97.
\[2]\ David R. Flum, D.R.; Salem, L.; Elrod, J.B.; Dellinger,
E.P.; Cheadle, A. Chan, L. ``Early Mortality Among Medicare
Beneficiaries Undergoing Bariatric Surgical Procedures''. JAMA.
2005;294(15):1903-1908.
\[3]\ Schrag, D; Cramer, L.D.; Bach, P.B.; Cohen, A.M.; Warren,
J.L.; Begg, C.B ``Influence of Hospital Procedure Volume on Outcomes
Following Surgery for Colon Cancer'' JAMA. 2000; 284 (23): 3028-
3035.
---------------------------------------------------------------------------

The table below, which shows the proportion of procedures during
calendar year 2010 performed in hospital outpatient departments
stratified by broad categories, reveals that most hospital outpatient
procedures (99%) fall into one of 8 categories: Cardiovascular, Eye,
Gastrointestinal, Genitourinary, Musculoskeletal, Nervous System,
Respiratory, and Skin.

CY 2010 Hospital Outpatient Data
------------------------------------------------------------------------
Percent of
Procedure category total services
------------------------------------------------------------------------
Cardiovascular.......................................... 75.50
Chest................................................... 0.00
Ear..................................................... 0.20
Endocrine............................................... 0.10
Eye..................................................... 1.70
Gastrointestinal........................................ 5.70
Genitourinary........................................... 2.70
Hemic & Lymphatic....................................... 0.30
Maternity............................................... 0.00
Musculoskeletal......................................... 3.80
Nervous System.......................................... 2.80
Radiology............................................... 0.10
Respiratory............................................. 1.00
Skin.................................................... 6.20
---------------
Total............................................... 100.00
------------------------------------------------------------------------

Because surgical volume is associated with better quality, and
surgical procedures are performed in hospital outpatient departments,
we believe that surgical volume is appropriate for measuring the
quality of these eight categories of surgical procedures performed in
an HOPD. For the CY 2014 payment determination, we are proposing that
HOPDs would report all-patient volume data with respect to these eight
categories between the dates July 1, 2013 and August 15, 2013 with
respect to the time period January 1, 2012 through December 31, 2012.
In other words, under this proposal, an HOPD would report its CY 2012
all-patient volume data for these eight categories of procedures during
the 45 day window of July 1, 2013 to August 15, 2013. The table below
lists the specific HCPCS codes for each of the 8 procedure categories
for which hospitals would be required to report the all-patient volume
data. Like the other structural measures in the Hospital OQR program,
data on this proposed measure would be collected via an online Web-
based tool that will be made available to HOPDs via the QualityNet Web
site.
We invite public comment on this proposal.
In summary, for the CY 2014 payment determination, in addition to
the 23 measures we previously adopted in the CY 2011 OPPS/ASC final
with comment period, we are proposing to adopt 1 new NHSN HAI measure,
6 additional new chart-abstracted measures, and 2 new structural
measures. With respect to the proposed surgical site infection HAI
measure, HOPDs would be required to report the data to the NHSN
beginning with January 1, 2013 to through June 30, 2013 infection
events and would be required to use the procedures set out by the NHSN.
We are proposing that submission of data on the five proposed diabetes
measures and the proposed cardiac rehabilitation measure would begin
with first quarter CY 2013 (January 1, 2013 to March 31, 2013)
encounters. With respect to the proposed structural measures, we are
proposing that HOPDs submit data between July 1, 2013 and August 15,
2013 with respect to a calendar year 2012 reporting time period.
We invite public comments on these proposals for the CY 2014
payment determination. The proposed complete measure set for the
Hospital OQR Program CY 2014 payment determination, including the
measures we adopted in the CY 2011 OPPS/ASC final rule with comment
period, is reflected in the table below.

CY 2014 Hospital OQR Program Measure Set Reflecting Measures Previously
Adopted and the Proposed Addition of 1 NHSN HAI Measure, 6 Chart-
Abstracted Measures, and 2 Structural Measures
------------------------------------------------------------------------

-------------------------------------------------------------------------
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.
OP-12: The Ability for Providers with HIT to Receive. Laboratory Data
Electronically Directly into their Qualified/Certified EHR System as
Discrete Searchable Data.*
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
Low Risk Surgery.*
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
Computed Tomography (CT).*
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache.*
OP-16: Troponin Results for Emergency Department acute myocardial
infarction (AMI) patients or chest pain patients (with Probable Cardiac
Chest Pain) Received Within 60 minutes of Arrival.**
OP-17: Tracking Clinical Results between Visits.**
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
Patients.**
OP-19: Transition Record with Specified Elements Received by Discharged
Patients.**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
Professional.**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture.**
OP-22: ED-Patient Left Without Being Seen.**
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
Stroke who Received Head CT Scan Interpretation Within 45 minutes of
Arrival.**
OP-24: Surgical Site Infection.***
OP-25: Diabetes: Hemoglobin A1c Management.***
OP-26: Diabetes Measure Pair: A Lipid management: low density
lipoprotein cholesterol (LDL-C) <130, B Lipid management: LDL-C
<100.***
OP-27: Diabetes: Blood Pressure Management.***

[[Page 42323]]

OP-28: Diabetes: Eye Exam.***
OP-29: Diabetes: Urine Protein Screening.***
OP-30: Cardiac Rehabilitation Patient Referral From an Outpatient
Setting.***
OP-31: Safe Surgery Checklist Use.***
OP-32: Hospital Outpatient Volume Data on Selected Outpatient Surgical
Procedures.***
------------------------------------------------------------------------

Procedure category Corresponding HCPCS codes
------------------------------------------------------------------------
Gastrointestinal.......................... 40000 through 49999, G0104,
G0105, G0121, C9716, C9724,
C9725, 0170T.
Eye....................................... 65000 through 68999, 0186,
0124T, 0099T, 0017T, 0016T,
0123T, 0100T, 0176T, 0177T,
0186T, 0190T, 0191T, 0192T,
76510, 0099T.
Nervous System............................ 61000 through 64999, G0260,
0027T, 0213T, 0214T, 0215T,
0216T, 0217T, 0218T, 0062T.
Musculoskeletal........................... 20000 through 29999, 0101T,
0102T, 0062T, 0200T, 0201T.
Skin...................................... 10000 through 19999, G0247,
0046T, 0268T, G0127, C9726,
C9727.
Genitourinary............................. 50000 through 58999, 0193T,
58805.
Cardiovascular............................ 33000 through 37999.
Respiratory............................... 30000 through 32999.
------------------------------------------------------------------------
* New measure for the CY 2012 payment determination.
** New measure for the CY 2013 payment determination.
*** Proposed new measure for the CY 2014 payment determination.

3. Proposed Hospital OQR Program Measures for the CY 2015 Payment
Determination
a. Proposed Retention of CY 2014 Hospital OQR Measures for the CY 2015
Payment Determination
In general, unless otherwise specified, we retain measures from one
payment determination to the next. Accordingly, we are proposing that
all of the measures we finalize for the CY 2014 payment determination
continue to be used for the CY 2015 payment determination. We invite
public comment on this proposal.
b. Proposed New NHSN HAI Measure for the CY 2015 Payment Determination
For the measure set to be used for the CY 2015 payment
determination, we are proposing to adopt an additional HAI measure
entitled Influenza Vaccination Coverage among Healthcare Personnel
(HCP) (NQF 0431). This measure is currently collected by the
CDC via the NHSN.
Rates of serious illness and death resulting from influenza and its
complications are increased in high-risk populations such as persons
over 50 years or under four years of age, and persons of any age who
have underlying conditions that put them at an increased risk. HCP can
acquire influenza from patients and can transmit influenza to patients
and other HCP. Many HCP provide care for, or are in frequent contact
with, patients with influenza or patients at high risk for
complications of influenza. The involvement of HCP in influenza
transmission has been a long-standing concern.^{22 23 24}
---------------------------------------------------------------------------

\22\ Maltezou, H.C., Drancourt, M.: Nosocomial influenza in
children. Journal of Hospital Infection 2003; 55:83-91
\23\ Hurley, J.C., Flockhart, S.: An influenza outbreak in a
regional residential facility. Journal of Infection Prevention 2010;
11:58-61
\24\ Salgado, C.D., Farr, B.M., Hall, K.K., Hayden, F.G.:
Influenza in the acute hospital setting. The Lancet Infectious
Diseases 2002; 2:145-155.
---------------------------------------------------------------------------

Vaccination is an effective preventive measure against influenza,
and can prevent many illnesses, deaths, and losses in productivity.\25\
HCP are considered a high priority for expanding influenza vaccine use.
Achieving and sustaining high influenza vaccination coverage among HCP
is intended to help protect HCP and their patients and reduce disease
burden and healthcare costs. Results of several studies indicate that
higher vaccination coverage among HCP is associated with lower
incidence of nosocomial influenza.^{26 27 28} Such findings
have led some to call for mandatory influenza vaccination of
HCP.^{29 30 31 32 33}
---------------------------------------------------------------------------

\25\ Wilde, J.A., McMillan, J.A., Serwint, J., Butta, J.,
O'Riordan, M.A., Steinhoff, M.C.: Effectiveness of influenza vaccine
in health care professionals: a randomized trial. The Journal of the
American Medical Association 1999; 281:908-913.
\26\ Salgado, C.D., Giannetta, E.T., Hayden, F.G., Farr, B.M.:
Preventing influenza by improving the vaccine acceptance rate of
clinicians. Infection Control and Hospital Epidemiology 2004; 25:
923-928.
\27\ Potter, J., Stott, D.J., Roberts, M.A., et al.: Influenza
vaccination of health-care workers in long-term-care hospitals
reduces the mortality of elderly patients. Journal of Infectious
Diseases 1997; 175:1-6.
\28\ Hayward, A.C., Harling, R., Wetten, S., et al.:
Effectiveness of an influenza vaccine programme for care home staff
to prevent death, morbidity, and health service use among residents:
cluster randomised controlled trial. British Medical Journal 2006;
333:1241-1246.
\29\ Talbot, T.R., Bradley, S.F., Cosgrove, S.E., et al.: SHEA
position paper: Influenza vaccination of healthcare workers and
vaccine allocation for healthcare workers during vaccine shortages.
Infection Control and Hospital Epidemiology 2005; 26:882-890
\30\ American College of Physicians (ACP), ACP policy on
influenza vaccination of health care workers. http://www.acponline.org/running_practice/quality_improvement/projects/adult_immunization/flu_hcw.pdf.
\31\ Greene, L.R., Cain, T.A., Dolan, S.A. et al.: APIC position
paper: influenza immunization of healthcare personnel. Association
of Professionals in Infection Control (APIC). November 2008.http://
www.apic.org/Content/NavigationMenu/PracticeGuidance/Topics/Influenza/APIC_Position_Paper_Influenza_11_7_08final_revised.pdfhttp://www.apic.org/Content/NavigationMenu/PracticeGuidance/Topics/Influenza/APIC_Position_Paper_Influenza_11_7_08final_revised.pdf.
\32\ National Patient Safety Foundation (NPSF), Mandatory flu
vaccinations for healthcare workers. Press Release, November 18,
2009. http://www.npsf.org/pr/pressrel/2009-11-18.php.
\33\ Infectious Diseases Society of America (IDSA), IDSA policy
on mandatory immunization of health care workers against seasonal
and 2009 H1N1 influenza. Infectious Diseases Society of America
(IDSA). September 30, 2009. http://www.idsociety.org/HCWimmunization/.
---------------------------------------------------------------------------

Until recently, vaccination coverage among HCP has been well below
the national Healthy People 2010 target of 60 percent,\34\ but
preliminary data suggest 62 percent of HCP reported receiving seasonal
influenza vaccine in 2009-2010.\35\ Only 37 percent reported

[[Page 42324]]

receiving the 2009 pandemic A/H1N1 vaccine.\36\
---------------------------------------------------------------------------

\34\ Walker, F.J., Singleton, J.A., Lu, P., Wooten, K.G.,
Strikas, R.A.: Influenza vaccination of healthcare workers in the
United States, 1989-2002. Infection Control and Hospital
Epidemiology 2006; 27:257-265.
\35\ http://www.cdc.gov/mmwr/preview/mmwrhtml/rr55e209a1.htm
Influenza Vaccination of Health-Care Personnel.
Recommendations of the Healthcare Infection Control Practices
Advisory Committee (HICPAC) and the Advisory Committee on
Immunization Practices.
\36\ Centers for Disease Control and Prevention., Interim
results: Influenza A (H1N1) 2009 and Monovalent Seasonal Influenza
Vaccination Coverage Among Health-Care Personnel--United States
August 2009- January 2010. Morbidity and Mortality Weekly Report
(MMWR); 59:357-362. Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/mm5912a1.htm.
---------------------------------------------------------------------------

HCP refers to all personnel working in healthcare settings who have
the potential for exposure to patients and/or to infectious materials,
including body substances, contaminated medical supplies and equipment,
contaminated environmental surfaces, or contaminated air.\37\ HCP may
include (but are not limited to) physicians, nurses, nursing
assistants, therapists, technicians, emergency medical service
personnel, dental personnel, pharmacists, laboratory personnel, autopsy
personnel, students and trainees, contractual staff not employed by the
healthcare facility, and persons (for example, clerical, dietary,
house-keeping, laundry, security, maintenance, billing, and volunteers)
not directly involved in patient care but potentially exposed to
infectious agents that can be transmitted to and from HCP and patients.
Settings in which HCP may work include, but are not limited to, acute
care hospitals, long-term care facilities, skilled nursing facilities,
rehabilitation centers, physicians' offices, urgent care centers,
outpatient clinics, home health agencies, and emergency medical
services.
---------------------------------------------------------------------------

\37\ Adapted from: Pearson ML., Bridges CB., Harper SA.,:
Influenza vaccination of health-care personnel: Recommendations of
the Healthcare Infection Control Practices Advisory Committee
(HICPAC) and the Advisory Committee on Immunization Practices
(ACIP). Morbidity and Mortality Weekly Report (MMWR) 2006; 55:1-16.
Available at: http://www.cdc.gov/mmwr/preview/mmwrhtml/rr5502a1.htm.
---------------------------------------------------------------------------

Currently, four States have ``offer'' laws for influenza
vaccination of HCP, meaning that vaccine must be offered to HCP by
healthcare facilities; and three States (Alabama, California, and New
Hampshire) have ``ensure'' laws for influenza vaccination of HCP,
meaning that vaccination of non-immune HCP is mandatory in the absence
of a specified exemption or refusal; and, additionally, numerous
hospitals and other healthcare facilities have established policies
requiring mandatory influenza vaccination of their HCP.\38\
---------------------------------------------------------------------------

\38\ For additional information regarding healthcare facilities'
influenza vaccine policies, please see: http://www.immunize.org/honor%2Droll/.http://www.immunize.org/honor%2Droll/.
---------------------------------------------------------------------------

Currently, no State requires that hospitals report this measure to
NHSN. However, approximately 13 hospitals (including long term acute
care and rehabilitation), outpatient hemodialysis centers, long term
care facilities, and ambulatory surgical centers are currently
reporting HCP immunization data to NHSN. In September 2009, CDC
released the Healthcare Personnel Safety (HPS) Component of NHSN, which
complements Patient Safety and Biovigilance components available in
NHSN. The HPS Component replaced CDC's National Surveillance System for
Health Care Workers (NaSH) and is comprised of two modules: the Blood/
Body Fluid Exposure Module and the Influenza Vaccination and Management
and Exposure Module.\39\ Currently, participation in either module is
voluntary. The current Influenza Vaccination and Management and
Exposure Module may soon offer options for healthcare facilities to
submit vaccination summary data. NHSN plans to partner with vendor-
based surveillance systems to permit periodic data extractions into
NHSN.
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\39\ Available at: http://www.cdc.gov/nhsn/hps.htmlhttp://www.cdc.gov/nhsn/hps.html.
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The modules feature basic, custom, and advanced analysis
capabilities available in real-time, which allow individual healthcare
facilities to compile and analyze their own data, as well as benchmark
these results to aggregate NHSN estimates. The HPS Component can assist
participating facilities in developing surveillance and analysis
capabilities to permit the timely recognition of HCP safety problems
and prompt interventions with appropriate measures. Influenza
vaccination data submitted to CDC will ultimately capture regional
trends on the yearly uptake of the vaccine, prophylaxis and treatment
for healthcare personnel, as well as the elements within yearly
influenza campaigns that succeed or require improvement. At the State
and national levels, the HPS Component will aid in monitoring rates and
trends.
Due to the significant impact of HCP influenza vaccination on
patient outcomes, we believe this measure is appropriate for measuring
the quality of care in hospital outpatient departments. Healthcare
Personnel (HCP) Influenza Vaccination is one of the HAI measures that
we proposed to adopt for the FY 2015 Hospital IQR Program in the FY
2012 IPPS/LTCH PPS proposed rule. This measure assesses the percentage
of healthcare personnel who have been immunized for influenza during
the flu season. The specifications for this measure are available at
http://www.cdc.gov/nhsn/PDFs/HSPmanual/HPS_Manual.pdf.
The proposed HCP Influenza Vaccination measure is NQF-endorsed for
the hospital setting and applies to the hospital outpatient setting.
Therefore, this measure meets the requirement for measure selection
under section 1833(t)(17)(C)(i) of the Act. We are proposing to adopt
the Influenza Vaccination Coverage among Healthcare Personnel measure
that is collected by the CDC via the NHSN. The NHSN proposed reporting
mechanism for this proposed HAI measure is discussed in greater detail
in section XIV.C.2.a. of this proposed rule. Data submission for this
NHSN proposed measure would relate to immunizations from October 1,
2013 through March 31, 2014 for the CY 2015 payment determination. We
are proposing that hospital outpatient departments use the NHSN
infrastructure and protocol to report the measure for Hospital OQR
purposes. We invite public comment on our proposal to adopt this HAI
measure into the Hospital OQR Program for the CY 2015 payment
determination.

Proposed Hospital OQR Program Measure Set for the CY 2015 Payment
Determination
------------------------------------------------------------------------

[[Page 42325]]

OP-12: The Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their Qualified/Certified EHR System as
Discrete Searchable Data.*
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
Low Risk Surgery.*
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
Computed Tomography (CT).*
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache.*
OP-16: Troponin Results for Emergency Department acute myocardial
infarction (AMI) patients or chest pain patients (with Probable Cardiac
Chest Pain) Received Within 60 minutes of Arrival.**
OP-17: Tracking Clinical Results between Visits.**
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
Patients.**
OP-19: Transition Record with Specified Elements Received by Discharged
Patients.**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
Professional.**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture.**
OP-22: ED-Patient Left Without Being Seen.**
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
Stroke who Received Head CT Scan .Interpretation Within 45 minutes of
Arrival.**
OP-24: Surgical Site Infection (via NHSN).***
OP-25: Diabetes: Hemoglobin A1c Management.***
OP-26: Diabetes Measure Pair: A Lipid management: low density
lipoprotein cholesterol (LDL-C) <130, B Lipid management: LDL-C
<100.***
OP-27: Diabetes: Blood Pressure Management.***
OP-28: Diabetes: Eye Exam.***
OP-29: Diabetes: Urine Protein Screening.***
OP-30: Cardiac Rehabilitation Patient Referral From an Outpatient
Setting.***
OP-31: Safe Surgery Checklist Use.***
OP-32: Hospital Outpatient Volume Data on Selected Outpatient Surgical
Procedures.***
------------------------------------------------------------------------

Procedure Category Corresponding HCPCS codes
------------------------------------------------------------------------
Gastrointestinal.......................... 40000 through 49999, G0104,
G0105, G0121, C9716, C9724,
C9725, 0170T.
Eye....................................... 65000 through 68999, 0186,
0124T, 0099T, 0017T, 0016T,
0123T, 0100T, 0176T, 0177T,
0186T, 0190T, 0191T, 0192T,
76510, 0099T.
Nervous System............................ 61000 through 64999, G0260,
0027T, 0213T, 0214T, 0215T,
0216T, 0217T, 0218T, 0062T.
Musculoskeletal........................... 20000 through 29999, 0101T,
0102T, 0062T, 0200T, 0201T.
Skin...................................... 10000 through 19999, G0247,
0046T, 0268T, G0127, C9726,
C9727.
Genitourinary............................. 50000 through 58999, 0193T,
58805.
Cardiovascular............................ 33000 through 37999.
Respiratory............................... 30000 through 32999.
------------------------------------------------------------------------
OP-33: Influenza Vaccination Coverage among Healthcare Personnel
(HCP).****
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* New measure for the CY 2012 payment determination.
** New measure for the CY 2013 payment determination.
*** Proposed new measure for the CY 2014 payment determination.
**** Proposed new measure for the CY 2015 payment determination.

D. Possible Quality Measures Under Consideration for Future Inclusion
in the Hospital OQR Program

The current measure set for Hospital OQR includes measures that
assess imaging efficiency patterns, care transitions, and the use of
HIT. We are proposing in this proposed rule to add measures to the CY
2014 and CY 2015 measure sets addressing diabetes care, HAIs, referrals
for cardiac rehabilitation, and Safe Surgery Checklist use. Thus, the
measures that we have previously adopted for the Hospital OQR Program,
as well as the proposed measures being proposed in this proposed rule,
address infection outcomes and infection control processes. In previous
years' rulemakings, we have provided lists of measures that are under
consideration for future adoption into the Hospital OQR measure set.
Below is a list of potential measurement areas that we are considering
for future Hospital OQR payment determinations (beginning with CY 2015)
for which we are soliciting public comment. In particular, we seek
comment on the inclusion of Patient Experience of Care Measures in the
Hospital OQR measure set for a future payment determination, such as
existing Consumer Assessment of Healthcare Providers and Systems
(CAHPS) surveys for clinicians/groups and the CAHPS Surgical Care
Survey, sponsored and submitted by the American College of Surgeons
(ACS) and the Surgical Quality Alliance (SQA).
We also intend to align the surgical safety measures across the
HOPD and ASC settings and would seek to utilize comparable data to
assess patient safety in these settings. We seek comment on the
potential submission of such measures by HOPDs via quality codes
submitted on claims in the future. We also seek comment on the
inclusion of measures of Anesthesia related Complications in the
Hospital OQR measurement set.

Measures and Measurement Topics Under Consideration for Future Hospital
OQR Program Payment Determinations Beginning With CY 2015
------------------------------------------------------------------------

-------------------------------------------------------------------------
Measures for future development:
Procedure Specific Measures:
Colonoscopy and other Endoscopy measures.
Cataract Surgery measures.
Cancer Care:
Adjuvant Chemotherapy is Considered or Administered within 4 Months
of Surgery to Patients Under Age 80 with AJCC III Colon Cancer.

[[Page 42326]]

Adjuvant Hormonal Therapy for Patients with Breast Cancer.
Needle Biopsy to Establish Diagnosis of Cancer Precedes Surgical
Excision/Resection.
Heart Failure:
Heart Failure: Angiotensin-Converting Enzyme (ACE) Inhibitor or
Angiotensin Receptor Blocker (ARB) Therapy for Left Ventricular
Systolic Dysfunction (LVSD)
Heart Failure: Left Ventricular Ejection Fraction Assessment.
Heart Failure: Combination Medical Therapy for Left Ventricular
Systolic Dysfunction.
Heart Failure: Beta-Blocker Therapy for Left Ventricular Systolic
Dysfunction.
Heart Failure: Counseling regarding Implantable Cardioverter-
Defibrillator (ICD) Implantation for Patients with Left Ventricular
Systolic Dysfunction on Combination Medical Therapy.
Heart Failure: Patients with Left Ventricular Systolic Dysfunction
on Combination Medical Therapy.
Heart Failure: Symptom Management.
Heart Failure: Symptom and Activity Assessment.
Heart Failure: Patient Education.
Heart Failure: Overuse of Echocardiography.
Heart Failure: Post-Discharge Appointment for Heart Failure
Patients.
Surgical Safety:
Patient Fall.
Patient Burn.
Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
Implant.
Hospital Transfer/Admission.
Patient Experience-of-Care:
Consumer Assessment of Healthcare Providers and Systems (CAHPS)
surveys for clinicians/groups.
CAHPS Surgical Care Survey.
Anesthesia Related Complications:
Death.
Cardiac Arrest.
Perioperative Myocardial Infarction.
Anaphylaxis.
Hyperthermia.
Transfusion Reaction.
Stroke, Cerebral Vascular Accident, or Coma following anesthesia.
Visual Loss.
Medication Error.
Unplanned ICU admission.
Patient intraoperative awareness.
Unrecognized difficult airway.
Reintubation.
Dental Trauma.
Perioperative aspiration.
Vascular access complication, including vascular injury or
pneumothorax.
Pneumothorax following attempted vascular access or regional
anesthesia.
Infection following epidural or spinal anesthesia.
Epidural hematoma following spinal or epidural anesthesia.
High Spinal.
Postdural puncture headache.
Major systemic local anesthetic toxicity.
Peripheral neurologic deficit following regional anesthesia.
Infection following peripheral nerve block.
Additional Measurement Topics:
NQF Serious Reportable Events in Healthcare.
Medication Reconciliation.
Chemotherapy.
Post-discharge follow up.
Post-discharge ED visit within 72 hours.
Breast cancer detection rate.
------------------------------------------------------------------------

We invite public comment on these measures and other topics that we
might consider proposing to adopt beginning with the Hospital OQR
Program CY 2015 payment determination. We also are seeking suggestions
and rationales to support the adoption of measures and topics for the
Hospital OQR Program which do not appear in the table above.

E. Proposed Payment Reduction for Hospitals That Fail To Meet the
Hospital OQR Program Requirements for the CY 2012 Payment Update

1. Background
Section 1833(t)(17)(A) of the Act, which applies to subsection (d)
hospitals (as defined under section 1886(d)(1)(B) of the Act), requires
that hospitals that fail to report data required to be submitted on the
measures selected by the Secretary, in the form and manner, and at a
time, required by the Secretary under section 1833(t)(17) 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 applies only
to the payment year involved and will not be taken into account in
computing the

[[Page 42327]]

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 Hospital OQR Program 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
Hospital OQR Program 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 proposed rule, which is available via the Internet on the CMS Web
site): ``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 with assigned
status indicator ``S'' or ``T,'' and brachytherapy sources with
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 the Medicare Improvements for Patients and Providers Act
of 2008 (MIPPA) (Pub. L. 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 the MIPPA, payment for
brachytherapy sources at charges adjusted to cost expired on January 1,
2010. Therefore, in the CY 2010 OPPS/ASC final rule with comment period
(74 FR 60641), we finalized 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 Hospital OQR Program for brachytherapy services furnished on and
after January 1, 2010.
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,
we calculate 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 calculate 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 2010 OPPS, we multiply the final full national
unadjusted payment rate in Addendum B to the CY 2010 OPPS/ASC final
rule with comment period by the CY 2010 OPPS final reporting ratio of
0.980 (74 FR 60642).
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. Under this policy, we apply the reporting
ratio to both the minimum unadjusted copayment and national unadjusted
copayment for those hospitals that receive the payment reduction for
failure to meet the Hospital OQR Program reporting requirements. This
application of the reporting ratio to the national unadjusted and
minimum unadjusted copayments is calculated according to Sec. 419.41
of our regulations, prior to any adjustment for a hospital's 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 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 Hospital OQR Program. 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 Hospital OQR Program 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. We continued this
policy in the CY 2010 OPPS/ASC final rule with comment period (74 FR
60642), and in the CY 2011 OPPS/ASC final rule with comment period (75
FR 72099). For a complete discussion of the OPPS outlier calculation
and eligibility criteria, we refer readers to section II.G. of this CY
2012 OPPS/ASC proposed rule.

2. Proposed Reporting Ratio Application and Associated Adjustment
Policy for CY 2012

We are proposing to continue our established policy of applying the
reduction of the OPD fee schedule increase factor through the use of a

[[Page 42328]]

reporting ratio for those hospitals that fail to meet the Hospital OQR
Program requirements for the full CY 2012 annual payment update factor.
For the CY 2012 OPPS, the proposed reporting ratio is 0.980, calculated
by dividing the proposed reduced conversion factor of $68.052 by the
proposed full conversion factor of $69.420. We are proposing to
continue to apply the reporting ratio to all services calculated using
the OPPS conversion factor. For the CY 2012 OPPS, we are proposing 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,'' ``U,'' and ``X'' (other than new technology
APCs to which we have assigned status indicators ``S'' and ``T''). We
are proposing to continue to exclude services paid under New Technology
APCs. We are proposing 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 Hospital OQR Program reporting
requirements. We also are proposing 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 Hospital
OQR Program. Similarly, we are proposing 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 invite public comments on these proposals.

F. Extraordinary Circumstances Extension or Waiver for CY 2012 and
Subsequent Years

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 final rule with comment period (74 FR 60046 through 60047), we
adopted 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. In the CY 2011 OPPS/ASC final rule with comment period
(75 FR 72103), we retained these procedures with some modifications.
For CY 2012 and subsequent years, we are proposing to retain these
procedures with one modification. We are proposing to extend these
procedures to the submission of medical record documentation for
purposes of complying with our validation requirement for the Hospital
OQR Program.
Under this process, in the event of extraordinary circumstances,
such as a natural disaster, 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 or medical record documentation for
one or more quarters, a hospital would submit to CMS a request form
that would 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);
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 would again be able to submit
Hospital OQR data and/or medical record documentation, and a
justification for the proposed date.
The request form would be signed by the hospital's CEO. A request
form would be required to be submitted within 45 days of the date that
the extraordinary circumstance occurred.
Following receipt of such a request, CMS would--
(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;
(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; and
(3) Complete our review of any CY 2012 request and communicate our
response within 90 days following our receipt of such a request.
We note that we might also decide to grant waivers or extensions to
hospitals that have not requested them when we determine that an
extraordinary circumstance, such as an act of nature (for example,
hurricane) affects an entire region or locale. If we make the
determination to grant a waiver or extension to hospitals in a region
or locale, we would communicate this decision to hospitals and vendors
through routine communication channels, including but not limited to e-
mails and notices on the QualityNet Web site.
We invite public comment on this proposal to retain our existing
process for granting extraordinary circumstances extensions or waivers,
and to extend this process to the submission of medical record
documentation, for the Hospital OQR Program.

G. Proposed Requirements for Reporting of Hospital OQR Data for CY 2013
and Subsequent Years

To participate in the Hospital OQR Program, hospitals must meet
administrative, data collection and submission, and data validation
requirements (if applicable). Hospitals that do not meet Hospital OQR
Program requirements, 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 to their OPD fee schedule increase factor for the
applicable payment year. We established the payment determination
requirements for the CY 2012 payment update in the CY 2011 OPPS/ASC
final rule with comment period (75 FR 72099 through 72106).
With respect to the payment determinations for CY 2013 and
subsequent years, we are proposing to implement the requirements listed
below. Most of these requirements are the same as the requirements we
implemented for the CY 2012 payment determination, with some proposed
modifications.
1. Administrative Requirements for CY 2013 and Subsequent Years
To participate in the Hospital OQR Program, we are proposing that
several administrative steps be completed. These steps are the same as
those we finalized for the CY 2012 payment determination and would
require the hospital to:
Identify a QualityNet security 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 would be
identified on the QualityNet Web site. The same person may be the
QualityNet security administrator for both the

[[Page 42329]]

Hospital IQR Program and the Hospital OQR Program. Based on our
experience, we believe that the QualityNet security administrator
typically fulfills a variety of tasks related to the hospital's ability
to participate in the Hospital OQR Program, 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 Hospital OQR
Program. However, the main purpose of the QualityNet Administrator is
to serve as a contact for security purposes. Because of CMS information
systems security requirements, the hospital would be required to
maintain a current QualityNet security administrator for as long as the
hospital participates in the program. While only a single QualityNet
security administrator would be required for program purposes, we
suggest to hospitals that it may be beneficial to have more than one
QualityNet security administrator for back-up purposes.
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 Hospital OQR Program purposes, hospitals that
share the same CCN would be required to complete a single online
participation form. At this time, the participation form for the
Hospital OQR Program is separate from the participation form required
for the Hospital IQR Program and completing a form for each program is
required. Agreeing to participate includes acknowledging that the data
submitted to the CMS-designated contractor would be submitted to CMS,
shared with one or more other CMS contractors that support the
implementation of the Hospital OQR Program, and be publicly reported.
We are proposing to retain the procedures and update the deadlines
for submitting the participation form which we established in the CY
2011 OPPS/ASC final rule with comment period (75 FR 72100):
Hospitals with Medicare acceptance dates on or after January 1 of
the year prior to the annual payment update affected: For the CY 2013
and subsequent years payment updates, we are proposing that any
hospital that has a Medicare acceptance date on or after January 1 of
the year prior to the annual payment update affected (for example, 2012
would be the year prior to the affected CY 2013 annual payment update),
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 Certification and
Survey Provider Enhanced Reporting (CASPER) 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 would
include 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 Hospital OQR Program participation allows us 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 would
allow newly functioning hospitals sufficient time to get their
operations fully functional before having to collect and submit quality
data.
We are aware that Medicare acceptance dates may be back-dated. In
that event, we would consider a hospital's request to allow additional
time to elect to participate.
Hospitals with Medicare acceptance dates before January 1 of the
year prior to the affected annual payment update: For the CY 2013 and
subsequent years payment update, we are proposing that any hospital
that has a Medicare acceptance date before January 1 of the year prior
to the affected annual payment update (for example, 2012 would be the
year prior to the affected CY 2013 annual payment update) that is not
currently participating in Hospital OQR and wishes to participate in
the Hospital OQR Program must submit a participation form by March 31
of the year prior to the affected annual payment update. We are
proposing a deadline of March 31, because we believe it would give
hospitals sufficient time to decide whether they wish to participate in
the Hospital OQR Program, as well as put into place the necessary staff
and resources to timely report data for first quarter of the year's
services. This requirement would apply to all hospitals whether or not
the hospital billed for payment under the OPPS.
For the CY 2013 and subsequent years payment updates, we are
proposing that any Hospital OQR participating hospital that wants to
withdraw may do so at any time from January 1 to November 1 of the year
prior to the affected annual payment update. A hospital that withdraws
during this time period for any annual payment update would not be able
to later sign up to participate for that payment update, would receive
a 2.0 percentage point reduction to its OPD fee schedule increase
factor for that year, and would be required to submit a new
participation form in order to participate in any future year of the
Hospital OQR Program. We note that once a hospital has submitted a
participation form, it is considered to be an active Hospital OQR
Program participant until such time as the hospital submits a
withdrawal form to CMS or is designated as closed in the CMS CASPER
system.
We invite public comment on these proposed Hospital OQR Program
administrative requirements for the CY 2013 and subsequent years'
payment determinations.
2. Form, Manner, and Timing of Data Submission for CY 2013 and
Subsequent Years
We are proposing that, to be eligible to receive the full OPD fee
schedule increase factor for any payment determination, hospitals must
comply with our submission requirements for chart-abstracted data,
population and sampling data, claims-based measure data, and structural
quality measure data, including all-patient volume data.
a. Proposed CY 2013 and CY 2014 Data Submission Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS
With respect to the proposed chart-abstracted measures for which
hospitals would submit data directly to CMS, we are proposing for CY
2013 and CY 2014 that participating hospitals submit chart-abstracted
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 2013 program, we are proposing that the applicable quarters would be
as follows: 3rd quarter CY 2011, 4th quarter CY 2011, 1st quarter CY
2012, and 2nd quarter CY 2012. Hospitals that did not participate in
the CY 2012 Hospital OQR Program, but would like to participate in the
CY 2013 Hospital OQR Program, and that have a Medicare acceptance date
on the CASPER system before January 1, 2012, would begin data
submission with respect to 1st quarter CY 2012 encounters using the

[[Page 42330]]

CY 2013 measure set that was finalized in the CY 2012 OPPS/ASC final
rule with comment period. For those hospitals with Medicare acceptance
dates on or after January 1, 2012, data submission must begin with the
first full quarter following the submission of a completed online
participation form.
For the CY 2014 program, we are proposing that the applicable
quarters for previously finalized measures would be as follows: 3rd
quarter CY 2012, 4th quarter CY 2012, 1st quarter CY 2013, and 2nd
quarter CY 2013. With respect to our proposed measures (5 Diabetes
measures and 1 Cardiac Rehabilitation measure), the applicable quarters
would be 1st quarter CY 2013 and 2nd quarter CY 2013. Hospitals that
did not participate in the CY 2013 Hospital OQR Program, but would like
to participate in the CY 2014 Hospital OQR Program, and that have a
Medicare acceptance date on the CASPER system before January 1, 2013,
would begin data submission with respect to 1st quarter CY 2013
encounters using the CY 2014 measure set that was finalized in the CY
2013 OPPS/ASC final rule with comment period. For those hospitals with
Medicare acceptance dates on or after January 1, 2013, data submission
must begin with the first full quarter following the submission of a
completed online participation form.
We are proposing that hospitals must submit all required data
according to the data submission schedule that is made available on the
QualityNet Web site (https://www.QualityNet.org). This Web site meets
or exceeds all current HIPAA requirements. Submission deadlines would
be, in general, approximately 4 months after the last day of each
calendar quarter. Thus, for example, the proposed submission deadline
for data for services furnished during the first quarter of CY 2012
(January-March, 2012) would be on or around August 1, 2012. The actual
submission deadlines would be posted on the http://www.QualityNet.org
Web site.
We are proposing that hospitals submit chart-abstracted 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.
We are proposing that hospitals must collect Hospital OQR data from
outpatient hospital encounters to which the required measures apply. In
previous rulemakings, we have utilized various terms for describing the
unit of care for outpatient hospital reporting, including encounter,
episode, episode of care, and discharge. We note that for outpatient
hospital services, the term encounter is explicitly used and defined in
the Medicare Benefit Policy Manual (Pub. 100-02), Chapter 6, Section
20.3, which states ``A hospital outpatient `encounter' is a direct
personal contact between a patient and a physician, or other person who
is authorized by State licensure law and, if applicable, by hospital or
CAH staff bylaws, to order or furnish hospital services for diagnosis
or treatment of the patient.'' For Medicare outpatient services, the
terms episode and episode of care also are used. When discussing
inpatient services, the Medicare Benefit Policy Manual specifically
refers to discharges; the term encounter is not used in reference to
inpatient services. Thus, for Hospital OQR, we are examining
encounters, episodes, or episodes of care and would use these terms in
connection with the Hospital OQR Program.
We will make every effort 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'').
We are proposing that hospitals must submit quality data using the
CCN under which the care was furnished.
To be accepted into the OPPS Clinical Warehouse and to meet data
submission requirements, 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 would be determined based on whether the data satisfy the
sampling criteria that are published and maintained in the Hospital OQR
Specifications Manual, and must correspond to both the aggregate number
of encounters submitted by a hospital and the number of Medicare claims
the hospital submits for payment; requirements for utilizing the option
of sampling are discussed below.
We strongly recommend that hospitals review OPPS Clinical Warehouse
feedback reports and the Hospital OQR Provider Participation Reports
that are accessible through their QualityNet accounts. These reports
enable hospitals to verify whether the data they or their vendors
submitted were 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 Hospital OQR requirements are met.
b. Eligibility To Voluntarily Sample and Proposed Data Submission
Exception for Low Patient Volume for CY 2013 and Subsequent Years
If a hospital has a sufficiently large number of eligible
encounters with respect to a measure, the hospital has the option to
sample those encounters and submit data only for these sampled
encounters, rather than submitting data on all of the eligible
encounters. This sampling scheme, which includes the minimum number of
encounters that a hospital must have in order to sample, is set out in
the Hospital OQR Specifications Manual at least 3 months in advance of
each data submission deadline. We note that sampling is not required
and hospitals may submit more cases than the minimum set by our
sampling scheme and may submit up to all of their cases if they desire
to do so. We changed the notification timeframe for this sampling
scheme to at least 3 months from at least 4 months to be consistent
with the Hospital OQR Specifications Manual release schedule. If a
hospital chooses to sample for a particular quarter, the hospital must
meet the sampling requirements for the required chart-abstracted
measures that quarter.
In addition, to reduce the burden on hospitals that treat a low
number of patients but otherwise meet the submission requirements for a
particular quality measure, we are proposing to continue our policy
that hospitals that have five or fewer encounters (both Medicare and
non-Medicare) for any measure included in a measure topic in a quarter
would not be required to submit patient level data for the entire
measure topic for that quarter. Even if hospitals would not be required
to submit patient level data because they have five or fewer encounters
(both Medicare and non-Medicare) for any measure included in a measure
topic in a quarter, we note that they may voluntarily do so.
c. Proposed Population and Sampling Data Requirements Beginning With
the CY 2013 Payment Determination and for Subsequent Years
During the past three years of the Hospital OQR Program, the
submission of population and sampling data was not required, though
hospitals could submit, on a voluntary basis, the aggregate numbers of
outpatient encounters which are eligible for submission under the
Hospital OQR Program and sample size counts. These aggregated numbers
of outpatient

[[Page 42331]]

encounters represent the number of outpatient encounters in the
universe of all possible cases eligible for data reporting under the
Hospital OQR Program. For the CY 2012 payment update, we proposed, but
did not adopt, a policy to require submission of this population and
sample size data.
We are now proposing that beginning with the CY 2013 payment
determination, hospitals must submit on a quarterly basis, aggregate
population and sample size counts for Medicare and non-Medicare
encounters for the measure populations for which chart-abstracted data
must be submitted.
Under this proposal, a hospital would submit on a quarterly basis
an aggregate population and sample size count with respect to each
measure regardless of whether any patients met the inclusion criteria
for the measure population. For example, if a hospital did not treat
any patients who met the inclusion criteria for a specific measure, the
hospital would still be required to submit a zero for its quarterly
aggregate population and sample count to meet the requirement.
Our analysis of third quarter CY 2010 outpatient hospital submitted
data shows that for hospitals that submitted abstracted data for
encounters, at least 99 percent of these providers voluntarily reported
both population and sampling data. Data completeness was also assessed
by comparing reported Medicare cases to submitted claim counts, minimum
encounter count thresholds based on reported population sizes, and
minimum sample size thresholds based on reported population sizes. We
found that less than 10 percent of hospitals differed significantly in
their Medicare self-reported encounters versus Medicare claim counts in
the Clinical Warehouse, and less than 20 percent did not meet case
count or sample size minimum thresholds. Based upon this analysis, we
believe that hospitals have had sufficient time to become familiar with
Hospital OQR data reporting and have developed data systems necessary
to support this proposed requirement; in fact recent data suggest that
the vast majority of hospitals have done so.
We are proposing that the deadlines for the reporting of aggregate
numbers of outpatient hospital encounters and sample size counts would
be the same as those for reporting data for chart-abstracted measures,
and these deadlines would be posted on the data submission schedule
that would be available on the QualityNet Web site. Hospitals would be
permitted to submit this information prior to the deadline; this would
allow us to advise hospitals regarding their incomplete submission
status as appropriate and give hospitals sufficient time to make
appropriate revisions before the data submission deadline.
We plan to use the aggregate population and sample size data to
assess data submission completeness to the OPPS Clinical Warehouse and
adherence to sampling requirements for Medicare and non-Medicare
patients.
d. Proposed Claims-Based Measure Data Requirements for the CY 2013 and
CY 2014 Payment Determinations
For the claims-based measures, we are proposing to calculate the
measures using the hospital's Medicare claims data as specified in the
Hospital OQR Specifications Manual; no additional data submission is
required for hospitals. For the CY 2013 and CY 2014 payment updates, we
would utilize paid Medicare FFS claims for services furnished from
January 1, 2010 to December 31, 2010 and January 1, 2011 to December
31, 2011, respectively.
e. Proposed Structural Measure Data Requirements for the CY 2013 and CY
2014 Payment Determinations
For the CY 2013 payment determination, we are proposing that
hospitals would be required to submit data on the structural measures,
including OP-17: Tracking Clinical Results between Visits, between July
1, 2012 and August 15, 2012 with respect to the time period of January
1, 2011 to December 31, 2011.
As discussed above, we are proposing to adopt two new structural
measures for the CY 2014 payment determination, OP-31: Safe Surgery
Checklist Use, and OP-32: Hospital Outpatient Department Volume for
Selected Outpatient Surgical Procedures. We are proposing that for the
CY 2014 payment determination, hospitals would be required to submit
data on all structural measures between July 1, 2013 and August 15,
2013 with respect to the time period from January 1, 2012 to December
31, 2012.
f. Proposed Data Submission Deadlines for the Proposed NHSN HAI
Surgical Site Infection Measure for the CY 2014 Payment Determination
As discussed above, we are proposing to adopt a new HAI measure for
the CY 2014 payment determination: surgical site infection. We are
proposing to use the data submission and reporting standard procedures
that have been set forth by CDC for NHSN participation in general and
for submission of this measure to NHSN. We refer readers to the CDC's
NHSN Web site (http://www.cdc.gov/nhsn) for detailed data submission
and reporting procedures. We believe that these procedures are feasible
because they are already widely used by over 4,000 hospitals reporting
HAI data to the NHSN. Our proposal seeks to reduce hospital burden by
aligning CMS data submission and reporting procedures with NHSN
procedures currently used by hospitals, including hospitals complying
with 28 State HAI reporting requirements. The submission timeframes for
the CY 2014 payment determination that we are proposing to use for the
proposed HAI measure are shown below. Hospitals would be required to
submit their quarterly data to the NHSN for Hospital OQR purposes
according to the schedule shown in the table below (any updates to this
schedule made by CMS will be posted on the QualityNet Web site).

Proposed Submission Timeframe for the Proposed Surgical Site Infection Measure for the CY 2014 Payment
Determination
----------------------------------------------------------------------------------------------------------------
Final submission deadline for
CY 2013 Infection events CDC-NHSN collection and hospital OQR program CY 2014 payment
quarterly report determination
----------------------------------------------------------------------------------------------------------------
Q1 (Jan 1 to Mar 31, 2013).............. January 31st to August 1st..... August 1, 2013.
Q2 (Apr 1 to Jun 30, 2013).............. April 30th to November 1st..... November 1, 2013.
----------------------------------------------------------------------------------------------------------------

Hospitals would have until the Hospital OQR final submission
deadline to submit their quarterly data to NHSN. After the final
Hospital OQR Program submission deadline has occurred for each CY 2013
quarter to be used toward

[[Page 42332]]

the CY 2014 payment determination, we will obtain the hospital-specific
calculations generated by the NHSN for the Hospital OQR Program.
g. Proposed Data Submission Requirements for OP-22, ED-Patient Left
Without Being Seen, for the CY 2013 and CY 2014 Payment Determinations
With respect to OP-22: ED-Patient Left Without Being Seen, we are
proposing that hospitals would be required to submit data once for each
of the CY 2013 and CY 2014 payment determinations via a Web-based tool
located on the QualityNet Web site. For the CY 2013 payment
determination, hospitals would be required to submit data between July
1, 2012 and August 15, 2012 with respect to the time period from
January 1, 2011 to December 31, 2011. For the CY 2014 payment
determination, hospitals would be required to submit data between July
1, 2013 and August 15, 2013 with respect to the time period of January
1, 2012 to December 31, 2012.
We invite public comment on these proposals for data collection and
submission requirements.
3. Hospital OQR Program Validation Requirements for Chart-Abstracted
Measure Data Submitted Directly to CMS: Proposed Data Validation
Approach for the CY 2013 Payment Determination
a. Randomly Selected Hospitals
Similar to our approach for the CY 2012 payment determination(75 FR
72103 through 72106), we are proposing to validate chart-abstracted
data submitted directly to CMS from randomly selected hospitals for the
CY 2013 payment determination. To reduce hospital burden and to
facilitate our efforts to reallocate resources in the event that we
finalize the targeting proposal discussed below, for the CY 2013
payment determination, we are proposing to reduce the number of
randomly selected hospitals from 800 to 450. We have found that
hospitals are consistently reporting high accuracy rates for chart-
abstracted measures and that variation among hospitals is relatively
low. We believe that this low level of variation between hospitals will
allow us to reduce the sample size while not diminishing our ability to
make statistical inferences from the sample. Thus, we believe that we
can safely reduce sample size and still have sufficient case numbers
for purposes of validation. Because these 450 hospitals will be
selected randomly, every Hospital OQR Program participating hospital
will be eligible each year for validation selection. To be eligible for
random selection for validation, a hospital must be coded as open in
the OSCAR system at the time of selection and must have submitted at
least 10 encounters to the OPPS Clinical Warehouse during the data
collection period for the CY 2013 payment determination. We are
proposing this 10 encounter minimum so that we have a sufficient sample
size for calculating a statistically valid validation score.
b. Proposed Use of Targeting Criteria for Data Validation Selection for
CY 2013
(1) Background
In the CY 2011 OPPS/ASC proposed rule (75 FR 46381), we stated that
we were considering building upon what we proposed as a validation
approach for the Hospital OQR Program. We noted that we were
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 these hospitals have reported
raises a concern regarding data accuracy. Because hospitals had gained
little experience with validation under the Hospital OQR at that time,
we noted that we were considering this approach for possible use
beginning with the CY 2013 payment determination. Examples of targeting
criteria suggested for inclusion:
Abnormal data patterns identified such as consistently
high Hospital OQR measure denominator exclusion rates resulting in
unexpectedly low denominator counts;
Whether a hospital had previously failed validation;
Whether a hospital had not been previously selected for
validation for 2 or more consecutive years;
Whether a hospital had low submitted case numbers relative
to population sizes; or
Whether a hospital had any extreme outlier values for
submitted data elements.
We invited comment on whether, in addition to random sampling for
validation, we should use targeted validation and, if so, what criteria
for targeting we should adopt.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
72106) we responded to the comments we received and noted that for the
CY 2013 payment determination, Hospital OQR Program data reporting will
have been completed for four payment determinations: CYs 2009, 2010,
2011, and 2012. Further, hospitals will have had the opportunity to
learn from the validation process. We also stated that we intended to
propose to implement validation targeting criteria for CY 2013 and
subsequent years in the CY 2012 OPPS/ASC proposed rule.
(2) Proposed Targeting Criteria for Data Validation Selection for CY
2013
In addition to proposing to randomly select 450 hospitals for
validation, we are proposing to select up to an additional 50 hospitals
based upon targeting criteria. A hospital could be selected for
validation based on targeting criteria if it:
Fails the validation requirement that applies to the CY
2012 payment determination; or
Has an outlier value for a measure based on the data it
submits. We are proposing to define an ``outlier value'' for purposes
of this targeting as a measure value that appears to deviate markedly
from the measure values for other hospitals. For a normally distributed
variable, nearly all values of the variable lie within 3 standard
deviations of the mean; very few values lie past the 3 standard
deviation mark. One definition of an outlier is a value that exceeds
this threshold.\40\ In order to target very extreme values, we are
proposing to target hospitals that greatly exceed this threshold; such
extreme values strongly suggest that data submitted is inaccurate.
Specifically, we are proposing to select hospitals for validation if
their measure value for a measure is greater than 5 standard deviations
from the mean, placing the expected occurrence of such a value outside
of this range at 1 in 1,744,278. If more than 50 hospitals meet either
of the above targeting criteria, then up to 50 would be selected
randomly from this pool of hospitals.
---------------------------------------------------------------------------

\40\ Ruan, Da, Chen, Guoguing, Kerre, Etienne E., and Wets,
Geert, (2010), Intelligent Data Mining: Techniques and Applications,
Studies in Computational Intelligence, Vol. 5, Page 318.
---------------------------------------------------------------------------

c. Encounter Selection
For each selected hospital (random or targeted), we are proposing
to validate up to 48 randomly selected patient encounters (12 per
quarter; 48 per year) from the total number of encounters that the
hospital successfully submitted to the OPPS Clinical Warehouse. If a
selected hospital has submitted less than 12 encounters in one or more
quarters, only those encounters available would be validated. For each
selected encounter, a designated CMS contractor would request that the
hospital submit the supporting medical record documentation that
corresponds to the encounter.

[[Page 42333]]

We continue to believe that validating a larger number of
encounters per hospital for fewer hospitals at the measure level has
several benefits. We believe that this approach is suitable for the
Hospital OQR Program 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 measured hospital as well as at a national level; and
reduce overall burden, for example in submitting validation
documentation, because hospitals most likely will not be selected to
undergo validation each year, and a smaller number hospitals per year
will be selected.
For all selected hospitals, we will not be selecting cases
stratified by measure or topic; our interest is whether the data
submitted by hospitals accurately reflects 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 are proposing
to validate data for April 1, 2011 to March 31, 2012 encounters as this
provides a full year of the most recent data possible to use for
purposes of completing the validation in time to make the CY 2013
payment determinations.
d. Validation Score Calculation
For the CY 2013 payment determination, we are proposing to use the
validation calculation approach finalized for the CY 2012 payment
determination with validation being done for each selected hospital.
Specifically, we are proposing to conduct a measures level validation
by calculating each measure within a submitted record using the
independently abstracted data and then comparing this to the measure
reported by the hospital; a percent agreement would then be calculated.
We would also compare the measure category for quality measures with
continuous units of measurement, such as time, so that for these
measures, both the category and the measure would need to match.
To receive the full OPPS OPD fee schedule increase factor for CY
2013, we are proposing that hospitals must attain at least a 75 percent
reliability score, based upon the proposed validation process. We are
proposing to use the upper bound of a two-tailed 95 percent confidence
interval to estimate the validation score. If the calculated upper
limit is above the required 75 percent reliability threshold, we would
consider a hospital's data to be ``validated'' for payment purposes.
Because we are more interested in whether the measure has been
accurately reported, we would continue to focus on whether the measure
data reported by the hospital matches the data documented in the
medical record as determined by our reabstraction. We are proposing to
calculate the validation score using the same methodology we finalized
for the CY 2012 payment determination (75 FR 72105). We also are
proposing to utilize the same medical record documentation submission
procedures that we also finalized for the CY 2012 payment determination
(75 FR 72104) with one modification; we are proposing to shorten the
time period given to hospitals to submit medical record documentation
to the CMS contractor from 45 calendar days to 30 calendar days. This
proposed change in submission timeframe will align the process with
requirements in 42 CFR 476.78(b)(2), which allow 30 days for chart
submission in the context of QIO review. We are proposing this deadline
of 30 days also to reduce the time for data validation completion to
increase timeliness of providing hospitals with feedback on their
abstraction accuracy.
4. Additional Data Validation Conditions Under Consideration for CY
2014 and Subsequent Years
We continue to consider building upon our validation approach of
targeting hospitals to address data quality concerns and to ensure that
our payment decisions are made using accurate data. Thus, we are
requesting public comment on the following additional targeting
criteria to select hospitals for validation:
Whether a hospital that was open under its current CCN and
had not been selected for validation in the previous 3 years. This is
consistent with validation targeting criteria we recently proposed to
implement for the CY 2015 Hospital IQR Program (76 FR 25920 through
25921).
Whether a hospital had submitted a low number of
encounters relative to population sizes; or
Whether a hospital reported significant numbers of
``Unable to Determine'' data elements.
We welcome public comment on these proposals, and are specifically
interested in receiving public comments on definitions of what low
numbers relative to population sizes and what would constitute
significant numbers of ``Unable to Determine'' data elements.

H. Proposed Hospital OQR Reconsideration and Appeals Procedures for CY
2013 and Subsequent Years

When the Hospital IQR 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 Hospital OQR Program and, therefore, in the
CY 2008 OPPS/ASC final rule with comment period (72 FR 66875), we
stated our intent to implement for the Hospital OQR Program a
reconsideration process modeled after the reconsideration process we
implemented for the Hospital IQR Program. In the CY 2009 OPPS/ASC final
rule with comment period (73 FR 68779), we adopted a reconsideration
process that applied to the CY 2010 payment decisions. In the CY 2010
OPPS/ASC final rule with comment period (74 FR 60654 through 60655), we
continued this process for the CY 2011 payment update. In the CY 2011
OPPS/ASC final rule with comment period (75 FR 72106 through 72108), we
continued this process for the CY 2012 payment update with some
modification.
We are proposing to continue this process for the CY 2013 payment
determination and subsequent years. Under this proposed process, a
hospital seeking reconsideration must--
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 of the affected payment year (for
example, for the CY 2013 payment determination, the request must be
submitted by February 3, 2013) and must contain the following
information:
oo Hospital CCN.
oo Hospital Name.
oo CMS-identified reason for not meeting the requirements of the
affected payment year's Hospital OQR Program as provided in any CMS
notification to the hospital.
oo Hospital basis for requesting reconsideration. This must
identify the hospital's specific reason(s) for believing it met the
affected year's Hospital OQR Program requirements and should receive
the full OPD fee schedule increase factor.
oo CEO and any additional designated hospital personnel contact
information, including name, e-mail address, telephone number, and
mailing address

[[Page 42334]]

(must include physical address, not just a post office box).
oo A copy of all materials that the hospital submitted to comply
with the requirements of the affected year's Hospital OQR Program. Such
material might include, but may not be limited to, the applicable
Notice of Participation form or completed online registration form, and
measure data that the hospital submitted via QualityNet.
Paper copies of all the medical record documentation that
it submitted for the initial validation (if applicable). We are
proposing that hospitals would submit this documentation to a
designated CMS contractor which would have authority to review patient
level information. We would post the address where hospitals are to
send this documentation on the QualityNet Web site.
To the extent that the hospital is requesting
reconsideration on the basis that CMS has determined it did not meet an
affected year's validation requirement, the hospital must provide a
written justification for each appealed data element classified during
the validation process as a mismatch. Only data elements that affect a
hospital's validation score would be eligible to be reconsidered. We
would review the data elements that were labeled as mismatched as well
as the written justifications provided by the hospital, and make a
decision on the reconsideration request.
We note that, consistent with our policy for CY 2012
reconsiderations, reconsideration request forms would not need to be
signed by the hospital's CEO.
Following receipt of a request for reconsideration, CMS would--
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.
We intend to complete any reconsideration reviews and communicate
the results of these determinations within 90 days following the
deadline for submitting requests for reconsideration.
We also propose to apply the same policies that we finalized for
the CY 2012 payment determination regarding the scope of our review
when a hospital requests reconsideration because it failed our
validation requirement. These policies are as follows:
If a hospital requests reconsideration on the basis that
it disagrees with a determination that one or more data elements were
classified as mismatches, we would only consider the hospital's request
if the hospital timely submitted all requested medical record
documentation to the CMS contractor each quarter under the validation
process.
If a hospital requests reconsideration on the basis that
it disagrees with a determination that one or more medical records it
submitted during the quarterly validation process was classified as an
invalid record selection (that is, the CMS contractor determined that
one or more medical records submitted by the hospital did not match
what was requested, thus resulting in a zero validation score for the
encounter(s)), our review would initially be limited to determining
whether the medical documentation submitted in response to the
designated CMS contractor's request was the correct documentation. If
we determine that the hospital did submit the correct medical
documentation, we would abstract the data elements and compute a new
validation score for the encounter. If we conclude that the hospital
did not submit the correct medical record documentation, we would not
further consider the hospital's request.
If a hospital requests reconsideration on the basis that
it disagrees with a determination that it did not submit the requested
medical record documentation to the CMS contractor within the proposed
30 calendar day timeframe, our review would initially be limited to
determining whether the CMS contractor received the requested medical
record documentation within 30 calendar days, and whether the hospital
received the initial medical record request and reminder notice. If we
determine that the CMS contractor timely received paper copies of the
requested medical record documentation, we would abstract data elements
from the medical record documentation submitted by the hospital and
compute a validation score for the hospital. If we determine that the
hospital received two letters requesting medical documentation but did
not submit the requested documentation within the 30 calendar day
period, we would not further consider the hospital's request.
If a hospital is dissatisfied with the result of a Hospital OQR
reconsideration decision, the hospital would be able to file an appeal
under 42 CFR Part 405, Subpart R (PRRB appeal).
We invite public comment on our proposed CY 2013 Hospital OQR
Program reconsideration and appeals procedures.

I. Electronic Health Records (EHRs)

Starting with the FY 2006 IPPS final rule, we have encouraged
hospitals to take steps toward the adoption of EHRs (also referred to
in previous rulemaking documents as electronic medical records) that
will allow for reporting of clinical quality data from EHRs to a CMS
data repository (70 FR 47420 through 47421). We sought to prepare for
future EHR submission of quality measures by sponsoring the creation of
electronic specifications for quality measures under consideration for
the Hospital IQR Program. Through the EHR Incentive Programs we expect
that the submission of quality data through EHRs will provide a
foundation for establishing the capacity of hospitals to send, and for
CMS, in the future, to receive, quality measures via hospital EHRs for
Hospital IQR Program measures. We expect the Hospital IQR and Hospital
OQR Programs to transition to the use of certified EHR technology, for
measures that otherwise require information from the clinical record.
This would allow us to collect data for measures without the need for
manual chart abstraction. In the FY 2012 IPPS/LTCH PPS proposed rule
(75 FR 25894), we identified FY 2015 as a potential transition date to
move to EHR-based submission and phase out manual chart abstraction. We
also anticipate such a transition for hospital outpatient measures,
although likely somewhat after the transition for hospital inpatient
measures. This is a result of the fact that the clinical quality
measures in the EHR Incentive Program currently are primarily aligned
with the Hospital IQR Program, rather than the Hospital OQR Program.
Our goals are to align the hospital quality reporting programs, to seek
to avoid redundant and duplicative reporting of quality measures for
hospitals, and to rely largely on EHR submission for measures based on
clinical record data.

J. 2012 Medicare EHR Incentive Program Electronic Reporting Pilot for
Eligible Hospitals and CAHs

1. Background
Under section 4102(a) of the American Recovery and Reinvestment Act
of 2009 (ARRA) (Pub. L. 111-5), eligible hospitals and CAHs may qualify
for incentive payments if they successfully demonstrate meaningful

[[Page 42335]]

use of certified EHR technology. The final rule for the Medicare EHR
Incentive Program (75 FR 44314) established the Stage 1 criteria for
meaningful use, which include, among other requirements, that eligible
hospitals and CAHs report clinical quality measures (CQMs) to CMS, in
addition to meeting other objectives and measures described in the
final rule. The final rule also requires that for the 2012 payment year
and subsequent years, an eligible hospital or CAH using certified EHR
technology must submit information on the specified clinical quality
measures electronically. However, for the 2011 payment year, eligible
hospitals and CAHs are required to submit CQM results as calculated by
certified EHR technology through attestation, rather than submit the
information electronically. In the final rule (75 FR 44380), we also
stated that we anticipated that we would have completed the necessary
steps to have the capacity to receive information on CQMs
electronically for the 2012 payment year. However, we also acknowledged
that if we do not have the capacity to accept electronic reporting of
CQMs in 2012, consistent with sections 1848(o)(2)(B)(ii) and
1886(n)(3)(B)(ii) of the Act, we would continue to rely on attestation
for reporting CQMs as a requirement for demonstrating meaningful use of
certified EHR technology for the 2012 payment year.
We also stated in the final rule that, with respect to electronic
submission of information on clinical quality measures, certified EHR
technology will be required to transmit calculated clinical quality
measure results under the PQRI 2009 Registry XML specification. We
noted that this was the only such standard that the certified EHR
technology would be able to support based on the standards that have
been adopted for certified EHR technology (75 FR 44435; see also 45 CFR
170.205(f)).
Since the publication of the final rule, we have determined that it
is not feasible to receive electronically the information necessary for
clinical quality measure reporting based solely on the use of PQRI 2009
Registry XML Specification content exchange standard as is required for
certified EHR technology. This is because the specification is tailored
to the elements required for 2009 PQRI Registry XML submission, rather
than constituting a more generic standard. As a result, we are
proposing to modify the requirement that clinical quality measure
reporting must be done electronically. Specifically, we are proposing
that for the 2012 payment year and subsequent years, eligible hospitals
and CAHs may continue to report clinical quality measure results as
calculated by certified EHR technology by attestation, as for the 2011
payment year. Alternatively, for the 2012 payment year, eligible
hospitals and CAHs would be able to participate in the proposed FY 2012
Medicare EHR Incentive Program Electronic Reporting Pilot for Eligible
Hospitals and CAHs (Electronic Reporting Pilot) which is further
described below. We are proposing to revise our regulations at Sec.
495.8(b)(2)(ii) and proposing to add Sec. 495.8(b)(2)(vi) that would
reflect these proposals for reporting CQMs through attestation and the
Electronic Reporting Pilot.
2. Proposed Electronic Reporting Pilot
Section 1886(n)(3)(B)(ii) of the Act provides authority for the
Secretary to accept information on CQMs electronically on a pilot
basis. For payment year 2012, we are proposing that eligible hospitals
and CAHs participating in the Medicare EHR Incentive Program may meet
the CQM reporting requirement of the EHR Incentive Program for payment
year 2012 by participating in the proposed Electronic Reporting Pilot.
We are proposing that participation in this Electronic Reporting Pilot
would be voluntary and that eligible hospitals and CAHs may continue to
attest to the results of CQMs calculated by certified EHR technology as
they did for the 2011 payment year.
We would encourage participation in the proposed Electronic
Reporting Pilot in view of our desire to adequately pilot electronic
submission of CQMs and to move to a system of reporting where eligible
hospitals and CAHs can qualify for CQM reporting for both the Hospital
IQR and Hospital OQR Programs, and the EHR Incentive Program. We
strongly encourage eligible hospitals and CAHs to participate in the
proposed Electronic Reporting Pilot as it provides opportunities to
test the interoperability and functionality of the certified EHR
technology that they have implemented. We believe that the
participation of eligible hospitals and CAHs in the proposed Electronic
Reporting Pilot would help advance EHR-based reporting in the Hospital
IQR and Hospital OQR Programs.
Eligible hospitals and CAHs would need to be registered in order to
participate in the proposed Electronic Reporting Pilot. Eligible
hospitals and CAHs wishing to participate in the proposed Electronic
Reporting Pilot for the CQMs would register by indicating their desire
and intent to participate in the proposed Electronic Reporting Pilot as
part of the attestation process for the Medicare EHR Incentive Program.
We are proposing that eligible hospitals and CAHs that participate in
the proposed Electronic Reporting Pilot and meet its submission
requirements would satisfy the requirements for reporting clinical
quality measures under the Medicare EHR Incentive Program. Such
eligible hospitals and CAHs would therefore not need to attest to the
results of clinical quality measures calculated by certified EHR
technology. As described below, for the purpose of the proposed
Electronic Reporting Pilot, CMS would calculate the results of the
clinical quality measures for eligible hospitals and CAHs based on
patient level data submitted for Medicare patients. The proposed
Electronic Reporting Pilot would require eligible hospitals and CAHs to
submit information on the same 15 CQMs that were listed in Table 10 of
the final rule (75 FR 44418 through 44420) for the Medicare and
Medicaid EHR Incentive Programs and such information would be obtained
from the certified EHR technology used by the eligible hospital or CAH.
We are proposing that electronic submission of the 15 CQMs through
this proposed Electronic Reporting Pilot would be sufficient to meet
the core objective for reporting CQMs for the Medicare EHR Incentive
Program for the 2012 payment year. Since the reporting of CQMs is only
one of the 14 core meaningful use objectives for eligible hospitals and
CAHs for the Medicare EHR Incentive Program, an eligible hospital or
CAH that chooses to participate in the proposed Electronic Reporting
Pilot would still be required to meet and attest to the other core and
menu set objectives and their associated measures using the attestation
module for the program on the CMS Web site.
After the eligible hospital or CAH had attested and CMS has
received electronic submission of the CQMs from an eligible hospital or
CAH participating in the proposed Electronic Reporting Pilot, CMS would
determine whether the eligible hospital or CAH has successfully met all
the requirements for the Medicare EHR Incentive Program. We expect this
determination would be made within 2 months after the end of the
payment year and not later than November 30, 2013. Eligible hospitals
and CAHs who do not meet the reporting requirements through the
Electronic Reporting Pilot may meet such requirement through
attestation. We are proposing that eligible hospitals and CAHs,
alternatively, may attest, but still participate in the proposed
Electronic Reporting Pilot.

[[Page 42336]]

3. CQM Reporting Under the Proposed Electronic Reporting Pilot
Under Sec. 495.6(f)(9), we require Medicare eligible hospitals and
CAHs (which would include those participating in the proposed
Electronic Reporting Pilot) to successfully report hospital clinical
quality measures to CMS in the manner specified by CMS. We are
proposing that eligible hospitals and CAHs participating in the
proposed Electronic Reporting Pilot must submit CQM data on all 15 CQMs
listed in Table 10 of the final rule (75 FR 44418 through 44420) to
CMS, via a secure portal based on data obtained from the eligible
hospital or CAH's certified EHR technology.
In the final rule for the Medicare and Medicaid EHR Incentive
Programs, we stated that we will require eligible hospitals and CAHs to
report aggregate-level CQM data (75 FR 44432). However, we note that
for the purpose of the proposed Electronic Reporting Pilot, we are
proposing that eligible hospitals and CAHs participating in the
proposed Electronic Reporting Pilot would submit patient-level CQM data
for Medicare patients only. Aside from requiring attestation to other
objectives/measures based on data for all patients, specifically, we
are proposing that eligible hospitals and CAHs participating in the
proposed Electronic Reporting Pilot would: (1) Submit CQM data on
Medicare patients only; (2) submit Medicare patient-level data from
which CMS may calculate CQM results using a uniform calculation
process, rather than aggregate results calculated by the eligible
hospital or CAH's certified EHR technology; (3) submit one full Federal
fiscal year of CQM data, regardless of the eligible hospital or CAH's
year of participation in the Medicare and Medicaid EHR Incentive
Programs; and (4) use electronic specifications for transmission as
specified by CMS which we expect would be Level 1 QRDA.
As noted previously, for the proposed Electronic Reporting Pilot,
CQM data on which the eligible hospital or CAH's submission is based
must be obtained from certified EHR technology. However, the
functionality of reporting these CQMs to CMS will not rely on the
certification process. Eligible hospitals and CAHs participating in the
proposed Electronic Reporting Pilot would report CQMs based on a pilot
measurement period of one full Federal fiscal year (October 1, 2011
through September 30, 2012), regardless of whether the eligible
hospital or CAH is in its first year of participation in the Medicare
and Medicaid EHR Incentive Programs. The period for submitting
information on CQMs under the proposed Electronic Reporting Pilot would
be October 1, 2012 through November 30, 2012, which is the 60 days
following the close of the measurement period. The CQM reporting format
would be as specified by CMS, which we expect would be Quality Data
Reporting Architecture (QRDA) Level 1. We would offer a test period
beginning July 1, 2012, which would allow eligible hospitals, CAHs, or
their designee to submit CQM reports to CMS with the requirements that
would be used in the proposed Electronic Reporting Pilot. The test
period would remain open. Additional details including educational
materials about participation in the proposed Electronic Reporting
Pilot would be provided on the QualityNet Web site at http://
www.qualitynet.org.
We invite public comment on the proposed Electronic Reporting Pilot
discussed above.

K. Proposed ASC Quality Reporting Program

1. Background
Section 109(b) of the MIEA TRHCA amended section 1833(i) of the Act
by re-designating clause (iv) as clause (v) and adding new clause (iv)
to paragraph (2)(D) and by adding new paragraph (7). Section
1833(i)(2)(D)(iv) of the Act authorizes, but does not require, the
Secretary to implement the revised ASC payment system ``in a manner so
as to provide for a reduction in any annual update for failure to
report on quality measures in accordance with paragraph (7).'' Section
1833(i)(7)(A) of the Act states that the Secretary may provide that any
ASC that does not submit quality measures to the Secretary in
accordance with paragraph (7) will incur a 2.0 percentage point
reduction to any annual increase provided under the revised ASC payment
system for such year. It also specifies that a reduction for one year
cannot be taken into account in computing any annual increase factor
for a subsequent 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 subparagraphs (B) through (E) of section 1833(t)(17) of
the Act shall apply to ASCs in a similar manner to the manner in which
they apply under these paragraphs to hospitals under the Hospital OQR
Program and any reference to a hospital, outpatient setting, or
outpatient hospital services is deemed a reference to an ASC, the
setting of an ASC, or services of an ASC, respectively. 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. 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 Hospital IQR Program.
Section 1833(t)(17)(D) of the Act gives the Secretary the authority to
replace measures or indicators as appropriate, such as where all
hospitals are effectively in compliance or 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 Hospital OQR
Program available to the public. Such procedures include providing
hospitals with the opportunity to review their data before these data
are released to the public. For a more detailed discussion of the
provisions in Sec. 1833(t)(17) of the Act, please see section
XIV.A.3.b. of this proposed rule.
In the CY 2008 OPPS/ASC final rule with comment period (72 FR
66875), the CY 2009 OPPS/ASC final rule with comment period (73 FR
68780), the CY 2010 OPPS/ASC final rule with comment period (74 FR
60656), and the CY 2011 OPPS/ASC final rule with comment period (75 FR
72109), we did not implement a quality data reporting program for ASCs.
We determined that it would be more appropriate to allow ASCs to
acquire some experience with the revised ASC payment system, which was
implemented for CY 2008, before implementing new requirements, such as
public reporting of quality measures. However, in these rules, we
indicated that we intended to implement the provisions of section
109(b) of the MIEA-TRHCA in the future.
In preparation for proposing an ASC quality reporting program, in
the CY 2011 OPPS/ASC proposed rule, we solicited public comment on the
following measures under consideration for ASC quality data reporting:
(1) Patient Fall in the ASC; (2) Patient Burn; (3) Hospital Transfer/
Admission; (4) Wrong Site, Side, Patient, Procedure,

[[Page 42337]]

Implant; (5) Prophylactic IV Antibiotic Timing; (6) Appropriate
Surgical Site Hair Removal; (7) Surgical Site Infection (SSI); (8)
Medication Administration Variance (MAV); (9) Medication
Reconciliation; and (10) VTE Measures: Outcome/Assessment/Prophylaxis
(75 FR 46383).
In addition to preparing to propose implementation of an ASC
quality reporting program, the Department developed a plan to implement
a value-based purchasing (VBP) program for payments under the Medicare
program under title XVIII of the Act for ASCs as required by section
3006(f) of the Affordable Care Act, as added by section 10301(a) of the
Affordable Care Act. We also have recently submitted a Report to
Congress, as required by section 3006(f)(4) of the Affordable Care Act,
entitled ``Medicare Ambulatory Surgical Center Value-Based Purchasing
Implementation Plan'' that contains this plan. This report is found on
our Web site at: http://www.cms.gov/ASCPayment/downloads/C_ASC_RTC%202011.pdf. Currently, we do not have express statutory authority
to implement an ASC VBP Program. Should there be legislation to
authorize CMS to implement an ASC VBP program, we will develop the
program and propose it through rulemaking.
In this proposed rule, we are proposing to implement the ASC
Quality Reporting Program beginning with the CY 2014 payment
determination, with data collection beginning in CY 2012 for most of
the measures to be used for the CY 2014 payment determination.
2. ASC Quality Reporting Program Measure Selection
a. Proposed Timetable for Selecting ASC Quality Measures
We are proposing to adopt measures for three CY payment
determinations for the ASC Quality Reporting Program in this
rulemaking. Therefore, in this proposed rule, we are proposing to adopt
measures for the CYs 2014, 2015, and 2016 payment determinations. To
the extent that we finalize some or all of the measures for future
payment determinations, we would not be precluded from proposing to
adopt additional measures or changing the list of measures for future
payment determinations through annual rulemaking cycles so that we may
address changing program needs arising from new legislation or from
changes in HHS and CMS priorities. Under this approach, in the CY 2013
or CY 2014 rulemaking cycle, we could propose any additions or
revisions to the measures we adopted in the CY 2012 rulemaking cycle
for the CY 2014 payment determination or for future payment
determinations. This is consistent with our approach to proposing
measures for multiple payment determinations for the Hospital IQR and
Hospital OQR Programs. We believe this proposed process will assist
ASCs in planning, meeting future reporting requirements, and
implementing quality improvement efforts. We also would have more time
to develop, align, and implement the infrastructure necessary to
collect data on the measures and make payment determinations. This
flexibility would enable us to adapt the program to support changes in
HHS and CMS priorities and any new legislative requirements. We invite
public comments on this proposal.
b. Considerations in the Selection of Measures for the ASC Quality
Reporting Program
Section 1833(i)(7)(B) of the Act states that Sec. 1833(t)(17)(C)
of the Act shall apply with respect to ASC services in a similar manner
in which they apply to hospitals for the Hospital OQR Program, except
as the Secretary may otherwise provide. The requirements at
1833(t)(17)(C)(i) of the Act state that measures developed shall ``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.''
In selecting proposed measures for the ASC Quality Reporting
Program and other quality reporting programs, we have focused on
measures that have a high impact on and support HHS and CMS priorities
for improved health care outcomes, quality, safety, efficiency and
satisfaction for patients. Our goal for the future is to expand any
measure set adopted for ASC quality reporting to address these
priorities more fully and to align ASC quality measure requirements
with those of other reporting programs as appropriate, including the
Hospital OQR Program, the Hospital IQR Program, the Physician Quality
Reporting System, and reporting requirements implemented under the
HITECH Act so that the burden for reporting will be reduced. In
general, we prefer to adopt measures that have been endorsed by the NQF
because it is a national multi-stakeholder organization with a well-
documented and rigorous approach to consensus development. However, as
we have noted in previous rulemaking for the Hospital OQR Program (75
FR 72065), the requirement that measures reflect consensus among
affected parties can be achieved in other ways, including through the
measure development process, through broad acceptance and use of the
measure(s), and through public comment.
In developing this and other quality reporting programs, as well as
the Hospital Inpatient VBP Program, we applied the following principles
for the development and use of measures. We invite public comment on
these principles in the ASC quality reporting context.
Pay-for-reporting, public reporting, and value-based
purchasing programs should rely on a mix of standards, process,
outcomes, and patient experience of care measures, including measures
of care transitions and changes in patient functional status. Across
all programs, we seek to move as quickly as possible to the use of
primarily outcome and patient experience measures. To the extent
practicable and appropriate, outcome and patient experience measures
should be adjusted for risk or other appropriate patient population or
provider/supplier characteristics.
To the extent possible and recognizing differences in
payment system maturity and statutory authorities, measures should be
aligned across public reporting and payment systems under Medicare and
Medicaid. The measure sets should evolve so that they include a focused
core set of measures appropriate to the specific provider/supplier
category that reflects the level of care and the most important areas
of service and measures for that provider/supplier.
The collection of information should minimize the burden
on providers/suppliers to the extent possible. To this end, we will
continuously seek to align our measures with the adoption of meaningful
use standards for HIT, so that data can be submitted and calculated via
certified EHR technology with minimal burden.
To the extent practicable and feasible, and within the
scope of our statutory authorities for various quality reporting and
value-based purchasing programs, measures used by CMS should be
endorsed by a national, multi-stakeholder organization. Measures should
be aligned with best practices among other payers and the needs of the
end users of the measures.
We believe that ASC facilities are similar, insofar as the delivery
of surgical and related nonsurgical services, to HOPDs. Similar
standards and guidelines can be applied between

[[Page 42338]]

hospital outpatient departments and ASCs with respect to surgical care
improvement, given that many of the same surgical procedures are
provided in both settings. Measure harmonization assures that
comparable care in different settings can be evaluated in similar ways,
which further assures that quality measurement can focus more on the
needs of a patient with a particular condition rather than on the
specific program or policy attributes of the setting in which the care
is provided. In general, our goal is to adopt harmonized measures that
assess the quality of care given across settings and providers/
suppliers and to use the same measure specifications based on clinical
evidence and guidelines for the care being assessed regardless of
provider/supplier type or setting. This harmonization goal is also
supported by a commenter to the CY 2011 OPPS/ASC proposed rule, who
recommended CMS align ASC quality measures with State and other Federal
requirements (75 FR 72109).
Our CY 2014 measure proposals for ASCs align closely with those
discussed in the Report to Congress entitled ``Medicare Ambulatory
Surgical Center Value-Based Purchasing Implementation Plan'' and with
those proposed for future consideration in the CY 2011 OPPS/ASC
proposed rule (75 FR 46383). Furthermore, the measures that we are
proposing for ASCs fall into the parameter of our stated framework for
the ASC Quality Reporting Program, discussed above. The initial measure
set that we are proposing for the CY 2014 payment determination
addresses outcome measures and infection control process measures. Six
of the eight initial measures that we are proposing for the CY 2014
payment determination are recommended by the ASC Quality Collaborative
(ASC QC) and are NQF-endorsed. The seventh measure that we are
proposing is appropriate for measuring ambulatory surgical care, is
NQF-endorsed, is currently in use in the Physician Quality Reporting
System, and is similar to a measure that is being utilized in the
Hospital OQR program, and therefore aligns across settings in which
outpatient surgery is performed. We are proposing collecting these
seven measures via ``quality data codes'' to be placed on Part B claims
submitted by ASCs for Medicare fee-for-service patients beginning
January 1, 2012. The eighth measure we are proposing for the ASC
Quality CY 2014 payment determination is an outcome measure of Surgical
Site Infection (SSI) to be submitted in 2013 via the CDC's National
Healthcare Safety Network (NHSN). Similarly, hospital inpatient
departments will begin reporting this measure to the CDC under the
Hospital IQR Program in 2012, and we are also currently proposing in
this rule that hospital outpatient departments begin reporting this
measure to the CDC under the Hospital OQR Program in 2013. Thus, this
measure would be aligned across quality reporting programs for
facilities performing surgery.
3. Proposed ASC Quality Measures for the CY 2014 Payment Determination
a. Proposed Claims-Based Measures Requiring Submission of Quality Data
Codes (QDCs) Beginning January 1, 2012
We are proposing to adopt seven NQF-endorsed claims-based measures,
six of which were developed by the ASC QC. The ASC QC is a cooperative
effort of organizations and companies formed in 2006 with a common
interest in ensuring that ASC quality data is measured and reported in
a meaningful way. Stakeholders in the ASC QC include ASC corporations,
ASC associations, professional societies and accrediting bodies that
focus on ASC quality and safety. The ASC QC initiated a process of
standardizing ASC quality measure development through evaluation of
existing nationally endorsed quality measures to determine which could
be directly applied to the outpatient surgery facility setting. The ASC
QC in its ASC Quality Measure Implementation Guide version 1.4 states
that ``it focused on outcomes and processes that ASC facilities could
influence or impact, outcomes that ASC facilities would be aware of
given their limited contact with the patient, and outcomes that would
be understandable and important to key stakeholders in ASC care,
including patients, providers and payers.''
The ASC QC developed and pilot-tested five facility-level measures
(Patient Burn; Patient Fall in the ASC; Wrong Site, Wrong Side, Wrong
Patient, Wrong Procedure, Wrong Implant; Hospital Transfer/Admission,
and Prophylactic IV Antibiotic Timing) for feasibility and usability.
On November 15, 2007, these five measures were endorsed by the NQF. On
September 25, 2008, a sixth ASC QC-developed facility-level measure,
``Appropriate Surgical Site Hair Removal'' was NQF-endorsed as
``Ambulatory Surgery Patients with Appropriate Method of Hair
Removal.'' Of the six ASC QC measures, the Prophylactic IV Antibiotic
Timing and Ambulatory Surgery Patients with Appropriate Method of Hair
Removal measures are infection control process measures, and the rest
are outcome measures. All six of these measures were listed as under
consideration in the CY 2011 OPPS/ASC proposed rule (75 FR 46383). We
are proposing these six measures for use in the CY 2014 payment
determination.
The seventh claims-based measure we are proposing for the CY 2014
payment determination is Selection of Prophylactic Antibiotic: First OR
Second Generation Cephalosporin. This measure was developed by the
American Medical Association's (AMA's) Physician Consortium for
Performance Improvement, a national, diverse, physician-led group that
identifies, develops, and promotes implementation of evidence-based
clinical performance measures that reflect best practices. This measure
is NQF-endorsed. It is an infection control process measure and is
currently adopted in the Hospital IQR Program and Physician Quality
Reporting System (PQRS).
We are proposing to collect all seven measures using the claims-
based quality data codes (QDCs) data collection mechanism. We are
proposing to require ASCs to report on ASC claims a quality data code
(QDC) to be used for reporting quality data. We are proposing that an
ASC would need to add a QDC to any claim involving a proposed claims-
based quality measure. CMS is in the process of developing QDCs for
each proposed claims-based quality measure. The QDC will be a CPT
Category II code or a HCPCS Level II G-code if an appropriate CPT code
is not available. More information on the QDCs that will be associated
with the proposed quality measures will be provided in the CY 2012
OPPS/ASC final rule with comment period. Additionally, CMS is proposing
to create a new ASC payment indicator ``M5'' (Quality measurement code
used for reporting purposes only; no payment made) for assignment to
the QDC to clarify that no payment is associated with the QDC for that
claim. If one or more of these measures are finalized as proposed, an
ASC would need to begin submitting these QDCs on any Medicare Part B
claims pertaining to the measures on January 1, 2012.
For the first six measures listed, the ASC QC measures
specifications can be found at http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf.\41\ For the seventh
measure, the specifications can be found on the PQRS Web site at:
http://www.cms.gov/apps/ama/license.asp?file=/pqrs/downloads/2011--

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PhysQualRptg--MeasureSpecificationsManual--033111.pdf.
---------------------------------------------------------------------------

\41\ ASC Quality Measures: Implementation Guide Version 1.4, ASC
Quality Collaboration, December 2010.
---------------------------------------------------------------------------

These seven proposed measures are discussed in more detail below:
(1) Patient Burns (NQF 0263)
The ASC Quality Measures: Implementation Guide Version 1.4 states
that every patient receiving care in an ASC setting has the potential
to experience a burn during an episode of care, given the multitude of
factors that could pose risks for patient burns in the surgical and
procedural settings. The Guide cited a recent publication from the ECRI
Institute that relates an increased risk of burns associated with newer
electrosurgical devices due to their application of higher electrical
current for longer time intervals. Other common sources of burns in a
surgical setting include chemical and thermal sources, and radiation,
scalds, and fires. Clinical practice guidelines for reducing the risk
of burns have been established by the American Society of
Anesthesiologists (ASA) and Association of Operating Room Nurses
(AORN).
This NQF-endorsed measure assesses the percentage of ASC admissions
experiencing a burn prior to discharge. The NQF-endorsed specifications
for ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf. The ASC QC in
their ASC Quality Measure Implementation Guide version 1.4 defines a
``burn'' for purposes of this measure as ``[u]nintended tissue injury
caused by any of the six recognized mechanisms: scalds, contact, fire,
chemical, electrical or radiation (e.g., warming devices, prep
solutions, and electrosurgical unit or laser).'' We believe that this
measure would allow stakeholders to develop a better understanding of
the incidence of these events and further refine means to ensure
prevention.
Read together, section 1833(i)(7)(B) of the Act and section
1833(t)(17)(C)(i) of the Act require the Secretary, except as the
Secretary may otherwise provide, to develop measures appropriate for
the measurement of the quality of care (including medication errors)
furnished by ASCs, that reflect consensus among affected parties and,
to the extent feasible and practicable, that include measures set forth
by one or more national consensus building entities. We believe that
this measure is appropriate to measure quality in ASCs since they serve
surgical patients who may face the risk of burns during ambulatory
surgical procedures. Furthermore, we believe that this measure meets
the consensus requirement and the requirement that it be set forth by a
national consensus building entity because it was developed by the ASC
QC and is endorsed by the NQF.
We invite public comment on our proposal to adopt this measure for
the CY 2014 payment determination using the claims-based QDC data
collection mechanism for ASC services furnished for Medicare patients
from January 1, 2012 through December 31, 2012. While the NQF-endorsed
specification for this measure includes all ASC admissions, our
proposal to use information submitted on claims to calculate these
measures requires that we restrict the measure population to the
population for which CMS receives claims. Therefore, for this program,
we would need to calculate the measures based on claims submitted for
ASC services furnished to Medicare fee-for-service beneficiaries. NQF
has indicated in recent exchanges that our proposal to use Medicare
Part B claims submitted by ASCs to calculate the measure consistently
with the measure specification is an appropriate application of the
NQF-endorsed measure to a subset of patients that are part of the
broader population to which the measure applies. If finalized, ASCs
would need to place QDCs relevant to this measure on Medicare Part B
claims beginning January 1, 2012 in order to report this measure for
purposes of the CY 2014 payment determination.
(2) Patient Fall (NQF 0266)
Falls, particularly in the elderly, can cause injury and loss of
functional status, and falls in healthcare settings can be prevented
through assessment of risk, care planning, and patient monitoring.
Healthcare settings are being called upon to report patient falls and
to take steps to reduce the risk of falls. The ASC QC indicates in
their ASC quality measure implementation guide the use of anxiolytics,
sedatives, and anesthetic agents may put patients undergoing outpatient
surgery at increased risk for falls. Guidelines and best practices for
the prevention of falls, and management of patients after falls have
been made available by the Agency for Healthcare Research and Quality
(http://www.ahrq.gov/qual/transform.htm), and the National Center for
Patient Safety (http://www.patientsafety.gov).
This NQF-endorsed measure assesses the percentage of ASC admissions
experiencing a fall in the ASC. The NQF-endorsed specifications for
this ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf. The ASC QC in
their ASC Quality Measure Implementation Guide version 1.4 defines a
``fall'' as ``a sudden, uncontrolled, unintentional, downward
displacement of the body to the ground or other object, excluding falls
resulting from violent blows or other purposeful actions'', which is
consistent with the definition set forth by the National Center for
Patient Safety.
Read together, section 1833(i)(7)(B) of the Act and section
1833(t)(17)(C)(i) of the Act require the Secretary, except as the
Secretary may otherwise provide, to develop measures appropriate for
the measurement of the quality of care (including medication errors)
furnished by ASCs, that reflect consensus among affected parties and,
to the extent feasible and practicable, that include measures set forth
by one or more national consensus building entities. We believe that
this measure is appropriate to measure quality in ASCs because it was
specifically developed to measure quality of surgical care furnished by
ASCs, as measured by patient falls. Furthermore, we believe that this
measure meets the consensus requirement and the requirement that it be
set forth by a national consensus building entity because it was
developed by the ASC QC and is NQF-endorsed.
We invite public comment on our proposal to adopt this measure for
the CY 2014 payment determination using the claims-based QDC data
collection mechanism for ASC services furnished for Medicare fee-for-
service beneficiaries from January 1, 2012 through December 31, 2012.
While the NQF-endorsed specification for this measure includes all ASC
admissions, our proposal requires that we restrict the measure
population to the population for which CMS receives claims. Therefore,
for this program, we would need to calculate the measures based on
claims submitted for ASC services furnished to Medicare fee-for-service
beneficiaries. NQF has indicated in recent exchanges that our proposal
to use Medicare Part B claims submitted by ASCs to calculate the
measure consistently with the measure specification is an appropriate
application of the NQF-endorsed measure to a subset of patients that
are part of the broader population to which the measure applies. If
finalized, ASCs would need to place QDCs relevant to this measure on
Medicare Part B claims beginning January 1, 2012 in order to report
this measure for purposes of the CY 2014 payment determination.

[[Page 42340]]

(3) Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
Implant (NQF 0267)
Surgeries and procedures performed on the wrong site/side, and
wrong patient can result in significant impact on patients, including
complications, serious disability or death. While the prevalence of
such serious errors may be rare, such events are considered serious
reportable events, and are included in the NQF's Serious Reportable
Events in Healthcare 2006 Update.\42\ The Joint Commission (a not-for-
profit organization that accredits and certifies health care
organizations and programs in the US) has issued a Universal Protocol
to prevent such serious surgical errors.\43\ The proposed NQF-endorsed
measure assesses the percentage of ASC admissions experiencing a wrong
site, wrong side, wrong patient, wrong procedure, or wrong implant. The
ASC QC in their ASC Quality Measures: Implementation Guide Version 1.4
defines ``wrong'' as ``not in accordance with intended site, side,
patient, procedure or implant.'' The NQF-endorsed specifications for
this ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf.
---------------------------------------------------------------------------

\42\ http://www.qualityforum.org/Publications/2007/03/Serious_Reportable_Events_in_Healthcare%E2%80%932006_Update.aspx.
\43\ Joint Commission. Universal Protocol for Preventing Wrong
Site, Wrong Procedure, Wrong Person Surgery. Available at http://www.jointcommission.org/standards_information/up.aspx. Last
accessed December 14, 2010.
---------------------------------------------------------------------------

Read together, section 1833(i)(7)(B) of the Act and section
1833(t)(17)(C)(i) of the Act require the Secretary, except as the
Secretary may otherwise provide, to develop measures appropriate for
the measurement of the quality of care (including medication errors)
furnished by ASCs, that reflect consensus among affected parties and,
to the extent feasible and practicable, that include measures set forth
by one or more national consensus building entities. We believe that
this measure is appropriate to measure quality in ASCs because the
measure assesses the quality of surgical care provided in ASCs as
measured by the percentage of surgical errors. Furthermore, we believe
that this measure meets the consensus requirement and the requirement
that it be set forth by a national consensus building entity because it
was developed by the ASC QC and is endorsed by the NQF.
We invite public comment on our proposal to adopt this measure for
the CY 2014 payment determination using the claims-based QDC data
collection mechanism for ASC services furnished for Medicare patients
from January 1, 2012 through December 31, 2012. While the NQF-endorsed
specification for this measure includes all ASC admissions, our
proposal to use information submitted on claims to calculate these
measures requires that we restrict the measure population to the
population for which CMS receives claims. Therefore, for this program,
we would need to calculate the measures based on claims submitted for
ASC services furnished to Medicare fee-for-service beneficiaries. NQF
has indicated in recent exchanges that our proposal to use Medicare
Part B claims submitted by ASCs to calculate the measure consistently
with the measure specification is an appropriate application of the
NQF-endorsed measure to a subset of patients that are part of the
broader population to which the measure applies. If finalized, ASCs
would need to place QDCs relevant to this measure on Medicare Part B
claims beginning January 1, 2012 in order to report this measure for
purposes of the CY 2014 payment determination.
(4) Hospital Transfer/Admission (NQF 0265)
The transfer or admission of a surgical patient from an outpatient
setting to an acute care setting can be an indication of a
complication, serious medical error, or other unplanned negative
patient outcome. While acute intervention may be necessary in these
circumstances, a high rate of such incidents may indicate suboptimal
practices or patient selection criteria. The proposed NQF-endorsed
measure assesses the rate of ASC admissions requiring a hospital
transfer or hospital admission upon discharge from the ASC. The ASC QC
defines ``hospital transfer/admission'' as ``any transfer/admission
from an ASC directly to an acute care hospital, including hospital
emergency room.''
The NQF-endorsed specifications for this ASC QC measure can be
found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf. The ASC QC believes
that this ``measure would allow ASCs to assess their guidelines for
procedures performed in the facility and patient selection if
transfers/admissions are determined to be at a level higher than
expected. If commonalities are found in patients who are transferred or
admitted, guidelines may require revision.''
Read together, section 1833(i)(7)(B) of the Act and section
1833(t)(17)(C)(i) of the Act require the Secretary, except as the
Secretary may otherwise provide, to develop measures appropriate for
the measurement of the quality of care (including medication errors)
furnished by ASCs, that reflect consensus among affected parties and,
to the extent feasible and practicable, that include measures set forth
by one or more national consensus building entities. We believe this
measure is appropriate to measure quality in ASCs because it assesses
outpatient surgical care quality in the form of the rate of surgical
outpatients needing acute care interventions. Furthermore, we believe
that this measure meets the consensus requirement and the requirement
that it be set forth by a national consensus building entity because it
was developed by the ASC QC and is endorsed by the NQF.
We invite public comment on our proposal to adopt this measure for
the CY 2014 payment determination using the claims-based QDC data
collection mechanism for ASC services furnished for Medicare patients
from January 1, 2012 through December 31, 2012. While the NQF-endorsed
specification for this measure includes all ASC admissions, our
proposal to use information submitted on claims to calculate these
measures requires that we restrict the measure population to the
population for which CMS receives claims. Therefore, for this program,
we would need to calculate the measures based on claims submitted for
ASC services furnished to Medicare fee-for-service beneficiaries. NQF
has indicated that our proposal to use Medicare Part B claims submitted
by ASCs to calculate the measure consistently with the measure
specification is an appropriate application of the NQF-endorsed measure
to a subset of patients that are part of the broader population to
which the measure applies. If finalized, ASCs would need to place QDCs
relevant to this measure on Medicare Part B claims beginning January 1,
2012 in order to report this measure for purposes of the CY 2014
payment determination.
(5) Prophylactic Intravenous (IV) Antibiotic Timing (NQF 0264)
Timely preoperative administration of intravenous antibiotics to
surgical patients is an effective practice in reducing the risk of
developing a surgical site infection, which in turn is associated with
reduced health care burden and cost, and better patient
outcomes.^{44 45 46} The measurement of

[[Page 42341]]

timely antibiotic administration for surgical patients is occurring in
the Hospital IQR Program, Hospital OQR Program and the Physician
Quality Reporting System. The NQF-endorsed ASC QC measure assesses the
rate of ASC patients who received IV antibiotics ordered for surgical
site infection prophylaxis on time. The NQF-endorsed specifications for
this ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf.
---------------------------------------------------------------------------

\44\ Classen, D. et al.: The timing of prophylactic
administration of antibiotics and the risk of surgical wound
infection. NEJM. 1992;326(5):281-286.
\45\ Silver, A. et al.: Timeliness and use of antibiotic
prophylaxis in selected inpatient surgical procedures. The
Antibiotic Prophylaxis Study Group. Am J Surg. 1996;171(6):548-552.
\46\ Dounis, E., Tsourvakas, S., Kalivas, L., and Giamacellou,
H.: Effect of time interval on tissue concentrations of
cephalosporins after tourniquet inflation. Highest levels achieved
by administration 20 minutes before inflation. Acta Orthop Scand.
1995;66(2):158-60.
---------------------------------------------------------------------------

The ASC QC measure implementation guide defines ``antibiotic
administered on time'' as ``[a]ntibiotic infusion * * * initiated
within one hour prior to the time of the initial surgical incision or
the beginning of the procedure (e.g., introduction of endoscope,
insertion of needle, inflation of tourniquet) or two hours prior if
vancomycin or fluoroquinolones are administered.'' The measure also
defines ``prophylactic antibiotic'' as ``an antibiotic prescribed with
the intent of reducing the probability of an infection related to an
invasive procedure. For purposes of this measure, the following
antibiotics are considered prophylaxis for surgical site infections:
Ampicillin/sulbactam, Aztreonam, Cefazolin, Cefmetazole, Cefotetan,
Cefoxitin, Cefuroxime, Ciprofloxacin, Clindamycin, Ertapenem,
Erythromycin, Gatifloxacin, Gentamicin, Levofloxacin, Metronidazole,
Moxifloxacin, Neomycin and Vancomycin.'' All prophylactic IV
antibiotics administered for surgical site infection would need to have
their infusion initiated within the one hour time frame, except for
vancomycin or fluoroquinolones, where infusion must be initiated within
the two hours time frame. The ASC QC Guide states that ``[i]n cases
involving more than one antibiotic, all antibiotics must be given
within the appropriate time frame in order for the case to meet
criteria.'' The timing of the antibiotic starts at the time the
antibiotic is initiated with a preoperative order.
Read together, section 1833(i)(7)(B) of the Act and section
1833(t)(17)(C)(i) of the Act require the Secretary, except as the
Secretary may otherwise provide, to develop measures appropriate for
the measurement of the quality of care (including medication errors)
furnished by ASCs, that reflect consensus among affected parties and,
to the extent feasible and practicable, that include measures set forth
by one or more national consensus building entities. We believe this
measure is appropriate to measure quality in ASCs because it assesses
the quality of care for surgical patients in an outpatient setting as
measured by timely antibiotic administration. Furthermore, we believe
that this measure meets the consensus requirement and the requirement
that it be set forth by a national consensus building entity because it
was developed by the ASC QC and is endorsed by the NQF.
We invite public comment on our proposal to adopt this measure for
the CY 2014 payment determination using the claims-based QDCs data
collection mechanism for ASC services furnished for Medicare patients
from January 1, 2012 through December 31, 2012. While the NQF-endorsed
specification for this measure includes all ASC admissions, our
proposal to use information submitted on claims to calculate these
measures requires that we restrict the measure population to the
population for which CMS receives claims. Therefore, for this program,
we would need to calculate the measures based on claims submitted for
ASC services furnished to Medicare fee-for-service beneficiaries. NQF
has indicated in recent exchanges that our proposal to use Medicare
Part B claims submitted by ASCs to calculate the measure consistently
with the measure specification is an appropriate application of the
NQF-endorsed measure to a subset of patients that are part of the
broader population to which the measure applies. If finalized, ASCs
would need to place QDCs relevant to this measure on Medicare Part B
claims beginning January 1, 2012 in order to report this measure for
purposes of the CY 2014 payment determination.
(6) Ambulatory Surgery Patients With Appropriate Method of Hair Removal
(NQF 0515)
The ASC QC \47\ cited evidence that ``[r]azors can cause
microscopic cuts and nicks to the skin, not visible to the eye. Use of
razors prior to surgery increases the incidence of wound infection when
compared to clipping, depilatory use or no hair removal at all.'' \48\
A 1999 guideline issued by the CDC suggests that if hair must be
removed from a surgical site, that it preferably be done with clippers
rather than razors in order to minimize cuts and nicks to the skin
which may increase the risk of a surgical site infection.\49\ In 2002,
the Association of Operating Room Nurses published similar guidelines
for appropriate hair removal.\50\ While a similar measure is being
considered for retirement from the Hospital IQR Program because it
displays a high degree of performance with little variability or room
for improvement, we believe that there is significant, variability in
practice and level of adherence to this guideline in outpatient
surgical settings such as ASCs is not known, and accordingly, this
measure is still appropriate for use in the ASC setting. We are
proposing to adopt the NQF-endorsed measure to capture the percentage
of ASC admissions with appropriate surgical site hair removal. The NQF-
endorsed specifications for this ASC QC measure can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf.
---------------------------------------------------------------------------

\47\ ASC QC Quality measures: Implementation Guide version 1.4.
ASC Quality Collaboration. December 2010.
\48\ Seropian, R., Reynolds, B.M.: Wound infections after
preoperative depilatory versus razor preparation. Am J Surg.1971
Mar;121(3):251-4.
\49\ http://www.cdc.gov/ncidod/dhqp/pdf/guidelines/SSI.pdf.
\50\ Association of Operating Room Nurses. Recommended practices
for skin preparation of patients. AORN J. 2002 Jan;75(1):184-7.
---------------------------------------------------------------------------

[[Page 42342]]

CMS receives claims. Therefore, for this program, we would need to
calculate the measures based on claims submitted for ASC services
furnished to Medicare fee-for-service beneficiaries. NQF indicated in
recent exchanges that our proposal to use Medicare Part B claims
submitted by ASCs to calculate the measure consistently with the
measure specification is an appropriate application of the NQF-endorsed
measure to a subset of patients that are part of the broader population
to which the measure applies. If finalized, ASCs would need to place
QDCs relevant to this measure on Medicare Part B claims beginning
January 1, 2012 in order to report this measure for purposes of CY 2014
payment determination.
(7) Selection of Prophylactic Antibiotic: First OR Second Generation
Cephalosporin (NQF 0268)
Surgical outcomes are affected by the selection of appropriate
antibiotics. Current guidelines indicate that first or second
generation cephalosporins are effective for prevention of surgical site
infections in most cases. The goal of this proposed measure is to
ensure safe, cost-effective, broad spectrum antibiotics are used as a
first line prophylaxis unless otherwise indicated. This measure was
developed by the AMA's Physician Consortium for Performance
Improvement, a national, diverse, physician-led group that identifies,
develops, and promotes implementation of evidence-based clinical
performance measures that reflect best practices. This measure received
NQF-endorsement under a 2008 project entitled ``Hospital Care:
Specialty Clinician Performance Measures,'' and it assesses the
percentage of surgical patients aged 18 years and older undergoing
procedures with the indications for a first OR second generation
cephalosporin prophylactic antibiotic, who had an order for cefazolin
or cefuroxime for antimicrobial prophylaxis. While we recognize that
this measure is not specifically endorsed for the ASC setting, we
believe that this measure is highly relevant for use in ASCs because it
assesses adherence to best practices for use of prophylactic
antibiotics for outpatient surgical patients. Accordingly, we propose
to adopt an application of this NQF-endorsed measure for use in the ASC
Quality Reporting Program. The measure specifications for this proposed
measure can be found at: http://www.cms.gov/pqrs/downloads/2011_PhysQualRptg_MeasuresGroups_SpecificationsManual_033111.pdf?agree=yes&next=Accept.
Read together, section 1833(i)(7)(B) of the Act and section
1833(t)(17)(C)(i) of the Act require the Secretary, except as the
Secretary may otherwise provide, to develop measures appropriate for
the measurement of the quality of care (including medication errors)
furnished by ASCs, that reflect consensus among affected parties and,
to the extent feasible and practicable, that include measures set forth
by one or more national consensus building entities. We believe this
measure is appropriate for measurement of quality care in an ASC
because it specifically assesses quality care, as measured by adherence
to best practices for prophylactic antibiotics provided for outpatient
surgical patients. It is not feasible or practicable to adopt an NQF-
endorsed measure of prophylactic antibiotic selection specifically for
ASCs because there is no such NQF-endorsed measure. We note that
section 1833(t)(17) of the Act does not require that each measure we
adopt for the ASC Quality Reporting Program be endorsed by a national
consensus building entity, or by the NQF specifically. Further, section
1833(i)(7)(B) of the Act states that section 1833(t)(17) of the Act,
which contains this requirement, applies to the ASC Quality Reporting
Program, except as the Secretary may otherwise provide. Under this
provision, the Secretary has further authority to adopt measures that
are not NQF-endorsed or measures that have not been endorsed for the
ASC setting.
The proposed adoption of this measure in the ASC Quality Reporting
Program also is consistent with our goal to align measures across
settings, as it is also used in the Physician Quality Reporting System,
and a similar measure (NQF 0528) has been implemented in the
Hospital OQR Program and the Hospital IQR Program.
We invite public comment on our proposal to adopt this measure for
the CY 2014 payment determination using the claims-based QDC data
collection mechanism for ASC services furnished for Medicare patients
from January 1, 2012 through December 31, 2012. While the NQF-endorsed
specification for this measure includes all surgical patients, our
proposal to use information submitted on claims to calculate these
measures requires that we restrict the measure population to the
population for which CMS receives claims. Therefore, for this program,
we would need to calculate the measures based on claims submitted for
ASC services furnished to Medicare fee-for-service beneficiaries. NQF
has indicated in recent exchanges that our proposal to use Medicare
Part B claims submitted by ASCs to calculate the measure consistently
with the measure specification is an appropriate application of the
NQF-endorsed measure to a subset of patients that are part of the
broader population to which the measure applies. If finalized, ASCs
would need to place QDCs relevant to this measure on Medicare Part B
claims beginning January 1, 2012 in order to report this measure for
purposes of the CY 2014 payment determination.
b. Surgical Site Infection Rate (NQF 0299)
HAIs are among the leading causes of death in the United States.
CDC estimates that as many as 2 million infections are acquired each
year in hospitals and result in approximately 90,000 deaths.\51\ It is
estimated that more Americans die each year from HAIs than from auto
accidents and homicides combined. HAIs not only put the patient at
risk, but also increase the days of hospitalization required for
patients and add considerable health care costs. HAIs are largely
preventable for surgical patients through application of perioperative
best practices such as those listed in the CDC's SSI prevention
guidelines. Therefore, many health care consumers and organizations are
calling for public disclosure of HAIs, arguing that public reporting of
HAI rates provides the information health care consumers need to choose
the safest hospitals, and gives hospitals an incentive to improve
infection control efforts. This proposed measure is currently collected
by the National Healthcare Safety Network (NHSN) as part of State-
mandated reporting and surveillance requirements for hospitals in some
States. Additionally, data submission for this measure through EHRs may
be possible in the near future.
---------------------------------------------------------------------------

\51\ McKibben. L., Horan, T.: Guidance on public reporting of
healthcare-associated infections: recommendations of the Healthcare
Infection Control Practices Advisory Committee. AJIC 2005;33:217-26.
---------------------------------------------------------------------------

This measure is NQF-endorsed and we are also proposing to adopt it
for the CY 2014 Hospital OQR Program. It also has been adopted for the
FY 2014 Hospital IQR Program. Because we are proposing the same measure
for Hospital OQR program in this rule, we refer readers to the
discussion of this measure in section XIV.C.2.a. of this proposed rule.
The measure specifications can be found at http://www.cdc.gov/nhsn/psc.html. The NQF describes this measure as the ``percentage of
surgical site infection events occurring within thirty days after the
operative procedure if no implant is left in place, or [within] one
year if an

[[Page 42343]]

implant is in place in patients who had an NHSN operative procedure
performed during a specified time period and the infection appears to
be related to the operative procedure.''
Read together, section 1833(i)(7)(B) of the Act and section
1833(t)(17)(C)(i) of the Act require the Secretary, except as the
Secretary may otherwise provide, to develop measures appropriate for
the measurement of the quality of care (including medication errors)
furnished by ASCs, that reflect consensus among affected parties and,
to the extent feasible and practicable, that include measures set forth
by one or more national consensus building entities. Increasingly,
surgical procedures are being performed in hospital outpatient
department settings and ASCs. We believe this measure is appropriate
for measuring quality of care in ASCs because it applies to outcomes
for surgical patients undergoing procedures that are performed in ASCs.
Furthermore, we believe that this measure meets the consensus
requirement and the requirement that it be set forth by a national
consensus building entity because it is endorsed by the NQF. The
proposed adoption of this measure in the ASC Quality Reporting Program
also is consistent with our goal to align measures across settings
because we have proposed this measure for the Hospital OQR Program for
CY 2014 payment determination and have previously adopted it for
Hospital IQR Program for the FY 2014 payment determination. Therefore,
we are proposing to adopt the Surgical Site Infection Rate measure that
is collected by the CDC via the NHSN for the ASC Quality Reporting
Program for the CY 2014 payment determination.
Data submission for this measure for the CY 2014 payment
determination would begin with infection events occurring on or after
January 1, 2013 through June 30, 2013. The proposed reporting mechanism
for this proposed HAI measure via the NHSN is discussed in greater
detail in section XIV.C.2.a. of this proposed rule. We invite public
comment on this proposed measure and the reporting mechanism.
In summary, we are proposing to adopt 7 claims-based measures using
the QDC data collection mechanism, and one NHSN HAI measure of Surgical
Site Infection Rate for a total of eight measures for ASCs for the CY
2014 payment determination. We believe the proposal falls within our
stated framework for the ASC Quality Reporting Program. For the CY 2014
payment determination, we are proposing that data submission for the
claims-based measures begin on January 1, 2012 and end December 31,
2012. For the CY 2014 payment determination, we are proposing that data
submission for the NHSN-based SSI measure begin with infection events
occurring between January 1, 2013 and June 30, 2013. This proposed
measure is currently collected by the NHSN as part of State-mandated
reporting and surveillance requirements for hospitals in some States.
The NHSN is a secure, Internet-based surveillance system maintained
and managed by the CDC, and can be utilized by all types of healthcare
facilities in the United States, including acute care hospitals, long
term acute care hospitals, psychiatric hospitals, rehabilitation
hospitals, outpatient dialysis centers, ASCs, and long term care
facilities. The NHSN reporting infrastructure is provided free of
charge to healthcare providers/suppliers to access and use for
reporting data regarding healthcare safety and infections. The NHSN
enables healthcare facilities to collect and use data about HAIs,
clinical practices known to prevent HAIs, the incidence or prevalence
of multidrug-resistant organisms within their organizations, and other
adverse events. Some States use the NHSN as a means for healthcare
facilities to submit data on HAIs mandated through their specific State
legislation. We invite public comments on our proposals. The proposed
measures for ASCs for the CY 2014 payment determination are listed
below with the ASC prefix:

ASC Program Measurement Set Proposed for the CY 2014 Payment
Determination
[Data submission to occur in 2012 and 2013]
------------------------------------------------------------------------

-------------------------------------------------------------------------
ASC-1: Patient Burn.*
ASC-2: Patient Fall.*
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
Implant.*
ASC-4: Hospital Transfer/Admission.*
ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing.*
ASC-6: Ambulatory Surgery Patients with Appropriate Method of Hair
Removal.*
ASC-7: Selection of Prophylactic Antibiotic First OR Second Generation
Cephalosporin.*
ASC-8: Surgical Site Infection Rate.**
------------------------------------------------------------------------
* Data submission proposed to begin in CY 2012.
** Data submission proposed to begin in CY 2013.

4. Proposed ASC Quality Measures for CY 2015 Payment Determination
a. Retention of Measures Adopted for the CY 2014 Payment Determination
in the CY 2015 Payment Determination
In general, unless we otherwise specify in the retirement section
of a rule, we propose to retain measures from one CY payment
determination to another. We are proposing to retain the eight measures
we are proposing to adopt for the CY 2014 payment determination, if
they are finalized in the CY 2012 OPPS/ASC final rule with comment
period, for the CY 2015 payment determination. We invite public
comments on this proposal.
b. Proposed Structural Measures for the CY 2015 Payment Determination
For the CY 2015 payment determination, we are proposing to adopt
two structural measures: Safe Surgery Checklist Use, and ASC Facility
Volume Data on Selected ASC Surgical Procedures. We discuss these
proposals below.
(1) Safe Surgery Checklist Use
A sound surgery safety checklist could minimize the most common and
avoidable risks endangering the lives and well-being of surgical
patients. The purpose of this proposed structural measure is to assess
whether ASCs are using a safe surgery checklist that covers effective
communication and helps ensure that safe practices are being performed
at three critical perioperative periods: prior to administration of
anesthesia, prior to incision, and prior to the patient leaving the
operating room. The use of such checklists has been credited with
dramatic decreases in preventable harm, complications and

[[Page 42344]]

post-surgical mortality.\52\ In November 2010, the New England Journal
of Medicine published a study concluding that surgical complications
were reduced by one-third, and mortality by nearly half, when a safe
surgery checklist was used.\53\
---------------------------------------------------------------------------

\52\ Haynes, A.B.; Weiser, T.G.; Berry, W.G. et. al (2009). ``A
Surgical Safety Checklist to Reduce Morbidity and Mortality in a
Global Population''. New England Journal of Medicine. 360: 491-499.
\53\ de Vries EN, Prins HA, Crolla RMPH, et al. Effect of a
comprehensive surgical safety system on patient outcomes. N Engl J
Med 2010;363: 1928-37.
---------------------------------------------------------------------------

We believe that effective communication and the use of safe
surgical practices during surgical procedures will significantly reduce
preventable surgical deaths and complications. Some examples of safe
surgery practices that can be performed during each of these three
perioperative periods are shown in the table below:

----------------------------------------------------------------------------------------------------------------
First critical point (prior to Second critical point (prior to skin Third critical point (prior to
administering anesthesia) incision) patient leaving the operating room)
----------------------------------------------------------------------------------------------------------------
Verbal confirmation of Confirm surgical team Confirm the procedure.
patient identity. members and roles. Complete count of surgical
Mark surgical site. Confirm patient identity, instruments and accessories.
Check anesthesia machine/ procedure, and surgical incision Identify key patient
medication. site. concerns for recovery and
Assessment of allergies, Administration of management of the patient.
airway and aspiration risk. antibiotic prophylaxis within 60
minutes before incision.
Communication among
surgical team members of
anticipated critical events.
Display of essential
imaging as appropriate.
----------------------------------------------------------------------------------------------------------------

For example, mistakes in surgery can be prevented by ensuring that
the correct surgery is performed on the correct patient and at the
correct place on the patient's body.\54\ A safe surgery checklist would
also reduce the potential for human error, which would increase the
safety of the surgical environment. An example of a checklist that
employs safe surgery practices at each of these three perioperative
periods is the World Health Organization Surgical Safety Checklist,
which was adopted by The World Federation of Societies of
Anesthesiologists as an international standard of practice. This
checklist can be found at: http://www.who.int/patientsafety/safesurgery/ss_checklist/en/index.html.
---------------------------------------------------------------------------

\54\ Hospital National Patient Safety Goals. The Joint
Commission Accreditation Hospital Manual, 2011. http://www.jointcommission.org/standards_information/npsgs.aspx.
---------------------------------------------------------------------------

The adoption of a structural measure that assesses Safe Surgery
Checklist Use would align our patient safety initiatives with those of
several surgical specialty societies including: the American College of
Surgeons' Nora Institute for Patient Safety, the American Society of
Anesthesiologists, The Joint Commission, the National Association for
Healthcare Quality and the AORN. The measure would assess whether the
ASC uses a safe surgery checklist in general, and would not require an
ASC to report whether it uses a checklist in connection with any
individual procedures.
Read together, section 1833(i)(7)(B) of the Act and section
1833(t)(17)(C)(i) of the Act require the Secretary, except as the
Secretary may otherwise provide, to develop measures appropriate for
the measurement of the quality of care (including medication errors)
furnished by ASCs, that reflect consensus among affected parties and,
to the extent feasible and practicable, that include measures set forth
by one or more national consensus building entities. This measure is
appropriate for the measurement of quality of care furnished by ASCs
because it pertains to best practices for surgeries, and ASCs perform
ambulatory surgeries. It also reflects consensus among affected
parties. As stated in section XIV.C.2.c.1 of this proposed rule, we
believe that consensus among affected parties can be reflected through
means other than NQF endorsement, including consensus achieved during
the measure development process; consensus shown through broad
acceptance and use of measures; and consensus through public comment.
The proposed safe surgery checklist measure assesses the adoption of a
best practice for surgical care that is broadly accepted and in
widespread use among affected parties. In addition to being adopted by
The World Federation of Societies of Anesthesiologists, the use of a
safe surgery checklist is one of the safe surgery principles endorsed
by the Council on Surgical and Perioperative Safety,\55\ which is
comprised of the American Association of Nurse Anesthetists, the
American College of Surgeons, the American Association of Surgical
Physician Assistants, the American Society of Anesthesiologists, the
American Society of PeriAnesthesia Nurses, AORN, and the Association of
Surgical Technologists. Two State agencies (Oregon, South Carolina),
the Veterans Health Administration,\56\ numerous hospital systems,
State hospital associations (such as California and South Carolina),
national accrediting organizations and large private insurers have
endorsed the use of a safe surgery checklist as a best practice for
reducing morbidity, mortality, and medical errors.^{57 58}
Because the use of a safe surgery checklist is a widely accepted best
practice for surgical care, we believe that the proposed structural
measure of Safe Surgery Checklist Use reflects consensus among affected
parties. We also note that The Joint Commission has included safe
surgery checklist practices among those to be used to achieve National
Patient Safety Goals adopted for 2011 for surgeries performed in
ambulatory settings and hospitals.\59\ The Safe Surgery Checklist Use
structural measure is not NQF-endorsed, and there is no NQF-endorsed
measure of safe surgery checklist use despite the broad acceptance and
widespread endorsement of this practice. Therefore, it is not feasible
or practicable to adopt an NQF-endorsed measure of safe surgery
checklist use because there is no such NQF-endorsed measure. We note
that section 1833(t)(17) of the Act does not require that each measure
we adopt for the ASC Quality Reporting Program be endorsed by a
national consensus building entity, or by the NQF specifically.
Further, section 1833(i)(7)(B) of the Act states that section
1833(t)(17) of the Act, which contains this requirement, applies to the

[[Page 42345]]

ASC Quality Reporting Program, except as the Secretary may otherwise
provide. Under this provision, the Secretary has further authority to
adopt non-endorsed measures. We note that the proposed adoption of this
measure in the ASC Quality Reporting Program is consistent with our
goal to align measures across settings because we are also proposing
the same measure for the Hospital OQR Program for CY 2014 payment
determination.
---------------------------------------------------------------------------

\55\ http://www.cspsteam.org/safesurgerychecklist/safesurgerychecklist.html.
\56\ Neily, J; Mills, PD, Young-Xu, Y. (2010). ``Association
between implementation of a Medical Team Training Program and
Surgical Mortality''. JAMA. 304 (15): 1693-1700.
\57\ Haynes, AB; Weiser, TG; Berry, WR et al (2009) ``A Surgical
Safety Checklist to Reduce Morbidity and Mortality in a Global
Population''. NEJM. 360:491-499.
\58\ Birkmeyer, JD (2010) ``Strategies for Improving Surgical
Quality--Checklists and Beyond.'' NEJM. 363: 1963-1965.
\59\ http://www.jointcommission.org/standards_information/npsgs.aspx.
---------------------------------------------------------------------------

For the CY 2015 payment determination, we are proposing that data
collection for this structural measure for ASCs would begin on July 1,
2013 and end on August 15, 2013 for the entire time period from January
1, 2012 through December 31, 2012. In other words, an ASC would report
whether their facility employed a safe surgery checklist that covered
each of the three critical perioperative periods for the entire
calendar year of 2012 during the 45-day window from July 1 through
August 15, 2013. The information for this structural measure would be
collected via an online Web-based tool that will be made available to
ASCs via the QualityNet Web site. This collection mechanism is also
used to collect structural measures and other information for other
programs, specifically for the Hospital IQR and Hospital OQR programs.
We invite public comments on our proposal to add this new
structural measure to the ASC quality measurement set and the
submission process for the CY 2015 payment determination.

(2) ASC Facility Volume Data on Selected ASC Surgical Procedures

There is substantial evidence in recent peer-reviewed clinical
literature that volume of surgical procedures, particularly of high
risk surgical procedures, is related to better patient outcomes,
including decreased surgical errors and mortality.^{60 61 62}
This may be attributable to greater experience and/or surgical skill,
greater comfort with and hence likelihood of application of
standardized best practices, and increased experience in monitoring and
management of surgical patients for the particular procedure. For this
reason, the National Quality Forum has endorsed measures of total all-
patient surgical volume for Isolated CABG and Valve Surgeries (NQF
0124), Percutaneous Coronary Intervention (PCI) (NQF
0165), Pediatric Heart Surgery (NQF 0340), Abdominal
Aortic Aneurism Repair (NQF 357), Esophageal Resection
(0361), and Pancreatic Resection (NQF 0366).
Additionally, many consumer-oriented Web sites reporting health care
quality information sponsored by States (California, New York, Texas,
Washington, Florida, Illinois, Michigan, Oregon) and private
organizations (Leapfrog Group, U.S. News & World Report) are reporting
procedure volume, in addition to provider performance on surgical
process (SCIP measures) and outcome measures (SSI, Patient Safety
Indicators, and Mortality), because it provides beneficial performance
information to consumers choosing a health care provider. The currently
NQF-endorsed measures of procedure volume (noted above) relate to
surgeries only performed in inpatient settings, and would not be
applicable to the types of procedures approved to be performed in HOPDs
and ASCs.
---------------------------------------------------------------------------

\60\ Livingston, E.H.; Cao, J ``Procedure Volume as a Predictor
of Surgical Outcomes''. JAMA. 2010;304(1):95-97.
\61\ David R. Flum, D.R.; Salem, L.; Elrod, J.B.; Dellinger,
E.P.; Cheadle, A. Chan, L. ``Early Mortality Among Medicare
Beneficiaries Undergoing Bariatric Surgical Procedures''. JAMA.
2005;294(15):1903-1908.
\62\ Schrag, D; Cramer, L.D.; Bach, P.B.; Cohen, A.M.; Warren,
J.L.; Begg, C.B '' Influence of Hospital Procedure Volume on
Outcomes Following Surgery for Colon Cancer'' JAMA. 2000; 284 (23):
3028-3035.
---------------------------------------------------------------------------

The recently issued Report to Congress entitled ``Medicare
Ambulatory Surgical Center Value-Based Purchasing Implementation Plan''
included an analysis of CY 2009 ASC claims for Medicare beneficiaries.
When stratified by specialty category, CMS identified six procedure
categories that historically constitute 98.5 percent of the total
volume of procedures performed in ASCs: Gastrointestinal, Eye, Nervous
System, Musculoskeletal, Skin, and Genitourinary. We are proposing that
ASCs submit all patient volume data on these six broad categories of
surgical procedures as a structural measure to be used for the ASC
Quality Reporting Program CY 2015 payment determination. In section
XIV.C.2.c.(2) of this proposed rule, we are also proposing that HOPDs
submit similar all patient volume data for eight broad procedure
categories.
Structural measures assess whether a provider/facility possesses
conditions for the care of patients that are associated with better
quality. Read together, section 1833(i)(7)(B) of the Act and section
1833(t)(17)(C)(i) of the Act require the Secretary, except as the
Secretary may otherwise provide, to develop measures appropriate for
the measurement of the quality of care (including medication errors)
furnished by ASCs, that reflect consensus among affected parties and,
to the extent feasible and practicable, that include measures set forth
by one or more national consensus building entities. Because surgical
volume is associated with better quality, and surgical procedures are
performed in ASCs, we believe that surgical volume is appropriate for
measuring the quality of these six categories of surgical procedures
performed in ASCs. We have previously established for other programs
that we believe consensus among affected parties can be reflected
through various means including widespread use among industry
stakeholders. We believe that the ASC Facility Volume Data on Selected
ASC Surgical Procedures structural measure reflects consensus among
affected parties as being associated with quality of surgical care
because of recent evidence published in well-respected and widely
circulated peer-reviewed clinical literature, and because of its
widespread reporting among States and private stakeholders on Web sites
featuring quality information. Because the current volume measures are
endorsed for inpatient procedures, many of which are not performed in
outpatient settings such as ASCs, it is not feasible or practicable to
utilize NQF endorsed measures of volume for ASCs. Further, section
1833(i)(7)(B) of the Act states that section 1833(t)(17) of the Act,
which contains this requirement, applies to the ASC Quality Reporting
Program, except as the Secretary may otherwise provide. Under this
provision, the Secretary has further authority to adopt non-endorsed
measures. For the CY 2015 payment determination, we are proposing that
ASCs would report these data with respect to these six categories
between the dates July 1, 2013 and August 15, 2013 with respect to the
time period January 1, 2012 through December 31, 2012. In other words,
under this proposal, an ASC would report its CY 2012 all-patient volume
data for these six categories of procedures during the 45-day window of
July 1 to August 15, 2013. The table below lists the HCPCS codes for
which hospitals would be required to report all-patient volume data.
Like the structural measures in the Hospital OQR program, data on this
proposed measure would be collected via an online Web-based tool that
will be made available to ASCs via the QualityNet Web site. This
collection mechanism is also used to collect structural measures and
other information for other programs (Hospital IQR and Hospital OQR).
We invite public comment on this proposal.
In summary, for the CY 2015 payment determination, we are proposing
to

[[Page 42346]]

retain the eight measures proposed for the CY 2014 payment
determination, if they are adopted in the final rule with comment
period, and to add two structural measures. We invite public comments
on these proposals for the CY 2015 payment determination. The proposed
measures for ASCs for CY 2015 payment determination are listed below:

Proposed ASC Program Measurement Set for the CY 2015 Payment
Determination
------------------------------------------------------------------------

-------------------------------------------------------------------------
ASC-1: Patient Burn.
ASC-2: Patient Fall.
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
Implant.
ASC-4: Hospital Transfer/Admission.
ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing.
ASC-6: Ambulatory Surgery Patients with Appropriate Method of Hair
Removal.
ASC-7: Selection of Prophylactic Antibiotic: First OR Second Generation
Cephalosporin.
ASC-8: Surgical Site Infection Rate.
------------------------------------------------------------------------

Proposed ASC Program Measurement Set for the CY 2015 Payment
Determination
------------------------------------------------------------------------

------------------------------------------------------------------------
ASC-9: Safe Surgery Checklist Use*
ASC-10: ASC Facility Volume Data on Selected ASC Surgical Procedures*
------------------------------------------------------------------------
Procedure category Corresponding HCPCS codes
------------------------------------------------------------------------
Gastrointestinal.......................... 40000 through 49999, G0104,
G0105, G0121, C9716, C9724,
C9725, 0170T.
Eye....................................... 65000 through 68999, 0186,
0124T, 0099T, 0017T, 0016T,
0123T, 0100T, 0176T, 0177T,
0186T, 0190T, 0191T, 0192T,
76510, 0099T.
Nervous System............................ 61000 through 64999, G0260,
0027T, 0213T, 0214T, 0215T,
0216T, 0217T, 0218T, 0062T.
Musculoskeletal........................... 20000 through 29999, 0101T,
0102T, 0062T, 0200T, 0201T.
Skin...................................... 10000 through 19999, G0247,
0046T, 0268T, G0127, C9726,
C9727.
Genitourinary............................. 50000 through 58999, 0193T,
58805.
------------------------------------------------------------------------
*New proposed measures for CY 2015 payment determination.

5. Proposed ASC Quality Measures for the CY 2016 Payment Determination
a. Retention of Measures Adopted for the CY 2015 Payment Determination
in the CY 2016 Payment Determination
In general, unless otherwise specified in the retirement section of
a rule, we propose to retain measures from one CY payment determination
to the next. We are proposing to retain the ten measures we are
proposing to adopt for the CY 2015 payment determination, if they are
finalized in an OPPS/ASC final rule with comment period, for the CY
2016 payment determination. We invite public comment on this proposal.
b. Proposed HAI Measure: Influenza Vaccination Coverage Among
Healthcare Personnel (HCP) (NQF 0431)
The Influenza Vaccination among Healthcare Personnel measure
assesses the percentage of healthcare personnel who have been immunized
for influenza during the flu season. The specifications for this
measure are available at http://www.cdc.gov/nhsn/PDFs/HSPmanual/HPS_Manual.pdf.
For the ASC CY 2016 payment determination, we are proposing to
adopt this NQF-endorsed HAI measure. We also are proposing to adopt
this measure for the Hospital OQR Program for the CY 2015 payment
determination. We refer readers to the discussion in section XIV.C.3.b.
of this proposed rule for a detailed description of this measure.
Read together, section 1833(i)(7)(B) of the Act and section
1833(t)(17)(C)(i) of the Act require the Secretary, except as the
Secretary may otherwise provide, to develop measures appropriate for
the measurement of the quality of care (including medication errors)
furnished by ASCs, that reflect consensus among affected parties and,
to the extent feasible and practicable, that include measures set forth
by one or more national consensus building entities. We believe this
measure is appropriate for measuring quality of care in ASCs due to the
significant impact of HCP influenza vaccination on the spread of
influenza among patients. Furthermore, we believe that this measure
meets the consensus requirement and the requirement that it be set
forth by a national consensus building entity because it is endorsed by
the NQF.
We are proposing that ASCs use the NHSN infrastructure and protocol
to report the measure for ASC Quality Reporting Program purposes.
Collection of data via the NHSN for this measure will begin with
immunizations from October 1, 2013 to March 31, 2014 for the CY 2016
payment determination. We invite public comment on our proposal to
adopt this HAI measure into the ASC Quality Reporting Program for the
CY 2016 payment determination.
In summary, for the CY 2016 payment determination, we are proposing
to retain the ten measures that we adopt for the CY 2015 payment
determination (if these proposals are finalized in a final rule) and to
add one NHSN HAI measure. The proposed measures for ASCs for the CY
2016 payment determination are listed below:

Proposed ASC Program Measurement Set for the CY 2016 Payment
Determination
------------------------------------------------------------------------

------------------------------------------------------------------------
ASC-1: Patient Burn.
ASC-2: Patient Fall.
ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong
Implant.
ASC-4: Hospital Transfer/Admission.
ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing.
ASC-6: Ambulatory Surgery Patients with Appropriate Method of Hair
Removal.

[[Page 42347]]

ASC-7: Selection of Prophylactic Antibiotic: First OR Second Generation
Cephalosporin.
ASC-8: Surgical Site Infection Rate.
ASC-9: Safe Surgery Checklist Use.
ASC-10: ASC Facility Volume Data on Selected ASC Surgical Procedures.
------------------------------------------------------------------------
Procedure category Corresponding HCPCS codes
------------------------------------------------------------------------
Gastrointestinal.......................... 40000 through 49999, G0104,
G0105, G0121, C9716, C9724,
C9725, 0170T.
Eye....................................... 65000 through 68999, 0186,
0124T, 0099T, 0017T, 0016T,
0123T, 0100T, 0176T, 0177T,
0186T, 0190T, 0191T, 0192T,
76510, 0099T.
Nervous System............................ 61000 through 64999, G0260,
0027T, 0213T, 0214T, 0215T,
0216T, 0217T, 0218T, 0062T.
Musculoskeletal........................... 20000 through 29999, 0101T,
0102T, 0062T, 0200T, 0201T.
Skin...................................... 10000 through 19999, G0247,
0046T, 0268T, G0127, C9726,
C9727.
Genitourinary............................. 50000 through 58999, 0193T,
58805.
------------------------------------------------------------------------
ASC-11: Influenza Vaccination Coverage among Healthcare Personnel.*
------------------------------------------------------------------------
*New proposed measure for CY 2016 payment determination.

6. ASC Measure Topics for Future Consideration
Below is a list of future measurement areas that we are considering
for future ASC Quality Reporting Program payment determinations for
which we seek comment.
In particular, we seek comment on the inclusion of Patient
Experience of Care Measures in the ASC Quality Reporting Program
measure set for a future payment determination, such as existing
Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys
for clinicians/groups and the CAHPS Surgical Care Survey, sponsored and
submitted by the American College of Surgeons (ACS) and the Surgical
Quality Alliance (SQA). We also, in particular, seek comment on the
inclusion of procedure-specific measures for cataract surgery,
colonoscopy and endoscopy, and for measures of Anesthesia Related
Complications in the ASC Quality Reporting Program measure set.

Measures and Measurement Topics Under Consideration for Future Payment
Determinations
------------------------------------------------------------------------

---------------------------------------------------------------------------
Patient Experience of Care:
Consumer Assessment of Healthcare Providers and Systems (CAHPS)
surveys for clinicians/groups.
CAHPS Surgical Care Survey.
Procedure Specific Measures:
Colonoscopy and other Endoscopy measures.
Cataract Surgery measures.
Anesthesia Related Complications:
Death.
Cardiac Arrest.
Perioperative Myocardial Infarction.
Anaphylaxis.
Hyperthermia.
Transfusion Reaction.
Stroke, Cerebral Vascular Accident, or Coma following anesthesia.
Visual Loss.
Medication Error.
Unplanned ICU admission.
Patient intraoperative awareness.
Unrecognized difficult airway.
Reintubation.
Dental Trauma.
Perioperative aspiration.
Vascular access complication, including vascular injury or
pneumothorax.
Pneumothorax following attempted vascular access or regional
anesthesia.
Infection following epidural or spinal anesthesia.
Epidural hematoma following spinal or epidural anesthesia.
High Spinal.
Postdural puncture headache.
Major systemic local anesthetic toxicity.
Peripheral neurologic deficit following regional anesthesia.
Infection following peripheral nerve block.
Additional Future Measurement Topics:
NQF Serious Reportable Events in Healthcare.
Medication administration variance.
Medication reconciliation.
Venous thromboembolism measures: outcome/assessment/prophylaxis.
Presence of Physician during Entire Recovery Period.
Post-discharge follow up.
Post-discharge ED visit within 72 hours.
------------------------------------------------------------------------

[[Page 42348]]

We invite public comment on these quality measures and measurement
topics so that we may consider proposing to adopt them for future ASC
Quality Reporting Program payment determinations beginning with the CY
2015 payment determination. We also are seeking suggestions for
additional measures and rationales for the ASC Quality Reporting
Program that are not listed in the table above.
7. Technical Specification Updates and Data Publication
a. Maintenance of Technical Specifications for Quality Measures
We are proposing to provide technical specifications, and in some
cases, links to technical specifications hosted on external third party
Web sites, for the ASC Quality Reporting Program measure in a
Specifications Manual, to be posted after publication of the CY 2012
OPPS/ASC final rule with comment period, on the CMS QualityNet Web site
at http://www.QualityNet.org. Currently, the specifications for the
proposed ASC measures for the CY 2014, CY 2015 and CY 2016 payment
determinations, with the exception of the two structural measures, can
be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf; http://www.cms.gov/apps/ama/license.asp?file=/pqrs/downloads/2011_PhysQualRptg_MeasureSpecificationsManual_033111.pdf; http://www.cdc.gov/nhsn/psc.html; and http://www.cdc.gov/nhsn/PDFs/HSPmanual/HPS_Manual.pdf.
The specifications for the two structural measures are included in the
discussion above and in the table of measures proposed for the CY 2015
payment determination.
We are proposing to maintain the technical specifications for the
measures adopted for the ASC quality reporting program by updating this
Specifications Manual and including detailed instructions and
calculation algorithms as appropriate. In some cases where the
specifications are available elsewhere, we may include links to Web
sites hosting technical specifications. We currently use this same
process for Hospital OQR Program measures, as discussed above in
section XIV.A.3.a. of this proposed rule. We are proposing to follow
the same technical specification maintenance process for the ASC
Quality Reporting Program measures and we invite public comments on
this proposal.
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766
through 68767), we established a subregulatory process for updates to
the technical specifications that we use to calculate Hospital OQR
Program measures. This process is used when changes to the measure
specifications are necessary due to changes in scientific evidence or
other substantive changes, thereby giving CMS the option to seek re-
endorsement of that measure. We note that NQF endorsement of an OQR
measure is not required under sections 1833(i)(2)(D)(iv), (i)(7) or
(t)(17) of the Act. The legal standard for adopting Hospital OQR
measures is consensus among affected parties, and to the extent
feasible and practicable, measures that are set forth by a consensus
building entity. The legal standard for adopting ASC measures is this
same standard, except as the Secretary may otherwise provide. Changes
of this nature to measures adopted for the ASC Quality Reporting
Program may not coincide with the timing of our regulatory actions, but
nevertheless require inclusion in the measure specifications so that
measures are calculated based on the most up-to-date scientific
standards and, in some instances, consensus standards.
For the Hospital OQR Program, we indicated that notification of
changes to the measure specifications is available on the QualityNet
Web site, http://www.QualityNet.org, and in the Hospital OQR Program
Specifications Manual and would occur no less than 3 months before any
changes become effective for purposes of reporting under the Hospital
OQR Program. The Hospital OQR Program Specifications Manual is released
every 6 months and addenda are released as necessary providing at least
3 months of advance notice for substantial 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. We are proposing to follow the same subregulatory
process for the ASC Quality Reporting Program for updates to the
technical specifications. We invite public comments on this proposal.
b. Publication of ASC Quality Reporting Program Data
Section 1833(t)(17)(E) of the Act requires that the Secretary
establish procedures to make data collected under the Hospital OQR
Program available to the public. It also states that such procedures
must ensure that a hospital has the opportunity to review the data that
are to be made public with respect to the hospital prior to such data
being made public. These requirements under section 1833(t)(17)(E) of
the Act also apply to the ASC Quality Reporting Program except as the
Secretary may otherwise provide. We are proposing to make data that an
ASC has submitted for the ASC Quality Reporting Program available on a
CMS Web site after providing ASCs an opportunity to preview the data to
be made public. We are proposing that these data would be displayed at
the CMS Certification Number (CCN) level. Publishing this information
encourages beneficiaries to work with their doctors and ASCs to discuss
the quality of care ASCs provide to patients, thereby providing an
additional incentive to ASCs to improve the quality of care that they
furnish. We intend to propose more detail on the publication of data in
a later rulemaking. We solicit public comment on these proposed
processes of making ASC quality data available to the public.
8. Proposed Requirements for Reporting of ASC Quality Data for the CY
2014 Payment Determination
To participate in the ASC Quality Reporting Program for the CY 2014
payment determination, we are proposing that ASCs must meet data
collection and data submission requirements. We intend to propose
administrative requirements, data validation and data completeness
requirements, reconsideration and appeals processes, and CY 2015
payment determination reporting requirements in the CY 2013 OPPS/ASC
proposed rule with comment period.
a. Proposed Data Collection and Submission Requirements for the
Proposed Claims-Based Measures
We are proposing that, to be eligible for the full CY 2014 ASC
annual payment update, ASCs would be required to submit complete data
on individual quality measures through a claims-based reporting
mechanism by submitting the appropriate QDCs on the ASC's Medicare
claims. For the CY 2014 payment determination, we are proposing to
utilize Medicare fee-for-service ASC claims for services furnished
between January 1, 2012 and December 31, 2012.
We are proposing to consider an ASC as participating in the ASC
Quality Reporting Program for CY 2014 payment determination if the ASC
includes QDCs specified for the program on their CY 2012 claims
relating to the proposed measures if finalized. As no determinations
will be made affecting payment until the CY 2014 annual payment update,
we are proposing this approach as to reduce ASC burden. We intend to
provide additional details regarding participation notification and

[[Page 42349]]

other administrative requirements in CY 2013 rulemaking.
We are proposing that data completeness for claims-based measures
would be determined by comparing the number of claims meeting measure
specifications that contain the appropriate QDCs with the number of
claims that would meet measure specifications, but did not have the
appropriate QDCs on the submitted claim. We intend to propose how we
will assess data completeness for claims-based measures in the CY 2013
OPPS/ASC proposed rule. We request public comment on these proposals
and are specifically interested in receiving public comment on what
constitutes complete data in regard to our proposed ASC claims-based
measures utilizing QDCs and methods to assess completeness.
b. Proposed Data Submission Deadlines for the Proposed Surgical Site
Infection Rate Measure
As discussed above, we are proposing to adopt a HAI measure,
Surgical Site Infection Rate, for the CY 2014 payment determination. We
are proposing to use the data submission and reporting standard
procedures that have been set forth by the CDC for NHSN participation
in general and for submission of this measure to NHSN. We refer readers
to the CDC's NHSN Web site (http://www.cdc.gov/nhsn) for detailed data
submission and reporting procedures. Our proposal seeks to reduce ASC
burden by aligning CMS data submission and reporting procedures with
NHSN procedures currently utilized by healthcare providers and
suppliers. The submission timeframes for the CY 2014 payment
determination that we are proposing to use for the proposed Surgical
Site Infection Rate measure are shown below. ASCs must submit their
quarterly data to NHSN for ASC Quality Data Reporting purposes within
the date intervals shown in the table below (any updates to this
schedule will be posted on the QualityNet Web site).

Proposed Submission Timeframe for the Proposed Surgical Site Infection
Rate Measure for the CY 2014 Payment Determination
------------------------------------------------------------------------
Final submission
deadline for ASC
CY 2013 infection events CDC-NHSN collection quality reporting
and quarterly report CY 2014 payment
determination
------------------------------------------------------------------------
Q1 (Jan 1 to Mar 31, 2013).. January 31st to August 1, 2013
August 1st.
Q2 (Apr 1 to Jun 30, 2013).. April 30th to November 1, 2013
November 1st.
------------------------------------------------------------------------

We request public comments on these proposals.

XV. Proposed Changes to Whole Hospital and Rural Provider Exceptions to
the Physician Self-Referral Prohibition: Exception for Expansion of
Facility Capacity; and Proposed Changes to Provider Agreement
Regulations Relating to Patient Notification Requirements

A. Background

Section 1877 of the Act, also known as the physician self-referral
law: (1) prohibits a physician from making referrals for certain
``designated health services'' (DHS) payable by Medicare to an entity
with which the physician (or an immediate family member) has a
financial relationship (ownership or compensation), unless an exception
applies; and (2) prohibits the entity from filing claims with Medicare
(or billing another individual, entity, or third party payer) for those
DHS furnished as a result of a prohibited referral. The Act establishes
a number of specific exceptions and grants the Secretary the authority
to create regulatory exceptions that pose no risk of program or patient
abuse.
Section 1877(d) of the Act sets forth additional exceptions related
to ownership or investment interests held by a physician (or an
immediate family member of a physician) in an entity that furnishes
DHS. Section 1877(d)(2) of the Act provides an exception for ownership
or investment interests in rural providers. In order for an entity to
qualify for the exception, the DHS must be furnished in a rural area
(as defined in section 1886(d)(2) of the Act) and substantially all of
the DHS furnished by the entity must be furnished to individuals
residing in a rural area. Section 1877(d)(3) of the Act provides an
exception, known as the ``whole hospital'' exception, for ownership or
investment interests in a hospital located outside of Puerto Rico,
provided that the referring physician is authorized to perform services
at the hospital and the ownership or investment interest is in the
hospital itself (and not merely in a subdivision of the hospital).

B. Changes Made by the Affordable Care Act

1. Provisions Relating to Exceptions to Ownership and Investment
Prohibition (Section 6001(a) of the Affordable Care Act)
Section 6001(a) of the Affordable Care Act amended the whole
hospital and rural provider exceptions to impose additional
restrictions on physician ownership or investment in hospitals. The
statute defines a ``physician owner or investor'' in a hospital as a
physician or immediate family member of a physician who has a direct or
indirect ownership or investment interest in a hospital. We will refer
to hospitals with such ``physician owners or investors'' as
``physician-owned hospitals.''
We addressed section 6001(a) of the Affordable Care Act in the CY
2011 OPPS/ASC final rule with comment period (75 FR 71800). In Sec.
411.362, we implemented most of the requirements of section 6001(a) of
the ACA, including patient safety requirements. In sections XV.B.2. and
C. of this proposed rule, we address the process for a hospital to
request an exception to the prohibition on expansion of facility
capacity under section 6001(a)(3) of the Affordable Care Act. In
section D. of this proposed rule, we address related patient
notification requirements in the provider agreement regulations.
2. Provisions of Section 6001(a)(3) of the Affordable Care Act
The amended whole hospital and rural provider exceptions provide
that a hospital may not increase the number of operating rooms,
procedure rooms, and beds beyond that for which the hospital was
licensed on March 23, 2010 (or, in the case of a hospital that did not
have a provider agreement in effect as of this date, but did have a
provider agreement in effect on December 31, 2010, the date of effect
of such agreement). Section 6001(a)(3) of the Affordable Care Act added
new section 1877(i)(3)(A)(i) of the Act to set forth that the Secretary
shall establish and implement an exception process to the prohibition
on expansion of facility capacity. Referrals are prohibited if made by
physician owners or investors after facility expansion and prior to the
Secretary granting an exception. Exceptions for expanding

[[Page 42350]]

facility capacity will protect only those referrals made after the
exception is granted. In this proposed rule, we set forth proposed
regulations for this process at Sec. 411.362(c) and related
definitions at Sec. 411.362(a).
The proposed regulations at Sec. 411.362(c) set forth the process
for a hospital to request an exception. Proposed new Sec.
411.362(c)(2) outlines the requirements for an applicable hospital
request and Sec. 411.362(c)(3) outlines the requirements for a high
Medicaid facility request. These terms are defined at sections
1877(i)(3)(E) and 1877(i)(3)(F) of the Act. The statute is clear that
an applicable hospital may apply for an exception up to once every 2
years. Using our rulemaking authority under sections 1871 and
1877(i)(3)(A)(i) of the Act, we are proposing to interpret the statute
to impose the same 2-year frequency limit to apply also to high
Medicaid facilities as discussed in section XV.C.2. of this proposed
rule.
We are proposing to set forth the elements required for a complete
request for an exception under proposed new Sec. 411.362(c)(4). The
opportunity for community input (required by section 1877(i)(3)(A)(ii)
of the Act) and timing of a complete request are described in proposed
Sec. 411.362(c)(5). Under proposed Sec. 411.362(c)(5), we are
proposing to provide an opportunity for individuals and entities in the
community in which the hospital is located to provide input with
respect to the hospital's request for an exception. For purposes of
this proposed rule, when the statute refers to an ``application,'' we
use the term ``request.''
Because section 1877(i)(3)(D) of the Act provides that any increase
in the number of operating rooms, procedure rooms, and beds for which a
hospital is licensed pursuant to being granted an exception may occur
only in facilities on the hospital's main campus, we are proposing a
definition of the ``main campus of the hospital'' at Sec. 411.362(a),
as discussed below. Additionally, we are proposing a definition of the
``baseline number of operating rooms, procedure rooms, and beds'' for
purposes of section 1877(i)(3)(C)(ii) of the Act.
Section 1877(i)(3)(H) of the Act provides that the Secretary shall
publish the final decision with respect to an application in the
Federal Register no later than 60 days after receiving a complete
application. Under section XV.C.4. of this proposed rule, below, we
discuss our proposal for publishing decisions in the Federal Register
as well as on the CMS Web site.
Under section 1877(i)(3)(A) of the Act, the Secretary must
promulgate regulations concerning the process for a hospital to apply
for an exception by January 1, 2012, and implement this process on
February 1, 2012. We anticipate an effective date of January 1, 2012,
for these proposed regulations. Below, we set out our proposals related
to the exception process in greater detail.

C. Proposed Changes Relating to the Process for an Exception to the
Prohibition on Expansion of Facility Capacity

In order to conform our regulations to the amendments made to the
rural provider and whole hospital exceptions by section 6001(a)(3) of
the Affordable Care Act, we are proposing to add two definitions in
Sec. 411.362(a) and a new Sec. 411.362(c) to establish the process by
which an applicable hospital or high Medicaid facility may request an
exception to the prohibition on expansion of facility capacity. We are
proposing to define the terms ``baseline number of operating rooms,
procedure rooms, and beds'' and ``main campus of the hospital''. The
process we are proposing sets forth the relevant data sources and the
elements of a complete request for an exception.
1. Applicable Hospital
Below we separately discuss each of the statutory criteria that a
hospital must satisfy to qualify as an ``applicable hospital''. We are
proposing the processes by which a hospital can determine whether it
satisfies each criterion. The proposed data requirements for each
criterion are further discussed in each section below.
We are proposing that data from the CMS Healthcare Cost Report
Information System (HCRIS) be used to determine whether a hospital
satisfies the inpatient admission, bed capacity, and bed occupancy
criteria. We currently consider HCRIS to contain a sufficient amount of
data for a particular fiscal year if HCRIS contains data from at least
6,100 hospitals for that fiscal year. Therefore, we are proposing that
HCRIS must contain data from at least 6,100 hospitals for a particular
year in order for that year's data to be used under the exception
process. If HCRIS does not contain sufficient data for that year, data
from the most recent year(s) that satisfy the threshold should be used.
CMS will post the average percent of total inpatient Medicaid
admissions per county, the average bed capacity per State, the national
average bed capacity, and the average bed occupancy per State on the
CMS Web site at: http://www.cms.gov/physicianselfreferral/85_physician_owned_hospitals.asp. Hospitals can access these data to
assess whether they satisfy the respective criteria to qualify as an
applicable hospital. CMS will make a reasonable effort to ensure that
the data contained in HCRIS are correct and complete at the time of
disclosure. We are soliciting public comment on proposing and
justifying alternative data sources other than HCRIS that could result
in more accurate determinations as to whether a hospital satisfies the
relevant criteria.
a. Percentage Increase in Population
Section 1877(i)(3)(E)(i) of the Act provides that an applicable
hospital means a hospital that is located in a county in which the
percentage increase in the population during the most recent 5-year
period (as of the application date) is at least 150 percent of the
percentage increase in the population growth of the State in which the
hospital is located during that period, as estimated by the Bureau of
the Census.
To determine the percentage increase in population in the county
and State in which the hospital is located, we are proposing at Sec.
411.362(c)(2)(i) that the hospital use population estimates provided by
the Bureau of the Census. If the hospital is located in an area
referred to by the Bureau of the Census as a county equivalent area,
such as an independent city, borough, or census area, the hospital
should use the Bureau of the Census estimates for the county equivalent
area in which it is located. For the remainder of this subsection,
``county'' refers to both a county and a county equivalent area.
We recognize that the Bureau of the Census may not provide county
and State population size estimates that are current as of the date
that a hospital submits its request for an exception. We are proposing
that a hospital should use only the most recent estimates available to
perform the necessary calculations. For example, if a hospital submits
a request for an exception in 2012, but the most recent year for which
the Bureau of the Census has estimates is 2010, the hospital should
perform the necessary calculations using estimates for years 2010 and 5
years prior.
We are proposing also that the hospital use county and State
population estimates for the same years. For example, if a hospital
submits a request for an exception in 2012 and the most recent year for
which the Bureau of the Census has State and county population
estimates is 2011 and 2010, respectively, the hospital should perform
the necessary calculations

[[Page 42351]]

using estimates for years 2010 and 5 years prior. We are proposing to
review a request based on the population estimates available as of the
date that a hospital submits its request even if the Bureau of the
Census updates its estimates after the hospital submits its request and
prior to our decision.
b. Inpatient Admissions
Section 1877(i)(3)(E)(ii) of the Act provides that an applicable
hospital means a hospital that has an annual percent of total inpatient
admissions under Medicaid that is equal to or greater than the average
percent with respect to such admissions for all hospitals located in
the county in which the hospital is located. We are proposing at Sec.
411.362(c)(2)(ii) to require hospitals to calculate inpatient
admissions using filed hospital cost report discharge data. We are
proposing that, in calculating the hospital's annual percent of total
Medicaid inpatient admissions, the hospital should divide the number of
discharges for the year that are paid for under Medicaid by the total
number of discharges for the year paid for by any governmental or
private payor. We are soliciting public comment on other data sources
that could be used to provide an accurate estimate of the annual
percent of total Medicaid inpatient admissions for the applicable
hospital and for all hospitals in the same county.
The statute does not specify the number of years for which the
hospital's annual percent of total inpatient admissions under Medicaid
must be equal to or greater than the average percent with respect to
such admissions for all hospitals located in the county in which the
hospital is located. We are proposing at Sec. 411.362(c)(2)(ii) that a
hospital must satisfy this criterion for each of the 3 most recent
fiscal years for which data are available as of the date the hospital
submits a request. We invite public comment on whether 3 years of data
are sufficient to indicate a legitimate need by the hospital to
increase its number of operating rooms, procedure rooms, and beds and,
if not, how many years of data we should consider in evaluating a
request for an exception.
We are proposing at Sec. 411.362(c)(2)(ii) that the hospital would
estimate its annual percentage of total inpatient admissions under
Medicaid. The hospital would reference its own filed cost reports for
the 3 most recent fiscal years for which data are available. We are
proposing that we would review a request based on the data available as
of the date the hospital submits its request. We plan to issue guidance
to further address the process for a hospital to estimate its annual
percentage of total inpatient admissions under Medicaid. The guidance
will also explain how CMS will determine and provide the average
percentages of inpatient admissions under Medicaid for each county.
c. Nondiscrimination
Section 1877(i)(3)(E)(iii) of the Act provides that an applicable
hospital does not discriminate against beneficiaries of Federal health
care programs and does not permit physicians practicing at the hospital
to discriminate against such beneficiaries. We are proposing to
incorporate this requirement at Sec. 411.362(c)(2)(iii) of the
regulations.
d. Bed Capacity
Section 1877(i)(3)(E)(iv) of the Act provides that an applicable
hospital means a hospital that is located in a State in which the
average bed capacity in the State is less than the national average bed
capacity. The statute does not specify a time period over which a
State's average bed capacity must be less than the national average bed
capacity. We are proposing at Sec. 411.362(c)(2)(iv) that the State
average bed capacity must be less than the national average bed
capacity for each of the 3 most recent fiscal years for which data are
available as of the date that a hospital submits its request. We invite
public comment on whether 3 years of data are sufficient to indicate a
legitimate need by the hospital to increase its number of operating
rooms, procedure rooms, and beds and, if not, how many years of data we
should consider in evaluating any request for an exception.
Under our proposed process, CMS would use filed hospital cost
reporting data to determine State and national average bed capacities.
We plan to issue guidance explaining how CMS will determine and provide
the average bed capacities. We are proposing that we would review a
request based on the data available as of the date a hospital submits
its request.
e. Bed Occupancy
Section 1877(i)(3)(E)(v) of the Act provides that an applicable
hospital means a hospital that has an average bed occupancy rate that
is greater than the average bed occupancy rate in the State in which
the hospital is located. The statute does not specify the time period
over which the hospital's average bed occupancy rate must be greater
than the State average bed occupancy rate. We are proposing at Sec.
411.362(c)(2)(v) that the hospital's bed occupancy rate must be greater
than the State average bed occupancy rate for each of the 3 most recent
fiscal years for which data are available as of the date that a
hospital submits its request. We invite public comment on whether 3
years of data are sufficient to indicate a legitimate need by the
hospital to increase the number of its operating rooms, procedure
rooms, and beds and, if not, how many years of data we should consider
in evaluating any request for an exception.
We are proposing at Sec. 411.362(c)(2)(v) that the hospital use
filed hospital cost reporting data to calculate its own average bed
occupancy rate. We plan to issue guidance explaining how the hospital
can calculate its bed occupancy rate. The guidance would also explain
how CMS will determine and provide the State bed occupancy rates. We
are proposing that we would review a request based on the data
available as of the date that the hospital submits its request.
2. High Medicaid Facility
Below we separately discuss each of the statutory criteria that a
hospital must satisfy to qualify as a ``high Medicaid facility.'' We
are proposing the processes by which a hospital can determine whether
it satisfies each criterion. The proposed data requirements for each
criterion are further discussed in the sections below.
As discussed in section XV.C.1. of this proposed rule, we currently
consider HCRIS to contain a sufficient amount of data for a particular
fiscal year once HCRIS contains data from at least 6,100 hospitals for
that year. Therefore, we are proposing that HCRIS must contain data
from at least 6,100 hospitals for a particular year in order for that
year's data to be used under the exception process. If HCRIS does not
contain sufficient data for that year, data from the most recent
year(s) that satisfies the threshold should be used.
a. Number of Hospitals in County
Section 1877(i)(3)(F)(i) of the Act provides that a high Medicaid
facility means a hospital that is not the sole hospital in a county. We
are proposing to incorporate this requirement into the regulations at
Sec. 411.362(c)(3)(i).
b. Inpatient Admissions
Section 1877(i)(3)(F)(ii) of the Act provides that a high Medicaid
facility means a hospital that, with respect to each of the 3 most
recent years for which data are available, has an annual percent of
total inpatient admissions under Medicaid that is estimated to be
greater than such percent with respect to such admissions for any other

[[Page 42352]]

hospital located in the county in which the hospital is located. We are
proposing to incorporate this requirement at Sec. 411.362(c)(3)(ii) of
the regulations.
We are proposing at Sec. 411.362(c)(3)(ii) that the hospital
estimate its annual percentages of total inpatient admissions under
Medicaid for each of the 3 most recent fiscal years for which data are
available. We also are proposing that the hospital estimate the annual
percentage of such admissions for all other hospitals located in the
county in which the hospital is located for each of the 3 most recent
fiscal years for which data are available. We are proposing that we
would review a request based on the data available as of the date that
the hospital submits its request.
We are proposing to require the applicant hospital to use filed
hospital cost reporting discharge data as a proxy for inpatient
admissions under Medicaid. CMS will post the data necessary for a
hospital to calculate the annual percentage of total inpatient
admissions under Medicaid for all other hospitals located in the county
in which the hospital is located on the CMS Web site at: http://www.cms.gov/physicianselfreferral/85_physician_owned_hospitals.asp.
We plan to issue guidance that further describes the process for
hospitals to estimate inpatient admissions under Medicaid.
c. Nondiscrimination
Section 1877(i)(3)(F)(iii) of the Act provides that a high Medicaid
facility does not discriminate against beneficiaries of Federal health
care programs and does not permit physicians practicing at the hospital
to discriminate against such beneficiaries. We are proposing to
incorporate this requirement at Sec. 411.362(c)(3)(iii) of the
regulations.
3. Procedure for Submitting a Request
We are not creating an application form that a hospital must
complete to apply for an exception to the prohibition on expansion of
facility capacity. Rather, we are proposing that a hospital submit to
CMS a request that includes the information and documentation set forth
in proposed Sec. 411.362(c)(4)(ii).
We are proposing that each request must include: (i) the name and
address, National Provider Identification number(s) (NPI), Tax
Identification Number(s) (TIN), and CMS Certification Number(s) (CCN)
of the hospital; (ii) the county in which the hospital is located; and
(iii) the name, title, address, and daytime telephone number of a
contact person who will be available to discuss the request with CMS on
behalf of the hospital. Each request must include a clear statement as
to whether the hospital is requesting an exception as an applicable
hospital or a high Medicaid facility. We are proposing that each
request submitted by a hospital must include a clear explanation of how
it satisfies the criteria using the information discussed in sections
XV.C.1. or 2. of this proposed rule. This includes performing,
recording, and submitting all calculations necessary to submit a
complete request. The hospital's request must state that it does not
discriminate against beneficiaries of Federal health care programs and
does not permit physicians practicing at the hospital to discriminate
against such beneficiaries. Finally, we encourage hospitals to clearly
label all documentation submitted with a request and indicate the
criteria for which the documentation provides supporting information.
We are proposing at Sec. 411.362(c)(4)(ii)(E) that each request
must include documentation supporting the hospital's calculation of the
hospital's baseline number of operating rooms, procedure rooms, and
beds as defined at section 1877(i)(3)(C)(iii) of the Act; the
hospital's number of operating rooms, procedure rooms, and beds for
which the hospital is licensed as of the date that the hospital submits
its request; and the additional number of operating rooms, procedure
rooms, and beds by which the hospital requests to expand.
Finally, we are proposing at Sec. 411.362(c)(4)(iii) that each
request must include a certification signed by an authorized
representative of the hospital attesting that all of the information
provided is true and correct to the best of his or her knowledge and
belief.
We are proposing at Sec. 411.362(c)(4)(i) that a hospital must
either mail an original and one copy of its request to CMS or submit
its request electronically. If a hospital submits its request
electronically, the hospital must also submit an original, hard copy of
the required certification.
4. Community Input
Section 1877(i)(3)(A)(ii) of the Act provides that individuals and
entities in the community in which the applicable hospital is located
shall have an opportunity to provide input on the applicable hospital's
request for an exception to the prohibition against facility expansion.
We are proposing to incorporate this provision in proposed Sec.
411.362(c)(5) of the regulations. We are proposing that the community
input must take the form of written comments. In addition, using our
rulemaking authority under sections 1871 and 1877(i)(3)(A)(i) of the
Act, we are proposing that individuals and entities in the community in
which a high Medicaid facility is located may have the same opportunity
to submit written comments.
We are proposing at Sec. 411.362(c)(5) that a hospital must
disclose on any public Web site for the hospital that it is requesting
an exception. The notice should be accessible to the public and should
remain posted from the time a request is submitted to CMS until a
decision is finalized by CMS. Once CMS has received the statements,
certifications, and documentation required for a hospital's request,
CMS will report that the hospital is requesting an exception on the CMS
Hospital Listserv and will post the hospital's request for an exception
on the CMS Web site. For specific information on how to subscribe to
the CMS Hospital Listserv, please access the CMS Web site at http://www.cms.gov/MLNProducts/downloads/MailingLists_FactSheet.pdf. In
addition, we are proposing that a notice of the hospital's request will
be published in the Federal Register. We are proposing at Sec.
411.362(c)(5) to allow individuals and entities in the community 30
days from the date of the notice's publication in the Federal Register
to submit written comments.
Examples of community input include documentation demonstrating
that the hospital does not satisfy one or more of the data criteria or
that the hospital discriminates against beneficiaries. These are
examples only; we are not restricting the types of community input that
may be submitted. We are proposing at Sec. 411.362(c)(5) that written
comments must be submitted by mail or electronically to CMS.
We are proposing at Sec. 411.362(c)(5)(i) that we will consider a
request complete if CMS does not receive any written comments during
the 30-day period after notice of the hospital's request is published
in the Federal Register.
If CMS receives written comments, CMS will notify the hospital in
writing. We are proposing at Sec. 411.362(c)(5)(ii) to allow the
hospital 30 days after CMS notifies the hospital of the written
comments to submit information and documentation that rebut the written
comments. We will consider the request complete at the end of the 30-
day period provided for the hospital's rebuttal, regardless of whether
the hospital

[[Page 42353]]

submits additional information or documentation. We reserve the right
to perform our own calculations based on a review of the material
submitted and of information generally available to CMS.
5. Permitted Increase
Section 1877(i)(3)(C)(i) of the Act provides that a hospital
granted an exception from the Secretary may increase the number of
operating rooms, procedure rooms, and beds for which the hospital is
licensed above its baseline number of operating rooms, procedure rooms,
and beds. If the hospital has been granted a previous exception from
the Secretary, the hospital may increase above the number of operating
rooms, procedure rooms, and beds for which the hospital is licensed
after application of the most recent increase under such an exception.
a. Amount of Permitted Increase
Section 1877(i)(3)(C)(ii) of the Act provides that the Secretary
shall not permit an increase in the number of operating rooms,
procedure rooms, and beds for which an applicable hospital is licensed
to the extent such increase would result in the number of operating
rooms, procedure rooms, and beds for which the applicable hospital is
licensed exceeding 200 percent of the baseline number of operating
rooms, procedure rooms, and beds of the applicable hospital. We are
proposing to incorporate this provision at Sec. 411.362(c)(6)(i) of
the regulations.
Using our rulemaking authority under sections 1871 and
1877(i)(3)(A)(i) of the Act, we are proposing to similarly limit the
increase in the number of operating rooms, procedure rooms, and beds
for which a high Medicaid facility may request an exception. We are
soliciting public comment on whether the proposed limit would be
sufficient to balance the intent of the general prohibition on
expansion with the purpose of the exception process to provide the
opportunity to expand in areas where a sufficient need for access to
high Medicaid facilities is demonstrated.
A hospital must determine its baseline facility capacity to ensure
that an expansion is within the limits set forth at section
1877(i)(3)(C)(ii) of the Act and to submit a complete request. Section
1877(i)(3)(C)(iii) of the Act defines the ``baseline number of
operating rooms, procedure rooms, and beds'' as the number of operating
rooms, procedure rooms, and beds for which the applicable hospital is
licensed as of [March 23, 2010] (or, in the case of a hospital that did
not have a provider agreement in effect as of such date but does have
such an agreement in effect on December 31, 2010, the effective date of
such provider agreement). We are proposing to incorporate this
definition, with the clarification that it also applies to high
Medicaid facilities, at Sec. 411.362(a) of the regulations.
b. Location of Permitted Increase
Section 1877(i)(3)(D) of the Act provides that any increase in the
number of operating rooms, procedure rooms, and beds for which an
applicable hospital is licensed may occur only in facilities on the
main campus of the applicable hospital. We are proposing to incorporate
this provision at proposed Sec. 411.362(c)(6)(ii) of the regulations.
We are proposing to define the term ``main campus'' as the term
``campus'' is defined at Sec. 413.65(a)(2). Using our rulemaking
authority under sections 1871 and 1877(i)(3)(A)(i) of the Act, we are
proposing that, with respect to high Medicaid facilities, the
limitation on expansion of hospital capacity, as set forth at section
1877(i)(1)(B) of the Act, similarly applies to the number of operating
rooms, procedure rooms, and licensed beds on the ``campus'' of the high
Medicaid facility.
6. Decisions
Section 1877(i)(3)(H) of the Act states that the Secretary shall
publish in the Federal Register the final decision with respect to an
application for an exception to the prohibition against facility
expansion not later than 60 days after receiving a complete
application. We are proposing to codify this provision at Sec.
411.362(c)(7). To facilitate access to decisions, we are proposing to
post our decisions on the CMS Web site as well. The posted information
will include the hospital's name, address, county, and our final
decision. If an exception is granted under this section, we will also
post the number of operating rooms, procedure rooms, and beds by which
the hospital may expand under the granted exception. We believe that
posting decisions on the CMS Web site will enable us to inform the
public and the affected community of our decisions in a timely manner
and in a centralized location.
7. Limitation on Review
Section 1877(i)(3)(I) of the Act provides that there shall be no
administrative or judicial review of the process, either under section
1869, section 1878, or otherwise. We incorporated this limitation on
review at proposed Sec. 411.362(c)(8) of the regulations. We interpret
this limitation on review to mean that CMS' decision with respect to
whether a hospital qualifies for an exception is not reviewable.
8. Frequency of Request
Section 1877(i)(3)(B) of the Act provides that the exception
process shall permit an applicable hospital to apply for an exception
up to once every 2 years. We are incorporating this provision at Sec.
411.362(c)(1). Using our authority under sections 1871 and 1877 of the
Act, we similarly are proposing to permit a high Medicaid facility to
submit a request for an exception up to once every 2 years from the
date of a CMS decision on the hospital's most recent request. We are
proposing to consider the date of a CMS decision to be the date of the
letter sent to the requesting party.

D. Proposed Changes Related to Provider Agreement Regulations on
Patient Notification Requirements

Section 1866 of the Act states that a provider of services shall be
qualified to participate in the Medicare program and shall be eligible
for Medicare payments if it files a Medicare provider agreement and
abides by the requirements applicable to Medicare provider agreements.
These requirements are incorporated in our existing regulations at 42
CFR Part 489, Subparts A and B (Provider Agreements and Supplier
Approval). Section 5006 of the Deficit Reduction Act of 2005 mandated
the Secretary to develop a strategic and implementing plan to address
certain issues with respect to physician ownership of specialty
hospitals. As part of that plan, we used our authority under sections
1866, 1820(e)(3), and 1861(e)(9) of the Act (as well as our general
rulemaking authority under sections 1102 and 1871 of the Act) to impose
certain additional requirements on physician-owned hospitals as part of
their provider agreements. These new requirements were established in
the FY 2008 IPPS final rule with comment period (72 FR 47385 through
47391) and the FY 2009 IPPS final rule (73 FR 48686 through 48688).
Specifically, we added a new provision to require that all
hospitals and CAHs: (1) furnish all patients written notice at the
beginning of their inpatient hospital stay or outpatient service if a
doctor of medicine or a doctor of osteopathy is not present in the
hospital 24 hours per day, 7 days per week; and (2) describe how the
hospital or CAH will meet the medical needs of any patient who develops
an emergency medical condition at a time when no physician is present
in the

[[Page 42354]]

hospital or CAH. These requirements are codified at Sec. 489.20(w).
The requirements of Sec. Sec. 489.20(u) and (w) were made applicable
to both inpatient hospital stays and outpatient services because, as we
stated in the FY 2008 IPPS final rule with comment period, these
provisions are in the interest of the health and safety of all
individuals who receive services in these institutions. The notice
requirements are intended to permit individuals to make more informed
decisions regarding their treatment.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
72251), we stated that we saw no reason to treat the safety of hospital
inpatients differently than hospital outpatients, and, thus, applied
these patient safety requirements to hospital inpatients and
outpatients. We continue to believe that both hospital inpatients and
outpatients should receive these disclosures prior to admission.
However, after hospitals in general informed us that it would be unduly
burdensome to provide disclosures to all outpatients, and hospitals
with emergency departments reported the individual notice requirement
makes the registration process more cumbersome and time-consuming than
is desirable in the emergency department setting, we revisited this
issue. We have reconsidered the patient safety requirements related to
patient notification of physician presence, and in this proposed rule,
we are proposing that hospital outpatients would need to receive such
disclosures only where the risk of an emergency or the length of the
outpatient visit make their situations more like that of hospital
inpatients. Under this proposal, disclosures would be required only for
those outpatients receiving observation services, surgery, or any other
procedure requiring anesthesia. Signage would be required for hospital
outpatients in the emergency department, as we recognize the merit of
finding a less cumbersome manner to provide the required notice in this
setting. Other hospital outpatient encounters are relatively short and,
in many cases, scheduled in advance. The risk of emergency is
relatively low in most of these scheduled encounters. As a result, we
believe the safety of these particular hospital outpatients would not
be compromised in any way if hospitals were not required to provide
disclosures in these circumstances.
In this proposed rule, we are proposing to revise paragraph (w)(1)
of Sec. 489.20 to reduce the categories of outpatients who must be
notified if a hospital does not have a physician on site 24 hours per
day/7 days per week. We are proposing that only those outpatients who
receive observation services, surgery, or services involving
anesthesia, must receive such written notice. We believe this change
would reduce burden, but ensure that notice goes to those categories of
patients who are more likely to find themselves in a situation where a
physician is not present when an emergency develops. (We note that we
are not making any changes to similar patient safety requirements for
physician-owned hospitals at Sec. 411.362(b)(5)(i).) We are proposing
to add a provision that notice would be required at the beginning of a
planned or unplanned inpatient stay or outpatient visit, and we provide
explanation of when a planned or unplanned stay or visit begins. We are
proposing to add a provision to state that an unplanned stay or visit
begins at the earliest point at which the patient presents to the
hospital. The current regulation describes when a stay or visit begins
by referring to the time when a package of information is provided
regarding scheduled preadmission testing and registration for a planned
hospital admission or outpatient service. However, many admissions to
the hospital are unplanned admissions of patients who present on an
unscheduled visit to the emergency department. Therefore, it was
necessary to clarify when we considered such unplanned stays or visits
begin.
We are proposing to add a new paragraph (w)(2) to Sec. 489.20
(existing paragraph (w)(2) would be redesignated as discussed below)
that would require a hospital that is a main provider that has one or
more remote locations of a hospital or satellites to make the
determination of whether notice is required separately at each location
providing inpatient services. We are proposing to use the terms ``main
provider,'' ``remote location of a hospital,'' and ``satellite'' as
these terms are defined at Sec. 413.65(a)(2), Sec. 412.22(h), or
Sec. 412.25(e), as applicable. We are proposing that notice would be
required for all applicable patients, that is, all inpatients and
applicable outpatients, at each location at which inpatient services
are furnished and at which a doctor of medicine or doctor of osteopathy
is not present 24 hours per day/7 days per week. We are proposing to
move language that is currently in paragraph (w)(1) to a new paragraph
(w)(3), governing the content of the written notice. We are proposing
to redesignate existing paragraph (w)(2), which requires the hospital
to receive a signed acknowledgment from the patient who has received a
notice that the patient understands that a physician may not be present
during all hours in which services are furnished to the patient, as
paragraph (w)(4) and to revise the redesignated paragraph. We are
proposing to add a provision to state that, before providing an
outpatient service to an outpatient for whom a notice is required, the
hospital must receive the signed acknowledgment. This revision would
make this requirement consistent with our proposed revisions to
paragraph (w)(1) limiting the notice requirement to certain categories
of outpatients.
We are proposing to add a new paragraph (w)(5) which would require
every hospital that has a dedicated emergency department in which a
doctor of medicine or doctor of osteopathy is not present 24 hours per
day/7 days per week to post a notice conspicuously in a place or places
likely to be noticed by all individuals entering the dedicated
emergency department. ``Dedicated emergency department'' would have the
meaning found in existing Sec. 489.24(b) of the regulations. We would
require the notice to state that the hospital does not have a doctor of
medicine or doctor of osteopathy present in the hospital 24 hours per
day/7 days per week, and to indicate how the hospital will meet the
needs of any patient with an emergency medical condition, as that term
is defined in Sec. 489.24(b), at a time when no doctor of medicine or
doctor of osteopathy is present within the hospital. In the event that
there is a decision to admit a patient from the emergency department as
an inpatient, the individualized written disclosure and acknowledgment
would have to be made at the time the patient is admitted.

XVI. Additional Proposals for the Hospital Value-Based Purchasing
(Hospital VBP) Program

A. Hospital VBP Program

1. Legislative Background
Section 3001(a) of the Affordable Care Act added section 1886(o) to
the Act. This section requires the Secretary to establish a hospital
inpatient value-based purchasing program under which value-based
incentive payments are made in a fiscal year to hospitals meeting
performance standards established for a performance period for such
fiscal year. Both the performance standards and the performance period
for a fiscal year are to be established by the Secretary.
Section 1886(o)(1)(B) of the Act directs the Secretary to begin
making value-based incentive payments under the Hospital Inpatient
Value-Based

[[Page 42355]]

Purchasing Program (Hospital VBP Program) to hospitals for discharges
occurring on or after October 1, 2012. These incentive payments will be
funded for FY 2013 through a reduction of 1.0 percent to the FY 2013
base operating DRG payment amount for each discharge, as required by
section 1886(o)(7)(B)(i) of the Act.
Section 1886(o)(1)(C) of the Act provides that the Hospital VBP
Program applies to subsection (d) hospitals (as defined in section
1886(d)(1)(B) of the Act), but excludes from the definition of the term
``hospital,'' with respect to a fiscal year: (1) a hospital that is
subject to the payment reduction under section 1886(b)(3)(B)(viii)(I)
of the Act (the Hospital IQR Program) for such fiscal year; (2) a
hospital for which, during the performance period for the fiscal year,
the Secretary cited deficiencies that pose ``immediate jeopardy'' to
the health or safety of patients; and (3) a hospital for which there
are not a minimum number (as determined by the Secretary) of measures
for the performance period for the fiscal year involved, or for which
there are not a minimum number (as determined by the Secretary) of
cases for the measures that apply to the hospital for the performance
period for such fiscal year.
2. Overview of the Hospital Inpatient VBP Program Final Rule
We recently issued the Hospital Inpatient VBP Program Final Rule,
which implemented the Hospital VBP Program gram under section 1886(o)
of the Act (76 FR 26490 through 26547). The Hospital Inpatient VBP
Program Final Rule was developed based on extensive research we
conducted on hospital value-based purchasing, including research that
formed the basis of a 2007 report we submitted to Congress, entitled
``Report to Congress: Plan to Implement a Medicare Hospital Value-Based
Purchasing Program.'' This report is available on our Web site (https://www.cms.gov/AcuteInpatientPPS/downloads/HospitalVBPPlanRTCFINALSUBMITTED2007.pdf) and takes into account input
from stakeholders and other interested parties.
As described more fully in the Hospital Inpatient VBP Program Final
Rule, we adopted for the FY 2013 Hospital VBP Program 13 measures that
we have already adopted for the Hospital IQR Program, categorized into
two domains (76 FR 26495 through 26511). We grouped 12 clinical process
of care measures into a clinical process of care domain, and placed the
HCAHPS survey measure into a patient experience of care domain. We
adopted a 3-quarter performance period from July 1, 2011 through March
31, 2012 for these measures (76 FR 26494 through 26495). To determine
whether a hospital meets the proposed performance standards for these
measures, we will compare each hospital's performance during this
performance period to its performance during a 3-quarter baseline
period from July 1, 2009 through March 31, 2010 (76 FR 26493 through
26495).
We also finalized a methodology for assessing the total performance
of each hospital based on performance standards under which we will
score each hospital based on achievement and improvement ranges for
each applicable measure. We will calculate a Total Performance Score
for each hospital by combining the greater of the hospital's
achievement or improvement points for each measure to determine a score
for each domain, weighting each domain score (for the FY 2013 Hospital
VBP Program, the weights will be clinical process of care = 70 percent,
patient experience of care = 30 percent), and adding together the
weighted domain scores. We will convert each hospital's Total
Performance Score into a value-based incentive payment using a linear
exchange function. We refer readers to the Hospital Inpatient VBP
Program Final Rule for further explanation of the details of the FY
2013 Hospital VBP Program (76 FR 26490 through 26547).
For FY 2014, we adopted 13 outcome measures comprised of 3
mortality measures, 2 AHRQ composite measures, and 8 hospital-acquired
condition (HAC) measures (76 FR 26511). These measures are discussed
fully in the Hospital Inpatient VBP Program Final Rule (76 FR 26510
through 26511). These finalized outcome measures for FY 2014 are set
forth below.

Finalized Outcome Measures for the FY 2014 Hospital VBP Program
------------------------------------------------------------------------

-------------------------------------------------------------------------
Mortality Measures (Medicare Patients):
Acute Myocardial Infarction (AMI) 30-day mortality rate.
Heart Failure (HF) 30-day mortality rate.
Pneumonia (PN) 30-day mortality rate.
AHRQ Patient Safety Indicators (PSIs), Inpatient Quality Indicators
(IQIs) Composite Measures:
Complication/patient safety for selected indicators
(composite).
Mortality for selected medical conditions (composite).
Hospital Acquired Condition Measures:
Foreign Object Retained After Surgery.
Air Embolism.
Blood Incompatibility.
Pressure Ulcer Stages III & IV.
Falls and Trauma: (Includes: Fracture, Dislocation,
Intracranial Injury, Crushing Injury, Burn, Electric Shock).
Vascular Catheter-Associated Infection.
Catheter-Associated Urinary Tract Infection (UTI).
Manifestations of Poor Glycemic Control.
------------------------------------------------------------------------

3. Proposed Additional FY 2014 Hospital VBP Program Measures
For the FY 2014 Hospital VBP Program, we are proposing to retain
all 13 of the clinical process of care and patient experience of care
measures that we adopted for the FY 2013 Hospital VBP Program. We also
are proposing to add one measure to the clinical process of care
domain: SCIP-Inf-9: Postoperative Urinary Catheter Removal on
Postoperative Day 1 or 2. This measure was specified for the Hospital
IQR Program beginning with FY 2011 and subsequent payment determination
years (74 FR 43869 through 43870), and information about the measure
first appeared on Hospital Compare in December 2010. Thus, we believe
that this measure meets the requirement in section 1886(o)(2)(C)(i) of
the Act to be included in the Hospital VBP Program because it has been
specified for the Hospital IQR Program and will have been displayed on
Hospital Compare for at least one year before the applicable
performance period begins. In addition, SCIP-Inf-9 is NQF-endorsed
(453).
The measure is relevant for the Hospital VBP Program because it
assesses a practice that reduces Catheter Associated Urinary Tract
Infection (CAUTI), and improves patient safety, which is highlighted as
one of the Institute of Medicine's six quality aims

[[Page 42356]]

along with effectiveness, patient-centeredness, timeliness, efficiency,
and equity. SCIP-Inf-9 is one of the NQF-endorsed SCIP infection
prevention measures; these measures are referenced as a whole among the
metrics listed in the HHS Action Plan to Prevent HAIs. This Action Plan
can be found at the following Web site: http://www.hhs.gov/ash/initiatives/hai/actionplan/. Furthermore, this measure meets other
criteria considered for measure selection for the Hospital VBP Program,
such as not being ``topped-out'' and displaying meaningful variability
among hospitals. Therefore, we believe it would be a meaningful measure
to include in the Hospital VBP Program.
The table below lists the clinical process of care and patient
experience of care measures we are proposing to adopt for the FY 2014
Hospital VBP Program. We note that these measures are currently NQF-
endorsed and we will continue to monitor these measures to ensure that
they reliably measure hospital quality, for example, ensuring that,
among other things, these measures are not ``topped-out,'' and their
measurement criteria remain endorsed by NQF and/or are otherwise
appropriate. To the extent we determine that these measures are topped-
out, we may choose not to finalize them.

Proposed Clinical Process of Care and Patient Experience of Care
Measures for the FY 2014 Hospital VBP Program
------------------------------------------------------------------------

------------------------------------------------------------------------
Clinical Process of Care Measures
------------------------------------------------------------------------
Measure ID Measure description
------------------------------------------------------------------------
Acute myocardial infarction:
AMI-7a............................ Fibrinolytic Therapy Received
Within 30 Minutes of Hospital
Arrival.
AMI-8a............................ Primary PCI Received Within 90
Minutes of Hospital Arrival.
Heart Failure:
HF-1.............................. Discharge Instructions.
Pneumonia:
PN-3b............................. Blood Cultures Performed in the
Emergency Department Prior to
Initial Antibiotic Received in
Hospital.
PN-6.............................. Initial Antibiotic Selection for
CAP in Immunocompetent Patient.
Healthcare-associated infections:
SCIP-Inf-1........................ Prophylactic Antibiotic Received
Within One Hour Prior to
Surgical Incision.
SCIP-Inf-2........................ Prophylactic Antibiotic
Selection for Surgical
Patients.
SCIP-Inf-3........................ Prophylactic Antibiotics
Discontinued Within 24 Hours
After Surgery End Time.
SCIP-Inf-4........................ Cardiac Surgery Patients with
Controlled 6AM Postoperative
Serum Glucose.
SCIP-Inf-9........................ Postoperative Urinary Catheter
Removal on Post Operative Day 1
or 2.
Surgeries:
SCIP-Card-2....................... Surgery Patients on a Beta
Blocker Prior to Arrival That
Received a Beta Blocker During
the Perioperative Period.
SCIP-VTE-1........................ Surgery Patients with
Recommended Venous
Thromboembolism Prophylaxis
Ordered.
SCIP-VTE-2........................ Surgery Patients Who Received
Appropriate Venous
Thromboembolism Prophylaxis
Within 24 Hours Prior to
Surgery to 24 Hours After
Surgery.
------------------------------------------------------------------------
Patient Experience of Care Measures
------------------------------------------------------------------------
HCAHPS................................ Hospital Consumer Assessment of
Healthcare Providers and
Systems Survey.*
------------------------------------------------------------------------
* Proposed dimensions of the HCAHPS survey for use in the FY 2014
Hospital VBP Program are: Communication with Nurses, Communication
with Doctors, Responsiveness of Hospital Staff, Pain Management,
Communication about Medicines, Cleanliness and Quietness of Hospital
Environment, Discharge Information and Overall Rating of Hospital.

We invite public comment on these proposals.
4. Proposed Minimum Numbers of Cases and Measures for the Outcome
Domain for the FY 2014 Hospital VBP Program
a. Background
Section 1886(o)(1)(C)(ii)(III) of the Act requires the Secretary to
exclude for the fiscal year hospitals that do not report a minimum
number (as determined by the Secretary) of measures that apply to the
hospital for the performance period for the fiscal year. Section
1886(o)(1)(C)(ii)(IV) of the Act requires the Secretary to exclude for
the fiscal year hospitals that do not report a minimum number (as
determined by the Secretary) of cases for the measures that apply to
the hospital for the performance period for the fiscal year. In the
Hospital Inpatient VBP Program Final Rule, we adopted 13 outcome
measures for the FY 2014 Hospital VBP Program (76 FR 26511), but we did
not adopt a minimum number of cases for such measures to apply to
hospitals, nor did we adopt a minimum number of measures necessary for
the outcome domain to be included in the Total Performance Score.
Under section 1886(o)(1)(C)(iii) of the Act, in determining the
minimum number of reported measures and cases under sections
1886(o)(1)(C)(ii)(III) and (IV), the Secretary must conduct an
independent analysis of what minimum numbers would be appropriate. As
described in the Hospital Inpatient VBP Final Rule (76 FR 26528 through
26529), to fulfill this requirement, we commissioned Brandeis
University to perform an independent analysis that examined technical
issues concerning the minimum number of cases per measure and the
minimum number of measures per hospital for clinical process of care
measures needed to derive reliable domain scores. Based on that
analysis, we finalized our policy to exclude any clinical process of
care measures for which a hospital reported fewer than 10 cases, and to
exclude from the Hospital VBP Program any hospital to which fewer than
4 of the clinical process of care measures applied. We also finalized
our proposal to exclude any hospital reporting fewer than 100 HCAHPS
surveys during the performance period (76 FR 26529 through 26531).
To determine the minimum numbers of measures and cases that should
be required for the outcome domain, we again commissioned Brandeis
University to perform an independent analysis. This analysis examined
hospital performance on the 13 finalized outcome measures using data
from the proposed baseline periods (discussed below) for the FY 2014
Hospital VBP Program. As we did to analyze the reliability of scores in
the clinical process of care domain, different minimum numbers of cases
and measures were tested to determine the combination of minimum
numbers of

[[Page 42357]]

cases and measures that would lead to reliable scores in the outcome
domain while allowing the maximum number of hospitals to be scored for
the Hospital VBP Program. Concurrent with the Brandeis analysis, we
contracted with researchers at Mathematica Policy Research
(Mathematica) to explore the minimum number of cases a hospital would
need to report for each individual outcome measure.
b. Proposed Minimum Number of Cases for Mortality Measures, AHRQ
Composite Measures, and HAC Measures
The analyses by Brandeis and Mathematica determined that in order
to receive a score on a mortality measure, the hospital would need to
report a minimum of 10 cases, and in order to receive a score on an
AHRQ composite measure, a hospital would need to report a minimum of 3
cases. Consistent with these analyses, we are proposing that these case
minimums would apply for the FY 2014 Hospital VBP Program.
Mathematica also examined the minimum number of cases a hospital
would need to report in order to receive a reliable score on each HAC
measure. Along with reliability concerns, when conducting this
analysis, Mathematica also took into consideration our view, more fully
explained in section XVI.A.6.d. of this proposed rule, that the
incidence of HACs raises significant safety and quality concerns for
patients and for the Medicare program. Therefore, we believe that a
hospital should be held accountable when HACs occur in all instances in
order to protect and promote patient safety. Mathematica concluded that
a minimum of one Medicare claim would be sufficient to compute an
accurate score on each HAC measure, and in accordance with this
conclusion, we are proposing that hospitals be evaluated based on the
presence or absence of HAC occurrences, regardless of the number of
Medicare cases a hospital treats, as long as the hospital submits at
least one Medicare claim during the performance period. As we discuss
further below, we anticipate that all participating hospitals will
submit at least one Medicare claim during the performance period, which
would be sufficient for the hospitals to receive a score on seven of
the eight HAC measures.
c. Proposed Minimum Numbers of Measures for Outcome Domain
Brandeis researchers also analyzed the reliability of the outcome
domain scores for hospitals depending upon the total number of outcome
measures on which they reported. The analysis showed that the data
provide a meaningful and sufficiently reliable indication of outcomes
for hospitals in the outcome domain as long as the hospitals submit the
minimum number of cases (discussed above) on each of 11 outcome
measures for FY 2014. Specifically, the analysis found that using at
least 11 outcome measures per hospital provided sufficiently comparable
reliability of hospitals' scores in the outcome domain (particularly in
terms of rank ordering relative to other hospitals) as compared with
what hospitals' scores would have been if they had reported on more
outcome measures. Brandeis concluded that this 11 measure minimum could
be comprised of the 8 HAC measures, together with 3 measures comprised
of any combination of the 3 mortality measures and the 2 AHRQ composite
measures.
We note that, in conducting its analysis, Brandeis evaluated how
the outcome domain score would be affected if a hospital reported all
eight finalized HAC measures. However, one of these HAC measures,
Foreign Object Retained After Surgery, will not apply to a very small
subset of hospitals that do not perform surgeries. Taking this into
account, as well as our own further analysis which shows that the
reliability of the outcome domain score would not be significantly
different as a statistical matter, we are proposing that the minimum
number of measures a hospital would need to report in order to receive
a score on the outcome domain is 10, comprised of 7 of the 8 HAC
measures (all but the Foreign Object Retained After Surgery measure),
along with 3 other measures comprised of any 3 of the other outcome
measures (for example, 2 AHRQ composite measures and 1 mortality
measure, or 3 mortality measures). We believe that this proposal is
consistent with the conclusions reached by Brandeis. In addition, from
an inclusiveness standpoint, we believe that a 10 measure minimum will
maximize hospital participation in the FY 2014 Hospital VBP Program.
Furthermore, because we believe that every domain is an important
component of an accurate Total Performance Score, we are proposing
that, in order for a hospital to receive a Total Performance Score and
be included in the FY 2014 Hospital VBP Program, the hospital must have
enough cases and measures to report on all finalized domains. This
proposed requirement should not impose any new barrier to hospitals or
greatly reduce the number of hospitals in the FY 2014 Hospital VBP
Program as compared to the FY 2013 Hospital VBP Program, when hospitals
will only be scored on clinical process of care and patient experience
of care measures. This is because, as stated above, an analysis of the
existing data shows that virtually all hospitals participating in the
FY 2014 Hospital VBP Program will report on a sufficient number of
cases and measures to receive outcome domain scores in addition to the
clinical process and patient experience domain scores for FY 2014.
We invite public comment on the proposed minimum numbers of cases
and measures required for the FY 2014 Hospital VBP Program. We also
invite public comment on the proposed requirement that hospitals must
report on all four domains (if finalized) to receive a Total
Performance Score for the FY 2014 Hospital VBP Program.
5. Proposed Performance Periods and Baseline Periods for FY 2014
Measures
Section 1886(o)(4) of the Act requires the Secretary to establish a
performance period for the Hospital VBP Program for a fiscal year that
begins and ends prior to the beginning of such fiscal year.
a. Proposed Clinical Process of Care Domain and Patient Experience of
Care Domain Performance Period and Baseline Period
For the FY 2014 Hospital VBP Program, we are proposing a 9-month
(3-quarter) performance period from April 1, 2012 to December 31, 2012
for the clinical process of care and patient experience of care domain
measures. As described in the Hospital Inpatient VBP Final Rule (76 FR
26494 through 26495), due to various statutory deadlines and other
challenges we faced in implementing the FY 2013 Hospital VBP Program in
a timely fashion, we adopted a 3-quarter performance period for the
clinical process of care and patient experience of care domains for the
FY 2013 payment determination. We have stated our intent to move to a
12-month performance period when feasible. While a 12-month performance
period is not yet feasible for FY 2014, we believe that this proposed
3-quarter performance period will allow us to notify hospitals of the
amount of their value-based incentive payment at least 60 days before
the start of FY 2014. It would also allow us to consider selecting CY
2013, a 12-month performance period, as the performance period for the
FY 2015 Hospital VBP Program. In addition, this proposed performance
period for FY 2014 would begin immediately after the end of the FY 2013
performance period, provide

[[Page 42358]]

reliable performance information, and ensure that incentive payments
can be made beginning with October 1, 2013 discharges.
As we explained in the Hospital Inpatient VBP Program Final Rule
(76 FR 26485), we believe that baseline data should be used from a
comparable 9-month (3-quarter) period. Therefore, we are proposing
April 1, 2010 to December 31, 2010 as the baseline period for these
proposed measures for FY 2014. We invite public comment on these
proposals.
b. Proposed Outcome Domain Performance Periods and Baseline Periods
In the Hospital Inpatient VBP Program proposed rule, we proposed an
18-month performance period of July 1, 2011 to December 31, 2012 and an
18-month baseline period of July 1, 2008 to December 31, 2009 for the
three mortality outcome measures currently specified under the Hospital
IQR Program (MORT-30-AMI, MORT-30-HF, MORT-30-PN). In response to
public comment and for reasons discussed in the Hospital Inpatient VBP
Program Final Rule (76 FR 26494), we adopted a 12-month performance
period of July 1, 2011 to June 30, 2012 and a 12-month baseline period
of July 1, 2009 to June 30, 2010 for these measures.
In the Hospital Inpatient VBP Program Final Rule, we stated that we
would begin the performance period for the proposed HAC and AHRQ
measures 1 year after such measures were included on Hospital Compare.
Because all the finalized HAC and AHRQ measures were included on
Hospital Compare on March 3, 2011, we finalized March 3, 2012 as the
start of the performance period for these measures in the Hospital
Inpatient VBP Program Final Rule (76 FR 26494 through 26495). We stated
in the Hospital Inpatient VBP Program Final Rule (76 FR 26495) that we
would propose the end performance period date for these measures in
this proposed rule.
In order for the HAC and AHRQ measures to be scored for the FY 2014
Hospital VBP Program, the performance period for these measures would
need to end by the fourth quarter of FY 2012 to allow us sufficient
time to collect and process the necessary claims data. We note that
this time period needs to be longer for HAC and AHRQ measures than for
clinical process and patient experience measures, which are based on
chart-abstracted data and surveys rather than claims. Claims data
require at least three months following a given calendar quarter to
process and necessitate two additional months to complete measure
calculation, including risk adjustment, statistical modeling, quality
assurance, programming, and generating reports on patient-level data,
which is provided to hospitals.
Therefore, we are proposing to adopt a nearly 7-month performance
period for the HAC and AHRQ measures for FY 2014 by selecting September
30, 2012 as the end of the performance period. While we would prefer to
use a 12-month performance period, analysis of existing data indicates
that a 7-month performance period would provide sufficiently robust
values on these critical measures.
As stated above, because we believe that a comparable period should
be selected for the baseline data, we are proposing to set March 3,
2010 to September 30, 2010 as the baseline period for the proposed HAC
and AHRQ measures for the FY 2014 Hospital VBP Program. We invite
public comment on these proposals.
The following tables include all proposed and finalized baseline
and performance periods for the FY 2013 and FY 2014 program years.

FY 2013 Hospital VBP Program Baseline and Performance Periods
------------------------------------------------------------------------
Domain Baseline period Performance period
------------------------------------------------------------------------
Clinical Process................ July 1, 2009-March July 1, 2011-March
31, 2010. 31, 2012.
Patient Experience.............. July 1, 2009-March July 1, 2011-March
31, 2010. 31, 2012.
------------------------------------------------------------------------

FY 2014 Hospital VBP Program Baseline and Performance Periods
------------------------------------------------------------------------
Domain Baseline period Performance period
------------------------------------------------------------------------
Clinical Process *.............. April 1, 2010- April 1, 2012-
December 31, 2010. December 31,
2012.
Patient Experience *............ April 1, 2010- April 1, 2012-
December 31, 2010. December 31,
2012.
Efficiency *.................... May 15, 2010-90 May 15, 2012-
days prior to February 14,
February 14, 2011. 2013.
Outcomes
Mortality.......... July 1, July 1,
2009-June 30, 2011-June 30,
2010. 2012.
HAC *.............. March 3, March 3,
2010-September 2012-September
30, 2010. 30, 2012.
AHRQ *............. March 3, March 3,
2010-September 2012-September
30, 2010. 30, 2012.
------------------------------------------------------------------------
* Proposed

6. Proposed Performance Standards for the FY 2014 Hospital VBP Program
a. Background
Section 1886(o)(3)(A) of the Act requires the Secretary to
establish performance standards for the measures selected under the
Hospital VBP Program for a performance period for the applicable fiscal
year. The performance standards must include levels of achievement and
improvement, as required by section 1886(o)(3)(B) of the Act, and must
be established and announced not later than 60 days before the
beginning of the performance period for the fiscal year involved, as
required by section 1886(o)(3)(C) of the Act. Achievement and
improvement standards are discussed more fully in the Hospital
Inpatient VBP Program Final Rule (76 FR 26511 through 26513). In
addition, when establishing the performance standards, section
1886(o)(3)(D) of the Act requires the Secretary to consider appropriate
factors, such as: (1) Practical experience with the measures, including
whether a significant proportion of hospitals failed to meet the
performance standard during previous performance periods; (2)
historical performance standards; (3) improvement rates; and (4) the
opportunity for continued improvement.
(1) Mortality Measures
In the Hospital Inpatient VBP Program Final Rule, we finalized the
achievement performance standard (achievement threshold) for each of
the proposed FY 2014 Hospital VBP

[[Page 42359]]

Program mortality measures at the median of hospital performance (50th
percentile) during the applicable baseline period. We also finalized
the improvement performance standard (improvement threshold) for each
mortality measure at each specific hospital's performance on each
measure during the baseline period of July 1, 2009 to June 30, 2010 (76
FR 26511 through 76 FR 26512). In addition, we finalized the precise
achievement thresholds for these mortality measures (76 FR 26513), as
shown below:

Achievement Thresholds for the FY 2014 Hospital VBP Program Mortality Outcome Measures
[Displayed as survival rates]
----------------------------------------------------------------------------------------------------------------
Performance
standard
Measure ID Measure description (achievement Benchmark
threshold)
----------------------------------------------------------------------------------------------------------------
Mortality Outcome Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI............................ Acute Myocardial Infarction (AMI) 0.8477 0.8673
30-Day Mortality Rate.
MORT-30-HF............................. Heart Failure (HF) 30-Day 0.8861 0.9042
Mortality Rate.
MORT-30 PN............................. Pneumonia (PN) 30-Day Mortality 0.8818 0.9021
Rate.
----------------------------------------------------------------------------------------------------------------

(2) Proposed Medicare Spending per Beneficiary Measure
In section IV.B.3.b.(2)(A) of the FY 2012 IPPS/LTCH PPS proposed
rule (76 FR 25927), we proposed to calculate a ratio of the Medicare
spending per beneficiary amount for each hospital to the median
Medicare spending per beneficiary amount across all hospitals during
the performance period. We proposed to set the achievement threshold at
the median Medicare spending per beneficiary ratio across all hospitals
during the performance period. The proposed value of the achievement
performance standard (achievement threshold) for the Medicare Spending
per Beneficiary measure would be 1.0. This would be the middle ratio,
or the Medicare spending per beneficiary for the median hospital
divided by the median Medicare spending per beneficiary for all
hospitals.
Likewise, in section IV.B.3.b.(2)(B) of the FY 2012 IPPS/LTCH PPS
proposed rule (76 FR 25927 through 25928), we proposed to set the
improvement performance standard (improvement threshold) for the
proposed Medicare spending per beneficiary measure at the hospital's
own Medicare spending per beneficiary ratio, as calculated during the
proposed baseline period. We also proposed to set the achievement
performance benchmark at the mean of the lowest decile of Medicare
spending per beneficiary ratios during the performance period, and that
the improvement benchmark would be equal to the achievement performance
benchmark for the performance period, which is the mean of the lowest
decile of Medicare spending per beneficiary ratios. We refer readers to
the FY 2012 IPPS/LTCH proposed rule for a complete discussion of these
proposals.
b. Proposed Clinical Process of Care and Patient Experience of Care FY
2014 Performance Standards
As discussed in section XVI.B.5.a. of this proposed rule, we are
proposing to adopt a 9-month (3-quarter) performance period of April 1,
2012 to December 31, 2012 for the clinical process of care and patient
experience of care measures for the FY 2014 Hospital VBP Program. To
set achievement and improvement performance standards for these
proposed measures for the FY 2014 Hospital VBP Program, we are
proposing to use the same approach adopted in the Hospital Inpatient
VBP Program Final Rule. That approach, as well as our rationale for
adopting it, is explained in detail at 76 FR 26511 through 76 FR 26513.
We are proposing to set the achievement performance standard
(achievement threshold) for each proposed measure at the median of
hospital performance (50th percentile) during the proposed baseline
period of April 1, 2010 through December 31, 2010. We also are
proposing to set the improvement performance standard (improvement
threshold) for each of the proposed measures at each specific
hospital's performance on the applicable measure during the proposed
baseline period of April 1, 2010 through December 31, 2010. We are
proposing to set each benchmark for each measure as the mean of the top
decile performance of applicable hospitals during the proposed baseline
period. We invite public comment on these proposals.
We set out proposed achievement performance standards for the
proposed clinical process of care and patient experience of care
measures using the applicable baseline period data in the table below.

Proposed Achievement Performance Standards for Proposed FY 2014 Clinical Process of Care and Patient Experience
of Care Measures
----------------------------------------------------------------------------------------------------------------
Performance
standard
Measure ID Measure description (achievement Benchmark
threshold)
----------------------------------------------------------------------------------------------------------------
Process of Care Measures
----------------------------------------------------------------------------------------------------------------
AMI-7a................................. Fibrinolytic Therapy Received 0.8066 0.9630
Within 30 Minutes of Hospital
Arrival.
AMI-8a................................. Primary PCI Received Within 90 0.9344 1.0000
Minutes of Hospital Arrival.
HF-1................................... Discharge Instructions........... 0.9266 1.0000
PN-3b.................................. Blood Cultures Performed in the 0.9730 1.0000
Emergency Department Prior to
Initial Antibiotic Received in
Hospital.
PN-6................................... Initial Antibiotic Selection for 0.9446 1.0000
CAP in Immunocompetent Patient.
SCIP-Inf-1............................. Prophylactic Antibiotic Received 0.9807 1.0000
Within One Hour Prior to
Surgical Incision.
SCIP-Inf-2............................. Prophylactic Antibiotic Selection 0.9813 1.0000
for Surgical Patients.
SCIP-Inf-3............................. Prophylactic Antibiotics 0.9663 0.9996
Discontinued Within 24 Hours
After Surgery End Time.

[[Page 42360]]

SCIP-Inf-4............................. Cardiac Surgery Patients with 0.9634 1.0000
Controlled 6AM Postoperative
Serum Glucose.
SCIP-Inf-9............................. Postoperative Urinary Catheter 0.9286 0.9989
Removal on Post Operative Day 1
or 2.
SCIP-Card-2............................ Surgery Patients on a Beta 0.9565 1.0000
Blocker Prior to Arrival That
Received a Beta Blocker During
the Perioperative Period.
SCIP-VTE-1............................. Surgery Patients with Recommended 0.9462 1.0000
Venous Thromboembolism
Prophylaxis Ordered.
SCIP-VTE-2............................. Surgery Patients Who Received 0.9492 0.9983
Appropriate Venous
Thromboembolism Prophylaxis
Within 24 Hours Prior to Surgery
to 24 Hours After Surgery.
----------------------------------------------------------------------------------------------------------------
Patient Experience of Care Measure
----------------------------------------------------------------------------------------------------------------
HCAHPS
Communication with Nurses........ 75.79% 84.99%
Communication with Doctors....... 79.57% 88.45%
Responsiveness of Hospital Staff. 62.21% 78.08%
Pain Management.................. 68.99% 77.92%
Communication about Medicines.... 59.85% 71.54%
Hospital Cleanliness & Quietness. 63.54% 78.10%
Discharge Information............ 82.72% 89.24%
Overall Rating of Hospital....... 67.33% 82.55%
----------------------------------------------------------------------------------------------------------------

c. AHRQ Measures
For the reasons we have discussed in the Hospital Inpatient VBP
Program Final rule (76 FR 26514), we are proposing to set the
achievement performance standard (achievement threshold) for each AHRQ
composite measure at the median of hospital performance (50th
percentile) during the proposed baseline period of March 3, 2010 to
September 30, 2010. We are proposing to set the benchmark for each AHRQ
composite measure at the mean of the top decile of hospital performance
during the proposed baseline period of March 3, 2010 to September 30,
2010. We also are proposing to set the improvement performance standard
(improvement threshold) for each of the proposed measures at each
specific hospital's performance on the applicable measure during the
proposed baseline period of March 3, 2010 to September 30, 2010.
d. HAC Measures
We adopted eight HAC measures in the Hospital Inpatient VBP Final
Rule. For each of these eight HAC measures, at least one quarter of
hospitals achieved a 100 percent rating based on administrative data
for all IPPS hospitals participating in the Hospital IQR Program for
Medicare discharges from October 1, 2008 through June 30, 2010 (that
is, they do not have any reportable HAC occurrences). In addition,
based on the administrative data from October 1, 2008 through June 30,
2010, at least one half of all hospitals achieved a measure rate of 100
percent on six of the eight HAC measures (Foreign Object Retained After
Surgery; Air Embolism; Blood Incompatibility; Pressure Ulcer Stages III
and IV; Catheter-Associated UTI; Manifestations of Poor Glycemic
Control). Accordingly, the achievement threshold for these measures
would be zero if we proposed to set performance standards for each
individual measure using the same methodology that we finalized with
respect to the mortality measures.
We believe that the HAC measures are extremely important in
promoting patient safety, improving quality of care, and reducing
costs. According to a 2010 HHS Office of the Inspector General report,
entitled ``Adverse Events in Hospitals: National Incidence Among
Medicare Beneficiaries'' (http://oig.hhs.gov/oei/reports/oei-06-09-00090.pdf), an estimated 13.5 percent of hospitalized Medicare
beneficiaries experienced adverse events during their hospital stays.
We believe that all the finalized HAC measures assess the presence of
conditions and outcomes that are reasonably preventable if high quality
care is furnished to the Medicare beneficiary. We also believe that the
incidence of HACs in general raises major patient safety issues for
Medicare beneficiaries. Outcome measures, including HAC outcome
measures, are widely regarded by the provider community as strongly
indicative of the quality of medical care and as integral to reporting
and improving quality and patient safety. Therefore, we believe it is
important to include HAC outcome measures in the Hospital VBP Program.
For these reasons, we are proposing that our topped-out policy
would not apply to the HAC measures. We also are proposing to treat the
eight individual HAC measures as a single aggregate HAC score for
purposes of scoring, and believe that this approach will enable us to
calculate meaningful distinction among hospitals and variation in
hospital performance. In addition, this aggregation of the scores for
the HAC measures ensures that the HAC measures do not unduly outweigh
the remainder of the measures in the outcome domain. Accordingly, in
taking into account our HAC policy and reliability concerns, we are
proposing to set achievement performance standards, benchmarks, and
improvement performance standards based on hospital combined
performance on seven or eight HAC measures, as applicable, during the
proposed performance or baseline period. Because certain hospitals will
report on only seven of the eight HAC measures, we are proposing
separate standards for hospital performance depending on whether the
hospitals report on seven or eight HAC measures. As discussed more
fully below, we are also proposing to score hospital performance on the
HAC measures by combining hospital performance scores on each of the
HAC measures to calculate a single, aggregate HAC score for this
purpose.
As finalized in the Hospital Inpatient VBP Program Final Rule (76
FR 26514), we are proposing to set the achievement performance standard
(achievement

[[Page 42361]]

threshold) for the HAC aggregate score for those hospitals that report
on all eight of the HAC measures at the median of hospital performance
(50th percentile) of those hospitals reporting on all eight of the HAC
measures during the proposed baseline period of March 3, 2010 to
September 30, 2010. We are proposing to set the achievement performance
standard (achievement threshold) for the HAC aggregate score for those
hospitals that report on seven of the HAC measures at the median of
hospital performance (50th percentile) on only those seven measures for
those hospitals reporting on either seven or eight of the HAC measures
during the proposed baseline period of March 3, 2010 to September 30,
2010.
We are proposing to set the benchmark for the HAC aggregate score
for those hospitals that report on all eight of the HAC measures at the
mean of the top decile of hospital performance for those hospitals
reporting on all eight HAC measures during the proposed baseline period
of March 3, 2010 to September 30, 2010. We are proposing to set the
benchmark for the HAC aggregate score for those hospitals that report
on seven of the HAC measures at the mean of the top decile of hospital
performance on only those seven measures for hospitals reporting on
either seven or eight of the HAC measures during the proposed baseline
period of March 3, 2010 to September 30, 2010.
We also are proposing to set the improvement performance standard
(improvement threshold) for the HAC aggregate score at each specific
hospital's performance during the proposed baseline period of March 3,
2010 to September 30, 2010, whether the hospitals report on seven or
eight HAC measures. Please see below for further discussion of the
aggregate HAC scoring methodology.
We note that the performance standards for the HAC aggregate score
are displayed in the table below as a score composed of all eight
individual HAC measures. We recognize that all hospitals report on
seven of these individual measures, and nearly all (about 95 percent)
of hospitals report all eight. However, a small number of hospitals do
not report on the Foreign Object Removal after Surgery HAC measure. We
believe that any numerical differences between the HAC performance
standards for hospitals reporting on seven of eight HAC measures
compared to the standards for hospitals reporting on all eight HAC
measures will be statistically insignificant. However, we intend to
provide updated performance standards in the CY 2012 OPPS/ASC final
rule with comment period for those hospitals only reporting on seven of
the eight HAC measures.
We invite public comment on the proposed methodology for setting
performance standards for the aggregate HAC score for HAC measures
finalized for the FY 2014 Hospital VBP Program. We specify the proposed
performance standards for the aggregate HAC score (all eight measures)
and AHRQ measures using the proposed baseline period data in the table
below. We note that, for both AHRQ and HAC measures, a lower value
represents better performance on the measures. Thus, a ``perfect''
score on each measure would be a 0.00.

Proposed Achievement Performance Standards for FY 2014 HAC * and AHRQ Measures
----------------------------------------------------------------------------------------------------------------
Performance
standard
Measure ID Measure description (achievement Benchmark
threshold)
----------------------------------------------------------------------------------------------------------------
Outcome Measures
----------------------------------------------------------------------------------------------------------------
HACs **.................................. Hospital Acquired Conditions per 0.00109 0.0000
1,000 (aggregated).
AHRQ Composite........................... Complication/patient safety for 0.4006 0.2754
selected indicators (composite).
AHRQ Composite........................... Mortality for selected medical 0.7542 0.6130
conditions (composite).
----------------------------------------------------------------------------------------------------------------
* Finalized HACs for use in the FY 2014 Hospital VBP Program include: Foreign Object Retained After Surgery, Air
Embolism, Blood Incompatibility, Pressure Ulcer Stages III & IV, Falls and Trauma, Vascular Catheter
Associated Infections, Catheter Associated Urinary Tract Infection, and Manifestations of Poor Glycemic
Control.
** HAC performance standards were calculated using data from hospitals reporting on 8 HAC measures. The final
rule will include the performance standards for hospitals reporting on seven HAC measures.

7. Proposed FY 2014 Hospital VBP Program Scoring Methodology
a. Proposed FY 2014 Domain Scoring Methodology
In the Hospital Inpatient VBP Program Final Rule, we adopted a
methodology for scoring all clinical process of care, patient
experience of care, and outcome measures. As noted in the Hospital
Inpatient VBP Program Final Rule, this methodology outlines an approach
that we believe is well-understood by patient advocates, hospitals and
other stakeholders because it was developed during a year-long process
that involved extensive stakeholder input, and was presented by us in a
report to Congress. Further, we have conducted extensive research on a
number of other scoring models for the Hospital VBP Program to ensure a
high level of confidence in the scoring methodology (76 FR 26514). In
addition, we believe that, for simplicity and consistency of the
Hospital VBP Program, it is important to score hospitals under the same
methodology for subsequent fiscal years, with appropriate modifications
to accommodate new domains and measures. Therefore, we are proposing to
use the same scoring methodology for these measures in the FY 2014
Hospital VBP Program, with the changes discussed below for HAC
measures. We also refer readers to discussion of the proposed Medicare
Spending per Beneficiary measure in the FY 2012 IPPS/LTCH PPS proposed
rule (76 FR 25927 through 25928). We invite public comment on this
proposal.
b. Proposed HAC Measures Scoring Methodology
We are proposing to score the HAC measures using an aggregated HAC
rate based on the unweighted average of the rates of the individual HAC
measures. However, as explained above, we are aware that hospitals may
only report on seven of the eight finalized HAC measures. This is
because some hospitals do not perform surgeries, and therefore would
not submit eligible claims that would be the basis for the Foreign
Object Retained After Surgery HAC measure. The remaining seven HAC
measures would apply to all hospitals, however, because all hospitals
that participate in the Hospital VBP Program will submit eligible
claims for these measures. We also anticipate that most hospitals will
report on all

[[Page 42362]]

eight of the individual HAC measures because most hospitals that
participate in the Hospital VBP Program perform surgeries and would
submit eligible surgical claims that would be the basis for the Foreign
Object Retained After Surgery HAC measure. Accordingly, we are
proposing that the aggregate HAC score for each hospital be calculated
as the equally weighted average of the rates on all HAC measures for
which the hospital reports Medicare claims, which will most often be an
equally weighted average of the rates on all eight measures, but may be
scores on seven of the HAC measures. As stated above, the HAC aggregate
score will be calculated if a hospital submits at least one Medicare
claim during the performance period. For example, if a hospital submits
one or more Medicare claims during the performance period, and those
claims do not indicate any HAC occurrences, the hospital will receive a
perfect score on all applicable HAC measures. The aggregate HAC rate
would then be used to assign points in accordance with the proposed
performance standards discussed above to calculate an individual
hospital's aggregate HAC achievement and improvement scores. The single
aggregate HAC score would be the greater of the hospital's achievement
or improvement score. The hospital's aggregate HAC score would be
combined with the hospital's score on other outcome measures to derive
an outcome domain score, with the aggregate HAC score weighted equally
with the other outcome measures in the domain. We note that in
assigning points for this aggregate HAC score, lower aggregate HAC
scores represent better performance. We believe our proposed aggregate
scoring methodology for HAC measures allows us to meaningfully score
hospitals on these critical patient safety measures.
We welcome public comment on this proposal.
8. Ensuring HAC Reporting Accuracy
For the FY 2013 Hospital VBP Program, the validation process we
adopted for the Hospital IQR Program will ensure that the Hospital VBP
data are accurate (76 FR 26537 through 26538). In addition, Medicare
Administrative Contractors (MACs) review claims to ensure that accurate
Medicare payments are made. This claims review ensures that HAC data
included on the claims are accurately reported both for the Hospital
IQR Program and the Hospital VBP Program. In addition, we are
considering proposing to adopt additional targeting to assess the
accuracy of HAC data reported on claims. Specifically, we are
considering targeting a subset of hospitals that report zero or an
aberrantly low percentage of HACs on Medicare fee-for-service IPPS
claims relative to the overall national average of HACs.
This consideration is supported by our analysis of HAC rates
calculated using data from Medicare fee-for-service claims from October
1, 2008 through June 30, 2010. We publicly released these rates in
March 2011, and they can be found on our Web site at: http://www.cms.gov/HospitalQualityInits/06_HACPost.asp#TopOfPage. This
analysis revealed a range in hospital-reporting of the eight HACs from
a low of 0.0001 percent (that is, 1 discharge out of every 100,000
applicable discharges) of hospital inpatient discharges (23 discharges)
reporting a blood incompatibility, to a high of 0.0564 percent (that
is, 56.4 discharges out of every 100,000 applicable discharges)
reporting Falls and Trauma. According to this analysis, however, these
HAC rates appear to be underreported occurrences when compared to
similar HAI measures. For example, the Catheter Associated Urinary
Tract Infection (CAUTI) measure rate was 5.4 percent, or 54 out of
every 1,000 eligible discharges, as reported in the AHRQ 2008 National
Healthcare Quality Report. This rate is more than 125 times greater
than the national HAC reported CAUTI rate of 0.317 out of every 1,000
eligible discharges. While we recognize that definitional differences
in the measures might contribute to this rate difference, we also
believe that underreporting of HAC claims data contributed to this
difference. It is important to note that the 5.4 percent CAUTI rate was
calculated using medical record documentation as a data source and a
random sample of Medicare beneficiaries for acute care hospital stays,
as discussed in a separate Federal report about healthcare quality
(AHRQ 2008 National Healthcare Quality Report). We note that this
analysis is exploratory in nature, and we cannot definitively conclude
any systematic underreporting by any particular hospitals. Nonetheless,
we believe that this analysis provides sufficient information for CMS
to consider development of a HAC validation process to assess potential
underreporting by hospitals and ensure accurate reporting among all
hospitals reporting HACs on Medicare claims. Our goal is to improve
quality and patient safety through accurate reporting of hospital
quality data and accurately linking quality to payment in the Hospital
VBP Program. We strive to ensure accurate reporting, and we believe
that validating a random subset of hospitals that report an aberrantly
low number of HACs would strengthen our overall effort to link value to
quality. We welcome public comments regarding our consideration of a
HAC validation process. We also note that we intend to take appropriate
action if we discover systematic underreporting of HAC and other
adverse event information, including, where appropriate, reporting such
instances to the HHS Office of the Inspector General for its review.
9. Proposed Domain Weighting for FY 2014 Hospital VBP Program
For the FY 2013 Hospital VBP Program, we adopted a weighting scheme
that weights the clinical process of care domain at 70 percent of the
Total Performance Score, and weights the patient experience of care
domain at 30 percent. However, the addition of the outcome domain and
the proposed addition of an efficiency domain necessitate the adoption
of a different domain weighting scheme than we adopted for the FY 2013
Hospital VBP Program. We discuss below the factors we considered in
determining the appropriate weight to propose for each domain in the FY
2014 Hospital VBP Program.
As we have previously stated, we believe that the patient's
experience associated with receiving inpatient services in a hospital
is important in determining the hospital's overall quality of care for
purposes of the Hospital VBP Program. However, we also believe that a
majority of the Total Performance Score should be based on the
objective data submitted by hospitals on the measures selected for the
Hospital VBP Program. Thus, as we finalized for the FY 2013 Hospital
VBP Program, we are proposing to weight the patient experience of care
domain at 30 percent for the FY 2014 Hospital VBP Program. We believe
that this weighting proposal appropriately incentivizes hospitals to
provide patient-centered care across the full spectrum of their
services. As we stated in the Hospital Inpatient VBP Program Final Rule
(76 FR 26491), we believe that domains need not be given equal weight,
and that over time, scoring methodologies should be weighted more
towards outcomes, patient experience of care and functional status
measures (measures assessing physical and mental capacity, capability,
well-being and improvement). Consistent with this policy and our
analysis showing that many of the clinical process of care

[[Page 42363]]

measures are nearly topped-out, we are proposing to reduce the
weighting for the clinical process of care domain to 20 percent. We
also are proposing to weight the outcome domain at 30 percent of the
Total Performance Score for the FY 2014 Hospital VBP Program. Because
we believe that scoring hospitals on outcome measures will improve
treatment outcomes and patient safety, we intend to propose increasing
the weighting for the outcome domain in subsequent fiscal years as more
outcome measures become available.
As we indicated in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR
25927 through 25928), we believe that efficiency is an important
component of improving outcomes, the patient experience of care and the
overall quality of care provided to Medicare beneficiaries in the
inpatient hospital setting. However, we also recognize the importance
of clinical quality based upon industry standards of care and the
patients' experience of care. Accordingly, we are proposing to weight
the efficiency domain at 20 percent of the Total Performance Score for
the FY 2014 Hospital VBP Program.
Therefore, we are proposing the following domain weights for the FY
2014 Total Performance Score: outcome domain = 30 percent; clinical
process of care domain = 20 percent; patient experience of care domain
= 30 percent; and efficiency domain = 20 percent. Under this proposed
weighting scheme, the clinical care-related domains (process of care
and outcome domains) would, together, constitute 50 percent of the
total performance score (20 percent for clinical process of care and 30
percent for outcome), the patient experience of care domain would
constitute 30 percent, and the efficiency domain would constitute 20
percent. We believe that this proposed weighting scheme will hold
hospitals accountable for all aspects of patient care, including
clinical outcomes and efficiency.
We invite public comment on the proposed weighting of the four
proposed domains to be used in the calculation of the Total Performance
Score for the FY 2014 Hospital VBP Program.

B. Proposed Review and Correction Process Under the Hospital VBP
Program

1. Background
Section 1886(o)(10)(A)(i) of the Act requires the Secretary to make
information available to the public regarding individual hospital
performance in the Hospital VBP Program, including: (1) Performance of
the hospital on each measure that applies to the hospital; (2) the
performance of the hospital with respect to each condition or
procedure; and (3) the hospital's Total Performance Score. To meet this
requirement, we stated our intention in the Hospital Inpatient VBP
Program Final Rule to publish hospital scores with respect to each
measure, each hospital's condition-specific score (that is, the
performance score with respect to each condition or procedure, for
example, AMI, HF, PN, and SCIP), each hospital's domain-specific score,
and each hospital's Total Performance Score on Hospital Compare (76 FR
26534 through 26536). We intend to make proposals related to making
this information publicly available in future rulemaking.
Section 1886(o)(10)(A)(ii) of the Act requires the Secretary to
ensure that each hospital has the opportunity to review, and submit
corrections for, the information to be made public with respect to each
hospital under section 1886(o)(10)(A)(i) of the Act prior to such
information being made public.
For the FY 2013 Hospital VBP Program, the finalized measures
consist of chart-abstracted clinical process of care measures and a
patient experience of care measure. We are proposing that hospitals
will have an opportunity to review and correct chart-abstracted data
and patient experience data through the processes discussed below. We
intend to make additional proposals regarding the review and correction
of outcome measures, efficiency measures, and domain, condition, and
Total Performance Scores in future rulemaking.
2. Proposed Review and Corrections of Data Submitted to the QIO
Clinical Warehouse on Chart-Abstracted Process of Care Measures and
Measure Rates
We are proposing that the process utilized to give hospitals an
opportunity to review and correct data submitted on the Hospital IQR
Program chart-abstracted measures also be used to allow hospitals to
correct data and measure rates on chart-abstracted measures for the
Hospital VBP Program. Under this proposed process, hospitals would
continue to have the opportunity to review and correct data they submit
on all Hospital IQR Program chart-abstracted measures, whether or not
the measure is adopted as a measure for the Hospital VBP Program. We
are proposing to use the Hospital IQR Program's data submission,
review, and correction processes, which will allow for review and
correction of data on a continuous basis as it is being submitted for
the Hospital IQR Program, which in turn would allow hospitals to
correct data and measure rates used to calculate the Hospital VBP
Program Total Performance Score for those hospitals that participate in
both programs. We believe this process would satisfy the requirement in
section 1886(o)(10)(A)(ii) of the Act to allow hospitals to review and
submit corrections for one of the pieces of information that will be
made public with respect to each hospital--the measure rates for chart-
abstracted measures. For hospitals that do not participate in the
Hospital IQR Program but do participate in the Hospital VBP Program,
such as Maryland hospitals, we intend to make proposals regarding how
those hospitals will be able to review and correct their Hospital VBP
data in future rulemaking.
Under the Hospital IQR Program, hospitals currently have an
opportunity to submit, review, and correct any of the chart-abstracted
information submitted to the QIO Clinical Warehouse for the full 4\1/2\
months following the last discharge date in a calendar quarter. (We
note that in the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25915), we
proposed to reduce the submission period from 4\1/2\ months to 104
days.) Hospitals can begin submitting data on the first discharge day
of any reporting quarter. Hospitals are encouraged to submit data early
in the submission schedule so that they can identify errors and
resubmit data before the quarterly submission deadline. Users are able
to view and make corrections to the data that they submit within 24
hours of submission. The data are populated into reports that are
updated nightly with all data that have been submitted and successfully
processed for the previous day. Hospitals are able to view a report
each quarter which shows the numerator, denominator and percentage of
total for each Clinical Measure Set and Strata. That report contains
the hospital's performance on each measure set/strata submitted to the
QIO Clinical Warehouse. The numerator is the number of cases that
satisfies the conditions of the performance measure, and a denominator
is the number of successfully accepted cases in the measure population
evaluated by the performance measure. The percentage of total is
calculated by using the numerator divided by the denominator multiplied
by 100. This measure rate is the same as the Hospital VBP measure rate.
We believe that 4\1/2\ months is sufficient time for hospitals to
be able to submit, review data, make corrections to the data, and view
their percentage of total, or measure rate, on each Clinical Measure
Set/Strata for use in both the

[[Page 42364]]

Hospital IQR and Hospital VBP Programs. Additionally, because this
process is familiar to most hospitals, use of this existing framework
reduces the burden that could have been placed on hospitals that
participate in the Hospital IQR Program if they had to learn a new
process for submitting data for the Hospital VBP Program. Following the
period in which hospitals can review and correct data and measure rates
for chart-abstracted measures as specified above, we propose that
hospitals will have no further opportunity to correct such data or
measure rates.
We are proposing that once the hospital has an opportunity to
review and correct data related to chart-abstracted measures submitted
in the Hospital IQR Program, we will consider that the hospital has
been given the opportunity to review and correct this data and measure
rates for purposes of the Hospital VBP Program, and these measure rates
will be used to calculate domain, condition, and Total Performance
Scores for the Hospital VBP Program without further review and
correction. We invite public comment on this proposal.
3. Proposed Review and Correction Process for Hospital Consumer
Assessment of Healthcare Providers and Systems (HCAHPS) Data
We are proposing a ``two-phase'' process for the review and
correction of HCAHPS data. Under this proposed process, hospitals would
have the opportunity to review and correct data they submitted on all
HCAHPS Hospital IQR Program items in the first phase, whether or not
such items or combination of items are adopted as HCAHPS dimensions for
the Hospital VBP Program. In the second phase, hospitals would have the
opportunity to review the patient-mix and mode adjusted HCAHPS scores
(details on the HCAHPS adjustment process may be found at: http://www.hcahpsonline.org/files/Final%20Draft%20Description%20of%20HCAHPS%20Mode%20and%20PMA%20with%20bottom%20box%20modedoc%20April%2030,%202008.pdf) on dimensions that we
will use to score hospitals under the Hospital VBP Program to determine
whether they believe CMS calculated their scores on these dimensions
correctly. We believe that this proposal for a two-phase review process
will expedite hospital review and correction of data. We also believe
that this proposal will improve quality of care because hospitals will
be able to timely review their HCAHPS scores and respond efficiently in
improving patient care to address areas of weakness reflected in their
scores. We are not proposing to release any patient level data to the
public. This proposed review process would only grant each hospital the
authority to review and correct the hospital's patient-level data.
a. Phase One: Review and Correction of HCAHPS Data Submitted to the QIO
Clinical Warehouse
For the first phase of the HCAHPS review and correction process, we
proposed to reduce the HCAHPS submission deadline under the Hospital
IQR Program by one week in order to create a 1-week period for
hospitals to review and correct their HCAHPS data. We included this
proposal to reduce the submission deadline in the FY 2012 IPPS/LTCH PPS
proposed rule (76 FR 25916). Currently, hospitals have approximately 14
weeks after the end of a calendar quarter to submit HCAHPS data for
that quarter to the QIO Clinical Warehouse. Under this proposal,
hospitals would have approximately 13 weeks after the end of a calendar
quarter to submit HCAHPS data for that quarter to the QIO Clinical
Warehouse and a 1-week period to review and correct that data. During
the 13-week submission period, hospitals would be able to resubmit
their data to make corrections to the patient-level records. The 1-week
review and correction period would occur immediately after the 13-week
data submission deadline.
The proposed 1-week review and correction period would allow
hospitals to provide missing data or replace incorrect data in the data
files they have submitted to the QIO Clinical Warehouse. The 1-week
review and correction period will allow hospitals to identify any
issues with the data they had submitted in the 13-week submission
period. Hospitals will have the opportunity to review frequency
distributions of all of their submitted data items, which include
hospital summary information, patient administrative data, and patient
survey responses, and resubmit their HCAHPS data files to correct
identified issues during the 1-week review and correction period. We
define the term ``review and correct'' to mean that hospitals can
correct their existing data records, but not add new data records.
Accordingly, hospitals would not be allowed to add new patient-level
records or remove existing patient-level records during the review and
correction period. Following the conclusion of the 1-week review and
correction period, hospitals would not be allowed to review, correct,
or submit additional HCAHPS data for the applicable calendar quarter.
b. Phase Two: Review and Correction of HCAHPS Scores for the Hospital
VBP Program
In the second phase of the proposed HCAHPS review and correction
process, hospitals would be given the opportunity to review their
scores on the HCAHPS items that will be used in the Hospital VBP
Program. These HCAHPS scores are constructed after the data that
hospitals had submitted have been analyzed to identify and remove
incomplete surveys and after adjustments for the effects of patient-mix
and survey mode have been applied. (Details on the HCAHPS adjustment
process may be found at: http://www.hcahpsonline.org/files/Final%20Draft%20Description%20of%20HCAHPS%20Mode%20and%20PMA%20with%20bottom%20box%20modedoc%20April%2030,%202008.pdf.) Hospitals would have
approximately 1 week to examine their HCAHPS dimension scores for the
applicable Hospital VBP Program performance period. A participating
hospital would have the opportunity to question CMS if the hospital
believes its scores were miscalculated. We would respond to a
hospital's inquiries by checking the calculation and, if necessary,
recalculating the hospital's HCAHPS scores. In this proposed second
phase of the HCAHPS review and correction process, hospitals would not
be allowed to change or submit new HCAHPS data or delete existing data.
Their right to correct information during this period would be limited
to reviewing their HCAHPS dimension scores and notifying CMS of any
errors in its calculation of those scores. We intend to propose the
procedural aspects of the second phase of the proposed HCAHPS review
and correction process in the FY 2013 IPPS/LTCH PPS proposed rule. In
summary, for the chart-abstracted and patient experience of care
measures, we are proposing that existing procedures for submission,
review, and correction related to chart-abstracted measures under the
Hospital IQR Program, coupled with the proposed two phase review of
HCAHPS scores discussed above, would constitute an opportunity for
review and correction of measure data and measure rates under the
Hospital VBP Program. Because these procedures give hospitals the
opportunity to review and correct the data and/or measure rates, such
data and measure rates may be used to calculate domain, condition, and
Total Performance Scores for the Hospital VBP Program. We intend to
make proposals related to making this

[[Page 42365]]

information publicly available, and to make additional proposals
regarding the review and correction of outcome measures, efficiency
measures, and domain, condition, and Total Performance Scores in future
rulemaking. We invite public comment on these proposals.

XVII. Files Available to the Public via the Internet

In the past, a majority of the Addenda to which we referred
throughout the preamble of the OPPS/ASC proposed and final rules
appeared in the printed version of the Federal Register as part of the
annual rulemakings. However, beginning with this CY 2012 proposed rule,
the Addenda of the proposed and final rules will be published and
available only via the Internet on the CMS Web site. We note that our
existing regulations at Sec. Sec. 416.166(b), 416.171(b), and 416.173
provide for the annual publication of the covered surgical procedures
and the payment rates under the ASC payment system in the Federal
Register. In this proposed rule, we are proposing to revise these three
regulations to reflect the option of annually publishing the Addenda
containing the covered surgical procedures and payment rates under the
ASC payment system via the Internet on the CMS Web site.
To view the Addenda of the CY 2012 OPPS/ASC proposed rule
pertaining to the CY 2012 proposed payments under the OPPS, go to the
CMS Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/HORD and
select ``1525-P'' from the list of regulations. All Addenda for this
proposed rule are contained in the zipped folder entitled ``2012 OPPS
NPRM Addenda'' at the bottom of the page.
To view the Addenda of the CY 2012 OPPS/ASC proposed rule
pertaining to the CY 2012 proposed payments under the ASC payment
system, go to the CMS Web site at: http://www.cms.gov/ASCPayment/ASCRN/
and select ``1525-P'' from the list of regulations. All Addenda for
this proposed rule are contained in the zipped folder entitled
``Addendum AA, BB, DD1, and DD2'' at the bottom of the page.

A. Information in Addenda Related to the Proposed CY 2012 Hospital OPPS

Addenda A and B provide various data pertaining to the proposed CY
2012 payment for items and services under the OPPS. Specifically,
Addendum A includes a list of all proposed APCs to be payable under the
OPPS, including the proposed scaled relative weights, the proposed
national unadjusted payment rates, the proposed national unadjusted
copayments, and the proposed minimum unadjusted copayments for each APC
that we are proposing for CY 2012. Addendum B includes a list of all
active HCPCS codes, including the proposed APC assignments, the
proposed scaled relative weights, the proposed national unadjusted
payment rates, the proposed national unadjusted copayments, the
proposed minimum unadjusted copayments, and the proposed payment status
indicators and proposed comment indicators for CY 2012 OPPS.
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 proposed payment status indicators that we
are proposing to use in Addenda A and B. Addendum D2 defines the
proposed comment indicators that are used in Addendum B. Addendum E
lists the HCPCS codes that are proposed to be only payable to hospitals
as inpatient procedures and that are not payable under the OPPS for CY
2012. Addendum L contains the proposed out-migration wage adjustment
for CY 2012. Addendum M lists the HCPCS codes that are proposed to be
members of a composite APC and identifies the proposed composite APC to
which each is assigned. This addendum also identifies the proposed
status indicator for each HCPCS code and a proposed comment indicator
if there is a proposed 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 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 proposed rule for a complete description of
the proposed composite APCs.
Addendum N, ``Proposed Bypass Codes for Creating `Pseudo' Single
Procedure Claims for CY 2012 OPPS,'' contains a list of the HCPCS codes
that we are proposing to use to create ``pseudo'' single claims from
multiple procedure claims so that the most claims data can be used to
set median costs for the CY 2012 OPPS. We refer readers to section
II.A.1.b. of this proposed rule for a full discussion of the use of
this file in the proposed 2012 OPPS ratesetting process. Addendum N
contains the following elements for the proposed CY 2012 bypass codes:
(1) HCPCS code; (2) short descriptor; (3) overall bypass indicator; and
(4) an indicator if the code was not used as a bypass code in
ratesetting activities prior to this CY 2012 proposed rule. The
addendum was previously issued as a table (usually Table 1) in the
preamble of the applicable proposed or final rule. We are issuing it as
an addendum in this proposed rule because it is lengthy and users can
better analyze the file if it is furnished in Excel format on the CMS
Web site.

B. Information in Addenda Related to the Proposed CY 2012 ASC Payment
System

Addenda AA and BB provide various data pertaining to the proposed
CY 2012 payment for the covered surgical procedures and covered
ancillary services for which ASCs may receive separate payment.
Addendum AA lists, for CY 2012, the proposed ASC covered surgical
procedures, whether the procedure is proposed to be subject to multiple
procedure discounting, the proposed comment and payment indicators for
each procedure, and the proposed payment weights and rates for each
procedure. Addendum BB displays, for CY 2012, the proposed ASC covered
ancillary services, the proposed comment and payment indicators for
each service, and the proposed payment weights and rates for each
service.
Addendum DD1 defines the proposed payment indicators that are used
in Addenda AA and BB. Addendum DD2 defines the proposed comment
indicators that are used in Addenda AA and BB.
To view the Addenda that pertain to the list of proposed surgical
procedures to be excluded from Medicare payment if furnished in ASCs,
go to the CMS Web site at: http://www.cms.gov/ASCPayment/ASCRN/ and
select ``1525-P'' from the list of regulations. The proposed excluded
ASC procedures are contained in the zipped folder titled ``Addendum
EE'' at the bottom of the page. The proposed 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 to a Medicare beneficiary when performed in an ASC or for which
standard medical practice dictates that the beneficiary typically
requires active

[[Page 42366]]

medical monitoring and care at midnight following the procedure.
The Medicare Physician Fee Schedule (MPFS) data files are located
at the CMS Web site at: http://www.cms.gov/PhysicianFeeSched/.
The links to all of the FY 2012 IPPS proposed wage index-related
tables (that are used for the CY 2012 OPPS) are accessible on the CMS
Web site at: http://www.cms.gov/AcuteInpatientPPS/WIFN.

XVIII. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and to 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.
In this proposed rule, we are soliciting public comments on each of
the issues outlined above as discussed below that contained information
collection requirements.

B. Requirements in Regulation Text

This proposed rule contains the following proposed information
collection requirements specified in the regulatory text:
1. ICRs Regarding Basic Commitments of Providers (Sec. 489.20)
Section 489.20(w) contains a physician presence disclosure
requirement that requires disclosure when a doctor of medicine or a
doctor of osteopathy is not onsite 24 hours per day, 7 days per week.
The burden associated with the physician presence disclosure
requirement is the time and effort necessary for each hospital and CAH
to develop a standard notice to furnish to its patient, obtain the
required patients signatures, and maintain a copy in the patient's
medical record. Although this requirement is subject to the PRA, the
associated burden is approved under OMB control number 0938-1034.
Our proposed amendment to Sec. 489.20(w) would require that, for
hospitals and CAHs that are not physician owned, the existing physician
presence disclosure requirement regarding outpatient services would
apply only to outpatients receiving observation services, surgery, and
procedures requiring anesthesia. The burden associated with this
requirement would be greatly reduced and includes revisions to the time
and effort necessary for each hospital and CAH to revise and
disseminate the existing standard notice to its patients. The
requirements in Sec. 489.20(w) apply to all hospitals as defined in
Sec. 489.24(b). We estimate that there are approximately 2,597
hospitals and CAHs that may not have a doctor or medicine or a doctor
of osteopathy onsite at all times. We estimate that it will take each
hospital or CAH 4 hours to develop or amend and review a disclosure
form on a one-time basis, 30 seconds to make each disclosure, another
30 seconds to obtain the patient's signature, and an additional 30
seconds to include a copy of the notice in the patient's medical
record. We estimate that on average each hospital or CAH that is
subject to the disclosure requirement will make 1966 disclosures per
year. The estimated annual burden associated with developing an amended
form, obtaining patient signatures, and copying and recording the form
is 137,872 hours at a cost of approximately $2,551,148.
2. ICRs Regarding Exceptions Process Related to the Prohibition of
Expansion of Facility Capacity (Sec. 411.362)
As discussed in section XV. of this proposed rule, our proposed new
Sec. 411.362(c) would establish and implement a process under which an
applicable hospital or high Medicaid facility may apply for an
exception to the prohibition on expansion of facility capacity. A
physician-owned hospital would be allowed to request an exception under
proposed Sec. 411.362(c) by providing information to CMS regarding the
hospital's baseline number of operating rooms, procedure rooms, and
beds for which the hospital is licensed as of March 23, 2010, and
specifying the increase in the number of operating rooms, procedure
rooms and beds it is requesting under the exceptions process. In
addition, the hospital would have to provide supporting documentation
to CMS regarding the criteria it must satisfy. We estimate that 265
physician-owned hospitals would request an exception. We estimate that
it would take each hospital 8 hours and 17.5 minutes to complete the
request process at the cost of $417.74 for each hospital. Overall, the
annual burden for this process is estimated at approximately 2,153
hours at the cost of approximately $110,707. These estimates do not
include time or cost burden estimates for hospitals to read and provide
rebuttal statements in response to community input comments, which is
included in the proposed regulation, and the associated time and costs
for the hospital to send them to CMS. Due to the voluntary nature of
this criterion, time and cost burden estimates would be difficult to
anticipate as this is an unknown variable.

Proposed Revised Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total Hourly labor Total labor Total
Number of Number of Burden per annual cost of cost of capital/ Total cost
Regulation section(s) OMB Control No. respondents responses response burden reporting reporting maintenance ($)
(hours) (hours) ($) ($) costs ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 489.20................ 0938-1034...... 2,597 1,966 0.019 * 137,872 18.50 2,551,148 0 2,551,148
Sec. 411.362............... 0938-New....... 265 265 8.29 2,153 51.42 110,707 0 110,707
---------------------------------------------------------------------------------------------------------
Total.................... ............... 2,862 2,231 ............ 140,025 ............ ........... ........... 2,661,855
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Represents the revised burden estimate associated with the requirement. It does not reflect the burden currently approved under OCN 0938-1034.

[[Page 42367]]

C. Proposed Associated Information Collections Not Specified in
Regulatory Text

In this proposed rule, we make reference to proposed associated
information collection requirements that are not discussed in the
regulation text contained in this document. The following is a
discussion of those requirements.
1. Hospital Outpatient Quality Reporting (Hospital OQR) Program
As previously stated in section XIV. of this proposed rule, the
Hospital OQR Program has been generally modeled after the quality data
reporting program for the Hospital IQR Program. We refer readers to the
CY 2011 OPPS/ASC final rule with comment period (75 FR 72064 through
72110 and 72111 through 72114) for a detailed discussion of Hospital
OQR Program information collection requirements we have previously
finalized.
2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 2014, and
CY 2015 Payment Determinations
a. Previously Adopted Hospital OQR Program Measures for the CY 2012, CY
2013, and CY 2014 Payment Determinations
In the CY 2009 OPPS/ASC final rule with comment period (73 FR
68766), we retained the 7 chart-abstracted measures we used in CY 2009
and adopted 4 new claims-based imaging measures for the CY 2010 payment
determination, bringing the total number of quality measures for which
hospitals must submit data to 11 measures. In the CY 2010 OPPS/ASC
final rule with comment period (74 FR 60637), we required hospitals to
continue to submit data on the same 11 measures for the CY 2011 payment
determination. The burden associated with the aforementioned data
submission requirements is currently approved under OCN: 0938-1109 and
expires October 31, 2013.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071
through 72094), we adopted measures for the CY 2012, CY 2013, and CY
2014 payment determinations.
For the CY 2012 payment determination, we retained the 7 chart-
abstracted measures and the 4 claims-based imaging measures we used for
the CY 2011 payment determination. We also adopted 1 structural HIT
measure that tracks HOPDs' ability to receive lab results
electronically, and 3 claims-based imaging efficiency measures. These
actions bring the total number of measures for the CY 2012 payment
determination for which hospitals must submit data to 15 measures. In
the CY 2011 OPPS/ASC final rule with comment period (75 FR 72112
through 72113), we discussed the burden associated with these
information collection requirements.
For the CY 2013 payment determination, we required that hospitals
continue to submit data for all of the quality measures that we adopted
for the CY 2012 payment determination. We also adopted 1 structural HIT
measure assessing the ability to track clinical results between visits,
6 new chart-abstracted measures on the topics of HOPD care transitions
and ED efficiency, as well as 1 chart-abstracted ED-AMI measure that we
proposed for the CY 2012 payment determination but which we decided to
finalize for the CY 2013 payment determination. These actions bring the
total number of quality measures for the CY 2013 payment determination
for which hospitals must submit data to 23 measures.
In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071
through 72094), for the CY 2014 payment determination, we retained the
CY 2013 payment determination measures, but did not adopt any
additional measures. In the CY 2011 OPPS/ASC final rule with comment
period (75 FR 72112 through 72113), we discussed the burden associated
with these information collection requirements.
The 23 measures that we adopted in the CY 2011 OPPS/ASC final rule
with comment period to be used for the CY 2012 through CY 2014 payment
determinations are listed in the table below.

Hospital OQR Program Measurement Set Adopted in the CY 2011 OPPS/ASC
Final Rule With Comment Period To Be Used for the CY 2012, CY 2013, and
CY 2014 Payment Determinations
------------------------------------------------------------------------

-------------------------------------------------------------------------
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.
OP-12: The Ability for Providers with HIT to Receive. Laboratory Data
Electronically Directly into their Qualified/Certified EHR System as
Discrete Searchable Data.
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac
Low Risk Surgery.
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
Computed Tomography (CT).
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache.
OP-16: Troponin Results for Emergency Department acute myocardial
infarction (AMI) patients or chest pain patients (with Probable Cardiac
Chest Pain) Received Within 60 minutes of Arrival.
OP-17: Tracking Clinical Results between Visits.
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
Patients.
OP-19: Transition Record with Specified Elements Received by Discharged
Patients.
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
Professional.
OP-21: ED-Median Time to Pain Management for Long Bone Fracture.
OP-22: ED-Patient Without Being Seen.
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
Stroke who Received Head CT Scan Interpretation Within 45 minutes of
Arrival.
------------------------------------------------------------------------

[[Page 42368]]

b. Additional Proposed Hospital OQR Program Measures for CY 2014
In the CY 2011 OPPS/ASC final rule with comment period, we did not
adopt any new measures for the CY 2014 payment determination. In this
CY 2012 OPPS/ASC proposed rule, we are proposing to add, for the CY
2014 payment determination, 6 chart-abstracted measures, 2 structural
measures (including hospital outpatient volume data for selected
outpatient surgical procedures), and 1 HAI surgical site infection
measure. Thus, for the CY 2014 payment determination, we are proposing
that there would be a total of 32 measures. The complete proposed
measure set we are proposing for the CY 2014 payment determination,
including measures we have previously adopted, is shown below.

Proposed CY 2014 Hospital OQR Program Measure Set Reflecting Measures
Previously Adopted and the Proposed Additions
------------------------------------------------------------------------

-------------------------------------------------------------------------
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.
OP-12: The Ability for Providers with HIT to Receive Laboratory Data
Electronically Directly into their Qualified/Certified EHR System as
Discrete Searchable Data.*
OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non-Cardiac
Low Risk Surgery.*
OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus
Computed Tomography (CT).*
OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department
for Atraumatic Headache.*
OP-16: Troponin Results for Emergency Department acute myocardial
infarction (AMI) patients or chest pain patients (with Probable Cardiac
Chest Pain) Received Within 60 minutes of Arrival.**
OP-17: Tracking Clinical Results between Visits.**
OP-18: Median Time from ED Arrival to ED Departure for Discharged ED
Patients.**
OP-19: Transition Record with Specified Elements Received by Discharged
Patients.**
OP-20: Door to Diagnostic Evaluation by a Qualified Medical
Professional.**
OP-21: ED-Median Time to Pain Management for Long Bone Fracture.**
OP-22: ED-Patient Left Before Being Seen.**
OP-23: ED-Head CT Scan Results for Acute Ischemic Stroke or Hemorrhagic
Stroke who Received Head CT Scan Interpretation Within 45 minutes of
Arrival.**
OP-24: Surgical Site Infection.***
OP-25: Hemoglobin A1c Poor Control in Diabetic Patients.***
OP-26: Low Density Lipoprotein (LDL-C) Control in Diabetic Patients.***
OP-27: High Blood Pressure Control in Diabetic Patients.***
OP-28: Dilated Eye Exam in Diabetic Patients.***
OP-29: Urine Screening for Microalbumin or Medical Attention for
Nephropathy in Diabetic Patients.***
OP-30: Cardiac Surgery Referral.***
OP-31: Safety Surgery Checklist.***
OP-32: Hospital Outpatient Department Volume for Selected Outpatient
Surgical Procedures.***
------------------------------------------------------------------------
* New measure for the CY 2012 payment determination.
** New measure for the CY 2013 payment determination.
*** Proposed new measure for the CY 2014 payment determination.

We will calculate the claims-based measures using Medicare FFS
claims data and do not require additional hospital data submissions,
and we are using the same data submission requirements related to the
chart-abstracted quality measures that are submitted directly to CMS
that we used for the CY 2011 and CY 2012 payment determinations. For
the structural measures, including the collection of all-patient volume
for selected outpatient procedures; hospitals will enter data into a
Web-based collection tool during a specified collection period once
annually. For the collection of HAI data, we are proposing that
hospitals would use the NHSN infrastructure and protocol to report the
measure for Hospital OQR Program purposes. The NHSN is a Web-based
reporting tool hosted by CDC and is provided free of charge to
hospitals. Under the Hospital OQR Program requirements, hospitals must
complete and submit a notice of participation form for the Hospital OQR
Program if they have not already done so or have withdrawn from
participation. By submitting this document, hospitals agree that they
will allow CMS to publicly report the measures for which they have
submitted data under the Hospital OQR Program.
For the CY 2014 payment determination, the burden associated with
these requirements (including those previously adopted and those
currently proposed) is the time and effort associated with completing
the notice of participation form, collecting and submitting the data on
the 32 measures. For the chart-abstracted measures where data is
submitted directly to CMS, we estimate that there will be approximately
3,200 respondents per year. For hospitals to collect and submit the
information on the chart-abstracted measures (including the OP-22
measure for which we are proposing that data be submitted via a Web-
based tool rather than via an electronic file) we estimate it will take
35 minutes per sampled case. Based upon the data submitted for the CY
2011 payment determination and our estimates for the additional
proposed measures, we estimate there will be a total of 1,307,510 cases
per year, approximately 409 cases per year per respondent. The
estimated annual burden associated with the submission requirements for
these chart-abstracted

[[Page 42369]]

measures is 762,278 hours (1,307,510 cases per year x 0.583 hours per
case).
For the structural measures, excluding the proposed all-patient
volume for selected surgical procedures measure, we estimate that each
participating hospital will spend 10 minutes per year to collect and
submit the required data, making the estimated annual burden associated
with this measure 1,603 hours (3,200 hospitals x 0.167 hours per
hospital x 3 structural measures per hospital).
For the collection of data for the proposed HAI Surgical Site
Infection measure, we estimate that approximately 1,200 hospitals are
participating in the Hospital OQR Program, but are not currently
submitting HAI data to the NHSN. Based upon burden estimates associated
with the collection of NHSN data currently approved under OCN: 0920-
0666, we estimate that additional annual burden associated with this
proposed measure will be 17,269 hours (0.533 hr per response x
estimated 27 responses per hospital x 1,200 hospitals).
For the proposed collection of all-patient volume for selected
outpatient surgical procedures, because hospitals must determine their
populations for data reporting purposes and most hospitals are
voluntarily reporting population and sampling data for Hospital OQR
Program purposes, we believe the only additional burden associated with
this proposed requirement would be the reporting of the data using the
Web-based tool. We estimate that each participating hospital will spend
10 minutes per year to collect and submit the data, making the
estimated annual burden associated with this measure 534 hours (3,200
hospitals x 0.167 hours per hospital).
c. Proposed Hospital OQR Program Measures for CY 2015
For the CY 2015 payment determination, we are proposing to retain
the requirement that hospitals must complete and submit a notice of
participation form for the Hospital OQR Program. For the CY 2015
payment determination, we also are proposing to retain the measures
used for CY 2014 payment determination (including, if adopted, the
measures proposed in this proposed rule) and to add one additional HAI
measure, Healthcare Personnel (HCP) Influenza Vaccination. Achieving
and sustaining high influenza vaccination coverage among HCP is
intended to help protect HCP and their patients and reduce disease
burden and healthcare costs.
For the CY 2015 payment determination, the burden associated with
these proposed requirements is the time and effort associated with
completing the notice of participation form, collecting and submitting
the data on the proposed measures, and collecting and submitting
proposed all-patient volume data for selected outpatient surgical
procedures. For the proposed chart-abstracted measures, we estimate
that there will be approximately 3,200 respondents per year. For
hospitals to collect and submit the information on the proposed chart-
abstracted measures where data is submitted directly to CMS, we
estimate it will take 35 minutes per sampled case. Based upon the data
submitted for the CY 2011 payment determination and our estimates for
the additional proposed measures, we estimate there will be a total of
1,307,510 cases per year, approximately 409 cases per year per
respondent. The estimated annual burden associated with the
aforementioned proposed submission requirements for the proposed chart-
abstracted data is 762,278 hours (1,307,510 cases per year x 0.583
hours per case). For the proposed structural measures, we estimate that
each participating hospital will spend 10 minutes per year to collect
and submit the data, making the estimated annual burden associated with
this proposed measure 1,603 hours (3,200 hospitals x 0.167 hours per
hospital x 3 structural measures per hospital).
For the proposed collection of HAI data, we estimate that
approximately 1,200 hospitals are participating in the Hospital OQR
Program, but are not currently submitting HAI data to the NHSN. We base
our burden estimates upon burden estimates associated with the
collection of NHSN data currently approved under OCN: 0920-0666. For
the proposed Surgical Site Infection HAI measure, we estimate that
hospitals will incur an additional burden of 17,269 hours (0.533 hours
per response x an estimated 27 responses per hospital x 1,200
hospitals).
For the proposed collection of HCP Influenza Vaccination HAI
measure data, we estimate that hospitals will incur an additional
burden of 14,400 hours (2.0 hours per response x an estimated 6
responses per hospital x 1,200 hospitals).
For the proposed collection of all-patient volume data for selected
outpatient surgical procedures, because hospitals must determine their
populations for data reporting purposes and most hospitals are
voluntarily reporting population and sampling data for Hospital OQR
purposes, we believe the only additional burden associated with this
proposed requirement will be the reporting of the data using the Web-
based tool. We estimate that each participating hospital will spend 10
minutes per year to collect and submit the data, making the estimated
annual burden associated with this proposed measure 534 hours (3,200
hospitals x 0.167 hours per hospital).
We invite public comment on the burden associated with these
proposed information collection requirements.
3. Proposed Hospital OQR Program Validation Requirements for CY 2013
In this proposed rule, we are proposing to retain most of the
requirements related to data validation for CY 2013 that we adopted in
the CY 2011 OPPS/ASC final rule with comment period (75 FR 72103
through 72106) for CY 2012, with some revisions. While these
requirements are subject to the PRA, they are currently approved under
OCN: 0938-1109 and expire October 31, 2013.
Similar to our approach for the CY 2012 Hospital IQR Program
payment determination (75 FR 72103 through 72106), we are proposing to
validate data from randomly selected hospitals for the CY 2013 payment
determination, but we are proposing to reduce the number of hospitals
from 800 to 450. We note that, because hospitals would be selected
randomly, every hospital participating in the Hospital OQR Program
would be eligible each year for validation selection.
In the CY 2011 OPPS/ASC proposed rule and final rule with comment
period (75 FR 46381 and 72106, respectively), we discussed additional
data validation conditions under consideration for CY 2013 and
subsequent years. In this proposed rule, we are proposing to select for
validation, up to 50 additional hospitals based upon targeting
criteria.
For each selected hospital, we would randomly select up to 48
patient episodes of care per year (12 per quarter) for validation
purposes 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 submitted less than 12 cases in
one or more quarters, only those cases available would be validated.
The burden associated with the proposed CY 2013 requirement is the
time and effort necessary to submit validation data to a CMS
contractor. We estimate that it would take each of the sampled
hospitals approximately 12 hours to comply with these proposed data
submission requirements. To

[[Page 42370]]

comply with the proposed requirements, we estimate each hospital must
submit up to 48 cases for the affected year for review. We are
proposing that selected hospitals comply with these requirements per
year, which would result in a total of up to 24,000 charts being
submitted by the sampled hospitals. The estimated annual burden
associated with the proposed data validation process for CY 2013 is
approximately 6,000 hours.
We also are proposing to reduce the deadline from 45 days to 30
days for hospitals to submit requested medical record documentation to
a CMS contractor to support our validation process. This proposal may
create an additional administrative burden for hospitals selected for
validation. However, this proposed deadline is in line with our QIO
regulations at Sec. 476.78 and the total burden would be the time
required to comply with the requirements for copying and mailing in a
30-day period 12 charts for each of four quarters for CY 2013.
We invite public comment on the burden associated with these
proposed information collection requirements.
4. Proposed Hospital OQR Program 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 applied to
the CY 2010 payment decisions. In the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60654 through 60655), we continued this process
for the CY 2011 payment update. In the CY 2011 OPPS/ASC final rule with
comment period (75 FR 72106 through 72108), we continued this process
for the CY 2012 payment update with some modifications. We eliminated
the requirement that the reconsideration request form be signed by the
hospital CEO to facilitate electronic submission of the form and reduce
hospital burden. We are proposing to continue this process for the CY
2013 payment determination. While there is burden associated with
filing a reconsideration request, 5 CFR 1320.4 of the Paperwork
Reduction Act of 1995 regulations excludes collection activities during
the conduct of administrative actions such as redeterminations,
reconsiderations, and/or appeals.
5. ASC Quality Reporting Program
In this proposed rule, we are proposing to adopt seven claims-based
measures for collection beginning in CY 2012 and one NHSN HAI measure
of Surgical Site Infection for collection beginning in CY 2013. These
measures would be used for the CY 2014 payment determination. We are
proposing to collect quality measure data for the seven claims-based
measures by using Quality Data Codes (QDCs) placed on submitted claims
beginning with services furnished from January 1, 2012 through December
31, 2012. Data collection for the HAI measure would begin with
infection events occurring on or after January 1, 2013 through June 30,
2013. The eight proposed measures are:
Patient Burns (NQF 0263)
Patient Falls (NQF 0266)
Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure,
Wrong Implant (NQF 0267)
Hospital Transfer/Admission (NQF 0265)
Prophylactic Intravenous (IV) Antibiotic Timing (NQF
0264)
Ambulatory Surgery Patients with Appropriate Method of
Hair Removal (NQF 0515)
Selection of Prophylactic Antibiotic: First OR Second
Generation Cephalosporin (NQF 0268)
Surgical Site Infection Rate (NQF 0299)
Approximately 71 percent of ASCs participate in Medical Event
Reporting, which includes reporting on the first four proposed claims-
based measures listed above. Between January 1995 and December 2007,
ASCs reported 126 events, an average of 8.4 events per year (Florida
Medical Quality Assurance, Inc. and Health Services Advisory Group.
Ambulatory Surgery Center Environmental Scan (July 2008) (Contract No.
GS-10F-0096T).). Thus, we estimate the burden to report QDCs on this
number of claims per year for the first four claims-based measures to
be nominal due to the small number of cases (less than 1 case per month
per ASC).
The remaining proposed claims-based measures concern surgical
procedures. We estimate the burden associated with submitting QDCs for
these measures to be 465,703 hours (5,577,280 claims per year x 50
percent of claims requiring quality data code information x 0.167 hours
per claim). We refer readers to the HHS Report to Congress: Medicare
Ambulatory Surgical Center Value-Based Purchasing Implementation Plan,
available at the Web site: https://www.cms.gov/ASCPayment/downloads/C_ASC_RTC%202011.pdf as the source for the number of ASCs and number of
claims per year to calculate ASC burden estimates.
For the collection of the Surgical Site Infection HAI data, we are
proposing that ASCs would use the NHSN infrastructure and protocol to
report the measure for ASC Quality Reporting Program purposes discussed
above.
For the Surgical Site Infection HAI measure, we estimate that it
will require ASCs an additional 8,275 hours (0.533 hours per response x
an estimated 3 responses per ASC x 5,175 ASCs). We base the time per
response for our burden estimate on burden estimates associated with
the collection of NHSN data currently approved under OCN: 0920-0666,
and the number of ASCs from the HHS Report to Congress: Medicare
Ambulatory Surgical Center Value-Based Purchasing Implementation Plan,
available at the Web site: https://www.cms.gov/ASCPayment/downloads/C_ASC_RTC%202011.pdf.
For CY 2015 payment determination, we are proposing to retain the
eight measures we are proposing to adopt for CY 2014 payment
determination (if they are adopted) and we are proposing to add two
structural measures.
For the structural measures, we are proposing that ASCs would enter
required information using a Web-based collection tool between July 1,
2013 and August 15, 2013. For the Safe Surgery Checklist Use structural
measure, we estimate that each participating ASC will spend 10 minutes
per year to collect and submit the required data, making the estimated
annual burden associated with this measure 864 hours (5,175 ASCs x
0.167 hours per ASC).
For the ASC Facility Volume Data on Selected ASC Surgical
Procedures structural measure, we estimate that each participating ASC
will spend 10 minutes per year to collect and submit the required data,
making the estimated annual burden associated with this measure, 864
hours (5,175 ASCs x 0.167 hours per ASC).
For the CY 2016 payment determination, we are proposing to retain
the ten measures we are proposing to adopt for the CY 2015 payment
determination (if they are adopted), and are proposing to add one
structural measure, Influenza Vaccination Coverage Among Healthcare
Personnel (NQF 0431).
We estimate that each participating ASC will spend 10 minutes per
year to collect and submit the data via a Web-based tool, making the
estimated annual burden associated with this proposed measure 864 hours
(5,175 ASCs x 0.167 hours per ASC).
6. Proposed 2012 Medicare EHR Incentive Program Electronic Reporting
Pilot for Hospitals and CAHs
Under 42 CFR 495.6(f)(9), we require eligible hospitals and CAHs
participating in the Medicare EHR

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Incentive Program (which would include those participating in the
proposed 2012 Medicare EHR Incentive Program Electronic Reporting
Pilot) to successfully report hospital clinical quality measures (CQMs)
to CMS in the manner specified by CMS. Although we are proposing that
eligible hospitals and CAHs may continue to attest CQMs in 2012, they
may also choose to participate in the proposed 2012 Medicare EHR
Incentive Program Electronic Reporting Pilot for Hospitals and CAHs. We
are proposing that eligible hospitals and CAHs participating in the
2012 Medicare EHR Incentive Program Electronic Reporting Pilot must
submit CQM data on all 15 CQMs (listed in Table 10 of the final rule
(75 FR 44418 through 44420) for the Medicare and Medicaid EHR Incentive
Program) to CMS, via a secure portal based on data obtained from the
eligible hospital's or CAH's certified EHR technology.
Eligible hospitals and CAHs are required to report on core and menu
set criteria for Stage 1 meaningful use. The reporting of clinical
quality measures is part of the core set. We estimate that it would
take an eligible hospital or CAH 0.5 hour to submit the required CQM
information via the proposed 2012 Medicare EHR Incentive Program
Electronic Reporting Pilot. Therefore, the estimated total burden for
all 4,922 Medicare eligible hospitals and CAHs participating in the
reporting Pilot (3,620 acute care hospitals and 1,302 CAHs) is 2,461
hours.
We believe that an eligible hospital or CAH might assign a Computer
and Information Systems Managers to submit the CQM information on their
behalf. We estimate the cost burden for an eligible hospital or CAH to
submit the CQMs and hospital quality requirements is $29.64 (0.5 hour x
$59.27 (mean hourly rate for computer and information systems managers
based on the 2010 Bureau of Labor Statistics)) and the total estimated
annual cost burden for all eligible hospitals and CAHs to submit the
required CQMs is $145,889 ($29.64 x 4,922 hospitals and CAHs). We are
soliciting public comments on the estimated numbers of eligible
hospitals and CAHs that may registered for the Medicare EHR Incentive
Program Electronic Reporting Pilot that would submit the CQM
information via the proposed Electronic Reporting Pilot in FY 2012. We
also invite public comments on the type of personnel or staff that
would mostly likely submit on behalf of eligible hospitals and CAHs.
7. Additional Topics
In addition to seeking OMB approval for the proposed information
collection requirements associated with the Hospital OQR Program, we
are seeking public comment on several issues that may ultimately affect
the burden associated with the Hospital OQR Program. Specifically, in
this proposed rule, we are proposing to retain measures for the CY 2015
payment determinations, adopt new measures for the CY 2014 and CY 2015
payment determinations, and we are seeking comments on other possible
measures under consideration for adoption into the Hospital OQR
Program. We also are soliciting public comments on collecting chart-
abstracted data for one measure for the CY 2013 payment determination
via a Web-based tool, and on the continued use of an extraordinary
circumstance extension or waiver for reporting quality data, and
additional data validation conditions that we are considering adopting
beginning with the CY 2014 payment determination.
We also are seeking public comment on our proposals for an ASC
Quality Reporting Program for the ASC payment determinations for CYs
2014, 2015 and 2016.
To obtain copies of the supporting statement and any related forms
for the proposed paperwork collections referenced above, access CMS'
Web site at http://www.cms.hhs.gov/[email protected], or call the
Reports Clearance Office at 410-786-1326.
We invite public comments on these potential information collection
requirements.
If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget,
Attention: CMS Desk Officer, (CMS-1525-P)
Fax: (202) 395-6974; or
E-mail: [email protected].

XIX. 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 proposed
rule, and, when we proceed with a subsequent document(s), we will
respond to those comments in the preamble to that document.

XX. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
We have examined the impacts of this proposed rule as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993, Executive Order 13563 on Improving Regulation and Regulatory
Review (January 18, 2011), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995
(UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C.
804(2)).
Executive Orders 12866 and 13563 direct 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). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This rule has been designated as an ``economically''
significant rule under section 3(f)(1) of Executive Order 12866.
Accordingly, the rule has been reviewed by the Office of Management and
Budget. We have prepared a Regulatory Impact Analysis that, to the best
of our ability, presents the costs and benefits of the proposed rule.
We are soliciting public comments on the Regulatory Impact Analysis
provided.
2. Statement of Need
This proposed rule requests public comment on the CMS proposal to
update the Medicare hospital outpatient prospective payment rates and
the ambulatory surgical center prospective payment rates for CY 2012.
The proposed rule is necessary to enable CMS to acquire and consider
the public comments on the proposed changes to payment policies and
payment rates for services furnished by hospitals and CMHCs to
outpatients for CY 2012. We are required under section
1833(t)(3)(C)(ii) of the Act to update annually the OPPS conversion
factor

[[Page 42372]]

used to determine the APC payment rates. We also are required under
section 1833(t)(9)(A) of the Act to review, not less often than
annually, and revise the groups, the relative payment weights, and the
wage and other adjustments described in section 1833(t)(2) of the Act.
In addition, we must review the clinical integrity of payment groups
and weights at least annually.
This proposed rule also requests public comment on the CMS proposal
to update the ASC payment rates for CY 2012. The proposed rule is
necessary to enable CMS to acquire and consider public comments on the
proposed changes to payment policies and payment rates for covered
surgical procedures and covered ancillary services that are performed
in an ASC for CY 2012. Because the ASC payment rates are based on the
OPPS relative weights for the majority of the procedures performed in
ASCs, the ASC payment rates are updated annually to reflect annual
changes to the OPPS weights. In addition, because the services provided
in ASCs are identified by HCPCS codes which are reviewed and revised
either quarterly or annually, depending on the HCPCS codes, it is
necessary to update the ASC payment rates annually to reflect these
changes to HCPCS codes. In addition, we are required under section
1833(i)(1) of the Act to review and update the list of surgical
procedures that can be performed in an ASC not less often than every 2
years.
Section 1833(t)(17) of the Act requires that subsection (d)
hospitals that fail to meet quality reporting requirements under the
Hospital OQR Program to incur a reduction of 2.0 percentage points to
their OPD fee schedule increase factor. In section XIV. of this
proposed rule, we are proposing additional policies affecting the
Hospital OQR Program for CY 2013, CY 2014, and CY 2015 that hospitals
would have to meet in order to receive the full OPD fee schedule
increase factor. We are soliciting public comments on these proposed
additional policies.
In this proposed rule, to further implement section 6001(a)(3) of
the Affordable Care Act, we set forth the proposed process for a
hospital to request an exception to the prohibition on expansion of
facility capacity under the whole hospital and rural provider
exceptions to the physician self-referral prohibition. We also set
forth a related proposal for amendments to the patient safety
requirements in the provider agreement regulations. We are soliciting
public comments on these proposed changes.
Section 1886(o)(1)(B) of the Act directs the Secretary to begin
making value-based incentive payments under the Hospital VBP Program to
hospitals for discharges occurring on or after October 1, 2012. In this
proposed rule, we are proposing to add one chart-abstracted measure for
the FY 2014 payment determination under the Hospital Inpatient VBP
Program. We are soliciting public comments on this proposed additional
measure.
Section 109(b) of the MIEA TRHCA states that the Secretary may
implement a quality reporting system for ASCs in a manner so as to
provide for a reduction of 2.0 percentage point s in any annual update
with respect to the year involved, for failure to report on quality
measures. In this proposed rule, we are proposing to establish an ASC
Quality Reporting Program with the collection of seven quality measures
beginning in CY 2012.
3. Overall Impacts for Proposed OPPS and ASC Provisions
We estimate that the effects of the proposed OPPS provisions that
would be implemented by this proposed rule would result in expenditures
exceeding $100 million in any 1 year. We estimate the total increase
(from proposed changes in this proposed rule as well as enrollment,
utilization, and case-mix changes) in expenditures under the OPPS for
CY 2012 compared to CY 2011 to be approximately $3.285 billion. Because
this proposed rule 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 51 of this proposed rule displays the
redistributional impact of the proposed CY 2012 changes on OPPS payment
to various groups of hospitals and for CMHCs.
We estimate that the effects of the proposed ASC provisions that
would be implemented by this proposed rule for the ASC payment system
would result in expenditures exceeding $100 million in any one year. We
estimate the total increase (from proposed changes in this proposed
rule as well as enrollment, utilization, and case-mix changes) in
expenditures under the ASC payment system for CY 2012 compared to CY
2011 to be approximately $224 million. Because this proposed rule for
the ASC payment system 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
of changes to the ASC payment system that, to the best of our ability,
presents the costs and benefits of this rulemaking. Table 52 and Table
53 of this proposed rule display the redistributional impact of the CY
2012 proposed changes on ASC payment, grouped by specialty area and
then grouped by procedures with the greatest ASC expenditures,
respectively.
4. Detailed Economic Analyses
a. Effects of Proposed OPPS Changes in This Proposed Rule
We are proposing to update the OPPS payment rates and to revise
several OPPS payment policies for CY 2012. 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 review, not less often than
annually, and revise the groups, the relative payment weights, and the
wage and other adjustments described in section 1833(t)(2) of the Act.
In addition, we must review the clinical integrity of payment groups
and weights at least annually. Consistent with our historical proactice
in this proposed rule, we are proposing to update the conversion factor
and the wage index adjustment for hospital outpatient services
furnished beginning January 1, 2012, as we discuss in sections II.B.
and II.C., respectively, of this proposed rule. We discuss our
implementation of section 10324 of the Affordable Care Act, as amended
by HCERA, authorizing a wage index of 1.00 for certain frontier States.
We also are proposing to revise the relative APC payment weights using
claims data for services furnished on and after January 1, 2010,
through and including December 31, 2010, and updated cost report
information. We are proposing to continue the current payment
adjustment for rural SCHs, including EACHs. Finally, we list the 19
drugs and biologicals in Table 26 of this proposed rule that we are
proposing to remove from pass-through payment status for CY 2012.
Under this proposed rule, we estimate that the update change to the
conversion factor and other adjustments (but not including the effects
of outlier payments, pass-through estimates, and the application of the
frontier State wage adjustment for CY 2012), would increase total OPPS
payments by 1.5 percent in CY 2012. The proposed changes to the APC
weights, the changes to the wage indices, the continuation of a payment
adjustment for rural SCHs, including EACHs, and the proposed

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payment adjustment for cancer hospitals would not increase OPPS
payments because these changes to the OPPS are budget neutral. However,
these proposed updates would change the distribution of payments within
the budget neutral system as shown in Table 51 below and described in
more detail in this section. We also estimate that the total proposed
change in payments between CY 2011 and CY 2012, considering all
payments, including proposed changes in estimated total outlier
payments, pass-through payments, and the application of the frontier
State wage adjustment outside of budget neutrality, in addition to the
application of the proposed OPD fee schedule increase factor after all
adjustments required by sections 1833(t)(3)(F) and 1833(t)(3)(G) of the
Act, would increase total estimated OPPS payments by 1.5 percent.
(1) Limitations of Our Analysis
The distributional impacts presented here are the projected effects
of the proposed CY 2012 policy changes on various hospital groups. We
post on the CMS Web site our hospital-specific estimated payments for
CY 2012 with the other supporting documentation for this proposed rule.
To view the hospital-specific estimates, we refer readers to the CMS
Web site at: http://www.cms.hhs.gov/HospitalOutpatientPPS/. At the Web
site, select ``regulations and notices'' from the left side of the page
and then select ``CMS-1525-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
proposed rule. We show hospital-specific data only for hospitals whose
claims were used for modeling the impacts shown in Table 51 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
proposed rule for a discussion of the hospitals whose claims we do not
use for ratesetting and impact purposes.
We estimate the effects of the proposed 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, we are soliciting public comment and information about
the anticipated effects of our proposed changes on providers and our
methodology for estimating them.
(2) Estimated Effects of This Proposed Rule on Hospitals
Table 51 below shows the estimated impact of this proposed rule on
hospitals. Historically, the first line of the impact table, which
estimates the proposed change in payments to all facilities, has always
included cancer and children's hospitals, which are held harmless to
their pre-BBA amount. We also include CMHCs in the first line that
includes all providers because we include CMHCs in our weight scalar
estimate. As discussed in section II.F. of this proposed rule, we are
proposing to extend an adjustment to certain cancer hospitals under
section 3138 of the Affordable Care Act. Because these hospitals would
continue to be eligible to receive hold harmless payments (under our
standard policy), we now include a second line for all hospitals,
excluding permanently held harmless hospitals and CMHCs, and we also
include a column that shows the impact on other hospitals of the
proposed budget neutral cancer adjustment.
We present separate impacts for CMHCs in Table 51 because CMHCs are
paid only for partial hospitalization services and CMHCs are a
different provider type from hospitals. In CY 2011, we are paying CMHCs
under APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs)
and APC 0173 (Level II Partial Hospitalization (4 or more services) for
CMHCs), and we are paying hospitals for partial hospitalization
services under APC 0175 (Level I Partial Hospitalization (3 services)
for hospital-based PHPs) and APC 0176 (Level II Partial Hospitalization
(4 or more services) for hospital-based PHPs). For CY 2012, we are
proposing to continue this APC payment structure and to base payment
fully on the median costs calculated using claims and cost report data
for the type of provider for which rates are being set, that is,
hospital or CMHC. We display the impact on CMHCs of this proposed
policy below, and we discuss the impact on hospitals as part of our
discussion of the impact of proposed changes on hospitals for CY 2012.
The estimated increase in the total payments made under the OPPS is
determined largely 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.
Section 1833(t)(3)(C)(iv) of the Act provides that, for purposes of
this subparagraph subject to paragraph (17) and subparagraph (F) of
this paragraph, 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. The proposed market basket percentage
increase applicable under section 1886(b)(3)(B)(iii) of the Act, which
we refer to as the IPPS market basket in this discussion, is 2.8
percent. However, section 1833(t)(3)(F)(i) of the Act reduces that 2.8
percent by the proposed productivity adjustment described in section
1886(b)(3)(B)(xi)(II) of the Act which we propose to be 1.2 percentage
points (which is the MFP adjustment for FY 2012 as proposed in the FY
2012 IPPS/LTCH proposed rule), and section 1833(t)(3)(F)(ii) and
1833(t)(3)(G)(ii) of the Act further reduce the amount by 0.1
percentage point, resulting in the OPD fee schedule increase factor of
1.5 percent, which we are proposing to use in the calculation of the CY
2012 OPPS proposed conversion factor. We refer readers to section II.B.
of this proposed rule for a detailed discussion of the calculation of
the conversion factor and the source of its components. Section 10324
of the Affordable Care Act, as amended by HCERA, further authorized
additional expenditures outside budget neutrality for hospitals in
certain frontier States that have a wage index of 1.00. The amounts
attributable to this frontier State wage index adjustment are
incorporated into the CY 2012 estimates in Table 51.
Table 51 shows the estimated redistribution of hospital and CMHC
payments among providers as a result of APC reconfiguration and
recalibration; wage indices and the rural adjustment; the combined
impact of the APC recalibration, wage and rural adjustment effects, and
the OPD fee schedule increase factor update to the conversion factor;
the effect of the proposed budget neutral adjustment to payments made
to the 11 cancer hospitals that meet the classification criteria in
section 1886(d)(1)(B)(v) of the Act; the frontier State wage index
adjustment; and, finally, estimated redistribution considering all
proposed payments for CY 2012 relative to all payments for CY 2011,
including the impact of changes in estimated outlier payments, 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 proposing to make any changes to the policy for CY
2012. Because the proposed updates to the conversion factor (including
the update of the OPD fee schedule increase factor, that is, the
proposed IPPS market basket amount

[[Page 42374]]

less the productivity adjustment required by section 1833(t)(3)(F)(i)
of the Act and less the adjustment required by sections
1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of the Act; the subtraction of
the estimated cost of the cancer adjustment; the subtraction of the
estimated cost of the rural adjustment; and the subtraction of the
estimated cost of projected pass-through payment for CY 2012), 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 would 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 proposed rule would
redistribute money during implementation also would depend on changes
in volume, practice patterns, and the mix of services billed between CY
2011 and CY 2012 by various groups of hospitals, which CMS cannot
forecast.
Overall, we estimate that the proposed OPPS rates for CY 2012 would
have a positive effect for providers paid under the OPPS, resulting in
a 1.5 percent estimated increase in Medicare payments. Removing
payments to cancer and children's hospitals because their payments are
held harmless to the pre-OPPS ratio between payment and cost and
removing payments to CMHCs suggest that these proposed changes would
result in a 1.1 percent estimated increase in Medicare payments to all
other hospitals.
To illustrate the impact of the proposed CY 2012 changes, our
analysis begins with a baseline simulation model that uses the final CY
2011 weights, the FY 2011 final IPPS wage indices that include
reclassifications, and the final CY 2011 conversion factor. Column 2 in
Table 51 shows the independent effect of the proposed changes resulting
from the reclassification of services among APC groups and the
recalibration of APC weights, based on 12 months of CY 2010 OPPS
hospital claims data and the most recent cost report data. We modeled
the effect of the proposed APC recalibration changes for CY 2012 by
varying only the weights (the final CY 2011 weights versus the proposed
CY 2012 weights calculated using the service mix and volume in the CY
2010 claims used for this proposed rule) and calculating the percent
difference in weight. Column 2 also reflects the effect of the proposed
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 proposed changes in
the relative magnitude of payment weights.
Column 3 reflects the independent effects of the proposed updated
wage indices, including the proposed application of budget neutrality
for the rural floor policy on a nationwide basis. This column excludes
the effects of the frontier State wage index adjustment, which is not
budget neutral and is included in Column 6. We did not model a budget
neutrality adjustment for the rural adjustment for SCHs because we are
not proposing to make any changes to the policy for CY 2012. 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 proposed CY 2012 scaled weights and a
CY 2011 conversion factor that included a budget neutrality adjustment
for the effect of changing the wage indices between CY 2011 and CY
2012.
Column 4 demonstrates the independent effect of the proposed cancer
hospital payment adjustment. For CY 2012 we are proposing to make
additional payment to raise each cancer hospital's payment to cost
ratio (PCR) to the weighted average PCR for all other hospitals paid
under the OPPS. We are proposing to accomplish this by adjusting each
cancer hospital's OPPS payment by the percentage difference between
their individual PCR (without TOPs) and the weighted average PCR of the
other hospitals paid under the OPPS. This results in an increase in
estimated payments to cancer hospitals of 38.8 percent compared to the
estimated payment that would have been made under the OPPS to these
hospitals as a class in CY 2011, but does not represent the estimated
net increase in payment to cancer hospitals for CY 2012. After
accounting for TOPs that we estimate cancer hospitals would no longer
receive as a result of increased payment under the OPPS, the net
increase in estimated payment to cancer hospitals for CY 2012 would be
approximately 9 percent.
Column 5 demonstrates the combined ``budget neutral'' impact of
proposed 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 OPD fee schedule increase factor, the proposed 2.8
percent hospital market basket update less the multifactor productivity
adjustment required by section 1833(t)(3)(F)(i) of the Act which we are
proposing to be 1.2 percentage points, and less the 0.1 percentage
point reduction required by sections 1833(t)(3)(F)(ii) and
1833(t)(3)(G)(ii) of the Act, which resulted in an OPD fee schedule
increase factor of 1.5 percent). We modeled the independent effect of
the budget neutrality adjustments and the OPD fee schedule increase
factor by using the weights and wage indices for each year, and using a
CY 2011 conversion factor that included the OPD fee schedule increase
and a budget neutrality adjustment for differences in wage indices.
Column 6 demonstrates the cumulative impact of the proposed budget
neutral adjustments from Columns 2 through 4, and the OPD fee schedule
increase factor of 1.5 percent reflected in Column 5, combined with the
non-budget neutral frontier State wage index adjustment, discussed in
section II.C.1. of this proposed rule. This differs from Column 5
solely based on application of the proposed nonbudget neutral frontier
Stage wage index adjustment.
Column 7 depicts the full impact of the proposed CY 2012 policies
on each hospital group by including the effect of all the proposed
changes for CY 2012 (including the APC reconfiguration and
recalibration shown in Column 2) and comparing them to all estimated
payments in CY 2011. Column 7 shows the combined budget neutral effects
of Columns 2 through 4, plus the impact of the frontier State wage
index adjustment; the proposed change to the fixed-dollar outlier
threshold from $2,025 to $2,100 as discussed in section II.G. of this
proposed rule; the change in the hospital OQR payment reduction for the
small number of hospitals in our impact model that failed to meet the
reporting requirements (discussed in section XIV.E. of this proposed
rule); and the impact of increasing the estimate of the percentage of
total OPPS payments dedicated to transitional pass-through payments. Of
the 107 hospitals that failed to meet the OQR reporting requirements
for the full CY 2011 update (and assumed, for modeling purposes, to be
the same number for CY 2012), we included 30 hospitals in our model
because they had both CY 2010 claims data and recent cost report data.
We estimate that the cumulative effect of all proposed changes for CY
2012 would increase payments to all providers by 1.5 percent for CY
2012. We modeled the independent effect of all changes in Column 7
using the final weights for CY 2011 and the proposed weights for CY
2012. We used the final conversion factor for CY 2011 of $68.876 and
the proposed CY 2012 conversion factor of $69.420 discussed

[[Page 42375]]

in section II.B. of this proposed rule in this model.
Column 7 also contains simulated outlier payments for each year. We
used the charge inflation factor used in the FY 2012 IPPS/LTCH PPS
proposed rule of 9.08 percent (1.0908) to increase individual costs on
the CY 2010 claims, and we used the most recent overall CCR in the
April 2011 Outpatient Provider-Specific File (OPSF) (76 FR 26025).
Using the CY 2010 claims and a 4.44 percent charge inflation factor, we
currently estimate that outlier payments for CY 2011, using a multiple
threshold of 1.75 and a fixed-dollar threshold of $2,025 should be
approximately 1.1 percent of total payments. Outlier payments of 1.1
percent are incorporated in the CY 2011 comparison in Column 6. We used
the same set of claims and a charge inflation factor of 9.08 percent
(1.0908) and the CCRs in the April 2011 OPSF, with an adjustment of
0.9850, to reflect relative changes in cost and charge inflation
between CY 2010 and CY 2012, to model the CY 2012 outliers at 1.0
percent of estimated total payments using a multiple threshold of 1.75
and a fixed-dollar threshold of $2,100.
Column 1: Total Number of Hospitals
The first line in Column 1 in Table 51 shows the total number of
facilities (4,141), including designated cancer and children's
hospitals and CMHCs for which we were able to use CY 2010 hospital
outpatient and CMHC claims to model CY 2011 and CY 2012 payments, by
classes of hospitals. We excluded all hospitals for which we could not
accurately estimate CY 2011 or CY 2012 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 proposed rule. 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 (3,879) 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 their ``pre-BBA amount'' as
specified under the terms of the statute and, therefore, we removed
them from our impact analyses. We show the isolated impact on 200 CMHCs
at the bottom of the impact table and discuss that impact separately
below.
Column 2: Proposed APC Changes Due to Reassignment and Recalibration
This column shows the combined effects of the proposed
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 and changes in payment for PHP
services). Overall, we estimate that proposed changes in APC
reassignment and recalibration across all services paid under the OPPS
would increase payments to urban hospitals by 0.2 percent. We estimate
that both large and other urban hospitals would experience an increase
of 0.2 percent, all attributable to recalibration. We estimate that
urban hospitals billing fewer than 21,000 lines for OPPS services would
experience decreases ranging from 0.2 percent to 5.5 percent. The
decrease of 5.5 percent for urban hospitals billing fewer than 5,000
lines per year is attributable to the decline in the proposed payment
for APC 0034 (Mental Health Services Composite), for which the payment
rate is proposed to be set at the payment rate for APC 0176 (Level II
Partial Hospitalization (4 or more services) for hospital-based PHPs).
Urban hospitals billing 21,000 or more lines for OPPS services would
experience increases of 0.1 to 0.5 percent.
Overall, we estimate that rural hospitals would experience an
increase of 0.2 percent as a result of changes to the APC structure. We
estimate that rural hospitals of all bed sizes would experience
increases of 0.1 to 0.5 percent as a result of the proposed APC
recalibration. We estimate that rural hospitals that report fewer than
5,000 lines for OPPS services would experience a decrease of 1.2
percent, while rural hospitals that report 5,000 or more lines for OPPS
services would experience an increase of 0.1 to 0.9 percent in payment
as a result of proposed APC recalibration.
Among teaching hospitals, we estimate that the impact resulting
from APC recalibration would include a decrease of 0.1 percent for
major teaching hospitals and an increase of 0.3 for minor teaching
hospitals and nonteaching hospitals.
Classifying hospitals by type of ownership suggests that voluntary,
proprietary, and governmental hospitals would experience no change or
estimated increases of 0.1 to 0.3 percent as a result of the proposed
APC recalibration. Finally, we estimate that hospitals for which DSH
payments are not available would experience a decrease of 7.5 to 7.7
percent. Hospitals for which DSH is not available furnish a large
number of psychiatric services and we believe that the proposed decline
in payment for APC 0176 is the cause for this estimated decline in
payment.
Column 3: Proposed New Wage Indices and the Effect of the Rural
Adjustment
This column estimates the impact of applying the proposed FY 2012
IPPS wage indices for the CY 2012 OPPS without the influence of the
frontier State wage index adjustment which is not budget neutral. The
frontier State wage index adjustment is reflected in the combined
impact shown in Columns 6 and 7. We are proposing to continue the rural
payment adjustment of 7.1 percent to rural SCHs for CY 2012, as
described in section II.E.2. of this proposed rule. We estimate that
the combination of updated wage data and nationwide application of
rural floor budget neutrality would 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
would experience no change from CY 2011 to CY 2012, and that rural
hospitals would experience decreases of 0.2 to 0.4 percent as a result
of the updated wage indices. We estimate that hospitals located in
urban New England, Middle Atlantic, West North Central, West South
Central, and Puerto Rico regions would experience increases of 0.1 to
0.5 percent while other urban regions would experience no change or
decreases of 0.2 to 0.7 percent. Hospitals in urban New England are
expected to see an increase of 3.8 percent as a result of the
implementation of the rural floor. See section II.C. for more
information. We estimate that hospitals in rural West North Central,
West South Central, and Pacific States would experience increases of
0.1 to 0.5 percent, respectively, while other rural regions would
experience decreases from 0.2 to 0.7 percent.
Column 4: Proposed Cancer Hospital Payment Adjustment
This column estimates the budget neutral impact of applying the
proposed hospital-specific CY 2012 cancer adjustment authorized by
section 3138 of the Affordable Care Act, which would

[[Page 42376]]

result in an estimated aggregate increase in OPPS payments to dedicated
cancer hospitals of 38.8 percent for the CY 2012 OPPS. After accounting
for TOPs that we estimate would no longer be made, the net impact would
result in an increase in payment to these hospitals of approximately 9
percent. We estimate that all other hospitals would experience a
decrease of 0.6 to 0.7 percent in CY 2012 as result of the adjustment
to payments to the cancer hospitals under this proposed payment
adjustment.
Column 5: All Proposed Budget Neutrality Changes Combined With the
Proposed OPD Fee Schedule Increase
We estimate that, for most classes of hospitals, the addition of
the proposed OPD fee schedule increase factor of 1.5 percent would
mitigate the negative impacts created by the budget neutrality
adjustments made in Columns 2 and 3. While all other classes of
hospitals would receive an increase after the update is applied to the
budget neutrality adjustments, urban hospitals that bill fewer than
11,000 lines and rural hospitals that report fewer than 5,000 lines
would experience decreases. In particular, urban hospitals that report
fewer than 5,000 lines would experience a cumulative decrease, after
application of the proposed OPD fee schedule increase factor and the
budget neutrality adjustments, of 4.3 percent, largely as a result of
the proposed decrease in payment for APC 0034 (Mental Health Services
Composite). OPPS payment for APC 0034 is proposed to continue being set
to the payment rate of APC 0176 (Level II Partial Hospitalization (4 or
more services) for hospital-based PHPs), which experienced a decline
based on updated cost report and hospital claims data.
Overall, we estimate that these proposed changes would increase
payments to urban hospitals by 1.1 percent. We estimate that large
urban hospitals and ``other'' urban hospitals would also experience an
increase of 1.1 percent. We estimate that rural hospitals would
experience a 0.8 percent increase as a result of the proposed OPD fee
schedule increase factor and other budget neutrality adjustments.
Among teaching hospitals, we estimate that the observed impacts
resulting from the proposed OPD fee schedule increase factor and other
budget neutrality adjustments would include an increase of 1.2 percent
for major teaching hospitals and an increase of 1.0 percent for minor
teaching hospitals.
Classifying hospitals by type of ownership suggests that
proprietary hospitals would experience an estimated increase of 0.7
percent, while voluntary hospitals would experience an estimated
increase of 1.2 percent and government hospitals would experience an
estimated increase of 0.6 percent.
Column 6: Proposed Frontier State Wage Index Adjustment
This column shows the impact of all budget neutrality adjustments,
application of the proposed 1.5 percent OPD fee schedule increase
factor, and the non-budget neutral impact of applying the proposed
frontier State wage adjustment (that is, the proposed frontier State
wage index change in addition to all changes reflected in Column 4). In
general, we estimate that all facilities would experience a combined
increase of 1.6 percent and that all hospitals would experience a
combined increase of 1.1 percent. Hospitals in the rural Mountain
region would experience an increase of 2.3 percent, most of which is
attributable to the proposed frontier State wage adjustment. Similarly,
hospitals in both the urban and rural West North Central region would
experience an increase of 1.8 percent, most of which is attributable to
the proposed frontier State wage adjustment.
Column 7: All Proposed Changes for CY 2012
Column 7 compares all proposed changes for CY 2012 to estimated
final payment for CY 2011, including the proposed changes in the
outlier threshold, payment reductions for hospitals that failed to meet
the OQR reporting requirements, and the difference in pass-through
estimates that are not included in the combined percentages shown in
Column 5. This column includes estimated payment for a few 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 2011 and CY 2012 for
these hospitals would be negligible. (We further discuss the estimated
impacts of hospitals' failure to meet these requirements below in
section XX.A.4.d. of this proposed rule.) Overall, we estimate that
facilities would experience an increase of 1.5 percent under this
proposed rule in CY 2012 relative to total spending in CY 2011. The
projected 1.5 percent increase for all facilities in Column 7 of Table
51 reflects the proposed 1.5 percent OPD fee schedule increase factor,
less 0.00 percent for the change in the pass-through estimate between
CY 2011 and CY 2012, less 0.06 percent for the difference in estimated
outlier payments between CY 2011 (1.06 percent) and CY 2012 (1.0
percent), less 0.09 percent due to the section 508 wage adjustment,
plus 0.10 percent due to the frontier State wage index adjustment. When
we exclude cancer and children's hospitals (which are held harmless to
their pre-BBA amount) and CMHCs, the estimated increase is 1.5 percent
after rounding.
We estimate that the combined effect of all proposed changes for CY
2012 would increase payments to urban hospitals by 1.2 percent. We
estimate that large urban hospitals would experience a 1.1 percent
increase, while ``other'' urban hospitals would experience an increase
of 1.2 percent. We estimate that urban hospitals that bill less than
5,000 lines of OPPS services would experience a decrease of 4.2
percent, largely attributable to the proposed decline in payment for
APC 0034 (Mental Health Services Composite). We estimate that urban
hospitals that bill 11,000 or more lines of OPPS services would
experience increases between 0.6 percent and 1.5 percent, while urban
hospitals that report between 5,000 and 10,999 lines would experience a
decrease of 0.8 percent.
Overall, we estimate that rural hospitals would experience a 0.9
percent increase as a result of the combined effects of all proposed
changes for CY 2012. We estimate that rural hospitals that bill less
than 5,000 lines of OPPS services would experience a decrease of 0.7
percent and that rural hospitals that bill 5,000 or more lines of OPPS
services would experience increases ranging from 0.8 to 1.7 percent.
Among teaching hospitals, we estimate that the impacts resulting
from the combined effects of all proposed changes would include an
increase of 1.2 percent for major teaching hospitals and 1.1 percent
for minor teaching hospitals and non-teaching hospitals.
In our analysis, we have also stratified hospitals by type of
ownership. Based on this analysis, we estimate that voluntary hospitals
would receive an increase of 1.3 percent, proprietary hospitals would
receive an increase of 0.8 percent, and governmental hospitals would
experience an increase of 0.7 percent.
(3) Estimated Effects of This Proposed Rule on CMHCs
The last line of Table 51 demonstrates the isolated impact on
CMHCs. In CY 2011, CMHCs are paid under four APCs for services under
the OPPS: APC 0172

[[Page 42377]]

(Level I Partial Hospitalization (3 services) for CMHCs); APC 0173
(Level II Partial Hospitalization (4 or more services) for CMHCs); APC
0175 (Level I Partial Hospitalization (3 services) for hospital-based
PHPs); and APC 0176 (Level II Partial Hospitalization (4 or more
services) for hospital-based PHPs). We implemented these four APCs for
CY 2011. We adopted payment rates for each APC based on the cost data
derived from claims and cost reports for the provider type to which the
APC is specific and provided a transition to CMHC rates based solely on
CMHC data for the two CMHC PHP per diem rates. For CY 2012, we are
proposing to continue the four APC provider-specific structure we
adopted for CY 2011 and to base payment fully on the cost data for the
type of provider furnishing the service. We modeled the impact of this
APC policy assuming that CMHCs would continue to provide the same
number of days of PHP care, with each day having either 3 services or 4
or more services, as seen in the CY 2010 claims data used for this CY
2012 OPPS/ASC proposed rule. We excluded days with one or two services
because our policy only pays a per diem rate for partial
hospitalization when 3 or more qualifying services are provided to the
beneficiary. Because the relative payment weights for APC 0172 and APC
0173 for CMHCs both decline in CY 2012 due to CMHC cost data for
partial hospitalization services provided by CMHCs, we estimate that
there would be a 34.2 percent decrease in payments to CMHCs due to
these APC policy changes (shown in Column 2).
Column 3 shows that the estimated impact of adopting the proposed
CY 2012 wage index values have no influence on payments to CMHCs.
Column 4 shows that CMHCs would receive a 0.7 percent reduction as a
result of the proposed cancer hospital adjustment. We note that all
providers paid under the OPPS, including CMHCs, would receive a
proposed 1.5 percent OPD fee schedule increase factor. Column 5 shows
that combining this proposed OPD fee schedule increase factor, along
with proposed changes in APC policy for CY 2012 and the proposed CY
2012 wage index updates, results in an estimated decrease of 33.2
percent. Column 6 shows that adding the frontier State wage adjustment
results in no change to the cumulative 33.2 percent decrease. Column 7
shows that adding the proposed changes in outlier and pass-though
payments would result in a 33.1 percent decrease in payment for CMHCs
that reflects all proposed changes for CY 2012.
The impact of the changes to hospital payment rates for partial
hospitalization services is reflected in the impact of all proposed
changes on hospitals. The impact of the decline in payment for APC 0034
appears most notably in small urban hospitals that furnish primarily
outpatient psychiatric services.
All providers paid under the OPPS would receive a proposed 1.5
percent OPD fee schedule increase factor under this policy. Combining
this proposed OPD fee schedule increase factor with proposed changes in
APC policy for CY 2012, the proposed CY 2012 wage index updates, and
with proposed changes in outlier and pass-through payments, we estimate
that the combined impact on hospitals within the OPPS system would be a
1.5 percent increase in total payment for CY 2012. Table 51 presents
the estimated impact of the proposed changes to the OPPS for CY 2012.

Table 51--Estimated Impact of the CY 2012 Proposed Changes for the Hospital Outpatient Prospective Payments System
--------------------------------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4) (5) (6) (7)
--------------------------------------------------------------------------------------------
Comb (cols
New wage New cancer 2, 3,4) Comb (col
Number of APC index and hospital with 5) with
hospitals Recalibration rural payment market frontier All changes
adjustment adjustment basket wage index
update adjustment
--------------------------------------------------------------------------------------------------------------------------------------------------------
ALL FACILITIES *........................................... 4,141 0.0 0.0 0.0 1.5 1.6 1.5
ALL HOSPITALS.............................................. 3,879 0.2 0.0 -0.6 1.0 1.1 1.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
(Excludes hospitals permanently held harmless and CMHCs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
URBAN HOSPITALS............................................ 2,928 0.2 0.0 -0.6 1.1 1.2 1.2
LARGE URBAN (GT 1 MILL.)............................... 1,592 0.2 0.0 -0.7 1.1 1.1 1.1
OTHER URBAN (LE 1 MILL.)............................... 1,336 0.2 0.0 -0.6 1.1 1.3 1.2
RURAL HOSPITALS............................................ 951 0.2 -0.3 -0.7 0.8 1.0 0.9
SOLE COMMUNITY......................................... 385 0.1 -0.2 -0.6 0.8 1.3 0.9
OTHER RURAL............................................ 566 0.3 -0.4 -0.7 0.8 0.8 0.9
BEDS (URBAN):
0-99 BEDS.............................................. 1,007 -0.1 0.1 -0.7 0.8 0.9 0.8
100-199 BEDS........................................... 856 0.4 0.1 -0.7 1.3 1.4 1.3
200-299 BEDS........................................... 445 0.4 0.1 -0.7 1.3 1.5 1.4
300-499 BEDS........................................... 417 0.2 -0.1 -0.6 1.0 1.0 1.0
500 + BEDS............................................. 203 0.0 0.1 -0.6 1.0 1.0 1.1
BEDS (RURAL):
0-49 BEDS.............................................. 340 0.2 -0.1 -0.7 0.9 1.1 1.0
50-100 BEDS............................................ 364 0.1 -0.3 -0.6 0.6 0.9 0.7
101-149 BEDS........................................... 140 0.5 -0.2 -0.7 1.1 1.3 1.2
150-199 BEDS........................................... 60 0.2 -0.4 -0.7 0.6 1.2 0.7
200 + BEDS............................................. 47 0.1 -0.3 -0.6 0.8 0.8 0.8
VOLUME (URBAN):
LT 5,000 Lines......................................... 611 -5.5 0.4 -0.7 -4.3 -4.2 -4.2
5,000-10,999 Lines..................................... 146 -1.5 -0.1 -0.7 -0.8 -0.6 -0.8
11,000-20,999 Lines.................................... 255 -0.2 -0.1 -0.7 0.6 0.6 0.6
21,000-42,999 Lines.................................... 490 0.5 -0.1 -0.7 1.2 1.2 1.2
42,999-89,999 Lines.................................... 738 0.5 0.1 -0.7 1.5 1.5 1.5
GT 89,999 Lines........................................ 688 0.1 0.0 -0.6 1.0 1.1 1.1

[[Page 42378]]

VOLUME (RURAL):
LT 5,000 Lines......................................... 71 -1.2 -0.2 -0.7 -0.7 1.4 -0.7
5,000-10,999 Lines..................................... 81 0.9 0.1 -0.7 1.8 1.9 1.7
11,000-20,999 Lines.................................... 184 0.3 -0.3 -0.7 0.8 1.0 0.8
21,000-42,999 Lines.................................... 286 0.4 -0.3 -0.7 0.9 1.2 1.0
GT 42,999 Lines........................................ 329 0.1 -0.3 -0.6 0.7 0.9 0.8
REGION (URBAN):
NEW ENGLAND............................................ 150 0.0 3.8 -0.6 4.6 4.6 4.4
MIDDLE ATLANTIC........................................ 351 0.1 0.1 -0.6 1.1 1.1 1.0
SOUTH ATLANTIC......................................... 452 0.3 -0.6 -0.7 0.6 0.6 0.7
EAST NORTH CENT........................................ 469 0.3 -0.6 -0.6 0.6 0.6 0.6
EAST SOUTH CENT........................................ 184 0.4 -0.7 -0.6 0.5 0.5 0.7
WEST NORTH CENT........................................ 193 0.1 0.1 -0.6 1.1 1.8 1.3
WEST SOUTH CENT........................................ 489 0.3 0.3 -0.7 1.4 1.4 1.5
MOUNTAIN............................................... 202 0.2 0.0 -0.6 1.0 1.4 1.2
PACIFIC................................................ 390 0.0 -0.2 -0.7 0.7 0.7 0.8
PUERTO RICO............................................ 48 0.3 0.5 -0.7 1.6 1.6 1.7
REGION (RURAL):
NEW ENGLAND............................................ 26 -0.5 -0.5 -0.6 -0.1 -0.1 0.1
MIDDLE ATLANTIC........................................ 68 0.2 -0.2 -0.6 0.9 0.9 1.0
SOUTH ATLANTIC......................................... 162 0.4 -0.2 -0.7 1.0 1.0 1.1
EAST NORTH CENT........................................ 126 0.2 -0.7 -0.7 0.4 0.4 0.3
EAST SOUTH CENT........................................ 172 0.6 -0.6 -0.7 0.8 0.8 0.9
WEST NORTH CENT........................................ 101 -0.4 0.2 -0.6 0.7 1.8 1.0
WEST SOUTH CENT........................................ 201 0.4 0.1 -0.7 1.3 1.3 1.3
MOUNTAIN............................................... 66 0.2 -0.6 -0.6 0.5 2.3 0.5
PACIFIC................................................ 29 0.1 0.5 -0.6 1.5 1.5 1.7
TEACHING STATUS:
NON-TEACHING........................................... 2,891 0.3 -0.1 -0.7 1.0 1.1 1.1
MINOR.................................................. 699 0.3 -0.1 -0.6 1.0 1.2 1.1
MAJOR.................................................. 289 -0.1 0.4 -0.6 1.2 1.2 1.2
DSH PATIENT PERCENT:
0...................................................... 7 -0.7 0.0 -0.7 0.1 0.1 0.3
GT 0-0.10.............................................. 343 0.2 0.2 -0.7 1.2 1.3 1.3
0.10-0.16.............................................. 359 0.4 -0.4 -0.7 0.8 0.9 0.8
0.16-0.23.............................................. 733 0.3 0.0 -0.7 1.1 1.3 1.1
0.23-0.35.............................................. 1,037 0.3 0.0 -0.6 1.2 1.3 1.2
GE 0.35................................................ 789 0.1 0.1 -0.6 1.0 1.0 1.2
DSH NOT AVAILABLE **................................... 611 -7.5 0.5 -0.7 -6.2 -6.2 -6.1
URBAN TEACHING/DSH:
TEACHING & DSH 901 0.2 0.1 -0.6 1.1 1.2 1.2
NO TEACHING/DSH........................................ 1,446 0.4 -0.1 -0.7 1.2 1.2 1.3
NO TEACHING/NO DSH..................................... 6 -0.7 0.0 -0.7 0.1 0.1 0.3
DSH NOT AVAILABLE **................................... 575 -7.7 0.6 -0.7 -6.3 -6.3 -6.2
TYPE OF OWNERSHIP:.....................................
VOLUNTARY.............................................. 2,060 0.3 0.1 -0.6 1.2 1.3 1.3
PROPRIETARY............................................ 1,259 0.0 -0.1 -0.7 0.7 0.8 0.8
GOVERNMENT............................................. 560 0.1 -0.4 -0.6 0.6 0.6 0.7
CMHCs...................................................... 200 -34.2 0.0 -0.7 -33.2 -33.2 -33.1
Cancer Hospitals........................................... 11 0.2 0.6 38.8 41.5 41.5 37.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
Column (1) shows total hospitals and/or CMHCs.
Column (2) shows the impact of proposed changes resulting from the reclassification of HCPCS codes among APC groups and the proposed recalibration of
APC weights based on CY 2010 hospital claims data.
Column (3) shows the proposed budget neutral impact of updating the wage index by applying the FY 2012 hospital inpatient wage index. See section II.C.
for discussion of the estimated increase in payments to urban New England hospitals.
Column (4) shows the proposed budget neutral estimated impact within the OPPS of applying a proposed cancer hospital adjustment to all OPPS services.
However, we note that after accounting for the TOPs that we estimate cancer hospitals would no longer receive, the proposed net increase in payment to
cancer hospitals would be approximately 9 percent.
Column (5) shows the impact of all proposed budget neutrality adjustments and the proposed addition of the 1.5 percent OPD fee schedule increase factor
(2.8 percent reduced by 1.2 percentage points for the proposed productivity adjustment and further reduced by 0.1 percentage point in order to satisfy
statutory requirements set forth in the Affordable Care Act).
Column (6) shows the proposed non-budget neutral impact of applying the frontier State wage adjustment, after application of the CY 2012 proposed OPD
fee schedule increase factor.
Column (7) shows the proposed additional adjustments to the conversion factor resulting from a proposed change in the pass-through estimate and adds
proposed outlier payments. This column also shows the expiration of section 508 wages on September 30, 2011 and the application of the proposed
frontier State wage adjustment for CY 2012.

[[Page 42379]]

* These 4,141 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs.
** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, and long-term care
hospitals.

(4) Estimated Effect of This Proposed Rule on Beneficiaries
For services for which the beneficiary pays a copayment of 20
percent of the payment rate, the beneficiary share of payment would
increase for services for which the OPPS payments would rise and would
decrease for services for which the OPPS payments would fall. For
example, for a service assigned to Level IV Needle Biopsy/Aspiration
Except Bone Marrow (APC 0037) in the CY 2011 OPPS, the national
unadjusted copayment is $228.76, and the minimum unadjusted copayment
is $215.24, 20 percent of the national unadjusted payment rate of
$1,076.14. For CY 2012, the proposed national unadjusted copayment for
APC 0037 is $225.55, a decline from the copayment in effect for CY
2011. The proposed minimum unadjusted copayment for APC 0037 is $213.25
or 20 percent of the proposed CY 2012 national unadjusted payment rate
for APC 0037 of $1,066.25. The proposed minimum unadjusted copayment
would decline because the CY 2011 payment rate for APC 0037 would
decline for CY 2012. For further discussion on the calculation of the
proposed national unadjusted copayments and minimum unadjusted
copayments, we refer readers to section II.I. of this proposed rule. We
note that the proposed rural hospital and cancer hospital payment
adjustments would result in corresponding increases in the beneficiary
copayment, where those payment adjustments are applied. In all cases,
the statute limits beneficiary liability for copayment for a procedure
to the hospital inpatient deductible for the applicable year. The CY
2011 hospital inpatient deductible is $1,132 (75 FR 68799 through
68800). The CY 2012 hospital inpatient deductible was not known at the
time this proposed rule was developed.
In order to better understand the impact of changes in copayment on
beneficiaries, we modeled the percent change in total copayment
liability using CY 2010 claims. We estimate, using the claims of the
4,141 hospitals and CMHCs on which our modeling is based, that total
beneficiary liability for copayments would increase as an overall
percentage of total payments, from 22.0 percent in CY 2011 to 22.1
percent in CY 2012 due largely to changes in service mix.
(5) Effects on Other Providers
The relative weights and payment amounts established under the OPPS
affect the payments made to ASCs as discussed in section XIII. of this
proposed rule. No types of providers other than hospitals and ASCs are
affected by the changes we are proposing in this proposed rule.
(6) Effects on the Medicare and Medicaid Programs
The effect on the Medicare program is expected to be $3.285 billion
in additional program payments for OPPS services furnished in CY 2012.
The effect on the Medicaid program is expected to be limited to
increased copayments that Medicaid may make on behalf of Medicaid
recipients who are also Medicare beneficiaries. We refer readers to our
discussion of the impact on beneficiaries under section XX.A.4.a.(4).
of this proposed rule.
(7) Alternatives Considered
Alternatives to the changes we are proposing to make and the
reasons for our selected alternatives are discussed throughout this
proposed rule. Some of the major issues discussed in this proposed rule
and the alternatives considered are discussed below.
Alternatives Considered for Payment of the Acquisition and
Pharmacy Overhead Costs of Drugs and Biologicals That Do Not Have Pass-
Through Status
We are proposing that, for CY 2012, the OPPS would make payment for
separately payable drugs and biologicals at ASP+4 percent, and this
payment would continue to represent combined payment for both the
acquisition and pharmacy overhead costs of separately payable drugs and
biologicals. In addition, because we are proposing to continue to make
a pharmacy overhead adjustment for CY 2012, we believe it is
appropriate to account for inflation that has occurred since the
overhead redistribution amount of $200 million was applied in CY 2011.
Therefore, as discussed in further detail in section V.B.3. of this
proposed rule, we believe that approximately $161 million of the
estimated $705 million in pharmacy overhead cost currently attributed
to coded packaged drugs and biologicals with an ASP and $54 million of
the estimated $502 million in pharmacy overhead cost currently
attributed to coded and uncoded packaged drugs and biologicals without
an ASP should, instead, be attributed to separately payable drugs and
biologicals to provide an adjustment for the pharmacy overhead costs of
these separately payable products. As a result, we also are proposing
to reduce the cost of packaged drugs and biologicals that is included
in the payment for procedural APCs to offset the proposed $215 million
adjustment to payment for separately payable drugs and biologicals. We
are proposing that any redistribution of pharmacy overhead cost that
may arise from CY 2012 final rule claims data would occur only from
some drugs and biologicals to other drugs and biologicals, thereby
maintaining the estimated total cost of drugs and biologicals under the
OPPS.
We considered two alternatives for payment of the acquisition and
pharmacy overhead costs of drugs and biologicals that do not have pass-
through status for CY 2012. The first alternative we considered, but
are not proposing, is to compare 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 best
proxy for the combined acquisition and pharmacy overhead costs of
separately payable drugs and biologicals (70 FR 68642), but without
redistribution of estimated pharmacy overhead costs. Under this
methodology without redistribution, using April 2011 ASP information
and costs derived from CY 2010 OPPS claims data, we estimated the
combined acquisition and overhead costs of separately payable drugs and
biologicals to be ASP-2 percent. As discussed in section V.B.3. of this
proposed rule, we also determined that the combined acquisition and
overhead costs of packaged drugs are 188 percent of ASP. 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 to some degree when there is no redistribution of estimated
pharmacy overhead costs. 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

[[Page 42380]]

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.
The second alternative we considered and the one we are proposing
for CY 2012 is to continue our pharmacy overhead redistribution
methodology and proposing to apply an inflation allowance and
redistribute $215 million in overhead costs from packaged coded and
uncoded drugs and biologicals to separately payable drugs and
biologicals which would result in a payment for non-pass-through
separately payable drugs and biologicals at ASP+4 percent, which would
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 proposing to reduce the
cost of packaged drugs and biologicals that is included in the payment
for procedural APCs to offset the $215 million adjustment to payment
for separately payable drugs and biologicals, resulting in payment for
packaged drugs and biologicals of ASP+123 percent under our proposal.
We chose this alternative because we believe that it provides the
most appropriate redistribution of pharmacy overhead costs associated
with drugs and biologicals, based on the analyses discussed in section
V.B.3. of this proposed rule.
Proposed OPPS Payment Adjustment for Certain Cancer Hospitals
Section 3138 of the Affordable Care Act instructs the Secretary to
conduct a study to determine if outpatient costs, including the cost of
drugs and biologicals, incurred by cancer hospitals described in
section 1886(d)(1)(B)(v) of the Act with respect to ambulatory
classification groups exceed the costs incurred by other hospitals
furnishing services under this subsection (section 1833(t) of the Act).
Further, section 3138 of the Affordable Care Act provides that if the
cancer hospitals' costs with respect to APC groups are determined to be
greater than the costs of other hospitals paid under the OPPS, the
Secretary shall provide an appropriate budget neutral payment
adjustment to reflect these higher costs.
As discussed in detail in section II. F. of this proposed rule,
using the claims and cost report data that we used under the modeled
proposed CY 2011 OPPS, we constructed our traditional provider-level
database of costs, modeled payments, units, service mix, wage index and
other provider information that we typically use to establish class
adjustments under the OPPS. We observed that cancer hospitals were more
costly with respect to APC groups than other hospitals paid under the
OPPS, having a standardized cost per discounted unit of $150.12
compared to a standardized cost per discounted unit of $94.14 for all
other hospitals.
Having reviewed the cost data from the standard analytic database
and determined that cancer hospitals are more costly with respect to
APC groups than other hospitals within the OPPS system, we are
proposing a payment adjustment for cancer hospitals for CY 2012 based
on a comparison of costliness relative to payments using cost report
data. Specifically, our proposed adjustment is as follows: If a
hospital described in section 1886(d)(1)(B)(v) of the Act has a PCR (as
determined by the Secretary) that is less than the weighted average PCR
of other hospitals furnishing services under section 1833(t) of the Act
(as determined by the Secretary) (Target PCR) for covered hospital
outpatient department services (except pass-through devices defined in
section 419.66), the payment adjustment is the percentage difference
between the PCR of the hospital and the Target PCR. The CY 2012
proposed rule cost report data indicated a cancer hospital weighted
average PCR of 0.647 (range = 0.56 to 0.82) and a weighted average PCR
for all other hospitals equal to 0.901. Our proposed adjustment would
result in an estimated 39.3 percent aggregate increase in budget
neutral payments to cancer hospitals. For a cancer hospital with an
individual PCR that is above the weighted average PCR of other
hospitals furnishing services under the OPPS, we are proposing a zero
percent adjustment for services furnished on and after January 1, 2012.
We considered three alternatives for the proposed OPPS payment
adjustment for certain cancer hospitals. The first alternative we
considered, but are not proposing, is to use our standard payment
regression model instead of cost report data to identify an appropriate
payment adjustment for cancer hospitals. We used this approach in our
CY 2006 OPPS final rule with comment period to establish the 7.1
percent payment adjustment for rural SCHs (70 FR 68556 through 68561).
However, in constructing our analysis of cancer hospitals' costs
relative to other hospitals, we considered whether our standard
analytical approach would lead to valid results. The analyses presented
in the CY 2006 OPPS proposed and final rules were designed to establish
an adjustment for a large class of rural hospitals. In contrast,
section 3138 of the Affordable Care Act is specifically limited to
identifying an adjustment for 11 cancer hospitals to the extent that
their costs with respect to APC groups exceeded the costs incurred by
other hospitals furnishing services under section 1833(t) of the Act.
With such a small sample size (11 out of approximately 4,000 hospitals
paid under the OPPS), we were concerned that the standard explanatory
and payment regression models used to establish the rural hospital
adjustment would lead to imprecise estimates of payment adjustments for
this small group of hospitals. Further, section 3138 of the Affordable
Care Act specifies explicitly that cost comparisons between classes of
hospitals must include the cost of drugs and biologicals. In our CY
2006 analysis of rural hospitals, we excluded the cost of drugs and
biologicals in our model because the extreme units associated with
proper billing for some drugs and biologicals can bias the calculation
of a service mix index, or volume weighted average APC relative weight,
for each hospital (70 FR 42698). Therefore, we chose not to pursue our
standard combination of explanatory and payment regression modeling to
determine a cancer hospital adjustment.
The second alternative we considered, but are not proposing, is to
provide the same adjustment to all cancer hospitals based on the
difference between the weighted average PCR for all cancer hospitals
(0.647) and the weighted average PCR for all other hospitals (0.901).
This class adjustment, instead of a hospital specific adjustment, would
provide a 39.3 percent payment increase for each cancer hospital.
Because this alternative did not seem equitable to other hospitals
furnishing services under OPPS as it would result in a PCR for most
cancer hospitals that is higher the weighted average PCR of other
hospitals furnishing services under OPPS and a much larger budget
neutrality adjustment, we did not propose this alternative.
The third alternative we considered, and the one we are proposing
for CY 2012, is to provide a hospital specific payment adjustment to
cancer hospitals that have a PCR that is less than the weighted average
PCR of other hospitals furnishing services under the OPPS, for covered
hospital outpatient department services (except pass-through devices)
furnished on and after January 1, 2012, based on the percent difference
between

[[Page 42381]]

each cancer hospital's PCR and the weighted average PCR of other OPPS
hospitals using the most recent cost report data. For cancer hospitals
with an individual PCR that is above the weighted average PCR of other
hospitals furnishing services under the OPPS, we are proposing a zero
percent adjustment for services furnished on and after January 1, 2012.
For purposes of calculating a proposed adjustment, we chose to rely on
this straightforward assessment of payments and costs from the cost
report data because of the concerns outlined above with respect to the
small number of hospitals, and because of the challenges associated
with accurately including drug and biological costs in our standard
regression models. We believe that an appropriate adjustment would
redistribute enough payments from other hospitals paid under the OPPS
to the cancer hospitals to give cancer hospitals a PCR that is
comparable to the average PCR for other hospitals paid under the OPPS.
Alternatives Considered for the Supervision of Hospital
Outpatient Therapeutic Services
In the CY 2011 OPPS/ASC final rule with comment period (75 FR
72012), we stated our intent to develop through our CY 2012 rulemaking
an independent review process that enables the agency to request, with
stakeholder input, advisory recommendations regarding the appropriate
supervision level for individual outpatient therapeutic services. We
considered three alternatives with regard to the nature of the advisory
recommendations regarding the appropriate supervision level for
individual outpatient therapeutic services.
The first alternative we considered but are not proposing is to use
an existing body other than the APC Panel such as the Relative Value
Scale Update Committee to make recommendations to CMS with regard to
the level of supervision that would be required for outpatient
therapeutic services. We did not choose a different existing body
because we did not believe there was an alternative that had an
appropriate balance of subject matter expertise or that would be able
to furnish the appropriate advice.
The second alternative we considered but are not proposing is to
establish a new non-advisory body such as a Technical Expert Panel. We
did not propose to establish a new entity because currently we have no
funding to do so. Moreover, it is not clear that the resources of a new
body are necessary for the supervision deliberations, especially once
initial determinations are made regarding key services. Also, we
believe it is important to obtain advice that carries the weight of a
Federal advisory recommendation.
The third alternative we considered, and the one we selected, is to
propose to establish the Federal Advisory APC Panel as an independent
review body that would evaluate individual outpatient therapeutic
services for potential assignment by CMS of general (lower) or personal
(higher) supervision. We are proposing to amend the APC Panel charter
to render the Panel more appropriate for this task by expanding its
scope to include the topic of supervision. We also are proposing to add
two to four members to the Panel who would be representative of CAHs,
so that all types of hospitals who are subject to the supervision rules
for payment would be represented in developing the Panel's
recommendations. We are proposing to use the standard APC Panel
protocols with respect to frequency of meetings and receiving requests
for evaluation of services. We believe it is important to obtain advice
that carries the weight of a Federal advisory recommendation, because
it may have greater legitimacy both with stakeholders and with CMS
compared to the opinions of other types of groups. The APC Panel has a
long and excellent history of providing valuable advice to CMS with
regard to the clinical issues associated with the APC groupings of
hospital outpatient therapeutic services under the OPPS, and we believe
that extension of the function of the Panel to providing advice on
supervision of individual hospital outpatient therapeutic services will
result in both full consideration of the views of all types of
hospitals and the best possible clinical decisions with respect to the
level of supervision that should be required as a condition of Medicare
payment.
b. Effects of Proposed ASC Payment System Changes in This Proposed 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 Pub. L. 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 performed in ASCs that
were on the CY 2007 ASC list of covered surgical procedures were 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 paid ASCs using a 50/
50 blend, in which payment was 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 transitioned the blend to a 25/75
blend of the CY 2007 ASC rate and the CY 2010 ASC payment rate
calculated according to the ASC standard ratesetting methodology. In CY
2011, we are paying 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.
ASC payment rates are calculated by multiplying the ASC conversion
factor by the ASC relative payment weight. As discussed fully in
section XIII. of this proposed rule, we set the proposed CY 2012 ASC
relative payment weights by scaling CY 2012 ASC relative payment
weights by the ASC scalar of 0.9373. The estimated effects of the
updated relative payment weights on payment rates during this second
year of full implementation of the ASC payment rates calculated
according to the ASC standard ratesetting methodology are varied and
are reflected in the estimated payments displayed in Tables 52 and 53
below.
Beginning in CY 2011, section 3401 of the Affordable Care Act
requires that the annual update to the ASC payment system, which is the
consumer price index for all urban consumers (CPI-U), be reduced by the
productivity adjustment. The Affordable Care Act defines the
productivity adjustment to be equal to the 10-year moving average of
changes in annual economy-wide private nonfarm business multi-factor
productivity (MFP) (as projected by the Secretary for the 10-year
period ending with the applicable fiscal year, year, cost reporting
period, or other annual period). We calculated the proposed CY 2012 ASC
conversion factor by adjusting the CY 2011 ASC conversion factor by
1.0003 to account for changes in the pre-floor and pre-reclassified
hospital wage indices between CY 2011 and CY 2012

[[Page 42382]]

and by applying the proposed CY 2012 MFP-adjusted CPI-U of 0.9 percent
(2.3 percent CPI-U minus a productivity adjustment of 1.4 percent
percentage points). The proposed CY 2012 ASC conversion factor is
$42.329.
(1) Limitations of Our Analysis
Presented here are the projected effects of the proposed changes
for CY 2012 on Medicare payment to ASCs. A key limitation of our
analysis is our inability to predict changes in ASC service mix between
CY 2010 and CY 2012 with precision. We believe that the net effect on
Medicare expenditures resulting from the proposed CY 2012 changes would
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 would experience changes
in payment that differ from the aggregated estimated impacts presented
below.
(2) Estimated Effects of This Proposed Rule 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 proposed update to the CY 2012 payments would 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 proposed CY 2012 update to the revised ASC payment system
on Medicare payments to ASCs, assuming the same mix of services as
reflected in our CY 2010 claims data. Table 52 depicts the estimated
aggregate percent change in payment by surgical specialty or ancillary
items and services group by comparing estimated CY 2011 payments to
estimated CY 2012 payments, and Table 53 shows a comparison of
estimated CY 2011 payments to estimated CY 2012 payments for procedures
that we estimate would receive the most Medicare payment in CY 2012.
Table 52 shows the estimated effects on aggregate proposed 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. 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 52.
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 CY 2011 ASC Payments were calculated
using CY 2010 ASC utilization (the most recent full year of ASC
utilization) and CY 2011 ASC payment rates. The surgical specialty and
ancillary items and services groups are displayed in descending order
based on estimated CY 2011 ASC payments.
Column 3--Estimated CY 2012 Percent Change 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 proposed ASC payment
rates for CY 2012 compared to CY 2011.
As seen in Table 52, we estimate that the proposed update to ASC
rates for CY 2012 would result in a 0 percent decrease in aggregate
payment amounts for eye and ocular adnexa procedures, a 1 percent
increase in aggregate payment amounts for digestive system procedures,
and a 2 percent increase in aggregate payment amounts for nervous
system procedures.
Generally, for the surgical specialty groups that account for less
ASC utilization and spending, we estimate that the payment effects of
the CY 2012 update are variable. For instance, we estimate that, in the
aggregate, payment for genitourinary system procedures and hemic &
lymphatic systems procedures would increase by 5 percent and 4 percent,
respectively, whereas auditory system procedures and cardiovascular
system procedures would decrease by 5 percent and 4 percent,
respectively, under the proposed CY 2012 rates.
An estimated increase in aggregate payment for the specialty group
does not mean that all procedures in the group would experience
increased payment rates. For example, the estimated modest increase for
CY 2012 for genitourinary system procedures is likely due to an
increase in the ASC payment weight for some of the high volume
procedures, such as CPT code 50590 (Fragmenting of kidney stone) where
estimated payment would increase by 25 percent for CY 2012.
Also displayed in Table 52 is a separate estimate of Medicare ASC
payments for the group of separately payable covered ancillary items
and services. The payment estimates for the covered surgical procedures
include the costs of packaged ancillary items and services. Payment for
New Technology Intraocular Lenses (NTIOLs) is captured under this
category. Because the NTIOL class for reduced spherical aberration
expired on February 26, 2011, and a new NTIOL class was not approved
during CY 2011 rulemaking, we redistributed the estimated payment
dedicated to separately paid NTIOLs in CY 2011 while the NTIOL class
was active to other services for CY 2012. Therefore, we estimate that
aggregate payments for these items and services would decrease by 30
percent for CY 2012.

[[Page 42383]]

Table 52--Estimated Impact of the Proposed CY 2012 Update to the ASC
Payment System on Aggregate CY 2012 Medicare Program Payments by
Surgical Specialty or Ancillary Items and Services Group
------------------------------------------------------------------------
Estimated CY
2011 ASC Estimated CY
Surgical Specialty Group payments (in 2012 percent
millions) change (3)
(1) (2) (3)
------------------------------------------------------------------------
Total............................. $3,400 1
Eye and ocular adnexa............. 1,435 0
Digestive system.................. 689 1
Nervous system.................... 454 2
Musculoskeletal system............ 420 2
Genitourinary system.............. 150 5
Integumentary system.............. 132 1
Respiratory system................ 43 0
Cardiovascular system............. 32 -4
Ancillary items and services...... 29 -30
Auditory system................... 11 -5
Hematologic & lymphatic systems... 5 4
------------------------------------------------------------------------

Table 53 below shows the estimated impact of the proposed updates
to the revised ASC payment system on aggregate ASC payments for
selected surgical procedures during CY 2012. The table displays 30 of
the procedures receiving the greatest estimated CY 2011 aggregate
Medicare payments to ASCs. The HCPCS codes are sorted in descending
order by estimated CY 2011 program payment.
Column 1-HCPCS code.
Column 2--Short Descriptor of the HCPCS code.
Column 3--Estimated CY 2011 ASC Payments were calculated
using CY 2010 ASC utilization (the most recent full year of ASC
utilization) and the CY 2011 ASC payment rates. The estimated CY 2011
payments are expressed in millions of dollars.
Column 4--Estimated CY 2012 Percent Change reflects the
percent differences between the estimated ASC payment for CY 2011 and
the estimated payment for CY 2012 based on the proposed update.
As displayed in Table 53, 21 of the 30 procedures with the greatest
estimated aggregate CY 2011 Medicare payment are included in the 3
surgical specialty groups that are estimated to account for the most
Medicare payment to ASCs in CY 2011, 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 52 the estimated effects of the proposed CY
2012 update on ASC payment for individual procedures shown in Table 53
are varied.
The ASC procedure for which the most Medicare payment is estimated
to be made in CY 2011 is the cataract removal procedure reported with
CPT code 66984 (Cataract surg w/iol 1 stage). We estimate that the
proposed update to the ASC rates would result in a 0 percent change for
this procedure in CY 2012. The estimated payment effects on two of the
other three eye and ocular adnexa procedures included in Table 53 are
slightly more significant. We estimate that the payment rate for CPT
code 66821 (After cataract laser surgery) would increase by 2 percent
and payment for CPT code 67042 (Vit for macular hole) would increase by
3 percent.
We estimate that the proposed payment rates for all of the
digestive system procedures included in Table 53 would change by -3 to
+3 percent in CY 2012. During the previous 4-year transition to the
revised ASC payment system, payment for most of the high volume
digestive system procedures decreased each year 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 proposed CY 2012 update on the nine
nervous system procedures for which the most Medicare ASC payment is
estimated to be made in CY 2011 would be variable. Our estimates
indicate that the proposed CY 2012 update would result in payment
increases of 2 to 3 percent for 6 of the 9 procedures and result in a 1
to 5 percent decrease for the other 3 nervous system procedures. The
nervous system procedure for which we estimate a negative effect on CY
2012 payments is CPT code 63650 (Implant neuroelectrodes) which is
expected to have payment decrease of 5 percent.
The estimated payment effects for most of the remaining procedures
listed in Table 53 would be positive. For example, the payment rate for
musculoskeletal CPT codes 26055 (Incise finger tendon sheath) is
estimated to increase 4 percent over the CY 2011 payment rates.
Musculoskeletal procedures are expected to account for a greater
percentage of CY 2012 Medicare ASC spending as we estimate that payment
for procedures in that surgical specialty group would increase under
the revised payment system in CY 2012.

Table 53--Estimated Impact of the Proposed CY 2012 Update to the ASC Payment System on Aggregate Payments for
Selected Procedures
----------------------------------------------------------------------------------------------------------------
Estimated CY 2011
CPT/HCPCS Code * Short descriptor ASC payments (in Estimated CY 2012
millions) percent change
(1) (2).............................. (3) (4)
----------------------------------------------------------------------------------------------------------------
66984.................................. Cataract surg w/iol, 1 stage..... $1,083 0
43239.................................. Upper GI endoscopy, biopsy....... 158 -3

[[Page 42384]]

45380.................................. Colonoscopy and biopsy........... 133 2
45378.................................. Diagnostic colonoscopy........... 100 2
45385.................................. Lesion removal colonoscopy....... 87 2
66982.................................. Cataract surgery, complex........ 79 0
62311.................................. Inject spine l/s (cd)............ 66 2
64483.................................. Inj foramen epidural l/s......... 66 2
66821.................................. After cataract laser surgery..... 56 2
15823.................................. Revision of upper eyelid......... 41 0
64493.................................. Inj paravert f jnt l/s 1 lev..... 40 2
63650.................................. Implant neuroelectrodes.......... 38 -5
G0105.................................. Colorectal scrn; hi risk ind..... 32 3
29881.................................. Knee arthroscopy/surgery......... 31 0
29826.................................. Shoulder arthroscopy/surgery..... 31 2
64721.................................. Carpal tunnel surgery............ 30 2
29827.................................. Arthroscop rotator cuf repr...... 27 2
29880.................................. Knee arthroscopy/surgery......... 26 0
63685.................................. Insrt/redo spine n generator..... 26 -1
G0121.................................. Colon ca scrn not hi rsk ind..... 25 3
45384.................................. Lesion remove colonoscopy........ 24 2
43235.................................. Uppr gi endoscopy, diagnosis..... 23 -3
52000.................................. Cystoscopy....................... 20 1
28285.................................. Repair of hammertoe.............. 19 0
64622.................................. Destr paravertebrl nerve l/s..... 19 3
64590.................................. Insrt/redo pn/gastr stimul....... 16 -1
62310.................................. Inject spine c/t................. 16 2
26055.................................. Incise finger tendon sheath...... 16 4
50590.................................. Fragmenting of kidney stone...... 15 25
67042.................................. Vit for macular hole............. 14 3
----------------------------------------------------------------------------------------------------------------
* Note that HCPCS codes proposed for deletion for CY 2012 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 were performed least often
in ASCs. We believed that the revised ASC payment system would
encourage greater efficiency in ASCs and would 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 2010 claims data that we used to develop the proposed CY
2012 ASC payment system relative payment weights and rates reflect the
third 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 2010 data indicate
that for CY 2012 there would be especially noticeable increases in
spending for the hematologic and lymphatic systems compared to the
previous ASC payment system.
(3) Estimated Effects of This Proposed Rule on Beneficiaries
We estimate that the proposed CY 2012 update to the ASC payment
system would 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 2012. First, other than certain preventive services where
coinsurance and the Part B deductible is waived to comply with sections
1833(a)(1) and (b) of the Act, 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 would be less than the OPPS copayment amount for the same
services. (The only exceptions would be if the ASC coinsurance amount
exceeds the inpatient deductible. The statute requires that copayment
amounts under the OPPS not exceed the inpatient deductible.)
Furthermore, the additions to the ASC list of covered surgical
procedures would 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 proposing to designate as office-based in CY 2012, the beneficiary
coinsurance amount would be no greater than the beneficiary coinsurance
in the physician's office.

[[Page 42385]]

(4) Alternatives Considered
Alternatives to the changes we are proposing to make and the
reasons that we have chosen specific options are discussed throughout
this proposed rule. Some of the major ASC issues discussed in this
proposed rule and the options considered are discussed below.
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, 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 practice expense payment amount
or the ASC rate developed according to the standard methodology of the
revised ASC payment system.
In developing this proposed rule, we reviewed CY 2010 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 2011
OPPS/ASC final rule with comment period (75 FR 72036 through 72038).
Based on that review, and as discussed in section XIII.C.1.b. of this
proposed rule, we are proposing to newly designate 10 surgical
procedures as permanently office-based and proposing to make temporary
office-based designations for 8 procedures in CY 2012 that were
designated as temporarily office-based for CY 2011. 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 ten procedures we are proposing to designate as permanently office-
based and the eight procedures we are proposing to designate as
temporarily office-based at an ASC payment rate calculated according to
the standard ratesetting methodology of the revised ASC payment system.
We did not select this alternative because our analysis of the data and
our clinical review indicated that all 10 procedures we are proposing
to designate as permanently office-based, as well as the 8 procedures
that we are proposing to designate temporarily as office-based, are
considered to be predominantly performed in physicians' offices.
Consistent with our final policy adopted in the August 2, 2007 final
rule (72 FR 42509 through 42513), we were concerned that making
payments at the standard ASC payment rate for the 10 procedures we are
proposing to designate as permanently office-based and the 8 procedures
we are proposing to designate 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 are proposing
for CY 2012 is to designate 10 additional procedures as permanently
office-based for CY 2012 and to designate 8 procedures as temporarily
office-based in CY 2012 that were designated as temporarily office-
based for CY 2011. 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
2012 ASC payment rate for these procedures potentially being capped at
the CY 2012 physicians' office rate (that is, the MPFS nonfacility
practice expense payment 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.
c. Accounting Statements and Tables
As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), we have prepared two
accounting statements to illustrate the impacts of this proposed rule.
The first accounting statement, Table 54 below, illustrates the
classification of expenditures for the CY 2012 estimated hospital OPPS
incurred benefit impacts associated with the proposed CY 2012 OPD fee
schedule increase shown in this proposed rule, based on the FY 2012
President's Budget. The second accounting statement, Table 55 below,
illustrates the classification of expenditures associated with the 0.9
percent proposed CY 2011 update to the revised ASC payment system,
based on the provisions of this proposed rule and the baseline spending
estimates for ASCs in the FY 2012 President's Budget. Lastly, both
tables classify all estimated impacts as transfers.

Table 54--Accounting Statement: CY 2012 Estimated Hospital OPPS
Transfers From CY 2011 To CY 2012 Associated With the Proposed CY 2012
Hospital Outpatient OPD Fee Schedule Increase
------------------------------------------------------------------------
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.
------------------------------------------------------------------------

Table 55--Accounting Statement: Classification of Estimated Transfers
From CY 2011 to CY 2012 as a Result of the Proposed CY 2012 Update to
the Revised ASC Payment System
------------------------------------------------------------------------
Category Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.... $26 million.
From Whom to Whom................. Federal Government to Medicare
Providers and Suppliers.
-------------------------------------

[[Page 42386]]

Total......................... $26 million.
------------------------------------------------------------------------

d. Effect of Proposed Requirements for the Hospital Outpatient Quality
Reporting (OQR) Program
In section XVI. of the CY 2009 OPPS/ASC final rule with comment
period (73 FR 68758 through 68781), section XVI. of the CY 2010 OPPS/
ASC final rule with comment period (74 FR 60629 through 60655), and
section XVI. of the CY 2011 OPPS/ASC final rule with comment period (75
FR72064 through 72110), we discussed our requirements for subsection
(d) hospitals to report quality data under the Hospital OQR Program in
order to receive the full OPD fee schedule increase factor for CY 2010,
CY 2011, and CY 2012-2014, respectively. In section XIV. of this
proposed rule, we are proposing additional policies affecting the
Hospital OQR Program for CY 2013, CY 2014, and CY 2015.
We determined that 107 hospitals did not meet the requirements to
receive the full OPD fee schedule increase factor for CY 2011. Most of
these hospitals (over 90 of the 107) received little or no OPPS payment
on an annual basis and did not participate in the Hospital OQR Program.
We estimate that 120 hospitals may not receive the full OPD fee
schedule increase factor in CY 2012. We are unable at this time to
estimate the number of hospitals that may not receive the full OPD fee
schedule increase factor in CY 2013, CY 2014 and CY 2015.
In section XVI.E.3.a. of the CY 2010 OPPS/ASC final rule with
comment period (74 FR 60647 through 60650), for the CY 2011 payment
update, as part of the validation process, we required hospitals to
submit paper copies of requested medical records to a designated
contractor within the required timeframe. Failure to submit requested
documentation could result in a 2 percentage point reduction to a
hospital's CY 2011 OPD fee schedule increase factor, but the failure to
attain a validation score threshold would not.
In section XVI.D.3.b of the CY 2011 OPPS/ASC final rule with
comment period, we finalized our proposal to validate data submitted by
800 hospitals of the approximately 3,200 participating hospitals for
purposes of the CY 2012 Hospital OQR Program payment determination. We
stated our belief that this approach was suitable for the CY Hospital
OQR Program because it would: 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 the national level;
and reduce overall hospital burden because most hospitals would not be
selected to undergo validation each year. We adopted a threshold of 75
percent as the threshold for the validation score because we believed
this level was reasonable for hospitals to achieve while still ensuring
accuracy of the data. Additionally, this level is consistent with what
we adopted in the Hospital Inpatient Quality Reporting (IQR) Program
(formerly referred to as the Reporting Hospital Quality Data for Annual
Payment Update (RHQDAPU) program)) (75 FR 50225 through 50229). As a
result, we believed that the effect of our validation process for CY
2012 would be minimal in terms of the number of hospitals that would
not meet all program requirements.
In this proposed rule, we are proposing to validate data submitted
by up to 500 of the approximately 3,200 participating hospitals for
purposes of the CY 2013 Hospital OQR Program payment determination.
Under our policy for the CY 2011 and CY 2012 payment determinations,
and under our proposal for CY 2013, we stated that we would conduct a
measure level validation by assessing whether the measure data
submitted by the hospital matches the independently reabstracted
measure data.
As stated above, we are unable to estimate the number of hospitals
that may not receive the full OPD fee schedule increase factor in CY
2013. Therefore, we are unable to estimate the number of hospitals that
would fail the validation documentation submission requirement for the
proposed CY 2013 payment update.
The validation requirements for CY 2011, CY 2012, and the
validation requirement proposed for CY 2013 would result in result in
medical record documentation for approximately 7,300 cases for CY 2011,
9,600 cases per quarter for CY 2012, and approximately 6,000 cases per
quarter for CY 2013, respectively, being submitted to a designated CMS
contractor. We would pay for the cost of sending this medical record
documentation to the designated CMS contractor at the rate of 12 cents
per page for copying and approximately $1.00 per case for postage. We
have found that an outpatient medical chart is generally up to 10
pages. Thus, as a result of validation requirements effective for the
CY 2011 and CY 2012 payment determinations, and proposed for the CY
2013 payment determination, respectively, we would have expenditures of
approximately $16,060 for CY 2011, $21,120 per quarter for CY 2012, and
approximately $13,200 per quarter for CY 2013. Again, as we would pay
for the data collection effort, we believe that a requirement for
medical record documentation for 7,300 total cases for CY 2011, a
maximum of 12 cases per quarter for 800 hospitals for CY 2012, and a
maximum of 12 cases per quarter for up to 500 hospitals for CY 2013
represents a minimal burden to Hospital OQR Program participating
hospitals.
In previous years, medical record documentation was requested by a
CMS contractor and hospitals were given 45 days from the date of the
request to submit the requested documentation. In section XIV.G.3.d. of
this proposed rule, for the CY 2013 payment determination, we are
proposing to reduce the time from 45 days to 30 days for hospitals to
submit requested medical record documentation to meet our validation
requirement; this may create an additional administrative burden. The
total burden would be a maximum of 12 charts for each of the four
quarters that must be copied and mailed within a 30-day period after
the end of each quarter. We are proposing this deadline of 30 days to
align the process with requirements in 42 CFR 476.78(b)(2), which
allows 30 days for chart submission in the context of QIO review and to
reduce the time for data validation completion to increase timeliness
of providing hospitals feedback on their abstraction accuracy.
e. Effects of Proposed Changes to Physician Self-Referral Regulations
Section 6001(a) of the Affordable Care Act amended the whole
hospital and rural provider exceptions (sections 1877(d)(2) and (d)(3)
of the Act,

[[Page 42387]]

respectively) to impose additional restrictions on physician ownership
or investment in hospitals. The amended whole hospital and rural
provider exceptions provide that a hospital may not increase the number
of operating rooms, procedure rooms, and beds beyond that for which the
hospital was licensed on March 23, 2010 (or, in the case of a hospital
that did not have a provider agreement in effect as of this date, but
did have a provider agreement in effect on December 31, 2010, the date
of effect of such agreement). Section 6001(a)(3) of the Affordable Care
Act added new section 1877(i)(3)(A)(i) of the Act to set forth that the
Secretary shall establish and implement an exception process to the
prohibition on expansion of facility capacity.
Most physician-owned hospitals are unable to qualify for the
ownership and investment exception at section 1877(d)(1) of the Act.
Section 1877(d)(1) of the Act provides an exception for ownership or
investment in publicly traded securities in a corporation where there
is stockholder equity exceeding $75 million at the end of the
corporation's most recent fiscal year or on average during the previous
3 fiscal years; or the ownership involves mutual funds in a company
that has assets greater than $75 million. Studies by the OIG and GAO
have concluded that physician-owned hospitals tend to be smaller and
are unable to meet the $75 million threshold.
The proposed regulations at Sec. 411.362(c) set forth the proposed
process for a hospital to request an exception to the prohibition on
expansion of facility capacity. Proposed new Sec. 411.362(c)(2)
outlines the requirements for an applicable hospital request and Sec.
411.362(c)(3) outlines the requirements for a high Medicaid facility
request. Our proposed regulations would require each hospital desiring
an exception to access certain data and make estimates based on that
data to determine if the hospital meets the relevant criteria. For
example, a hospital would be required to access data furnished by the
CMS Healthcare Cost Report Information System (HCRIS) and by the Bureau
of the Census, in addition to referencing data from the hospital's
individual cost reports and making certain estimates on the basis of
its cost report data. We believe the impact of these requirements on
affected hospitals would be minimal.
Our proposed regulations would require each hospital requesting an
exception to provide documentation supporting its calculations to
demonstrate that it satisfies the relevant criteria. Our proposed
regulations would further require each hospital to provide
documentation to support information related to its number of operating
rooms, procedure rooms, and beds. This information would include, for
example, the number of operating rooms, procedure rooms, and beds for
which the hospital is licensed as of the date that the hospital submits
a request for an exception. Each hospital would also be required to
provide a detailed explanation regarding whether and how it satisfies
each of the relevant criteria. We believe physician-owned hospitals
would be minimally affected by these requirements.
Our proposed regulations would require each hospital requesting an
exception to disclose on a public Web site for the hospital that it is
requesting an exception. Our proposed regulations would require each
hospital to certify that it does not discriminate and does not permit
physicians to discriminate against beneficiaries of Federal health care
programs. In addition, under our proposed regulations, if CMS were to
receive input from the community related to a particular hospital's
request for an exception, the hospital may submit a rebuttal statement
in response to input from the community. We believe the impact of these
requirements on physician-owned hospitals would be minimal.
We believe our proposals would affect a relatively small number of
physician-owned hospitals. We estimate that 265 physician-owned
hospitals are eligible to apply for an exception. We believe accurately
estimating the number of hospitals choosing to request an exception
would be impracticable. Further, we are not aware of any existing data
or projections that may produce an estimate with reasonable certainty.
As a result, we are choosing to estimate that each of the 265 eligible
hospitals will request an exception in order to avoid underestimating
the potential impact. We are not aware of any data that may indicate
the potential increase in operation rooms, procedure rooms, or beds
pursuant to exceptions potentially approved. We also have no data or
projections that may help estimate the number of physicians that would
be affected by this proposed rule as a result of their ownership
interests in hospitals.
The proposed requirements concerning the criteria and process for
hospitals seeking an exception to the prohibition on expansion of
facility capacity are consistent with the physician self-referral
statute and regulations and the current practices of most hospitals.
Thus, our proposed requirements would present a negligible impact on
physician-owned hospitals. Physician-owned hospitals would bear costs
associated with requesting an exception to the prohibition on facility
expansion. In part because hospitals are currently undertaking the
costs of producing a cost report, we believe that the cost of
referencing the required data and making the required estimates would
be negligible. In addition, we believe the costs of providing
supporting documentation, certifying nondiscrimination against
beneficiaries of Federal health care programs, and submitting other
required information necessary to request an exception to CMS would be
minimal.
We believe that beneficiaries may be positively impacted by these
proposed provisions. Specifically, an increase in operating rooms,
procedure rooms, and beds may augment the volume or nature of services
offered by physician-owned hospitals. An expansion in the number of
hospital beds may also permit additional inpatient admissions and
overnight stays. Increased operating rooms, procedure rooms, and beds
may result in improved access to health care facilities and services.
We believe that our proposals are necessary to conform our regulations
to the amendments to section 1877 of the Act. We also believe the
proposed regulations would help minimize anticompetitive behavior that
can affect the decision as to where a beneficiary receives health care
services and would possibly enhance the services furnished.
In this proposed rule, we are soliciting public comments on each of
the issues outlined above that contain estimates of the costs and
benefits of the proposed rule.
f. Effects of Proposed Changes to Provider Agreement Regulations on
Patient Notification Requirements
In section XV.D. of this proposed rule, we discuss our proposal
concerning the requirement that all hospitals and critical access
hospitals must furnish written notice to their patients at the
beginning of their hospital stay or outpatient visit if a doctor of
medicine or a doctor of osteopathy is not present in the hospital 24
hours per day, 7 days per week, and that the notice must indicate how
the hospital will meet the medical needs of any patient who develops an
emergency medical condition at a time when there is no physician
present in the hospital. In this proposed rule, we are proposing to
modify the provider agreement regulations to reduce the categories of
outpatients who must be notified if hospital does not have a doctor of
medicine or doctor of osteopathy on site

[[Page 42388]]

24 hours per days/7 days per week. We are proposing that only those
outpatients who receive observation services, surgery, or services
involving anesthesia must receive written notice. We are not making any
changes to our patient safety requirements for physician-owned
hospitals at Sec. 411.362(b)(5)(i). We continue to believe that
patients should be made aware of whether or not a doctor of medicine or
a doctor of osteopathy is present in the hospital at all times, and the
hospital's plans to address patient's emergency medical conditions when
a doctor of medicine or a doctor of osteopathy is not present.
We believe our proposed changes to the provider agreement
regulations would result in only a minor change in the number of
hospitals that are subject to the disclosure requirements, specifically
those multicampus hospitals that currently have 24 hour per day, seven
day per week presence of a doctor of medicine or a doctor of osteopathy
on one, but not all of their campuses with inpatient services. We
anticipate that very few multicampus hospitals would fall into this
category. Rather, the primary impact of the proposed regulation would
be to change the number of annual written disclosures given by
hospitals to patients. We believe the cost of implementing these
provisions borne by hospitals would be limited to a one-time cost
associated with completing minor revisions to portions of the
hospitals, policies and procedures related to patient admission and
registration, as well as providing written notification to patients and
affected staff. Therefore, we do not believe that these proposed
changes will have any significant economic impact on hospitals.
We do not anticipate that our proposals will have a significant
economic impact on a substantial number of physicians, other health
care providers and suppliers, or the Medicare or Medicaid programs and
their beneficiaries. Specifically, we believe that this proposed rule
will affect mostly hospitals, physicians, and beneficiaries. The
proposed changes concerning the disclosure of the presence of a doctor
of medicine or a doctor of osteopathy in hospitals is consistent with
the physician self-referral statute and regulations as well as the
current practices of most hospitals. Thus, our physician presence
disclosure proposal would present a negligible economic impact on the
hospital.
Overall, we believe that beneficiaries will be positively impacted
by these provisions. Specifically, disclosure of physician presence
equips patients to make informed decisions about where they elect to
receive care. Our proposal makes no significant change that has the
potential to impede patient access to health care facilities and
services. In fact, we believe that our proposal will help minimize
anti-competitive behavior that can affect the decision as to where a
beneficiary receives health care services and possibly the quality of
the services furnished.
g. Effects of Additional Proposed Hospital VBP Program Requirements
Section 1886(o)(1)(B) of the Act directs the Secretary to begin
making value-based incentive payments under the Hospital VBP Program to
hospitals for discharges occurring on or after October 1, 2012. These
incentive payments will be funded for FY 2013 through a reduction to
the FY 2013 base operating MS-DRG payment amount for each discharge of
1 percent, as required by section 1886(o)(7)(B)(i) of the Act. The
applicable percentage for FY 2014 is 1.25 percent, for FY 2015 is 1.5
percent, for FY 2016 is 1.75 percent, and for FY 2017 and subsequent
years is 2 percent. In section XVI.A.3. of this proposed rule, we are
proposing additional requirements for the FY 2014 Hospital VBP Program.
Specifically, we are proposing to add one chart-abstracted measure to
the Hospital VBP measure set for the FY 2014 payment determination.
Because this additional measure is chart-abstracted and is required for
the Hospital IQR Program, its inclusion in the Hospital VBP Program
does not result in any additional burden because the Hospital VBP
Program uses data that are required for the Hospital IQR Program.
h. Effects of the Proposed EHR Reporting Pilot
Under section XIV.J. of this proposed rule, we are proposing to
allow eligible hospitals and CAHs that are participating in the EHR
Incentive Program to meet the CQM reporting requirement of the program
for payment year 2012 by participating in the Medicare EHR Incentive
Program Electronic Reporting Pilot. This proposal would facilitate the
use of an electronic infrastructure that supports the use of EHRs by
hospitals and CAHs to meet the requirements in various CMS programs and
reduce reporting burden simultaneously. Through this pilot, we have
encouraged hospitals to take steps toward the adoption of EHRs that
will allow for reporting of clinical quality data from EHRs to a CMS
data repository. We expect that the submission of quality data through
EHRs will provide a foundation for establishing the capacity of
hospitals to send, and for CMS, in the future, to receive, quality
measures via hospital EHRs for the Hospital IQR Program's measures.
Hospitals that choose to participate in the EHR Incentive Program by
means of this pilot for the purpose of meeting the CQM reporting
requirement of Meaningful Use will be taking those first steps toward
reporting clinical quality data in such a way.

B. Regulatory Flexibility Act (RFA) Analysis

The RFA requires agencies to analyze options for regulatory relief
of small entities, if a rule has a significant impact on a substantial
number of small entities. For purposes of the RFA, we estimate that
most hospitals, ASCs and CMHCs are small entities as that term is used
in the RFA. For purposes of the RFA, most hospitals are considered
small businesses according to the Small Business Administration's size
standards with total revenues of $34.5 million or less in any single
year. Most ASCs and most CMHCs are considered small businesses with
total revenues of $10 million or less in any single year. For details,
see the Small Business Administration's Web site at http://sba.gov;
choose ``Contracting'' and select ``Table of Small Business Size
Standards'' in PDF or Excel.
In addition, section 1102(b) of the Social Security 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. For purposes of section 1102(b) of the Act, we
define a small rural hospital as a hospital that is located outside of
a metropolitan statistical area and has fewer than 100 beds. We
estimate that this proposed rule may have a significant impact on
approximately 704 small rural hospitals.
The analysis above, together with the remainder of this preamble,
provides a Regulatory Flexibility Analysis and a Regulatory Impact
Analysis.

C. Unfunded Mandates Reform Act Analysis

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 $135 million. This proposed rule would
not mandate any requirements for State,

[[Page 42389]]

local, or tribal governments, nor would it affect private sector costs.

D. Conclusion

The changes we are proposing would affect all classes of hospitals
paid under the OPPS and would affect both CMHCs and ASCs. We estimate
that most classes of hospitals paid under the OPPS would experience a
modest increase or a minimal decrease in payment for services furnished
under the OPPS in CY 2012. Table 51 demonstrates the estimated
distributional impact of the OPPS budget neutrality requirements that
would result in a 1.5 percent increase in payments for all services
paid under the OPPS in CY 2012, after considering all proposed changes
to APC reconfiguration and recalibration, as well as the proposed OPD
fee schedule increase factor, wage index changes, including the
proposed frontier State wage index adjustment, estimated payment for
outliers, and changes to the pass-through payment estimate. However,
some classes of providers that are paid under the OPPS would experience
significant gains and others would experience modest losses in OPPS
payments in CY 2012. Specifically, we estimate that the 11 dedicated
cancer hospitals that met the classification criteria in section
1883(d)(1)(B)(v) of the Act, as a class, would receive an increase in
payments under the OPPS of 38.8 percent for CY 2012, although after
accounting for the TOPs that we estimate they would no longer receive
due to increased payments under the OPPS, the net increase in payment
to these hospitals would be approximately 9 percent. In contrast, we
estimate that CMHCs would see an overall decrease in payment of 33.1
percent as a result of the proposed full transition in CY 2012 to
payment rates for partial hospitalization services at CMHCs based on
cost report and claims data submitted by CMHCs.
The proposed updates to the ASC payment system for CY 2012 would
affect each of the approximately 5,000 ASCs currently approved for
participation in the Medicare program. The effect on an individual ASC
would 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. Table 52 demonstrates
the estimated distributional impact among ASC surgical specialties of
the MFP-adjusted CPI-U update of 0.9 percent proposed for CY 2012.

XXI. Federalism Analysis

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
proposed rule in accordance with Executive Order 13132, Federalism, and
have determined that they would 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 51 of this
proposed rule, we estimate that OPPS payments to governmental hospitals
(including State and local governmental hospitals) would increase by
1.5 percent under this proposed rule. While we do not know the number
of ASCs with government ownership, we anticipate that it is small. We
believe that the proposed provisions related to payments to ASCs in CY
2012 would not affect payments to any ASCs owned by government
entities.
The analyses we have provided in section XX.A. of this proposed
rule, in conjunction with the remainder of this document, demonstrates
that this proposed rule is consistent with the regulatory philosophy
and principles identified in Executive Order 12866, the RFA, and
section 1102(b) of the Act.
This proposed rule would 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.

List of Subjects

42 CFR Part 410

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

42 CFR Part 411

Kidney diseases, Medicare, Physician referral, Reporting and
recordkeeping requirements.

42 CFR Part 416

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

42 CFR Part 419

Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 489

Health facilities, Medicare, Reporting and recordkeeping
requirements.

42 CFR Part 495

Computer technology, Electronic health records, Electronic
transactions, Health, Health care. Health information technology,
Health insurance, Health records, Hospitals, Incorporation by
reference, Laboratories, Medicaid, Medicare, Privacy, Reporting and
recordkeeping requirements, Public health, Security.
For reasons stated in the preamble of this document, the Centers
for Medicare & Medicaid Services is proposing to amend 42 CFR Chapter
IV as set forth below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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).

2. Section 410.27 is amended by--
a. Revising the section heading.
b. Revising paragraph (a).
c. In paragraph (b), removing the cross-reference ``Sec. 410.168''
and adding in its place the cross-reference ``Sec. 410.29''.
d. In paragraph (c), removing the cross-reference ``Sec. 410.168''
and adding in its place the cross-reference ``subpart G of Part 424 of
this chapter''.
e. Redesignating paragraphs (d) through (f) as paragraphs (e)
through (g), respectively.
f. Adding a new paragraph (d).
The revisions and addition read as follows:

Sec. 410.27 Therapeutic outpatient hospital or CAH services and
supplies incident to a physician's or nonphysician practitioner's
service: Conditions.

(a) Medicare Part B pays for therapeutic hospital or CAH services
and supplies furnished incident to a physician's or nonphysician
practitioner's service, which are defined as all services and supplies
furnished to hospital or CAH outpatients that are not diagnostic
services and that aid the physician or nonphysician practitioner in the
treatment of the patient, 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 subchapter;

[[Page 42390]]

(ii) As an integral although 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 (or other level of supervision as
specified by CMS for the particular service) of a physician or a
nonphysician practitioner as specified in paragraph (g) of this
section, subject to the following requirements:
(A) For services furnished in the hospital or CAH, or in an
outpatient department of the hospital or CAH, both on and off-campus,
as defined in Sec. 413.65 of this subchapter, ``direct supervision''
means that the physician or nonphysician practitioner must be
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;
(B) Certain therapeutic services and supplies may be assigned
either general supervision or personal supervision. When such
assignment is made, general supervision means the definition specified
at Sec. 410.32(b)(3)(i), and personal supervision means the definition
specified at Sec. 410.32(b)(3)(iii);
(C) 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;
(D) For pulmonary rehabilitation, cardiac rehabilitation, and
intensive cardiac rehabilitation services, direct supervision must be
furnished by a doctor of medicine or a doctor of osteopathy, as
specified in Sec. Sec. 410.47 and 410.49, respectively; and
(E) For nonsurgical extended duration therapeutic services
(extended duration services), which are hospital or CAH outpatient
therapeutic services that can last a significant period of time, have a
substantial monitoring component that is typically performed by
auxiliary personnel, have a low risk of requiring the physician's or
appropriate nonphysician practitioner's immediate availability after
the initiation of the service, and are not primarily surgical in
nature, Medicare requires a minimum of direct supervision during the
initiation of the service which may be followed by general supervision
at the discretion of the supervising physician or the appropriate
nonphysician practitioner. ``Initiation'' means the beginning portion
of the nonsurgical extended duration therapeutic service which ends
when the patient is stable and the supervising physician or the
appropriate nonphysician practitioner determines that the remainder of
the service can be delivered safely under general supervision.
(2) In the case of partial hospitalization services, also meet the
conditions of paragraph (e) of this section.
* * * * *
(d) Rules on emergency services furnished to outpatients in a
foreign country are specified in subpart H of Part 424 of this chapter.
* * * * *

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE
PAYMENT

3. The authority citation for Part 411 continues to read as
follows:
Authority: Secs. 1102, 1860D-1 through 1860D-42, 1871, and 1877 of
the Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152,
1395hh and 1395nn).
4. Section 411.362 is amended by--
a. Adding in paragraph (a) definitions of ``baseline number of
operating rooms, procedure rooms, and beds'' and ``main campus of the
hospital'' in alphabetical order.
b. Revising paragraph (b)(2).
c. Adding paragraph (c).
The revision and additions read as follows:

Sec. 411.362 Additional requirements concerning physician ownership
and investment in hospitals.

(a) * * *
Baseline number of operating rooms, procedure rooms, and beds means
the number of operating rooms, procedure rooms, and beds for which the
applicable hospital or high Medicaid facility is licensed as of March
23, 2010 (or, in the case of a hospital that did not have a provider
agreement in effect as of such date, but does have a provider agreement
in effect on December 31, 2010, the date of effect of such agreement).
Main campus of the hospital means ``campus'' as defined at Sec.
413.65(a)(2).
* * * * *
(b) * * *
(2) Prohibition on facility expansion. The hospital may not
increase the number of operating rooms, procedure rooms, and beds
beyond that for which the hospital is licensed on March 23, 2010 (or,
in the case of a hospital that did not have a provider agreement in
effect as of this date, but does have a provider agreement in effect on
December 31, 2010, the effective date of such agreement), unless an
exception is granted pursuant to paragraph (c) of this section.
* * * * *
(c) Criteria for an individual hospital seeking an exception to the
prohibition on facility expansion.
(1) General. An applicable hospital or high Medicaid facility may
request an exception from the prohibition on facility expansion up to
once every 2 years from the date of a CMS decision on the hospital's
most recent request.
(2) Criteria for applicable hospital. An applicable hospital is a
hospital that satisfies all of the following criteria:
(i) Population increase. Is located in a county that has a
percentage increase in population that is at least 150 percent of the
percentage increase in population of the State in which the hospital is
located during the most recent 5-year period for which data are
available as of the date that the hospital submits its request. To
calculate State and county population growth, a hospital must use
Bureau of the Census estimates.
(ii) Medicaid inpatient admissions. Has an annual percent of total
inpatient admissions under Medicaid that is equal to or greater than
the average percent with respect to such admissions for all hospitals
located in the county in which the hospital is located for each of the
3 most recent fiscal years for which data are available as of the date
that the hospital submits its request. A hospital must use filed
hospital cost report discharge data to estimate its annual percent of
total inpatient admissions under Medicaid.
(iii) Nondiscrimination. Does not discriminate against
beneficiaries of Federal health care programs and does not permit
physicians practicing at the hospital to discriminate against such
beneficiaries.
(iv) Average bed capacity. Is located in a State in which the
average bed capacity in the State is less than the national average bed
capacity for each of the 3 most recent fiscal years for which data are
available as of the date that the hospital submits its request.
(v) Average bed occupancy. Has an average bed occupancy rate that
is greater than the average bed occupancy rate in the State in which
the hospital is located for each of the 3 most recent fiscal years for
which data are available as of the date that the hospital submits its
request. A hospital must use filed hospital cost report data to
determine its average bed occupancy rate.
(3) Criteria for high Medicaid facility. A high Medicaid facility
is a hospital that satisfies all of the following criteria:

[[Page 42391]]

(i) Sole hospital. Is not the sole hospital in the county in which
the hospital is located.
(ii) Medicaid inpatient admissions. With respect to each of the 3
most recent fiscal years for which data are available as of the date
the hospital submits its request, has an annual percent of total
inpatient admissions under Medicaid that is estimated to be greater
than such percent with respect to such admissions for any other
hospital located in the county in which the hospital is located. A
hospital must use filed hospital cost report discharge data to estimate
its annual percentage of total inpatient admissions under Medicaid and
the annual percentages of total inpatient admissions under Medicaid for
every other hospital located in the county in which the hospital is
located.
(iii) Nondiscrimination. Does not discriminate against
beneficiaries of Federal health care programs and does not permit
physicians practicing at the hospital to discriminate against such
beneficiaries.
(4) Procedure for submitting a request. (i) A hospital must either
mail an original and one copy of the written request to CMS or submit
the request electronically to CMS. If a hospital submits the request
electronically, the hospital must mail an original hard copy of the
signed certification set forth in paragraph (c)(4)(iii) of this section
to CMS.
(ii) A request must include the following information:
(A) The name, address, National Provider Identification number(s)
(NPI), Tax Identification Number(s) (TIN), and CMS Certification
Number(s) (CCN) of the hospital requesting an exception.
(B) The county in which the hospital requesting an exception is
located.
(C) The name, title, address, and daytime telephone number of a
contact person who will be available to discuss the request with CMS on
behalf of the hospital.
(D) A statement identifying the hospital as an applicable hospital
or high Medicaid facility and a detailed explanation with supporting
documentation regarding whether and how the hospital satisfies each of
the criteria for an applicable hospital or high Medicaid facility. The
request must state that the hospital does not discriminate against
beneficiaries of Federal health care programs and does not permit
physicians practicing at the hospital to discriminate against such
beneficiaries.
(E) Documentation supporting the hospital's calculations of its
baseline number of operating rooms, procedure rooms, and beds; the
hospital's number of operating rooms, procedure rooms, and beds for
which the hospital is licensed as of the date that the hospital submits
a request for an exception; and the additional number of operating
rooms, procedure rooms, and beds by which the hospital requests to
expand.
(iii) A request must include the following certification signed by
an authorized representative of the hospital: ``With knowledge of the
penalties for false statements provided by 18 U.S.C. 1001, I certify
that all of the information provided in the request and all of the
documentation provided with the request is true and correct to the best
of my knowledge and belief.'' An authorized representative is the chief
executive officer, chief financial officer, or other comparable officer
of the hospital.
(5) Community input and timing of complete request. Upon submitting
a request for an exception and until the hospital receives a CMS
decision, the hospital must disclose on any public Web site for the
hospital that it is requesting an exception. Individuals and entities
in the hospital's community may provide input with respect to the
hospital's request no later than 30 days after CMS publishes notice of
the hospital's request in the Federal Register. Such input must take
the form of written comments. The written comments must be either
mailed or submitted electronically to CMS.
(i) If CMS does not receive written comments from the community, a
request will be deemed complete at the end of the 30-day period.
(ii) If CMS receives written comments from the community, the
hospital has 30 days after CMS notifies the hospital of the written
comments to submit a rebuttal statement. A request will be deemed
complete at the end of this 30-day period regardless of whether the
hospital submits a rebuttal statement.
(6) A permitted increase under this section--
(i) May not exceed 200 percent of the hospital's baseline number of
operating rooms, procedure rooms, and beds; and
(ii) May occur only in facilities on the hospital's main campus.
(7) Publication of final decisions. Not later than 60 days after
receiving a complete request, CMS will publish the final decision in
the Federal Register.
(8) Limitation on review. There shall be no administrative or
judicial review under section 1869, section 1878, or otherwise of the
process under this section (including the establishment of such
process).

PART 416--AMBULATORY SURGICAL SERVICES

5. The 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).

6. Section 416.166 is amended by revising paragraph (b) to read as
follows:

Sec. 416.166 Covered surgical procedures.

* * * * *
(b) General standards. Subject to the exclusions in paragraph (c)
of this section, covered surgical procedures are surgical procedures
specified by the Secretary and published in the Federal Register and/or
via the Internet on the CMS Web site that are separately paid under the
OPPS, that would not be expected to pose a significant safety risk to a
Medicare beneficiary when performed in an ASC, and for which standard
medical practice dictates that the beneficiary would not typically be
expected to require active medical monitoring and care at midnight
following the procedure.
* * * * *
7. Section 416.171 is amended by revising paragraphs (b) and (d) to
read as follows:

Sec. 416.171 Determination of payment rates for ASC services.

* * * * *
(b) Exception. The national ASC payment rates for the following
items and services are not determined in accordance with paragraph (a)
of this section but are paid an amount derived from the payment rate
for the equivalent item or service set under the payment system
established in part 419 of this subchapter as updated annually in the
Federal Register and/or via the Internet on the CMS Web site.
* * * * *
(d) Limitation on payment rates for office-based surgical
procedures and covered ancillary radiology services. Notwithstanding
the provisions of paragraph (a) of this section, for any covered
surgical procedure under Sec. 416.166 that CMS determines is commonly
performed in physicians' offices or for any covered ancillary radiology
service, excluding those listed in paragraphs (d)(1) and (2) of this
section, the national unadjusted ASC payment rates for these procedures
and services will be the lesser of the amount determined under
paragraph (a) of this section or the amount calculated at the
nonfacility practice expense relative value units under Sec.
414.22(b)(5)(i)(B) of this subchapter multiplied by the

[[Page 42392]]

conversion factor described in Sec. 414.20(a)(3) of this subchapter.
(1) The national unadjusted ASC payment rate for covered ancillary
radiology services that involve certain nuclear medicine procedures
will be the amount determined under paragraph (a) of this section.
(2) The national unadjusted ASC payment rate for covered ancillary
radiology services that use contrast agents will be the amount
determined under paragraph (a) of this section.
* * * * *
8. Section 416.173 is revised to read as follows:

Sec. 416.173 Publication of revised payment methodologies and payment
rates.

CMS publishes annually, through notice and comment rulemaking in
the Federal Register and/or via the Internet on the CMS Web site, the
payment methodologies and payment rates for ASC services and designates
the covered surgical procedures and covered ancillary services for
which CMS will make an ASC payment and other revisions as appropriate.

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

9. 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), and1395hh).

10. Section 419.32 is amended by:
a. Revising paragraph (b)(1)(iv)(A).
b. Removing the word ``and'' that appears at the end of paragraph
(b)(1)(iv)(B)(1).
c. Removing the period and adding ``; and'' in its place at the end
of paragraph (b)(1)(iv)(B)(2).
d. Adding a new paragraph (b)(1)(iv)(B)(3).
The revision and addition read as follows:

Sec. 419.32 Calculation of prospective payment rates for hospital
outpatient services.

* * * * *
(b) * * *
(1) * * *
(iv)(A) For calendar year 2003 and subsequent years, by the
hospital inpatient market basket percentage increase applicable under
section 1886(b)(3)(B)(iii) of the Act, reduced by the factor(s)
specified in paragraph (b)(1)(iv)(B) of this section.
(B) * * *
(3) For calendar year 2012, a multifactor productivity adjustment
(as determined by CMS) and 0.1 percentage point.
* * * * *
11. Section 419.43 is amended by adding paragraph (i) to read as
follows:

Sec. 419.43 Adjustments to national program payment and beneficiary
copayment amounts.

* * * * *
(i) Payment adjustment for certain cancer hospitals.--(1) General
rule. CMS provides for a payment adjustment for covered hospital
outpatient department services furnished on or after January 1, 2012,
by a hospital described in section 1886(d)(1)(B)(v) of the Act.
(2) Amount of payment adjustment. The amount of the payment
adjustment under paragraph (i)(1) of this section is determined by the
Secretary as follows:
(i) If a hospital described in section 1886(d)(1)(B)(v) of the Act
has a payment-to-cost ratio (as determined by the Secretary) that is
less than the weighted average payment-to-cost ratio of other hospitals
furnishing services under section 1833(t) of the Act (as determined by
the Secretary) (referred to as the target payment-to-cost ratio), for
covered hospital outpatient department services except pass-through
devices as defined in Sec. 419.66, the payment adjustment is the
percentage difference between the payment-to-cost ratio of the hospital
and the target payment-to-cost ratio.
(ii) If a hospital described in section 1886(d)(1)(B)(v) of the Act
has a payment-to-cost ratio (as determined by the Secretary) that is
less than the weighted average payment-to-cost ratio of other hospitals
furnishing services under section 1866(t) of the Act (as determined by
the Secretary) (referred to as the target payment-to-cost ratio), for
pass-through devices as defined in Sec. 419.66, the payment adjustment
is zero percent.
(iii) If a hospital described in section 1886(d)(1)(B)(v) of the
Act has a payment-to-cost ratio (as determined by the Secretary) that
is greater than the target payment-to-cost ratio (as determined by the
Secretary), for covered hospital outpatient department services, the
payment adjustment is zero percent.
(3) Budget neutrality. CMS establishes the payment adjustment under
paragraph (i)(1) of this section in a budget neutral manner.
12. Section 419.70 is amended by revising paragraphs (d)(2)
introductory text and (d)(6) to read as follows:

Sec. 419.70 Transitional adjustments to limit decline in payments.

* * * * *
(d) * * *
(2) Temporary treatment for small rural hospitals on or after
January 1, 2006. For covered hospital outpatient services furnished in
a calendar year from January 1, 2006, through December 31, 2011, for
which the prospective payment system amount is less than the pre-BBA
amount, the amount of payment under this part is increased by 95
percent of that difference for services furnished during CY 2006, 90
percent of that difference for services furnished during CY 2007, and
85 percent of that difference for services furnished during CYs 2008,
2009, 2010, and 2011 if the hospital--
* * * * *
(6) Temporary treatment for sole community hospitals on or after
January 1, 2010, and through December 31, 2011. For covered hospital
outpatient services furnished on or after January 1, 2010, through
December 31, 2011, for which the prospective payment system amount is
less than the pre-BBA amount, the amount of payment under this part is
increased by 85 percent of that difference if the hospital is a sole
community hospital as defined in Sec. 412.92 of this chapter or is an
essential access community hospital as described under Sec. 412.109 of
this chapter.
* * * * *

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

13. The authority citation for Part 489 continues to read as
follows:

Authority: Secs. 1102, 1819, 1820(e), 1861, 1864(m), 1866, 1869,
and 1871 of the Social Security Act (42 U.S.C. 1302, 1395i-3, 1395x,
1395aa(m), 1395cc, 1395ff, and 1395hh).

14. Section 489.20 is amended by revising paragraph (w) to read as
follows:

Sec. 489.20 Basic commitments.

* * * * *
(w)(1) In the case of a hospital as defined in Sec. 489.24(b), to
furnish written notice to all patients at the beginning of their
planned or unplanned inpatient hospital stay or at the beginning of any
planned or unplanned outpatient visit for observation, surgery or any
other procedure requiring anesthesia, if a doctor of medicine or a
doctor of osteopathy is not present in the hospital 24 hours per day, 7
days per week, in order to assist the patients in making informed
decisions regarding their care, in accordance with Sec. 482.13(b)(2)
of this subchapter. For purposes of this paragraph, a planned hospital
stay or

[[Page 42393]]

outpatient visit begins with the provision of a package of information
regarding scheduled preadmission testing and registration for a planned
hospital admission for inpatient care or outpatient service. An
unplanned hospital stay or outpatient visit begins at the earliest
point at which the patient presents to the hospital.
(2) In the case of a hospital that is a main provider and has one
or more remote locations of a hospital or one or more satellites, as
these terms are defined in Sec. 413.65(a)(2), Sec. 412.22(h), or
Sec. 412.25(e) of this chapter, as applicable, the determination is
made separately for the main provider and each remote location or
satellite whether notice to patients is required. Notice is required at
each location at which inpatient services are furnished at which a
doctor of medicine or doctor of osteopathy is not present 24 hours per
day, 7 days per week.
(3) The written notice must state that the hospital does not have a
doctor of medicine or a doctor of osteopathy present in the hospital 24
hours per day, 7 days per week, and must indicate how the hospital will
meet the medical needs of any patient who develops an emergency medical
condition, as defined in Sec. 489.24(b), at a time when there is no
doctor of medicine or doctor of osteopathy present in the hospital.
(4) Before admitting a patient or providing an outpatient service
to outpatients for whom a notice is required, the hospital must receive
a signed acknowledgment from the patient stating that the patient
understands that a doctor of medicine or doctor of osteopathy may not
be present during all hours services are furnished to the patient.
(5) Each dedicated emergency department, as that term is defined in
Sec. 489.24(b), in a hospital in which a doctor of medicine or doctor
of osteopathy is not present 24 hours per day, 7 days per week must
post a notice conspicuously in a place or places likely to be noticed
by all individuals entering the dedicated emergency department. The
posted notice must state that the hospital does not have a doctor of
medicine or a doctor of osteopathy present in the hospital 24 hours per
day, 7 days per week, and must indicate how the hospital will meet the
medical needs of any patient with an emergency medical condition, as
defined in Sec. 489.24(b), at a time when there is no doctor of
medicine or doctor of osteopathy present in the hospital.

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY
INCENTIVE PROGRAM

15. The authority citation for Part 495 continues to read as
follows:

Authority: Secs. 1102 and 1871 of the Social Security Act (42
U.S.C. 1302 and 1395hh).
16. Section 495.8 is amended by revising paragraph (b)(2)(ii) and
adding paragraph (b)(2)(vi) to read as follows:

Sec. 495.8 Demonstration of meaningful use criteria.

* * * * *
(b) * * *
(2) * * *
(ii) Reporting clinical quality information. For Sec. 495.6(f)(9)
``Reporting hospital clinical quality measures to CMS or, in the case
of Medicaid eligible hospitals, the States,'' report the hospital
quality measures selected by CMS to CMS (or in the case of Medicaid
eligible hospitals, the States) in the form and manner specified by CMS
(or in the case of Medicaid eligible hospitals, the States).
* * * * *
(vi) Exception for Medicare eligible hospitals and CAHs for FY
2012--Participation in the Medicare EHR Incentive Program Electronic
Reporting Pilot. In order to satisfy the clinical quality measure
reporting objective in Sec. 495.6(f)(9), aside from attestation, a
Medicare eligible hospital or CAH may participate in the Medicare EHR
Incentive Program Electronic Reporting Pilot.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773,
Medicare--Hospital Insurance; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778
(Medical Assistance)

Dated: June 24, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
Dated: June 28, 2011.
Kathleen Sebelius,
Secretary.
[FR Doc. 2011-16949 Filed 7-1-11; 4:15 pm]
BILLING CODE 4120-01-P