[Federal Register Volume 76, Number 230 (Wednesday, November 30, 2011)]
[Rules and Regulations]
[Pages 74122-74584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-28612]



[[Page 74121]]

Vol. 76

Wednesday,

No. 230

November 30, 2011

Part II





Department of Health and Human Services





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Centers for Medicare and Medicaid Services





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42 CFR Parts 410, 411, 416 et al.





Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment; Ambulatory Surgical Center Payment; Hospital Value-Based 
Purchasing Program; Physician Self-Referral; and Patient Notification 
Requirements in Provider Agreements; Final Rule

  Federal Register / Vol. 76 , No. 230 / Wednesday, November 30, 2011 / 
Rules and Regulations  

[[Page 74122]]


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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-FC]
RIN 0938-AQ26


Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment; Ambulatory Surgical Center Payment; Hospital Value-Based 
Purchasing Program; Physician Self-Referral; and Patient Notification 
Requirements in Provider Agreements

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule with comment period revises the Medicare 
hospital outpatient prospective payment system (OPPS) for CY 2012 to 
implement applicable statutory requirements and changes arising from 
our continuing experience with this system. In this final rule with 
comment period, we describe the changes to the amounts and factors used 
to determine the payment rates for Medicare hospital outpatient 
services paid under the OPPS.
    In addition, this final rule with comment period updates the 
revised Medicare ambulatory surgical center (ASC) payment system to 
implement applicable statutory requirements and changes arising from 
our continuing experience with this system. In this final rule with 
comment period, we set forth the relative payment weights and payment 
amounts for services furnished in ASCs, specific HCPCS codes to which 
these changes apply, and other ratesetting information for the CY 2012 
ASC payment system.
    We are revising the requirements for the Hospital Outpatient 
Quality Reporting (OQR) Program, adding new requirements for ASC 
Quality Reporting System, and making additional changes to provisions 
of the Hospital Inpatient Value-Based Purchasing (VBP) Program.
    We also are allowing 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.
    Finally, we are making 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: Effective Date: This final rule with comment period is effective 
on January 1, 2012.
    Comment Period: To be assured consideration, comments on the 
payment classifications assigned to HCPCS codes identified in Addenda 
B, AA, and BB of this final rule with comment period with the ``NI'' 
comment indicator and on other areas specified throughout this final 
rule with comment period, and comments on the suspension of the 
effective dates of the Hospital-Acquired Condition (HAC), Agency for 
Healthcare Research and Quality (AHRQ), and Medicare spending per 
beneficiary measures discussed in section XVI.A.2. of this final rule 
with comment period, must be received at one of the addresses provided 
in the ADDRESSES section no later than 5 p.m. EST on January 3, 2012.
    Application Deadline--New Class of New Technology Intraocular 
Lenses: Requests for review of applications for a new class of new 
technology intraocular lenses must be received by 5 p.m. EST on March 
2, 2012, at the following address: ASC/NTOL, Division of Outpatient 
Care, Mailstop C4-05-17, Centers for Medicare and Medicaid Services, 
7500 Security Boulevard, Baltimore, MD 21244-1850.

ADDRESSES: In commenting, please refer to file code CMS-1525-FC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may (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-FC, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1525-FC, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments 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.
    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 

Marjorie Baldo, (410) 786-4617, Hospital outpatient prospective payment 
issues.
Char Thompson, (410) 786-2300, 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.

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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 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 the CY 2012 proposed 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.gov/HospitalOutpatientPPS. The Addenda relating to the ASC payment system 
are available at: http://www.cms.gov/ASCPayment/. For complete details 
on the availability of the Addenda referenced in this final rule with 
comment period, 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, Public Law 111-
5
ASC Ambulatory Surgical Center
ASP Average Sales Price
AWP Average Wholesale Price
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Public Law 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 Current Procedural Terminology (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, Public Law 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, Public Law 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, Public 
Law 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, 
Public Law 104-191
HOPD Hospital Outpatient Department
Hospital OQR Hospital Outpatient Quality Reporting
ICR Intensive Cardiac Rehabilitation
IDE Investigational Device Exemption
IHS Indian Health Service
IQR Inpatient Quality Reporting
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, Public Law 109-
432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public 
Law 110-173
MPFS Medicare Physician Fee Schedule
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NHSN National Healthcare Safety Network
NCD National Coverage Determination
NPP Nonphysician practitioner
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
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 OPPS and the ASC payment system. In addition, we are 
making changes to the rules governing limitations on certain physician 
referrals to hospitals in which

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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., section XIV., and sections XVII. through XXI. of this 
final rule with comment period. Addenda A, B, C, D1, D2, E, L, M, and 
N, which relate to the OPPS, are referenced in section XVII. of this 
final rule with comment period 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 final rule with comment period. Addenda 
AA, BB, DD1, DD2, and EE, which relate to the ASC payment system, are 
referenced in section XVII. of this final rule with comment period 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 final rule with comment period.

Table of Contents

I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule and 
This Final Rule With Comment Period
    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 the CY 2012 OPPS/ASC 
Proposed Rule
    1. Updates Affecting OPPS Payments
    2. OPPS Ambulatory Payment Classification (APC) Group Policies
    3. OPPS Payment for Devices
    4. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    5. Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    6. OPPS Payment for Hospital Outpatient Visits
    7. Payment for Partial Hospitalization Services
    8. Procedures That Would Be Paid Only as Inpatient Procedures
    9. Policies on Supervision Standards for Outpatient Services in 
Hospitals and CAHs
    10. OPPS Payment Status and Comment Indicators
    11. OPPS Policy and Payment Recommendations
    12. Updates to the Ambulatory Surgical Center (ASC) Payment 
System
    13. Reporting Quality Data for Annual Payment Rate Updates
    14. Changes to EHR Incentive Program for Eligible Hospitals and 
CAHs Regarding Electronic Submission of Clinical Quality Measures 
(CQMs)
    15. Changes to Provisions Relating to Physician Self-Referral 
Prohibition and Provider Agreement Regulations on Patient 
Notification Requirements
    16. Additional Changes to the Hospital Inpatient VBP Program
    17. Economic and Federalism Analyses
    F. Public Comments Received in Response to the CY 2012 OPPS/ASC 
Proposed Rule
    G. Public Comments Received on the CY 2011 OPPS/ASC Final Rule 
With Comment Period
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Use of Single and Multiple Procedure Claims
    c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    2. 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. 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. 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. Changes to Packaged Services
    a. Background
    b. Packaging Issues
    (1) CMS Presentation of Findings Regarding Expanded Packaging at 
the February 28-March 1, 2011 and August 10-12, 2011 APC Panel 
Meetings
    (2) Packaging Recommendations of the APC Panel at Its February 
28-March 1, 2011 Meeting
    (3) Packaging Recommendations of the APC Panel at Its August 
2011 Meeting
    (4) Other Packaging Proposals and Policies for CY 2012
    4. Calculation of OPPS Scaled Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default CCRs
    E. OPPS Payment to Certain Rural and Other Hospitals
    1. Hold Harmless Transitional Payment Changes
    2. Adjustment for Rural SCHs and EACHs Under Section 
1833(t)(13)(B) of the Act
    F. 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. Payment Adjustment for Certain Cancer Hospitals for CY 2012
    G. Hospital Outpatient Outlier Payments
    1. Background
    2. Proposed Outlier Calculation
    3. Final Outlier Calculation
    4. Outlier Reconciliation
    H. Calculation of an Adjusted Medicare Payment From the National 
Unadjusted Medicare Payment
    I. Beneficiary Copayments
    1. Background
    2. OPPS Copayment Policy
    3. Calculation of an Adjusted Copayment Amount for an APC Group
III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Treatment of New Level II HCPCS Codes and Category I CPT 
Vaccine Codes and Category III CPT Codes for Which We Solicited 
Public Comments in the CY 2012 Proposed Rule
    2. Process for New Level II HCPCS Codes and Category I and 
Category III CPT Codes for Which We Are Soliciting Public Comments 
on This CY 2012 OPPS/ASC Final Rule With Comment Period
    B. OPPS Changes--Variations Within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. Exceptions to the 2 Times Rule
    C. New Technology APCs
    1. Background
    2. Movement of Procedures From New Technology APCs to Clinical 
APCs

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    D. OPPS APC-Specific Policies
    1. Cardiovascular Services
    a. Cardiovascular Computed Tomography (CCT) (APCs 0340 and 0383)
    b. Cardiac Imaging (APC 377)
    c. Insertion/Replacement/Repair of AICD Leads, Generator, and 
Pacing Electrodes (APC 0108)
    d. Implantable Loop Recorder Monitoring (APC 0690)
    e. Echocardiography (APCs 0128, 0269, 0270, and 0697)
    2. Gastrointestinal Services
    a. Upper Gastrointestinal (GI) Services (APCs 0141, 0419, and 
0422)
    b. Gastrointestinal Transit and Pressure Measurement (APC 0361)
    3. Genitourinary Services
    a. Laser Lithotripsy (APC 0163)
    b. Percutaneous Renal Cryoablation (APC 0423)
    4. Nervous System Services
    a. Revision/Removal of Neurotransmitter Electrodes (APCs 0040 
and 0687)
    b. Magnetoencephalography (MEG) (APCs 0065, 0066, and 0067)
    c. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0218)
    5. Ocular and Ophthalmic Services
    a. Placement of Amniotic Membrane (APCs 0233 and 0244)
    b. Insertion of Anterior Segment Aqueous Drainage Device (APC 
0673)
    c. Scanning Ophthalmic Diagnostic Imaging (APC 0230)
    d. Intraocular Laser Endoscopy (APC 0233)
    6. Orthopedic and Musculoskeletal Services
    a. Percutaneous Laminotomy/Laminectormy (APC 0208)
    b. Level II Arthroscopy (APC 0042)
    c. Closed Treatment Fracture of Finger, Toe, and Trunk (APCs 
0129, 0138, and 0139)
    d. Level I and II Strapping and Cast Application (APCs 0058 and 
0426)
    7. Radiology Services
    a. Proton Beam Therapy (APCs 0664 and 0667)
    b. Stereotactic Radiosurgery (SRS) Treatment Delivery Services 
(APCs 0065, 0066, 0067, and 0127)
    c. Adrenal Imaging (APC 0408)
    d. Positron Emission Tomography (PET) Imaging (APC 0308) 
(Created From Myocardial Positron Emission Tomography (PET) Imaging 
(APC 0307) and Nonmyocardial Positron Emission Tomography (PET) 
Imaging (APC 0308))
    e. Device Construction for Intensity Modulated Radiation Therapy 
(IMRT) (APC 0305)
    f. Computed Tomography of Abdomen/Pelvic (APCs 0331 and 0334)
    g. Complex Interstitial Radiation Source Application (APC 0651)
    h. Radioelement Applications (APC 0312)
    8. Respiratory Services
    a. Pulmonary Rehabilitation (APC 0102)
    b. Bronchial Thermoplasty (APC 0415)
    c. Insertion of Bronchial Valve (APC 0415)
    9. Other Services
    a. Skin Repair (APCs 0133, 0134, and 0135)
    b. Nasal Sinus Endoscopy (APC 0075)
    c. Bioimpedance Spectroscopy (APC 0097)
    d. Autologous Blood Salvage (APC 0345)
IV. OPPS Payment for Devices
    A. Pass-Through Payments for Devices
    1. Expiration of Transitional Pass-Through Payments for Certain 
Devices
    a. Background
    b. CY 2012 Policy
    2. Provisions for Reducing Transitional Pass-Through Payments To 
Offset Costs Packaged Into APC Groups
    a. Background
    b. CY 2012 Policy
    B. Adjustment to OPPS Payment for No Cost/Full Credit and 
Partial Credit Devices
    1. Background
    2. APCs and Devices Subject to the Adjustment Policy
V. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Drugs and Biologicals With Expiring Pass-Through Status in CY 
2011
    3. Drugs, Biologicals, and Radiopharmaceuticals With New or 
Continuing Pass-Through Status in CY 2012
    4. Provisions for Reducing Transitional Pass-Through Payments 
for Diagnostic Radiopharmaceuticals and Contrast Agents To Offset 
Costs Packaged Into APC Groups
    a. Background
    b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    c. Payment Offset Policy for Contrast Agents
    B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
Without Pass-Through Status
    1. Background
    2. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
    a. Background
    b. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Nonimplantable Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. Packaging Determination for HCPCS Codes That Describe the 
Same Drug or Biological But Different Dosages
    d. Packaging of Payment for Diagnostic Radiopharmaceuticals, 
Contrast Agents, and Implantable Biologicals (``Policy-Packaged'' 
Drugs and Devices)
    3. Payment for Drugs and Biologicals Without Pass-Through Status 
That Are Not Packaged
    a. Payment for Specified Covered Outpatient Drugs (SCODs) and 
Other Separately Payable and Packaged Drugs and Biologicals
    b. CY 2012 Payment Policy
    c. Payment Policy for Therapeutic Radiopharmaceuticals
    4. Payment for Blood Clotting Factors
    5. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes, But Without OPPS Hospital 
Claims Data
    VI. Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient Visits
    A. Background
    B. Policies for Hospital Outpatient Visits
    1. Clinic Visits: New and Established Patient Visits
    2. Emergency Department Visits
    3. Visit Reporting Guidelines
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2012
    C. Separate Threshold for Outlier Payments to CMHCs
IX. Procedures That Will Be Paid Only as Inpatient Procedures
    A. Background
    B. Changes to the Inpatient List
X. Policies for the Supervision of 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
    a. Selection of Review Entity
    b. Review Process
    c. Evaluation Criteria
    2. Conditions of Payment and Hospital Outpatient Therapeutic 
Services Described by Different Benefit Categories
    3. Technical Corrections to the Supervision Standards for 
Hospital Outpatient Therapeutic Services Furnished in Hospitals or 
CAHs
    C. Summary of CY 2012 Final Policies on Supervision Standards 
for Outpatient Therapeutic Services in Hospitals and CAHs
    1. Independent Review Process
    2. Conditions of Payment and Hospital Outpatient Therapeutic 
Services Described by Different Benefit Categories
    3. Technical Corrections
XI. Final CY 2012 OPPS Payment Status and Comment Indicators
    A. Final CY 2012 OPPS Payment Status Indicator Definitions
    1. Payment Status Indicators To Designate Services That Are Paid 
Under the OPPS
    2. Payment Status Indicators To Designate Services That Are Paid 
Under a Payment System Other Than the OPPS
    3. Payment Status Indicators to Designate Services That Are Not 
Recognized Under the OPPS But That May Be Recognized by Other 
Institutional Providers
    4. Payment Status Indicators To Designate Services That Are Not 
Payable by Medicare on Outpatient Claims
    B. Final CY 2012 Comment Indicator Definitions
XII. OPPS Policy and Payment Recommendations
    A. MedPAC Recommendations
    B. APC Panel Recommendations
    C. OIG Recommendations
XIII. Updates to the Ambulatory Surgical Center (ASC) Payment System
    A. Background
    1. Legislative Authority for the ASC Payment System
    2. Prior Rulemaking

[[Page 74126]]

    3. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC Covered Surgical Procedures and Covered Ancillary 
Services
    B. Treatment of New Codes
    1. Process for Recognizing New Category I and Category III CPT 
Codes and Level II HCPCS Codes
    2. Treatment of New Level II HCPCS Codes and Category III CPT 
Codes Implemented in April and July 2011 for Which We Solicited 
Public Comments in the CY 2012 OPPS/ASC Proposed Rule
    3. Process for New Level II HCPCS Codes and Category I and 
Category III CPT Codes for Which We Are Soliciting Public Comments 
in This CY 2012 OPPS/ASC Final Rule With Comment Period
    C. Update to the Lists of ASC Covered Surgical Procedures and 
Covered Ancillary Services
    1. Covered Surgical Procedures
    a. Additions to the List of ASC Covered Surgical Procedures
    b. Covered Surgical Procedures Designated as Office-Based
    (1) Background
    (2) Changes for CY 2012 to Covered Surgical Procedures 
Designated as Office-Based
    c. ASC Covered Surgical Procedures Designated as Device-
Intensive
    (1) Background
    (2) Changes to List of Covered Surgical Procedures Designated as 
Device-Intensive for CY 2012
    d. ASC Treatment of Surgical Procedures Removed From the OPPS 
Inpatient List for CY 2012
    2. Covered Ancillary Services
    D. ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
    1. Payment for Covered Surgical Procedures
    a. Background
    b. Update to ASC-Covered Surgical Procedure Payment Rates for CY 
2012
    c. Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    d. Waiver of Coinsurance and Deductible for Certain Preventive 
Services
    e. Payment for the Cardiac Resynchronization Therapy Composite
    2. Payment for Covered Ancillary Services
    a. Background
    b. Payment for Covered Ancillary Services for CY 2012
    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
    4. Payment Adjustment
    5. Announcement of CY 2012 Deadline for Submitting Requests for 
CMS Review of Appropriateness of ASC Payment for Insertion of an 
NTIOL Following Cataract Surgery
    F. ASC Payment and Comment Indicators
    1. Background
    2. ASC Payment and Comment Indicators
    G. ASC Policy and Payment Recommendations
    H. Calculation of the ASC Conversion Factor and the ASC Payment 
Rates
    1. Background
    2. 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
    3. Display of 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. Revision to Measures Previously Adopted for the Hospital OQR 
Program for the CY 2013 and CY 2014 Payment Determinations
    1. Background
    2. Revision to OP-22 Left Without Being Seen
    C. 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. New Hospital OQR Program Quality Measures for the CY 2014 
Payment Determination
    a. New National Healthcare Safety Network (NHSN) Healthcare 
Associated Infection (HAI) Measure for the CY 2014 Payment 
Determination: Surgical Site Infection (NQF 0299)
    b. New Chart-Abstracted Measures for the CY 2014 Payment 
Determination
    c. New Structural Measures
    (1) Safe Surgery Checklist Use Measure
    (2) Hospital Outpatient Department Volume for Selected 
Outpatient Surgical Procedures Measure
    3. Hospital OQR Program Measures for the CY 2015 Payment 
Determination
    a. Retention of CY 2014 Hospital OQR Measures for the CY 2015 
Payment Determination
    b. 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. Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Requirements for the CY 2012 Payment Update
    1. Background
    2. Reporting Ratio Application and Associated Adjustment Policy 
for CY 2012
    F. Extraordinary Circumstances Extension or Waiver for CY 2012 
and Subsequent Years
    G. 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. CY 2013 and CY 2014 Data Submission Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS
    b. Eligibility to Voluntarily Sample and Data Submission 
Exception for Low Patient Volume for CY 2013 and Subsequent Years
    c. Population and Sampling Data Requirements Beginning With the 
CY 2013 Payment Determination and for Subsequent Years
    d. Claims-Based Measure Data Requirements for the CY 2013 and CY 
2014 Payment Determinations
    e. Structural Measure Data Requirements for the CY 2013 and CY 
2014 Payment Determinations
    f. Data Submission Deadlines for the NHSN HAI Surgical Site 
Infection Measure for the CY 2014 Payment Determination
    g. Data Submission Requirements for OP-22: ED-Patient Left 
Before Being Seen for the CY 2013 and CY 2014 Payment Determinations
    3. Hospital OQR Validation Requirements for Chart-Abstracted 
Measure Data Submitted Directly to CMS: Data Validation Approach for 
the CY 2013 Payment Determination
    a. Randomly Selected Hospitals
    b. Use of Targeting Criteria for Data Validation Selection for 
CY 2013
    (1) Background
    (2) 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. 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. Electronic Reporting Pilot
    3. CQM Reporting Under the Electronic Reporting Pilot
    K. ASC Quality Reporting Program
    1. Background
    2. ASC Quality Reporting Program Measure Selection
    a. Timetable for Selecting ASC Quality Measures
    b. Considerations in the Selection of Measures for the ASC 
Quality Reporting Program
    3. ASC Quality Measures for the CY 2014 Payment Determination
    a. 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 Intravenous (IV) Antibiotic Timing (NQF 
0264)

[[Page 74127]]

    (6) Ambulatory Patient With Appropriate Method of Surgical Hair 
Removal (NQF 0515)
    (7) Selection of Prophylactic Antibiotic: First OR Second 
Generation Cephalosporin (NQF 0268)
    b. Surgical Site Infection Rate (NQF 0299)
    4. 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. Structural Measures for the CY 2015 Payment Determination
    (1) Safe Surgery Checklist Use
    (2) ASC Facility Volume Data on Selected ASC Surgical Procedures
    5. 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. HAI Measure: Influenza Vaccination Coverage Among Healthcare 
Personnel (HCP) (NQF 0431)
    6. ASC Measure Topics for Future Consideration
    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. Requirements for Reporting of ASC Quality Data for the CY 
2014 Payment Determination
    a. Data Collection and Submission Requirements for the Claims-
Based Measures
    b. Data Submission Deadlines for the Surgical Site Infection 
Rate Measure
XV. Changes to Whole Hospital and Rural Provider Exceptions to the 
Physician Self-Referral Prohibition: Exception for Expansion of 
Facility Capacity; and Changes to Provider Agreement Regulations on 
Patient Notification Requirements
    A. Background
    B. Changes Made by the Affordable Care Act
    1. Provisions 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. Process for Requesting an Exception to the Prohibition on 
Expansion of Facility Capacity
    1. General Comments
    2. Applicable Hospital
    a. Percentage Increase in Population
    b. Inpatient Admissions
    c. Nondiscrimination
    d. Bed Capacity
    e. Bed Occupancy
    3. High Medicaid Facility
    a. Number of Hospitals in County
    b. Inpatient Admissions
    c. Nondiscrimination
    4. Procedures for Submitting a Request
    5. Community Input
    6. Permitted Increase
    a. Amount of Permitted Increase
    b. Location of Permitted Increase
    7. Decisions
    8. Limitation on Review
    9. Frequency of Request
    D. Changes Related to Provider Agreement Regulations on Patient 
Notification Requirements
XVI. Additional Hospital Value-Based Purchasing (Hospital VBP) 
Program Policies
    A. Hospital VBP Program
    1. Legislative Background
    2. Overview of the Hospital Inpatient VBP Program Final Rule
    3. Additional FY 2014 Hospital VBP Program Measures
    4. Minimum Number of Cases and Measures for the Outcome Domain 
for the FY 2014 Hospital VBP Program
    a. Background
    b. Minimum Number of Cases for Mortality Measures, AHRQ 
Composite Measures, and HAC Measures
    c. Minimum Number of Measures for Outcome Domain
    5. Performance Periods and Baseline Periods for FY 2014 Measures
    a. Clinical Process of Care Domain and Patient Experience of 
Care Domain Performance Period and Baseline Period
    b. Outcome Domain Performance Periods and Baseline Periods
    6. Performance Standards for the FY 2014 Hospital VBP Program
    a. Background
    b. Mortality Measures
    c. Clinical Process of Care and Patient Experience of Care FY 
2014 Performance Standards
    d. AHRQ Measures
    e. HAC Measures
    7. FY 2014 Hospital VBP Program Scoring Methodology
    a. FY 2014 Domain Scoring Methodology
    b. HAC Measures Scoring Methodology
    8. Ensuring HAC Reporting Accuracy
    9. Domain Weighting for FY 2014 Hospital VBP Program
    B. Review and Correction Process Under the Hospital VBP Program
    1. Background
    2. Review and Correction of Data Submitted to the QIO Clinical 
Warehouse on Chart-Abstracted Process of Care Measures and Measure 
Rates
    3. Review and Correction Process for Hospital Consumer 
Assessment of Healthcare Providers and Systems (HCAHPS) Data
    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 Final CY 2012 Hospital 
OPPS
    B. Information in Addenda Related to the Final 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. 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 Hospital OQR Program Measures for CY 2014
    c. Hospital OQR Program Measures for CY 2015
    3. Hospital OQR Program Validation Requirements for CY 2013
    4. Hospital OQR Program Reconsideration and Appeals Procedures
    5. ASC Quality Reporting Program
    6. 2012 Medicare EHR Incentive Program Electronic Reporting 
Pilot for Hospitals and CAHs
    7. Additional Topics
XIX. Response to Comments
XX. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for OPPS and ASC Provisions
    4. Detailed Economic Analyses
    a. Effects of OPPS Changes in This Final Rule With Comment 
Period
    (1) Limitations of Our Analysis
    (2) Estimated Effects of This Final Rule With Comment Period on 
Hospitals
    (3) Estimated Effects of This Final Rule With Comment Period on 
CMHCs
    (4) Estimated Effect of This Final Rule With Comment Period on 
Beneficiaries
    (5) Effects on Other Providers
    (6) Effects on the Medicare and Medicaid Programs
    (7) Alternatives Considered
    b. Effects of ASC Payment System Changes in This Final Rule With 
Comment Period
    (1) Limitations of Our Analysis
    (2) Estimated Effects of This Final Rule With Comment Period on 
Payments to ASCs
    (3) Estimated Effects of This Final Rule With Comment Period on 
Beneficiaries
    (4) Alternatives Considered
    c. Accounting Statements and Tables
    d. Effects of Requirements for the Hospital Outpatient Quality 
Reporting (OQR) Program
    e. Effects of Changes to Physician Self-Referral Regulations
    f. Effects of Changes to Provider Agreement Regulations on 
Patient Notification Requirements
    g. Effects of Additional Hospital VBP Program Requirements
    h. Effects of the 2012 Electronic Reporting Pilot
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis

[[Page 74128]]

    D. Conclusion
XXI. Federalism Analysis
Regulation Text

I. Background and Summary of the CY 2012 OPPS/ASC Proposed Rule and 
This Final Rule With Comment Period

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

    When Title XVIII of the Social Security Act (the Act) was enacted, 
Medicare payment for hospital outpatient services was based on 
hospital-specific costs. In an effort to ensure that Medicare and its 
beneficiaries pay appropriately for services and to encourage more 
efficient delivery of care, the Congress mandated replacement of the 
reasonable cost-based payment methodology with a prospective payment 
system (PPS). The Balanced Budget Act 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, 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; 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 includes 
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 final rule with comment period. 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.

[[Page 74129]]

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, 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).
    On July 18, 2011, the CY 2012 OPPS/ASC proposed rule appeared in 
the Federal Register (76 FR 42170). This proposed rule, with a 60-day 
comment period that ended on August 30, 2011, proposed to revise the 
Medicare OPPS and the ASC payment system to implement applicable 
statutory requirements and changes arising from our continuing 
experience with these systems.

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 final 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.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 August 10-12, 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, currently 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 August 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 and August 2011 APC Panel meetings are included 
in the sections of this final rule with comment period that are 
specific to each recommendation. For discussions of earlier APC Panel 
meetings and recommendations, we refer readers to previously published 
hospital OPPS/ASC proposed and final rules, the CMS Web site mentioned 
earlier in this section, and the FACA database at: http://fido.gov/facadatabase/public.asp.

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

    In the CY 2012 OPPS/ASC proposed rule that appeared in the Federal 
Register on July 18, 2011 (76 FR 42170), we set forth proposed changes 
to the Medicare hospital OPPS for CY 2012 to implement statutory 
requirements and changes arising from our continuing

[[Page 74130]]

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 proposed 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 proposed to 
make for CY 2012:
1. Updates Affecting OPPS Payments
    In section II. of the 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 proposed 
changes in the amounts and factors for calculating the full annual 
update increase to the conversion factor.
     The proposed consideration of adopting a policy that would 
address situations where IPPS wage index adjustments result in 
significant fluctuations in the wage index.
     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 payment adjustment for cancer hospitals.
     The proposed calculation of the hospital outpatient 
outlier payment.
     The calculation of the proposed national unadjusted 
Medicare OPPS payment.
     The proposed beneficiary copayments for OPPS services.
2. OPPS Ambulatory Payment Classification (APC) Group Policies
    In section III. of the proposed rule, we discussed--
     The proposed additions of new HCPCS codes to APCs.
     The proposed establishment of a number of new APCs.
     Our analyses of Medicare claims data and certain 
recommendations of the APC Panel.
     The application of the 2 times rule and proposed 
exceptions to it.
     The proposed changes to specific APCs.
     The proposed movement of procedures from New Technology 
APCs to clinical APCs.
3. OPPS Payment for Devices
    In section IV. of the proposed rule, we discussed the proposed 
pass-through payment for specific categories of devices and the 
proposed adjustment for devices furnished at no cost or with partial or 
full credit.
4. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    In section V. of the proposed rule, we discussed the proposed CY 
2012 OPPS payment for drugs, biologicals, and radiopharmaceuticals, 
including the proposed payment for drugs, biologicals, and 
radiopharmaceuticals with and without pass-through status.
5. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    In section VI. of the proposed rule, we discussed the estimate of 
CY 2012 OPPS transitional pass-through spending for drugs, biologicals, 
and devices.
6. OPPS Payment for Hospital Outpatient Visits
    In section VII. of the proposed rule, we set forth our proposed 
policies for the payment of clinic and emergency department visits and 
critical care services based on claims data.
7. Payment for Partial Hospitalization Services
    In section VIII. of the proposed rule, we set forth our proposed 
payment for partial hospitalization services, including the proposed 
separate threshold for outlier payments for CMHCs.
8. Procedures That Would Be Paid Only as Inpatient Procedures
    In section IX. of the proposed rule, we discussed the procedures 
that we proposed to remove from the inpatient list and assign to APCs 
for payment under the OPPS.
9. Policies on Supervision Standards for Outpatient Services in 
Hospitals and CAHs
    In section X. of the proposed rule, we discussed proposed policy 
changes relating to the supervision of outpatient services furnished in 
hospitals and CAHs.
10. OPPS Payment Status and Comment Indicators
    In section XI. of the proposed rule, we discussed our proposed 
changes to the definitions of status indicators assigned to APCs and 
presented our proposed comment indicators.
11. OPPS Policy and Payment Recommendations
    In section XII. of the proposed rule, we addressed 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. Updates to the Ambulatory Surgical Center (ASC) Payment System
    In section XIII. of the proposed rule, we discussed 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 the proposed rule, we discussed 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 discussed 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. Changes to EHR Incentive Program for Eligible Hospitals and CAHs 
Regarding Electronic Submission of Clinical Quality Measures (CQMs)
    In section XIV.J. of the proposed rule, we proposed 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. Changes to Provisions Relating to Physician Self-Referral 
Prohibition and Provider Agreement Regulations on Patient Notification 
Requirements
    In section XV. of the proposed rule, we presented our proposed 
exception

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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 Changes Relating to the Hospital Inpatient VBP Program
    In section XVI. of the proposed rule, we presented our proposed 
requirements for the FY 2014 Hospital Inpatient VBP Program.
17. Economic and Federalism Analyses
    In sections XX. and XXI. of the 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 in Response to the CY 2012 OPPS/ASC 
Proposed Rule

    We received approximately 1,356 timely pieces of correspondence 
containing multiple comments on the CY 2012 OPPS/ASC proposed rule that 
appeared in the Federal Register on July 18, 2011. We note that we 
received some public comments that were outside the scope of the CY 
2012 OPPS/ASC proposed rule. Out of scope public comments are not 
addressed in this CY 2012 OPPS/ASC final rule with comment period. 
Summaries of the public comments that are within the scope of the 
proposed rule and our responses are set forth in the various sections 
of this final rule with comment period under the appropriate headings.

G. 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. 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 are set 
forth in various sections of this final rule with comment period under 
the appropriate headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
not less often than annually and revise the relative payment weights 
for APCs. 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42179), for the CY 
2012 OPPS, we proposed 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 
proposed 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. Therefore, 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 this final rule with 
comment period, for the purpose of recalibrating the final APC relative 
payment weights for CY 2012, we used approximately 148 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 the proposed 
rule and this final rule with comment period on the CMS Web site at: 
http://www.cms.gov/HospitalOutpatientPPS/HORD/.)
    Of the 148 million final action claims for services provided in 
hospital outpatient settings used to calculate the final CY 2012 OPPS 
payment rates for this final rule with comment period, approximately 
112 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 112 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 109 million claims, we 
created approximately 110 million single records, of which 
approximately 75 million were ``pseudo'' single or ``single session'' 
claims (created from approximately 25 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 108 
million single bills for median setting. As described in section 
II.A.2. of this final rule with comment period, our data development 
process is designed with the goal of using appropriate cost information 
in setting the APC relative weights. The bypass process is described in 
section II.A.1.b. of this final rule with comment period. This section 
discusses how we develop ``pseudo'' single 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 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 final APC relative weights and payments for CY 2012 in Addenda 
A and B to this final rule with comment period (which are referenced in 
section XVII. of this final rule with comment period and available via 
the Internet on the CMS Web site) were calculated using claims from CY 
2010 that were processed before July 1, 2011, and continue to be based 
on the median hospital costs for services in the APC groups. Under the 
methodology we are adopting in this final rule with comment period, 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.

[[Page 74132]]

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. Use of Single and Multiple Procedure Claims
    For CY 2012, in general, we proposed to continue to use single 
procedure claims to set the medians on which the APC relative payment 
weights would be based, with some exceptions as discussed below in this 
section. We generally use single procedure claims to set the median 
costs for APCs because we believe that the OPPS relative weights on 
which payment rates are based should be derived from the costs of 
furnishing one 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 
proposed 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 CYs 2009, 2010, and 
2011, and we proposed 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 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 
proposed to continue to create them for CY 2012. We refer readers to 
section II.A.2.e. of the proposed rule and this final rule with comment 
period for a discussion of the use of claims to establish median costs 
for composite APCs.
    We proposed 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 the 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 the 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 proposed to bypass 460 HCPCS codes for CY 2012 that 
were identified in Addendum N to the proposed rule (which is 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 proposed to continue to bypass all of the 
HCPCS codes on the CY 2011 OPPS 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 proposed to be deleted for CY 2012, which were listed in Table 
1 of the proposed rule. We also proposed to remove HCPCS codes that 
were 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 proposed 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) was 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 were:
     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

[[Page 74133]]

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 increase 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 increase 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 
increase 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 reflects the extent to which the 
price of inputs for hospital services is expected to increase compared 
to the price of inputs for hospital services in the prior year. We 
proposed 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 
increase. 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 
proposed 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 proposed to continue to include, on the bypass 
list, HCPCS codes that CMS medical advisors believe have minimal 
associated packaging based on their clinical assessment of the complete 
CY 2012 OPPS proposal. Some of these codes were identified by CMS 
medical advisors and some were identified in prior years by commenters 
with specialized knowledge of the packaging associated with specific 
services. We also proposed to continue to include on the bypass list 
certain HCPCS codes in order to purposefully direct the assignment of 
packaged costs to a companion code where services always appear 
together and where there would otherwise be few single 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 the proposed rule and this final rule with comment period 
for further discussion of the treatment of ``overlap bypass codes.'') 
This process also created multiple imaging composite ``single session'' 
bills that could be used for calculating composite APC median costs. 
``Overlap bypass codes'' that are members of the proposed multiple 
imaging composite APCs were identified by asterisks (*) in Addendum N 
to the proposed rule (which is available via the Internet on the CMS 
Web site).
    Addendum N to the proposed rule included 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 CY 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 were identified by asterisks (*) in the third column of 
Addendum N to the proposed rule. HCPCS codes that we proposed to add 
for CY 2012 were identified by asterisks (*) in the fourth column of 
Addendum N.
    Comment: One commenter recommended that CMS add CPT code 77332 
(Treatment devices, design and construction; simple (simple block, 
simple bolus)) to the bypass list in order to yield additional claims 
for ratesetting for composite APC 8001 (LDR Prostate Brachytherapy 
Composite). The commenter's analysis showed that bypassing the code 
would yield a significant increase in the number of claims to set the 
composite rate.
    Response: As discussed above, we perform an analysis on the natural 
single major claims to determine possible additions to the bypass list. 
In doing so, we apply a set of empirical criteria to identify codes 
that would be appropriate for addition to the bypass list, based on how 
well they represent the clinical use of the service as well as the 
limited packaging impact of bypassing those codes. These criteria are 
consistent with the goal of using appropriate data for ratesetting. The 
commenter suggested that bypassing the code would be appropriate 
because it would yield additional claims without a discussion of the 
impact of bypassing the code. In the APC Panel 2012 data used to create 
the bypass list proposal, the code failed to meet the empirical 
criteria. Of the 134 available natural single major claims, 117 (87 
percent) of those claims contained packaging, which exceeds the 5 
percent limit for a code to be placed on the bypass list. Additionally, 
the median cost of packaging on those claims was $200.23, which exceeds 
the $55 limit for the code to be placed on the bypass list. These data 
suggest that bypassing the code may potentially and relatively often, 
distribute packaged costs, where it

[[Page 74134]]

might not be appropriate. For example, where CPT code 77332 is 
furnished on the day on which a visit was the only other payable 
service, if CPT code 77332 were on the bypass list, the packaging would 
be associated with the visit, not with CPT code 77332, because we use 
the line-item costs for codes on the bypass list without their 
attendant packaging to establish the median cost for the bypass code. 
This would inappropriately reduce the median cost for CPT code 77332. 
While we seek to use as much available information as possible that is 
available in the OPPS claims data set, we do so with the goal of using 
appropriate cost information in setting the APC relative weights. In 
this case, we believe that adding the CPT code 77332 to the bypass list 
would create considerable risk in assigning packaging that rightfully 
should be associated with CPT code 77332 to other services. Therefore 
we are not adding CPT code 77332 to the bypass list for CY 2012.
    Comment: One commenter recommended that CMS continue to explore 
additional methodologies to increase the number of procedure claims 
used for rate setting, including expanding the criteria for inclusion 
on the bypass list.
    Response: We are always seeking additional methodologies that would 
enable us to increase the number of procedure claims used for rate 
setting. However, it is important to us that we ensure that any new 
methodology or change to current methodology or criteria would not 
result in costs that are appropriately packaged into a service being 
inappropriately assigned to another service, as, for example, we 
believe would be the case if we were to place CPT code 77332 on the 
bypass list.
    After consideration of the public comments we received, we are 
adopting as final the proposed ``pseudo'' single claims process and the 
final CY 2012 bypass list of 460 HCPCS codes, as displayed in Addendum 
N of this final rule with comment period (available via the Internet on 
the CMS Web site). Table 1 below contains the list of codes that we are 
removing 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 CY 2010) or were not separately payable codes under the 
CY 2012 OPPS because these codes are not used for ratesetting (and 
therefore would not need to be bypassed). None of these deleted codes 
were ``overlap bypass'' codes.
[GRAPHIC] [TIFF OMITTED] TR30NO11.000

c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42181), for CY 2012, 
we proposed 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 
were 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 proposed 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

[[Page 74135]]

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 proposed 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 discuss MEG, including the 
issue of the CCR to be applied to charges for MEG, in section III.D. of 
this final rule with comment period. 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. 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 the proposed rule and this final 
rule with comment period 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 the proposed rule, we used the most recently 
submitted cost reports to calculate the CCRs to be used to calculate 
median costs for the proposed CY 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 section II.A.1.c. of the proposed rule for all 
purposes that require use of an overall ancillary CCR. We proposed 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

[[Page 74136]]

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 the CY 2012 
OPPS proposed rule, we 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 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 
the proposed rule. We determined that there were only 437 hospitals 
that had completed the ``Implantable Devices Charged to Patients'' cost 
center (out of approximately 3,500 IPPS hospitals). We stated in the 
proposed rule that we do not believe this is a sufficient amount of 
data from which to generate a meaningful analysis. Therefore, we did 
not propose 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 stated that we would 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.gov/Manuals/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 proposed to use for calculating payment rates for 
the CY 2012 OPPS (76 FR 42183). 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 proposed 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 final rule with comment period) 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.
    Comment: Commenters requested that CMS reconsider its position to 
not use the data from the implantable device cost center to calculate 
the APC relative weights for CY 2012. Commenters noted that in the FY 
2012 IPPS proposed rule, CMS found that only 437 hospitals out of 
approximately 3,500 IPPS hospitals reported data in the ``Implantable 
Devices Charged to Patients'' cost center of the Medicare hospital cost 
report based on the December 2010 update of FY 2009 HCRIS. Several 
commenters said that an analysis by their contractor identified nearly 
800 hospitals using the new cost center in the April 2011 HCRIS update 
and estimated that 1000 hospitals would be using the new cost center by 
August 2011. Therefore, the commenters believed there is now a 
sufficient amount of data to use the implantable device CCR to 
calculate the relative weights and improve the

[[Page 74137]]

accuracy of the payment rates. Commenters also suggested that because 
the IPPS and OPPS use CCRs calculated at different levels, the analysis 
of robustness for the new cost center is less significant in the OPPS 
than in the IPPS, and should not be necessary before adopting the CCRs 
from the Implantable Device cost center. One commenter suggested that 
the only justifiable reason to not implement the new CCR would be for 
issues related to suspect data, and that the limited use of the cost 
center should not delay implementation of the new Implantable Medical 
Device cost center CCR. One commenter suggested that, should the 
available data be deemed insufficient, CMS should provide additional 
analysis justifying why that data were insufficient, provide data on 
the representativeness of the hospitals reporting under the implantable 
medical device cost center and explore other alternatives in addressing 
charge compression.
    Response: In the CY 2012 OPPS/ASC proposed rule, we indicated that 
we did not have sufficient cost report data to develop the kind of 
robust analysis that we assured the public we would provide prior to 
implementing a new CCR for implantable medical devices. Therefore, we 
stated that we would reassess the availability of data for CY 2013. We 
have reviewed the availability of FY 2009 cost reports in the June 30, 
2011 quarter ending update of HCRIS, which is the latest upload of FY 
2009 cost report data that we currently have available. We have 
determined that, for cost reporting periods beginning on or after May 
1, 2009, the effective date of line 55.30 (Implantable Devices Charged 
to Patients), there were 363 hospitals paid under the OPPS whose claims 
were used for the calculation of median costs in the CY 2012 OPPS/ASC 
proposed rule (out of approximately 4,000 OPPS hospitals) that have 
completed the ``Implantable Devices Charged to Patients'' cost center 
in the HCRIS data for the quarter ending December 31, 2010. In 
contrast, we found that there were 1,689 OPPS hospitals that reported 
costs in the implantable device cost center in the HCRIS data for the 
quarter ending June 30, 2011, that were used to calculate the median 
costs that are the basis for the CY 2012 payment rates established in 
this final rule with public comment period.
    We agree that there are differences between the OPPS and IPPS in 
the calculation of the CCRs and their use in establishing estimated 
costs. However, we believe that it is important to analyze the CCRs 
used for calculation of the median costs for procedures that use 
implantable devices and the impact of changes in these median costs on 
payments for all services before the new CCRs for implantable devices 
are adopted. Such analysis is important because it allows the 
opportunity for the public to provide comment on the impact of the 
adoption of those CCRs on payment for services that do not use 
implantable devices. In a budget neutral payment system, payment for 
services that do not require implantable devices would be reduced as a 
result of increases in payment for services that use implantable 
devices. Quarterly HCRIS updates and the commenters themselves indicate 
that hundreds of hospitals would report cost report data for the new 
implantable device cost center in the HCRIS data used for this final 
rule with comment period, although such data was not available for the 
proposed rule. This would create the possibility that changes to 
payments for services that include implantable devices that appear in 
the final rule with comment period could be vastly different from the 
proposed payments for those services in the CY 2012 proposed rule. 
Similarly, if we were to use the CCRs for implantable devices in the 
calculation of the median costs for this final rule with comment 
period, the public would not have had an opportunity to comment on the 
impact of their use on payments for services that do not use 
implantable devices.
    We are not finalizing relative payment weights based on the new CCR 
for implantable devices charged to patients for CY 2012 because we 
believe that the transition in reporting charges and costs for 
implantable medical devices from the general medical supplies cost 
centers to a highly specialized cost center for high cost items means 
that the final rule relative weights would otherwise be very different 
from the proposed rule relative weights. In the proposed rule cost 
report data, 363 hospitals reported approximately $4.9 billion in costs 
in the implantable medical device cost center in Worksheet A. In the 
final rule cost report data, 1,689 hospitals reported approximately 
$20.7 billion in costs in the implantable medical device cost center on 
Worksheet A. Therefore, it was not possible to calculate proposed 
payment rates that would reflect the same use of the implantable 
medical device CCR as would be used for the final rule due to the 
transition. To the extent that the use of a CCR for implantable medical 
devices in the final rule might create median costs for services that 
require high cost implantable medical devices that differ significantly 
from those we estimated for the proposed rule, the public would not 
have had an opportunity to comment on the unexpected changes to 
payments for all other services that would occur as a result of using 
the CCR for implantable medical devices.
    We believe that it is more appropriate to wait until CY 2013, when 
we expect to provide an impact analysis that enables the public to 
assess the full impact of the use of the new CCR that is specific to 
implantable devices on payments for all services. Therefore, we are not 
using the CCRs that are specific to implantable devices in calculating 
the APC relative weights for CY 2012.
    Comment: Commenters urged CMS to increase education efforts to 
encourage faster hospital adoption of the use of the implantable 
medical device cost center. One commenter suggested that more 
widespread use of the implantable device cost center would improve the 
validity of payment weights based on those estimated costs.
    Response: We agree that it is important that hospitals understand 
how to accurately report data in the ``Implantable Devices Charged to 
Patients'' cost center, and we have worked to add more clarity to the 
cost report instructions. In addition, we also believe that the 
December 31, 2010 update of HCRIS reflected relatively few entries for 
this cost center because the corresponding cost center line was only 
available for use for cost reporting periods beginning on or after May 
1, 2009. This timing of this effective date meant that hospital data 
for this cost center line would not be evident to CMS until the March 
31, 2011 HCRIS update. However, this update occurred after the December 
31, 2010 HCRIS update we used when we prepared the proposed rule.
    Comment: Commenters suggested that CMS monitor the accuracy of the 
data reported in the implantable device cost center on the Medicare 
hospital cost report. Commenters urged CMS to impress upon the Medicare 
Administrative Contractors (MACs) the importance of establishing a 
mechanism to audit the implantable device cost center to ensure that 
the costs and charges are appropriately reported. In addition, one 
commenter suggested that the cost reporting software be modified to 
create a level 1 error in the case where no data is reported on line 
55.30 (Implantable Devices Charged to Patients) to compel hospitals to 
report that information.
    Response: We agree with the commenters that the cost reporting 
lines, whether they are for implantable devices charged to patients, 
MRI, CT scans, cardiac catheterization, or any

[[Page 74138]]

others, should be subject to greater audit scrutiny from the Medicare 
contractors. The new Medicare cost report form CMS-2552-10, on line 121 
of Worksheet S-2, Part I, asks ``Did this facility incur and report 
costs for implantable devices charged to a patient? Enter in column 1 
`Y' for yes or `N' for no.'' All hospital types, including non-IPPS 
hospitals, CAHs, and Maryland inpatient short-term acute hospitals, are 
required to properly report their costs and charges, and if the answer 
to this question is ``Y'' for any type of hospital, then line 72, 
column 26, of Worksheet B, Part I must be greater than 0, with an 
accurate amount that reflects the hospital's costs for implantable 
devices charged to patients. In addition, we note that a Level 1 edit 
on the CMS-2552-10 form already exists that ensures that line 72, 
column 26, of Worksheet B, Part I (Implantable Devices Charged to 
Patients on Worksheet A of the CMS-2552-10 form) is greater than 0 if 
Worksheet S-2, Part I, line 121 is ``Y.'' The edit is also set up for 
the reverse scenario; that is, if there is an amount on Worksheet B, 
Part I, line 72, column 26, then the response on Worksheet S-2, Part I, 
line 121 must be ``Y.'' We do not agree with commenters that a level 1 
error should be established to force hospitals to report costs on line 
55.30 because it is possible that some hospitals do not provide 
services for which charges are reported in the revenue codes that 
correspond to the costs that are to be reported on line 55.30 (for 
example, psychiatric hospitals).
    Comment: One commenter believed that the standard cost centers for 
Computed Tomography and Magnetic Resonance Imaging would be 
artificially low due to hospital allocation of capital costs across the 
hospital rather than to particular cost centers, and suggested that 
payments based on these CCRs would not accurately reflect the resources 
used in providing those services. As a result, the commenter 
recommended that CMS exercise a similar degree of caution as that in 
the approach for the new ``Implantable Devices Charged to Patients'' 
cost center CCRs before using any data based on the new CT and MRI cost 
centers.
    Response: We provided background on the creation of the new 
standard cost centers in the proposed rule and will reassess the 
availability of data for the ``Implantable Devices Charged to 
Patients'' cost center, and the ``MRI, CT Scans, and Cardiac 
Catheterization'' cost centers, for the CY 2013 OPPS rulemaking cycle. 
If appropriate, we will propose to create distinct CCRs for these cost 
centers at that time.
    Comment: Commenters asked that CMS create a new cost center 
exclusively for the costs of MEG so that the calculation of the median 
cost for MEG would more accurately reflect the expense of the 
equipment, maintenance contract and dedicated staff necessary to 
furnish the service. Several commenters suggested that cost center 5400 
should be the primary cost center assignment and 3280 should be the 
secondary cost center assignment for revenue codes 0860 
(Magnetoencephalography (MEG)--General Classification) and 0861 
Magnoetoecnephalography (MEG). This would reverse the current cost 
center assignments for these revenue codes. Some commenters asked that 
CMS adopt the non-standard subscripted cost center assignment that one 
MAC had allowed for its hospitals that furnish MEG.
    Response: In the absence of recommendations for use of other 
existing cost center's CCRs, we continue to believe that for revenue 
codes 0860 and 0861 nonstandard cost center 3280 ``EKG and EEG'' is an 
appropriate primary cost center mapping and cost center 5400 
``Electroencephalography'' is an appropriate secondary cost center 
mapping. We welcome recommendations on more suitable currently existing 
standard or nonstandard cost center CCRs. We will also discuss the 
issue with the APC Panel.
    With regard to the request to create a new cost center exclusive to 
the costs of MEG, as we stated in the CY 2011 OPPS/ASC final rule with 
comment period, we do not believe a new cost center is needed to 
capture the costs of MEG. Over the past several years, we have either 
proposed or discussed potential new standard and nonstandard cost 
centers for the Medicare hospital cost report in our 2008, 2009, 2010, 
2011 hospital inpatient and outpatient final rules. All of the 
potential cost centers that we have discussed for addition to the cost 
report, whether standard or nonstandard, have demonstrated volume in 
the electronic hospital cost report data. In its July 2008 report on 
using cost report data to estimate costs for both the IPPS and OPPS 
(http://www.rti.org/reports/cms/), RTI International examined the 
electronic hospital cost report database and recommended new standard 
and nonstandard cost centers on the basis of reporting volume across 
hospitals. RTI International typically identified no fewer than 200 
institutions reporting a specific service category, such as cardiac 
catheterization or cardiac rehabilitation, in subscripted or other 
lines for the new nonstandard and standard cost centers. Historically, 
our rationale for adding an official nonstandard cost center to the 
cost report has been at the request of Medicare contractors 
experiencing a significant volume of requests for a cost center for a 
specific type of service.
    In contrast, the volume of MEG services has been and continues to 
be extremely low. In the hospital outpatient CY 2010 OPPS claims data, 
hospitals reported 150 units of MEG spread among the three CPT codes 
for MEG: 75 units of CPT code 95965 (Magnetoencephalography (MEG), 
recording and analysis; for spontaneous brain magnetic activity (e.g. 
epileptic cerebral cortex localization)); 38 units of CPT code 95966 
(Magnetoencephalography (MEG), recording and analysis; for spontaneous 
brain magnetic activity (e.g. epileptic cerebral cortex localization) 
for evoked magnetic fields, single modality (e.g. sensory, motor, 
language or visual cortex localization)); and 37 units of CPT code 
95967 (Magnetoencephalography (MEG), recording and analysis; for 
spontaneous brain magnetic activity (e.g. epileptic cerebral cortex 
localization), for evoked magnetic fields, each additional modality 
(e.g. sensory, motor language, or visual cortex localization (List 
separately in addition to code for primary procedure))). This continues 
the pattern of very low volumes of the total of the 3 MEG codes that 
have been reported in the outpatient setting since the creation of the 
codes in CY 2005 (39 units in CY 2005, 75 units in CY 2006, 102 units 
in CY 2007, 75 units in 2008, 131 units in 2009, and 150 units in CY 
2010). Therefore, we continue to believe that a specific cost center is 
not appropriate for MEG, given the longstanding low volume of this 
service.
    For a discussion of the APC Panel recommendation on the final 
payment policy for MEG, we refer readers to section III.D. of this 
final rule with comment period.
    Comment: Commenters requested that CMS outline a method by which 
more discrete cost center lines could be requested for capital-
expensive services having their own NUBC revenue codes.
    Response: The process by which a hospital may request permission to 
use a subscripted line on a cost report is found in the Provider 
Reimbursement Manual, Part II (PRM-II), Chapter 40. Contractor approval 
is not necessary to subscript lines on the cost report for use in 
reporting nonstandard cost centers, as long as hospitals follow the 
Medicare guidelines in the PRM. However, as discussed above with regard 
to creation of national cost centers, we have either

[[Page 74139]]

proposed or discussed potential new standard and nonstandard cost 
centers for the Medicare hospital cost report in cases where doing so 
would provide more accurate information that would justify the 
resources and costs associated with doing so. For example, we have 
proposed and finalized nonstandard cost centers such as those for 
Cardiac Rehabilitation, Hyperbaric Oxygen Therapy, and Lithotripsy (74 
FR 60344) as well as standard cost centers for Implantable Medical 
Devices Charged to Patients, Cardiac Catheterization, Computed 
Tomography, and Magnetic Resonance Imaging through the annual 
rulemaking process.
    Comment: Several commenters requested that CMS modify the revenue 
code-to-cost center crosswalk to include data on the number of 
providers billing using each revenue code in the claims data whose cost 
reports contain the associated cost center under each mapping.
    Response: All of the data that are required to perform this 
analysis is available to the public. The HCRIS data, which include 
information from the hospital cost reports, are available on the CMS 
Web site at http://www.cms.gov/CostReports/CostReportsFY/list.asp#TopOfPage, while our CMS Web site, http://www.cms.gov/HospitalOutpatientPPS, includes information about purchasing the ``OPPS 
Limited Data Set''. The HCRIS data can be used to extract the cost 
center information the commenters request while the claims data in the 
OPPS Limited Data Set include the revenue codes and HCPCS on the claims 
billed by each OPPS provider.
2. Data Development Process and Calculation of Median Costs
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate OPPS payment rates for CY 2012. The 
hospital OPPS page on the CMS Web site on which this final rule with 
comment period is posted provides an accounting of claims used in the 
development of the final payment rates at: http://www.cms.gov/HospitalOutpatientPPS. The accounting of claims used in the development 
of this final rule with comment period is included on the CMS Web site 
under supplemental materials for this CY 2012 OPPS/ASC final rule with 
comment period. That accounting provides additional detail regarding 
the number of claims derived at each stage of the process. In addition, 
below in this section we discuss the file of claims that 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 and final 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 final rule with comment period to calculate the 
median costs we use to establish the relative weights used in 
calculating the OPPS payment rates for CY 2012 shown in Addenda A and B 
to the this rule with comment period (which are available via the 
Internet on the CMS Web site). We refer readers to section II.A.4. of 
the proposed rule and this final rule with comment period for a 
discussion of the conversion of APC median costs to scaled payment 
weights.
    Comment: Commenters expressed concern with respect to the 
volatility of the OPPS payment rates from year to year. One commenter 
suggested a ``stability policy'' that the median costs from claims be 
adjusted to limit changes from year to year and asked that CMS limit 
any decreases in payment compared to the prior year to no more than a 
5-percent decline.
    Response: As previously discussed in the CY 2011 OPPS/ASC final 
rule with comment period (FR 75 71833), there are a number of factors 
that contribute to median costs fluctuations from one year to the next 
including (but not limited to) hospital behavior in adjusting mix of 
services, hospital costs and charges changes each year resulting in 
changes to the CCRs, reassignments of HCPCS codes, changes to OPPS 
payment policy (for example, changes to packaging), and implementation 
of composite APCs. We cannot stabilize hospital-driven fundamental 
inputs to the calculation of OPPS payment rates. However, we have 
strived to resolve some of the other potential reasons for instability 
from year to year. Specifically, we continue to seek ways to use more 
claims data so that we have fewer APCs for which there are small 
numbers of single bills used to set the APC median costs. Moreover, we 
have tried to eliminate APCs with very small numbers of single bills 
where we could do so. We recognize that changes to payment policies, 
such as the packaging of payment for ancillary and supportive services 
and the implementation of composite APCs, may contribute to volatility 
in payment rates in the short term. However, we believe that larger 
payment packages and bundles should help to stabilize payments in the 
long term by enabling us to use more claims data and by establishing 
payments for larger groups of services. Further, in seeking to mitigate 
fluctuations in the OPPS, implementing such a system would make 
payments less reflective of the true service costs. Limiting decreases 
to payments across all APCs in a budget neutral payment system could 
unfairly reduce the payments for other services due to the effects of 
the scaling that is necessary to maintain budget neutrality and would 
distort the relativity of payment that is based on the cost of all 
services.
    Comment: Several commenters expressed concerns over the payment 
reductions for device-dependent APCs, blood and blood products, 
multiple imaging composites, and packaged services citing impact to 
beneficiary access to necessary procedures and patient safety. The 
commenters were also concerned that payments do not accurately reflect 
the costs of providing the procedures.
    Response: We discuss the public comments we received on the payment 
for particular services throughout this final rule with comment period. 
However, in general, we believe that our methodology for calculating 
the payments made for services furnished in hospital outpatient 
departments comports with the statutory requirements and results in 
payments that reflect the relative cost of these services within the 
statutory constraints of a budget neutral system. Indeed, our data show 
significant increase in payment as a percentage of cost since the 
inception of the OPPS.
a. Claims Preparation
    For this final rule with comment period, we used the CY 2010 
hospital outpatient claims processed before July 1, 2011, to calculate 
the median costs of APCs that underpin the 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,

[[Page 74140]]

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 112 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X (Hospital Inpatient 
(Medicare Part B only)), 13X (Hospital Outpatient), 14x (Hospital--
Laboratory Services Provided to Nonpatients), or 76X (Clinic--Community 
Mental Health Center). Other bill types are not paid under the OPPS; 
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 final rule with comment period. 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 (that exceeded +/-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 final rule with 
comment, as we proposed, we are continuing 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 July 2011 ASP amount multiplied by total units for each 
drug or biological in the CY 2010 claims data). These values are ASP+9 
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+192 percent (for drugs and 
biologicals that have HCPCS codes and that are packaged), respectively. 
As we discuss in section V.B.3. of this final rule with comment period, 
and as we proposed, we are redistributing $169 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 redistributing an additional $71.3 million from the cost of uncoded 
packaged drugs billed under pharmacy revenue code series 025X 
(Pharmacy) and 026X (IV Therapy). 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 redistribution of $240.3 
million in estimated costs from coded and uncoded packaged drugs to 
separately payable drugs represents the $200 million in total packaged 
drug costs redistributed from the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71967), updated by the PPI for Pharmaceuticals 
for Human Use, to derive a proportion of redistributed costs to total 
costs. We then updated our analysis for this CY 2012 OPPS/ASC final 
rule with comment period, holding the proportion of redistributed 
pharmacy overhead and handling cost constant, both for packaged coded 
drugs (35 percent) and for packaged uncoded drugs (10.7 percent), 
constant between the proposed rule and the final rule with comment 
period. This allowed us to keep the proportion of redistributed costs 
(and

[[Page 74141]]

thus the ASP+X percent) stable between the proposed rule and the final 
rule with comment period. Redistributing a total of $240.3 million in 
pharmacy overhead cost from packaged drugs and biologicals reduces the 
$1.4 billion cost of packaged drugs and biologicals with HCPCS codes 
and ASPs to $1.16 billion, approximately a 17-percent reduction. 
Redistributing $71.3 million from the cost of uncoded packaged drugs 
and biologicals reduces the $666 million cost of uncoded drugs and 
biologicals to $594.7 million, approximately an 11-percent reduction. 
To implement our CY 2012 policy to redistribute $169 million from the 
pharmacy overhead cost of coded packaged drugs and biologicals to 
separately payable drugs and biologicals and $71.3 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 $240.3 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 final rule with comment period for a complete discussion of our 
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 prospective 
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 prospective 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 proposed 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 final rule with 
comment period.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
    As we proposed, for this CY 2012 final rule with comment period, 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 
proposed to continue our current policy of defining major procedures as 
any HCPCS code having a status indicator of ``S,'' ``T,'' ``V,'' or 
``X;'' defining minor procedures as any code having a status indicator 
of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' ``R,'' ``U,'' or ``N,'' and 
classifying ``other'' procedures as any code having a status indicator 
other than one that we have classified as major or minor. For CY 2012, 
we proposed to continue assigning status indicator ``R'' to blood and 
blood products; status indicator ``U'' to brachytherapy sources; status 
indicator ``Q1'' to all ``STVX-packaged codes;'' status indicator 
``Q2'' to all ``T-packaged codes;'' and status indicator ``Q3'' to all 
codes that may be paid through a composite APC based on composite-
specific criteria or paid separately through single code APCs when the 
criteria are not met. As discussed in the CY 2009 OPPS/ASC final rule 
with comment period (73 FR 68709), we established status indicators 
``Q1,'' ``Q2,'' and ``Q3'' to facilitate identification of the 
different categories of codes. We proposed to treat these codes in the 
same manner for data purposes for CY 2012 as we have treated them since 
CY 2008. Specifically, we proposed to continue to evaluate whether the 
criteria for separate payment of codes with status indicator ``Q1'' or 
``Q2'' are met in determining whether they are treated as major or 
minor codes. 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 final rule with comment period.
    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

[[Page 74142]]

with a status indicator ``T'' on the same claim on the same date.
    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 for ratesetting. Claims that contain codes to which we have 
assigned status indicator ``Q3'' (composite APC members) appear in both 
the data of the single and multiple major files used in this final rule 
with comment period, depending on the specific composite calculation.
    We did not receive any public comments on our proposed process of 
organizing claims by type. Therefore, for the reasons set forth in the 
proposed rule (76 FR 42185 through 41286), we are finalizing our CY 
2012 proposal without modification. (2) Creation of ``Pseudo'' Single 
Procedure Claims
    As we proposed, to develop ``pseudo'' single procedure claims for 
this final rule with comment period, 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).
    As we proposed, for this final rule with comment period, we also 
used the bypass codes listed in Addendum N to this final rule with 
comment period (which is referenced in section XVII. of this final rule 
with comment period and available via the Internet on the CMS Web site) 
and discussed in section II.A.1.b. of this final rule with comment 
period 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 CY 2012 ``overlap bypass 
codes'' are listed in Addendum N to this final rule with comment period 
(which is 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.
    As we proposed, for this final rule with comment period, we then 
assessed the claims to determine if the criteria for the multiple 
imaging composite APCs, discussed in section II.A.2.e.(5) of this final 
rule with comment period, were met. Where the criteria for the imaging 
composite APCs were met, we created a ``single session'' claim for the 
applicable imaging composite service and determined whether we could 
use the claim in ratesetting. For HCPCS codes that are both 
conditionally packaged and are members of a multiple imaging composite 
APC, we first assessed whether the code would be packaged and, if so, 
the code ceased to be available for further assessment as part of the 
composite APC. Because the packaged code would not be a separately 
payable procedure, we considered it to be unavailable for use in 
setting the composite APC median cost. Having identified ``single 
session'' claims for the imaging composite APCs, we reassessed the 
claim to determine if, after removal of all lines for bypass codes, 
including the ``overlap bypass codes,'' a single unit of a single 
separately payable code remained on the claim. If so, we attributed the 
packaged costs on the claim to the single unit of the single remaining 
separately payable code other than the bypass code to create a 
``pseudo'' single procedure claim. We also identified line-items of 
overlap bypass codes as a ``pseudo'' single procedure claim. This

[[Page 74143]]

allowed us to use more claims data for ratesetting purposes.
    As we proposed, for this final rule with comment period, 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 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, as we proposed, for this final rule with comment period, 
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.
    As we proposed, for this final rule with comment period, 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 final rule with comment period.
    Lastly, as we proposed, for this final rule with comment period, 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.
    Comment: Commenters supported the proposed process for creating 
pseudo single procedure claims.
    Response: We appreciate the commenters' support and will continue 
to look for ways to refine the process to secure more claims data for 
use in calculating median costs.
    After consideration of the public comments we received, as we 
proposed, we are continuing to apply the proposed methodology described 
above for the purpose of creating pseudo single procedure claims for 
the CY 2012 OPPS.
c. Completion of Claim Records and Median Cost Calculations
(1) General Process
    As we proposed, for this final rule with comment period, we then 
packaged the costs of packaged HCPCS codes (codes with status indicator 
``N'' listed in Addendum B to this final rule with comment period 
(which is referenced in section XVII. of this final rule with comment 
period 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

[[Page 74144]]

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, 
as we proposed, we are continuing 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.
    We did not receive any public comments on our proposed list of 
packaged revenue codes. Therefore, for the reasons set forth in the 
proposed rule (76 FR 42187 through 42188), we are finalizing the 
proposed packaged revenue codes for CY 2012, without modification, 
which are identified in Table 2 below. We note that these revenue codes 
include only revenue codes that were in effect in CY 2010, the year of 
the claims data on which the CY 2012 OPPS payment rates are based.
BILLING CODE 4120-01-P

[[Page 74145]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.001


[[Page 74146]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.002

BILLING CODE 4120-01-C
    In accordance with our longstanding policy, as we proposed, we are 
continuing 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 continuing these processes for the CY 
2012 OPPS.
    As we proposed, for this final rule with comment period, 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

[[Page 74147]]

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 proposed to use the pre-
reclassified wage indices for standardization because we believe that 
they better reflect the true costs of items and services in the area in 
which the hospital is located than the post-reclassification wage 
indices and, therefore, would result in the most accurate unadjusted 
median costs.
    In accordance with our longstanding practice, as proposed, for this 
final rule with comment period, 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 109 million 
claims were left. Using these 109 million claims, we created 
approximately 110 million single and ``pseudo'' single procedure 
claims, of which we used slightly more than 108 million single bills 
(after trimming out approximately 888,000 claims as discussed in 
section II.A.1.a. of this final rule with comment period) in the CY 
2012 median development and ratesetting.
    We used these claims to calculate the final 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 final rule with comment period, 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 final rule 
with comment period 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 final rule with comment period, in some cases, APC 
median costs are calculated using variations of the process outlined 
above. Specifically, section II.A.2.d. of this final rule with comment 
period addresses the calculation of single APC criteria-based median 
costs. Section II.A.2.e. of this final rule with comment period 
discusses the calculation of composite APC criteria-based median costs. 
Section VIII.B. of this final rule with comment period addresses the 
methodology for calculating the median costs for partial 
hospitalization services.
    We did not receive any public comments on this aspect of the median 
calculation process that we proposed for CY 2012. Therefore, we are 
adopting it as final.
    After consideration of the public comments we received, we are 
finalizing our proposed methodology for calculating median costs for 
purposes of creating payment weights and subsequent payment rates for 
the CY 2012 OPPS.
(2) 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 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.
    At the August 10-12, 2011 APC Panel Meeting, CMS again provided the 
APC Panel Data Subcommittee with a list of all APCs fluctuating by 
greater than 10 percent when comparing the CY 2012 OPPS proposed rule 
median costs based

[[Page 74148]]

on CY 2010 claims processed through December 21, 2010, to those based 
on CY 2011 OPPS/ASC final rule data (CY 2009 claims processed through 
June 30, 2010). We also gave an overview of the ASP+X calculation and 
the CY 2012 proposal for separately paid drugs, and an overview of the 
proposed payment (with DRG Cap) for Cardiac Resynchronization Therapy-
Defibrillator (CRT-D) composite. The APC Panel made a number of 
recommendations related to specific services. Recommendations (4-9) are 
discussed as part of the discussion of the specific service to which 
they pertain.
    Recommendation 10: The Panel recommends that the work of the Data 
Subcommittee continue.
    CMS Response to Recommendation 10: We are accepting this 
recommendation.
    Recommendation 14: The Panel recommends that Daniel J. Pothen, 
M.S., R.H.I.A, C.H.P.S., C.P.H.I.M.S., C.C.S., C.C.S.-P., C.H.C., be 
named the chair of the Data Subcommittee
    CMS Response to Recommendation 14: We are accepting this 
recommendation.
d. Calculation of Single Procedure APC Criteria-Based Median Costs
(1) Device-Dependent APCs
    Device-dependent APCs are populated by HCPCS codes that usually, 
but not always, require that a device be implanted or used to perform 
the procedure. For a full history of how we have calculated payment 
rates for device-dependent APCs in previous years and a detailed 
discussion of how we developed the standard device-dependent APC 
ratesetting methodology, we refer readers to the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66739 through 66742). Overviews of the 
procedure-to-device edits and device-to-procedure edits used in 
ratesetting for device-dependent APCs are available in the CY 2005 OPPS 
final rule with comment period (69 FR 65761 through 65763) and the CY 
2007 OPPS/ASC final rule with comment period (71 FR 68070 through 
68071).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42190), for CY 2012, 
we proposed 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 
referred readers to section II.D.6. and II.A.e.6. of the 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 proposed 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 stated in 
the proposed rule that 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 of the proposed rule (76 FR 42191) listed the APCs for 
which we proposed 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. In the 
proposed rule, we noted 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 the proposed rule, we proposed 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 proposed 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 the 
proposed rule. In addition, as discussed in section II.A.2.e.(6) of the 
proposed rule, we proposed to delete APC 0418 (Insertion of Left 
Ventricular Pacing Electrode) for CY 2012. As we discussed in detail in 
section III.D.6. of the proposed rule, we proposed 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), and we proposed to continue to apply 
the device edits and other standard features of the device-dependent 
APCs to APC 0108. Finally, we referred readers to Addendum A to the 
proposed rule for the proposed payment rates for device-dependent APCs 
for CY 2012.
    Comment: Several commenters supported CMS' proposal to continue 
using the standard methodology for calculating median costs for device-
dependent APCs as well as the continued use of device coding edits to 
ensure that hospitals are reporting charges for implanted devices. Some 
commenters recommended that CMS continue examining and refining the 
ratesetting methodology for procedures involving devices in order to 
encourage the continued development and proliferation of new 
technology, and that CMS further improve the accuracy of estimates for 
the costs of devices included in multiple procedure claims used for the 
purpose of setting relative weights. Some commenters asked for 
continued focus on coding education, particularly as it impacts the use 
of proper HCPCS supply codes, so that these codes are appropriately 
reported by hospital coders. Other commenters supported the mandatory 
reporting of all device HCPCS codes.
    Response: We appreciate the commenters' support of the continued 
use of the standard device-dependent APC ratesetting methodology and 
the procedure-to-device and device-to-procedure edits. As we have 
stated in the past (75 FR 71835 and 74 FR 60367), we agree with the 
commenters that we should continue to encourage the development and 
proliferation of new technology under the OPPS. We have special 
mechanisms to provide payment for new technologies and services under 
the OPPS, including new technology APCs and transitional pass-through 
payments devices. We refer readers to sections III.C. and IV.A., 
respectively, of

[[Page 74149]]

this final rule with comment period for more information on these 
payment methodologies. For all OPPS services, we continue our efforts 
to use the data from as many claims as possible, through approaches 
such as use of the bypass list and date splitting of claims as 
described further in section II.A. of this final rule with comment 
period, and through methodologies such as increased packaging and 
composite APCs.
    As we have stated in the past (73 FR 68535 through 68536 and 74 FR 
60367), we agree that accurate reporting of device, supply, and 
technology charges will help to ensure that these items are 
appropriately accounted for in future years' OPPS payment rates. We 
encourage stakeholders to carefully review HCPCS code descriptors, as 
well as any guidance CMS may have provided for specific HCPCS codes. In 
addition, we have provided further instructions on the billing of 
medical and surgical supplies in the October 2008 OPPS update 
(Transmittal 1599, Change Request 6196, dated September 19, 2008) and 
the April 2009 OPPS update (Transmittal 1702, Change Request 6416, 
dated March 13, 2009). For HCPCS codes that are paid under the OPPS, 
providers may also submit inquiries to the AHA Central Office on HCPCS, 
which serves as a clearinghouse on the proper use of Level I HCPCS 
codes for hospitals and certain Level II HCPCS codes for hospitals, 
physicians, and other health professionals. Inquiries must be submitted 
using the approved form, which may be downloaded from the AHA Web site 
(http://www.ahacentraloffice.org) and either faxed to (312) 422-4583 or 
mailed directly to the AHA Central Office: Central Office on HCPCS, 
American Hospital Association, One North Franklin, Floor 29, Chicago, 
IL 60606.
    Comment: Some commenters concurred with CMS' proposed determination 
that APC 0385 (Level I Prosthetic Urological Procedures) and APC 0386 
(Level II Prosthetic Urological Procedures) should be categorized as 
device-dependent APCs. Other commenters expressed appreciation for the 
proposed increase in payment for APC 0425 (Level II Arthroplasty or 
Implantation with Prosthesis).
    Response: We appreciate the commenters' support of the designation 
of APC 0385 and APC 0386 as device-dependent APCs and the proposed 
payment increase for APC 0425.
    Comment: Several commenters expressed concern that the proposed CY 
2012 payment rate for the implantation of cochlear implants, described 
by CPT code 69930 (cochlear device implantation, with or without 
mastoidectomy) which is assigned to APC 0259 (Level VII ENT 
Procedures), decreased by approximately 12 percent from that in the CY 
2011 OPPS/ASC final rule with comment period. According to commenters, 
this payment rate is inconsistent with the average decrease in proposed 
payment of all OPPS APCs relative to CY 2011 of approximately 6 percent 
and is insufficient to cover hospitals' costs for providing this 
service and ensure that beneficiaries will continue to have access to 
cochlear implants. The commenters observed, based on their analysis of 
Medicare claims data, that while the overall median cost of APC 0259 
decreased, the component parts of the APC (that is, the device, the 
procedure, and the other bundled supplies and services) either remained 
the same or increased. The commenters requested that CMS evaluate the 
data upon which the proposed CY 2012 payment rate for APC 0259 is based 
in order to ensure its validity.
    Response: We appreciate the commenters' concerns regarding the 
proposed payment rate for procedures involving cochlear implants. Under 
the standard device-dependent APC ratesetting methodology, the median 
cost for APC 0259 is calculated using only those single bills that 
reflect the full cost of the cochlear implant device. While we will 
monitor the changes in APC 0259 over time, we believe that the payment 
rate for this service, calculated according to the standard device-
dependent APC ratesetting methodology for the proposed rule and this 
final rule with comment period, appropriately reflects hospitals' 
relative costs for providing this procedure as reported to us in the 
claims and cost report data. We note that the median cost for CPT code 
69930 calculated from the CY 2010 hospital claims and cost report data 
available for this final rule with comment is $28,892, approximately 6 
percent less than the median cost of $30,730 calculated from the CY 
2009 hospital claims and cost report data upon which the final CY 2011 
payment rate was calculated.
    After consideration of the public comments we received, we are 
finalizing our proposed CY 2012 payment policies for device-dependent 
APCs with modification. The CY 2012 OPPS payment rates for device-
dependent APCs are based on their median costs calculated from CY 2010 
claims and the most recent cost report data, using only single 
procedure claims that pass the procedure-to-device and device-to-
procedure edits, do not contain token charges for devices (less than 
$1.01), do not have an ``FB'' modifier signifying that the device was 
furnished without cost or with full credit, and do not contain an 
``FC'' modifier signifying that the hospital received partial credit 
for the device. We continue to believe that the median costs calculated 
from the single claims that meet these criteria represent the most 
valid estimated relative costs of these services to hospitals when they 
incur the full cost of the devices required to perform the procedures.
    Table 3 below lists the APCs for which we used our standard device-
dependent APC ratesetting methodology for CY 2012. We note that we are 
not finalizing our proposal to limit the payment for services that are 
assigned to APC 0108 to the IPPS standardized payment amount for MS-DRG 
227, and that we are continuing to apply the device edits and other 
standard features of the device-dependent APCs to this APC for CY 2012. 
We also are deleting APC 0418 and changing the titles of APC 0108 and 
0655 as we proposed. We refer readers to section II.A.2.e.(6) of this 
final rule with comment period for a detailed discussion of these final 
policies. We also note that we are revising the APC titles for APC 
0083, 0229, and 0319 for CY 2012, as we discuss in section II.A.2.d.(6) 
of this final rule with comment period and that we are changing the APC 
titles for APC 0040 and APC 0061 as discussed in section III.D.4.a. of 
this final rule with comment period. We refer readers to Addendum A to 
this final rule with comment period (which is available via the 
Internet on the CMS Web site) for the final payment rates for these 
APCs for CY 2012.
BILLING CODE 4120-01-P

[[Page 74150]]

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[[Page 74151]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.005

BILLING CODE 4120-01-C
(2) Blood and Blood Products
    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as well as for the costs of collecting, processing, and 
storing blood and blood products, are made through the OPPS payments 
for specific blood product APCs.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42191 through 42192), 
we proposed to continue to establish payment rates for blood and blood 
products using our blood-specific CCR methodology, which utilizes 
actual or simulated CCRs from the most recently available hospital cost 
reports to convert hospital charges for blood and blood products to 
costs. This methodology has been our standard ratesetting methodology 
for blood and blood products since CY 2005. It was developed in 
response to data analysis indicating that there was a significant 
difference in CCRs for those hospitals with and without blood-specific 
cost centers, and past 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 proposed to continue to simulate 
blood CCRs for each hospital that does not report a blood cost center 
by calculating the ratio of the blood-specific CCRs to hospitals' 
overall CCRs for those hospitals that do report costs and charges for 
blood cost centers. We would then apply this mean ratio to the overall 
CCRs of hospitals not reporting costs and charges for blood cost 
centers on their cost reports in order to simulate blood-specific CCRs 
for those hospitals. We calculated the median costs upon which the 
proposed CY 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 simulated 
blood-specific CCR for hospitals that did not report costs and charges 
for a blood cost center.
    As we stated in the proposed rule (76 FR 42192), 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.
    Comment: Some commenters asserted that there is a gap between CMS' 
proposed payments for blood and blood products and the costs incurred 
by

[[Page 74152]]

hospitals for the acquisition, management, and processing of blood and 
blood products, including high volume products such as leukocyte 
reduced red blood cells, described by HCPCS codes P9016 (Red blood 
cells, leukocytes reduced, each unit), P9021 (Red blood cells unit), 
and P9040 (Red blood cells, leukoreduced irradiated). These commenters 
stated that CMS should implement appropriate payment policies, such as 
paying no less than the payment rates in effect for CY 2011 for 
individual blood products in CY 2012, to close the gap between OPPS 
payment and the costs of blood and blood products and to ensure 
continued beneficiary access. They stated that this action is crucial, 
given that those costs continue to rise for a variety of reasons. For 
example, one commenter cited federally mandated requirements and 
recommendations by the U.S. Food and Drug Administration (FDA) as 
having a significant impact on the increasing costs of blood products, 
while another commenter noted that transfusion safety officers are 
being hired in most major hospitals to address improper transfusion and 
inappropriate use of blood. The commenters argued that, given the 2-
year lag inherent in available claims data in the OPPS ratesetting 
process, the use of hospital claims data without adjustments likely 
will not reflect these rising costs in a timely manner.
    Response: As we indicated in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71838 through 71839), we continue to believe that 
using blood-specific CCRs applied to hospital claims data results in 
payments that appropriately reflect hospitals' relative costs of 
providing blood and blood products as reported to us by hospitals, 
which would reflect hospitals' changing costs due to factors cited by 
the commenters, such as FDA requirements, to the extent that these are 
affecting blood costs. We annually update payment groups and payment 
weights using the most recently available hospital claims and cost 
report data. This process allows us to recalibrate the payment groups 
and payment weights in response to changes in hospitals' costs from 
year to year in the most timely manner possible. A fundamental 
principle of the OPPS is that it is based on relative weights, and as 
we have stated in the past (73 FR 68541), it is the relativity of the 
costs to one another, rather than absolute cost, that is important in 
setting payment rates. To deviate from our standard OPPS ratesetting 
methodology by paying no less than the payment rates in effect for CY 
2011 for individual blood products in CY 2012 would skew this 
relativity. We also note that the median costs per unit (calculated 
using the blood-specific CCR methodology) for this final rule with 
comment period increase for the majority of the most commonly provided 
blood and blood products (including the highest volume blood and blood 
product, described by HCPCS code P9016) compared to the CY 2011 median 
costs. For all APCs whose payment rates are based upon relative payment 
weights, we note that the quality and accuracy of reported units and 
charges significantly influence the median costs that are the basis for 
our payment rates, especially for low volume items and services.
    After consideration of the public comments we received, we are 
finalizing, without modification, our CY 2012 proposal to calculate 
median costs upon which the CY 2012 payments rates for blood and blood 
products are based 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 (the methodology we have utilized since CY 2005). We 
believe that continuing this methodology in CY 2012 results in median 
costs for blood and blood products that appropriately reflect the 
relative estimated costs of these products for hospitals without blood 
cost centers and, therefore, for these products in general.
    We refer readers to Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site) for 
the final 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)
    In the CY 2006 OPPS final rule with comment period (70 FR 68610), 
we discussed the confusion raised by a number of providers related to 
the reporting of units for single and multiple allergy tests described 
by CPT codes 95004 through 95078. According to the providers, while 
some of these codes instruct providers to specify the number of tests 
or use the singular word ``tests'' or ``testing'' in their descriptors, 
others do not contain such instruction or do not contain ``tests'' or 
``testing'' in their descriptors. In light of the variable hospital 
billing that may be inconsistent with the CPT code descriptors, as 
discussed in detail in the CY 2006 OPPS final rule with comment period 
(70 FR 68610), we examined CY 2004 claims and determined that the 
charges reported on many single procedure claims represent a ``per 
visit'' charge, rather than a ``per test'' charge, including claims for 
the allergy test codes that instruct providers to specify the number of 
tests. As a result of our analysis of our claims data, we 
differentiated single allergy tests (``per test'' from multiple allergy 
tests (``per visit'') by placing these services in two different APCs. 
We believed that making this distinction clarified billing for these 
services and more accurately placed them with like services sharing 
similar resource costs. We also 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. Since 2006, we have analyzed our claims data to 
determine whether the reporting of these services has improved.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42192), we proposed to 
continue to use 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. Specifically, services proposed to be 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. Alternatively, the procedures 
proposed for assignment to APC 0370 (Allergy Tests) describe multiple 
allergy tests per encounter; therefore, for these procedures, only one 
unit of the service is billed even if multiple tests are performed.
    As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42192), 
our analysis of the CY 2010 claims data available for the proposed rule 
for the single allergy tests, specifically those services assigned to 
APC 0381, did not reflect improved and more consistent hospital billing 
practices of ``per test'' for single allergy tests. The median cost of 
APC 0381 calculated for the proposed rule according to the standard 
single

[[Page 74153]]

claims OPPS methodology was 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 was 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).
    In addition, we proposed that multiple allergy tests continue to be 
assigned to APC 0370 with a median cost calculation based on the 
standard OPPS methodology for CY 2012. This resulted in a proposed APC 
median cost of approximately $97 based on 283 claims.
    We did not receive any public comments on our CY 2012 proposal for 
payment of single or multiple allergy tests. We are finalizing our CY 
2012 proposal, without modification, to calculate a ``per unit'' median 
cost for APC 0381 as described above in this section. The final CY 2012 
median cost of APC 0381 is approximately $31.
    Furthermore, we also are finalizing our CY 2012 proposal, without 
modification, to use the standard OPPS methodology to set the APC 
payment rate for APC 0370. We are revising the title of APC 0370 from 
``Allergy Tests'' to ``Multiple Allergy Tests'' so that the APC title 
more accurately describes all the services assigned to the APC. The 
final CY 2012 median cost of APC 0370 is approximately $80 based on 306 
claims.
(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 (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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42192), we proposed to 
continue using the same methodology to estimate a ``per unit'' median 
cost for HCPCS code C1300 for CY 2012. This methodology resulted 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.
    We did not receive any public comments on our proposal to continue 
to use our established ratesetting methodology for calculating the 
median cost of APC 0659 for payment of HBOT for CY 2012. We are 
finalizing our CY 2012 proposal, without modification, to continue to 
use our established ratesetting methodology for calculating the median 
cost of APC 0659 for payment of HBOT, with a final CY 2012 median cost 
of approximately $105.
(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).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42192 through 42193), 
we proposed to continue to use our established ratesetting methodology 
for calculating the median cost of APC 0375 (Ancillary Outpatient 
Services When Patient Expires) and to continue to make one payment 
under APC 0375 for the services that meet the specific conditions for 
using HCPCS modifier ``-CA.'' That is, we proposed 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 stated in the proposed rule that 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 stated that we believe that hospitals are reporting the HCPCS 
modifier ``-CA'' according to the policy initially established in CY 
2003. We noted that the claims frequency for APC 0375 has been 
relatively stable over the past few years. We noted 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 of the proposed rule showed the number of claims and the median 
costs

[[Page 74154]]

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 proposed a median 
cost of approximately $5,711 for APC 0375 based on 155 claims.
    We did not receive any public comments regarding this proposal. For 
the reasons explained in the CY 2012 OPPS/ASC proposed rule, we are 
finalizing our CY 2012 proposal, without modification, to continue to 
use our established ratesetting methodology for calculating the median 
cost of APC 0375, which has a final CY 2012 APC median cost of 
approximately $6,039. Table 4 below shows the number of claims and the 
final median costs for APC 0375 for CYs 2007, 2008, 2009, 2010, 2011, 
and 2012.
[GRAPHIC] [TIFF OMITTED] TR30NO11.006

(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. In the CY 2012 OPPS/ASC 
proposed rule, we indicated that we were accepting the APC Panel's 
recommendation and will provide additional data to the Panel at an 
upcoming meeting.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42190), we proposed 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 proposed 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

[[Page 74155]]

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 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 
stated that 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 proposed to revise the APC assignment for 
CPT code 37221, from APC 0083 to APC 0229, to accurately reflect the 
cost and clinical features of the procedure. This proposed reassignment 
of CPT code 37221 from APC 0083 to APC 0029 would eliminate the 2 times 
rule violation for APC 0083 noted above. Based on this reconfiguration, 
the CY 2010 claims data available for the 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 were 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 proposed to revise the APC titles for APCs 0083, 
0229, and 0319 to better describe the procedures assigned to these 
APCs. Specifically, we proposed 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 solicited public comments on the proposed status indicators and 
APC assignments for the endovascular revascularization of the lower 
extremity CPT codes for CY 2012. Table 5 of the proposed rule listed 
the endovascular revascularization of the lower extremity CPT codes 
along with their proposed status indicator and APC assignments for CY 
2012. As noted previously, 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). We respond to any public comments received on the CY 2011 OPPS/
ASC final rule with comment period and the CY 2012 OPPS/ASC proposed 
rule below.
    At its August 10-12, 2011 meeting, the APC Panel supported CMS' 
proposal to move HCPCS code 37221 (Revascularization, endovascular, 
open or percutaneous, iliac artery, unilateral, initial vessel; with 
transluminal stent placement(s), includes angioplasty within the same 
vessel, when performed) to APC 0229.
    Comment: Several commenters supported the CY 2012 proposal to 
rename APCs 0083, 0229, and 0319 to better describe the procedures 
assigned to these APCs, and requested that CMS finalize these changes. 
The commenters also supported the proposed status indicator assignments 
of ``T'' for each of these APCs. One commenter agreed with the proposed 
renaming of APC 0229 and 0319 but asked that CMS change the APC title 
of APC 0038 to ``Coronary Angioplasty, Valvuloplasty, and Level I 
Endovascular Revascularization of the Lower Extremity'' in order to 
reflect the coronary as well as endovascular procedures assigned to 
that APC.
    Response: We appreciate the commenters' support of our proposal to 
revise the titles for APCs 0083, 0229, and 0319. We agree with the 
commenter that a title of ``Coronary Angioplasty, Valvuloplasty, and 
Level I Endovascular Revascularization of the Lower Extremity'' would 
more accurately describe the procedures assigned to APC 0083. 
Therefore, we are finalizing our CY 2012 proposal, with modification, 
to revise the APC title for APC 0083 from ``Coronary or Non-Coronary 
Angioplasty and Percutaneous Valvuloplasty'' to ``Coronary Angioplasty, 
Valvuloplasty, and 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 also 
are finalizing our proposal, without modification, to continue to 
assign status indicator ``T'' to each of these APCs.
    Comment: Many commenters supported our overall methodology for 
calculating simulated medians for the endovascular revascularization 
CPT codes established for 2011 and agreed with the APC reassignment for 
CPT code 37221 from APC 0083 to APC 0229. A few commenters cited that, 
during the August 2011 APC Panel meeting, the APC Panel recommended 
that CMS finalize this proposal.
    Response: We appreciate the commenters' support of our overall 
methodology for calculating simulated medians for the endovascular 
revascularization CPT codes established for 2011. Based on our analysis 
of the hospital claims and cost report data available for this final 
rule with comment period, and in accordance with the feedback we 
received from many commenters, we continue to believe that CPT code 
37221 is more appropriately placed in APC 0229 than in APC 0083. Our 
data shows 4,673 simulated single claims (out of 4,710 total claims) 
for CPT code 37221 with a CPT median cost of approximately $7,053, 
which is closer to the APC median cost of approximately $8,088 for APC 
0229 than to the APC 0083 median cost of approximately $4,611.28. We 
also note that if CPT code 37221 were assigned to APC 0083, a 2 times 
violation would likely result. Therefore, after consideration of the 
public comments received and the APC Panel recommendation at its August 
2011 meeting, we are finalizing our proposal, without modification, to 
assign CPT code 37221 to APC 0229, which has a final CY 2012 median 
cost of approximately $8,088.
    Comment: Several commenters disagreed with the continued APC 
assignment for CPT code 37223 (Revascularization, endovascular, open or 
percutaneous, iliac artery, each additional ipsilateral iliac vessel; 
with transluminal stent placement(s),

[[Page 74156]]

includes angioplasty within the same vessel, when performed) in APC 
0083. They stated that the service described by CPT code 37223 is more 
similar clinically and in terms of resource utilization to the 
procedures assigned to APC 0229 because this service involves stent 
placement. The commenters also argued that CPT code 37223 is an add-on 
code to CPT code 37221, and should be assigned to APC 0229, which is 
the APC to which CPT code 37221 is assigned. They pointed out that CPT 
codes 37206 (Transcatheter placement of an intravascular stent(s) 
(except coronary, carotid, and vertebral vessel, and lower extremity 
arteries), percutaneous; each additional vessel) and 37208 
(Transcatheter placement of an intravascular stent(s) (non-coronary 
vessel other than iliac and lower extremity arteries), open; each 
additional vessel) are also add-on CPT codes, and that they are 
assigned to the same APC as the primary codes with which they are 
billed (that is, APC 0229). The commenters further added that CPT code 
37223, like CPT code 37221, requires the use of an implantable 
endovascular stent, and that the CY 2012 OPPS proposed payment rate of 
approximately $4,520 for CPT code 37223 does not take the cost of the 
device into consideration. They noted that any efficiencies to be 
gained by performing the procedure described by CPT code 37223 at the 
same time as the procedure described by CPT code 37223 would be 
captured appropriately in the multiple procedure discount that would 
apply as a result of both procedures being assigned status indicator 
``T.''
    Response: We are unable to simulate a median cost for CPT code 
37223 using the CY 2010 claims data available for this final rule with 
comment period because we have no single service claims data that 
appropriately describe the procedure associated with CPT code 37223. 
Therefore, analysis of our hospital outpatient claims data does not 
support an APC reassignment for CPT code 37223 from APC 0083 to APC 
0229 based on resource homogeneity, and we believe that the service 
described by CPT code 37223 is clinically similar to procedures in APC 
0083. We note that we will have CY 2011 hospital claims available for 
CPT code 37223 and the other new endovascular revascularization CPT 
codes for the first time for CY 2013 OPPS ratesetting, and that we will 
closely monitor our data to ensure that the APC placements 
appropriately reflect hospitals' costs for these procedures.
    We also note that when hospitals report CPT code 37223, we expect 
them to also report one of the following device HCPCS C-codes for the 
implantable stent used in those procedures:
     C1874 (Stent, coated/covered, with delivery system)
     C1875 (Stent, coated/covered, without delivery system)
     C1876 (Stent, non-coated/non-covered, with delivery 
system)
     C1877 (Stent, non-coated/non-covered, without delivery 
system)
     C2617 (Stent, non-coronary, temporary, without delivery 
system)
     C2625 (Stent, non-coronary, temporary, with delivery 
system)
    These HCPCS C-codes were made effective April 1, 2001, and are a 
part of the procedure-to-device edits for CPT code 37223. Procedure-to-
device edits, which have been in place for many procedures since 2005, 
require that when a particular service or procedural CPT or Level II 
HCPCS code is billed, the claim must also contain an appropriate device 
code.
    After analysis of our claims data and consideration of the public 
comments received, we are finalizing our proposal, without 
modification, to continue to assign CPT code 37223 to APC 0083, which 
has a final CY 2012 median cost of approximately $4,611.
    Comment: Some commenters disagreed with the APC assignment for CPT 
codes 37224 (Revascularization, endovascular, open or percutaneous, 
femoral/popliteal artery(s), unilateral; with transluminal angioplasty) 
and 37235 (Revascularization, endovascular, open or percutaneous, 
tibial/peroneal artery, unilateral, each additional vessel; with 
transluminal stent placement(s) and atherectomy, includes angioplasty 
within the same vessel, when performed) to APC 0083, and stated that 
both procedures would be more appropriately placed in APC 0229 based on 
the economic and clinical coherence to other procedures already 
assigned to APC 0229.
    Response: Analysis of our hospital outpatient claims shows 4,288 
simulated single claims (out of 4,320 total claims) with a median cost 
of approximately $5,418 for CPT code 37224, while there were no claims 
submitted upon which we could simulate a median cost for CPT code 
37235. The range of the median costs for APC 0083 with significant 
claims data is approximately between $3,230 to approximately $5,766, 
which is in line with the median cost of approximately $5,418 for CPT 
code 37224. Based on our claims data, we believe that CPT code 37224 is 
appropriately placed in APC 0083 which has a final median cost is 
approximately $4,611. As is the case with CPT code 37223, we do not 
have claims data to support the reassignment of CPT code 37235 to a 
different APC. We also believe that CPT codes 37224 and 37235 are 
sufficiently similar clinically to the other procedures in APC 0083 to 
warrant their continued placement in that APC. Therefore, we will 
continue to assign CPT codes 37224 and 37235 to APC 0083 for CY 2012.
    We note that, similar to CPT code 37223, both CPT codes 37224 and 
37235 are included as part of the procedure-to-device edits, and 
hospitals are reminded to refer to the latest edits on the CMS OPPS Web 
site. The updated lists of edits can be found under ``Device, 
Radiolabeled Product, and Procedure Edits'' at http://www.cms.gov/HospitalOutpatientPPS/.
    After consideration of the public comments received on the CY 2011 
OPPS/ASC final rule with comment period and the CY 2012 OPPS/ASC 
proposed rule and review of our claims data, we are finalizing our CY 
2012 proposal, without modification, to continue with the CY 2011 
methodology that we described in the CY 2012 OPPS/ASC proposed rule (76 
FR 42193 through 42194) in determining the APC assignments for the CPT 
codes that describe endovascular revascularization of the lower 
extremity for the reasons set forth above. We also are finalizing our 
CY 2012 proposal, without modification, to revise the APC assignment 
for CPT code 37221, from APC 0083 to APC 0229. We are finalizing our CY 
2012 proposal, with modification, to revise the APC titles for APCs 
0083, 0229, and 0319 as described previously. Table 5 below lists the 
endovascular revascularization of the lower extremity CPT codes along 
with their final status indicator and APC assignments for CY 2012.

[[Page 74157]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.007

(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 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

[[Page 74158]]

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).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42195), for CY 2012, 
we proposed to continue to use 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, we 
proposed for CY 2012 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 the proposed rule, 
the proposed median cost for APC 0080 was approximately $2,822 for CY 
2012, which was 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 did not propose any changes to the CY 2011 APC assignments of 
any of the codes assigned to APC 0080 because the claims data available 
for the proposed rule support continuation of these APC assignments.
    We solicited public comments on the proposed status indicators and 
the APC assignments for CY 2012 for the cardiac catheterization CPT 
codes. Table 6 of the proposed rule listed the new CY 2011 cardiac 
catheterization CPT codes along with their proposed status indicators 
and APC assignments for CY 2012.
    Comment: Some commenters supported our CY 2012 proposal for payment 
of non-congenital cardiac catheterization.
    Response: We appreciate the commenters' support of our payment 
methodology for the non-congenital cardiac catheterization procedures. 
Therefore, consistent with our rationale set forth above, we are 
finalizing our CY 2012 proposal, without modification, to continue with 
the CY 2011 methodology in determining the APC assignments for the non-
congenital cardiac catheterization CPT codes. The final CY 2012 median 
cost for APC 0080 is approximately $2,721.
    Table 6 below lists the CY 2012 cardiac catheterization CPT codes 
along with their final status indicators and APC assignments for CY 
2012.

[[Page 74159]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.008

(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 indicated 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 with the description of the new CPT 
code 64568. We treated the summed costs on these claims as if they were 
a

[[Page 74160]]

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).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42195 through 42196), 
we proposed to use the same methodology we used in CY 2011 to estimate 
the hospital costs of CPT code 64568 and to continue to maintain CPT 
code 64568 as the only code assigned to APC 0318 for CY 2012.
    Comment: One commenter on the CY 2011 OPPS final rule with comment 
period expressed appreciation for CMS' efforts to establish APC 0318.
    Response: We appreciate the commenters' support for the creation of 
APC 0318.
    We did not receive any public comments on our proposals for cost 
estimation or APC assignment of CPT code 64568 for CY 2012. We are 
finalizing our CY 2012 proposal, without modification, to use the same 
methodology we used in CY 2011 to estimate hospital costs of CPT code 
64568. For this final rule with comment period, we created an estimated 
median cost of approximately $24,262 for CPT code 64568 from 455 single 
claims to set a payment rate for APC 0318 for CY 2012. We are 
maintaining CPT code 64568 as the only code assigned to APC 0318 for CY 
2012.
(9) Brachytherapy Sources
(A) Background
    Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) 
of Pub. L. 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 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) 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42196 through 42197), 
we proposed to use the median costs from CY 2010 claims data for 
setting the proposed CY 2012 payment rates for brachytherapy sources, 
as we proposed for most other items and services that will be paid 
under the CY 2012 OPPS. We proposed to continue the other payment 
policies for brachytherapy

[[Page 74161]]

sources we finalized and first implemented in the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60537). We proposed to pay for 
the stranded and non-stranded NOS codes, HCPCS codes C2698 and C2699, 
at a rate equal to the lowest stranded or non-stranded prospective 
payment rate for such sources, respectively, on a per source basis (as 
opposed, for example, to a per mCi), which is based on the policy we 
established in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66785). The proposed payment methodology for NOS sources would 
provide payment to a hospital for new sources 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 proposed 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 Pub. L. 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 proposed to subject 
brachytherapy sources to outlier payments under section 1833(t)(5) of 
the Act, and also to subject brachytherapy source payment weights to 
scaling for purposes of budget neutrality. 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 the 
proposed rule.
    Therefore, we proposed to pay for brachytherapy sources at 
prospective payment rates based on their source-specific median costs 
for CY 2012. We referred readers to Addendum B to the proposed rule 
(which is 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).
    Comment: Some commenters requested that CMS discard its prospective 
payment methodology for brachytherapy sources based on source-specific 
median costs, and revert to payments based on brachytherapy charges 
adjusted to costs, for a variety of reasons. The commenters claimed 
that the claims data show a huge variation in costs per unit; that 
there continues to be, in the CY 2012 proposed rule data, longstanding 
instability and fluctuation of costs; that more than one half of the 
current brachytherapy sources have proposed payment rates based on 50 
or fewer hospitals (a number that a commenter reported has declined 
from 2010 to 2012); and that proposed payment rates are unstable and 
fluctuate significantly. The commenters were also concerned that rank 
order anomalies continue to exist in proposed source payment rates, 
such as between C2635, high activity palladium, and C2640 and C2641, 
which represent forms of low activity palladium. The commenters also 
claimed that the charges adjusted to cost method would cost the 
Medicare program approximately $10.8 million less than the prospective 
payment methodology based on median cost per source. The commenters 
claimed that the number of hospitals providing brachytherapy treatment 
and the number of beneficiaries treated with brachytherapy have 
declined from 2010 to 2011 because some hospitals cannot recover their 
costs under the prospective payment rates adopted in CY 2010. The 
commenters also pointed out that High Dose Rate (HDR) Iridium-192 may 
treat multiple patients over a 90-day source life, making its true cost 
dependent on the number of patients treated, and thus making fair 
prospective payment difficult to achieve.
    Response: As we stated previously (72 FR 66782; 74 FR 60534; 75 FR 
71979), we believe that median costs based on hospital claims data for 
brachytherapy sources have produced reasonably consistent per-source 
cost estimates over the past several years, comparable to the patterns 
we have observed for many other OPPS services whose payments are set 
based upon relative payment weights from claims data. We believe that 
our per-source payment methodology specific to each source's 
radioisotope, radioactive intensity, and stranded or non-stranded 
configuration, supplemented by payment based on the number of sources 
used in a specific clinical case, adequately accounts for the major 
expected sources of variability across treatments. As we also explained 
previously (72 FR 66782; 74 FR 60535; 75 FR 71979), a prospective 
payment system such as the OPPS relies on the concept of averaging, 
where the payment may be more or less than the estimated cost of 
providing a service for a particular patient, but with the exception of 
outlier cases, it is adequate to ensure access to appropriate care. In 
the case of brachytherapy sources for which the law requires separate 
payment groups, without packaging, the costs of these individual items 
could be expected to show greater variation than some other APCs under 
the OPPS because higher variability in costs for some component items 
and services is not balanced with lower variability for others and 
because relative weights are typically estimated using a smaller set of 
claims. Nevertheless, we believe that prospective payment for 
brachytherapy sources based on median costs from claims calculated 
according to the standard OPPS methodology is appropriate and provides 
hospitals with the greatest incentives for efficiency in furnishing 
brachytherapy treatment.
    As we have stated previously (75 FR 71979), under the budget 
neutral provision for the OPPS, it is the relativity of costs of 
services, not their absolute costs, that is important, and we believe 
that brachytherapy sources are appropriately paid according to the 
standard OPPS payment approach. Furthermore, we are not concerned that 
some sources may have median costs and payment rates based on 50 or 
fewer providers, because it is not uncommon for OPPS prospective 
payment rates to be based on claims from a relatively small number of 
hospitals that furnished the service in the year of claims data 
available for the OPPS update year. Fifty hospitals may report hundreds 
of brachytherapy source claims for many cases and comprise the universe 
of providers using particular low volume sources, for which we are 
required to pay separately by statute. Further, our methodology for 
estimating median costs for brachytherapy sources utilizes all line-
item charges for those sources, which allows us to use all

[[Page 74162]]

hospital reported charge and estimated cost information to set payment 
rates for these items. Therefore, no brachytherapy source claims are 
lost. We have no reason to believe that prospective payment rates based 
on claims from those providers furnishing a particular source do not 
appropriately reflect the cost of that source to hospitals.
    In the case of high and low activity iodine-125 sources, our claims 
data show that the cost of the high activity source is greater than the 
low activity sources, as we have noticed in the past. However, this 
relationship is reversed for palladium-103 sources, as one commenter 
pointed out. As we have stated in the past (75 FR 71979), we have no 
information about the expected cost differential between high and low 
activity sources of various isotopes other than what is available in 
our claims and hospital cost report data. For high activity palladium-
103, only 12 hospitals reported this service in CY 2010, compared to 
150 and 211 providers for low activity palladium sources described by 
HCPCS codes C2640 and C2641, respectively. As we stated regarding this 
issue in the CY 2010 and CY 2011 OPPS/ASC final rule with comment 
period (74 FR 60535 and 75 FR 71979), it is clear that fewer providers 
furnished high activity palladium-103 sources than low activity 
palladium sources, and we expect that the hospital cost distribution 
for those hospitals could be different than the cost distribution of 
the large number of providers reporting the low activity sources. These 
varied cost distributions clearly contribute to the observed 
relationship in median costs between the different types of sources. 
However, we see no reason why our standard ratesetting methodology for 
brachytherapy sources that relies on all claims from all hospitals 
furnishing brachytherapy sources would not yield valid median costs for 
those hospitals furnishing the different brachytherapy sources upon 
which CY 2012 prospective payments rates are based.
    Prospective payment for brachytherapy sources based on their median 
costs makes the source payment an integral part of the OPPS, rather 
than a separate cost-based payment methodology within the OPPS, as 
indicated previously (75 FR 71980). We believe that consistent and 
predictable prospectively established payment rates under the OPPS for 
brachytherapy sources are appropriate because we do not believe that 
the hospital resource costs associated with specific brachytherapy 
sources would vary greatly across hospitals or clinical conditions 
under treatment, other than through differences in the numbers of 
sources utilized that would be accounted for in the standard OPPS 
payment methodology we are finalizing for CY 2012.
    As we indicated in the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71980), we agree that high dose rate (HDR) brachytherapy 
sources such as HDR irirdium-192 have a fixed active life and must be 
replaced every 90 days; as a result, hospitals' per-treatment cost for 
the source would be dependent on the number of treatments furnished per 
source. The source cost must be amortized over the life of the source. 
Therefore, in establishing their charges for HDR iridium, we expect 
hospitals to project the number of treatments that would be provided 
over the life of the source and establish their charges for the source 
accordingly, as we have stated previously (72 FR 66783; 74 FR 60535; 75 
FR 71980). For most of these OPPS services, our practice is to 
establish prospective payment rates based on the median costs from 
hospitals' claims data to provide incentives for efficient and cost-
effective delivery of these services.
    We do not agree with the commenters that prospective brachytherapy 
source payment based on median costs would increase aggregate Medicare 
expenditures using the charges-adjusted-to-cost methodology compared to 
the proposed prospective payment methodology. Our past studies, such as 
that discussed in the CY 2010 final rule with comment period (74 FR 
60535), have shown that payment at charges adjusted to cost results in 
higher aggregate payment for brachytherapy sources than does 
prospective payment. As we indicated in the CY 2010 final rule with 
comment period and the CY 2011 final rule with comment period (74 FR 
60535 and 75 FR 71980), we have traditionally found that charge 
inflation for brachytherapy sources appears to be higher than the 
market basket inflation update applicable to prospective payments under 
the OPPS. Therefore, we found that the estimated payments we calculated 
for brachytherapy charges adjusted to cost were greater than the 
estimated prospective payment rates because the hospital market basket 
grows more slowly than the charges for brachytherapy sources. The 
commenter did not provide its aggregate payments study in its comment 
to the CY 2012 OPPS/ASC proposed rule, and we do not know whether the 
commenter's study took into account factors such as charge inflation. 
Moreover, the OPPS is a prospective payment system that ensures 
equitable prospective payment of services across providers, and 
efficient use of resources, including brachytherapy sources, which 
since CY 2010 are part of OPPS prospective payment.
    Concerning the comment that some providers may have decided to 
discontinue offering brachytherapy services because the OPPS payment 
rates for sources were too low, as we have noted in the past (75 FR 
71980), there are many reasons why some providers may discontinue 
services, such as brachytherapy. For example, changes in medical 
technology or emphasis on different treatment forms for a medical 
condition can influence whether a set of services are continued. In 
addition, providers accept payment from a number of payers in addition 
to Medicare, and we believe a global shift by a provider to discontinue 
any services would be influenced by factors other than our payment 
rates alone.
    Comment: One commenter supported the proposed payment policy for 
new brachytherapy sources for which we have no claims data, namely, to 
assign new HCPCS codes for new brachytherapy sources to their own APCs, 
with prospective payment rates based on CMS' consideration of external 
data and other relevant information regarding the expected costs of the 
sources to hospitals.
    Response: We appreciate the commenter's support for this payment 
policy.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 final rule with comment period 
(which is available via the Internet on the CMS Web site) for the final 
CY 2012 payment rates for brachytherapy sources, identified with status 
indicator ``U.'' We also are finalizing our proposals to continue our 
policies regarding payment for NOS codes for stranded and non-stranded 
sources and new brachytherapy sources for which we have no claims data. 
Specifically, we are finalizing our proposals to continue payment for 
stranded and non-stranded NOS codes, HCPCS codes C2698 and C2699, at a 
rate equal to the lowest stranded or non-stranded prospective payment 
for such sources, respectively as discussed in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66786); and our proposal to 
assign HCPCS codes for new brachytherapy sources to their own APCs, 
with proposed payment rates based on consideration of external data and 
other

[[Page 74163]]

relevant information, in the absence of claims data. Once claims data 
are available, our standard ratemaking process will be applied to the 
calculation of the median cost for the new brachytherapy source.
    Consistent with our policy regarding APC payments made on a 
prospective basis, we are finalizing our proposal to subject the cost 
of brachytherapy sources to the outlier provision of section 1833(t)(5) 
of the Act, and also to subject brachytherapy source payment weights to 
scaling for purposes of budget neutrality.
    As stated in the proposed rule (76 FR 42197), 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. 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).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42197), for CY 2012, 
we proposed 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 the proposed rule. We 
also proposed to create a new composite APC for cardiac 
resynchronization therapy services, as discussed in section 
II.A.2.e.(6) of the proposed rule.
    After consideration of the public comments we received as discussed 
below, for CY 2012, we are finalizing, without modification, our 
proposal to modify some aspects of our established composite APC 
policies for extended assessment and management, LDR prostate 
brachytherapy, cardiac electrophysiologic evaluation and ablation, 
mental health services, and multiple imaging services, as discussed in 
sections II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), and 
II.A.2.e.(5), respectively, of this final rule with comment period. We 
also are finalizing, with modification, our proposal to create a new 
composite APC for cardiac resynchronization therapy services, as 
discussed in section II.A.2.e.(6) of this final rule with comment 
period.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42197 through 42198), 
for CY 2012, we proposed to continue to include composite APC 8002 
(Level I Extended Assessment and Management Composite) and composite 
APC 8003 (Level II Extended Assessment and Management Composite) in the 
OPPS for CY 2012. 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 
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 did not 
propose 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).

[[Page 74164]]

We did not propose to change these reporting requirements for the CY 
2012 OPPS.
    For CY 2012, we proposed to continue the extended assessment and 
management composite APC payment methodology for APCs 8002 and 8003 (76 
FR 42198). We stated that we continue to believe that the composite 
APCs 8002 and 8003 and related policies provide the most appropriate 
means of paying for these services. We proposed to calculate the median 
costs for APCs 8002 and 8003 using all single and ``pseudo'' single 
procedure claims for CY 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 
already assure 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 the proposed rule and this 
final rule with comment period, and consistent with our CY 2008, CY 
2009, CY 2010, and CY 2011 final policies (as discussed in section IX. 
of the final rules with comment period for these calendar years), 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. In the proposed rule, we indicated that we 
are accepting this recommendation.
    As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42198), 
consistent with our decision to accept 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. We did not 
propose 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). As we stated in the proposed rule, 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 proposed to continue to include 
composite APCs 8002 and 8003 in the OPPS. We proposed to continue the 
extended assessment and management composite APC payment methodology 
and criteria that we finalized for CYs 2009, 2010, and 2011. We also 
proposed 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 was 
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 was approximately $735, which 
was calculated from 225,874 single and ``pseudo'' single bills that met 
the required criteria.
    Comment: Commenters supported CMS' policy to package payment for 
observation care and to not provide additional payment through an 
extended assessment and management composite APC payment when 
observation services are billed with significant surgical procedures. 
One commenter stated that the observation services in such cases are 
most likely related to post-procedural recovery, and thus no additional 
payment is warranted. The commenter argued, however, that when 
observation services are billed along with minor surgical procedures, 
the observation services should be paid separately. The commenter 
suggested that CMS utilize the MPFS definition of minor surgical 
procedures and reassign the codes currently assigned status indicator 
``T'' to two newly created status indicators ``T1''(for general 
surgical procedures) and ``T2'' (for minor surgical procedure as 
defined in MPFS) in order to allow observation services to be paid 
separately when provided with a minor surgical procedure with the 
suggested status indicator ''T2.''
    Response: We appreciate the commenters' support of our policy not 
to allow payment of APC 8002 or 8003 for claims that include a HCPCS 
code to which we have assigned status indicator ``T'' that is reported 
with a date of service on the same day as or one day prior to the date 
of the service

[[Page 74165]]

associated with HCPCS code G0378. We agree with the commenters that 
payment for such services is included in the payment for the surgical 
procedure. We appreciate the commenter's suggestions to define minor 
surgical procedures and to develop new status indicators to allow for 
separate payment for observation services when billed with a minor 
surgical procedure and will take these suggestions into consideration 
for possible future rulemaking. At this time, we have not proposed to 
make any policy changes to allow for separate payment for observation 
services when billed with a minor surgical procedure, nor have we 
proposed to create new status indicators for CY 2012. Therefore, we are 
not making any such changes in this final rule with comment period.
    After consideration of the public comments we received, we are 
adopting as final, without modification, our CY 2012 proposal to 
continue to include composite APCs 8002 and 8003 in the OPPS and to 
continue the extended assessment and management composite APC payment 
methodology and criteria that we finalized for CYs 2009 through 2011. 
We applied the standard packaging and trimming rules to the claims and 
calculated the median costs for APCs 8002 and 8003 using all single and 
``psuedo'' single procedure claims from CY 2010 that meet the criteria 
for payment of each composite APC. The final CY 2012 median cost 
resulting from this methodology for APC 8002 is approximately $393, 
which was calculated from 18,447 single and ``psuedo'' single bills 
that met the required criteria. The final CY 2012 median cost for 
composite APC 8003 is approximately $721, which was calculated from 
247,334 single and ``psuedo'' single bills that met the required 
criteria.
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which hollow needles or catheters are inserted into the prostate, 
followed by permanent implantation of radioactive sources into the 
prostate through the needles/catheters. At least two CPT codes are used 
to report the composite treatment service because there are separate 
codes that describe placement of the needles/catheters and the 
application of the brachytherapy sources: CPT code 55875 (Transperineal 
placement of needles or catheters into prostate for interstitial 
radioelement application, with or without cystoscopy) and CPT code 
77778 (Interstitial radiation source application; complex). Generally, 
the component services represented by both codes are provided in the 
same operative session in the same hospital on the same date of service 
to the Medicare beneficiary being treated with LDR brachytherapy for 
prostate cancer. As discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66653), OPPS payment rates for CPT code 77778, in 
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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42199), we proposed 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 proposed 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 proposed not to use the 
claims that meet these criteria in the calculation of the median costs 
for APCs 0163 (Level IV Cystourethroscopy and Other Genitourinary 
Procedures) and 0651 (Complex Interstitial Radiation Source 
Application), the APCs to which CPT codes 55875 and 77778 are assigned, 
respectively. We proposed that the median costs for APCs 0163 and 0651 
would continue to be calculated using single and ``pseudo'' single 
procedure claims. We stated that 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 a partial year of CY 2010 claims data available for the 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 was approximately 
$3,364. This was 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 was 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 stated that 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.
    Comment: One commenter expressed concern with CMS' methodology to 
use claims for median cost calculation for APC 8001 with both CPT codes 
55875 and 77778 on the same date of service and no other separately 
paid services that are not on the bypass list, which resulted in 556 CY 
2012 proposed rule claims. The commenter noted that this is only 12 
percent of all CY 2012 proposed rule claims containing CPT codes 55875 
and 77778. The commenter stated that its analysis of commonly included 
procedure codes with LDR procedures would include CPT code

[[Page 74166]]

77332 (Treatment devices, design and construction; simple (simple 
block, simple bolus)), which the commenter recommended be added to the 
bypass list. This would add 406 claims to the median cost calculation 
based on the commenter's analysis of CY 2012 proposed rule claims.
    Response: We disagree with the commenter that 556 claims is not a 
robust number of single claims for ratesetting purposes. There are many 
services for which we have median costs based on hundreds of single and 
``pseudo'' single claims. Moreover, the CY 2012 proposed rule median 
cost of approximately $3,364, the CY 2012 final median cost of 
approximately $3,340, and the CY 2011 final median cost of 
approximately $3,195 all compare favorably and show stability in the 
median cost calculation for APC 8001. We do not believe the median cost 
would remain stable to such a degree if the claims used in ratesetting 
for composite APC 8001 were inadequate or inaccurately reflected 
hospitals' costs for providing the service described by CPT codes 55875 
and 77778. We also do not believe it is appropriate to include CPT code 
77332 on the bypass list for the reasons discussed in section II.A.1.b. 
of this final rule with comment period.
    Comment: One commenter requested that CMS implement the proposed CY 
2012 payment rate for composite APC 8001, due to the increased median 
cost for APC 8001.
    Response: We appreciate the commenter's support for our proposed 
payment rate for composite APC 8001. We note that we base final OPPS 
rates on median costs calculated using a full year of hospital claims 
and cost report data rather than a partial year's data, which were the 
data available for the proposed rule.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to continue paying for 
LDR prostate brachytherapy services using the composite APC methodology 
implemented for CYs 2008, 2009, 2010, and 2011 described above in this 
section. The final CY 2012 median cost for composite APC 8001 is 
approximately $3,340, calculated from 595 single bills.
(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 for a code in group B for the same beneficiary, payments are 
made under the appropriate single procedure APCs and the composite APC 
does not apply.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42200), we proposed 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 proposed not to use the claims that meet the 
composite payment criteria in the calculation of the median costs for 
APC 0085 and APC 0086, to which the CPT codes in both groups A and B 
for composite APC 8000 are otherwise assigned. Median costs for APCs 
0085 and 0086 would continue to be calculated using single procedure 
claims. We stated that 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 the proposed rule, we were able to use 11,156 claims containing a 
combination of group A and group B codes and calculated a proposed 
median cost of approximately $11,598 for composite APC 8000. This was 
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 stated in the CY 2012 OPPS/ASC proposed rule (76 FR 
42200) that 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.
    Comment: One commenter supported CMS' proposal to continue its 
current composite methodology for cardiac electrophysiologic evaluation 
and ablation services, stating that it is the most efficient and 
effective method to use claims data for most of the cardiac

[[Page 74167]]

electrophysiologic services, and best represents the resources 
associated with the combined services.
    Response: We appreciate the commenter's support.
    We are finalizing our proposal for CY 2012, without modification, 
to continue to pay for cardiac electrophysiologic evaluation and 
ablation services using the composite APC methodology implemented for 
CY 2008 through CY 2011. For this final rule with comment period, we 
were able to use 11,706 claims from CY 2010 containing a combination of 
group A and group B codes and calculated a final CY 2012 median cost of 
approximately $11,313 for composite APC 8000. Table 7 below list the 
groups of procedures upon which we based composite APC 8000 for CY 
2012.
[GRAPHIC] [TIFF OMITTED] TR30NO11.009


[[Page 74168]]


(4) Mental Health Services Composite APC (APC 0034)
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42200 through 42201), 
for CY 2012, we proposed to continue our longstanding policy of 
limiting the aggregate payment for specified less resource-intensive 
mental health services furnished on the same date to the payment for a 
day of partial hospitalization, which we consider to be the most 
resource-intensive of all outpatient mental health treatment for CY 
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 stated that we continue to believe that 
the costs associated with administering a partial hospitalization 
program represent the most resource-intensive of all outpatient mental 
health treatment. Therefore, we did 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 the proposed rule, for 
CY 2012, we proposed 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 
proposed 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 proposed that the 
payment rates for these two APCs be based upon the median per diem 
costs calculated using data only from CMHCs. Similarly, we proposed 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 
proposed 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 resource-intensive of 
all outpatient mental health treatment, for CY 2012, we proposed to 
continue to set the payment rate for APC 0034 (Mental Health Services 
Composite) at the same rate as we proposed for APC 0176, which is the 
maximum partial hospitalization per diem payment. As we stated in the 
CY 2012 OPPS/ASC proposed rule (76 FR 42201), 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 proposed that those specified mental health services would be 
assigned to APC 0034. We proposed 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 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, and we 
proposed for CY 2012 that it would continue to determine this.
    We did not receive any comments on this proposal. 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, and we do not believe that CMS 
should pay more for a day of individual mental health services under 
the OPPS than the partial hospitalization per diem payment. Therefore, 
we are finalizing our CY 2012 proposal, without modification, to limit 
the aggregate payment for specified less intensive outpatient mental 
health services furnished on the same date by a hospital to the payment 
for a day of partial hospitalization, specifically APC 0176.
(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.

[[Page 74169]]

    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). As we 
discuss in the CY 2012 OPPS/ASC proposed rule, 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 (76 FR 42201).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42201), for CY 2012, 
we proposed to continue paying for all multiple imaging procedures 
within an imaging family performed on the same date of service using 
the multiple imaging composite payment methodology. The proposed CY 
2012 payment rates for the five multiple imaging composite APCs (APC 
8004, APC 8005, APC 8006, APC 8007, and APC 8008) were based on median 
costs calculated from a partial year of CY 2010 claims available for 
the CY 2012 OPPS/ASC 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 the CY 2012 OPPS/ASC 
proposed rule. (We noted that, consistent with our proposal in section 
II.A.1.b. of the CY 2012 proposed rule to add CPT code 71550 (Magnetic 
resonance (eg, proton) imaging, chest (eg, for evaluation of hilar and 
mediastinal lymphadenopathy); without contrast material(s)) to the list 
of bypass codes for CY 2012, we also proposed to add CPT code 71550 to 
the list of proposed OPPS imaging family services overlapping with 
HCPCS codes on the proposed CY 2012 bypass list (76 FR 42201 through 
42202). 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 the CY 2012 OPPS/ASC 
proposed rule, we proposed 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 (76 FR 
42235). Specifically, we proposed to create new APC 0331 (Combined 
Abdominal and Pelvis CT Without Contrast), to which we proposed to 
assign CPT code 74176 (Computed tomography, abdomen and pelvis; without 
contrast material); and we proposed to create new APC 0334 (Combined 
Abdominal and Pelvis CT With Contrast), to which we proposed 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 the 
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 (76 FR 42235). Therefore, we proposed not 
to use those claims listed in Table 21 in section III.D.2. of the 
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 listed in Table 8 of the proposed rule 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 were assigned status indicator ``Q3''' in Addendum B to the proposed 
rule (which is 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 was identified in Addendum M to 
the proposed rule (which is available via the Internet on the CMS Web 
site). Table 9 of the proposed rule listed the OPPS imaging family 
services that overlap with HCPCS codes on the proposed CY 2012 bypass 
list.
    Comment: Some commenters requested that CMS provide separate APC 
payment when multiple imaging services are provided on the same date of 
service but at different times, because, according to the commenters, 
services at different times require additional resources than services 
performed together. The commenters indicated that hospitals providing 
emergent services are more likely than other hospitals to provide 
multiple imaging services, some of which are provided in the same day 
but at different times. The commenters stated that when imaging 
services are not provided at the same encounter, the same economies of 
scale are not realized as when imaging services are provided together. 
For example, cases in which it

[[Page 74170]]

is necessary to perform CT scans of the chest, abdomen, and pelvis, and 
also a CT scan of the brain and/or soft tissues of the neck, must be 
split into two separate encounters separated by a period of time, due 
to required repositioning of the patient, and safety requirements. One 
commenter requested that hospitals report a modifier or condition code 
to report situations in which multiple imaging services are provided on 
the same date but at different times, in order to afford additional 
payment in those circumstances. The commenter further opined that the 
fact that CMS allows separate payment for multiple E/M services on the 
same date of service shows that CMS recognizes that resources are 
expended for each clinic visit, and that this is an identical concept 
to multiple imaging services on the same date but at differing 
sessions.
    Response: As we stated in the CY 2010 and CY 2011 final rules with 
comment period (74 FR 60399 and 75 FR 71858 through 71859), we do not 
agree with the commenters that multiple imaging procedures of the same 
modality provided on the same date of service but at different times 
should be exempt from the multiple imaging composite payment 
methodology. As we indicated in the CY 2009 through CY 2011 OPPS/ASC 
final rules with comment period (73 FR 68565; 74 FR 60399; 75 FR 
71859), we believe that composite payment is appropriate even when 
procedures are provided on the same date of service but at different 
times because hospitals do not expend the same facility resources each 
and every time a patient is seen for a distinct imaging service in a 
separate imaging session. In most cases, we expect that patients in 
these circumstances would receive imaging procedures at different times 
during a single prolonged hospital outpatient encounter. The 
efficiencies that may be gained from providing multiple imaging 
procedures during a single session are achieved in ways other than 
merely not having to reposition the patient. Even if the same level of 
efficiencies could not be gained for multiple imaging procedures 
performed on the same date of service but at different times, we expect 
that any higher costs associated with these cases would be reflected in 
the claims data and cost reports we use to calculate the median costs 
for the multiple imaging composite APCs and, therefore, in the payment 
rates for the multiple imaging composite APCs. Therefore, we do not 
believe it is necessary or appropriate for hospitals to report imaging 
procedures provided on the same date of service but during different 
sittings any differently than they would report imaging procedures 
performed consecutively in one sitting with no time in between the 
imaging services. In addition, for the above reasons, we do not believe 
it is necessary to implement a modifier or condition code to 
distinguish between such cases. We believe that the comparison to our 
E/M visit policy of providing separate payments to separate clinic 
visits on the same day is not relevant because, unlike radiology 
departments, clinics often operate independently from each other in 
different parts of the hospital with separate staffs providing 
different services.
    Comment: A few commenters, who expressed concern that providers may 
receive inadequate compensation and a resulting decrease in beneficiary 
access, stated that CMS should continue to provide analyses to the APC 
Panel of the impact of its imaging composite APC policy on payment and 
usage of imaging services. One commenter noted the updated analysis 
that CMS staff provided at the February 28-March 1, 2011 APC Panel 
meeting. The commenter appreciated the shared information, and 
recommended that CMS continue to monitor costs, provide information on 
the impact of multiple imaging composite APCs, and use the information 
learned to ensure beneficiary access, as well as to evaluate whether 
the existing multiple imaging composite APC methodology accurately 
reflects all costs of proving the services. Other commenters agreed 
with CMS' decision not to propose any expansion of imaging composite 
APCs, opining that no expansion of the imaging composite APCs should be 
considered until robust data on the current policy is available for 
public review and comment. One commenter expressed concern with CMS' 
proposal to create two additional multiple imaging composite APCs.
    Response: We will continue to monitor the multiple imaging 
composite APC rate methodology and the cost of providing imaging 
services. We will report any information to the APC Panel and the 
public, as appropriate. Any expansion to the multiple imaging composite 
APCs would be subject to notice and comment rulemaking. We note that we 
did not propose to create two additional multiple imaging composite 
APCs for CY 2012 as one commenter indicated.
    Comment: Some commenters stated that, while they understood the 
multiple imaging composite APCs are intended to encourage efficiencies, 
they were concerned that the methodology employs arbitrary reductions 
absent data and may adversely affect beneficiary access to those 
imaging services subject to the policy. Other commenters stated that 
the efficiencies to be gained from multiple imaging procedures cannot 
be extrapolated across modalities.
    Response: The median costs upon which the payment rates for the 
multiple imaging composite APCs are based are calculated using CY 2010 
claims that qualified for composite payment, including those with only 
two imaging procedures and those with substantially higher numbers of 
imaging procedures. Therefore, because the payment rates reflect actual 
hospitals' actual costs for providing multiple imaging services during 
a single session, we do not agree with the commenter that the policy 
employs arbitrary reductions. As we have stated in the past (75 FR 
71858 and 74 FR 60400), we do not agree that the composite APC payment 
rates are insufficient to reflect the current costs of diagnostic 
imaging procedures when more than two imaging procedures are performed, 
and we do not believe that, in aggregate, OPPS payment for multiple 
imaging services will be inadequate so as to limit beneficiary access. 
We note that the multiple imaging composite APC methodology is applied 
only when multiple imaging procedures of the same imaging modality are 
performed during the same session, and is not applied across imaging 
modalities.
    After consideration of the public comments we received, we are 
adopting our CY 2012 proposal, without modification, to continue paying 
for all multiple imaging procedures within an imaging family performed 
on the same date of service using the multiple imaging composite 
payment methodology. The CY 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 CY 2010 claims that 
would have qualified for composite payment under the current policy 
(that is, those claims with more than one procedure within the same 
family on a single date of service). Using the same ratesetting 
methodology described in the CY 2012 OPPS/ASC proposed rule (76 FR 
42202), we were able to identify approximately 1.1 million ``single 
session'' claims out of an estimated 2.2 million potential composite 
cases from our ratesetting claims data, or approximately half of all 
eligible claims, to calculate the final CY 2012 median costs for the 
multiple imaging composite APCs.

[[Page 74171]]

    Table 8 below lists the HCPCS codes that will be subject to the 
multiple imaging composite policy and their respective families and 
approximate composite APC median costs for CY 2012. Table 9 below lists 
the OPPS imaging family services that overlap with HCPCS codes on the 
CY 2012 bypass list.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR30NO11.010


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[GRAPHIC] [TIFF OMITTED] TR30NO11.011


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[GRAPHIC] [TIFF OMITTED] TR30NO11.012


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[GRAPHIC] [TIFF OMITTED] TR30NO11.013


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[GRAPHIC] [TIFF OMITTED] TR30NO11.014

BILLING CODE 4120-01-C

[[Page 74176]]

(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 services 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, in combination 
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)), which is assigned to APC 0418 
(Insertion of Left Ventricular Pacing Electrode) 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, in 
combination with CPT code 33225.
    For CRT-P services, 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 assigned to APC 0089 
(Insertion/Replacement of Permanent Pacemaker and Electrodes) for CY 
2011, in combination with CPT code 33225. 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), in 
combination with CPT code 33225.
    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 services, 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 services and recommended that CMS reconsider 
creating a composite APC or a group of composite APCs for CRT-D and 
CRT-P services. While we did not propose to create any new composite 
APCs for CY 2010 or CY 2011, we accepted both of these APC Panel 
recommendations (75 FR 71852).
    As described in the CY 2012 OPPS/ASC proposed rule (76 FR 42203 
through 42206), in response to the APC Panel recommendations and the 
comments we received, we evaluated the implications of creating four 
composite APCs for CRT services, 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 of the proposed rule and Table 
10 below outline 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 using CY 2010 claims data available for the 
proposed rule, that is, those claims processed between January 1 and 
December 31, 2010.

[[Page 74177]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.016

    For CY 2012, under the authority of section 1833(t)(1)(B) of the 
Act, we proposed 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 was the only modeled composite in the study 
with significant claims volume, as shown above in Table 10, and would 
provide a single payment for a procedure currently assigned to APC 0418 
together with a procedure currently assigned to APC 0108 (Insertion/
Replacement/Repair of Cardioverter-Defibrillator Leads) when performed 
on the same date of service. Specifically, we proposed to create 
composite APC 8009, which would be used when the procedures described 
by CPT code 33225 and CPT code 33249 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 the standard OPPS ratesetting methodology, and to address 
the public commenters' concerns regarding the fluctuations in median 
costs for APC 0418. We stated that 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 to calculate median costs, 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 stated that we believe that 
there is sufficient claims volume for CPT code 33225 and CPT code 33249 
provided in the same encounter to warrant creation of the composite 
APC. In addition, we indicated that we believe the claims volume for 
CPT 33225 and CPT 33249 is sufficient to demonstrate that these 
services are commonly performed

[[Page 74178]]

together. While the other combinations of CRT procedures listed in 
Table 10 may also be performed together, we did not propose to 
implement composite APCs for these services because of the low 
frequency with which CPT code 33225 was reported in the claims data in 
combination with other CPT codes that describe the insertion of an ICD 
and a pacemaker. 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 of the low frequency of 
the other combinations of CRT procedures listed in Table 10 above, we 
did not consider them to be commonly performed together.
    Under the authority of section 1833(t)(2)(E) of the Act, we also 
proposed 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 proposed a payment rate for APC 8009 as 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 stated that we would establish the OPPS payment 
amount as the FY 2012 IPPS standardized payment amount for MS-DRG 227 
under this proposal. In the FY 2012 IPPS/LTCH proposed rule, this 
amount was $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 proposed rule (5.1370) by the sum of the 
non-labor and labor-related shares of the proposed FY 2012 IPPS 
operating standardized amount (nonwage-adjusted) ($5,132.36), which 
were obtained from Table 1B of the FY 2012 IPPS/LTCH proposed rule. 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 stated that we consider the standardized payment rate for MS-DRG 
227 to represent appropriate payment for a comparable package of 
services furnished to outpatients. We also stated that 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 services on an outpatient basis 
because hospital outpatients are generally less sick than hospital 
inpatients and because patients who have complications or comorbitities 
would be most likely to be admitted to inpatient status to receive CRT-
D services. Similar to the proposed payment rate for composite APC 
8009, the proposed payment rate for MS-DRG 227 included the device 
costs associated with CRT-D services, along with the service costs 
associated with CPT codes 33225 and 33249, which are the procedures 
that are reported for implanting those devices. We stated that 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. We explained that 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 as opposed to another by paying more for CRT-D services 
in the outpatient setting compared to the inpatient setting. We also 
explained that we 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42241 through 42242), 
we also addressed cases when CPT codes 33225 and 33249 are performed on 
different dates of service. We proposed to retain CPT code 33249 in APC 
0108, but to reassign CPT code 33225 to APC 0108 on the basis that 
these codes are similar in clinical characteristics and median cost. We 
proposed to revise the title of APC 0108 to read ``Insertion/
Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes'' 
for CY 2012. We also proposed to reassign 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)) from APC 0418 to APC 0655, 
and to change the title 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.'' In the CY 2012 OPPS/ASC proposed rule (76 FR 42205), we 
stated that we believe that reassigning CPT code 33224 to APC 0655 will 
promote stability in payment for CPT code 33224 because CPT code 33224 
would then be assigned to an APC with similar median costs, but with a 
higher volume of services and, therefore, will benefit from the 
stability in APC median costs and payment rates that generally result 
as the volume of services within an APC increases. Because these 
proposed actions would result in APC 0418 containing no CPT codes, we 
proposed to delete APC 0418.
    In addition, as with composite APC 8009 and under the authority of 
section 1833(t)(2)(E) of the Act, we proposed to limit the payment for 
services assigned to APC 0108 to the IPPS standardized payment amount 
for MS-DRG 227. In other words, we proposed a payment rate for APC 0108 
as the lesser of the APC 0108 median cost or the IPPS standardized 
payment rate for MS-DRG 227. We stated that 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 complications 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 stated that 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 order to ensure that hospitals correctly code for CRT services 
in the future, we proposed 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 the 
AMA in the CPT code book:

[[Page 74179]]

     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).
    In summary, for CY 2012, we proposed to create a composite APC for 
CRT-D services billed with CPT code 33225 and CPT code 33249 on the 
same date of service (Composite APC 8009 (Cardiac Resynchronization 
Therapy--ICD Pulse Generator and Leads)), for which we proposed that 
payment would be capped at the IPPS payment rate for MS-DRG 227. In 
other words, we would calculate payment for APC 8009 based on the 
lesser of the APC 8009 median cost or the IPPS standardized payment for 
MS-DRG 227. We also proposed to reassign CPT code 33225 to APC 0108 and 
to continue to assign CPT code 33249 to APC 0108 when they are 
furnished on different dates of service; to calculate payment for APC 
0108 based on the lesser of the APC 0108 median cost or the IPPS 
standardized payment for MS-DRG 227; and to delete APC 0418. Finally, 
we proposed 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. 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.
    At its August 10-11 meeting, the APC Panel recommended that CMS 
establish the payment rates for APC 8009 (Cardiac Resynchronization 
Therapy with Defibrillator, Composite) and APC 0108 (Insertion/
Replacement/Repair of Cardioverter-Defibrillator Leads) using only 
outpatient claims data. We are accepting this recommendation and will 
use only outpatient claims data to establish the payment rates for ICD 
and CRT-D implantation procedures, as discussed in greater detail in 
response to comments below.
    Comment: Many commenters supported the creation of a composite APC 
for CRT-D services, and the restructuring of APC 0108 in order to 
address the median cost fluctuations in APC 0418. Many commenters 
objected to the proposal to cap payments for the composite APC 8009 and 
for APC 0108 at the IPPS payment rate for MS-DRG 227. While some 
commenters acknowledged that limiting the payment for CRT-D services 
provided to hospital outpatients makes intuitive sense and applauded 
CMS for exploring Medicare payment across payment systems rather than 
limiting policy proposals to within a single payment system, they 
expressed concern that CMS had not demonstrated that the services 
included in composite APC 8009 and APC 0108 are the same services 
included in MS-DRG 227. Many commenters noted that there could be 
legitimate explanations for the higher hospital outpatient cost 
estimates for CRT that would support higher hospital outpatient 
payments, such as the inclusion of less expensive ICD-only cases in the 
MS-DRG 227 payment bundle and geographic variations in cost for CRT-D 
devices provided to hospital inpatients and hospital outpatients. They 
asserted that MS-DRG 227 is an inappropriate comparator because it 
includes CRT-D implantation procedures, along with less expensive ICD-
only cases. Other commenters argued that a payment cap is inappropriate 
because the proposed payment rate of approximately $26,365 for 
composite APC 8009 would fail to cover the cost of CRT-D devices used 
in the procedures described by CPT codes 33225 and 33249 based on CMS' 
calculation of APC costs associated with devices presented in Table 24 
of the CY 2012 OPPS/ASC proposed rule.
    The leading manufacturers of CRT devices argued that the payment 
cap is unnecessary, projecting that average actual payment differences 
(after accounting for wage index adjustments, indirect medical 
education (IME) payments, and disproportionate share hospital (DSH) 
payments) under the CRT-D composite APC (with no payment cap applied) 
and MS-DRG 227 would be unsubstantial and unlikely to create 
inappropriate payment incentives, indicating that a significant shift 
in site of care (from hospital inpatient to hospital outpatient) for 
implantable defibrillator implants has already been taking place over 
the past several years despite lower OPPS payment rates. Other 
commenters urged CMS to postpone the proposal to link IPPS and OPPS 
payments for CRT services until data from the new cost centers for 
implantable devices provides more accurate information for median cost 
development.
    Many commenters also stated that the cap as described in the 
proposed rule is not an accurate reflection of the equivalent IPPS 
payment for CRT-D services because the operating and capital 
standardized amounts paid to inpatient hospitals were not included, 
indicating that, according to the IPPS final rule, the total payment 
cap should be approximately $29,000. Other commenters added that IME 
and DSH payments also should be included in the cap calculation. The 
commenters urged CMS to take these MS-DRG payment adjustments into 
consideration if an IPPS payment cap were applied to composite APC 8009 
and APC 0108.
    Response: We appreciate the commenters' suggestions presented in 
response to our proposal to cap the OPPS payment for CRT-D services at 
the IPPS payment for MS-DRG 227, and the commenters' support for the 
creation of a composite APC for CRT-D services. After revisiting this 
issue, we agree that while MS-DRG 227 includes less expensive ICD-only 
cases, along with CRT-D system implants, proposed APC 8009 would 
include only CRT-D cases (and not ICD-only cases), and therefore does 
not represent a comparable package of services. Therefore, because 
there are significant differences in these payment bundles, and because 
we believe a payment cap would only be appropriate for comparable 
packages of services, we agree with the commenters that a better 
approach at this time would be to refrain from implementing our CY 2012 
proposal to cap the hospital outpatient payment rate for CRT-D services 
or ICD

[[Page 74180]]

implantation procedures based on the IPPS payment rate for MS-DRG 227.
    As described in the proposed rule, we continue to believe that we 
should recognize the inherent challenges in calculating accurate median 
costs for CPT code 33225 based on single procedure claims utilized in 
the standard OPPS ratesetting methodology, and that we should address 
the commenters' past concerns regarding the fluctuations in median 
costs for the APC to which this service has been assigned. We also 
continue to believe that it is important to ensure that we do not 
create an inappropriate payment incentive to provide services in one 
setting of care as opposed to another, also as stated in the proposal. 
In light of these goals, and taking into consideration the commenters' 
observations that the hospital inpatient and outpatient payment bundles 
for CRT-D services are different, we are modifying our proposal to 
create composite APC 8009 for CRT-D services. Under this final rule 
with comment period, we will treat CPT codes 33225 and 33249 as a 
single, composite service when they are performed on the same day as 
proposed, but rather than assigning them to composite APC 8009, we are 
assigning them to existing APC 0108 for CY 2012. We believe that this 
APC assignment is appropriate because the CRT-D procedure described by 
the combination of CPT codes 33225 and 33249 is clinically similar to 
the basic (nonresynchronization) ICD insertion procedure described by 
CPT code 33249 when it is performed by itself and assigned to APC 0108. 
Both procedures involve the insertion of one or more electrodes into 
the heart with subsequent connection to a cardiac pacing and 
defibrillation device. The difference between CRT-D and ICD insertion 
is the use of an additional pacing wire, but we note that APC 0108, in 
general, and CPT code 33249, specifically, already reflect a range of 
numbers of electrodes. We also note that the CRT-D procedure and the 
ICD-only procedure have similar final CY 2012 median costs of 
approximately $38,468 (based on 3,145 single claims) and $26,988 (based 
on 7,910 single claims), respectively, and that the placement of these 
procedures in the same APC does not violate the 2 times rule. We also 
are finalizing our proposal to change the title of APC 0108 to 
``Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing 
Electrodes'' because this APC will provide payment for ICD procedures, 
including CRT-D services.
    In calculating the median costs upon which the payment rate for APC 
0108 is based for CY 2012, for this final rule with comment period, we 
included single procedure claims for the individual services assigned 
to APC 0108, as well as single procedure claims that contain the 
composite CRT-D service, defined as the combination of CPT codes 33225 
and 33249 with the same date of service. We were able to use 11,055 
single bills from the CY 2012 final rule claims data (3,145 composite 
CRT-D service claims and 7,910 claims for other services assigned to 
APC 0108) to calculate a median cost of approximately $29,839. We note 
that under this policy, hospitals will continue to use the same CPT 
codes to report CRT-D procedures, and the I/OCE will determine when 
combinations of procedures qualify for composite service payment or map 
to standard (sole service) APCs for payment. We will make a single 
payment for those procedures that qualify for composite service 
payment, as well as any packaged services furnished on the same date of 
service. Because CPT codes 33225 and 33249 may be treated as a 
composite service for payment purposes, we are assigning them status 
indicator ``Q3'' (Codes that may be paid through a composite APC) in 
Addendum B to this final rule with comment period. The assignment of 
CPT codes 33225 and 33249 to APC 0108 when treated as a composite 
service also will be reflected in Addendum M to this final rule with 
comment period (which is available via the Internet on the CMS Web 
site).
    By continuing to recognize these procedures as a single, composite 
service, we are able to use a higher volume of correctly coded claims 
for CPT code 33225 and, therefore, to address the inherent ratesetting 
challenges associated with CPT code 33225 and stabilize payment for 
this service. We also note that this policy is consistent with the 
principles of a prospective payment system, specifically to place 
similar services that utilize technologies with varying costs in the 
same APC in order to promote efficiency and decisionmaking based on 
individual patient's clinical needs rather than financial 
considerations. By calculating the median cost for APC 0108 using 
claims from both ICD-only cases and CRT-D cases, we allow the costs of 
each to influence the overall median cost for the APC, which will rise 
or fall in the future depending on hospitals' utilization patterns. As 
indicated earlier, this methodology allows us to accept the APC Panel's 
recommendation to calculate payment for these services using only 
hospital outpatient claims data.
    Comment: A few commenters questioned CMS' authority under section 
1833(t)(2)(E) of the Act to cap the payment rate for an OPPS composite 
APC at a comparable MS-DRG payment rate established under the IPPS, 
arguing that they believe this provision of the Act applies only to 
adjustments made within the OPPS, and does not give CMS authority to 
make equitable adjustments across payment systems.
    Many commenters pointed out that CMS has held strongly to the 
principle of setting OPPS payment rates based only on hospital 
outpatient claims and cost report data since the beginning of the OPPS, 
often refusing stakeholders' requests to use external data or make 
cross-system payment comparisons as the basis for setting payment 
rates. The commenters stated that for CMS to cross payment systems and 
deviate from this longstanding policy would introduce a significant 
level of uncertainty and unpredictability. Other commenters stated that 
crossing payment systems for the first time under the OPPS represents a 
significant departure from the standard OPPS ratesetting methodology, 
undermines the integrity of the OPPS, discourages hospitals from 
providing care in the most appropriate setting, and adversely affects 
investment in new technologies.
    Some commenters also argued that CMS should not assume the hospital 
inpatient cost data for CRT-D services is more valid than hospital 
outpatient cost data. To the contrary, commenters noted that there are 
various mechanisms in place for hospital outpatient claims, such as the 
procedure-to-device edits, to ensure that hospitals report the full 
costs of devices provided in hospital outpatient departments, while 
there are no similar mechanisms in place for devices provided in 
hospital inpatient settings of care. The commenters pointed out that 
the OPPS and the IPPS have been designed to be internally consistent 
but not comparable to each other, noting that the methods used to 
establish relative weights in each system are independent and 
unrelated.
    Commenters also stated that if CMS were to set a precedent for 
looking across payment systems in this circumstance, then CMS should be 
consistent and make cross-system payment comparisons for all items and 
services, such as separately payable drugs and biologicals, which are 
paid at a lower per drug payment rate when they are provided in 
hospital outpatient settings compared to physician office settings.

[[Page 74181]]

    Response: Although we are not finalizing our proposal to institute 
a payment cap for composite APC 8009 and APC 0108, we believe we have 
broad authority under the statute to implement a cap on the payment 
rate for an OPPS APC at a comparable MS-DRG payment rate established 
under the IPPS. We also disagree that we cannot explore this policy 
option because it would be unprecedented and involve data other than 
data obtained from hospital outpatient claims. It is not unprecedented 
for CMS to use data from one payment system in the calculations for 
another in specific circumstances. For example, as described in detail 
in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72033) 
and in section XIII.C.1.b. of this CY 2012 OPPS/ASC final rule with 
comment period, we use physician claims data in determining which 
procedures will be designated as ``office-based'' for the ASC list of 
covered surgical procedures, and in setting the ASC payment rate, we 
use the lower of the MPFS nonfacility PE RVU -based amount or the 
amount calculated using the ASC standard ratesetting methodology for 
the procedure. Even if the use of such data were unprecedented, we do 
not believe that we should neglect to pursue innovations and 
refinements to Medicare payment policy because any such innovations and 
refinements would be new. We also disagree that a payment policy to 
create payment parity between the IPPS and OPPS in one clinical area 
would necessitate the creation of parity across payment systems for all 
items and services. We note that there could be many different payment 
approaches that could be chosen for comparison purposes for any given 
item or service, giving rise to implementation issues. That is, 
comparisons could be made between the OPPS and the payment 
methodologies for services furnished in the physician's office setting 
such as the MPFS for physicians' services or ASP for certain covered 
Part B drugs, as the commenter suggested, or comparisons could be made 
between the OPPS and the IPPS or other payment systems, and the 
``payment parity'' resulting from those comparisons would be vastly 
different. For example, while the commenters' suggested approach to 
achieve payment parity between the hospital outpatient setting and the 
physician office setting for drugs and biologicals would usually result 
in higher hospital outpatient payment rates of ASP+ 6 percent, an 
approach that would achieve payment parity between the hospital 
outpatient setting and the hospital inpatient setting would result in 
payment for most drugs and biologicals being packaged into the 
associated APC procedure payment, because payment for most drugs and 
biologicals under the IPPS is included in the MS-DRG payment. In 
addition, immediately applying such a policy across all items and 
services (rather than incrementally for items and services in one 
clinical area or a handful of clinical areas through notice-and-comment 
rulemaking) may result in payment instability as payments would 
potentially increase and decrease for thousands of services.
    We note that we may consider examining the issue of payment parity 
with respect to other payment systems, even when the data upon which 
the cost of a service is calculated are from a different source, 
because such an approach may deter inappropriate migration of services 
to a setting of care based on financial consideration rather than 
clinical needs.
    Although we are not implementing our proposal to cap payment for 
CRT-D services in CY 2012, we will continue to explore methods to 
ensure our payment systems do not provide inappropriate payment 
incentives to provide services in one setting of care as opposed to 
another setting of care.
    Comment: Some commenters contested the statement in the CY 2012 
OPPS/ASC proposed rule that hospital outpatients are generally less 
sick than hospital inpatients, arguing that not all patients with 
comorbidities are admitted as inpatients. Several commenters stated 
that CMS has not provided evidence to support the claim that CRT-D 
services on an outpatient basis would include fewer items and services 
than on an inpatient basis.
    Response: As indicated previously, we are not implementing our 
proposal to cap payment for CRT-D services at the IPPS payment rate for 
MS-DRG 227. We continue to believe, however, that the Medicare 
beneficiaries who receive a service on an outpatient basis would 
generally not be expected to be as sick as those who are admitted to 
the hospital to receive the same service. The Medicare Benefit Policy 
Manual (100-02), Chapter 1, Section 10 (available on the CMS Web site 
at: http://www.cms.gov/manuals/Downloads/bp102c01.pdf) defines an 
inpatient as a person who has been admitted to a hospital for bed 
occupancy for purposes of receiving inpatient hospital services. As 
stated in the manual, factors to be considered when making the decision 
to admit include such things as the severity of the signs and symptoms 
exhibited by the patient and the medical predictability of something 
adverse happening to the patient. We believe this supports our 
statement that, generally, patients who can receive a service on an 
outpatient basis rather than be admitted as inpatients are not as sick 
as patients who would need to be admitted as inpatients to receive 
those same services.
    We also continue to believe that the costs of providing a service 
to a hospital inpatient, in general, may exceed the costs for providing 
the same service on an outpatient basis. In general, payment for 
outpatient care through an APC consists only of the cost of the 
procedure, certain packaged ancillary services, and the cost of nursing 
and other staff care during the immediate recovery period. Patients are 
able to go home quickly (and if they are not able to go home quickly, 
they would typically be admitted). In general, the payment for 
operating costs of inpatient hospital services under the IPPS includes 
similar services that would be paid under the OPPS through an APC, plus 
associated diagnostic testing, drugs, laboratory tests, and the cost of 
an extended recovery over several days. Inpatient care is typically 
associated with longer periods of recovery, which may be triggered by 
increased complications, increased comorbidity, or increased risk. 
Although an individual outpatient case may be more expensive than an 
individual inpatient case, inpatients, on the average, will be sicker 
and more costly than outpatients receiving similar services.
    Comment: A few commenters disagreed with the proposed reassignment 
of CPT code 33224 to APC 0655, and the proposed reassignment of CPT 
code 33225 to APC 0108. According to the commenters, the claims data 
upon which CMS calculated the proposed median cost of CPT code 33225 
was flawed because it included many claims that should have been 
rejected if CMS applied its device-to-procedure edits. The commenters 
provided data analysis indicating that there were only 13 single bills 
that met the criteria of the device-dependent APC ratesetting 
methodology, and that the median cost calculated from those 13 single 
bills is approximately $8,149 rather than the median cost of 
approximately $34,018 calculated by CMS using 458 single bills from the 
data available for the CY 2012 proposed rule. The commenters requested 
that CMS maintain APC 0418, and continue to assign to it CPT codes 
33224 and 33225, based on their estimated median cost of approximately 
$8,149 for CPT code 33225 and CMS' estimated median cost of 
approximately $12,418 for CPT code 33224. The commenters expressed

[[Page 74182]]

general concern that the device-to-procedure edits were not being 
applied correctly to hospital outpatient claims.
    Response: We appreciate the commenters bringing to our attention 
potential problems with the claims used to calculate the proposed CY 
2012 median cost for CPT code 33225. We are investigating the 
possibility that erroneous claims may have made it pass the claims 
processing logic in place to enforce the device-to-procedure and 
procedure-to-device edits, and how they may have been present in the 
set of claims we used in ratesetting for the proposed rule. We note 
that we used a total of 28 single bills for CPT code 33225 to calculate 
a median cost of approximately $18,855 for this final rule with comment 
period, which is consistent with the much lower number of single bills 
identified by the commenters in the proposed rule data set and 
consistent with the number of single bills for this service in prior 
years' hospital outpatient claims data. We will continue to examine 
this issue in order to ensure that the claims we use to calculate 
median costs for these CPT codes, as well as all CPT codes assigned to 
device-dependent APCs, conform with the device-dependent APC 
ratesetting methodology outlined in section II.A.2.d.(1) of this final 
rule with comment period.
    We do not agree with the commenters that we should maintain APC 
0418 for CPT codes 33224 and 33225. Based on the hospital outpatient 
claims and cost report data available for this final rule with comment 
period, we calculated a final median cost of approximately $12,418 
using 198 single bills (out of 831 total bills) for CPT code 33224, and 
a final median cost of approximately $18,855 using 28 single bills (out 
of 10,424 total bills) for CPT code 33225. We continue to believe that 
CPT code 33224 appropriately aligns, both in terms of clinical 
characteristics and resource utilization, with other procedures 
assigned to APC 0655, which has a final CY 2012 median cost of 
approximately $9,638, because the median cost of CPT code 33224 is 
relatively close to the overall APC median cost and APC 0655 includes 
pacemaker insertion procedures. Therefore, we are finalizing our 
proposal, without modification, to assign CPT code 33224 to APC 0655.
    In addition, we agree with commenters that CPT code 33225 should 
not be assigned to APC 0108. We believe that CPT code 33225 should be 
assigned to APC 0655, rather than APC 0108 or APC 0418, when it is not 
performed on the same day as the service described by CPT code 33249, 
based upon the median cost calculated for CPT code 33225 using data 
available for this final rule with comment period and based upon the 
commenters' estimates presented in their analysis of this CPT code's 
cost. While we acknowledge that the final rule median cost of 
approximately $18,855 is higher than the median costs of the other 
procedures assigned to APC 0655, we believe this is an appropriate 
assignment for this CPT code from a clinical perspective because the 
procedure described by CPT code 33225 differs from the procedure 
described by CPT code 33224 (which is in APC 0655) only in the position 
of the end of the electrode within the heart. In addition, CPT code 
33225 is also similar to other procedures assigned to APC 0655, such as 
CPT code 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), which describes the 
upgrade of a pacemaker which generally includes new hardware and 
placement of a new electrodes. We also note that this assignment does 
not violate the 2 times rule. Therefore, for CY 2012, we are modifying 
our proposal to reassign CPT code 33225 to APC 0108 when it is 
performed without CPT code 33249. Instead, CPT code 33225 is reassigned 
to APC 0655 when it is performed without CPT code 33249. We also are 
finalizing our proposals to change the title of APC 0655 to 
``Insertion/Replacement/Conversion of a Permanent Dual Chamber 
Pacemaker or Pacing Electrode'' and to delete APC 0418.
    Comment: Many commenters supported the proposal to implement claims 
processing edits that would return claims to providers unless CPT code 
33225 is billed in conjunction with one of the clinically appropriate 
CPT codes specified by the AMA in the CPT code book.
    Response: We appreciate the commenters' support. We are 
implementing our CY 2012 proposal, without modification, to create 
claims processing edits for CPT code 33225 that would return claims to 
providers if CPT code 33225 is not correctly billed on the claim in 
conjunction with one of the clinically appropriate CPT codes specified 
by the AMA in the CPT code book, as described previously in this 
section.
    In summary, after consideration of the public comments we received 
and the APC Panel recommendation, we are not finalizing our proposal to 
implement a payment cap for CRT-D services and ICD implantation 
procedures based upon the payment rate for IPPS MS-DRG 227 as proposed. 
Instead, we will recognize CPT codes 33225 and 33249 as a single, 
composite service when they are performed on the same day as proposed. 
However, for CY 2012, rather than assigning the procedures described by 
CPT codes 33225 and 33249 when they are performed on the same day to 
composite APC 8009, we are assigning them to existing APC 0108. We are 
implementing our proposal to change the title of APC 0108 to 
``Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing 
Electrodes'' because this APC will provide payment for ICD procedures 
including CRT-D services. Hospitals will continue to use the same CPT 
codes to report CRT-D procedures and ICD-only procedures, and the I/OCE 
will identify when the combination of CPT codes 33225 and 33249 on the 
same day qualify for composite service payment. We will make a single 
composite payment for such cases. When not performed on the same day as 
the service described by CPT code 33225, the service described by CPT 
code 33249 will continue to be assigned to APC 0108. When not performed 
on the same day as the service described by CPT code 33249, the service 
described by CPT code 33225 will be assigned to APC 0655 (we note that 
this is a modification from our proposal to assign CPT code 33225 when 
it does not appear with CPT code 33249 to APC 0108). We also are 
finalizing our proposals to reassign CPT code 33224 to APC 0655 for CY 
2012, to change the title 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,'' and to delete APC 0418.
    In addition, we are finalizing our proposed policy to implement 
claims processing edits that will return to providers incorrectly coded 
claims on which a pacing electrode insertion (the procedure described 
by CPT code 33225) is billed without a procedure to insert an ICD or 
pacemaker.
3. 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

[[Page 74183]]

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 final rule with comment period and 
Addenda D1 (which is referenced in section XVII. of this final rule 
with comment period and available via the Internet on the CMS Web site) 
with other Addenda, for a complete listing of 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 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 final rule with comment 
period.
    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, in the CY 2012 
OPPS/ASC proposed rule (76 FR 42206), we invited 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 and August 10-11, 2011 APC Panel Meetings
    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

[[Page 74184]]

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 the proposed rule and this final 
rule with comment period, 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 CMS 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. The first APC Panel recommendation that relates to 
packaging and that we discuss in this section is APC Panel 
Recommendation 4. Two other recommendations, Recommendations 12 and 13, 
which evolved from the discussions of the APC Groups and Status 
Indicator Subcommittee, are related specifically to HCPCS codes, were 
discussed in section III.D. of the proposed rule, and are addressed in 
section III.D. of this final rule with comment period. Recommendation 
12 was that CMS reassign HCPCS code 65778 (Placement of amniotic 
membrane on the ocular surface for wound healing; self-retaining) and 
HCPCS code 65779 (Placement of amniotic membrane on the ocular surface 
for wound healing; single layer, sutured) to APC 0233 (Level III 
Anterior Segment Eye Procedures) and that CMS furnish data when data 
become available for these two codes. Recommendation 13 was that CMS 
create an intermediate-level upper gastrointestinal procedures APC.
    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])) should 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 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

[[Page 74185]]

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 percent 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 had 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. In the CY 2012 OPPS/ASC proposed rule (76 FR 42208), we proposed 
to accept both of the APC Panel's recommendations for the CY 2012 OPPS. 
Specifically, we proposed to assign HCPCS code 31627 to status 
indicator ``N'' for the CY 2012 OPPS and, therefore, proposed 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, we propose that the cost we calculate for 
CPT code 31627 would 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 would be 
incorporated into the payment for the APC to which that bronchoscopy 
code is assigned. We stated in the proposed rule that 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 bronchoscopy service and, therefore, we believe that it is 
ancillary and supportive to the bronchoscopy service with which it must 
be reported. We agreed to provide further claims information on HCPCS 
code 31627 to the APC Panel when it becomes available.
    Comment: One commenter supported the APC Panel recommendation at 
its February 2011 meeting that CMS provide further claims information 
on HCPCS code 31627 to the APC Panel when it becomes available.
    Response: We appreciate the commenter's support and will furnish 
further information on HCPCS code 31627 to the APC Panel at a future 
meeting.
    For CY 2012, we are continuing to package payment for HCPCS code 
31627 into payment for the separately paid procedure with which it is 
furnished because we continue to believe that it is ancillary and 
supportive to the bronchoscopy with which it is performed, as set forth 
in the CY 2012 proposed rule (76 FR 42207 through 42208). Therefore, we 
have assigned HCPCS code 31627 a status indicator of ``N'' for CY 2012.
    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: In the CY 2012 OPPS/ASC proposed 
rule, we accepted this recommendation and, therefore, proposed to 
reassign HCPCS code 31626 (which had a proposed CY 2012 APC median cost 
of approximately $2,708) from APC 0076 (which had a proposed CY 2012 
APC median cost of approximately $751) to APC 0415 (Level II Endoscopy 
Lower Airway), which had a proposed CY 2012 APC median cost of 
approximately $2,007. We agreed with the APC Panel that it appears that 
the proposed APC median cost of HCPCS code 31626 of $2,708 justified 
placement in an APC that has a median cost that is more similar to the 
APC median cost for this code. We stated that 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.
    Comment: Commenters supported our proposal to move HCPCS code 31626 
to APC 0415 for CY 2012.
    Response: We appreciate the commenters' support and are finalizing 
our proposal for the reasons set forth above.
    For CY 2012, we are moving HCPCS code 31626 from APC 0076 to APC 
0415, which has a final median cost of approximately $2,024.
    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: In the CY 2012 OPPS/ASC proposed 
rule, we indicated that we accepted 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.
    We did not receive any public comments on this recommendation. We 
appreciate the services of Ms. Kelly as chair of the Subcommittee for 
CY 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); and
     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: In the CY 2012 OPPS/ASC proposed 
rule, we indicated that we accepted 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,

[[Page 74186]]

and HCPCS code 76937, at a future APC Panel meeting.
    Comment: One commenter supported the APC Panel recommendation that 
CMS furnish the results of its investigation of claims that contain the 
following unconditionally packaged codes without separately paid 
procedures: HCPCS code 75940 and HCPCS code 76937.
    Response: As we indicated in the proposed rule (76 FR 42208), we 
will furnish this information to the APC Panel at a future meeting.
    APC Panel Recommendation 8: That the work of the APC Groups and 
Status Indicator (SI) Assignments Subcommittee continue.
    CMS Response to Recommendation 8: In the CY 2012 OPPS/ASC proposed 
rule, we indicated that we accepted the APC Panel's recommendation that 
the work of the APC Groups and Status Indicator Assignments 
Subcommittee continue.
    We did not receive any public comments on this recommendation.
(3) Packaging Recommendations of the APC Panel at Its August 2011 
Meeting
    During the August 10-11, 2011 APC Panel meeting, the APC Panel 
accepted the report of the Subcommittee for APC Groups and Status 
Indicator (SI) Assignments, heard several public presentations related 
to packaged services, discussed the deliberations of the subcommittee, 
and made three recommendations related to packaging and to the function 
of the subcommittee. The subcommittee also made recommendations with 
regard to APC placement of specific services that are discussed in 
section III.D of this final rule with comment period. The Report of the 
August 10-11, 2011 meeting of the APC Panel may be found at the CMS Web 
site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp.
    Below we present each of the three recommendations related to 
packaging and our responses to those recommendations. Recommendations 
that evolved from the discussions of the Subcommittee on APC Groups and 
Status Indicator Assignments that are specific to the APC assignment of 
HCPCS codes and removal of HCPCS codes from the inpatient only list are 
discussed in sections III and IX, respectively, of this final rule with 
comment period.
    APC Panel Recommendation 9: That CMS give HCPCS code 65778 
(Placement of amniotic membrane on the ocular surface for wound 
healing; self-retaining) a status indicator of ``T'' and provide the 
Panel with correlating claims data when available.
    CMS Response to Recommendation 9: We refer readers section 
III.D.5.a of this final rule with comment period for discussion of this 
recommendation.
    APC Panel Recommendation 11: The Panel recommends that Judith 
Kelly, R.H.I.T., R.H.I.A., C.C.S., remain the chair of the APC Groups 
and SI Assignments Subcommittee.
    CMS Response to Recommendation 11: We accept the recommendation 
that Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., remain the chair of the 
APC Groups and SI Assignments Subcommittee. We appreciate Ms. Kelly's 
continuing service in this position.
    APC Panel Recommendation 12: The Panel recommends that the work of 
the APC Groups and SI Assignments Subcommittee continue.
    CMS Response to Recommendation 12: We are accepting the APC Panel's 
recommendation that the work of the APC Groups and SI Assignments 
Subcommittee continue.
(4) Other Packaging Proposals and Policies for CY 2012
    The HCPCS codes that we proposed be packaged either unconditionally 
(for which we continue to assign status indicator ``N''), or 
conditionally (for which we continue to assign status indicators 
``Q1,'' ``Q2,'' or ``Q3''), were displayed in Addendum B of the CY 2012 
OPPS/ASC proposed rule (76 FR 42208). The supporting documents for the 
CY 2012 OPPS/ASC proposed rule, including but not limited to Addendum 
B, are available at the CMS Web site at: 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'' or ``2012 OPPS Final 
Rule with Comment Period 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.
    Comment: Commenters stated that CMS' packaging policies would 
likely lead to less efficient use of resources, limited access to 
innovative treatment options, and greater instability in payments 
because the policies are based on several flawed assumptions. 
Commenters believed that, to the extent that hospitals control the 
array of services they provide, CMS' packaging policies assume that the 
same incentives apply to services furnished in hospital outpatient 
departments as to inpatient services. One commenter stated that under 
the hospital inpatient prospective payment system (IPPS), hospitals 
have an incentive to provide care, including advanced technologies, in 
an efficient manner to ensure the lowest cost for the patient's 
diagnosis. In contrast, in hospital outpatient departments, because 
Medicare payment is based on procedures rather than diagnoses, the 
commenter believed that hospitals have an incentive to provide the 
lowest cost item or service included in an APC. The commenter further 
believed that if that service does not fully address the patient's 
needs, the hospital would receive better payment by bringing the 
patient back for a second visit or admitting the patient for inpatient 
care than by providing a more costly option within the same APC.
    Moreover, the commenters believed that when an APC's payment rate 
is significantly less than the cost of a technology, hospitals have a 
strong disincentive to use that technology, even if it could reduce the 
costs of care at a later date. The commenters believed that CMS' use of 
expanded packaging has the risk of encouraging hospitals to forego 
performing needed services and using new technologies that may be more 
resource intensive during one visit, but could save the patient future 
outpatient department visits or inpatient care.
    Response: Packaging payment for items and services that are 
ancillary to and dependent on the major procedure for which a payment 
rate is established is a fundamental concept of the OPPS, based in 
regulation in the definition of costs that are included in the national 
payment rate for a service (42 CFR 419.2(b)) and in place since the 
inception of the OPPS (65 FR 18447). We continue to believe that 
packaging creates incentives for hospitals and their physician partners 
to work together to establish appropriate protocols that eliminate 
unnecessary services where they exist and institutionalize approaches 
to providing necessary services more efficiently. With respect to new 
services or new applications of existing technology, we believe that 
packaging payment for ancillary and dependent services creates 
appropriate incentives for hospitals to seriously consider whether a 
new service or a new technology offers a benefit that is sufficient to 
justify the cost of the new service or new technology. Where this 
review results in reductions in services that are only marginally 
beneficial or influences hospitals' choices to not utilize certain 
technologies, we believe that these changes could improve, rather than 
harm, the quality of care for Medicare beneficiaries because every 
service furnished in a hospital carries

[[Page 74187]]

some level of risk to the patient and the beneficiary would be spared 
the risk associated with the additional service or different 
technology. Moreover, we believe that hospitals strive to provide the 
best care they can to the patients they serve so that when new 
technologies are proven to improve the quality of care, their 
utilization will increase appropriately, whether the payment for them 
is packaged or not. While we believe hospitals are committed to provide 
optimal care to their patients, we are aware that there are financial 
pressures on hospitals that might motivate some providers to split 
services among different hospital encounters in such a way as to 
maximize payments. While we do not expect that hospitals would 
routinely change the way they furnish services or the way they bill for 
services in order to maximize payment, we recognize that it would be 
possible and we consider that possibility as we annually review 
hospital claims data. We will continue to examine claims data for 
patterns of fragmented care, and if we find a pattern in which a 
hospital appears to be dividing care across multiple days, we will 
refer it for investigation to the QIO or to the Program Safeguard 
Contractor, as appropriate to the circumstances we find.
    Comment: Commenters asked that CMS make underlying payment rates 
for packaged services, including utilization rates, estimated median 
costs, and numbers of hospitals furnishing various services, available 
to the public. In addition, commenters asked that CMS study and report 
annually to the APC Panel and to the public on the impact of packaged 
payment on beneficiary access to care. One commenter believed that the 
APC Panel recommended that CMS report annually on the impact of 
packaging on net payments for patient care.
    Response: Each year, CMS makes available an extensive amount of 
OPPS data that can be used for any data analysis an interested party 
would care to perform. Specifically, we make available a considerable 
amount of data for public analysis each year through the supporting 
data files that are posted on the CMS Web site in association with the 
display of the proposed and final rules. In addition, as we discuss in 
detail in section II.A.2. of this final rule with comment period, we 
make available the public use files of claims, including, for CY 2008 
and later, supplemental line item cost data for every HCPCS code under 
the OPPS, and a detailed narrative description of our data process for 
the annual OPPS/ASC proposed and final rules that the public can use to 
perform any desired analyses. Therefore, commenters are able to examine 
and analyze these data to develop specific information to assess the 
impact and effect of packaging for the services of interest to them. 
This information is available to support public requests for changes to 
payments under the OPPS, whether with regard to separate payment for a 
packaged service or other issues. We understand that the OPPS is a 
complex payment system and that it may be difficult to determine the 
quantitative amount of packaged cost included in the median cost for 
every independent service. However, commenters routinely provide us 
with meaningful analyses at a very detailed and service-specific level 
based on the claims data we make available. We routinely receive 
complex and detailed public comments, including extensive code-specific 
data analysis on packaged and separately paid codes, using the data 
from current and prior proposed and final rules. The APC Panel did not 
recommend at either the February 2011 or August 2011 meetings that CMS 
should report annually on the impact of packaging on net payments for 
patient care.
    Comment: Commenters stated that CMS assumes that its packaging 
policies will allow it to continue to collect the data it needs to set 
appropriate, stable payment rates in the future, but that this 
assumption is flawed. Commenters stated that CMS' past experience with 
packaging payment for ancillary items indicates that hospitals do not 
submit codes for services that do not directly affect their payment and 
see no reason to believe that this will change. The commenters asked 
that CMS require complete and correct coding for packaged services so 
that all items and services that are not individually paid must be 
included on the claim to provide CMS with essential data for future 
OPPS updates. Commenters expressed concern about what they believed to 
be decreases in the number of hospitals reporting services as a result 
of packaging and bundling. They believed that the decline could be due 
to one or both of two reasons: Hospitals may no longer be providing 
these services; or hospitals could be providing these services but not 
reporting codes and charges for them, denying CMS accurate data for use 
in rate setting. The commenters were concerned that decreased reporting 
of services will result in the costs of packaged services not being 
included in the payment for the independent service with which they are 
furnished.
    Response: We do not believe that there has been or will be a 
significant change in what hospitals report and charge for the 
outpatient services they furnish to Medicare beneficiaries and other 
patients as a result of our current packaging methodology. Medicare 
cost reporting standards specify that hospitals must impose the same 
charges for Medicare patients as for other patients. We are often told 
by hospitals that many private payers pay based on a percentage of 
charges and that, in accordance with Medicare cost reporting rules and 
generally accepted accounting principles, hospital chargemasters do not 
differentiate between the charges to Medicare patients and other 
patients. Therefore, we have no reason to believe that hospitals will 
stop reporting HCPCS codes and charges for packaged services they 
provide to Medicare beneficiaries. As we stated in the CY 2009 OPPS/ASC 
final rule with comment period (74 FR 68575), we strongly encourage 
hospitals to report a charge for each packaged service they furnish, 
either by billing the packaged HCPCS code and a charge for that service 
if separate reporting is consistent with CPT and CMS instructions, by 
increasing the charge for the separately paid associated service to 
include the charge for the packaged service, or by reporting the charge 
for the packaged service with an appropriate revenue code but without a 
HCPCS code. Any of these means of charging for the packaged service 
will result in the cost of the packaged service being incorporated into 
the cost we estimate for the separately paid service. If a HCPCS code 
is not reported when a packaged service is provided, we acknowledge 
that it can be challenging to specifically track the utilization 
patterns and resource cost of the packaged service itself. However, we 
have no reason to believe that hospitals have not considered the cost 
of the packaged service in reporting charges for the independent, 
separately paid service. We expect that hospitals, as other prudent 
businesses, have a quality review process that ensures that they 
accurately and completely report the services they furnish, with 
appropriate charges for those services to Medicare and all other 
payers. We encourage hospitals to report on their claim for payment all 
HCPCS codes that describe packaged services that were furnished, unless 
the CPT Editorial Panel or CMS provides other guidance. To the extent 
that hospitals include separate charges for packaged services on their 
claims, the estimated costs of those packaged services are then added 
to the costs of separately paid procedures on the same claims and used 
in establishing

[[Page 74188]]

payment rates for the separately paid services. It is impossible to 
know with any certainty whether hospitals are failing to report HCPCS 
codes and charges for services for which the payment is packaged into 
payment for the independent service with which the packaged service is 
furnished. Moreover, if a hospital fails to report the HCPCS codes and 
charges for packaged services, the reason may be that the hospital has 
chosen to package the charge for the ancillary and dependent service 
into the charge for the service with which it is furnished. Although we 
prefer that hospitals report HCPCS codes and charges for all services 
they furnish, if the hospital's charge for the independent service also 
reflects the charge for all ancillary and supportive services it 
typically provides, the absence of HCPCS codes and separate charges 
would not result in inappropriately low median cost for the independent 
service, although CMS would not know which specific ancillary and 
supportive services were being furnished. If a hospital is no longer 
providing a service, there may be many reasons that a hospital chooses 
not to provide a particular service or chooses to cease providing a 
particular service, including, but not limited to, because the hospital 
has determined that it is no longer cost effective for the hospital to 
furnish the service and that there may be other hospitals in the 
community that can furnish the service more efficiently.
    Comment: One commenter asked that CMS reinstate separate payment 
for radiation oncology guidance procedures because these services are 
vital to the safe provision of radiation therapy and unconditionally 
packaging payment for them may discourage hospitals from providing 
them.
    Response: We recognize that radiation oncology guidance services, 
like most packaged services, are important to providing safe and high 
quality care to patients. However, we continue to believe that 
hospitals will invest in services that represent genuinely increased 
value to patient care, and if hospitals can furnish them efficiently. 
We will continue to pay separately for innovative technologies if a 
device meets the conditions for separate payment as a pass-through 
device or if a new procedure meets the criteria for payment as a new 
technology APC.
    After considering the public comments we received, for CY 2012, we 
are continuing to package payment for the services for which we 
proposed unconditional or conditional packaged payment in the proposed 
rule for the reasons set forth above. The HCPCS codes for which payment 
will be packaged into payment for the independent separately paid 
procedures with which the codes are reported either unconditionally 
(for which we continue to assign status indicator ``N''), or 
conditionally (for which we continue to assign status indicators 
``Q1'', ``Q2'', or ``Q3'') are displayed in Addendum B of this final 
rule with comment period (which is referenced in section XVIII. of this 
final rule with comment period and available via the Internet on the 
CMS Web site). The supporting documents for this CY 2012 OPPS/ASC final 
rule with comment period, including but not limited to Addendum B, are 
available at www.cms.gov/HospitalOutpatientPPS/HORD. To view the status 
indicators by HCPCS code in Addendum B, select ``CMS 1525-FC'' and then 
select the folder labeled ``2012 OPPS Proposed Rule Addenda'' or ``2012 
OPPS Final Rule With Comment Period 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 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 
final rule with comment period. 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 final rule 
with comment period as an ``implantable biological.''
    The 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 final rule with comment period.
4. Calculation of OPPS Scaled Payment Weights
    As we proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42209), 
using the APC median costs discussed in sections II.A.1. and II.A.2. of 
this final rule with comment period, we calculated the final relative 
payment weights for each APC for CY 2012 shown in Addenda A and B to 
this final rule with comment period (which are referenced in section 
XVII. of this final rule with comment period 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, in the CY 2012 OPPS/ASC proposed rule (76 FR 42209), 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 proposed to continue to use the median 
cost of the mid-level clinic visit APC (APC 0606) to calculate unscaled 
weights. Following our standard methodology, but using the proposed CY 
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 proposed 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

[[Page 74189]]

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 the proposed rule and this final rule with comment period) 
was included in the proposed budget neutrality calculations for the CY 
2012 OPPS.
    We did not receive any public comments on the proposed methodology 
for calculating scaled weights from the median costs for the CY 2012 
OPPS. Therefore, for the reasons set forth in the proposed rule (76 FR 
42209), we are finalizing our proposed methodology without 
modification, including updating of the budget neutrality scaler for 
this final rule with comment period as we proposed. Under this 
methodology, the final unscaled payment weights were adjusted by a 
weight scaler of 1.3588 for this final rule with comment period. The 
final scaled relative payment weights listed in Addenda A and B to this 
final rule with comment period (which are referenced in section XVII. 
of this final rule with comment period and available via the Internet 
on the CMS Web site) incorporate the final recalibration adjustments 
discussed in sections II.A.1. and II.A.2. of this final rule with 
comment period.

B. Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires us to update the 
conversion factor used to determine payment rates under the OPPS on an 
annual basis 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 final rule 
(76 FR 51689), consistent with current law, based on IHS Global 
Insight, Inc.'s second quarter 2011 forecast of the FY 2012 market 
basket increase, the FY 2012 IPPS market basket update is 3.0 percent. 
However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(ii) of the Act, as 
added by section 3401(i) of the Public Law 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 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 final rule 
(76 FR 51690 through 51692) for a discussion of the calculation of the 
MFP adjustment. The final MFP adjustment for FY 2012 is 1.0 percentage 
point.
    We proposed that if more recent data are subsequently available 
after the publication of the proposed rule (for example, a more recent 
estimate of the market basket and MFP adjustment), we would use such 
data, if appropriate, to determine the CY 2012 market basket update and 
the MFP adjustment in the CY 2012 final rule. Consistent with this 
proposal, in this CY 2012 OPPS/ASC final rule with comment period, we 
reduced the OPD fee schedule increase factor for CY 2012 by the final 
MFP adjustment of 1.0 percentage point for FY 2012. Because 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 final rule, we applied the updated final FY 2012 
market basket percentage increase and the MFP adjustment to the OPD fee 
schedule increase factor for the CY 2012 OPPS. 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, as we proposed, 
we are applying 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 applying an OPD fee 
schedule increase factor of 1.9 percent for the CY 2012 OPPS (3.0 
percent, which is the final estimate of the hospital market basket 
increase, less the 1.0 percentage point MFP adjustment, less the 0.1 
percentage point additional adjustment).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42210), we proposed to 
revise 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (3) 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

[[Page 74190]]

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 proposed to amend Sec.  419.32(b)(1)(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.
    We did not receive any public comments on our proposed adjustments 
to the OPD fee schedule increase factor or on the proposed changes to 
Sec.  419.32(b)(1)(iv)(B) to add a new paragraph (3). We also did not 
receive any public comments on our proposed change to Sec.  
419.32(b)(1)(iv)(A). For the reasons discussed above, we are adjusting 
the OPD fee schedule increase factor and are making the two changes to 
Sec.  419.32 as proposed.
    To set the OPPS conversion factor for CY 2012, we increased the CY 
2011 conversion factor of $68.876 by 1.9 percent. In accordance with 
section 1833(t)(9)(B) of the Act, we further adjusted 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 an overall budget neutrality factor of 
1.0005 for wage index changes by comparing total estimated payments 
from our simulation model using the FY 2012 IPPS final 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 making a change to our rural adjustment 
policy. Therefore, the budget neutrality factor for the rural 
adjustment is 1.0000.
    For CY 2012, we are finalizing a payment adjustment policy for 
dedicated cancer hospitals, as discussed in section II.F. of this final 
rule with comment period. Consistent with the final cancer hospital 
payment adjustment policies discussed in section II.F. of this final 
rule with comment period, we calculated a CY 2012 budget neutrality 
adjustment factor of 0.9978 by comparing the estimated total payments 
under section 1833(t) of the Act, including the cancer hospital 
adjustment under section 1833(t)(18)(B) and 1833(t)(2)(E) of the Act, 
to hospitals described in section 1886(d)(1)(B)(v) of the Act to the 
estimated total payments under section 1833(t) of the Act if there were 
no cancer hospital adjustment, including TOPS that would otherwise be 
made to hospitals described in section 1886(d)(1)(B)(v) of the Act. As 
discussed in section II.F. of this final rule with comment period, in 
terms of dollars, the budget neutrality payment reduction is estimated 
to be $71 million for CY 2012; that is, we estimate that total payments 
with a cancer hospital payment adjustment would increase total payments 
by $71 million and this amount needs to be offset by adjusting other 
payments. Therefore, we applied a budget neutrality adjustment factor 
of 0.9978 to the conversion factor to make the hospital adjustment 
budget neutral.
    For this final rule with comment period, we estimate that pass-
through spending for both drugs and biologicals and devices for CY 2012 
will equal approximately $89 million, which represents 0.22 percent of 
total projected CY 2012 OPPS spending. Therefore, the conversion factor 
is also adjusted by the difference between the 0.15 percent estimate of 
pass-through spending for CY 2011 and the 0.22 percent estimate of CY 
2012 pass-through spending, resulting in an adjustment for CY 2012 of 
0.07 percent. Finally, estimated payments for outliers remain at 1.0 
percent of total OPPS payments for CY 2012.
    The OPD fee schedule increase factor of 1.9 percent for CY 2012 
(that is, the estimate of the hospital market basket increase of 3.0 
percent less the 1.0 percentage point MFP adjustment and less the 0.1 
percentage point adjustment which were necessary in order to comply 
with the requirements of the Affordable Care Act), the required wage 
index budget neutrality adjustment of approximately 1.0005, the cancer 
hospital payment adjustment of 0.9978, and the adjustment of 0.07 
percent of projected OPPS spending for the difference in the pass-
through spending result in a conversion factor for CY 2012 of $70.016. 
This conversion factor for CY 2012 of $70.016 reflects the full OPD fee 
schedule increase, after including the adjustments which were necessary 
in order to comply with the requirements of the Affordable Care Act.
    As we stated in the proposed rule, 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. E. of the proposed rule and this final rule 
with comment period. To calculate the 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 
update, we are making all other adjustments discussed above, but using 
a reduced OPD fee schedule update factor of -0.1 percent (that is, the 
OPD fee schedule increase factor of 1.9 percent 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 reduced conversion factor for CY 2012 of $68.616 for 
those hospitals that fail to meet the Hospital OQR requirements (a 
difference of -$1.40 in the conversion factor relative to those 
hospitals that met the Hospital OQR requirements).
    We did not receive any public comments on our proposed methodology 
for calculating the CY 2012 conversion factor.
    In summary, for CY 2012, we are using a final conversion factor of 
$70.016 in the calculation of the national unadjusted payment rates for 
those items and services for which payment rates are calculated using 
median costs. We did not receive any public comments on this proposal. 
Therefore, for the reasons we discuss above, we are amending 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 amending 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 using a reduced conversion factor of 
$68.616 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. 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

[[Page 74191]]

labor-related share. This adjustment must be made in a budget neutral 
manner and budget neutrality is discussed in section II.B. of this 
final rule with comment period.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that, 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, in the CY 2012 OPPS/ASC 
proposed rule (76 FR42211), we did not propose to revise this policy 
for the CY 2012 OPPS. We refer readers to section II.H. of this final 
rule with comment period for a description and example of how the wage 
index for a particular hospital is used to determine the payment for 
the hospital.
    As discussed in section II.A.2.c. of this final rule with comment 
period, for estimating national median APC costs, we standardize 60 
percent of estimated claims costs for geographic area wage variation 
using the same FY 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 also applies 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 final 
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 of the Affordable Care Act specifies that, for 
services furnished beginning CY 2011, the wage adjustment factor 
applicable to any HOPD 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, as we proposed, we are 
continuing 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 
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 will 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 
will also apply for the affiliated HOPD. We refer readers to the FY 
2011 and FY 2012 IPPS/LTCH PPS final rules (75 FR 50160 and 76 FR 
51581, respectively) 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 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 (the out-migration adjustment). We refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51581 through 51605) for a 
detailed discussion of all 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, through FY 
2011, section 508 reclassifications as well as certain special 
exceptions. The latest extension of these provisions expired on 
September 30, 2011, and is no longer 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 the OPPS for all other nonsection 508 and non-
special exception providers was July 1, 2011, instead of April 1, 2011, 
so that these providers also received a full 6 months of payment under 
the revised wage index comparable to the IPPS.
    For purposes of the OPPS, as we proposed, we are continuing our 
policy in CY 2012 of allowing 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 final rule (and made available via the Internet 
on the CMS Web site at: http://www.cms.gov/AcuteInpatientPPS/01_overview.asp) identifies counties eligible for the out-migration 
adjustment and hospitals that will receive the adjustment for FY 2012. 
We note that, beginning with FY 2012, under the IPPS, 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)

[[Page 74192]]

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 final rule (76 FR 51599) for a more detailed discussion 
on the Lugar redesignation waiver for the out-migration adjustment). As 
we have done in prior years, we are including Table 4J as Addendum L to 
this final rule with comment period with the addition of non-IPPS 
hospitals that will receive the section 505 out-migration adjustment 
under the CY 2012 OPPS. Addendum L is referenced in section XVII. of 
this final rule with comment period 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 OPPS payments in CY 2012, we used the 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 out-migration 
adjustment, reclassifications, and the rural floor. For the OPPS, using 
the 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 their status significantly inflate wage indices across a 
State. 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 final rule (76 FR 51824) shows the impact 
of this CAH conversion. Hospitals in Massachusetts can expect an 
approximate 8.7percent increase in IPPS payments due to the conversion 
and the 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 indices 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 are concerned with individual urban to rural conversions 
allowing payment redistributions of this magnitude.
    We believe the above discussions demonstrate that 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 calculations the same wage adjustment factor that the law 
requires be applied to IPPS payments.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42212), we stated that 
we were considering the adoption of a policy that would address 
situations where IPPS wage index adjustments, such as the rural floor, 
result in significant fluctuations in the wage index within a State. 
One option we proposed would be not to apply the rural floor wage index 
at all in the OPPS where the rural floor is set by a small number of 
hospitals in a State and results in a rural floor that benefits all 
hospitals in the State. Alternatively, we proposed that 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. In the 
proposed rule, we sought 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 (our 
current policy); (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, and, if so, then 
not apply the rural floor wage index; (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 requested public comments on an option that we were 
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 that the rural floor is based 
upon hospitals located in rural areas.
    Comment: Commenters that were in favor of maintaining the current 
policy (option 1 listed above) of adopting the IPPS wage indices under 
the OPPS cited several different reasons for their choice. Several 
commenters believed that hospital inpatient and outpatient departments 
are ``inseparable'' because they are subject to the same labor cost 
environment, and, therefore, should have the same wage index where 
applicable. Other commenters preferred maintaining the current wage 
index policy and implementing wage index changes in the context of 
comprehensive wage index reform. These commenters believed that only 
comprehensive wage index reform can revise the wage index in such as 
way as ``to minimize volatility of the wage index and remove incentives 
to game the system.'' Commenters stated that an additional reason for 
maintaining the current policy was that different wage indices for 
inpatient and outpatient payments would add a level of administrative 
complexity that is overly burdensome and unnecessary.
    Several commenters expressed a preference for wage index policy 
option 2 included in the proposed rule (to 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, and, if so, then not apply the rural floor wage index). These 
commenters typically viewed this option to be the best in terms of 
addressing current inequities. However, some of the commenters 
requested that CMS explicitly define a ``small number'' threshold as 
well as what is considered as a ``benefit'' for all other hospitals in 
the State. Some commenters that supported option 2 preferred option 2 
to option 3 (the adoption of the IPPS wage index policies but 
application of statewide rather than national budget

[[Page 74193]]

neutrality for the rural floor policy). Commenters that preferred 
option 2 rather than option 3 argued that a national level adjustment 
was in keeping with Congressional intent, especially given that 
Congress enacted legislation to establish national budget neutrality 
for the rural floor in the IPPS under the Affordable Care Act 
(effective in FY 2011). These commenters also were concerned about CMS 
deciding when budget neutrality adjustments should be applied at the 
State versus national levels.
    Several commenters favored option 3 because they supported the 
application of statewide level budget neutrality for the rural floor 
policy. These commenters favored basing the wage index on Bureau of 
Labor Statistics (BLS) data rather than hospital cost reports but 
believed that, in the absence of broader wage index reform, option 3 
was the most equitable policy. One commenter, although supportive of 
systematic wage index reform, stated that CMS ``should not wait for 
reform to address obvious and significant immediate problems'' and 
therefore advocated for option 3.
    Instead of recommending other policy options, for the fourth 
potential wage index policy option (adopting another decision rule), 
most commenters simply requested further detail. Several commenters did 
not exhibit any preferences for any specific wage index policy options, 
choosing instead to comment generally about issues of concern. One 
commenter believed that ``looking at one policy in isolation serves 
only to address one issue while likely creating other inequities in the 
system.'' Another commenter was concerned that any new rule could 
unnecessarily harm rural providers. Another commenter that supported 
systematic wage index reform advocated not making changes until reports 
from the Institute of Medicine are completed and the CMS report to 
Congress, which is due on December 31, 2011, are fully analyzed. 
Commenters requested further detail to formulate a policy position on 
the four options presented and urged CMS to include impact analyses for 
the final rule.
    Response: We appreciate the public comments. We acknowledge that 
there may be inequities in the current application of the wage index 
policy and its various adjustments. This is why we described various 
methods and wage index options that we might consider under the OPPS to 
address manipulation of wage index adjustment policies, and, in this 
specific case, the rural floor wage index and its national level budget 
neutrality.
    In the CY 2012 OPPS/ASC proposed rule, we referred specifically to 
the conversion of one CAH to IPPS status to increase the rural floor 
for the State, which would increase IPPS and OPPS payments to that 
State, while decreasing IPPS and OPPS payments to hospitals in other 
States, under a policy in which the rural floor wage index budget 
neutrality was applied at the national level. Similarly, we are aware 
of requests from urban hospitals to convert to rural hospital status, 
which would inflate those States' rural floors. While we recognize that 
conversions from urban-to-rural status are permitted under section 
1886(d)(8)(E) of the Act, we are concerned with individual urban-to-
rural conversions that would result in payment redistributions of this 
magnitude.
    However, we agree with the commenters that stated that maintaining 
the current policy for CY 2012 would be the best option, given the 
broader wage index reform currently under development and 
consideration. This includes the Report to Congress with a plan for 
wage index reform, which is due December 31, 2011, under the Affordable 
Care Act. We will continue to consider these policy options in future 
rulemaking, especially in the context of other significant wage index 
revisions. In response to commenters' recommendations that we provide 
more detailed impact analysis, we are providing a State level impact 
table, similar to the table provided in the FY 2012 IPPS/LTCH final 
rule (76 FR 51824 through 51825), that displays the impact of the rural 
floor and imputed floor policies with national budget neutrality on 
OPPS hospitals and their payments by State. This table is included in 
section XX. of this final rule with comment period.
    Comment: A few commenters responded to our request for comments on 
setting the applicable rural wage index floor using only data from 
hospitals that are geographically rural according to OMB and 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. One commenter opposed using data from geographically rural 
hospitals alone in setting the rural floor because reclassified 
hospitals are considered rural for all payment policies. Several 
commenters agreed that wage data associated with hospitals that are 
reclassified should be excluded from calculation of the rural floor. 
One commenter questioned why it is necessary to maintain the rural 
floor wage index policy under the OPPS.
    Response: For the reasons stated above, in this final rule with 
comment period, we are adopting the IPPS wage index and its adjustments 
for use under the OPPS. However, in the IPPS proposed rule for FY 2013, 
we may address the issue of including hospitals reclassified from urban 
to rural status under section 1886(d)(8)(E) of the Act.
    Comment: One commenter asked whether an increase similar to the 1.1 
percent increase included in the FY 2012 IPPS/LTCH final rule (76 FR 
51788) should also apply under the OPPS.
    Response: The increase cited by the commenter is limited to IPPS 
payments. Budget neutrality (including that for the rural floor) is 
calculated prospectively each year under the OPPS. While we have 
historically adopted the IPPS wage index when developing the wage 
indices for calculating payments under the OPPS, the budget neutrality 
factors that applied to the standardized amount under IPPS as a result 
of the rural floor were not applied to the OPPS conversion factor, and 
thus would not have any effect on OPPS budget neutrality.
    After consideration of the public comments we received, we are 
finalizing our policy to adopt the FY 2012 IPPS wage index for the CY 
2012 OPPS in its entirety including the rural floor, geographic 
reclassifications, and all other wage index adjustments.
    With the exception of the out-migration wage adjustment table 
(Addendum L to this final rule with comment period, 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 final 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 
final FY 2012 IPPS wage index tables.

D. Statewide Average Default CCRs

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, CMS uses overall hospital-specific CCRs calculated 
from the hospital's most recent cost report to determine outlier 
payments, payments for pass-through devices, and monthly interim 
transitional corridor payments under the OPPS during the PPS year. 
Medicare contractors cannot calculate a CCR for some hospitals because 
there is no cost report available. For these hospitals, CMS uses the 
statewide average default CCRs to determine the payments mentioned 
above until a hospital's Medicare contractor is able to

[[Page 74194]]

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). As we proposed in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42213), we are updating 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.
    We proposed 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 CY 2012 OPPS relative weights. Table 11 published in the 
proposed rule listed the proposed CY 2012 default urban and rural CCRs 
by State and compared them to last year's default CCRs. These proposed 
CCRs represented 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 adjusted 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 weighted each hospital's CCR by the volume of 
separately paid line-items on hospital claims corresponding to the year 
of the majority of cost reports used to calculate the overall CCRs. We 
refer readers to the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66680 through 66682) and prior OPPS rules for a more detailed 
discussion of our established methodology for calculating the statewide 
average default CCRs, including the hospitals used in our calculations 
and our trimming criteria.
    We did not receive any public comments on our CY 2012 proposal. We 
are finalizing our proposal to apply our standard methodology of 
calculating the statewide average default CCRs using the same hospital 
overall CCRs that we used to adjust charges to costs on claims data for 
setting the CY 2012 OPPS relative weights. We used this methodology to 
calculate the statewide average default CCRs listed in Table 11 below.
    For this CY 2012 OPPS/ASC final rule with comment period, 
approximately 47 percent of the submitted cost reports utilized in the 
default ratio calculations represented data for cost reporting periods 
ending in CY 2010 and 53 percent were for cost reporting periods ending 
in CY 2009. 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 finalized statewide average default CCRs 
for OPPS services furnished on or after January 1, 2012.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

E. OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes
    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 TOPs were 
temporary payments for most providers and intended to ease their 
transition from the prior reasonable cost-based payment system to the 
OPPS system. There are two exceptions to this temporary provision, 
cancer hospitals and children's hospitals. Such a hospital could 
receive TOPs to the extent its PPS amount was less than its pre-BBA 
amount in the applicable year. Section 1833(t)(7)(D)(i) of the Act 
originally provided for TOPs to rural hospitals with 100 or fewer beds 
for covered OPD services furnished before January 1, 2004. However, 
section 411 of Pub. L. 108-173 (the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003) 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 TOPs 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 TOPs 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 (the Deficit Reduction Act of 
2005) extended 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. Section 5105 also reduced the TOPs 
to rural hospitals from 100 percent of the difference between the 
provider's OPPS payments and the pre-BBA amount. 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 authorized under 
section 411 of Public Law 108-173. 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 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

[[Page 74199]]

year, for services provided before January 1, 2011, and section 3121(b) 
of the Affordable Care Act removed 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 1 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) of the Act). 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 1 year the hold harmless provision for an SCH 
(as defined in section 1886(d)(5)(D)(iii) of the Act (including EACHs) 
and removed 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. Effective for 
services provided on or after January 1, 2012, a rural hospital with 
100 or fewer beds that is not an SCH and an SCH (including EACHs) will 
no longer be eligible for TOPs, in accordance with section 108 of the 
MMEA. In the CY 2012 OPPS/ASC proposed rule (76 FR 42216), we proposed 
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.
    We did not receive any public comments on our proposed policy to 
update the language in Sec.  419.70(d) of the regulations. For the 
reasons we specified in the CY 2012 OPPS/ASC proposed rule (76 FR 42215 
and 42216), we are finalizing our proposed revisions of Sec.  419.70(d) 
without modification.
2. 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 Pub. L. 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 we 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 proposed to continue our policy of a 
budget neutral 7.1 percent payment adjustment for rural SCHs, including 
EACHs, for all services and procedures paid under the OPPS, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs (76 
FR 46232). In the CY 2012 OPPS/ASC proposed rule, we indicated that we 
intend to reassess the 7.1 percent adjustment in the near future by 
examining differences between urban hospitals' costs and rural 
hospitals' costs using updated claims data, cost reports, and provider 
information.
    We did not receive any public comments regarding the proposed 
continuation of the 7.1 rural adjustment. We are finalizing our CY 2012 
proposal, without modification, to apply the 7.1 percent payment 
adjustment to rural SCHs, including EACHs, for all services and 
procedures paid under the OPPS in CY 2012, excluding separately payable 
drugs and biologicals, devices paid under the pass-through payment 
policy, and items paid at charges reduced to costs because we continue 
to believe that the adjustment is appropriate for application in CY 
2012.

F. 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

[[Page 74200]]

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 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 PCR for the cancer hospitals is 0.83, 
or the outpatient payment with TOPs to cancer hospitals is 83 percent 
of reasonable cost.
    Section 3138 of the Affordable Care Act amended section 1833(t) of 
the Social Security Act by adding a new paragraph (18), which 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 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 under section 1833(t)(2)(E) of the Act 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

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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 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.
[GRAPHIC] [TIFF OMITTED] TR30NO11.021

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

[[Page 74202]]

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 reason was 
that 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. 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 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 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).
    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 APC 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 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 encouraged CMS to implement the adjustment in a way 
that does not increase beneficiary copayments. 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. Payment Adjustment for Certain Cancer Hospitals for CY 2012
    After further review and deliberation of the issues associated with 
the cancer hospital payment adjustment, in the CY 2012 OPPS/ASC 
proposed rule, we proposed a cancer hospital payment adjustment 
reflecting the same approach as we took in the CY 2011 OPPS/ASC 
proposed rule, that is, an adjustment under which cancer hospitals 
would receive additional payments (based on estimates) so that each 
cancer hospital's PCR would be comparable to the weighted average PCR 
for other hospitals furnishing services under section 1833(t) of the 
Act. Therefore, for services furnished on and after January 1, 2012, we 
proposed 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, a

[[Page 74203]]

payment adjustment above zero percent is unnecessary) 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 
methodology resulted in estimated percentage payment adjustments for 
the 11 cancer hospitals that ranged between 10.1 percent and 61.8 
percent, with an estimated aggregate increase in OPPS payment to cancer 
hospitals of 39 percent for CY 2012 and an estimated net increase in 
total payments, including TOPs, of 9 percent.
    Because section 7101 of the Affordable Care Act expanded the 340B 
drug program to include certain cancer hospitals, we also proposed that 
the cancer hospital payment adjustment be recalculated each year. The 
340B drug program allows certain hospitals to purchase certain 
outpatient drugs at reduced prices. We understand from commenters that, 
currently, two cancer hospitals participate in the 340B program. 
However, inclusion of cancer hospitals in the 340B drug program should 
lower drug costs at participating cancer hospitals going forward and, 
therefore, may cause changes in each cancer hospital's PCR compared to 
the previous year's calculation.
    Comment: Many commenters urged CMS to consider TOPs when 
calculating the cancer hospital payment adjustment. The commenters 
stated that the proposed methodology to adjust 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 OPPS results, largely, in a change in the form of outpatient 
payments to cancer hospitals by shifting payment from hold harmless 
payments under the TOPs provision to APC payments. This substitution of 
TOPs for APC payments, in turn, results in savings to the Medicare 
program which, the commenters asserted, is in violation of the 
statutory requirement that the policy be budget neutral. The commenters 
suggested that because the Congressional Budget Office scoring of 
section 3138 of the Affordable Care Act estimates no Federal budgetary 
impact, Congress did not intend for savings under this provision.
    Commenters also suggested that the associated budget neutral 
payment reduction to other hospitals is not appropriate or equitable to 
other hospitals paid under the OPPS. The commenters indicated that it 
was not the intent of Congress for the provision to impact the non-
cancer hospitals in a manner that is disproportionate to the benefits 
obtained by the cancer hospitals. Many commenters noted 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 
proposal.
    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 will experience higher copayments due to 
the proposed methodology. The commenters encouraged CMS to implement 
the adjustment in a way that does not increase beneficiary copayments, 
such as providing the adjustment amount in aggregate instead of on a 
per claim basis through enhanced APC payments.
    Commenters indicated that CMS selected an inappropriate benchmark 
against which to compare each cancer hospital's PCR. Specifically, the 
commenters indicated that CMS should have taken into account the 
concentration of outpatient services at the designated cancer hospitals 
as compared to other PPS 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. These commenters asserted that, because concentration 
of outpatient services was not considered in establishing the 
benchmark, the proposed adjustment was not valid. The commenters also 
indicated that, because outliers were included in the calculation of 
hospital PCRs, application of the payment adjustment to the APC payment 
amount will result in PCRs less than the intended target for cancer 
hospitals with relatively large outlier payments and suggested that the 
payment adjustment be applied to outlier payments as well as APC 
payments. In addition, the commenters opposed annual recalculation of 
the cancer adjustment stating that CMS should not expect significant 
cost savings at the cancer hospitals as a result of the inclusion of 
cancer hospitals in the 340B drug program and that the cancer hospitals 
require payment stability and predictability over the long term. Other 
commenters supported the proposal to annually recalculate the cancer 
hospital adjustment, stating that this will ensure more equitable 
payments. In addition, these commenters indicated that CMS must make 
the payment adjustment effective for services furnished on or after 
January 1, 2011, in order to comply with section 3138 of the Affordable 
Care Act.
    Several commenters addressed CMS' study methodology. One commenter 
suggested that the CMS analysis is inadequate to conclude that costs 
are higher in cancer hospitals and that an adjustment is warranted. 
This commenter noted that the CMS analysis did not control for the many 
factors that might explain differences in costliness or assess to what 
extent cost differences could be explained by differences in 
efficiency. This commenter also asserted that the exclusion of TOPs 
from the comparison of costliness distorts the analysis and makes the 
findings invalid. Another commenter suggested that CMS examine the 
costs of cancer patients generally for all hospitals and compare the 
costs of these 11 hospitals to all hospitals providing cancer care to 
ensure an adjustment does not reinforce high-cost characteristics of 
the 11 designated cancer hospitals. This commenter also indicated that 
additional payments to cancer hospitals should be guided by quality of 
care and, because the Affordable Care Act requires the 11 cancer 
hospitals to begin submitting quality data in fiscal year 2014, 
suggested that the additional payments to cancer hospitals be delayed 
until these quality data are available to serve as a basis for the 
payment adjustment.
    Response: We analyzed the various issues raised by commenters, and 
in this final rule with comment period, we are adopting final policies 
that reflect a number of modifications to our proposed policies. We 
believe that a number of points raised by the commenters have merit 
and, consistent with our broad authority under the statute, we are 
adopting some (but not all) of their recommendations.
    As discussed above, section 3138 of the Affordable Care Act added a 
new section 1833(t)(18) to the Social Security Act, providing for an 
adjustment under section 1833(t)(2)(E) of the Social Security Act to 
address higher costs incurred by cancer hospitals. Section 
1833(t)(2)(E) of the Act, in turn, directs the Secretary to establish, 
``in a budget neutral manner,'' payment ``adjustments as determined to 
be necessary to ensure equitable payments, such as adjustments for 
certain classes of hospitals.''

[[Page 74204]]

    Under sections 1833(t)(18) and 1833(t)(2)(E) of the Social Security 
Act, the agency's authority with respect to the cancer hospital 
adjustment is broad; similarly, under section 1833(t)(2)(E) of the Act, 
the agency's authority with respect to calculating budget neutrality is 
broad. In contrast, the provision of the statute for calculating TOPs 
is prescriptive.
    Commenters requested that CMS maintain TOPs at their current level, 
that is, calculate TOPs by ignoring the cancer hospital payment 
adjustment under sections 1833(t)(18) and 1833(t)(2)(E) of the Act. 
Under the statute, however, the calculation of TOPs is directly tied to 
what is paid under section 1833(t) of the Act. Specifically, under 
section 1833(t)(7)(D)(ii) of the Act, ``for covered OPD services for 
which the PPS amount is less than the pre-BBA amount, the amount of 
payment under this subsection [1833(t)] shall be increased by the 
amount of such difference.'' 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) * * *'' 
(section 1833(t)(7)(E) of the Act). Under this provision, the cancer 
hospital payment adjustment is included in the calculation of the ``PPS 
amount'' because it is an adjustment under sections 1833(t)(18) and 
1833(t) (2)(E) of the Act and, therefore, is the ``amount payable under 
this title.'' To the extent the PPS amount is less than the pre-BBA 
amount, a cancer hospital would qualify for a TOP.
    With respect to the issue of establishing, in a budget neutral 
manner, the cancer hospital payment adjustment, we agree with the 
commenters that it is appropriate to consider that, to some extent, the 
cancer hospital payment adjustment changes the form of payments (from 
TOPs to cancer hospital adjustment payments). The cancer hospital 
payment adjustment presents a unique circumstance insofar as the cancer 
hospital adjustment can result in lower TOPs. Consistent with section 
1833(t)(2)(E) of the Act, we agree that, in determining the baseline 
for the budget neutrality calculation, it is appropriate to consider 
TOPs that would otherwise be made if there were no cancer hospital 
payment adjustment. In determining the budget neutrality adjustment 
factor, we compare estimated CY 2012 total payments with the cancer 
hospital payment adjustment under sections 1833(t)(18) and 
1833(t)(2)(E) of the Act to estimated CY 2012 total payments without a 
cancer hospital payment adjustment, taking into account TOPs that would 
otherwise be made in the absence of a cancer hospital payment 
adjustment. The inclusion of TOPs in the baseline significantly 
increases the baseline, and accordingly decreases the amount that other 
payments need to be reduced to offset the increased payments resulting 
from the cancer hospital payment adjustment. The budget neutrality 
adjustment factor for the cancer hospital payment adjustment is 0.9978. 
In percentage terms, the budget neutrality reduction to the conversion 
factor is 0.2 percent in this final rule with comment period, as 
opposed to 0.7 percent in the proposed rule. In dollar terms, the 
budget neutral payment reduction associated with the cancer hospital 
payment adjustment is an estimated $71 million for CY 2012 based on 
updated cost report information. That is, the cancer hospital payment 
adjustment is estimated to increase total payments by $71 million over 
the baseline (which accounts for TOPs) and this amount must be offset 
by reductions in other payments (resulting in the 0.2 percent reduction 
to the conversion factor). For this final rule with comment period, we 
are adopting the above-described approach of calculating budget 
neutrality, consistent with our broad authority under the statute, for 
the reasons stated above and because we believe it will increase equity 
to hospitals paid under the OPPS that are not cancer hospitals, as 
urged by the commenters.
    In response to commenters who urged us to implement the cancer 
hospital payment adjustment in a manner that does not increase 
beneficiary copayments, such as providing the adjustment amount in 
aggregate instead of on a per claim basis through enhanced APC 
payments, we reexamined the manner in which the cancer hospital payment 
adjustment is applied. We have broad discretion in designing the cancer 
hospital payment adjustment under sections 1833(t)(18)(B) and 
1833(t)(2)(E) of the Act. Consistent with this broad authority, we 
agree that it is appropriate to make the cancer hospital payment 
adjustment through the form of an aggregate payment determined at cost 
report settlement to each cancer hospital, as opposed to an adjustment 
at the APC level, thereby avoiding the higher copayments for 
beneficiaries associated with providing the adjustment on a claims 
basis through increased APC payments. Therefore, in order to implement 
the cancer hospital payment adjustment in a way that does not increase 
beneficiary copayments as urged by commenters, and in light of the 
discretion afforded by the statute, we are providing the cancer 
hospital payment adjustment as an aggregate payment to each cancer 
hospital at cost report settlement instead of through enhanced APC 
payments as proposed. As explained further below, the aggregate 
adjustment adopted in this final rule with comment period (like the 
proposed APC-level adjustment) is based on the comparison of each 
cancer hospital's PCR to the weighted average PCR of the other 
hospitals that furnish services under the OPPS using the most recent 
submitted or settled cost report available at the time of this final 
rule with comment period.
    In addition, commenters suggested that CMS take into account the 
cancer hospitals' significant Medicare outpatient concentration (which, 
based on the comment letter, is the portion of the cancer hospitals' 
total Medicare payments that are OPPS payments) when establishing an 
appropriate PCR benchmark. In other words, the commenter argued that 
CMS should take into account the portion of the cancer hospitals' total 
Medicare payments that are OPPS payments compared to the non-cancer 
hospitals' total Medicare payments that are OPPS payments. Section 3138 
of the Affordable Care Act provides that if the Secretary determines 
under section 1833(t)(18)(A) of the Act that costs incurred by cancer 
hospitals exceed those costs of other hospitals furnishing services 
under section 1833(t), the Secretary shall provide for an appropriate 
adjustment to reflect the higher costs. We are not persuaded that 
Medicare outpatient concentration in and of itself has an impact on the 
costs incurred for providing OPD services at cancer hospitals relative 
to other OPPS hospitals that warrants an adjustment in determining the 
cancer hospital adjustment. Therefore, we are not adopting this 
suggestion of the commenters.
    With respect to commenters that indicated that because outliers 
were included in the calculation of hospital PCRs, application of the 
payment adjustment to the APC payment amount will result in PCRs less 
than the intended target for cancer hospitals with relatively large 
outlier payments, we examined this issue and believe commenters made a 
valid argument that cancer hospitals with relatively large outlier 
payments will be provided less additional payment than intended under 
the proposed methodology because the payment adjustment would be 
applied only to the APC portion of

[[Page 74205]]

the payment and not to the outlier amounts. If we were to finalize the 
implementation of the cancer hospital payment adjustment through 
increased APC payments as proposed, the PCR used to determine the 
amount of the adjustment would need to be recalculated to exclude 
outlier payments. This change would provide a larger APC adjustment to 
cancer hospitals that have large outlier payments relative to other 
OPPS hospitals. However, because we are providing the cancer hospital 
payment adjustment in aggregate at cost report settlement and not 
through adjustments to the APC payment, it is appropriate to continue 
to include outlier payments in the calculation of the PCRs used to 
determine the payment adjustment amount.
    In response to the commenters who suggested that annual 
recalculation of the PCRs for purposes of calculating the cancer 
hospital payment adjustment is not necessary because significant cost 
savings are not expected at the cancer hospitals as a result of the 
inclusion of cancer hospitals in the 340B drug program, we believe that 
annual recalculation of the cancer hospital payment adjustment will 
provide a timely assessment of the changes in OPPS payments relative to 
costs due to any reason and, therefore, will enable CMS to provide OPPS 
payments that are accurate and equitable.
    With regard to the implementation date for the cancer hospital 
payment adjustment, the agency did not finalize the proposed cancer 
hospital adjustment for CY 2011 for a variety of reasons, as explained 
in the CY 2011 OPPS/ASC final rule with comment period. Significantly, 
the majority of all commenters expressed concerns about implementation 
of the adjustment and, based on the broad range of important issues and 
concerns raised by them, we did not implement a cancer hospital 
adjustment for CY 2011. Moreover, the obligation to provide a cancer 
hospital payment adjustment is triggered only insofar as the Secretary 
determines under section 1833(t)(18)(A) of the Act that costs incurred 
by hospitals described in section 1886(d)(1)(B)(v) of the Act exceed 
those costs incurred by other hospitals furnishing services under this 
subsection. Several commenters raised concerns about the agency's study 
of costliness conducted under section 1833(t)(18)(A) of the Act; for 
example, a commenter suggested that the CMS analysis was inadequate to 
conclude that costs are higher in cancer hospitals and that an 
adjustment was warranted. Given the uncertainty surrounding these 
issues as well as public comments arguing against implementing a cancer 
hospital payment adjustment for CY 2011, we decided not to do so for CY 
2011. We note that, insofar as the cancer adjustment is budget neutral, 
the lack of a cancer hospital payment adjustment for CY 2011 also means 
that other payments were not reduced for CY 2011 to offset the 
increased payments from the adjustment.
    Regarding the commenter's concerns related to the agency's study 
conducted pursuant to section 1833(t)(18)(A) of the Act, as detailed 
above and in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71883), we determined that we could not use our standard analytical 
approach, which uses a combination of explanatory and payment 
regression models while controlling for other legitimate influences of 
costliness, to assess the costliness of cancer hospitals relative to 
other OPPS hospitals. Although this kind of analysis would allow us to 
control for the many factors that might explain differences in 
costliness, as suggested by the commenter, we believe that this 
approach would lead to imprecise estimates of costliness due to the 
small sample size (11 hospitals).
    With respect to commenters who suggested that it would be more 
appropriate for the CMS study on costliness to compare the costs of 
providing OPD services at the 11 cancer hospitals to the costs of 
providing services related to cancer care at other hospitals furnishing 
services under section 1833(t) of the Act, we believe such an approach 
is not appropriate because section 3138 of the Affordable Care Act does 
not specify that the comparison be made with regard to particular APC 
groups related to cancer services.
    In addition, with respect to the commenter who believed that the 
amount of additional payments to cancer hospitals should be guided by 
quality of care information and, therefore, be delayed until 2014 when 
the cancer hospitals begin to submit quality data to CMS, we note that 
section 1833(t)(18) of the Act did not include such a requirement nor 
did it include quality measures as a requirement for the additional 
payments to cancer hospitals. Therefore, we do not believe it is 
appropriate to delay implementation of the cancer hospital payment 
adjustment until cancer hospitals have submitted quality data to CMS.
    After consideration of the public comments we received, we are 
adopting in this final rule with comment period a number of the 
commenters' suggestions and a number of changes to our proposed CY 2012 
policies regarding the cancer hospital payment adjustment including 
modifications to our CY 2012 proposal with regard to the calculation of 
the budget neutrality adjustment associated with the cancer hospital 
payment adjustment. The budget neutral payment reduction that is 
associated with the cancer hospital payment adjustment for CY 2012 is 
calculated as the difference in estimated CY 2012 total payments to 
cancer hospitals, including the cancer hospital payment adjustment, and 
estimated CY 2012 total payments to cancer hospitals without the cancer 
adjustment, including TOPs. Therefore, based on updated cost report 
data, the budget neutrality adjustment to the OPPS conversion factor is 
0.9978, a reduction of 0.2 percent (as opposed to a reduction of 0.7 
percent in the proposed rule). In addition, we are providing the CY 
2012 cancer hospital payment adjustment to cancer hospitals in the form 
of an aggregate payment at cost report settlement instead of through an 
increased adjustment to APC payments on a claims basis, as was 
proposed.
    Consistent with the approach in the proposed rule, the CY 2012 
cancer hospital payment adjustment adopted in this final rule with 
comment period is intended to provide additional payments to cancer 
hospitals so that the hospital's PCR with the payment adjustment is 
equal to the weighted average PCR for other hospitals, which we refer 
to as the ``target PCR.'' In contrast to the approach in the proposed 
rule, however, in this final rule with comment period, we are adopting 
a policy under which the amount of the payment adjustment will be made 
on an aggregate basis at cost report settlement. Under this final rule 
with comment period, we will examine each cancer hospital's data at 
cost report settlement, determine the cancer hospital's PCR (before the 
cancer hospital payment adjustment), and in turn determine the lump sum 
amount necessary (if any) to make the cancer hospital's PCR equal to 
the target PCR. To the extent at cost report settlement a cancer 
hospital's PCR (before the cancer hospital payment adjustment) is above 
the target PCR, a cancer hospital payment adjustment of zero is given. 
This is because 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 would not be necessary. We are amending are regulations at 
Sec.  419.43 to capture the above-described final policy.

[[Page 74206]]

    Consistent with the approach in the proposed rule, the target PCR 
is set in advance and is calculated using the most recent submitted or 
settled cost report data that are available at the time of this final 
rule with comment period. For CY 2012, the target PCR for purposes of 
the cancer hospital payment adjustment is 0.91. To calculate the target 
PCR, we used the same extract of cost report data from HCRIS, as 
discussed in section II.A of this final rule with comment period, used 
to estimate median costs for the 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 dataset to the hospitals with 
CY 2010 claims data that we use to model the impact of the CY 2012 
final APC relative weights (4,018 hospitals) because it is appropriate 
to use the same set of hospitals that we are using to calibrate the 
modeled CY 2012 OPPS. The cancer hospitals in this dataset largely had 
cost report data from cost reporting periods ending in FY 2010. The 
cost report data for the other hospitals were from cost report periods 
with fiscal year ends ranging from 2009 to 2010. We then removed the 
cost report data of the 47 hospitals located in 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 223 hospitals with cost report data that were not complete 
(missing aggregate OPPS payments (which include outliers), missing 
aggregate cost data, or missing 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 3,748 
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 is sufficiently accurate for assessing 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 estimated that, 
on average, the OPPS payments to the 11 cancer hospitals, not including 
TOPs, are approximately 67 percent of reasonable cost (that is, we 
calculated a PCR of 0.674 for the cancer hospitals), whereas, we 
estimated that, on average, the OPPS payments to other hospitals 
furnishing services under the OPPS are approximately 91 percent of 
reasonable cost (weighted average PCR of 0.91). Individual cancer 
hospital's OPPS PCRs range from approximately 0.63 to approximately 
0.78. Based on these data, a target PCR of 0.91 will be used to 
determine the CY 2012 cancer hospital payment adjustment to be paid at 
cost report settlement. Therefore, the payment amount associated with 
the cancer hospital adjustment to be determined at cost report 
settlement will be the additional payment needed to result in a PCR 
equal to 0.91 for each cancer hospital.
    Using the same data described above, we calculated estimates of the 
percentage difference between each cancer hospital's PCR and the target 
PCR. Table 13 below indicates estimates in percentage terms of the CY 
2012 payment adjustment for each cancer hospital. The actual amount of 
the CY 2012 cancer hospital payment adjustment for each cancer hospital 
will be determined at cost report settlement and will depend on each 
hospital's CY 2012 payments and costs. Under the policies in this final 
rule with comment period, the payment adjustments for cancer hospitals 
are estimated to result in an aggregate increase in OPPS payments to 
cancer hospitals of 34.5 percent for CY 2012 and a net increase in 
total payment, including TOPs, of 9.5 percent. We note that the changes 
made by section 1833(t)(18) of the Act do not affect the existing 
statutory provisions that provide for TOPs for cancer hospitals. The 
TOPs will be assessed as usual after all payments, including the cancer 
hospital payment adjustment, have been made for a cost reporting 
period.

[[Page 74207]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.022

G. Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS provides 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 2011 Trustee's Report, is approximately 1.13 percent 
of the total aggregated OPPS payments. Therefore, for CY 2010, we 
estimate that we paid at 0.13 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 will 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 final rule with comment period. 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.gov/HospitalOutpatientPPS/.
2. Proposed Outlier Calculation
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42222), we proposed 
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 proposed 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

[[Page 74208]]

discussed in section VIII.C. of the proposed rule, for CMHCs, we 
proposed 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 final rule with comment 
period.
    To ensure that the estimated CY 2012 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we proposed that the hospital outlier threshold be set so that 
outlier payments would be triggered when the cost of furnishing a 
service or procedure by a hospital exceeds 1.75 times the APC payment 
amount and exceeds the APC payment rate plus a $2,100 fixed-dollar 
threshold. This proposed threshold reflected 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 the 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 the 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 the 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 and final rule (76 FR 26024 and 51792, respectively). 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, in the CY 2012 OPPS/ASC proposed rule, we 
proposed to apply the same CCR inflation adjustment factor that we 
proposed 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 
proposed 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 was discussed in 
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 26024 through 26025).
    Therefore, to model hospital outlier payments for the 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 estimated 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 proposed to continue to make an 
outlier payment that equals 50 percent of the amount by which the cost 
of furnishing the service exceeds 1.75 times the APC payment amount 
when both the 1.75 multiple threshold and the proposed fixed-dollar 
threshold of $2,100 are met. For CMHCs, we proposed that, if a CMHC's 
cost for partial hospitalization services, paid under either APC 0172 
or APC 0173, exceeds 3.40 times the payment for APC 0173, the outlier 
payment would be calculated as 50 percent of the amount by which the 
cost exceeds 3.40 times the APC 0173 payment rate.
    Section 1833(t)(17)(A) of the Act, which applies to hospitals as 
defined under section 1886(d)(1)(B) of the Act, requires that hospitals 
that fail to report data required for the quality measures selected by 
the Secretary, in the form and manner required by the Secretary under 
1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to 
their OPD fee schedule increase factor, that is, the annual payment 
update factor. The application of a reduced OPD fee schedule increase 
factor results in reduced national unadjusted payment rates that will 
apply to certain outpatient items and services furnished by hospitals 
that are required to report outpatient quality data and that fail to 
meet the Hospital OQR requirements. For hospitals that fail to meet the 
Hospital OQR requirements, we proposed 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 final rule with comment period.
    Comment: One commenter opposed the proposed increase to the fixed-
dollar threshold, stating that it would reduce the number of cases 
eligible for outlier payments across the industry. Another commenter 
supported the proposed policy of estimating outlier payments to be 1.0 
percent of the estimated aggregate total payments under the OPPS for 
outlier payments and of increasing the fixed-dollar outlier threshold 
to $2,100.
    Response: As indicated above, we introduced a fixed-dollar 
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. We maintain the target outlier 
percentage of 1.0 percent of estimated aggregate total payment under 
the OPPS and have a fixed-dollar threshold so that OPPS outlier 
payments are made only when the hospital would experience a significant 
loss for supplying a particular service. For CY 2012, based on updated 
data, we have established a fixed-dollar threshold of $1,900 which, 
together with a multiple threshold of 1.75, will enable us to meet

[[Page 74209]]

our target outlier payment of 1 percent of total OPPS spending.
3. Final Outlier Calculation
    Consistent with historical practice, we used updated data for this 
final rule with comment period for our outlier calculation. For CY 
2012, we are applying the overall CCRs from the July 2011 Outpatient 
Provider-Specific File with a CCR adjustment factor of 0.9903 to 
approximate CY 2012 CCRs to charges on the final CY 2010 claims that 
were adjusted to approximate CY 2012 charges (using the final 2-year 
charge inflation factor of 1.0794). These are the same CCR adjustment 
and charge inflation factors that were used to set the IPPS fixed-
dollar threshold for the FY 2012 IPPS/LTCH PPS final rule (76 FR 51792 
through 51795). 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 payment would continue to be made at 50 percent of the 
amount by which the cost of furnishing the service would exceed 1.75 
times the APC payment amount, until the total outlier payments equaled 
1.0 percent of aggregated estimated total CY 2011 OPPS payments. We 
estimate that a fixed-dollar threshold of $1,900, combined with the 
multiple threshold of 1.75 times the APC payment rate, will allocate 
1.0 percent of estimated aggregated total OPPS payments to outlier 
payments.
    In summary, for CY 2012, we will continue to make an outlier 
payment that equals 50 percent of the amount by which the cost of 
furnishing the service exceeds 1.75 times the APC payment amount when 
both the 1.75 multiple threshold and the final fixed-dollar threshold 
of $1,900 are met. For CMHCs, if a CMHC's cost for partial 
hospitalization services, paid under either APC 0172 or APC 0173, 
exceeds 3.40 times the payment for APC 0173, the outlier payment is 
calculated as 50 percent of the amount by which the cost exceeds 3.40 
times the APC 0173 payment rate. We estimate that this threshold will 
allocate 0.12 percent of outlier payments to CMHCs for PHP outlier 
payments.
4. Outlier Reconciliation
    In the CY 2009 OPPS/ASC final rule with comment period (73 CFR 
68599), we adopted as final policy a process to reconcile hospital or 
CMHC outlier payments at cost report settlement for services furnished 
during cost reporting periods beginning in CY 2009. OPPS outlier 
reconciliation 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 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) and as we proposed for CY 2012, 
we did not incorporate any assumptions about the effects of 
reconciliation into our calculation of the OPPS fixed-dollar outlier 
threshold.

H. 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. As proposed, for this final rule with 
comment period, the payment rate for most services and procedures for 
which payment is made under the OPPS is the product of the conversion 
factor calculated in accordance with section II.B. of this final rule 
with comment period and the relative weight determined under section 
II.A. of this final rule with comment period. Therefore, as proposed, 
for this final rule with comment period, the national unadjusted 
payment rate for most APCs contained in Addendum A to this final rule 
with comment period (which is referenced in section XVII. of this final 
rule with comment period 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 final rule with comment period 
(which is referenced in section XVII. of this final rule with comment 
period and available via the Internet on the CMS Web site) was 
calculated by multiplying the CY 2012 scaled weight for the APC by the 
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 final 
rule with comment period.
    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 final rule with comment period), in a 
circumstance in which the multiple procedure discount does not apply, 
the procedure is not bilateral, and conditionally packaged services 
(status indicator of ``Q1'' and ``Q2'') qualify for separate payment. 
We note that, 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 final 
rule with comment period (which are referenced in section XVII. of this 
final rule with comment period 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 
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

[[Page 74210]]

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 1.90 percent.
    Step 1. Calculate 60 percent (the labor-related portion) of the 
national unadjusted payment rate. Since the initial implementation of 
the OPPS, we have used 60 percent to represent our estimate of that 
portion of costs attributable, on average, to labor. We refer readers 
to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 
through 18497) for a detailed discussion of how we derived this 
percentage. We confirmed that this labor-related share for hospital 
outpatient services is appropriate during our regression analysis for 
the payment adjustment for rural hospitals in the CY 2006 OPPS final 
rule with comment period (70 FR 68553).
    The formula below is a mathematical representation of Step 1 and 
identifies the labor-related portion of a specific payment rate for a 
specific service.
    X is the labor-related portion of the national unadjusted payment 
rate.

X = .60 * (national unadjusted payment rate)

    Step 2. Determine the wage index area in which the hospital is 
located and identify the wage index level that applies to the specific 
hospital. The wage index values assigned to each area reflect the 
geographic statistical areas (which are based upon OMB standards) to 
which hospitals are assigned for FY 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 final rule with comment period.) As we 
proposed, we are continuing to apply 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 final rule with comment period (which is 
referenced in section XVII. of this final rule with comment period and 
available via the Internet on the CMS Web site) contains the qualifying 
counties and the associated wage index increase developed for the FY 
2012 IPPS and listed as Table 4J in the FY 2012 IPPS/LTCH PPS final 
rule and available via the Internet on the CMS Web site at: http://www.cms.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 total payment.
    The formula below is a mathematical representation of Step 6 and 
applies the rural adjustment for rural SCHs.

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

    We have provided examples below of the calculation of both the full 
and reduced national unadjusted payment rates that will 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 CY 2012 full national unadjusted payment rate for 
APC 0019 is $307.74. The reduced national unadjusted payment rate for a 
hospital that fails to meet the Hospital OQR Program requirements is 
$301.59. This reduced rate is calculated by multiplying the reporting 
ratio of 0.980 by the full unadjusted payment rate for APC 0019.
    The FY 2012 wage index for a provider located in CBSA 35644 in New 
York is 1.3142. The labor-related portion of the full national 
unadjusted payment is $242.66 (.60 * $307.74 * 1.3142). The labor-
related portion of the reduced national unadjusted payment is $237.81 
(.60 * $301.59 * 1.3142). The nonlabor-related portion of the full 
national unadjusted payment is $123.10 (.40 * $307.74). The nonlabor-
related portion of the reduced national unadjusted payment is 
$120.63(.40 * $301.59). The sum of the labor-related and nonlabor-
related portions of the full national adjusted payment is $365.76 
($242.66 + $123.10). The sum of the reduced national adjusted payment 
is $358.44 ($237.81 + $120.63).

I. 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

[[Page 74211]]

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, which for CY 2012 is $1,156.
    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/ASC 
final rule with comment period (75 FR 72013).
2. OPPS Copayment Policy
    In the CY 2012 OPPS/ASC proposed rule (76 FR42224), we proposed to 
determine copayment amounts for new and revised APCs using the same 
methodology that we implemented beginning in CY 2004. (We refer readers 
to the November 7, 2003 OPPS final rule with comment period (68 FR 
63458).) In addition, we proposed to use the same standard rounding 
principles that we have historically used in instances where the 
application of our standard copayment methodology would result in a 
copayment amount that is less than 20 percent and cannot be rounded, 
under standard rounding principles, to 20 percent. (We refer readers to 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66687) in 
which we discuss our rationale for applying these rounding principles.) 
The proposed national unadjusted copayment amounts for services payable 
under the OPPS that would be effective January 1, 2012, were shown in 
Addenda A and B to the proposed rule (which were available via the 
Internet on the CMS Web site). As discussed in section XIV.E. of the 
proposed rule and this final rule with comment period, for CY 2012, the 
Medicare beneficiary's minimum unadjusted copayment and national 
unadjusted copayment for a service to which a reduced national 
unadjusted payment rate applies will equal the product of the reporting 
ratio and the national unadjusted copayment, or the product of the 
reporting ratio and the minimum unadjusted copayment, respectively, for 
the service.
    We did not receive any public comments regarding the proposed 
methodology for calculating copayments for CY 2012. Therefore, for the 
reasons set forth in the proposed rule (76 FR 42225), we are finalizing 
our CY 2012 copayment amounts without modification. We note that we 
received public comments on the copayments that would apply to 
beneficiaries who receive services from dedicated cancer hospitals 
under our proposal to provide an adjustment to payments to these 
hospitals. Those copayment-related public comments are discussed in 
section II.F. of this final rule with comment period.
3. Calculation of an Adjusted Copayment Amount for an APC Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its 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, $61.55 is 20 percent of the full national 
unadjusted payment rate of $307.74. For APCs with only a minimum 
unadjusted copayment in Addenda A and B of this final rule with comment 
period (which are 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 final rule with comment period. Calculate 
the rural adjustment for eligible providers as indicated in Step 6 
under section II.H. of this final rule with comment period.
    Step 3. Multiply the percentage calculated in Step 1 by the payment 
rate calculated in Step 2. The result is the wage-adjusted copayment 
amount for the APC.
    The formula below is a mathematical representation of Step 3 and 
applies the beneficiary percentage to the adjusted payment rate for a 
service calculated under section II.H. of this final rule with comment 
period, with and without the rural adjustment, to calculate the 
adjusted beneficiary copayment for a given service.

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

    Step 4. For a hospital that failed to meet its Hospital OQR Program 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.980.
    The unadjusted copayments for services payable under the OPPS that 
will be effective January 1, 2012, are shown in Addenda A and B to this 
final rule with comment period (which are referenced in section XVII. 
of this final rule with comment period and available via the Internet 
on the CMS Web site). We note that the national unadjusted payment 
rates and copayment rates shown in Addenda A and B to this final rule 
with comment period reflect the full CY 2012 OPD fee schedule increase 
factor discussed in section XIV.E. of this final rule with comment 
period.
    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, which for CY 2012 is $1,156.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

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

    CPT and Level II HCPCS codes are used to report procedures, 
services, items, and supplies under the hospital OPPS. Specifically, 
CMS recognizes the following codes on OPPS claims:
     Category I CPT codes, which describe medical services and 
procedures;
     Category III CPT codes, which describe new and emerging

[[Page 74212]]

technologies, services, and procedures; and
     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. 
As we proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42225 
through 42226), in Table 14 below (also Table 14 of the proposed rule), 
we summarize our 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 the proposed rule, the codes that were implemented through the July 
2011 OPPS quarterly update were not included in Addendum B of the 
proposed rule (which is available via the Internet on the CMS Web 
site), while those codes based upon the April 2011 OPPS quarterly 
update were included in Addendum B.
[GRAPHIC] [TIFF OMITTED] TR30NO11.023


[[Page 74213]]


    This process is discussed in detail below. We have separated our 
discussion into two sections based on whether we solicited public 
comments in the CY 2012 OPPS/ASC proposed rule or whether we are 
soliciting public comments in this CY 2012 OPPS/ASC final rule with 
comment period. In the CY 2012 OPPS/ASC proposed rule, we noted 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 
are responding to public comments and finalizing our proposed OPPS 
treatment of these codes in this CY 2012 OPPS/ASC final rule with 
comment period.
    We received comments on several new codes that were assigned to 
comment indicator ``NI'' in Addendum B of the CY 2011 OPPS/ASC final 
rule with comment period. We respond to those comments in sections 
II.A. and III.D. of this final rule with comment period. Table 15 lists 
the long descriptors for the CPT codes that were assigned to comment 
indicator ``NI'' for which we received public comments to the CY 2011 
OPPS/ASC final rule with comment period and the specific sections where 
the comments are addressed.
BILLING CODE 4120-01-P

[[Page 74214]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.024


[[Page 74215]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.025

BILLING CODE 4120-01-C
1. Treatment of New Level II HCPCS Codes and Category I CPT Vaccine 
Codes and Category III CPT Codes for Which We Solicited Public Comments 
in the 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 16 below (Table 15 of the proposed 
rule), 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 16 below. Specifically, HCPCS code 
Q2040 is assigned to APC 9278 and status indicator ``G.''
    In the CY 2012 OPPS/ASC proposed rule, we solicited public comments 
on the proposed status indicators and APC assignments of HCPCS codes 
C9280, C9281, C9282, C9729, and Q2040, which were listed in Table 15 of 
that proposed rule (76 FR 42226) and now

[[Page 74216]]

appear in Table 16 of this final rule with comment period. We did not 
receive any public comments on the proposed APC assignments and status 
indicators for HCPCS codes C9280, C9281, C9282, C9729, and Q2040. 
However, for CY 2012, the HCPCS Workgroup replaced HCPCS C9280, C9281, 
C9282, and Q2040 with permanent HCPCS J-codes. Specifically, C9280 was 
replaced with J9179 (Injection, eribulin mesylate, 0.1 mg), C9281 with 
J2507 (Injection, pegloticase, 1 mg), C9282 with J0712 (Injection, 
ceftaroline fosamil, 10 mg), and Q2040 with J0588 (Injection, 
incobotulinumtoxin A, 1 unit). Consistent with our general policy of 
using permanent HCPCS codes if appropriate rather than using temporary 
HCPCS codes for the reporting of drugs under the OPPS in order to 
streamline coding, we are showing the replacement HCPCS codes effective 
January 1, 2012 in Table 16 that replaced HCPCS C9280, C9281, C9282, 
and Q2040.
    Similarly, for CY 2012, we deleted HCPCS code C9729 on June 30, 
2011 because it was replaced with CPT code 0275T. Further discussion of 
CPT code 0275T can be found below.
    Because HCPCS codes J2507, J0712, and J0588 describe the same drugs 
and the same dosages currently designated by HCPCS codes C9281, C9282, 
and Q2040, respectively, these drugs will continue their pass-through 
status in CY 2012. Therefore, we are assigning HCPCS codes J2507, 
J0712, and J0588 to the same status indicators and APCs as their 
predecessor HCPCS codes, as shown in Table 16.
    However, we note that the replacement code for HCPCS code C9280 
does not describe the same dosage descriptor, and consequently, the 
replacement HCPCS code will be assigned a new APC number. Specifically, 
C9280 has a dosage descriptor of 1 mg; however, its replacement HCPCS 
code J9179 has a dosage descriptor of 0.1 mg. Therefore, effective 
January 1, 2012, HCPCS codes J9179 will be assigned to APC 1426 to 
maintain data consistency for future rulemaking. Because the 
predecessor HCPCS code C9280 was assigned to pass-through status, HCPCS 
code J9179 will continue to be assigned status indicator ``G'' for CY 
2012.
    We did not receive any public comments on the new Level II HCPCS 
codes that were implemented in April 2011. We are adopting as final, 
without modification, our proposal to assign the Level II HCPCS codes 
listed in Table 16 to the APCs and status indicators as proposed for CY 
2012, with the exception of HCPCS code J9179, which will be assigned to 
APC 1426. Table 16 shows the final APC and status indicator assignments 
for all five Level II HCPCS codes.
[GRAPHIC] [TIFF OMITTED] TR30NO11.026

    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

[[Page 74217]]

the proposed rule (Table 17 of this final rule with comment period), 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 six 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 were listed in Table 16 of the 
proposed rule, and were assigned to either status indicator ``Y'' or 
``A'' effective July 1, 2011.
    In the CY 2012 OPPS/ASC proposed rule, we solicited public comments 
on the status indicators and APC assignments where applicable for the 
17 HCPCS codes that were listed in Table 16 of that proposed rule (76 
FR 42227 through 42228) and now appear in Table 17 of this final rule 
with comment period. We received a comment on the APC assignments for 
HCPCS codes C9730 and C9731. A summary of the comments and our 
responses can be found in section III.D.8.b. (Bronchial Thermoplasty) 
of this final rule with comment period. In addition, we received some 
comments on the long descriptor for HCPCS code Q2043. A summary of the 
comments and our responses can be found in section V.A.3. of this final 
rule with comment period.
    With the exception of HCPCS codes C9730, C9731, and Q2043, we 
received no other public comments on the 14 other Level II HCPCS codes 
listed in Table 16 of the CY 2011 OPPS/ASC proposed rule. However, for 
CY 2012, the HCPCS Workgroup replaced several HCPCS C-codes with an A-
code, J-code, or Q-code. Specifically, C9283 was replaced with J0131 
(Injection, acetaminophen, 10 mg), C9284 with J9228 (Injection, 
ipilimumab, 1 mg), C9365 with Q4124 (Oasis Ultra Tri-Layer Matrix, per 
square centimeter), C9406 with A9584 (Iodine I-123 ioflupane, 
diagnostic, per study dose, up to 5 millicuries), Q2041 with J7183 
(Injection, von willebrand factor complex (human), Wilate, 1 i.u. 
vwf:rco), Q2042 with J1725 (Injection, hydroxyprogesterone caproate, 1 
mg), and Q2044 with J0490 (Injection, belimumab, 10 mg).
    Because HCPCS codes J0131, J9228, Q4124, A9584, J7183 and J0490 
describe the same drugs and the same dosages currently designated by 
HCPCS codes C9283,C9284, C9365, C9406, Q2041, and Q2044, respectively, 
these drugs will continue their pass-through status in CY 2012. 
Therefore, we are assigning HCPCS codes J0131, J9228, Q4124, A9584, 
J7183 and J0490 to the same status indicators and APCs as their 
predecessor HCPCS codes, as shown in Table 17. We note that since HCPCS 
code Q2042 is assigned to status indicator ``K'' (Nonpass-Through 
Drugs; Paid under OPPS; Separate APC payment), its replacement HCPCS 
code J1725 will also continue its nonpass-through status in CY 2012.
    Further, for CY 2012, the CPT Editorial Panel made effective 
Category III CPT codes 0276T and 0277T on January 1, 2012. Because 
Category III CPT codes 0276T and 0277T describe the same procedures as 
HCPCS code C9730 and C9731, we are deleting HCPCS codes C9730 and C9731 
on December 31, 2011, and assigning both CPT codes to the same status 
indicator and APC assignment as its predecessor HCPCS code, as shown in 
Table 17.
    As stated previously, we did not receive any other public comments 
on the new Level II HCPCS codes that were implemented in July 2011, 
other than HCPCS codes C9730, C9731, and Q2043, which are discussed in 
sections III.D.8.b. and V.A.3., respectively, of this final rule with 
comment period. We are adopting as final, without modification, our 
proposal to assign the 17 Level II HCPCS codes listed in Table 12 to 
the APCs and status indicators as proposed for CY 2012.
    Table 17 below includes a complete list of the Level II HCPCS codes 
that were made effective July 1, 2011, with their final status 
indicators, APC assignments, and payment rates for CY 2012.
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BILLING CODE 4120-01-C
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42228), for CY 2012, 
we proposed to continue our established policy of recognizing Category 
I CPT vaccine codes for which FDA approval is imminent and Category III 
CPT codes that the AMA releases in January of each year for 
implementation in July through the OPPS quarterly update process. Under 
the OPPS, Category I vaccine codes and Category III CPT codes that are 
released on the AMA Web site in January are made effective in July of 
the same year through the July quarterly update CR, consistent with the 
AMA's implementation date for the codes. Through the July 2011 OPPS 
quarterly update CR, we allowed separate payment for 12 of the 14 new 
Category III CPT codes effective July 1, 2011. Specifically, as 
displayed in Table 17 of the proposed rule, we allow separate payment 
for the following Category III 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 (eg, 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 (eg, 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 (eg, 
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

[[Page 74220]]

elements, (with or without ligamentous resection, discectomy, 
facetectomy and/or foraminotomy) any method under indirect image 
guidance (eg, 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, intra-operative interrogation, 
programming, and repositioning, when performed)) were assigned to 
status indicator ``C'' (Inpatient Procedures) under the hospital OPPS 
beginning July 1, 2011. As we stated in the proposed rule (76 FR 
42229), 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.
    Furthermore, for CY 2012, the CPT Editorial Panel made effective 
Category III CPT code 0275T on July 1, 2011. Because Category III CPT 
code 0275T describes the same procedure as HCPCS code C9729, we deleted 
HCPCS code C9729 on June 30, 2011. Through the July 2011 OPPS quarterly 
update CR, we also instructed hospitals to report the procedure 
previously described by HCPCS code C9729 with Category III CPT code 
0275T effective July 1, 2011. Because Category III CPT code 0275T 
describes the same procedure designated by HCPCS code C9729, we 
assigned Category III CPT code 0275T to the same status indicator and 
APC assignment as its predecessor HCPCS code, as shown in Table 16 and 
Table 18.
    We received a comment on the APC assignment and long descriptor for 
Category III CPT code 0275T. A summary of the comment and our response 
can be found in section III.D.6.a. (Percutaneous Laminotomy/
Laminectomy) of this final rule with comment period. Table 18 lists the 
Category III CPT codes that were implemented in July 2011, along with 
their final status indicators, final APC assignments where applicable, 
and final payment rates for CY 2012.
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[[Page 74222]]


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[GRAPHIC] [TIFF OMITTED] TR30NO11.031

BILLING CODE 4120-01-C
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42227 through 42229), 
we solicited 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 were listed in Tables 15, 16, and 17 of the 
proposed rule. We proposed to finalize their status indicators and 
their APC assignments and payment rates, if applicable, in this CY 2012 
OPPS/ASC final rule with comment period. Because the July 2011 OPPS 
quarterly update CR was issued close to the publication of the 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 the proposed rule, but these codes were 
listed in Tables 16 and 17, respectively. We proposed to incorporate 
these codes into Addendum B to this 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 were included in Addendum B to 
the proposed rule (which is available via the Internet on the CMS Web 
site), where their proposed CY 2012 payment rates were also shown. We 
did not receive any additional comments on this process. The final 
status indicators, 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 are found in Addendum B to this CY 2012 OPPS/ASC 
final rule with comment period (which is available via the Internet on 
the CMS Web site).
2. Process for New Level II HCPCS Codes and Category I and Category III 
CPT Codes for Which We Are Soliciting Public Comments on This 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. In 
the CY 2012 OPPS/ASC proposed rule (76 FR 42230), we proposed to 
continue this process for CY 2012. Specifically, for CY 2012, we 
proposed to include in Addendum B to this CY 2012 OPPS/ASC final rule 
with comment period (which is available via the Internet on the CMS Web 
site) 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. As proposed, 
in this final rule with comment period, these codes are flagged with 
comment indicator ``NI'' in Addendum B to this CY 2012 OPPS/ASC final 
rule with comment period to indicate that we have assigned them an 
interim OPPS payment status for CY 2012. As

[[Page 74224]]

proposed, in this final rule with comment period, their status 
indicators and their APC assignments and payment rates, if applicable, 
are open to public comment and will be finalized in the CY 2013 OPPS/
ASC final rule with comment period. We note that the CPT codes that 
were released by the AMA in July 2011 that were subject to comment in 
the CY 2012 OPPS/ASC proposed rule, and were listed in Table 17, will 
not be assigned to comment indicator ``NI'' in Addendum B because 
comments about these codes will be addressed in this CY 2012 OPPS/ASC 
final rule with comment period.
    Comment: One commenter recommended that, through a Web posting, CMS 
request public input on the APC assignments of the Category I CPT 
vaccine codes, Category III CPT codes, and Level II HCPCS codes that 
are made effective on October 1 or January 1 of subsequent years but 
are made available to the public by the completion of each year's OPPS 
proposed rule. The commenter indicated that some of these codes have 
already been released to the public, either through the CMS or AMA CPT 
Web site, by July 1 of any given year. This same commenter suggested 
that the lack of stakeholder input on the interim APC assignments may 
negatively impact Medicare beneficiaries. In particular, the commenter 
stated that interim payment assignments have been influential in 
determining whether hospitals provide services to Medicare 
beneficiaries or not, and further suggested that if the payment for a 
procedure or service does not adequately reflect the true costs of 
furnishing the service, then hospitals may decide not to offer the 
service to Medicare beneficiaries.
    Response: The commenter is correct that Category I Vaccine and 
Category III CPT codes that are effective January 1 of a subsequent 
year are released on the AMA CPT Web site on or about July 1. However, 
some Level II HCPCS codes are not released on the CMS Web site until 
much later. For the October update, the Level II HCPCS C-codes that are 
effective October 1 are usually released and posted on the CMS Web site 
in August or September, depending on the number of OPPS new technology 
service and pass-through drug and device applications that are 
evaluated. Therefore, we do not have sufficient time to evaluate the 
new codes, determine proposed APC assignments, post those proposed 
assignments to the CMS Web site, accept and consider public comments, 
and respond to public comments between the time that the new codes 
become available and the time that we must meet our systems deadlines 
for our claims processing and payment files for the upcoming quarter. 
Given the challenges and time constraints in meeting the quarterly CPT 
and Level II HCPCS systems deadlines, we will continue to assign the 
new codes that are effective October 1 and January 1 of subsequent year 
to interim APC assignments. If we were to wait for comments on the 
interim APC assignments for the new codes before making them effective 
on October 1 or January 1, this may result in services and items not 
being paid for separately for a whole year, which would ultimately 
disadvantage both the hospital outpatient facilities and Medicare 
beneficiaries.
    The OPPS is a prospective payment system that provides payment for 
groups of services that share clinical and resource use 
characteristics. It should be noted that, with all new codes, our 
policy has been to assign the service to an APC based on input from a 
variety of sources, including but not limited to review of the clinical 
similarity of the service to existing procedures; input from CMS 
medical advisors; information from interested specialty societies; and 
review of all other information available to us, including information 
provided to us by the public, whether through meetings with 
stakeholders or additional information that is mailed or otherwise 
communicated to us.
    After consideration of the public comments we received, we are 
finalizing our proposed policy, without modification, to assign the new 
CPT and Level II HCPCS codes that are effective October 1 and January 1 
of subsequent years to interim APC assignments and request comments on 
the codes in the annual OPPS/ASC final rule with comment period, as 
described above.
    Comment: Some commenters requested that CMS implement a 1 to 2 year 
dampening period to minimize significant fluctuations in payments from 
year to year for newly bundled or packaged procedure codes. One 
commenter specifically stated that limiting the payment reduction to 10 
percent would prevent hospitals from experiencing substantial payment 
reductions and would allow hospitals reasonable time to appropriately 
update their chargemasters to reflect the newly packaged codes.
    Response: We do not believe it is necessary or appropriate to limit 
payment reductions for any individual service in order to prevent 
hospitals from experiencing substantial payment reductions as the 
commenter indicates. While payment rates for individual services may 
decrease from year to year, the total estimated payments made to 
hospitals remains the same because the OPPS is, by statute, a budget 
neutral payment system. In order to accurately report charges on their 
claims, hospitals must be cognizant of HCPCS coding changes, 
specifically with respect to Category I and III CPT codes and Level II 
HCPCS codes that occur throughout the year, including the quarterly 
updates (April 1, July 1, and October 1) as well as the annual updates 
(January 1). In recent years, the CMS and the AMA's CPT Editorial Panel 
have increasingly created new codes that use a single HCPCS code to 
report combinations of services that were previously reported by 
multiple HCPCS codes or multiple units of a single HCPS code. For 
example, effective January 1, 2010, CMS created HCPCS code G0424 
(Pulmonary rehabilitation, including exercise (includes monitoring), 
per hour, per session) to represent a comprehensive program of 
pulmonary therapy and the CPT Editorial Panel created CPT code 77338 
(Multi-leaf collimator (MLC) device(s) for intensity modulated 
radiation therapy (IMRT), design and construction per IMRT plan) to 
report all devices furnished under a single IMRT treatment plan. As we 
have stated before, we expect hospitals to carefully review each new 
HCPCS code when setting charges for the forthcoming year. However, in 
particular, hospitals should be especially careful to thoughtfully 
establish charges for new codes that use a single code to report 
multiple services that were previously reported by multiple codes. It 
is vital in these cases that hospitals carefully establish charges that 
fully include all of the charges for all of the predecessor services 
that are reported by the new code. To fail to carefully construct the 
charge for a new code that reports a combination of services that were 
previously reported separately, particularly in the first year of the 
new code, under-represents the cost of providing the service describing 
by the new code and can have significant adverse impact on future 
payments under the OPPS for the individual service described by the new 
code.

B. OPPS Changes--Variations Within APCs

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

[[Page 74225]]

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 the 
proposed rule and this final rule with comment period);
    (7) Incidental services such as venipuncture;
    (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 final rule with comment period.
    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 
final rule with comment period.
    Under the OPPS, we generally pay for hospital outpatient services 
on a rate-per-service basis, where the service may be reported with one 
or more HCPCS codes. Payment varies according to the APC group to which 
the independent service or combination of services is assigned. Each 
APC weight represents the hospital median cost of the services included 
in that APC, relative to the hospital median cost of the services 
included in APC 0606 (Level 3 Hospital Clinic Visits). The APC weights 
are scaled to APC 0606 because it is the middle level 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. Section 1833(t)(9)(A) of the Act also 
requires the Secretary 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 final rule with comment period).
    Finally, section 1833(t)(2) of the Act provides that, subject to 
certain exceptions, the items and services within an APC group cannot 
be considered comparable with respect to the use of resources if the 
highest median cost (or mean cost as elected by the Secretary) for an 
item or service in the group is more than 2 times greater than the 
lowest median cost (or mean cost, if so elected) for an item or service 
within the same group (referred to as the ``2 times rule''). We use the 
median cost of the item or service in implementing this provision. 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 codes 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 the CY 2012 OPPS/ASC proposed rule (76 FR 42231), we 
proposed to make exceptions to this limit on the variation of costs 
within each APC group in unusual cases, such as low-volume items and 
services for CY 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 and final policies for CY 
2012 are contained mainly in sections III.C. and III.D. of this final 
rule with comment period.
    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

[[Page 74226]]

with the APC Panel but for which we proposed changes to their HCPCS 
codes' APC assignments in Addendum B to the proposed rule. We note that 
Addendum B did not appear in the printed version of the Federal 
Register as part of the CY 2012 OPPS/ASC proposed rule. Rather, it was 
published and made available only via the Internet on the CMS Web site 
at: http://www.cms.gov/. In these cases, to eliminate a 2 times 
violation or to improve clinical and resource homogeneity, we proposed 
to reassign the codes to APCs that contain services that are similar 
with regard to both their clinical and resource characteristics. We 
also proposed to rename existing APCs or create new clinical APCs to 
complement proposed HCPCS code reassignments. In many cases, the 
proposed HCPCS code reassignments and associated APC reconfigurations 
for CY 2012 included in the proposed rule were related to changes in 
median costs of services that were observed in the CY 2010 claims data 
newly available for CY 2012 ratesetting. We also proposed changes to 
the status indicators for some codes that were not specifically and 
separately discussed in the proposed rule. In these cases, we proposed 
to change the status indicators for some codes because we believe that 
another status indicator would more accurately describe their payment 
status from an OPPS perspective based on the policies that we proposed 
for CY 2012. Addendum B of the CY 2012 OPPS/ASC proposed rule 
identified with a comment indicator ``CH'' those HCPCS codes for which 
we proposed a change to the APC assignment or status indicator as 
assigned in the April 2011 Addendum B Update (available via the 
Internet on the CMS Web site at: http://www.cms.gov/). In contrast, 
Addendum B of this final rule with comment period identifies with the 
``CH'' comment indicator the final CY 2012 changes compared to the 
codes' status as reflected in the October 2011 Addendum B update.
3. Exceptions to the 2 Times Rule
    As discussed earlier, we may make exceptions to the 2 times limit 
on the variation of costs within each APC group in unusual cases such 
as low volume items and services. Taking into account the APC changes 
that we proposed for CY 2012 based on the APC Panel recommendations 
that were discussed mainly in sections III.C. and III.D. of the 
proposed rule, the other proposed changes to status indicators and APC 
assignments as identified in Addendum B to the proposed rule (which was 
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).
    Table 18 of the CY 2012 OPPS/ASC proposed rule (76 FR 42232) listed 
17 APCs that we proposed to exempt from the 2 times rule for CY 2012 
based on the criteria cited above.
    For cases in which a recommendation by the APC Panel appeared to 
result in or allow a violation of the 2 times rule, we generally 
accepted the APC Panel's recommendation because those recommendations 
were based on explicit consideration of resource use, clinical 
homogeneity, site of service, and the quality of the CY 2010 claims 
data used to determine the APC payment rates that we proposed for CY 
2012. The median costs for hospital outpatient services for these and 
all other APCs that were used in the development of the CY 2012 OPPS/
ASC proposed rule and this final rule with comment period can be found 
on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp.
    For the CY 2012 OPPS/ASC proposed rule, we based the listed 
exceptions to the 2 times rule on claims data for dates of service 
between January 1, 2010, and December 31, 2010, that were processed 
before January 1, 2011. For this final rule with comment period, we 
used 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. Although we stated in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42232) that the list of APC exemptions that 
appeared in Table 18 were based on claims data processed from January 
1, 2010, through September 30, 2010, we are clarifying that the listed 
exceptions were based on claims data processed between January 1, 2010, 
and December 31, 2010, consistent with past practice of using claims 
data processed between January 1 and December 31 of an applicable year 
to determine APCs that are exempted from the 2 times rule. Thus, after 
considering the public comments we received on the CY 2012 OPPS/ASC 
proposed rule and making changes to APC assignments based on those 
comments, we analyzed the CY 2010 claims data used for this final rule 
with comment period to identify the APCs with 2 times violations. Based 
on the final CY 2010 claims data, we found that there are 23 APCs with 
2 times rule violations, a cumulative increase of 6 APCs from the 
proposed rule. We applied the criteria as described earlier to identify 
the APCs that are exceptions to the 2 times rule for CY 2012, and 
identified additional APCs that meet the criteria for exception to the 
2 times rule for this final rule with comment period:
     APC 0076 (Level I Endoscopy Lower Airway)
     APC 0135 (Level III Skin Repair)
     APC 0148 (Level I Anal/Rectal Procedures)
     APC 0262 (Plain Film of Teeth)
     APC 0317 (Level II Miscellaneous Radiology Procedures)
     0330 (Dental Procedures)
     APC 0341 (Skin Tests)
     APC 0403 (Level I Nervous System Imaging)
     APC 0409 (Red Blood Cell Tests)
     APC 0607 (Level 4 Hospital Clinic Visits)
    In addition, we also determined that there are five APCs that no 
longer violate the 2 times rule:
     APC 0016 (Level IV Debridement & Destruction)
     APC 0105 (Repair/Revision/Removal of Pacemakers, AICDs, or 
Vascular Devices)
     APC 0245 (Level I Cataract Procedures without IOL)
     APC 0263 (Level I Miscellaneous Radiology)
     APC 0432 (Health and Behavior Services)
    We have not included in this count those APCs where a 2 times 
violation is not a relevant concept, such as APC 0375 (Ancillary 
Outpatient Services when Patient Expires), with an APC median cost set 
based on multiple procedure claims; therefore, we have identified only 
final APCs, including those with criteria-based median costs, such as 
device-dependent APCs, with 2 times rule violations.
    Comment: One commenter supported CMS' proposal to exempt APCs 0016 
and 0058 from the 2 times rule. According to the commenter, because the 
procedures included in both APCs are similar based on clinical 
homogeneity and resource costs, there is little opportunity to upcode, 
and therefore, it is appropriate to exempt APCs 0016 and 0058 from the 
2 times rule.
    Response: We appreciate the commenter's support. Based on our

[[Page 74227]]

analysis of the CY 2010 claims used for the final rule with comment 
period, we found that APC 0016 no longer violated the 2 times rule. 
However, APC 0058 continued to violate the 2 times rule. The range in 
median costs for the procedures with significant claims data in APC 
0058 is between $49 and $116. Currently, there are only two levels of 
APCs for services that describe strapping and cast application, which 
include APC 0058 and APC 0426 (Level II Strapping and Cast 
Application). In contrast to APC 0058, our claims data show that the 
range in median costs for the procedures with significant claims data 
in APC 0426 is between $150 and $197. Because of the range in median 
costs in APC 0426, we believe that the procedures in APC 0058 should 
continue to be placed in APC 0058. Therefore, we are finalizing our 
proposal to continue to exempt APC 0058 from the 2 times rule.
    After consideration of the public comment that we received and our 
review of the CY 2010 costs from claims available for this final rule 
with comment period, we are finalizing our proposal to exempt 12 
original APCs (that appeared in Table 18 of the CY 2012 OPPS/ASC 
proposed rule with comment period and also appears in Table 19 below) 
from the 2 times rule for CY 2012, with modification. Specifically, we 
removed five APCs that no longer violated the 2 times rule and 
increased the number of APC exceptions from 17 to 23 APCs, as described 
previously in this section. Our final list of 23 APCs exempted from the 
2 times rule is displayed in Table 19 below.
[GRAPHIC] [TIFF OMITTED] TR30NO11.032


[[Page 74228]]



C. New Technology APCs

1. Background
    In the November 30, 2001 final rule (66 FR 59903), we finalized 
changes to the time period a service was eligible for payment under a 
New Technology APC. Beginning in CY 2002, we retain services within New 
Technology APC groups until we gather sufficient claims data to enable 
us to assign the service to 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 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. Movement of Procedures From New Technology APCs to Clinical APCs
    As we explained in the November 30, 2001 final rule (66 FR 59902), 
we generally keep a procedure in the New Technology APC to which it is 
initially assigned until we have collected sufficient data to enable us 
to move the procedure to a clinically appropriate APC. However, in 
cases where we find that our original New Technology APC assignment was 
based on inaccurate or inadequate information (although it was the best 
information available at the time), or where the New Technology APCs 
are restructured, we may, based on more recent resource utilization 
information (including claims data) or the availability of refined New 
Technology APC cost bands, reassign the procedure or service to a 
different New Technology APC that most appropriately reflects its cost.
    Consistent with our current policy, in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42233), we proposed 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 of the proposed rule listed the HCPCS codes and associated 
status indicators that we proposed 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

[[Page 74229]]

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 proposed 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 proposed 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 stated in the 
proposed rule that 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 of the proposed rule.
    We did not receive any public comments on the APC reassignments for 
HCPCS codes G0417, G0418, and G0419. Therefore, for the reasons set 
forth above, we are finalizing our proposal, without modification, to 
assign HCPCS code G0417 to APC 1505, HCPCS code G0418 to APC 1506, and 
to assign HCPCS code G0419 to APC 1508. The final CY 2012 payment rates 
for HCPCS codes G0417, G0418, and G0419 can be found in Addendum B of 
this final rule with comment period (which is available via the 
Internet on the CMS Web site). Table 20 below lists the HCPCS codes and 
associated status indicators that we are reassigning from a New 
Technology APC to a different New Technology APC for CY 2012.
[GRAPHIC] [TIFF OMITTED] TR30NO11.033

D. OPPS APC-Specific Policies

1. Cardiovascular Services
a. Cardiovascular Computed Tomography (CCT) (APC 0340 and 0383)
    The CPT Editorial Panel created the following new codes for 
cardiovascular computed tomography (CCT) services effective January 1, 
2010: CPT codes 75571 (Computed tomography, heart, without contrast 
material, with quantitative evaluation of coronary calcium), 75572 
(Computed tomography, heart, with contrast material, for evaluation of 
cardiac structure and morphology (including 3D image postprocessing, 
assessment of cardiac function, and evaluation of venous structures, if 
performed)), 75573 (Computed tomography, heart, with contrast material, 
for evaluation of cardiac structure and morphology in the setting of 
congenital heart disease (including 3D image postprocessing, assessment 
of LV cardiac function, RV structure and function and evaluation of 
venous structures, if performed)), and 75574 (Computed tomographic 
angiography, heart, coronary arteries and bypass grafts (when present), 
with contrast material, including 3D image postprocessing (including 
evaluation of cardiac structure and morphology, assessment of cardiac 
function, and evaluation of venous structures, if performed)). These 
Category I CPT codes replaced eight Category III CPT codes that had 
been in effect through December 31, 2009. For CY 2010, we assigned CPT 
code 75571 to APC 0340 (Minor Ancillary Procedures), and we assigned 
CPT codes 75572, 75573, and 75574 to APC 0383 (Cardiac Computed 
Tomographic Imaging). For CY 2011, we maintained these APC assignments, 
with final payment rates for APC 0340 and 0383 of $46.23 and $256.86, 
respectively. For CY 2012, we proposed to maintain the assignments of 
CPT code 75571 to APC 0340 and CPT codes 75572, 75573, and 75574 to APC 
0383. APCs 0340 and 0383 have final CY 2012 median costs of 
approximately $46 and $262, respectively.
    Comment: One commenter was concerned that hospitals may be failing 
to report the services in APC 0383 with CPT codes 75572, 75573, and 
75574, which were effective January 1, 2010, and are continuing to 
report the related services using the expired Category III CPT codes 
previously used through December 31, 2009. The commenter requested that 
CMS analyze the CY 2010 claims data to determine whether the expired 
CCT codes are being used to report CCT services and, if so, to use 
those claims in calculating the APC 0383 final median cost. The 
commenter

[[Page 74230]]

also urged CMS to reassign CPT code 75571 from APC 0340 to APC 0282 
(Miscellaneous Computed Axial Tomography) for reasons of clinical 
coherence and resource use similarity to procedures in APC 0282. The 
commenter contended that APC 0340 contains several procedures that do 
not require the same equipment or clinical staff as CPT code 75571, 
while APC 0282 contains services that do have similar clinical and 
resource characteristics to CPT code 75571.
    In addition, the commenter expressed concerns that hospitals do not 
report their costs in a consistent and accurate way and do not update 
their chargemasters regularly with charges that reflect appropriate 
relativity, and offered to work with CMS to develop a standard 
methodology to address these issues. The commenter also recommended 
that CMS promote the need to accurately and completely report all 
services provided.
    Response: We believe that the CY 2012 median costs we have 
calculated for CPT codes 75572, 75573, and 75574 and APC 0383 
appropriately reflect valid estimates of the cost of these services. We 
compared the median costs and single procedure claims based on CY 2009 
claims (used for final CY 2011 payment rates) with median costs and 
single procedure claims based on CY 2010 claims (which we are using for 
the final CY 2012 payment rates). The final CY 2011 APC 0383 median 
cost of approximately $254 used 11,323 single bills based on 6 of the 
category III CPT codes used prior to CPT codes 75572, 75573, and 75574. 
The final CY 2012 APC 0383 median cost of approximately $262 used 
15,253 single bills based on CPT codes 75572, 75573, and 75574. This 
shows consistency across years in median costs and an increase in the 
number of single bills used. Therefore, we have no reason to believe 
that the median costs we have calculated do not reflect valid estimates 
of the costs of CPT codes 75572, 75573, and 75574, which went into 
effect on January 1, 2010.
    We believe that CPT code 75571 is a minor ancillary procedure and 
is appropriately assigned to APC 0340, in terms of resources and 
clinical similarity. CPT code 75571 has a final median cost of 
approximately $31, and APC 0340 has a final median cost of 
approximately $46. In contrast, APC 0282 has a final median cost of 
approximately $107, driven largely by a single major procedure CPT 
code, that is, CPT code 76380 (Computed tomography, limited or 
localized follow-up study), with a final median cost of approximately 
$107. Therefore, CPT code 75571, with a final median cost of 
approximately $31, would not be an appropriate resource similarity for 
APC 0282, while CPT code 75571 is similar to other codes in APC 0340 
with respect to resource use. Therefore, we believe it is appropriately 
assigned to APC 0340. We agree with the commenter that accurate 
reporting of charges for all services will help to ensure that these 
items are appropriately accounted for in future years' OPPS payment 
rates. As we often state (73 FR 68535 through 68536; 74 FR 60367; and 
75 FR 71835), we encourage stakeholders to carefully review HCPCS code 
descriptors, as well as any guidance CMS may have provided for specific 
HCPCS codes. We note that the definition of charges in the regulations 
at 42 CFR 413.53(b) states that implicit in the use of charges as the 
basis of apportionment is the objective that charges for services be 
related to the cost of the services. As new HCPCS codes are developed 
or existing HCPCS code descriptors are revised from year to year (for 
example, by redefining units of service), we expect that hospitals' 
submitted Medicare charges relate appropriately to the costs of those 
services. Therefore, we do not share the commenter's belief that we 
should modify our standard ratesetting methodology (for example, by 
using claims data for deleted codes) in order to calculate the median 
costs for the services described by CPT codes 75572, 75573, and 75574. 
We refer readers to the Provider Reimbursement Manual (Pub. 15-2, Part 
2, Chapter 40 Hospital and Hospital Health Care, Form CMS 2552-10) for 
CMS' instructions for reporting costs.
    After considering the public comments we received and reviewing our 
claims data, we are maintaining the assignment of CPT code 75571 to APC 
0340, for which we have calculated a final rule median cost of 
approximately $46 for CY 2012, and we are maintaining the assignment of 
CPT codes 75572, 75573, and 75574 to APC 0383, for which we have 
calculated a final rule median cost of approximately $262 for CY 2012.
b. Cardiac Imaging (APC 0377)
    For CY 2012, we proposed to assign the following CPT codes to APC 
0377 (Level II Cardiac Imaging): 78451(Myocardial perfusion imaging, 
tomographic (SPECT) (including attenuation correction, qualitative or 
quantitative wall motion, ejection fraction by first pass or gated 
technique, additional quantification, when performed); single study, at 
rest or stress (exercise or pharmacologic)); 78452 (Myocardial 
perfusion imaging, tomographic (SPECT) (including attenuation 
correction, qualitative or quantitative wall motion, ejection fraction 
by first pass or gated technique, additional quantification, when 
performed); multiple studies, at rest and/or stress (exercise or 
pharmacologic) and/or redistribution and/or rest reinjection); 78453 
(Myocardial perfusion imaging, planar (including qualitative or 
quantitative wall motion, ejection fraction by first pass or gated 
technique, additional quantification, when performed); single study, at 
rest or stress (exercise or pharmacologic)); and 78454 (Myocardial 
perfusion imaging, planar (including qualitative or quantitative wall 
motion, ejection fraction by first pass or gated technique, additional 
quantification, when performed); multiple studies, at rest and/or 
stress (exercise or pharmacologic) and/or redistribution and/or rest 
reinjection). APC 0377 had a proposed national unadjusted payment rate 
of approximately $677.
    The national unadjusted payment for APC 0377 for CY 2011 is 
approximately $760. However, it is important to note that the national 
unadjusted payment rate for APC 0377 for CY 2011 was based on CY 2009 
claims data and CPT codes 78451, 78452, 78453 and 78454 had not been 
created in CY 2009. In CY 2009, APC 0377 was populated with CPT codes 
78460 (Myocardial perfusion imaging (planar) single study, at rest of 
stress (exercise and/or pharmacologic), with or without 
quantification); 78461 (Myocardial perfusion imaging (planar) single 
study, at rest or stress (exercise and/or pharmacologic), with or 
without quantification; multiple studies (planar), at rest and/or 
stress (exercise and/or pharmacologic), and redistribution and/or rest 
injection, with or without quantification); 78464 (Myocardial perfusion 
imaging (planar) single study, at rest or stress (exercise and/or 
pharmacologic), with or without quantification; tomographic (SPECT) 
single study (including attenuation correction when performed), at rest 
or stress (exercise and/or pharmacologic), with or without 
quantification); and 78465 (Myocardial perfusion imaging (planar) 
single study, at rest or stress (exercise and/or pharmacologic), with 
or without quantification; tomographic (SPECT) multiple studies 
(including attenuation correction when performed), at rest or stress 
(exercise and/or pharmacologic), with or without quantification), which 
were also cardiac imaging services. Therefore, CY 2009 is the first 
year in which hospitals established charges for the new CPT codes for 
CY 2010 on which the CY

[[Page 74231]]

2012 proposed rule and final rule medians are based.
    Comment: Several commenters expressed concern over the proposed 11 
percent payment reduction to APC 0377. Commenters believed that there 
were irregularities in the hospital cost data that suggest inaccurate 
reporting of costs associated with procedures in APC 0377, rather than 
an actual decline in resource use. Commenters particularly pointed out 
that CPT code 78453 (Myocardial perfusion imaging, planar, single 
study) has a higher mean and median cost than CPT code 78454 
(Myocardial perfusion imaging, planar, multiple studies), according to 
CMS data. The commenters stated that it is illogical to expect 
hospitals to use fewer resources for furnishing multiple studies than 
for furnishing a single study. In light of these irregularities, and 
the continued decline in the proposed payment, the commenters 
recommended that CMS reevaluate the data used to set the payment rate 
for APC 0337, to ensure that the data indeed capture the entire 
universe of claims for these APCs and reflect all procedure and 
radiopharmaceutical costs. The commenters further recommended that CMS 
recalculate median costs for these procedures after additional 
refinement of the data, including eliminating hospital claims with CCRs 
of 0.2 or less and, if subsequent review still warrants a payment 
reduction for either APC, such a reduction should be phased in over 
several years. Commenters suggested a 1- to 2-year ``dampening period'' 
beginning with the first year that CMS could utilize claims for 
ratesetting, given that APC 0377 contains four CPT codes that were new 
for CY 2010 and replaced previously existing services that were 
assigned to APC 0377. Commenters stated that hospitals are often slow 
to update their charge masters following coding changes. Additionally, 
the commenters recommended that CMS establish a threshold change of 10 
percent that triggers an enhanced CMS validation process for all APCs, 
including accounting for all packaged costs and review of excluded/
included claims. The commenters also recommended that CMS limit year-
to-year changes in payment rates to a maximum of 5 to 10 percent for a 
single year, unless CMS or public commenters identify factors 
responsible for significant fluctuations in cost data, such as the 
introduction of new technologies or changes in the composition of an 
APC.
    Response: In accordance with sections 1833(t)(2)(B) and 
1833(t)(9)(A) of the Act and Sec. Sec.  419.31 and 419.50 of the 
regulations, we annually review the items and services within an APC 
group with respect to comparability of the use of resources and 
clinical homogeneity. The payment rates, including the relative 
weights, set annually for these services are based on the claims and 
cost report data used for ratesetting. For the CY 2012 update, the 
payment rates for APCs 0337 are based on data from claims submitted 
during CY 2010 according to the standard OPPS ratesetting methodology. 
Specifically, we used 502,757 single claims (out of 584,855 total 
claims) from CY 2012 proposed rule claims data to calculate the 
proposed rule median cost of approximately $701, and we used 539,100 
single claims (out of 640,458 total claims) from CY 2012 final rule 
claims data to calculate the median cost for APC 0337 of approximately 
$672, on which we based the CY 2012 national unadjusted payment rate.
    We note that the final CY 2012 median cost represents a slight 
decline from the median cost of approximately $701, upon which the CY 
2012 proposed payment rate for this APC was based and the median cost 
of approximately $752, upon which the final CY 2011 payment rate was 
based. As we have in the past (75 FR 71916), we note that our cost-
finding methodology is based on reducing each hospital's charge for its 
services to an estimated cost by applying the most discrete hospital-
specific CCR available for the hospital that submitted the claim. 
Therefore, it is the hospital's claims and cost reports that determine 
the estimated costs that are used to calculate the median cost for each 
service and, when aggregated into APC groups, the hospital data are 
used to calculate the median cost for the APC on which the APC payment 
rate is based. As we have previously, we note that, as part of our 
standard ratesetting process, we already engage in a standard review 
process for all APCs that experience significant changes in median 
costs (74 FR 60365).
    We examined our claims data for APC 0377 for the CY 2011 OPPS final 
rule with comment period, the CY 2012 proposed rule, and this CY 2012 
final rule with comment period. Specifically we looked at the following 
data elements for all single and pseudo single procedure bills for the 
four CPT codes that are assigned to APC 0377 and that, therefore, are 
the data points on which the median cost for the APC is based: median 
CCR; median charge; median line item cost (that is, without packaging); 
and median amount of packaging (shown in Table 21). We also show in 
Table 21 the count of single and pseudo single procedure claims for the 
APC and the total frequency for the APC.

[[Page 74232]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.034

    We observe from this information that the median charge for 
services that are assigned to APC 0377 has increased from the CY 2011 
final rule data (CY 2009 claims containing charges for the deleted 
codes) to the CY 2012 proposed and final rule data sets (based on 
charges for the codes that were effective January 1, 2010). The CCRs 
that are applied to the codes remained the same from the CY 2011 final 
rule data to the CY 2012 proposed rule data but declined slightly in 
the CY 2012 final rule data, with the updating of the data with more 
current cost reports. Therefore, the line item median costs increased 
between the CY 2011 final rule data and the CY 2012 proposed rule data 
but declined in the CY 2012 final rule data due to the decrease in the 
CCRs. We also observe that the packaged cost for codes in APC 0377 
declined 61 percent from the CY 2011 final rule data to the CY 2012 
proposed rule data and further declined another 3 percent in the CY 
2012 final rule data. Therefore, we believe that the reduction in the 
payment rate for APC 0377 is attributable to the slight decline in the 
CCRs and the significant decline in the packaged cost.
    We acknowledge that some hospitals may charge at different markups 
over cost for different services. However, as long as the cost report 
is correctly completed and the charges are mapped to the cost center in 
which the costs for the service are recorded, the CCRs will represent a 
valid reflection of the relationship between the costs and the charges. 
The OPPS, like all other prospective payment systems, assumes that 
hospitals complete the cost report properly, including mapping the 
charges for a service to the cost center in which the costs for that 
service are captured.
    We recognize that there is considerable variability in the charges 
that hospitals established for the four CPT codes that were new for CY 
2010 and replaced deleted codes for reporting these services that had 
been assigned to APC 0377, but it is not uncommon for a high level of 
variability in the charges for a service to occur. In addition, it is 
normal that such variability would be carried through to the 
calculation of estimated costs for the service. Hospitals charges are a 
reflection of the monetary value that the hospital places on the 
service, and we do not advise hospitals with regard to what they should 
charge for a service other than to require that the charges be 
reasonably related to their cost for the service, and that they must 
charge all payers the same amount for the same service. (We refer 
readers to the definition of ``charges'' at 42 CFR 413.53(b).) However, 
our use of the median charge to establish payment levels was 
specifically designed to address wide variances in hospital cost 
accounting systems and billing patterns, and also has consistently been 
a reliable mechanism for promoting increased consistency without 
introducing additional regulations.
    We recognize that it appears peculiar that the estimated cost for 
CPT code 78453, which represents the cost of a single myocardial 
perfusion imaging (MPI) study, would be greater than the estimated cost 
for CPT code 78454, which represents the cost of multiple myocardial 
perfusion imaging studies done in a single session. However, our costs 
are based on the amount of the charge that the hospital established for 
the service and the hospital's CCR from its Medicare cost report. It is 
not unusual for hospitals to establish charges that do not comport with 
our expectation of the charges they would establish based on the 
definition of the code for the service for which they are establishing 
charges and on which we based simulated medians. Moreover, because the 
median cost is the 50th percentile of the array of costs from different 
hospitals, case-mix and volume differences between different hospitals 
can also result in seemingly peculiar relativity between median costs.
    Based on our review of the claims data and cost report data, we 
believe our estimated median cost for APC 0377 is a valid estimate of 
the relative cost of the services under the APC and, therefore, see no 
reason to adopt an alternative methodology that would eliminate claims 
from hospitals with CCRs below 0.2 or limit the decline in the median 
cost to 5 to 10 percent. In addition, based on the significant volume 
of single bills used to calculate the median cost (539,100 single 
procedure bills of 640,458 total frequency or 84 percent of the total 
frequency for the services in the APC), we have no reason to believe 
that the median cost we have calculated should not be used to establish 
the payment for APC 0377 and, therefore, will not implement a 1- to 2-
year ``dampening period,'' as suggested by the commenters. To the 
extent that hospitals determine that their charges should be revised to 
better reflect the resources required to furnish the services currently 
assigned to APC 0377, the revised charges would be reflected in future 
years' OPPS payment rates.
    Comment: Commenters asked that CMS post to the CMS Web site the 
data analysis that was made available to the

[[Page 74233]]

APC Panel for all APCs for which the APC Panel median costs fluctuated 
by more than 10 percent compared to the CY 2011 OPPS final rule median 
costs to allow all interested stakeholders to review and comment on the 
data.
    Response: During the August 10-11, 2011 meeting of the APC Panel, 
we presented a list of all APCs whose median costs fluctuated by 
greater than 10 percent when comparing the CY 2011 final rule median 
costs to CY 2012 proposed rule median costs. While the proposed payment 
for APC 0377 represented a reduction in payment of 11 percent, the 
decline in median cost was less than 10 percent; therefore, it was not 
included on the list presented to the APC Panel during its August 10-
11, 2011 meeting. The comparisons of APCs with median costs fluctuating 
by more than 10 percent is based on median cost data available on the 
CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS. 
Additionally, the OPPS Limited Data Set (LDS), which contain claims 
used to establish median cost for use in ratesetting, is available for 
purchase on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS. Therefore, interested stakeholders have access 
to the same data that we examined and presented to the APC Panel.
    After considering the public comments we received and examining the 
reasons for the decline in the median cost for APC 0377, we are 
declining to make any of the adjustments to the median cost that 
commenters requested because we believe that the data on which the 
median cost for APC 0377 is calculated are valid and that the median 
cost is an appropriate reflection of the 50th percentile of the array 
of the estimated costs of services assigned to APC 0377. Therefore, we 
are finalizing our CY 2012 proposal, without modification, to continue 
to assign CPT codes 78451, 78452, 78453, and 78454 to APC 0377. We are 
finalizing a payment rate for APC 0377 for CY 2012 based on the CY 2012 
OPPS final rule median cost of approximately $672.
c. Insertion/Replacement/Repair of AICD Leads, Generator, and Pacing 
Electrodes (APC 0108)
    We refer readers to section II.A.2.E.(6) of this final rule with 
comment period for a detailed discussion of this issue.
d. Implantable Loop Recorder Monitoring (APC 0690)
    For CY 2012, we proposed to reassign CPT code 93299 (Interrogation 
device evaluation(s), (remote) up to 30 days; implantable 
cardiovascular monitor system or implantable loop recorder system, 
remote data acquisition(s), receipt of transmissions and technician 
review, technical support and distribution of results) from APC 0691 
(Level III Electronic Analysis of Devices) to APC 0690 (Level I 
Electronic Analysis of Devices), with a proposed payment rate of 
approximately $35.
    Comment: Some commenters objected to the reassignment of CPT code 
93299 from APC 0691 to APC 0690. They believed that the reassignment 
will result in inadequate payment to hospitals for the resources 
required to provide the service and may be a disincentive to hospitals 
to provide this service.
    Response: The calculated median cost for CPT code 93299 based on CY 
2010 hospital claims and cost report data available for this final rule 
with comment period is approximately $38. We are confident that the 
observed costs in the claims data are representative of the costs of 
providing this service in CY 2010 because almost all of the claims are 
single claims (2,249 out of 2,253) that can be used for ratesetting. 
The calculated median cost of approximately $38 for CPT code 93299 is 
similar to that of most of the CPT codes in APC 0690, and very close to 
the overall APC median cost of approximately $35. In contrast, the 
overall APC median cost for APC 0691 is approximately $168, more than 
four times the median cost of CPT code 93299. Therefore, we do not 
agree with commenters that the placement of CPT code 93299 in APC 0690 
does not meet the APC recalibration standards of clinical and resource 
homogeneity and would result in inadequate payment to hospitals. Thus, 
we are finalizing our proposal, without modification, to reassign CPT 
code 93299 to APC 0690 for CY 2012.
e. Echocardiography (APCs 0128, 0269, 0270, and 0697)
    Under the OPPS, echocardiography services are reported using a 
combination of CPT codes and HCPCS C-codes. Hospitals report the 
echocardiography CPT codes when performing echocardiography procedures 
without contrast. Alternatively, hospitals report the HCPCS C-codes 
when performing echocardiography procedures with contrast, or without 
contrast followed by with contrast. In addition to the HCPCS C-codes, 
hospitals should also report the appropriate units of the HCPCS codes 
for the contrast agents used in the performance of the echocardiograms.
    Currently, there are four APCs that describe echocardiography 
services
     APC 0128 (Echocardiogram With Contrast)
     APC 0697 (Level I Echocardiogram Without Contrast)
     APC 0269 (Level II Echocardiogram Without Contrast)
     APC 0270 (Level III Echocardiogram Without Contrast)
    For CY 2012, we proposed payment rates for these APCs of 
approximately $564, $219, $384, and $567, respectively.
    Comment: Some commenters expressed concern with the proposed 
payment rate of approximately $384 for CPT code 93306 
(Echocardiography, transthoracic real-time with image documentation 
(2D), includes M-mode recording, when performed, complete, with 
spectral Doppler echocardiography, and with color flow Doppler 
echocardiography), stating that the 5-percent decrease in the payment 
rate could be the result of miscoding. The commenters suggested that 
hospitals were continuing to bill CPT code 93307 (Echocardiography, 
transthoracic, real-time with image documentation (2D), includes M-mode 
recording, when performed, complete, without spectral or color Doppler 
echocardiography) in conjunction with CPT codes 93320 (Doppler 
echocardiography, pulsed wave and/or continuous wave with spectral 
display (List separately in addition to codes for echocardiographic 
imaging); complete) and 93325 (Doppler echocardiography color flow 
velocity mapping), rather than using CPT code 93306 because they were 
still adjusting to billing with CPT code 93306. The commenters 
requested that CMS confirm that the calculation of the median cost for 
APC 0269, which is the APC that CMS proposed to continue to assign to 
CPT code 93306, is based on correct coding.
    Response: CPT code 93306 was made effective on January 1, 2009. 
Consistent with our statement in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71947), we find no evidence that would suggest 
that the fluctuations in cost data for echocardiography APCs are due to 
incorrect hospital billing practices. For this CY 2012 OPPS/ASC final 
rule with comment period, which is based on the CY 2010 hospital 
outpatient claims for ratesetting, our claims show a significant volume 
of data for CPT code 93306. Specifically, our analysis reveals a CPT 
median cost of approximately $394 based on 975,213 single claims (out 
of 990,809 total claims) for CPT code 93306, which represents 90 
percent of the claims in APC 0269. Given the significant volume of 
claims and its CPT median cost of

[[Page 74234]]

approximately $394, we believe that CPT code 93306 is appropriately 
placed in APC 0269, which has a final APC median cost of approximately 
$393 for CY 2012.
    Therefore, after consideration of the public comments that we 
received, we are finalizing our CY 2012 proposal, without modification, 
to continue to assign CPT code 93306 to APC 0269. 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 rule 
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. We will again reevaluate the status 
indicator and APC assignment for CPT code 93306 for the CY 2013 OPPS 
rulemaking cycle.
    Comment: Several commenters requested that CMS reassign CPT codes 
76825 (Echocardiography, fetal, cardiovascular system, real time with 
image documentation (2d), with or without m-mode recording) and 76826 
(Echocardiography, fetal, cardiovascular system, real time with image 
documentation (2d), with or without m-mode recording; follow-up or 
repeat study) from the proposed APC 0697 to APC 0269. The commenters 
believed that fetal echocardiography is just as resource intensive as 
adult echocardiography. Another commenter stated that the low median 
cost for these services is the result of low frequency for these 
services, and suggested that some of the charges reported may be the 
result of miscoding.
    Response: In Addendum B of the CY 2012 OPPS/ASC proposed rule, we 
flagged CPT codes 76825 and 76826 with comment indicator ``CH'' to 
indicate that we are reassigning the APC assignments for these codes. 
Specifically, we proposed to reassign CPT code 76825 from APC 0270 to 
APC 0697, and reassign CPT code 76826 from APC 0269 to APC 0697. 
Because these codes have been in existence for almost 20 years, and 
have been reportable under the hospital OPPS since it was implemented 
in 2000, we believe that the low frequency of these services is the 
result of infrequent use of this procedure on Medicare patients. 
Analysis of our claims data from the past 3 years, specifically from CY 
2008, CY 2009, and CY 2010, reveal that these procedures are relatively 
low volume procedures. CPT code 76825 has had fewer than 330 single 
claims for ratesetting for each year (327 single claims in CY 2008, 291 
single claims in CY 2009, and 282 single claims in CY 2010), with a CPT 
median cost that has ranged between $89 and $126. Similarly, CPT code 
76826 has had fewer than 50 single claims for ratesetting for each year 
(25 single claims in CY 2008, 23 single claims in CY 2009, and 43 
single claims in 2010), with a CPT median cost that has ranged between 
$85 and $92. Based on our claims data, we believe that CPT codes 76825 
and 76826 are more appropriately placed in APC 0697 based on their 
clinical homogeneity and resource costs to the other procedure assigned 
to APC 0697. Furthermore, despite the relatively low volumes, the 
median costs for these services are notably stable and are more 
consistent with the median costs of the services assigned to lowest 
level echocardiogram APC, specifically, APC 0697, than to the services 
assigned to APC 0269, which has an APC median cost of approximately 
$393.
    After consideration of the public comments received on our proposed 
APC reassignment, we are finalizing our CY 2012 proposal, without 
modification, to reassign CPT code 76825 from APC 0270 to APC 0697, and 
to reassign CPT code 76826 from APC 0269 to APC 0697, which has a final 
CY 2012 median cost of approximately $221.
    Commenter: Several commenters expressed concern that the proposed 
payment rate of approximately $567 for the non-contrast echocardiogram 
procedures that are assigned to APC 0270 is higher than the proposed 
payment rate of approximately $564 for the contrast echocardiograms 
procedures that are assigned to APC 0128. The commenters indicated that 
it is not appropriate for an APC with contrast enhanced echocardiogram 
procedures to have a lower median cost and lower payment rate than an 
APC with non-contrast enhanced echocardiogram procedures. The 
commenters requested that CMS develop a more consistent and stable 
payment methodology for echocardiograms that utilize contrast agents 
because the cost of the contrast agents is approximately $117 and 
requires significantly more work when compared to non-contrast 
echocardiogram procedures. One commenter recommended that CMS adopt 
three APCs for contrast-enhanced echocardiogram procedures to parallel 
the three APCs that exist for non-contrast enhanced echocardiogram 
procedures, while another commenter requested data analysis supporting 
the higher proposed payment rate for APC 0270. Several commenters urged 
CMS to pay separately for the administration and cost of the contrast 
agent.
    Response: As stated above, we have four separate APCs to which 
echocardiography services are assigned. Procedures that utilize 
contrast agents are assigned to APC 0128, while procedures without 
contrast agents are assigned to one of three APCs, specifically, APC 
0270, APC 0269, or APC 0697. As described above, in the CY 2012 OPPS/
ASC proposed rule, the proposed payment rates for APCs 0270, APC 0269, 
and APC 0697 varied between $219 and $567. Analysis of our claims data 
show that the median costs for two of the non-contrast echocardiogram 
APCs (APC 0697 and 0269) are lower than the median cost of the contrast 
echocardiogram APC (APC 0128). Specifically, our claims data show an 
APC median cost of approximately $221 for APC 0697 and approximately 
$393 for APC 0269, compared to the median cost of approximately $557 
for APC 0128. Our claims data show a higher median cost for one of the 
non-contrast echocardiography APCs, specifically, APC 0270, which has a 
median cost of approximately $581. We agree with the commenters that, 
in general, contrast-based echocardiography procedures would involve 
more resources than non-contrast echocardiography services. However, we 
believe that some non-echocardiography procedures are more complex than 
contrast-based echocardiography procedures despite the lack of contrast 
use, and as a result, we expect their costs to be higher. As shown by 
our claims data, the costs involved with the non-contrast 
echocardiography procedures assigned to APC 0270 are significantly 
higher than the contrast-based echocardiography procedures that are 
assigned to APC 0128. As we do every year, we will again review our 
claims data for these services for the CY 2013 OPPS rulemaking cycle. 
We find no evidence that would suggest that the median costs calculated 
for these APCs based on hospital claims and cost report data 
incorrectly reflect the relative resource costs of providing the 
services in APC 0128 or APC 0697. We also do not believe that it is 
necessary to separate APC 0128 into three APCs as one commenter 
suggested, because the current composition results in no 2 times rule 
violation and the major procedures in the APC are similar based on 
resource costs, ranging from approximately $505 to approximately $732.
    In addition, payment for the administration of contrast agents as 
well

[[Page 74235]]

as the contrast agent products are included in payment for the 
associated imaging procedure, as discussed in section V.B.2.d. of this 
final rule with comment period. In limited circumstances, we pay 
separately for contrast agents that are approved for pass-through 
status under the OPPS, as discussed in section V.A. of this final rule 
with comment period. Payment for pass-through status is limited to a 
minimum of 2 years but no more than 3 years.
    Furthermore, as we stated above, hospitals should report the 
appropriate units of the HCPCS codes for the contrast agents used in 
the performance of the echocardiograms procedures. It is extremely 
important that hospitals report all HCPCS codes, consistent with their 
descriptors, CPT and/or CMS instructions, and correct coding 
principles, for all charges for all services they furnish, whether 
payment for the services is made separately or is packaged. The 
appropriateness of the OPPS payment rates depend on the quality and 
completeness of the claims data that hospitals submit for the services 
they furnish to Medicare beneficiaries.
    After consideration of the public comments we received, we are 
finalizing, without modification, our CY 2012 proposal to continue to 
calculate our median costs for the non-contrast echocardiography 
procedures based on APCs 0697, 0269, and 0270, and to calculate our 
median costs for the contrast-echocardiography procedures based on APC 
0128. We believe that continuing this methodology in CY 2012 results in 
payment rates for the contrast echocardiography and non-contrast 
echocardiography procedures that appropriately reflect the costs for 
these services. For a more detailed discussion and history of the OPPS 
payment for echocardiography services, we refer readers to the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66644 through 66646), 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68542 
through 68544), and the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60374 through 60383). Table 22 below shows the procedures and 
final median costs assigned to the four echocardiography APCs.

[[Page 74236]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.035

2. Gastrointestinal Services

a. Upper Gastrointestinal (GI) Services (APCs 0141, 0419, and 0422)
    For CY 2012 we proposed to create new APC 0419 (Level II Upper GI 
Procedures), an intermediate APC between APC 0141 (Level I Upper GI 
Procedures) and APC 0422 (Level II Upper GI Procedures, which we 
proposed to rename ``Level III Upper GI Procedures''). 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.
    For CY 2011, there are two upper gastrointestinal (GI) procedure 
APCs, APC 0141, which has a CY 2011 national unadjusted payment rate of 
$611.73, and APC 0422, 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 and APC 0422 by moving several CPT codes from 
APC 0141 to APC 0422. We had received public comments on the CY 2011 
proposed rule objecting to our CY 2011 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

[[Page 74237]]

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 rule 
violation for APC 0141 that had not existed for the CY 2010 OPPS. For 
the APC Panel meeting, we simulated the HCPCS codes 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, as stated in the proposed rule, 
we accepted 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. We stated that creating 
an intermediate APC for upper GI procedures would provide 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, we believed that the 
proposed reconfiguration would resolve 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 stated 
in the proposed rule that we believed that we would need to propose to 
reassign HCPCS codes, regardless of whether we created the intermediate 
APC for CY 2012. We stated that we believed that the proposed 
reconfiguration to create the intermediate APC would be the most 
appropriate means of avoiding a 2 times rule violation that would 
otherwise exist for CY 2012 and that the resulting median costs would 
provide payments that are more reflective of the relative costs of the 
services being furnished.
    Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42238), for 
CY 2012, we proposed to create new APC 0419 (Level II Upper GI 
Procedures), as recommended by the stakeholders, and we proposed to 
reassign HCPCS codes previously assigned to APCs 0141 and 0422 to the 
three APC configuration. Table 23 of the proposed rule contained the 
proposed HCPCS code 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.
    At its August 10-11, 2011 APC Panel meeting, the APC Panel 
recommended that CMS adopt the proposed APC reconfiguration for upper 
gastrointestinal (GI) procedures and the creation of a new APC 0419 
(Level II Upper GI Procedures). The Panel further recommended that 
HCPCS code 43227 (Esophagoscopy, rigid or flexible; with control of 
bleeding (e.g., injection, bipolar cautery, unipolar cautery, laser, 
heater probe, stapler, plasma coagulator)) and HCPCS code 43830 
(Gastrostomy, open; without construction of gastric tube (e.g., Stamm 
procedure) (separate procedure)) be reassigned to APC 0422 (proposed to 
be renames ``Level III Upper GI Procedures'').
    Response to APC Panel Recommendation: We do not agree with the APC 
Panel recommendation to move CPT code 43227 to APC 0422 because CPT 
code 43227 is a very low volume service with a total frequency of 45 in 
CY 2010, for which the median cost has varied considerably over the 
past few years ($1,010 in CY 2011; $725 in CY 2010). We will reassess 
the placement of CPT code 43227 for CY 2013. However, we agree with the 
APC Panel's recommendation to move CPT code 43830 to APC 0422 because 
the median cost for CPT code 43830 of approximately $1,630 is more 
similar to the median cost for APC 0422 of approximately $1,819 and is 
less similar to the median cost for APC 0319 of approximately $887. 
Therefore, we are assigning CPT code 43830 to APC 0422 for the CY 2012 
OPPS.
    Comment: Many commenters supported the creation of new APC 0419. 
Commenters indicated that creation of the new intermediate APC would 
result in APCs for upper GI procedures that are more cohesive with 
regard to the resources used to provide the services and would provide 
for more equitable payment for these services. In particular, 
commenters were pleased to with the proposed reassignment of CPT code 
43228 to APC 0422 because they believed that the assignment would 
enable facilities to cover the cost of the device and provide patients 
with greater access to the service. One commenter objected to the 
reconfiguration of these APCs on the basis that some of the services in 
each APC have median costs that are higher than the median cost for the 
APC and, therefore, would be paid less than their median cost.
    Response: We continue to believe that it is appropriate to create a 
third level of upper GI procedures and that it is appropriate to assign 
CPT code 43228 to APC 0422 for the reasons discussed in the proposed 
rule as summarized at the beginning of this section. Therefore, we are 
adopting our proposal to create new APC 0419 for CY 2012, and we have 
assigned CPT code 43228 to APC 0422 for CY 2012. We disagree with the 
commenter who objected to the reconfiguration of the upper GI procedure 
APCs on the basis that the medians for some HCPCS codes in each APC 
were higher than the median cost for the APC. The median cost by 
definition is the 50th percentile of the array of the costs of single 
bills. Therefore, the median costs for some HCPCS codes will always 
fall below the median cost for the APC. A fundamental principle of a 
prospective payment system like the OPPS is that prospective payment is 
set at a measure of central tendency that, on average, pays an amount 
that is appropriately reflective of the relative cost of the services 
in the group to which the payment rate applies.
    Comment: Several commenters objected to the proposed assignment of 
CPT code 43257 (Upper gastrointestinal endoscopy including esophagus, 
stomach, and either the duodenum and/or jejunum as appropriate; with 
delivery of thermal energy to the muscle of lower esophageal sphincter 
and/or gastric cardia, for treatment of gastroesophageal reflux 
disease) and CPT code C9724 (Endoscopic full thickness placation in the 
gastric cardia using endoscopic placation system (EPS); includes 
endoscopy) to APC 0422 and asked that CMS create an APC for transoral 
surgical endoscopy to which these codes would be assigned. The 
commenters believe that CPT codes 43257 and C9724 are clinically 
different

[[Page 74238]]

from most other services in APC 0422 because these services provide 
surgical therapy and that the resources required to furnish them are 
much greater than the resources required to furnish the other services 
in APC 0422. Commenters requested the creation of the new level IV 
upper GI procedure APC that they believed would result in appropriate 
payment for these procedures and would also improve the accuracy of the 
payment for the procedures that will remain in APC 0422. Commenters 
stated that current claims data for CPT code 43257 underestimates the 
cost of the service because hospitals are using the code incorrectly. 
They also stated that the CY 2010 claims data for CPT code 43257 
reports the cost of a generation 1 Stretta catheter that was sold at a 
cost of $1,225, although since 2010 hospitals have been using a 
generation 2 catheter which has an average sales price of $2,450. 
Therefore, the commenters asserted that the use of CY 2010 claims data 
will not fully reflect the cost of the devices that will be used in CY 
2012. Commenters suggested that CMS designate the new level IV APC that 
they requested as device dependent, establish procedure-to-device 
edits, and use only the claims that meet the device edits in setting 
the rates for the applicable APCs.
    Response: We disagree that it is necessary to create a fourth level 
upper GI APC to which to assign HCPCS codes 43257 and C9724. We believe 
that CPT codes 43257 and C9724 are clinically similar to the other 
services assigned to APC 0422 such as CPT codes 43228 (Esophagoscopy, 
rigid or flexible; with ablation of tumor(s), polyp(s), or other 
lesion(s), not amenable to removal by hot biopsy forceps, bipolar 
cautery or snare technique), and 43870 (Closure of gastrostomy, 
surgical), which are both therapeutic upper GI procedures. Moreover, 
the final median cost for CPT code 43257 of approximately $1,535 falls 
below the final median cost for APC 0422 of approximately $1,819. As we 
discuss in section II.A. of this final rule with public comment, we 
calculate the median costs of services based on the most recent charges 
and cost reports that are available to us at the time we are preparing 
the proposed and final rules. To the extent that the costs for the 
catheter used to furnish CPT code 43257 increased after CY 2010, those 
costs will be used to establish payment rates for the years in which 
the claims are used. With regard to HCPCS code C9724, we note that it 
is a low volume service for which the median cost has varied widely 
over the past few years (for example, $1,370 for CY 2009 OPPS; $2,947 
for CY 2010 OPPS; and $5,139 for CY 2011 OPPS), and we believe that its 
median cost of approximately $5,944 and low volume make it unsuited for 
establishment of a single service APC for CY 2012 OPPS. We note that 
placement of HCPCS code C9724 in APC 0422 is not a violation of the 2 
times rule because HCPCs code C9724 is not a significant procedure to 
which the 2 times rule applies because it has a single bill frequency 
of less than 1,000 and also has a single bill frequency that is less 
than 99 and the single bills represent less than 2 percent of the 
single bills used to calculate the median cost for APC 0422. We refer 
readers to section III.B. of this final rule with comment period for 
additional information regarding the 2 times rule.
    After consideration of the comments we received, we are finalizing 
our proposals to create new APC 0419 (Level II Upper GI Procedures), to 
rename APC 0422 as ``Level III Upper GI Procedures'', and to reassign 
the HCPCS codes for upper GI procedures to the three APC configuration 
(APCs 0141, 0419 and 0422) for CY 2012 OPPS, as shown in Table 23 
below. We are not creating a level IV upper GI procedure APC into which 
to place HCPCS codes 43257 and C9724 because we believe that HCPCS 
codes 43257 and C9724 are appropriately assigned to APC 0422 for CY 
2012. We are not accepting the APC Panel's recommendation that we 
reassign CPT code 43227 to APC 0422 because it is a very low volume 
service for which the median cost has not been stable over the past few 
years. We are accepting the APC Panel's recommendation that we reassign 
CPT code 43830 to APC 0422, and we have done so for the CY 2012 OPPS.
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b. Gastrointestinal Transit and Pressure Measurement (APC 0361)
    The AMA CPT Editorial Panel created CPT code 0242T 
(Gastrointestinal tract transit and pressure measurement, stomach 
through colon, wireless capsule, with interpretation and report) 
effective January 1, 2011. For CY 2011, we assigned CPT code 0242T to 
APC 0361 (Level II Alimentary Tests) with a payment rate of $282.48. 
For CY 2012, we proposed to maintain the assignment of CPT code 0242T 
to APC 0361 with a proposed rule median cost of approximately $295, and 
a proposed payment of $284.80. (The CY 2012 OPPS/ASC final rule median 
cost for APC 0361 is approximately $286.)
    Comment: Several commenters on the CY 2011 final rule with comment 
period regarding the APC assignment of CPT code 0242T, requested 
reassignment of CPT code 0242T from APC 0361 to New Technology APC 1510 
(New Technology APC--Level X), which has a payment rate of $850. The 
commenters claimed that CPT code 0242T is not similar to the other 
procedures assigned to APC 0361 either in terms of clinical similarity 
or resource costs; therefore, it should be assigned to a New Technology 
APC because there currently are insufficient utilization and claims 
data for the service. The commenters believed that CPT code 0242T is 
significantly different than the other procedures in APC 0361, which

[[Page 74242]]

are predominantly indicated to assess the esophagus, while CPT code 
0242T is purportedly a unique test that provides transit, pressure, pH, 
and temperature measurement of the GI tract from the stomach to the 
colon. The commenters also stated that the resources, including 
clinical labor, for the procedures in APC 0361 differ from those of CPT 
code 0242T. The commenters claimed that the manometric tests assigned 
to APC 0361 measure neuromuscular activity in an anatomically specific, 
fixed manner, utilizing a reusable catheter, while CPT code 0242T 
utilizes a disposable capsule and a special meal to capture multiple 
pressure and transit measurements throughout the GI tract and cost $600 
per procedure. Adding other procedure costs to the disposable costs 
yields total procedure costs in excess of $800, according to the 
commenters. The commenters point to the past assignment of CPT code 
91110 (Gastrointestinal tract imaging, intraluminal (eg, capsule 
endoscopy), esophagus through ileum, with physician interpretation and 
report) to a New Technology APC until sufficient claims data were 
gathered for assignment to a clinical APC, and they request a similar 
approach to APC assignment for CPT code 0242T.
    Response: We disagree that assignment to a clinical APC necessarily 
implies that there are clinical and cost data for a new service. We 
routinely make assignments of new CPT codes to clinical APCs before we 
have claims data that are indicative of their source costs of a 
procedure. We make these assignments initially using the best currently 
available information, while reviewing claims data once such data 
become available and making reassignments accordingly based on those 
data. We expect to do the same regarding CPT code 0242T.
    As was the case when we made the initial assignment for CY 2011, we 
continue to believe that there are relevant clinical similarities 
between the CPT code 0242T service and other services in APC 0361 to 
continue to justify this APC assignment. CPT code 0242T and the 
services in APC 0361 all involve tests of the alimentary canal. 
Regarding resource costs, the final rule median cost of APC 0361 is 
approximately $288, with a median cost range of procedures in the APC 
from approximately $235 to approximately $680. We do not believe a New 
Technology APC is warranted for this procedure at this time. We believe 
that the clinical attributes and CY 2012 median costs of the services 
found in APC 0361 support the assignment of CPT code 0242T to APC 0361 
as an initial assignment. We generally wait until median cost claims 
data are available before reassignment to a new APC. For CY 2012, we 
will maintain our assignment of CPT code 0242T to APC 0361, which has a 
final median cost of approximately $286. We will review this assignment 
for CY 2013 when some claims data should be available for this 
procedure.
3. Genitourinary Services
a. Laser Lithotripsy (APC 0163)
    For CY 2012, we proposed to continue to assign CPT codes 52353 
(Cystourethroscopy, with ureteroscopy and/or pyeloscopy; with 
lithotripsy (ureteral catheterization is included)) and 50590 
((Fragmenting of kidney stone) to their existing CY 2011 APCs. That is, 
we proposed to continue to assign CPT code 52353 to APC 0163 (Level IV 
Cystourethroscopy and other Genitourinary Procedures), which had a 
proposed payment rate of approximately $2,566, and to continue to 
assign CPT code 50590 to APC 0169 (Lithotripsy), which had a proposed 
payment rate of approximately $3,568. CPT code 50590 was made effective 
January 1, 1986, and describes an extracorporeal shock wave 
lithotripsy. CPT code 52353 was made effective January 1, 2001, and 
describes a cystourethroscopy with lithotripsy. Our understanding is 
that the lithotripsy described in CPT code 52353 is laser lithotripsy.
    At the August 2011 APC Panel Meeting, a presenter requested the 
Panel to recommend to CMS to reassign CPT code 52353 from APC 0163 to 
the same APC as CPT code 50590, which is APC 0169. The presenter stated 
that the proposed payment rate for APC 0169 for CY 2012 shows an 
increase of approximately 23 percent in the OPPS and approximately 25 
percent in the ASCs, while the proposed payment rate for APC 0163 shows 
a 0.3 percent decrease in the OPPS and a 1.3 percent decrease in the 
ASCs, thereby creating a significant financial advantage for shock wave 
lithotripsy over ureteroscopy with lithotripsy. The presenter further 
suggested that placing CPT code 52353 in APC 0169 would be clinically 
appropriate because both procedures describe lithotripsy of stones in 
the ureter and kidney, and also because their historical median costs 
have tracked closely over time. After discussion of the of the median 
costs observed for both CPT codes 52353 and 50590, the APC Panel made 
no recommendation on the CY 2012 APC assignment for CPT code 52353.
    Comment: Some commenters recommended the reassignment CPT code 
52353 to the same APC as CPT code 50590, which is APC 0169. One 
commenter argued that the reassignment of CPT code 52353 to APC 0169 
would avoid potential incentives to use shock wave lithotripsy over 
ureteroscopy with lithotripsy. This commenter further stated that these 
two similar and competing procedures should be placed in the same APC 
so that their OPPS and ASC payment rates will increase, or decrease, 
consistently in the future.
    Response: CPT code 50590 has been assigned to APC 0169 since the 
OPPS was implemented in 2000. CPT code 52353 was initially assigned to 
APC 0162 (Level III Cystourethroscopy Procedures) when the CPT code was 
made effective in 2001. However, in CY 2002, we revised the APC 
assignment for CPT code 52353 to APC 0163 (Level IV Cystourethroscopy 
Procedures) based on input from our clinical advisors that the 
procedure is similar to the other procedures in APC 0163 based on 
clinical homogeneity and resource costs. Since CY 2002, CPT code 52353 
has been assigned to APC 0163.
    In addition, we disagree with the commenter that placing these two 
procedures in two separate APCs creates an incentive to use one 
procedure over another. We believe that physicians would choose the 
most appropriate procedure based on a patient's diagnosis and other 
relevant clinical factors. Further, based on our claims data, we do not 
believe that placing both procedures in the same APC would be 
appropriate. Our analysis of the final CY 2012 claims data reveal that 
shock wave lithotripsy (CPT code 50590) is more commonly performed on 
Medicare patients than ureteroscopy with lithotripsy (CPT code 52353). 
Specifically, our data show a CPT median cost of approximately $2,711, 
based on 3,366 single claims, for CPT code 52353. CPT code 52353 
represents 22 percent of the claims within APC 0163, and its CPT median 
cost of approximately $2,711 is relatively close to the CY 2012 final 
APC median cost of approximately $2,596 for APC 0163.
    In contrast, the CY 2012 final median cost for CPT code 50590, 
which is in APC 0169, is approximately $3,647, based on 30,178 single 
claims. This final median cost of approximately $3,647 for CPT code 
50590 is higher than the final median cost of approximately $2,711 for 
CPT code 52353.
    Comment: One commenter suggested that the increase in the median 
cost for CPT code 50590 may be a result of the application of a CCR 
calculated from costs and charges reported in the nonstandard cost 
center data for lithotripsy.

[[Page 74243]]

    Response: The nonstandard lithotripsy cost center 07699 is a 
feature of the hospital cost report CMS 2552-10. No CMS 2552-10 cost 
reports were used in determining the payment rates for the CY 2012 
OPPS. The CCRs in the CY 2012 OPPS are created from the hospital cost 
report CMS 2552-96, and there is no standard or nonstandard lithotripsy 
cost center in the CMS 2552-96 cost report.
    Given our claims data for the CY 2012 update for these lithotripsy 
procedures, we believe that CPT code 52353 is appropriately placed in 
APC 0163 based on its clinical homogeneity and resource cost compared 
to other procedures already assigned in APC 0163. As has been our 
practice since the implementation of the OPPS in 2000, we review, on an 
annual basis, the APC assignments for the procedures and services paid 
under the OPPS. We will continue to review on an annual basis the APC 
assignment for CPT code 52353 and determine whether a reassignment in 
the APC is necessary.
    Therefore, after consideration of the public comments we received, 
we are finalizing our CY 2012 proposal, without modification, to 
continue to assign CPT code 52353 to APC 0163, which has a final CY 
2012 median cost of approximately $2,596, and to continue to assign CPT 
code 50590 to APC 0169, which has a final CY 2012 median cost of 
approximately $3,647.
b. Percutaneous Renal Cryoablation (APC 0423)
    For CY 2012, we proposed to continue to assign CPT code 50593 
(Ablation, renal tumor(s), unilateral, percutaneous, cryotherapy) to 
APC 0423 (Level II Percutaneous Abdominal and Biliary Procedures), with 
a proposed payment rate of approximately $3,969. This CPT code was new 
in CY 2008; however, the same service was previously described by CPT 
code 0135T (Ablation renal tumor(s), unilateral, percutaneous, 
cryotherapy). We note that in CY 2007, based upon the APC Panel's 
recommendation made at the March 2006 APC Panel meeting, we reassigned 
CPT code 50593 (then CPT code 0135T) from APC 0163 ((Level IV 
Cystourethroscopy and other Genitourinary Procedures)) to APC 0423. We 
expect hospitals, when reporting CPT code 50593, to also report the 
device HCPCS code, C2618 (Probe, cryoablation), associated with the 
procedure.
    Comment: One commenter disagreed with the proposed continued 
assignment for CPT code 50593 to APC 0423 because, the commenter 
stated, this APC includes other procedures that do not require the use 
of high-cost devices, such as cryoablation probes. The commenter 
reported that the payment rate of approximately $3,969 for the 
procedure does not accurately reflect the costs incurred by hospitals 
that perform this procedure, and, as a result, hospitals are reluctant 
to perform this procedure. The commenter suggested that CMS determine 
the payment rate for CPT code 50593 based on its mean cost, rather than 
on median cost. The commenter stated that the proposed mean cost for 
APC 0423 is approximately $4,835, and approximately $5,394 for CPT code 
50593. Further, the commenter recommended that CMS designate CPT code 
50593 as a device-dependent procedure and require hospitals to submit 
claims with the appropriate HCPCS code, C2618, so that charges can be 
reported appropriately. The commenter stated that CPT code 50593 cannot 
be performed without the device, and adding CPT code 50593 to the 
device-dependent procedure list would result in more accurate claims 
data for future ratesetting.
    Response: First, we believe that CPT code 50593 is appropriately 
placed in APC 0423 based on clinical and resource costs when compared 
to other procedures also assigned to APC 0423. As we stated in the CY 
2007 OPPS final rule with comment period (71 FR 68049 through 68050), 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66709), the 
CY 2009 OPPS/ASC final rule with comment period (73 FR 68611), the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60444), and the CY 
2011 OPPS/ASC final rule with comment period (75 FR 71910), we revised 
the APC assignment for the percutaneous renal cryoablation procedure 
from APC 0163 to APC 0423 in CY 2007 based on the APC Panel's 
recommendation to reassign the procedure to APC 0423.
    For CY 2012, we proposed to assign four CPT codes to APC 0423. 
These procedures share similar median costs ranging from approximately 
$3,733 to approximately $4,493, which are well within the two-fold 
variation in median cost that is permitted by the law for an OPPS 
payment group. Therefore, the grouping of these procedures in the same 
APC does not violate the 2 times rule. We note that all four of these 
procedures are relatively low volume, with fewer than 1,800 total 
claims each for CY 2010 and fewer than 700 single claims each for 
ratesetting. We believe that grouping these clinically similar, low-
volume procedures for the percutaneous ablation of renal, liver, or 
pulmonary tumors in the same payment group helps to promote payment 
stability for these low volume services.
    Secondly, as we stated in the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68611), the final APC relative weights and 
payment rates are based on median hospital costs, not mean costs, for 
APC groups. The OPPS relies on the relativity of costs for procedures 
as reported by hospitals in establishing payment rates, and we do not 
believe it would be appropriate to utilize a different payment 
methodology based on mean cost for one APC, while the payment rates for 
the other clinical APCs would be based on median costs. Mean and median 
costs are two different statistical measures of central tendency and, 
based on common distributions, mean costs typically are higher than 
median costs. Therefore, we do not believe it would be appropriate to 
use a combination of these measures to establish the payment weights 
for different APCs under the OPPS.
    Further, as we stated in the CY 2007 OPPS final rule with comment 
period (71 FR 68049 through 68050), the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66709), the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68611), the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60444), and the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71910), we designate a procedure as device-
dependent service based on consideration of all the procedures in a 
single APC. While all of the procedures assigned to APC 0423 require 
the use of implantable devices, for many of the procedures, there are 
no Level II HCPCS codes that describe all of the technologies that may 
be used in the procedures. Therefore, it would not be possible for us 
to develop procedure-to-device edits for all of the CPT codes assigned 
to APC 0423.
    Finally, we remind hospitals that we expect all of the HCPCS codes 
to be reported that appropriately describe the items used to provide 
services, regardless of whether the HCPCS codes are packaged or paid 
separately. When reporting CPT code 50593, we expect hospitals to also 
report the device HCPCS code C2618, which is associated with this 
procedure. If hospitals use more than one probe in performing the CPT 
code 50593 procedure, we expect hospitals to report this information on 
the claim and adjust their charges accordingly. Hospitals should report 
the number of cryoablation probes used to perform the CPT code 50593 
procedure as the units of HCPCS code C2618, which describes these 
devices, with their charges for the probes. Since CY

[[Page 74244]]

2005, we have required hospitals to report device HCPCS codes for all 
devices used in procedures if there are appropriate HCPCS codes 
available. In this way, we can be confident that hospitals have 
included charges on their claims for devices used in procedures when 
they submit claims for those procedures.
    After consideration of the public comment we received, we are 
finalizing our CY 2012 proposal, without modification, to continue to 
assign CPT code 50593 to APC 0423, which has a final CY 2012 APC median 
cost of approximately $4,096.
4. Nervous System Services
a. Revision/Removal of Neurostimulator Electrodes (APCs 0040 and 0687)
    As discussed in detail in the CY 2012 OPPS/ASC proposed rule (76 FR 
42233 through 42234), for CY 2012, we proposed to move CPT codes 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) 
from APC 0687 (Revision/Removal of Neurostimulator Electrodes) to APC 
0040 (Level I Implantation/Revision/Replacement of Neurostimulator 
Electrodes). We noted that the proposed CY 2012 median costs for CPT 
codes 63663 and 63664 of approximately $4,316 and $4,883, respectively, 
are more consistent with the proposed median cost of APC 0040 of 
approximately $4,516 than with the proposed median cost of APC 0687 of 
approximately $1,492. We also proposed 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 (Level II Implantation/Revision/
Replacement of Neurostimulator Electrodes) from ``Laminectomy, 
Laparoscopy, or Incision for Implantation of Neurostimulator 
Electrodes'' to ``Level II Implantation/Revision/Replacement of 
Neurostimulator Electrodes.'' 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, and 63664 were all effective 
January 1, 2010. We proposed that CPT codes 63661 and 63662 would 
remain in APC 0687.
    In addition, for CY 2012, we proposed to assign CPT 64569 (Revision 
or replacement of cranial nerve (eg, vagus nerve) neurostimulator 
electrode array, including connection to existing pulse generator), 
effective January 1, 2011, to APC 0687.
    Comment: Several commenters supported the proposed reassignment of 
CPT codes 63663 and 63664 from APC 0687 to APC 0040. The commenters 
believed that the proposed reassignment places these CPT codes in an 
APC that is consistent with their median costs. The commenters also 
supported the retention of CPT code 63661 and 63662 in APC 0687 because 
their proposed CY 2012 median costs are consistent with the overall 
proposed APC 0687 median costs. In addition, the commenters agreed with 
the proposed title changes for APC 0040 and APC 0061. One commenter 
agreed with the proposed reassignment of CPT codes 63663 and 63664 to 
APC 0040 but recommended the creation of two new HCPCS codes to allow 
hospitals to differentiate between revision and replacement procedures 
and to foster analysis of the cost differences between revision and 
replacement procedures for purposes of future APC assignments. The 
commenter also sought device-to-procedure and procedure-to-device edits 
to ensure device costs are completely captured.
    Response: We appreciate the commenters' support for the 
reassignment of CPT codes 63663 and 63664 from APC 0687 to APC 0040, 
the continued assignment of CPT codes 63661 and 63664 to APC 0687, and 
the title changes to APC 0040 and APC 0061. We agree with the 
commenters that the proposed changes would ensure that all four codes 
are in APCs that are consistent with their median costs. Therefore, we 
are finalizing our proposals to reassign CPT codes 63663 and 63664 to 
APC 0040, to continue to assign CPT codes 63661 and 63662 to APC 0687, 
and to change the titles of APC 0040 to ``Level I Implantation/
Revision/Replacement of Neurostimulator Electrodes'' and APC 0061 to 
``Level II Implantation/Revision/Replacement of Neurostimulator 
Electrodes.''
    We do not agree that it is necessary to create new HCPCS codes in 
order to differentiate between neurostimulator electrode replacement 
and revision procedures. As we discussed in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42234), we examined the CY 2010 claims data 
available for the proposed rule to compare the frequency of claims 
containing CPT codes 63663 or 63664 that were billed with and without 
HCPCS code C1778 (Lead, neurostimulator (implantable)) or HCPCS code 
C1897 (Lead, neurostimulator test kit (implantable)) in order to 
determine whether they describe mainly device revision or replacement 
procedures. Because the majority of claims did not contain HCPCS code C 
1778 or C1897, these findings suggested that these CPT codes are being 
used by hospitals to describe mainly device revision procedures, 
although there were a significant number of cases with device 
replacement procedures in the claims data. We also note that we 
implemented claims processing logic to allow CPT codes 63663 and 63664 
to satisfy the device-to-procedure edits for HCPCS codes C1778 and 
C1897, effective January 1, 2012. We cannot implement procedure-to-
device edits for CPT codes 63663 and 63664 because they do not always 
involve the implantation of a device.
    Comment: One commenter objected to the proposed assignment of CPT 
code 64569 to APC 0687. The commenter stated that CPT code 64569 is 
clinically similar to CPT codes 63663 and 63664, the only difference 
being CPT code 64569 is an incision-based procedure, while CPT codes 
63663 and 63664 are percutaneous. The commenter also argued that 
assigning CPT code 64569 to APC 0687 would result in significant 
financial losses for hospitals and presented simulated data using 
claims for CPT code 63663 and 63664 to estimate a median cost for CPT 
code 64569 ranging between approximately $5,551 and $7,790.
    Response: We are assigning CPT code 64569 to APC 0687, as we 
proposed, with a CY 2012 final rule median cost of approximately 
$1,451. We do not agree that CPT code 64569 is inappropriately assigned 
to APC 0687. Our clinical analysis indicates that CPT code 64569 is 
similar to the other device revision and replacement procedures in APC 
0687. Furthermore, since CPT code 64569 was effective January 1, 2011, 
we do not have frequency and cost information upon which to make an 
assessment of whether there is a meaningful difference between the cost 
of revising the VNS electrodes and generator or replacing them. We do 
not agree with the commenter that it is possible to derive meaningful 
estimates of the costs of providing the service described by CPT code 
64569 by using data for CPT codes 63663 and 63664 because these codes 
involve different types of devices. Therefore, we are not

[[Page 74245]]

convinced by the commenter that the assignment of the CPT code 64569 to 
APC 0687 is inappropriate. As we did with the CPT codes 63661 through 
63664, we will continue to monitor and analyze the data for CPT code 
64569 when it becomes available.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to assign CPT codes 
63663 and 63664 to APC 0040 and to assign CPT codes 63661, 63662, and 
64569 to APC 0687. We also are finalizing our proposal 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.''
b. Magnetoencephalography (MEG) (APCs 0065, 0066, and 0067)
    There are three CPT codes associated with MEG: 95965 
(Magnetoencephalography (meg), recording and analysis; for spontaneous 
brain magnetic activity (eg, epileptic cerebral cortex localization)); 
95966 (Magnetoencephalography (meg), recording and analysis; for evoked 
magnetic fields, single modality (eg, sensory, motor, language, or 
visual cortex localization)); and 95967 (Magnetoencephalography (meg), 
recording and analysis; for evoked magnetic fields, each additional 
modality (eg, sensory, motor, language, or visual cortex 
localization)). For CY 2012 we calculated a proposed rule median cost 
of approximately $1,821 for CPT code 95965 based on a frequency of 48 
single bills out of a total frequency of 50 bills. We proposed to 
continue to assign CPT code 95965 to APC 0067 (Level III Stereotactic 
Radiosurgery, MRgFUS, and MEG), which had a proposed rule median cost 
of approximately $3,368.
    At its August 10-11, 2011 meeting, the APC Panel made two 
recommendations with regard to CPT code 95965. First, the APC Panel 
recommended that CMS implement appropriate edits requiring hospitals to 
use the new MEG revenue code, 086X, with CPT codes 95965, 95966, and 
95967. We address this recommendation in the context of a comment from 
the public to which we respond below. Second, the APC Panel recommended 
that CMS move CPT code 95965 from APC 0067 to APC 0066 (Level II 
Stereotactic Radiosurgery, MRgFUS, and MEG), for consistency. We agree 
with this recommendation and have reassigned CPT code 95965 to APC 0066 
because the median cost in the data available for this final rule with 
comment period for CPT code 95965 of approximately $1,741 is similar to 
the median cost of APC 0066 of approximately $2,521. In contrast, the 
median cost of APC 0067 of approximately $3,374 is substantially above 
the median cost for CPT code 95965. We note that the procedure 
described by CPT code 95965 is a low-volume service for which we have a 
single bill frequency of 70, compared to a total bill frequency of 75, 
in our CY 2012 OPPS final rule data. Although it is a low-volume 
service, single bills represent 93 percent of total frequency for CPT 
code 95965.
    Comment: Commenters stated that the costs of MEG are far higher 
than the costs of electroencephalograms (EEG) and electrocardiograms 
(ECG) and that therefore CMS should not use the CCRs from the cost 
centers for these services to reduce the charges for MEG to costs. 
Instead, according to commenters, CMS should create a new cost center 
on the Medicare hospital cost report to isolate the costs of MEG and 
calculate and apply a CCR from the dedicated MEG cost center to the 
charges for MEG to secure a more accurate estimated cost for MEG.
    Response: We refer readers to section II.A.1.c. of this final rule 
with comment period for a summary of public comments and responses 
related to the use of the CCRs for cost centers 3280 (EKG and EEG) as 
primary and 5400 (Electroencephalography) as secondary, to reduce the 
charges for MEG to estimated relative costs.
    Comment: Commenters urged CMS to require that hospitals use revenue 
codes that are specific to MEG. One hospital that furnished comments 
indicated that its MEG services are furnished through the radiology 
department, but that the department through which MEG services are 
furnished varies across hospitals. (As indicated previously, the APC 
Panel recommended that CMS implement appropriate edits requiring 
hospitals to use the MEG specific revenue codes, 086X, with CPT codes 
95965, 95966, and 95967.)
    Response: As we indicate in the Section 20.5, Chapter 4, of the 
Medicare Claims Processing Manual, generally, CMS does not instruct 
hospitals on the assignment of HCPCS codes to revenue codes for 
services provided under OPPS because hospitals' assignment of cost vary 
(available on the CMS Web site at: http://www.cms.gov/Manuals; select 
Internet Only Manuals). Where explicit instructions are not provided, 
hospitals should report their charges under the revenue code that will 
result in the charges being assigned to the same cost center to which 
the cost of those services are assigned in the cost report. We do not 
believe that establishing edits to require hospitals to report the 
charges for MEG under the dedicated MEG revenue code series is 
necessary or appropriate. Medicare pays for a low volume of MEG 
services for which there are no special requirements that would justify 
creation of edits that force hospitals to report particular revenue 
codes for particular CPT codes. Specifically, in the CY 2012 final rule 
claims data, a small number of hospitals reported one of the three CPT 
codes for MEG. We believe that it is not reasonable to implement 
national CPT-to-revenue code edits to enforce the use of MEG-specific 
revenue codes when a small number of hospitals reported only 144 lines 
of MEG total for the 3 MEG codes in CY 2010. Specifically, in the final 
rule single bills on which we are basing the CY 2012 median costs, 4 
hospitals reported 31 lines of CPT code 95967; 6 hospitals reported 384 
lines of CPT code 95966; and 10 hospitals reported 75 lines of CPT code 
95965. The MEG codes were first paid under the OPPS as new technology 
services in CY 2006 and the total frequency of services and the number 
of hospitals that furnish the service have always been very low.
    For CY 2012, as stated previously, we are accepting the APC Panel's 
recommendation to reassign CPT code 95965 to APC 0066 because the CY 
2012 final rule median cost of CPT code 95965 of approximately $1,741 
is more similar to the final median cost of APC 0066 of approximately 
$2,521 than to the median cost of APC 0067, which is approximately 
$3,374. We are not accepting the APC Panel's recommendation to 
implement edits requiring that hospitals that furnish MEG must report 
the charges for the service using the MEG specific revenue code series 
086X for the reasons stated above. For a response to the commenters' 
requests for a dedicated cost center on the Medicare cost report, we 
refer readers to section II.A.c. of this final rule with comment 
period.
c. Transcranial Magnetic Stimulation Therapy (TMS) (APC 0218)
    For CY 2011, the CPT Editorial Panel deleted CPT code 0160T 
(Therapeutic repetitive transcranial magnetic stimulation treatment 
planning) on December 31, 2010, and replaced it with CPT codes 90867 
(Therapeutic repetitive transcranial magnetic

[[Page 74246]]

stimulation treatment; planning) effective January 1, 2011. Similarly, 
CPT code 0161T (Therapeutic repetitive transcranial magnetic 
stimulation treatment delivery and management, per session) was deleted 
on December 31, 2010, and was replaced with CPT code 90868 (Therapeutic 
repetitive transcranial magnetic stimulation treatment; delivery and 
management, per session) effective January 1, 2011.
    In Addendum B to the CY 2011 OPPS/ASC final rule with comment 
period, CPT codes 90867 and 90868 were assigned to APC 0216 (Level III 
Nerve and Muscle Tests) with a payment rate of approximately $186 and 
were flagged with comment indicator ``NI'' to indicate that these codes 
were new codes for CY 2011 with an interim APC assignment subject to 
public comment. We stated that we would address any public comments on 
issues regarding these new codes in this CY 2012 OPPS/ASC final rule 
with comment period.
    In addition, in the CY 2012 OPPS/ASC proposed rule, we proposed to 
continue to assign CPT codes 90867 and 90868 to APC 0216 for CY 2012.
    Comment: One commenter on the CY 2011 OPPS/ASC final rule with 
comment period agreed with the APC assignment for CPT code 90867 and 
indicated that APC 0216 is appropriate, based on the resources required 
to perform TMS planning and its similarity to other procedures with 
similar resource costs in this APC. However, this same commenter 
disagreed with the placement of CPT code 90868 in APC 0216. The 
commenter stated there are no clinically similar procedures in APC 0216 
whose resources are comparable to that of TMS treatment delivery, and 
recommended the reassignment of CPT code 90868 from APC 0216 to APC 
0320 (Electroconvulsive Therapy), which has a payment rate of 
approximately $414 for CY 2011. The commenter asserted that the 
hospital outpatient claims data for TMS is not reliable and, therefore, 
should not be used as the basis for the assignment of CPT code 90868 to 
APC 0216.
    Response: Although both CPT codes 90867 and 90868 were new codes 
for CY 2011, the services they describe are not new because they were 
previously described by two predecessor CPT codes, specifically 
Category III CPT codes 0160T and 0161T. CPT code 90867 was previously 
described by CPT code 0160T, and CPT code 90868 was previously 
described by CPT code 0161T. Both CPT codes 0160T and 0161T were made 
effective July 1, 2006, and deleted on December 31, 2010. From July 1, 
2006 through December 31, 2010, both CPT codes 0160T and 0161T were 
assigned to APC 0216.
    We do not agree with the commenter that CPT code 90868 should be 
placed in APC 0320 based on resource similarity. Based on analysis of 
our hospital outpatient claims data for predecessor CPT codes 0160T and 
0161T from CY 2006 through CY 2010, we believe that both CPT codes 
90867 and 90868 would be more appropriately placed in APC 0218 (Level 
II Nerve and Muscle Tests) rather than in the proposed APC 0216. There 
were no claims data for either procedure (as described by CPT codes 
0160T and 0161T) during CY 2006, CY 2007, and CY 2008. For the CY 2011 
OPPS/ASC final rule with comment period, we used claims processed 
during CY 2009 for ratesetting, and our claims data showed a CPT median 
cost of approximately $176 for CPT code 0160T based on 17 single claims 
(out of 17 total claims), and a CPT median cost also of approximately 
$176 for CPT code 0161T based on 68 single claims (out of 69 total 
claims), which closely resemble the APC median cost of approximately 
$184 for APC 0216 for the CY 2011 OPPS. However, for this CY 2012 OPPS/
ASC final rule with comment period, which is based on the CY 2010 
hospital outpatient claims for ratesetting, our claims data show a CPT 
median cost of approximately $88 for CPT code 0160T (which is now 
described by CPT code 90867) based on 6 single claims (out of 9 total 
claims), and a CPT median cost of approximately $105 for CPT code 0161T 
(which is now described by CPT code 90868) based on 211 single claims 
(out of 221 total claims). Given our claims data for predecessor CPT 
codes 0160T and 0161T, we believe that both CPT codes 90867 and 90868 
are appropriately placed in APC 0218, which has a final APC median cost 
of approximately $84 for CY 2012 based on clinical homogeneity and 
resource costs. We note that the OPPS methodology allows hospitals to 
actively contribute on an ongoing basis to the ratesetting process and 
to influence future payment rates for services by submitting correctly 
coded and accurately priced claims for the services they provide. 
According to this methodology, it is generally not our policy to judge 
the accuracy of hospital coding and charging for purposes of 
ratesetting. We also do not agree with the commenter that the procedure 
described by CPT code 90868 would fit into APC 0320 from a clinical 
perspective because the provision of electroconvulsive therapy 
generally requires more extensive monitoring and services (for example, 
muscle blockade) than transcranial magnetic treatment delivery and 
management.
    Therefore, after consideration of the public comment we received on 
the CY 2011 OPPS/ASC final rule with comment period, we are finalizing 
our CY 2012 proposal, with modification. That is, we are reassigning 
CPT codes 90867 and 90868 from APC 0216 to APC 0218, which has a final 
CY 2012 median cost of approximately $84. Given the information 
reflected in the CY 2012 final rule claims data for predecessor CPT 
codes 0160T, which shows a median cost of approximately $105, and a 
median cost of approximately $88 for CPT code 0161T, we believe our 
claims data show the costs of these procedures are similar to the costs 
of other procedures assigned to APC 0218. We also believe that these 
procedures are similar to the other procedures assigned to APC 0218 
from a clinical standpoint. We will reevaluate the APC assignment for 
CPT codes 90867 and 90868 in future OPPS updates as additional 
information becomes available to us.
5. Ocular and Ophthalmic Services
a. 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 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,

[[Page 74247]]

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 further stated that we would 
address any public comments on issues regarding these new codes in this 
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, in the CY 2012 OPPS/ASC proposed rule 
(76 FR 42237), we proposed 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 proposed 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 and following another 
procedure or service. Our medical advisors indicated 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. In fact, the self-retaining amniotic 
membrane device is structurally similar to a bandage contact lens, 
except that the central material is amniotic membrane instead of 
contact lens polymer. Given the characteristics of this procedure, the 
device used in the procedure, and its likely use in the HOPD, we 
proposed 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 proposed to reassign CPT code 65778 
from APC 0239 to APC 0233 with a conditionally packaged status of 
``Q2,'' to reassign CPT code 65779 from APC 0255 to APC 0233, which had 
a proposed median cost of approximately $1,214, and to continue to 
assign CPT code 65780 to APC 0244, which had a proposed median cost of 
approximately $2,767.
    At the August 2011 APC Panel Meeting, a presenter urged the Panel 
to recommend to CMS not to conditionally package CPT code 65778 for CY 
2012, and instead, assign it to status indicator ``T.'' Based on 
information presented at the meeting, and after further discussion on 
the issue, the APC Panel recommended that CMS reassign the status 
indicator for CPT code 65778 from conditionally packaged ``Q2'' to 
status indicator ``T.''
    Comment: Several commenters urged CMS not to finalize its proposal 
to conditionally package CPT code 65778 by assigning it to status 
indicator ``Q2,'' and instead adopt the APC Panel's recommendation to 
assign it to status indicator ``T.'' One commenter expressed concern 
that conditionally packaging CPT code 65778 is inappropriate because it 
will result in no payment for the procedure despite the significant 
costs hospitals incur in furnishing the service, which includes the 
cost of the Prokera device (the self-retaining amniotic membrane 
device) that is used with this procedure. Further, this same commenter 
disagreed with CMS' assertion that the service described by CPT code 
65778 is merely a minor procedure that involves placing a bandage 
contact lens on the surface of the eye, and stated that the service is 
a significant, separate procedure that should continue to be separately 
paid.
    Response: We disagree that the procedure described by CPT code 
65778 is a significant procedure. The procedure has been described by 
the manufacturer as ``like inserting a contact lens.'' The 
manufacturer's Web site states the following about the Prokera self-
retaining amniotic membrane device: ``The ProKera[reg] device 
configuration enables easy insertion in the office, hospital bedside or 
following surgical procedures to prevent adhesions while delivering the 
wound repair and wound healing actions of amniotic membrane.'' Because 
this is a type of specialized bandage that is typically placed on the 
surface of the eye immediately after a surgery that has resulted in a 
corneal epithelial defect, we believe that assigning CPT code 65778 to 
a conditionally packaged status encourages hospitals to use resources 
more efficiently. We expect hospitals to provide only necessary, high 
quality care and to provide that care as efficiently as possible. We 
expect that, for most surgically induced corneal epithelial defects, 
hospitals will use a conventional eye patch or a standard bandage 
contact lens to promote faster wound healing and greater patient 
comfort, and that they will reserve very high cost products, such as 
the self-retaining amniotic membrane device, for rare and exceptional 
vision-threatening cases. We believe that the conditional packaging of 
CPT code 65778 is consistent with this expectation and will encourage 
efficient hospital outpatient care under these circumstances. Based on 
the nature of this procedure, we believe that assigning CPT code 65778 
to status indicator ``Q2'' is appropriate under the hospital OPPS. 
Therefore, we are not accepting the APC Panel's recommendation to 
reassign this procedure to status indicator ``T.''
    After consideration of the public comments we received and the APC 
Panel's August 2011 recommendation, we are finalizing our proposal, 
without modification, to assign status indicator ``Q2'' to CPT code 
65778. When the service is furnished with a separately payable surgical 
procedure with status indicator ``T''' on the same day, payment for CPT 
code 65778 is packaged. Otherwise, payment for CPT

[[Page 74248]]

code 65778 is made separately through APC 0233, which has a CY 2012 
final median cost of approximately $1,164. We also are finalizing our 
proposal to accept the APC Panel's recommendation to reassign CPT code 
65779 from APC 0255 to APC 0233, which has a final CY 2012 median cost 
of approximately $1,164. Further, we are finalizing our proposal, 
without modification, to continue to assign CPT code 65780 to APC 0244, 
which has a final CY 2012 median cost of approximately $2,654.
    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 rule 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. In CY 2012, we will 
again reevaluate the status indicator and APC assignments for CPT codes 
65778, 65779, and 65780 for the CY 2013 OPPS rulemaking cycle. The 
amniotic membrane procedures and their CY 2012 final APC assignments 
are displayed in Table 24 below.
[GRAPHIC] [TIFF OMITTED] TR30NO11.039

b. Insertion of Anterior Segment Aqueous Drainage Device (APC 0673)
    The AMA CPT Editorial Panel created category III CPT code 0253T 
(Insertion of anterior segment aqueous drainage device, without 
extraocular reservoir; internal approach, into the suprachoroidal 
space) effective on January 1, 2011. We assigned CPT code 0253T to APC 
234 (Level IV Anterior Segment Eye Procedures) in the OPPS, effective 
January 1, 2011 with a comment indicator ``NI'' in Addendum B of the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72448). For CY 
2012, we proposed to continue to assign CPT code 0253T to APC 0234, 
with a proposed payment rate of approximately $1,754.
    Comment: A few commenters requested that CMS reassign CPT code 
0253T to APC 0673 (Level V Anterior Segment Eye Procedures), with a 
proposed CY 2012 payment rate of approximately $2,901. The commenters 
claimed that CPT code 0253T would be more appropriately placed in APC 
0673 based on clinical homogeneity and resource costs. Specifically, 
the commenters stated that, because CPT code 0253T is a glaucoma 
treatment with an implantable device, it should be assigned to APC 0673 
because, unlike the procedures assigned to APC 0234, the procedures 
assigned to APC 0673 are primarily glaucoma treatments with an 
implantable device. Commenters also stated that the procedure described 
by CPT code 0253T is very similar to the procedure described by CPT 
code 0191T (Insertion of anterior segment aqueous drainage device, 
without extraocular reservoir; external approach), which is assigned to 
APC 0673. Finally, the commenters stated that the cost of the device 
used in CPT code 0253T is similar to that of other devices used in 
glaucoma treatment procedures assigned to APC 0673.
    Response: After revisiting this issue and reexamining the clinical 
and resource characteristics of CPT code 0253T, we agree with the 
commenters that CPT code 0253T is similar clinically and in terms of 
resource utilization to the procedures currently assigned to APC 0673. 
In fact, the procedure described by CPT code 0253T is almost the same 
as the procedure described by CPT code 0191T, which is currently 
assigned to APC 0673. Also, both of these procedures employ the same 
type of internally inserted implantable glaucoma drainage device. 
Therefore, after consideration of the public comments we received, we 
are modifying our proposal and reassigning CPT code 0253T from APC 0234 
to APC 0673, which has a final median cost of approximately $2,911 for 
CY 2012. We will monitor claims and cost report data related to CPT 
code 0253T as the data become available for future updates.
c. Scanning Ophthalmic Diagnostic Imaging (APC 0230)
    For CY 2011, the CPT Editorial Panel deleted CPT codes 0187T 
(Scanning computerized ophthalmic diagnostic imaging, anterior segment, 
with interpretation and report, unilateral) and 92135 (Scanning 
computerized ophthalmic diagnostic imaging, posterior segment, (e.g., 
scanning laser) with interpretation and report, unilateral) on December 
31, 2010, and replaced them with three new codes effective January 1, 
2011. Specifically, CPT code 0187T was replaced with CPT code 92132 
(Scanning computerized ophthalmic diagnostic imaging, anterior segment, 
with interpretation and report, unilateral or bilateral), and CPT code 
92135 was replaced with CPT codes 92133 (Scanning computerized 
ophthalmic diagnostic imaging, posterior segment, with interpretation 
and report, unilateral or bilateral; optic nerve) and 92134 (Scanning 
computerized ophthalmic diagnostic imaging, posterior segment, with 
interpretation and report, unilateral or bilateral; retina).
    In Addendum B of the CY 2011 OPPS/ASC final rule with comment 
period, CPT codes 92132, 92133, and 92134 were assigned to APC 0230 
(Level I Eye Tests & Treatments) with a payment rate of approximately 
$42 and were flagged with comment indicator ``NI'' to indicate that 
these codes were

[[Page 74249]]

new codes for CY 2011 with an interim APC assignment subject to public 
comment. We stated that we would address any public comments on issues 
regarding these new codes in this CY 2012 OPPS/ASC final rule with 
comment period.
    In addition, in the CY 2012 OPPS/ASC proposed rule, we proposed to 
continue to assign CPT codes 92132, 92133, and 92134 to APC 0230.
    Comment: One commenter on the CY 2011 OPPS/ASC final rule with 
comment period requested that CMS reassign CPT codes 92132, 92133, and 
92134 from APC 0230 to APC 0698 (Level II Eye Tests & Treatments), 
which has a CY 2011 payment rate of approximately $67, to account for 
the long descriptor changes for the new codes. Specifically, the 
commenter indicated that the predecessor codes, specifically, CPT codes 
0187T and 92135 described a unilateral procedure; however, the new 
codes, specifically, CPT codes 92132, 92133, and 92134, describe a 
``unilateral or bilateral'' procedure in the code descriptors. Further, 
the commenter expressed concern that the new codes are paid at half the 
CY 2010 payment rate, which the commenter believed is inappropriate 
since the typical patient encounter involves two tests.
    Response: As indicated above, CPT codes 92132, 92133, and 92134 
were assigned to APC 0230 effective on January 1, 2011. We assigned 
these new codes to the same APC and status indicator as their 
predecessor CPT codes 0187T and 92135. We note that these predecessor 
CPT codes were active codes for some time. CPT code 92135 was made 
effective January 1, 1999 and deleted on December 31, 2010, while CPT 
code 0187T was made effective January 1, 2008, and deleted on December 
31, 2010. Given the history of the predecessor codes, we reviewed our 
claims.
    For the CY 2012 update, the payment rates are based on data from 
claims submitted during CY 2010 according to the standard OPPS 
ratesetting methodology. Based on our analysis, we found significant 
claims data for predecessor CPT codes 92135 and 0187T. Our CY 2012 
final claims data show that the median cost for CPT code 92135 is 
approximately $41 based on 191,170 single claims (out of 191,934 total 
claims), and approximately $44 based on 341 single claims (out of 348 
total claims) for CPT code 0187T. We believe that the final rule median 
costs of approximately $41 and $44 are similar to the final median cost 
of approximately $48 for APC 0230. We also believe that the resources 
consumed in performing these procedures are not significantly different 
for unilateral versus bilateral imaging.
    After consideration of the public comment we received on the CY 
2011 OPPS/ASC final rule with comment period, we are finalizing our CY 
2012 proposal, without modification. Given the significant information 
reflected in the CY 2012 final rule claims data for predecessor CPT 
codes 92135 and 0187T, we believe our claims data are sufficient for us 
to continue to assign these services to APC 0230, which has a final CY 
2012 median cost of approximately $45. We will reevaluate the APC 
assignment for CPT codes 92132, 92133, and 92134 in future OPPS updates 
as additional information becomes available to us. Also, we expect to 
have the first claims data available for CPT codes 92132, 92133, and 
92134 for the CY 2013 OPPS/ASC rulemaking cycle.
d. Intraocular Laser Endoscopy (APC 0233)
    CPT code 66711 (Ciliary body destruction; cyclophotocoagulation, 
endoscopic) is assigned to APC 0233 (Level III Anterior Segment Eye 
Procedures) for CY 2011, with a CY 2011 payment rate of $1,233.03. In 
the CY 2012 OPPS/ASC proposed rule, we proposed continued assignment 
for CPT code 66711 for CY 2012 to APC 0233, with a proposed payment 
rate of $1,171.65. The final rule median cost for APC 0233 is 
approximately $1,164.
    Comment: One commenter, the manufacturer of a single use 
intraocular laser endoscope, indicated that the device used to 
accomplish CPT code 66711 is used to treat patients with glaucoma and 
retinal disease. The commenter had previously manufactured a multiple 
use version of the intraocular laser endoscope, and claimed that the 
multiple use device had lower per unit costs per use than the new 
single use device, but that it could no longer be manufactured due to 
supply constraints of a part used in the manufacturing process. The 
commenter stated that the most frequent service code used to deliver 
this service is represented by CPT code 66711, and stated that the 
multiple procedure discount typically applies, which reduces the OPPS 
payment rate to approximately $616 for CY 2011. The commenter stated 
that the procedure is also performed in the ASC setting with a payment 
rate of approximately $694 for CY 2011, but a multiple procedure 
discount typically applies, for a payment rate of approximately $347. 
The commenter requested that CMS use one of several suggested 
approaches to pay for the higher costs associated with the single use 
device. One approach the commenter mentioned was to establish a device 
pass-through category for the single use intraocular laser endoscope, 
while noting that it had filed an OPPS pass-through application, and 
that it expected a separate decision on the pass-through application. 
Another alternative suggested by the commenter was for CMS to use its 
equitable adjustment authority under section 1833(t)(2)(E) of the SSA, 
to adjust payment rates when necessary to ensure patients' treatment 
options are not inappropriately limited as a result of CMS policies. 
The third option the commenter listed was to temporarily assign the CPT 
code 66711 procedure to a different clinical APC or to a new technology 
APC, based on external data provided by the commenter, until Medicare 
claims data are available for ratesetting.
    Response: As stated above, CPT code 66711 is assigned to APC 0233 
for CY 2011, which has a CY 2011 final rule median cost of 
approximately $1,168. CPT code 66711 has a CY 2012 final median cost of 
approximately $1,430. The commenter stated that the CPT code 66711 
procedure will not change with use of the single use laser endoscope 
over the multi-use endoscope. We do not believe that it is necessary to 
invoke the equitable adjustment clause in this case. There are several 
clinical APCs for anterior segment eye procedures that are potential 
APCs for this type of service, and the particular APC assignment 
depends in part on the underlying claims data for the procedure. Upon 
further review of the various procedures in APC 0233 and APC 0234 
(Level IV Anterior Segment Eye Procedures), we believe that CPT code 
66711 is more clinically similar to the range of procedures in APC 0234 
than the procedures in APC 0233. Both APCs 0233 and 0234 consist of 
anterior segment eye procedures, but APC 0234 includes several 
intraocular procedures for the treatment of glaucoma, which also 
describes CPT code 66711. From a resource perspective, CPT code 66711 
fits in either APC 0233 or APC 0234, which have CY 2012 final median 
costs of approximately $1,164 and $1,631, respectively. Therefore, we 
are reassigning CPT code 66711 to APC 0234 for CY 2012.
    We agree with the commenter that we will decide on any device pass-
through application by means of our normal process for that payment 
mechanism.

[[Page 74250]]

6. Orthopedic and Musculoskeletal Services
a. Percutaneous Laminotomy/Laminectomy (APC 0208)
    We created new 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), and assigned it to APC 0208 
(Laminotomies and Laminectomies) effective April 1, 2011. AMA's CPT 
Editorial Panel thereafter created CPT code 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 (eg, fluoroscopic, CT), with or without the use of an 
endoscope, single or multiple levels, unilateral or bilateral; lumbar) 
effective July 1, 2011. We assigned CPT code 0275T to APC 0208 and 
deleted HCPCS code C9729 effective July 1, 2011. For CY 2011, APC 0208 
has a payment rate of $3,535.92. For CY 2012 we proposed to maintain 
assignment of percutaneous laminotomy/laminectomy (HCPCS code C9729 is 
used in the CY 2012 proposed rule, while CPT code 0275T is used in this 
CY 2012 final rule with comment period) to APC 0208, because we believe 
the service is similar clinically and with regard to resources to other 
APC 0208 procedures, APC 0208 had a CY 2012 proposed rule median cost 
of approximately $3,676, and has a final rule median cost of 
approximately $3,553
    Comment: One commenter believed it is appropriate to assign CPT 
code 0275T to APC 0208, in the case of ``unilateral'' percutaneous 
laminotomy/laminectomy, but not in the case of bilateral or multiple 
level procedures, which are, according to the commenter, more resource 
intensive. The commenter claimed that the phrase ``unilateral or 
bilateral'' in the CPT code 0275T descriptor suggests to providers that 
the code must be reported unmodified when the procedure is performed 
either unilaterally or bilaterally, which will preclude the use of 
modifier ``50'' when the bilateral approach is employed, even though 
additional physician and facilities resources are used. Additionally, 
the commenter believed that the CPT code 0275T descriptor's inclusion 
of ``single or multiple levels'' will preclude providers from reporting 
modifier ``51'' with CPT code 0275T, to reflect the additional 
resources consumed when the procedure is performed on multiple levels 
of the spine. Therefore, the commenter believed that the APC 0208 
payment rate is not adequate when CPT code 0275T is performed 
bilaterally or on multiple levels. The commenter recommended that, for 
CY 2012, CMS either allow the use of modifiers when CPT code 0275T is 
used, or that CMS create a HCPCS G-code that describes the service when 
performed bilaterally or on multiple levels. The commenter anticipated 
that the CPT Editorial Panel will take up the issue of bilateral or 
multiple levels in the CPT code 0275T code descriptor for CY 2013.
    Response: Concerning the request for availability of modifiers 50 
or 51, or modification to the descriptor for CPT code 0275T, we refer 
the commenter to the CPT Editorial Panel. CPT code 0275T is the 
property of the AMA, and CMS may not modify any CPT codes. We also will 
wait to see if the CPT Editorial Panel changes the descriptor for CY 
2013, and we will not create a HCPCS G-code for CY 2012.
    CPT code 0275T is a new code effective July 1, 2011 (as was its 
predecessor code, HCPCS code C9729, which was available for one 
quarter, beginning April 1, 2011), and as such we have no claims data 
at this time. For CY 2013, we should have partial CY 2011 data for both 
HCPCS code C9729 and CPT code 0275T, which we can use to reevaluate any 
APC assignment for percutaneous laminotomy/laminectomy for CY 2013. 
These claims data will include the hospital costs related to all of the 
various clinical options to perform this service, (that is, unilateral 
versus bilateral, and single versus multiple levels) to the extent they 
were performed. Based on those claims, we will reevaluate the APC 
placement of CPT code 0275T.
    After consideration of the public comments we received, we are 
finalizing our proposed assignment of CPT code 0275T to APC 0208 for CY 
2012, which is clinically similar to the procedures in APC 0208, and 
which has a median cost of approximately $3,553.
b. Level II Arthroscopy (APC 0042)
    The CY 2012 proposed rule median cost for APC 0042 (Level II 
Arthroscopy) was approximately $3,485, based on 5,676 single bill 
claims from the 28 procedures assigned to APC 0042. The CY 2011 final 
rule median is $3,301, based on 6,297 single bill claims from those 28 
arthroscopic procedures. Our CY 2012 final rule data consist of a 
median cost of approximately $3,996, based on 3,140 single bill claims 
based on 234 procedures.
    Comment: One commenter believed that the procedures currently 
assigned to APC 0042 have widely varying median costs, which range from 
approximately $88 to more than $10,000, according to the CY 2012 
proposed rule data. The commenter claimed that the APC currently 
violates the 2 times rule. The commenter recommended that CMS 
reconfigure APC 0042 and create two additional APCs in order to group 
procedures similar in clinical features and resources together. The 
commenter recommended that CMS place the following hip procedures in 
the reconfigured APC 0042: CPT codes 29861 (Arthroscopy, hip, surgical; 
with removal of loose body or foreign body), 29914 (Arthroscopy, hip, 
surgical; with femoroplasty (ie, treatment of cam lesion)), 29915 
(Arthroscopy, hip, surgical; with acetabuloplasty (ie, treatment of 
pincer lesion)), and 29916 (Arthroscopy, hip, surgical; with labral 
repair). The commenter also recommended that CMS separate the remaining 
CPT codes in APC 0042 into new APC 0043 (proposed descriptor ``Level 
III Upper Extremity Arthroscopy'') and APC 0044 (Level IV Lower 
Extremity Arthroscopy), with respective payment amounts based on the 
median costs of those service groupings.
    Response: We do not agree that the HCPCS codes comprising APC 0042 
have widely varying median costs or that there is a 2 times rule 
violation for services currently assigned to APC 0042, as claimed by 
the commenter. As we stated in the CY 2012 OPPS/ASC proposed rule (76 
FR 42231), 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 codes 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

[[Page 74251]]

71832). Based on this rule, we have no 2 times rule violations in APC 
0042. Using our CY 2012 final rule claims data, the highest significant 
procedure in APC 0042 is CPT code 29827 (Arthroscopy, shoulder, 
surgical; with rotator cuff repair) with a final median cost of 
approximately $4,817, and the lowest significant procedure in the APC 
is CPT code 29823 (Arthroscopy, shoulder, surgical; debridement, 
extensive), with a final median cost of approximately $2,959, leading 
to a ratio of approximately 1.6, well below the 2.0 required for a 
violation. Furthermore, we do not agree with the commenter's 
recommendation to establish an arthroscopy APC with the four hip 
arthroscopy procedures, specifically, CPT codes 29861, 29914, 29915, 
and 29916, as a viable alternative, because all four of those CPT codes 
have no CY 2010 median costs. Therefore, there would be no basis for 
establishing an APC median cost and payment amount for those four 
procedures. We see no compelling reason to revise the current 
procedures of APC 0042 for CY 2012 because they are similar both 
clinically and in terms of resource utilization. We will keep the 
current HCPCS code configuration of APC 0042 for CY 2012, and will 
review the APC 0042 and component HCPCS code median costs again next 
year for clinical and resource similarity.
c. Closed Treatment Fracture of Finger, Toe, and Trunk (APCs 0129, 
0138, and 0139)
    In Addendum A (Proposed OPPS APCs for CY 2012) of the CY 2012 OPPS/
ASC proposed rule, we proposed to continue with the existing group 
titles for APCs 0129, 0138, and 0139 to read as follows:

 APC 0129 (Level I Closed Treatment Fracture Finger/Toe/Trunk)
 APC 0138 (Level II Closed Treatment Fracture Finger/Toe/Trunk)
 APC 0139 (Level III Closed Treatment Fracture Finger/Toe/
Trunk)

    We note that Addendum A did not appear in the printed version of 
the Federal Register as part of the CY 2012 OPPS/ASC proposed rule. 
Rather, it was published and made available only via the Internet on 
the CMS Web site at: http://www.cms.gov/.
    Comment: One commenter recommended that CMS remove the words 
``Finger/Toe/Trunk'' from the group titles for APCs 0129, 0138, and 
0139 because there is no need to make this distinction since there are 
no other APCs that describe closed treatment fractures.
    Response: We appreciate the commenter's suggestion, and we accept 
this recommendation. We agree that removing the words ``Finger/Toe/
Trunk'' from the group titles for APCs 0129, 0138, and 0139 more 
appropriately describe these APCs.
    After consideration of the public comment we received, we are 
revising the group titles for APCs 0129, 0138, and 0139 to ensure that 
the title describes all procedures assigned to these APCs. Table 25 
shows the final group titles for APCs 0129, 0138, and 0139 for CY 2012.
[GRAPHIC] [TIFF OMITTED] TR30NO11.040

d. Level I and II Strapping and Cast Application (APCs 0058 and 0426)
    In Addendum A (Proposed OPPS APCs for CY 2012) of the CY 2012 OPPS/
ASC proposed rule, we proposed to continue with the existing group 
titles for APCs 0058 and 0426 to read as follows:

 APC 0058 (Level I Strapping and Cast Application)
 APC 0426 (Level II Strapping and Cast Application)

    We note that Addendum A did not appear in the printed version of 
the Federal Register as part of the CY 2012 OPPS/ASC proposed rule. 
Rather, it was published and made available only via the Internet on 
the CMS Web site at: http://www.cms.gov/.
    Comment: One commenter stated there is only a single level APC for 
the strapping procedures; therefore, the designation ``Level I'' is not 
appropriate in the group title because there is no ``Level II.''
    Response: We disagree with the commenter. There is another level 
APC for the strapping procedures, specifically, APC 0426 which reads 
``Level II Strapping and Cast Application.'' Under the OPPS, APC 0426 
was made effective January 1, 2005. We remind hospitals that APCs with 
multiple levels are not always in sequential order and, as a result, 
may not always appear close to each other in Addendum B.
    After consideration of the public comment we received, we are 
finalizing our CY 2012 proposal, without modification, to continue to 
title APC 0058 to read ``Level I Strapping and Cast Application'' and 
APC 0426 to read ``Level II Strapping and Cast Application.''
7. Radiology Services
a. Proton Beam Therapy (APC 0664 and 0667)
    For CY 2012, we proposed to continue to assign CPT codes 77520 
(Proton treatment delivery; simple, without compensation) and 77522 
(Proton treatment delivery; simple, with compensation) to APC 0664 
(Level I Proton Beam Radiation Therapy), which had a proposed payment 
rate of approximately $992. We also proposed to continue to assign CPT 
codes 77523 (Proton treatment delivery; intermediate) and 77525 (Proton 
treatment delivery; complex) to APC 0667 (Level II Proton Beam 
Radiation Therapy), which had a proposed payment rate of approximately 
$1,298.
    Comment: Some commenters appreciated the relative stability in the 
hospital outpatient proton therapy rates and supported the proposed 
payments for the proton beam treatment CPT codes.

[[Page 74252]]

    Other commenters indicated that they were pleased with CMS' 
proposal to exempt APC 0667 from the 2 times rule based on the list of 
APCs that appeared in Table 18 of the CY 2012 OPPS/ASC proposed rule, 
but expressed concern with the proposed decrease in payments for the 
proton beam therapy APCs.
    Response: In accordance with sectionS 1833(t)(2)(B) and 
1833(t)(9)(A) of the Act and Sec. Sec.  419.31 and 419.50 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 and clinical homogeneity. The payment rates, including the 
relative weights, set annually for these services are based on review 
of the claims data used for ratesetting. For the CY 2012 update, the 
payment rates for APCs 0664 and 0667 are based on data from claims 
submitted during CY 2010 according to the standard OPPS ratesetting 
methodology. Specifically, we used 12,263 single claims (out of 13,364 
total claims) from CY 2012 proposed rule claims data (and we used 
13,437 single claims (out of 14,519 total claims) from CY 2012 final 
rule claims data) to calculate the median cost upon which the CY 2012 
payment rate for APC 0664 is based. In addition, we used 3,379 single 
claims (out of 3,879 total claims) from CY 2012 proposed rule claims 
data (and we used 3,638 single claims (out of 4,145 total claims) from 
CY 2012 final rule claims data) to calculate the median cost for APC 
0667.
    For CY 2012, we are setting the final payment rate for proton beam 
therapy based on median costs of approximately $1,184 for APC 0664 and 
approximately $1,549 for APC 0667. We note that these median costs are 
higher than the median costs upon which the CY 2012 proposed payment 
rates for these APCs were based ($1,028.10 and $1,344.90, respectively) 
and higher than the median costs upon which the final CY 2011 payment 
rates were based ($1,020.72 and $1,335.24, respectively). As we have in 
the past (75 FR 71916), we note that our cost-finding methodology is 
based on reducing each hospital's charge for its services to an 
estimated cost by applying the most discrete hospital-specific CCR 
available for the hospital that submitted the claim. Therefore, it is 
the hospitals' claims and cost reports that determine the estimated 
costs that are used to calculate the median cost for each service and, 
when aggregated into APC groups, the hospital data are used to 
calculate the median cost for the APC on which the APC payment rate is 
based.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 proposal, without modification, to pay for 
proton beam therapy through APCs 0664 and 0667, with payment rates 
based upon the most current claims and cost report data for these 
services. Specifically, we will continue to assign CPT codes 77520 and 
77522 to APC 0664, with a final CY 2012 APC median cost of 
approximately $1,184, and CPT codes 77523 and 77525 to APC 0667, with a 
final CY 2012 APC median cost of approximately $1,549 because we 
continue to believe these placements are appropriate in light of the 
resource cost and clinical intensity of the services describe by these 
CPT codes.
b. Stereotactic Radiosurgery (SRS) Treatment Delivery Services (APCs 
0065, 0066, 0067, and 0127)
    For CY 2012, we proposed to continue to assign CPT code 77371 
(Radiation treatment delivery, stereotactic radiosurgery (SRS), 
complete course of treatment of cranial lesion(s) consisting of 1 
session; multi-source Cobalt 60 based) to APC 0127 (Level IV 
Stereotactic Radiosurgery, MRgFUS, and MEG), with a proposed payment 
rate of approximately $7,368. We also proposed to continue to recognize 
four existing HCPCS G-codes that describe linear accelerator-based SRS 
treatment delivery services for separate payment in CY 2012. 
Specifically, we proposed the following: to assign HCPCS code G0173 
(Linear accelerator based stereotactic radiosurgery, complete course of 
therapy in one session) and HCPCS code G0339 (Image-guided robotic 
linear accelerator-based stereotactic radiosurgery, complete course of 
therapy in one session or first session of fractionated treatment) to 
APC 0067 (Level III Stereotactic Radiosurgery, MRgFUS, and MEG), with a 
proposed payment rate of approximately $3,251; to assign HCPCS code 
G0251 (Linear accelerator-based stereotactic radiosurgery, delivery 
including collimator changes and custom plugging, fractionated 
treatment, all lesions, per session, maximum five sessions per course 
of treatment) to APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, 
and MEG), with a proposed payment rate of approximately $864; and to 
assign HCPCS code G0340 (Image-guided robotic linear accelerator-based 
stereotactic radiosurgery, delivery including collimator changes and 
custom plugging, fractionated treatment, all lesions, per session, 
second through fifth sessions, maximum five sessions per course of 
treatment) to APC 0066 (Level II Stereotactic Radiosurgery, MRgFUS, and 
MEG), with a proposed payment rate of approximately $2,447. Further, we 
proposed to continue to assign SRS CPT codes 77372 (Radiation treatment 
delivery, stereotactic radiosurgery (SRS) (complete course of treatment 
of cerebral lesion(s) consisting of 1 session); linear accelerator 
based) and 77373 (Stereotactic body radiation therapy, treatment 
delivery, per fraction to 1 or more lesions, including image guidance, 
entire course not to exceed 5 fractions) status indicator ``B'' (Codes 
that are not recognized by OPPS when submitted on an outpatient 
hospital Part B bill type (12x and 13x)) under the OPPS, to indicate 
that these CPT codes are not payable under the OPPS.
    Comment: One commenter requested that CMS continue to recognize 
HCPCS codes G0173, G0251, G0339, and G0340 for CY 2012 as proposed and 
supported the proposed assignment of status indicator ``B'' to CPT 
codes 77372 and 77373. The commenter also recommended that CMS revise 
the code descriptors for HCPCS code G0173, G0251, G0339, and G0340 to 
distinguish between robotic and nonrobotic gantry-based SRS systems. 
Based on analysis of claims data for HCPCS codes G0339 and G0340, the 
commenter found that 41 and 42 percent of the claims submitted for 
HCPCS codes G0339 and G0340, respectively, during CY 2010 were paid to 
hospitals without image-guided robotic SRS systems. The commenter 
suggested specific code descriptor changes for the four HCPCS G-codes 
to ensure submission of correctly coded claims. Alternatively, the 
commenter requested that CMS provide guidance on the reporting of the 
existing SRS HCPCS G-codes if no change is made to the HCPCS code 
descriptors.
    Response: As we have stated in the past (75 FR 71915), these HCPCS 
G-codes for SRS have been in effect for several years and, based on 
questions brought to our attention by hospitals, we have no reason to 
believe that hospitals are confused about the reporting of these codes. 
Moreover, based on our analysis of the hospital outpatient claims data 
that we use for ratesetting, we see resource differences reflected in 
the median costs of the four HCPCS G-codes that are reasonably 
consistent with our expectations for different median costs for the 
services based on the current code descriptors. We continue to believe 
it would be confusing to hospitals if we were to revise the code 
descriptors for HCPCS codes G0173, G0251, G0339, and G0340 at this 
point in time and could lead to instability in our median costs and 
inaccurate payments for some services. Therefore, we believe that 
modifying the

[[Page 74253]]

HCPCS G-code descriptors is not necessary for us to continue to provide 
appropriate payment for the services they describe. Further, we have 
provided instruction on the reporting of these SRS codes in Chapter 4, 
Section 200.3 of the Medicare Claims Processing Manual of the Internet-
Only Manual.
    After consideration of the public comment we received, we are 
finalizing our CY 2012 proposals, without modification, to maintain the 
existing CY 2011 APC assignments for the SRS HCPCS codes for CY 2012. 
Specifically, we are continuing to assign HCPCS G-codes G0173 and G0339 
to APC 0067, which has a final CY 2012 APC median cost of approximately 
$3,374; HCPCS G-code G0251 to APC 0065, which has a final CY 2012 APC 
median cost of approximately $903; HCPCS G-code G0340 to APC 0066, 
which has a final CY 2012 APC median cost of approximately $2,521; and 
CPT code 77371 to APC 0127, which has a final CY 2012 APC median cost 
of approximately $7,461 because we continue to believe these placements 
are appropriate in light of the resource cost and clinical intensity of 
the services describe by these CPT codes. In addition, we are 
finalizing our proposals, without modification, to continue to assign 
CPT codes 77372 and 77373 to status indicator ``B'' under the OPPS.
c. Adrenal Imaging (APC 0408)
    For CY 2012, we proposed to reassign CPT code 78075 (Adrenal 
imaging, cortex and/or medulla) from APC 0408 (Level III Tumor/
Infection Imaging), which had a proposed payment rate of approximately 
$953, to APC 0414 (Level II Tumor/Infection Imaging), which had a 
proposed payment rate of approximately $485.
    Comment: Commenters questioned CMS' rationale for the proposal to 
reassign CPT code 78075 from APC 0408 to APC 0414, citing a lack of 
clinical reasoning to justify its movement as well as CPT code 78075's 
cost similarity to a clinically similar procedure assigned to APC 0408. 
Commenters requested that CMS reevaluate the reassignment of CPT code 
78075 and consider maintaining its placement in APC 0408. Commenters 
further recommended that CMS provide rationale in all proposed rules 
when any CPT code placement change is proposed.
    Response: After revisiting this issue and analyzing the final CY 
2012 median cost for CPT code 78075, we agree with commenters' 
assertion that CPT code 78075 should remain in APC 0408 and, therefore, 
we will continue to assign CPT code 78075 to APC 0408 for CY 2012 based 
on its final median cost of approximately $997 (calculated using 99 
single claims out of 127 total claims), which is similar to the APC 
median cost of APC 0408 of approximately $958. . We note that the 
proposed rule does not include service-specific discussions for each 
separately paid HCPCS code reassignment or for each APC. Rather, we 
discuss the general methodology used to calculate the median costs upon 
which the proposed payment rates are based (76 FR 42183 through 42190) 
and the principles applied in determining APC configurations (76 FR 
42230 through 42232). We discuss specific APCs or services in the 
proposed rule only when we have a specific reason to do so, such as 
when we apply a nonstandard ratesetting methodology to calculate a 
proposed payment rate for a particular item or service. In most cases, 
a proposed reduction of a median cost for an APC or for a HCPCS code 
that is calculated from actual charges and cost data will not result in 
a service specific discussion in the propose rule. The number of APCs 
and the volume of HCPCS codes for which median costs are calculated 
prohibit a detailed explanation of each in the proposed rule.
    After consideration of the public comments we received, we are 
modifying our CY 2012 proposal to reassign CPT code 78075 to APC 0414 
and will instead continue to assign it to APC 0408, with a final CY 
2012 APC median cost of approximately $958.
d. Positron Emission Tomography (PET) Imaging (APC 0308) (Created From 
Myocardial Positron Emission Tomography (PET) Imaging (APC 0307) and 
Non-Myocardial Positron Emission Tomography (PET) Imaging (APC 0308))
    For CY 2012, we proposed to continue to assign CPT codes 78459 
(Myocardial imaging, positron emission tomography (PET), metabolic 
evaluation), 78491 (Myocardial imaging, positron emission tomography 
(PET), perfusion; single study at rest or stress), and 78492 
(Myocardial imaging, positron emission tomography (PET), perfusion; 
multiple studies at rest and/or stress) to APC 0307 (Myocardial 
Position Emission Tomography (PET) Imaging), for which we proposed a 
national unadjusted payment rate of approximately $921. The CY 2011 
national unadjusted payment rate is approximately $1,107.
    For CY 2012, we proposed to continue to assign CPT codes 78608 
(Brain imaging, positron emission tomography (PET); metabolic 
evaluation), 78811 (Tumor imaging, positron emission tomography (PET) 
imaging; limited area (eg, chest, head/neck)), 78812 (Tumor imaging, 
positron emission tomography (PET) imaging; skull base to mid-thigh), 
78813 (Tumor imaging, positron emission tomography (PET) imaging; whole 
body), 78814 (Tumor imaging, positron emission tomography (PET) with 
concurrently acquired computed tomography (CT) for attenuation 
correction and anatomical localization imaging; limited area (eg, 
chest, head/neck)), 78815 (Tumor imaging, positron emission tomography 
(PET) with concurrently acquired computed tomography (CT) for 
attenuation correction and anatomical localization imaging; skull base 
to mid-thigh), and 78816 (Tumor imaging, positron emission tomography 
(PET) with concurrently acquired computed tomography (CT) for 
attenuation correction and anatomical localization imaging; whole body) 
to APC 0308 (Non-Myocardial Positron Emission Tomography (PET) 
imaging), for which we proposed a national unadjusted payment rate of 
$1,015. The CY 2011 national unadjusted payment rate for APC 0308 is 
approximately $1,042.
    Comment: Commenters objected to the proposed decrease in the 
payment rate for APC 0307. Commenters were concerned with the 
volatility of the payment rates from one year to the next and the 
proposed reduction in the payment rate for CY 2012, particularly in 
view of the reduction in the payment rate from CY 2010 to CY 2011. The 
commenters urged CMS to validate the costs estimated from the CY 2010 
hospital claims and cost report data for the limited number of 
hospitals reporting CPT codes 78459, 78491, and 78492 to determine the 
reason for the proposed change in payment. Several commenters asked 
that CMS limit to 5 to 10 percent the amount of decrease in the payment 
rate for CY 2012 compared to CY 2011 because they believed that the 
reduction CMS proposed for myocardial PET for CY 2012 would jeopardize 
access to the service. One commenter asked that CMS combine APC 0307 
and APC 0308 into one single PET imaging APC because the commenter 
believed that myocardial PET and non-myocardial PET are clinically 
similar and have similar resource requirements. The commenter also 
believe that merging the APCs would result in more appropriate payment 
for myocardial PET services and would increase the stability of payment 
for myocardial PET services.
    Several commenters indicated that they believed that aberrant CCRs 
for a few hospitals that furnish myocardial PET services are affecting 
the median cost for APC 0307 and that the

[[Page 74254]]

methodology must be flawed to permit this to occur. Commenters stated 
that their analyses of the claims data showed that 4 of the top 25 
hospitals contribute 34 percent of all single bills used in ratesetting 
for CPT code 78492 and that these hospitals have substantially lower 
calculated costs as compared to their peer institutions. The commenters 
believed that the CCRs of these institutions are aberrantly low and 
have skewed the data and lowered the overall median cost for APC 0307 
due to the significant percentage of single bills attributable to them. 
The commenter recommended that CMS delete claims from hospitals with a 
CCR lower than 0.15 or 0.20 from ratesetting for APC 0307 to remove the 
effect of these hospitals on the APC 0307 median cost. In contrast, 
another commenter asked that CMS ensure that claims from every hospital 
that furnished a service assigned to APC 0307 are included in the 
calculation of the median for APC 0307.
    One commenter stated that the median cost for myocardial PET 
services is decreasing because they are performed at a relatively small 
number of hospitals and because hospitals do not always align the costs 
and charges for the service properly in their accounts and, therefore, 
the CCRs that result from the cost reports understate the cost of the 
services. Commenters also stated that they were concerned that 
hospitals had not charged appropriately for the services and the 
radiopharmaceutical that is needed to furnish the service. Some 
commenters objected to the absence of a strict definition of what costs 
should be included in each cost center because this results in a wide 
variance in the calculation of costs. One commenter stated that the 
absence of CMS guidance to hospitals with regard to how to charge for 
services results in the potential for hospitals to set charges at 4 to 
5 times the cost for established procedures but to establish charges at 
1.5 times the cost for new, more expensive procedures. One commenter 
urged CMS to remind hospitals to accurately report all myocardial PET 
costs on their Medicare cost reports to improve the accuracy of the 
CCRs in the futures, while another commenter suggested that CMS 
establish a new cost center or CCRs for PET to moderate the 
fluctuations in the median cost calculation for PET services.
    Response: We agree that myocardial PET and non-myocardial PET have 
similar clinical characteristics and, currently, appear to have 
somewhat similar resource requirements. Therefore, for CY 2012, we are 
deleting the myocardial PET APC (APC 0307) and are reassigning CPT 
codes 78459, 78491, and 78492 to APC 0308, which we have renamed 
``Positron Emission Tomography (PET) Imaging.'' The CY 2012 final rule 
median cost for newly reconfigured APC 0308 is approximately $1,038.
    We were influenced in this decision by a significant unexpected and 
unusual decrease in the median cost for CPT code 78492 between the 
proposed rule data and the final rule data for the CY 2012 OPPS. CPT 
code 78492 comprises approximately 98 percent of the volume of the 3 
myocardial PET services that were assigned to APC 0307 and therefore 
largely would control the median cost for APC 0307 if it had been 
retained for CY 2012 OPPS. The proposed rule median cost for CPT code 
78492 was approximately $954, but the final rule median cost for CPT 
code 78492 is approximately $778, a decrease of approximately 18 
percent from the proposed rule median cost and a decrease of 
approximately 29 percent from the CY 2011 OPPS median cost of 
approximately $1,096. APC 0307 had a median cost of approximately 
$1,096 for CY 2011, a median cost of approximately $954 for the CY 2012 
proposed rule, and had we not deleted it for this final rule, APC 0307 
would have had a median cost of approximately $809, a 15-percent 
decrease from the median cost on which the CY 2012 proposed payment 
rate was based.
    We examined the claims and cost report data for the single 
procedure claims for CPT code 78492 to determine why it declined 
substantially from the CY 2011 OPPS final rule data and the CY 2012 
proposed rule and yet further between the CY 2012 proposed rule and the 
CY 2012 final rule data. We believe that there are multiple reasons 
that the median cost for APC 0307 declined from CY 2011 to CY 2012. 
Specifically, we looked at the following elements for CPT code 78492 
across the three data sets: Line item CCRs; line item charges; line 
item costs; packaged costs; number of hospitals billing the service; 
and number of single bills. Our findings are contained in Table 26 
below.
[GRAPHIC] [TIFF OMITTED] TR30NO11.041

    We note three significant observations from these data for CPT code 
78492, which is the myocardial PET imaging service that represents 98 
percent of the volume of APC 0307. First, the median line item CCR for 
CPT code 78492

[[Page 74255]]

decreased 21 percent from the CY 2011 final rule claims data to the CY 
2012 proposed rule claims data, although the median charge increased 
only 5 percent over the same time between the two data sets. Similarly, 
the median line item CCR for CPT code 78492 decreased 5.8 percent from 
the CY 2012 proposed rule data to the CY 2012 final rule data, although 
the line item charge remained the same in both data sets. Therefore, 
the median line item CCR for CPT code 78492 decreased 25.5 percent from 
the CT 2011 final rule data to the CY 2012 final rule data although the 
median line item charge increased only 5 percent over the same period, 
thus resulting in a significant decrease in the CY 2012 final rule line 
item median cost compared to both the CY 2011 line item median cost and 
the CY 2012 line item median cost. Secondly the estimated median cost 
of the packaged radiopharmaceutical and other supplies necessary to 
furnish the service decreased in each data set. Specifically, the 
estimated median packaged cost decreased by 16.2 percent from the CY 
2011 final rule data to the CY 2012 proposed rule data and by 16.6 
percent from the CY 2012 proposed rule data to the CY 2012 final rule 
data, or a decrease of 30.1 percent from the CY 2012 final rule data to 
the CY 2012 final rule data. Third, we observed that the number of 
hospitals that furnished the service increased in a significant 
proportion and that the volume of services furnished increased by 25 
percent from CY 2009 (CY 2011 final rule data) to CY 2010 (CY 2012 
proposed and final rule data sets) and by an additional 6.7 percent 
from the CY 2012 proposed rule data set to the CY 2012 final rule data 
set, or a total increase from CY 2009 to CY 2010 of 33.3 percent.
    We are particularly concerned with the volatility that is displayed 
in the data, particularly from the CY 2012 proposed rule data to the CY 
2012 final rule data. In particular, there seems to be a transition in 
CCRs underway that should stabilize itself once the number of hospitals 
that furnish the service is stable and once the volume of services 
being furnished each year is stable. We believe that the CCR changes 
are increasing the instability in the median costs for CY 2012 and that 
combining the two APCs is a reasonable response for the CY 2012 final 
rule, particularly because both former APC 0307 and APC 0308 are for 
PET imaging services and because it is reasonable to expect that the 
costs would be similar. However, we will reevaluate the relative 
resource utilization of the services after the cost center transitions 
are complete. In general, large volumes of services enhance stability 
of median costs, and we believe that by reassigning CPT codes 78459, 
78491 and 78492 to APC 0308, we can lessen the volatility of payment 
changes for these services for CY 2012. There are many legitimate 
reasons why costs for these services may go down (for example, 
hospitals are becoming more efficient as they provide greater volumes 
of these services without incurring additional substantial costs for 
equipment and staff, the radiopharmaceuticals used to provide these 
services are furnished by use of a generator that produces a dose 
periodically for 28 days and, therefore, additional doses are no more 
costly during the life of the generator, among others). If we determine 
that the per unit costs for providing myocardial PET have genuinely 
decreased over time and stabilized, we believe that it is appropriate 
that our payment rates would reflect these diminishing costs.
    With regard to the comments that we should exclude claims from 
hospitals with CCRs less than 0.15 or 0.20, we note that we applied our 
standard policy regarding calculation of CCRs to the calculation of the 
median cost of myocardial PET services for the proposed and final rule 
data for the CY 2012 OPPS. Specifically, as we discuss in detail in the 
claims accounting description that accompanies this final rule with 
comment period, we excluded claims from hospitals whose CCRs were 
flagged as invalid. These included claims for hospitals without a CCR, 
for hospitals paid an all inclusive rate, for CAHs, for hospitals with 
obviously erroneous CCRs (greater than 90 or less than .0001), and for 
hospitals with CCRs that were identified as outliers (3 standard 
deviations from the geometric mean after removing error CCRs). This 
longstanding practice has resulted in enhancing the number of claims we 
use for ratesetting, while eliminating claims that cannot be reduced to 
cost or for which hospital CCRs are clearly erroneous. In the case of 
myocardial PET services, the commenter indicated that the claims that 
the commenter requested be deleted from the set of claims used for 
ratesetting comprise 34 percent of the set of single bills and were 
submitted by hospitals with CCRs lower than 0.15. Assuming that the 
commenter's statement is correct, we believe that to remove 34 percent 
of the claims (more than 1 in every 3 single bills) from hospitals 
because their CCRs are lower than 0.15 would result in a skewed set of 
single bills and that the resulting median cost would not be an 
accurate representation of the relative cost of the service furnished 
by the full population of providers that furnish the service. These 
claims would be retained in the dataset used to set median costs under 
our standard process because they would not be affected by the standard 
claim trims. We refer readers to section II.A.2.c. of this final rule 
with comment period for discussion of our policy with regard to 
trimming of claim records before median cost calculation. The OPPS is a 
system of averages in which the measure of central tendency is used as 
the basis for the payment for a service, and to delete 34 percent of 
the data points would necessarily result in a median cost that would be 
a less accurate, if perhaps higher, reflection of the cost of the 
service. We believe that the low CCRs that are of concern to the 
commenter may be only one element in the transition in the data for 
these codes. For CY 2012, we believe that deleting APC 0307 and 
reassigning CPT codes 78459, 78491, and 78492 to APC 0308 is a more 
reasonable response than deleting 34 percent of the single bills for 
the procedures. Similarly, we do not believe that it is necessary to 
create a service-specific cost center for the purpose of calculating a 
PET-specific CCR because correct and consistent reporting of the costs 
of PET services on the Medicare hospital cost report and accurate 
crosswalking of the charges for PET to the cost center in which the 
costs are housed will result in appropriate estimates of the cost of 
PET services when the CCR for the cost center is applied to the charges 
for the services.
    With regard to what the commenter viewed as the absence of CMS 
guidance regarding what cost centers should be used to record the costs 
of services and how hospitals should charge for services, we note that 
CMS provides extensive instructions on how cost reports should be 
completed in the Provider Reimbursement Manual. However, hospitals 
charges are a reflection of the monetary value that the hospital 
establishes for service it is furnishing and the only CMS restriction 
on hospital charges is that charges must be reasonably related to cost 
and that the same amount must be charged to all payers for the same 
service (we refer readers to the definition of ``charges'' for cost 
reporting purposes in 42 CFR 413.53(b)). We recognize that some 
hospitals may charge at different markups over cost for similar 
services. However, as long as the cost report is correctly completed 
and the charges are mapped to the cost center in which the costs for 
the service are recorded, the CCRs should represent a valid reflection

[[Page 74256]]

of the relationship between the costs and the charges in the aggregate 
for services for which the cost is reported in that cost center. The 
OPPS, like all other prospective payment systems, assumes that 
hospitals complete the cost report properly, including mapping the 
charges for a service to the cost center in which the costs for that 
service are captured. Therefore, when the appropriate CCR is applied to 
the charge for a service for which the costs are housed in the cost 
center from which the CCR is calculated, the result should be a 
reasonable estimate of the cost of the service.
    With regard to the comment that we should limit the decline in 
payment for APC 0307 in CY 2012 to 5 to 10 percent compared to the 
payment for these services in CY 2011, we do not believe that it is 
appropriate to limit the decrease in payment in such an arbitrary 
manner for CY 2012. Moreover, for the reasons we discuss above, we have 
deleted APC 0307 for CY 2012. Accordingly, we also believe that there 
will be no adverse impact on access to care as a result of deleting APC 
0307 and reassigning CPT codes 78459, 78491 and 78492 to APC 0308.
    Comment: One commenter asked CMS to explain why it proposed to pay 
more for the non-myocardial PET APC (APC 0308) than for the myocardial 
PET APC (APC 0307).
    Response: We proposed to pay more for non-myocardial PET (APC 0308) 
than for myocardial PET (APC 0307) because the proposed rule median 
cost we calculated for APC 0308 of approximately $1,051 was higher than 
the proposed rule median cost we calculated for APC 0307 of 
approximately $954. We calculated both median costs using our 
longstanding standard cost estimation methodology which applied each 
hospital's most current, hospital-specific and departmental-specific 
CCR to that hospital's charge for services furnished in CY 2010. 
However, we are deleting APC 0307 for CY 2012 and, therefore, all PET 
imaging services will be paid at the same payment rate for CY 2012, 
based on the APC 0308 median cost of approximately $1,038.
    Comment: Commenters noted that the median cost for single 
myocardial PET scans, represented by CPT code 78491, has been higher 
than the median cost for multiple scans, represented by CPT code 78492 
in CYs 2007, 2009 and 2010. The commenters believed that this is 
evidence indicating that the data on which CMS is basing the payment 
rate are flawed. One commenter also stated that the CY 2012 proposed 
payment rate for APC 0307 is below the mean cost for each of the codes 
assigned to APC 0307 (CPT codes 78459, 78491, and 78492) and is also 
below the median cost for three of the codes in APC 0307 that comprise 
10,929 of the 11,060 total claims for the APC.
    Response: We do not believe that the presence of a median cost for 
multiple scans that is greater than the median cost for a single scan 
indicates that the data are flawed. There are many reasons that the 
median cost for a single scan could be higher than the median cost for 
multiple scans, including different charging practices and cost 
structures across hospitals and different hospital utilization of 
single versus multiple scans. Our standard ratesetting methodology 
converts the hospital's charge to cost by application of the most 
specific departmental or overall hospital-specific CCR and after 
trimming claims for which the cost exceeds +/-3 standard deviations 
from the geometric mean, and calculates the 50th percentile, that is, 
the median cost, the array of costs. Variation in hospital patterns of 
utilization combined with differential hospital charging practices can 
result in valid relative costs, as we define them for the OPPS, in 
which the median cost for single scans exceeds the median cost for 
multiple scans.
    With respect to the commenter's observation that the proposed rule 
mean cost for APC 0307 as it was proposed is higher than its proposed 
rule median cost, we note that it is very common for the mean cost to 
be higher than the median cost for services that are paid under the 
OPPS because there is frequently a wide range between the minimum cost 
and the maximum cost. For example, for CPT code 78492, the CY 2012 
proposed rule minimum cost on a single bill was approximately $175 and 
the maximum cost was approximately $7,828, although the median cost was 
approximately $954 and the mean cost was approximately $1,186. 
Therefore, it is clear that the cost of most of the single bills were 
closer to $175 than they were to $7,827, but when all of the single 
bill costs were averaged, the mean cost (approximately $1,186) was 
greater than the median cost (approximately $954). We do not understand 
what is meant by the commenter's additional statement that the CY 2012 
proposed rule median cost for APC 0307 ``is also below the median cost 
for three of the codes in APC 0307 that comprise 10,929 of the 11,060 
total claims for the APC'' because there were only three codes in APC 
0307. CPT codes 78459, 78491, and 78492 were the only CPT codes 
assigned to now deleted APC 0307. We note that it is not surprising 
that the median cost for APC 0307 in the CY 2012 proposed rule data was 
equal to the median cost for CPT code 78492 because CPT code 78492 
contained 98 percent of the single bills in APC 0307 (deleted for CY 
2012) and, therefore, CPT code 78492 would be likely to control the 
median cost in the array of single procedure bills.
    Comment: One commenter objected to the absence of a CMS 
presentation and explanation of the change in median cost for APC 0307 
at either the winter or summer APC Panel meetings in 2011 and to the 
limited amount of information furnished in the proposed rule.
    Response: We do not discuss all services paid under the OPPS at the 
APC Panel meetings. The APC Panel meetings offer the opportunity for 
any member of the public to make presentations on any issue of interest 
that is within scope of the Panel's charter and for CMS to seek Panel 
comment and advice on issues for which CMS believes such comment and 
advice would be useful. The winter APC Panel meeting generally reviews 
concerns of the public with regard to the final rule for that year and 
provides an opportunity for the public and CMS to seek the Panel's 
comment and advice on issues for the forthcoming year's OPPS. The 
summer APC Panel meeting occurs during the comment period of the 
proposed rule and is generally limited to hearing the views of the 
public on the proposed rule for the upcoming year. No member of the 
public asked to make a presentation on the payment rate for APC 0307 at 
either the Panel's winter or the summer meetings in 2011. Moreover, we 
had no clinical or resource-related question related to APC 0307 for 
which we believed that APC Panel input would be useful. Therefore, like 
many other topics applicable to the CY 2012 OPPS, there was no 
discussion of the proposed payment for APC 0307 for CY 2012.
    We also note that the proposed rule does not include service-
specific discussions of the calculation of median cost for each 
separately paid HCPCS code or for each APC. Rather, we discuss the 
general methodology used to calculate the median costs on which the 
proposed payment rates are based and the principles applied in 
determining APC configurations. We discuss specific APCs or services in 
the proposed rule only when we have a specific reason to do so, such as 
when we apply a nonstandard ratesetting methodology to calculate a 
proposed payment rate for a particular item or service. In most cases, 
a proposed reduction of a median cost for an APC or for a HCPCS code 
that is calculated from actual charges and cost

[[Page 74257]]

data does not result in a service-specific discussion in the proposed 
rule. The number of APCs and the volume of HCPCS codes for which median 
costs are calculated prohibit a detailed explanation of each change in 
a median cost in the proposed rule because annual changes to hospital 
charges and costs generally result in changes to median costs for each 
HCPCS code and, therefore, for each APC each year.
    Comment: Commenters objected to the proposed decrease in the 
payment rate for non-myocardial PET imaging services assigned to APC 
0308.
    Response: For CY 2012, the payment rate for APC 0308 is based on 
data from claims submitted during CY 2010 according to the standard 
OPPS ratesetting methodology after the reassignment of CPT codes 78459, 
78491, and 78492 to APC 0308 for the reasons we discuss above. 
Specifically, we used 249,026 single procedure bills (out of 289,786 
total claims) from CY 2012 final rule claims data to calculate the 
final median cost upon which the CY 2012 payment rate for APC 0308 is 
based. For CY 2012, we are setting the final payment rate for all PET 
imaging services (including CPT codes 78459, 78491 and 78492 that were 
in APC 0307 for CY 2011) based on final rule median costs of 
approximately $1,038 for APC 0308. This median cost results in a modest 
decline in the final CY 2012 median cost for PET imaging services 
compared to the CY 2011 median cost for non-myocardial PET imaging 
services. We note that our cost-finding methodology is based on 
converting each hospital's charge for its services to an estimated cost 
by applying the most discrete hospital-specific CCR available for the 
hospital that submitted the claim. Therefore, it is each hospital's 
claims and cost reports that determine the estimated costs that are 
used to calculate the median cost for each service and, when aggregated 
into APC groups, the hospital data are used to calculate the median 
cost for the APC on which the APC payment rate is based.
    In summary, based on our review of the claims and cost report data 
and our assessment of the similarity of the services in APCs 0307 and 
0308, we have reassigned CPT codes 78459, 78491, and 78492 to APC 0308, 
for which we have calculated a median cost of approximately $1,038 for 
CY 2012. We have revised the description of APC 0308 to be ``Positron 
Emission Tomography (PET) Imaging,'' so that it will describe both non-
myocardial PET and myocardial PET services, and we have deleted APC 
0307 for CY 2012 for the reasons we discuss previously in this section. 
We have made no other reassignments to APC 0308 nor have we removed 
codes that are assigned to APC 0308 for CY 2011 from APC 0308 for CY 
2012.
    We will reassess whether it continues to be appropriate to assign 
both the non-myocardial PET and the myocardial PET services to the same 
APC for CY 2013 based on the CY 2013 OPPS cost data. We would propose 
to make any reassignments that we may believe to be necessary through 
the standard annual notice-and-comment rulemaking process.
e. Device Construction for Intensity Modulated Radiation Therapy (IMRT) 
(APC 0305)
    CPT code 77338 (Multi-leaf collimator (MLC) device(s) for intensity 
modulated radiation therapy (IMRT), design and construction per IMRT 
plan) was new for CY 2010. The service was previously reported using 
multiple units of CPT code 77334 (Treatment devices, design and 
construction; complex (irregular blocks, special shields, compensators, 
wedges, molds or casts)). For CY 2012, the first year of claims data 
for CPT code 77338, we proposed to assign CPT code 77338 to APC 0305 
(Level II Therapeutic Radiation Treatment Preparation), with a proposed 
median cost of approximately $266 because we calculated a proposed rule 
median cost for CPT code 77338 of approximately $186 based on a single 
bill frequency of 32,547 (out of a total bill frequency of 41,663) in 
the CY 2010 claims data that we used to establish the proposed payment 
rates for the CY 2012 OPPS.
    For CY 2011, we had assigned CPT code 77338 to APC 0310 (Level III 
Therapeutic Radiation Treatment Preparation) based on a simulated 
median cost of approximately $792 that we calculated using CY 2009 
claims data for CPT code 77334, the predecessor code to CPT code 77338. 
Using CY 2009 claims data, we estimated that hospitals would furnish 4 
units of CPT code 77334 per IMRT treatment plan and that the estimated 
CY 2009 cost per unit for CPT code 77334 was $198, thus resulting in an 
estimated cost per IMRT plan of $792. Based on this simulated median 
cost for CPT code 77338, we assigned the code to APC 0310 which had a 
CY 2011 median cost of approximately $917. We stated that, for the CY 
2012 OPPS, we planned to use our standard cost estimation process using 
the CY 2010 claims data and the most recent cost report data to 
establish a median cost for CPT code 77338, and that, based on that 
data, we would assess whether placement of CPT code 77338 in APC 0310 
would remain appropriate for the CY 2012 OPPS (75 FR 71916).
    Using the claims data from CY 2010, upon which we proposed to base 
the CY 2012 OPPS payment rates, we proposed to move CPT code 77338 from 
APC 0310 to APC 0305 for CY 2012 because its presence in APC 0310 would 
have created a 2 times rule violation. We refer readers to section 
III.B. of this final rule with comment period for discussion of the 2 
times rule. Specifically, the proposed rule median cost for APC 0310 of 
approximately $953 was more than twice the median cost of approximately 
$186 that we calculated for CPT code 77338, and the single bill 
frequency for CPT code 77338 of 32,547 caused it to meet the criteria 
as a significant procedure in APC 0310. To resolve the 2 times rule 
violation, we proposed to move CPT code 77338 to APC 0305 for CY 2012 
OPPS.
    Comment: Commenters objected to our proposal to move CPT code 77338 
from APC 0310 to APC 0305. They believed that even if assigned to APC 
0310, the code is being underpaid because the predecessor code CPT code 
77334 would have been charged 3 to 9 units for the initial IMRT 
treatment and that additional units would be charged 3 to 9 units for 
the successive IMRT treatments. Therefore, the commenters stated that 
if CPT code 77334 had not been replaced by CPT code 77338, they would 
have charged and been paid approximately $4,625 for 18 total units of 
CPT code 77334. Commenters stated that it is illogical that the 
proposed rule median cost of $213 for CPT code 77334, which is for one 
device, would be greater than the median cost of $186 for CPT code 
77338, which is for all devices in an IMRT plan of treatment. One 
commenter stated that its analysis revealed there is huge variability 
in hospital charges for CPT code 77338, specifically, that 25 percent 
of hospitals charge less than $500 and 8.5 percent of hospitals charge 
more than $5,000 for one unit of CPT code 77338. This commenter noted 
that this variability is carried through the CMS cost data, with CMS 
finding costs of less than $100 for 17.5 percent of hospitals and costs 
of more than $1,000 for 10 percent of hospitals. Another commenter 
indicated that its analysis of the proposed rule claims data indicated 
that only 13 percent of hospitals submitted claims in line with CMS 
expectations of the charges for CPT code 77338. Many commenters stated 
that it is clear that hospitals require guidance with regard to billing 
for this service before improved data should be used to establish 
payment rates. Commenters asked that CMS reassign CPT code

[[Page 74258]]

77338 to APC 0301 (Level II Radiation Therapy), or alternatively assign 
the procedure to an APC that would pay for construction of 10 to 20 
devices or assign the code to a new technology APC. Commenters also 
asked that CMS provide guidance to ensure that hospitals bill 
appropriately for this new service because they believed that their 
data analysis shows that median costs are not accurate.
    Response: After consideration of the public comments, the nature of 
the service being reported by CPT code 77338, and our claims data, we 
are finalizing our placement of CPT code 77338 in APC 0305, consistent 
with the median cost that we calculated based on the actual charges 
reported by 965 hospitals for CPT code 77338, converted to cost by 
application of the CCRs we calculated from the billing hospitals' most 
recently submitted cost reports. CPT code 77338 has similar clinical 
characteristics to the services in APC 0305 (Level II Therapeutic 
Radiation Treatment Preparation). In addition, the final rule median 
cost for CPT code 77338 of approximately $188 is more similar to the 
median cost for APC 0305 of approximately $264 than it is similar to 
the median cost for APC 0310 of approximately $955.
    Our examination of the CY 2010 claims that we used to calculate the 
final median cost of approximately $188 for CPT code 77338 reveals that 
the median charge in the single bills used for ratesetting for CPT code 
77338 was approximately $826. The median CCR that we used to reduce the 
hospital established charges to costs was 0.23. We used 36,860 single 
procedure bills from 965 hospitals (out of 47,589 total lines) or 
approximately 78 percent of the total lines containing actual charges 
for CPT code 77338, to calculate the final rule median cost for CPT 
code 77338, which is defined as including all devices required for an 
IMRT treatment plan.
    We recognize that there is considerable variability in the charges 
that hospitals established for these new codes, but it is not uncommon 
for there to be a high level of variability in the charges for a 
service, and it is normal that such variability would be carried 
through to the calculation of estimated costs for the service. We do 
not advise hospitals with regard to what they should charge for a 
service other than to require that the charges be reasonably related to 
their cost for the service and that they must charge all payers the 
same amount for the same service. However, our use of the median 
charges to establish payment levels was specifically designed to 
address wide variances in hospital cost accounting systems and billing 
patterns, and has also consistently been a reliable mechanism for 
promoting increased consistency without introducing additional 
regulations. We recognize that it is peculiar that the estimated cost 
for CPT code 77334, which represents the cost of a single device, would 
be greater than the estimated cost for CPT code 77338, which represents 
the cost of all devices in a single IMRT plan of treatment, but our 
estimated costs are based on the amounts of the charges established by 
hospitals for the service and the hospitals' CCRs, which are calculated 
from their Medicare cost reports. There are many reasons why this 
apparent anomaly could exist, including clinical rationales such as the 
inclusion of labor-intensive physical blocks, shields, and molds in the 
service described by CPT code 77334, as well as accounting rationales 
such as the crosswalking of a single collimator setting to the charges 
for the construction of a physical block, also in the service described 
by CPT code 77334. It is not unusual for hospitals to establish charges 
that do not comport with our expectation of the charges they would 
establish based on the definition of the code for the service for which 
they are establishing charges and on which we based simulated medians.
    The OPPS is based on the expectation that hospital charges reflect 
the relative resources that are required to furnish the service for 
which they are requesting a specified amount of payment. This self-
selected hospital charge is converted to an estimated cost by the 
application of a CCR for the billing hospital which is calculated from 
the billing hospital's own cost report. As described previously, in 
this case the single bills used to calculate the median cost were 
submitted in significant volume by 965 hospitals (36,860 single bills 
were used for ratesetting out of 47,589 total lines). Therefore, we 
have no reason to believe that the median cost we have calculated from 
such a robust submission of charge data from a significant number of 
hospitals should not be used to establish the payment for the service 
reported by CPT code 77338 for CY 2012. To the extent that hospitals 
determine that their charges should be revised to better reflect the 
resources required to furnish the service as defined by CPT code 77338, 
the revised charges would be reflected in future years' OPPS payment 
rates. However, for CY 2012, based on the robust set of single 
procedure bills containing actual charges for CPT code 77338 by 965 
hospitals, we believe that it is appropriate to apply our longstanding 
cost-finding methodology, as we proposed, to calculate the median cost 
on which the payment for CPT code 77338 is based for CY 2012. We see no 
basis to ignore our robust set of single procedure claims submitted by 
a significant number of hospitals by continuing to simulate a median 
cost for CPT code 77338.
    In conclusion, we see no irregularities in our calculation of the 
median cost for CPT code 77338 based on the actual charges reported on 
36,860 single procedure bills submitted by 965 hospitals. Therefore, we 
are finalizing our assignment of CPT code 77338, which has a final 
median cost of approximately $188 to APC 0305, which has a final median 
cost of $264 for CY 2012.
f. Computed Tomography of Abdomen and Pelvis (APC 0331 and 0334)
    The AMA CPT Editorial Panel created three codes for computed 
tomography (CT) of abdominal and pelvis that were effective January 1, 
2011, specifically, 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 approximately $300; and 
we assigned CPT code 74178 to APC 0333 (Computed Tomography Without 
Contrast Followed by with Contrast), which has a CY 2011 payment rate 
of approximately $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

[[Page 74259]]

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 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 are responding to the public 
comments in this 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 around 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. In the CY 2012 OPPS/ASC proposed rule 
(76 FR 42235), we stated that we were accepting this recommendation, 
and we would provide claims data as soon as the data are available. We 
noted 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.
    As we described in the proposed rule, 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 stated in the proposed rule that 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 indicated that 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, in the CY 2012 OPPS/ASC proposed rule 
(76 FR 42234), we proposed to establish two APCs to which we proposed 
to assign the combined abdominal and pelvis CT services. Specifically, 
we proposed to create new APC 0331 (Combined Abdominal and Pelvis CT 
Without Contrast), to which we proposed to assign CPT code 74176 and 
for which we proposed to base the CY 2012 OPPS payment rate on a median 
cost of approximately $417. We also proposed to create new APC 0334 
(Combined Abdominal and Pelvis CT With Contrast), to which we proposed 
to assign CPT codes 74177 and 74178 for the CY 2012 OPPS and for which 
we proposed to base the CY 2012 OPPS payment rate on a median cost of 
approximately $592. We proposed 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. 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 proposed to create new APC 0331 to which we proposed to assign 
CPT code 74176 and to create new APC 0334 to which we proposed to 
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. We stated in the proposed rule that, 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 proposed 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 
74176, 74177, and 74178. The predecessor codes were limited to the 
codes in Table 20 of the proposed rule (now Table 27 of this final rule 
with comment period).

[[Page 74260]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.042

    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 of the proposed rule (now Table 28 of this final 
rule with comment period). 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 the proposed 
rule and this final rule with comment period for discussion of the 
imaging composite APCs.
[GRAPHIC] [TIFF OMITTED] TR30NO11.043

    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 the proposed rule 
and this final rule with comment period, and to Addendum N, which was 
available via the Internet on the CMS Web site). We bypassed the costs 
for codes that appeared on the

[[Page 74261]]

bypass list to create simulated single procedure claims for CPT codes 
74176, 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 the proposed rule and this final rule with comment period for 
discussion of our standard trimming, packaging, and wage 
standardization methodology.
    We found that using the proposed methodology resulted in a 
simulated median cost for CPT code 74176 of approximately $417, and 
that, because we proposed 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 proposed to use this simulation 
methodology to establish proposed median costs for proposed APCs 0331 
and 0334 for the CY 2012 OPPS.
    We also proposed 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 proposed 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 
proposed that the code would be assigned to APC 8006 (CT and CTA with 
Contrast), for which we proposed a median cost of approximately $744 
for the CY 2012 OPPS. We proposed 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 of the proposed rule) continue 
to be reported when either abdominal CT or pelvis CT (but not both) is 
furnished, and we proposed to continue to assign them to imaging 
composite APCs 8005 and 8006. We stated that 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 the proposed rule and this final rule with 
comment period for the discussion of the calculation of our median 
costs for APCs 8005 and 8006 for CY 2012.
    In summary, we proposed 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 CY 2011. We noted 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.
    At its August 10-11, 2011 meeting, the APC Panel recommended that 
CMS adopt the proposal to create new APC 0331 (Combined Abdomen and 
Pelvis CT [computed tomography] without Contrast), for payment of CPT 
code 74176 (Computed tomography, abdomen and pelvis; without contrast 
material); and new APC 0334 (Combined Abdomen and Pelvis CT with 
Contrast), for payment of 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). We respond to the Panel's 
recommendation as part of the response to comments below.
    Comment: Commenters supported the use of data for the predecessor 
codes for the services that were combined into CPT codes 74176, 74177, 
and 74178 to create simulated median costs for use in establishing 
payments for CY 2012. Commenters supported the creation of APC 0331, to 
which we proposed to assign CPT code 74176, and APC 0334, to which we 
proposed to assign CPT codes 74177 and 74178 for CY 2012. As described 
previously, commenters on the CY 2011 OPPS/ASC final rule with comment 
period also 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 
claims data that reflect the combined cost of the two predecessor 
codes.
    Response: We continue to believe that it is appropriate to base 
payment for CPT codes 74176, 74177, and 74178 on simulated median costs 
established using the cost data for predecessor codes for CY 2012 for 
the reasons we stated in the proposed rule, as summarized in the 
discussion above. Therefore, the median costs for CPT codes 74176, 
74177, and 74178 for CY 2012 are based on the cost data for the 
predecessor codes, and we are establishing new APCs 0331 and 0334 to 
which these codes are assigned, as we proposed. The final rule median 
cost for CPT code 74176, which is the only code in APC 0331, is 
approximately $406. The final median cost for CPT code 74177 is 
approximately $561 and the final median cost for CPT code 74178 is 
approximately $631. The final median cost for APC 0334 to which CPT 
codes 74177 and 74178 are assigned is approximately $581.
    We have a large volume of services in the predecessor data on which 
to base the simulated median costs for APCs 0331 and 0334. 
Specifically, to calculate the medians for CPT code 71476, we used 
222,193 claims; for CPT code 71477, we used 331,262 claims; and for CPT 
code 74178, we used 201,693 claims. Because these codes were created 
effective January 1, 2011, we will have claims data containing actual 
charges for use in calculating the median cost of these services for 
the CY 2013 OPPS. We expect to have a very robust set of claims data 
containing actual hospital charges to which we expect to apply our 
standard processes to calculate the median costs for these codes for CY 
2013 because of the large volume of services that we found in the 
predecessor data that meet the definition of the new codes. At that 
time, we will decide whether it is necessary and appropriate to propose 
to retain APCs 0331 and 0334. However, we note that the extent to which 
hospitals establish charges in a manner that reflects that the new 
codes report both the abdominal and pelvis CT services will greatly 
affect the median

[[Page 74262]]

costs that are calculated, using our longstanding methodology, from the 
charge data present on claims for services in CY 2011.
    Comment: One commenter on the CY 2012 proposed rule and several 
commenters on the CY 2011 final rule with comment period asked that CMS 
increase payment for the services described by CPT codes 74176, 74177, 
and 74178 for CY 2011 because they believe that CMS inappropriately 
reduced payment for these services as a result of the assignment of CPT 
code 74176 to APC 0332 and the assignment of CPT codes 74177 and 74178 
to APC 0333 for CY 2011. Commenters on the CY 2011 final rule with 
comment period objected to the assignment of CPT code 74176 to APC 0332 
and to the assignment of CPT codes 74177 and 741178 to APC 0333 on the 
basis that the payments for these single service APCs reduced the 
payment for the services which, when coded using multiple CPT codes in 
CY 2010, would have been paid as imaging composite APCs at much higher 
payment rates.
    Response: The prospective payments that were established as a 
result of publication of the CY 2011 OPPS/ASC final rule with comment 
period are generally final payments, with the exception of any outlier 
payment or transitional outpatient payment to which the hospital may be 
entitled. We generally do not change payments that we implement as a 
result of the standard regulatory process during the year in which the 
payments are in effect unless required by legislation. We followed our 
longstanding policy when we made an interim assignment of CPT code 
74176 to APC 0332 and when we made an interim assignment of CPT codes 
74177 and 74178 to APC 0333 for CY 2011, based on our understanding of 
the hospital resources required to furnish these services. It is our 
longstanding practice to assign new CPT codes to interim APCs without 
having an opportunity to acquire comment from the public because the 
new codes are not announced to the public until after the opportunity 
for public comment has ended. This interim assignment remains in effect 
for the calendar year under this established process. The first 
opportunity to change the APC assignment for new codes is the final 
rule with comment period following the year the new codes are first 
recognized for OPPS payment.
    After consideration of the public comments we received, for CY 
2012, for the reasons we discussed previously in this section, we are 
creating new APC 0331, to which we are assigning CPT code 74176, and 
new APC 0334, to which we are assigning CPT codes 74177 and 74178. 
Using the claims data for the predecessor codes and the methodology we 
identify above and in the proposed rule, we calculated a simulated 
median cost of approximately $406 for APC 0331 and a simulated median 
cost of approximately $581 for APC 0334 for CY 2012. We will reassess 
whether there is a continued need for these APCs for the CY 2013 OPPS 
once we have actual charges for these services.
    For the reasons we discuss previously in this section, we also are 
finalizing our proposal to assign CPT code 74176 to imaging composite 
APC 8005 where CPT code 74176 is reported with CT codes that describe 
CT services for regions of the body other than the abdomen and pelvis 
in which contrast is not used and to assign CPT codes 74177 and 74178 
to APC 8006 when either of them is reported with CT codes that describe 
CT services for regions of the body other than abdomen and pelvis in 
which contrast is used. For CY 2012, APC 8005 has a median cost of 
approximately $432 and APC 8006 has a median cost of approximately 
$722.
g. Complex Interstitial Radiation Source Application (APC 0651)
    APC 0651 (Complex Interstitial Radiation Source Application) 
consists of one service described by CPT code 77778 (Interstitial 
radiation source application; complex). Composite APC 8001 (Low Dose 
Rate Prostate Brachytherapy Composite) employs claims on which both CPT 
code 77778 and CPT code 55875 (Transperineal placement of needles or 
catheters into prostate for interstitial radioelement application, with 
or without cystoscopy) are found on the same date of service, as 
described in section II.A.2.e.(2) of this final rule with comment 
period. For the CY 2012 proposed rule, APC 0651 had a median cost of 
approximately $897, based on 96 claims. APC 0651 has a final CY 2012 
median cost of approximately $835, based on 92 single claims.
    Comment: Several commenters expressed concern about the low volume 
of single and ``pseudo'' single claims used for APC 0651 ratesetting. 
They pointed out that both CY 2011 and CY 2012 payment rates for APC 
0651 are based on fewer than 100 claims, and that the proposed CY 2012 
payment rate for APC 0651 of $866.08 is a 23.3 percent decrease from 
the final CY 2011 payment rate of $1,129.46. The commenters believed 
the 96 claims used to set the proposed CY 2012 rate for APC 0651 are 
inadequate, and recommended that CMS continue to explore additional 
methodologies to increase the number of multiple procedure claims used 
for brachytherapy ratesetting.
    Response: While we agree that 96 single claims associated with CPT 
code 77778 is not optimal for APC 0651 ratesetting, we believe that a 
low volume of single claims for this code is not unexpected due to the 
clinical nature of the procedure. As we describe in section 
II.A.2.e.(2) of this final rule with comment period, the application of 
brachytherapy sources described by CPT code 77778 and the placement of 
needles or catheters into the prostate described by CPT code 55875 are 
generally 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. For this reason, we are 
continuing to pay for these two procedures when performed together 
through composite APC 8001. However, as we indicate in that section, we 
understand that there are a few occasions when a physician places the 
needles or catheters outside the hospital and the patient is then 
transferred to a hospital for brachytherapy source application, in 
which case CPT code 77778 would be reported alone in the hospital 
outpatient setting. While we agree with the commenter that it would be 
preferable if we had more single bills on which to base the payment for 
APC 0651, we believe the variation in the median costs for CPT code 
77778 between the CY 2011 final rule and the CY 2012 final rule appears 
to be normal variation that we would expect to see for low-volume 
services. We also found from examining the single bills for CPT code 
77778 that they are from different hospitals from year to year, which 
also could result in fluctuations in the median costs. We will continue 
to evaluate additional refinements and improvements to our ratesetting 
methodologies to maximize our use of claims data generally and continue 
to study means by which we can use more claims data to establish the 
payment rate for APC 0651 in particular.
    For CY 2012, the final median cost for APC 0651 is approximately 
$835, based on 92 single bills. We will continue to use this median 
cost to establish payment for APC 0651 for CY 2012, and are finalizing 
our policy for CY 2012 that CPT code 77778, when billed alone, will be 
paid at the APC 0651 payment rate.

[[Page 74263]]

h. Radioelement Applications (APC 0312)
    APC 0312 consists of six radioelement application codes, one of 
which is unlisted CPT code 77799 (Unlisted procedure, clinical 
brachytherapy). For the CY 2012 proposed rule, APC 0312 had a median 
cost of approximately $338 based on 168 single claims. For CY 2011, APC 
0312 had a final rule median cost of $351.17, based on 254 single 
claims.
    Comment: One commenter stated that the number of APC 0312 single 
claims is sparse and shows large and random variations in yearly median 
costs. The commenter pointed to a decrease in single claims from the CY 
2011 final rule to the CY 2012 proposed rule of 33 percent, and a 
decrease in the CY 2011 final payment rate to the CY 2012 proposed 
payment rate of 8.1 percent. The commenter recommended that CMS 
continue to explore additional methodologies to increase the number of 
multiple procedure claims used for brachytherapy ratesetting, such as 
for APC 0312.
    Response: The CY 2012 final median cost of approximately $378 shows 
an increase of 7.8 percent from the CY 2011 final median of $351.17. We 
believe the variation in the median costs between the CY 2011 final 
rule and the CY 2012 final rule appears to be normal variation that we 
would expect to see for low-volume services. We agree with the 
commenter that it would be preferable if we had more single bills on 
which to base the payment for APC 0312, and we will continue to 
evaluate additional refinements and improvements to our ratesetting 
methodologies generally to maximize our use of claims data generally 
and continue to study means by which we can use more claims data to 
establish the payment rate for APC 0312 in particular. However, we note 
that 268, or approximately 36 percent, of the 736 total lines reported 
for services that are assigned to APC 0312 in the CY 2012 final rule 
data, were reported as CPT code 77799, which we do not use for setting 
the median cost for the APC because there is no definition of the 
service that was furnished. Therefore, some of the approximately 36 
percent of the lines paid under APC 0312 might be used to establish the 
median cost for services in APC 0312 if they had been coded 
specifically, or in cases in which there is no existing code for the 
service, a new code were to be created to describe the services being 
furnished.
    After consideration of the public comments we received, we are 
finalizing a CY 2012 median cost for APC 0312 of approximately $378, 
based on 183 single claims.
8. Respiratory Services
a. 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, at that time, 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 the 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 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

[[Page 74264]]

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 indicated in our discussion of the simulated median that 
we expected hospitals would establish charges for pulmonary 
rehabilitation that would reflect all of the services that are included 
in comprehensive benefit that would be reported by one unit of HCPCS 
code G0424 (76 FR 42240).
    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, in the CY 2012 OPPS/ASC proposed rule (76 FR 42239 and 
42240), we proposed 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 the 
proposed rule and this final rule with comment period 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 resulted 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 was so robust for HCPCS code G0424, we believed that the proposed 
median cost we calculated for HCPCS code G0424 was 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 was an appropriate basis on which to establish the 
proposed national unadjusted payment rate for APC 0102.
    We indicated in the proposed rule that we recognized 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 was 
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 cost 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 the 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 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 
approximately $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 caused us to believe that the proposed median cost that we 
calculated from claims data for HCPCS code G0424 was calculated 
correctly

[[Page 74265]]

according to our longstanding standard median cost calculation 
methodology. Therefore, we proposed 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.
    Comment: Commenters objected to the proposed CY 2012 payment 
because it proposed a significant reduction in payment from the payment 
that resulted from the simulated median cost for pulmonary 
rehabilitation for CY 2010 and CY 2011. They stated that such a 
reduction in payment would not cover the labor cost of the service and 
would result in hospitals ceasing to furnish the service and, 
therefore, would reduce access to care for beneficiaries. Commenters 
believed that hospitals do not understand the nature of HCPCS code 
G0424 as a unit of a comprehensive service. They believed that 
hospitals are very familiar with HCPCS code G0237, which is for 15 
minutes of care for patients with chronic pulmonary diseases, and they 
believed that hospitals presumed that a single code for very similar 
services correlated to a different diagnosis would also be a 15 minute 
code and that they set the charge for HCPCS code G0424, which is for 
similar services but is limited to persons with chronic obstructive 
pulmonary disease (COPD), accordingly. Commenters stated that CMS data 
support that hospitals are not reporting charges associated with the 
corollary services that are part of HCPCS code G0424. They urged CMS to 
freeze the payment for pulmonary rehabilitation for CY 2012 at the CY 
2011 rate and to shift from the use of a standard cost center to the 
use of a nonstandard cost center for determining the relative cost of 
pulmonary rehabilitation services because they believed that using a 
standard cost center does not adequately capture the cost of the 
services. The commenters believed that continuing the CY 2011 payment 
for CY 2012 is justified because there is strong historical data for 
HCPCS codes G0237 through G0239 and a weak data base for HCPCS code 
G0424 and that using 10 years of data for HCPCS codes G0237 through 
G0239 is wiser than using one year of artifact data for HCPCS code 
G0424 as the basis for the payment for HCPCS code G0424. They indicated 
that the proposed payment for pulmonary rehabilitation will reduce 
access to care and thereby result in CMS losing an important tool for 
reducing readmissions and decreasing length of stay in inpatient 
hospital settings. The commenters stated that HCPCS codes G0237 through 
G0239 are used to report individual pulmonary services while HCPCS code 
G0424 is generally recognized as a group code with a maximum ratio of 
one staff to four patients. However, they stated that this is not 
always the case and that HCPCS code G0424 is sometimes requires a one-
to-one staff to patient ratio. Therefore, until such time as a more 
robust set of data is available, the commenters asked that CMS continue 
to base payment for HCPCS code G0424 on the data for HCPCS codes G0237 
through G0239 using the simulated median methodology that was the basis 
for payments for HCPCS code G0424 for CY 2010 and 2011.
    Response: After considering the comments and reexamining our claims 
data, we are establishing the CY 2012 median cost on which the CY 2012 
payment for HCPCS code G0424 will be based on our claims and cost 
report data. The final rule median cost for APC 0102 to which HCPCS 
code G0424 is assigned is approximately $37. Our final rule data shows 
that hospitals billed a total frequency of 448,396 lines of pulmonary 
rehabilitation, of which we were able to use 446,456 or nearly 100 
percent of the billed lines, for the calculation of the final median 
cost for HCPCS code G0424 for CY 2012. We disagree with commenters that 
these claims are artifact claims that should not be used.
    For this final rule we expanded our data analysis to look not only 
at the charges and CCRs for HCPCS code G0424, but also to look at the 
charges and CCRs for HCPCS code G0237 through G0239, which the 
commenters indicated are similar services, and also to look at the cost 
centers that were used to reduce the charges to costs. We found that 
the median charge for one unit of HCPCS code G0424 is approximately 
$152 and the median charge for HCPCS code G0239, which is defined to 
include services to two or more persons, rather than one on one 
service, is approximately $120. Commenters stated that HCPCS code G0424 
is generally, but not always, considered to be a group service with a 
staff to patient ratio of 1:4. Therefore, we view it as most similar to 
HCPCS code G0239, which is defined as a group service and which was the 
basis for the simulated median cost methodology on which we based the 
OPPS payments for CY 2010 and CY 2011. Therefore, it seems logical that 
hospitals charged more for the comprehensive pulmonary rehabilitation 
service of HCPCS code G0424 than for HCPCS code G0239 which is not a 
comprehensive service but which is a group service for which time is 
not limited. Hospital charges represent the hospital's statement of the 
dollar value of the service they furnish and we conclude that hospitals 
place a higher dollar value on HCPCS code G0424 than on G0239. We do 
not view HCPCS code G0237 or G0238, which have median charges of 
approximately $88 and $85, respectively, and which represent 15 minutes 
of care to be similar to HCPCS code G0424 because each of them is for 
one-on-one care, as opposed to the group nature of HCPCS codes G0239 
and G0424. For that reason, when we simulated median costs for CY 2010 
and CY 2011, we based the simulation on the presence of HCPCS code 
G0239 on the claim, with HCPCS code G0237 and/or HCPCS code G0238 being 
a secondary requirement.
    We next looked at the revenue codes under which hospitals reported 
HCPCS code G0424 and G0239. We found that the most commonly reported 
revenue codes on the lines with the single bills for HCPCS code G0424 
were 0410, Respiratory Services, with 108,154 single bills; 0948, 
Pulmonary Rehabilitation, with 84,126 single bills; 0460, Pulmonary 
Function, with 64,641 single bills; 0419, Other Respiratory Services, 
with 37,833 single bills, and 0940, Other Therapeutic, with 59,533 
single bills. Therefore, of the 446,456 single bills used to set the 
median cost for APC 102, 345,738 bills (excluding the single bills 
reported as ``Other therapeutic''), or 77 percent, were reported under 
revenue codes that were specific to respiratory services of some nature 
(that is, revenue codes 0410, 0948, 0460, and 0419). The remaining 
single bills were reported under a variety of revenue codes. We next 
looked at the cost centers that were applied to the charges on the 
single bills, and we found that we used the respiratory therapy cost 
center, cost center 4900 on the hospital cost report CMS 2552-96, to 
reduce the charges on the line to costs on 63 percent of the single 
bills. When we looked at the CCRs used to reduce charges to cost for 
HCPCS codes G0424 and G0239, we found that both the HCPCS codes G0424 
and G0239 have a CCR of 0.25, which is consistent with our finding that 
charges for both codes were usually reduced by the CCR for cost center 
4900, Respiratory Therapy. We disagree with the commenters' request 
that we create a nonstandard cost center for pulmonary rehabilitation 
because we believe that it is not necessary and would not result in 
more accurate estimated median costs for pulmonary rehabilitation.

[[Page 74266]]

Stakeholders have repeatedly told us that respiratory therapists 
furnish most pulmonary rehabilitation. Therefore, we expect that the 
costs of pulmonary rehabilitation are captured in the standard cost 
center 4900 (Respiratory Therapy), which is used to convert charges to 
costs for pulmonary rehabilitation for approximately 63 percent of 
single bills used to establish the median cost for pulmonary 
rehabilitation. We note also that a nonstandard cost center, which 
commenters' requested, is not required to be used to report costs. 
However, a standard cost center, like cost center 4900, must be 
completed by a hospital if it has a cost account for those costs in its 
general ledger. Hence, the creation of a nonstandard cost center would 
not necessarily be used.
    Everything we observe in the claims data for the 446,456 single 
bills used to report the CY 2010 charges from which we calculated the 
median cost for HCPCS code G0424 leads us to believe that the 
calculation of the median cost of approximately $37 for HCPCS code 
G0424 is appropriate, based on the charge that hospitals set for the 
service. The median cost was calculated using charges, the majority of 
which are reported under pulmonary specific revenue codes and using 
CCRs, and which mostly used the respiratory therapy cost center.
    With regard to the comment that the payment that results from a 
median cost of approximately $37 would be insufficient to pay the labor 
cost for the service, we note that, given that HCPCS code G0424 is 
generally recognized to be a group service, generally with a ratio of 1 
staff to 4 patients, the payment for an hour of service would usually 
be 3 to 4 times the payment for one unit of HCPCS code G0424.
    We do not agree with the commenters that freezing the payment for 
HCPCS code G0424 at the rate that was based on the simulated median 
cost for CY 2011 would be appropriate, given the results of our 
analysis of the robust charge data and cost report data that hospitals 
submitted. Similarly, we see no basis for continuing to use the 
simulated methodology to calculate median costs for pulmonary 
rehabilitation because we now have an abundant number of single bills 
containing the actual charges that hospitals requested in payment for 
the service they are furnishing. With regard to the comment that 
hospitals established their charges based on misunderstanding of the 
nature of the service or based on charges for services that they 
wrongly viewed to be similar, we note that the median hospital charge 
for HCPCS code G0424 is higher than the median charge for HCPCS code 
G0239, the group respiratory service as we would expect given that 
HCPCS code G0424 is a comprehensive service. The charges that hospitals 
establish for services are the amount they seek to be paid for the 
service they furnish, and therefore, we view them as being a reflection 
of the monetary value the hospital places on the service. Under our 
longstanding methodology, we use hospital charges to calculate the 
median costs on which the OPPS payment is based.
    Lastly, we do not agree with commenters that payment based on the 
median cost we derived from hospital's costs and charges for CY 2010 
will necessarily result in reduced access to care for Medicare 
patients. We note that the respiratory therapy services reported under 
HCPCS code G0239, which commenters stated is for an hour of group 
respiratory therapy and is the most similar code to HCPCS code G0424, 
has a median cost of approximately $31, which compares reasonably to 
the median cost of approximately $37 which we found for HCPCS code 
G0424, a service of more complexity. We note that in CY 2010, when the 
payment rate for HCPCS code G0239 was $27.39, hospitals reported a 
total frequency of 146,616, which indicates no absence of access to 
care at a payment rate significantly less than the median cost for 
HCPCS code G0424 in CY 2012.
    Comment: Commenters also stated that some CMS instructions to 
contractors were not issued until May 2010 and that some MACs did not 
permit billing of HCPCS code G0424 until October of 2010. Moreover, 
they stated that some MACs instructed hospitals to report HCPCS codes 
G0237 through G0239 for pulmonary rehabilitation for COPD patients 
contrary to CMS instructions. They added that, given these issues with 
implementation of billing and payment for HCPCS code G0424, it is 
understandable that hospitals struggled with developing charges for a 
one hour code for COPD patients when charges were already in place for 
very similar services for patients with other chronic pulmonary 
diseases.
    Response: Hospitals are responsible for updating their billing 
systems to recognize changes to codes and payment for services, 
particularly with regard to the quarterly changes to HCPCS codes, 
including the addition of new codes. CMS posts all instructions 
regarding new codes on the CMS Web site, issues Medicare Learning 
Network (MLN) Matters articles on new codes and hosts Hospital Open 
Door Forum calls regularly to provide easy ways for hospitals to stay 
up to date on changes in Medicare payment policy. The instructions to 
MACs are available to the public via the Web site. If a hospital 
believes that a MAC is not in compliance with the instructions and 
cannot achieve satisfaction from discussing the issue with the MAC, the 
hospital should bring it to the attention of the CMS regional office 
staff for the area in which the hospital is located. We acknowledge 
that Change Request (CR) 6823 regarding coverage and implementation of 
pulmonary rehabilitation was issued by CMS on May 7, 2010, effective 
for services furnished on and after January 1, 2010. However, the 
Federal Register notice of the OPPS for CY 2010, which was posted to 
http://www.cms.gov/HospitalOutpatientPPS/ on October 30, 2009, 
contained the coverage and payment policy for the pulmonary 
rehabilitation benefit, a discussion of how the services should be 
coded, including a full discussion of HCPCS code G0424 and an 
explanation of how the simulated median was created, including how CMS 
viewed HCPCS code G0424 to be similar to HCPCS codes G0237 through 
G0239 (74 FR 60569). Moreover, CMS hosted regular Hospital Open Door 
Forum calls between November 2009 and January 1, 2010 at which CMS 
staff was available to discuss any issue arising from the Medicare 
hospital OPPS. CMS expected that hospitals would use the detailed 
explanation of how we arrived at the simulated median that was 
articulated in the CY 2010 OPPS/ASC final rule with comment period that 
was posted on the CMS Web site as a basis for establishing charges for 
the services for HCPCS code G0424 for CY 2010, because CMS advised 
hospitals of how the simulated median was created. Therefore, 
notwithstanding the delay in the issuance of CR 6823, we believe that 
hospitals had access to all of the information that was necessary to 
report the new codes and to establish appropriate charges for HCPCS 
code G0424 beginning with the January 1, 2010 effective date.
    Comment: Commenters asked that, for hospital cost reports filed 
January 1, 2012 and later, CMS require that pulmonary rehabilitation be 
reported in a nonstandard cost center rather than a standard cost 
center. They believed that the recommendations of RTI in its 2006 
report, with regard to the creation of a new nonstandard cost center 
for cardiac rehabilitation, should also apply to pulmonary 
rehabilitation because the

[[Page 74267]]

authorizing legislation is almost identical and because they believed 
that this would result in more accurate charge data and cost reports 
for pulmonary rehabilitation.
    Response: We do not agree that the accuracy of median calculation 
would be improved if CMS would create a nonstandard cost center for 
pulmonary rehabilitation. There is already a cost center in which 
hospitals can isolate the costs of respiratory services (which may 
include the cost of hospital staff other than respiratory therapists 
who furnish respiratory therapy): Cost center 4900, Respiratory 
Therapy, on the CMS form 2552-96 and cost center 6600, Respiratory 
Therapy, on the CMS form 2552-10. However, we believe that respiratory 
therapists provide the majority of pulmonary rehabilitation and that 
the costs of respiratory therapists are largely reported on the cost 
report under the respiratory therapy cost center. Therefore, we believe 
that most of the costs of pulmonary rehabilitation are already carried 
in the Respiratory Therapy cost center, based on our finding that the 
CCR for the Respiratory Therapy cost center (4900 in the CMS hospital 
cost report form 2552-96) is reported sufficiently often that it was 
used to reduce the charge for 279,803 of the 446,456 single bills, or 
63 percent of the single bills, to cost. In view of the existence of 
the standard cost center for respiratory therapy on both the CMS form 
2552-96 and the CMS form 2552-10 hospital cost reports, we have no 
reason to believe that creation of a nonstandard cost center would 
result in more specific and accurate cost data for HCPCS code G0424. In 
contrast, unlike respiratory therapy, which has long had a dedicated 
cost center, the costs of the staff who furnish cardiac rehabilitation 
were not predominantly carried in a single cost center before the 
creation of the cardiac rehabilitation cost center. For this reason, 
the creation of a cardiac rehabilitation cost center does not justify 
the creation of a pulmonary rehabilitation cost center.
    Comment: One commenter asked that CMS reconsider the valuation of 
the cost of HCPCS code G0424 to appropriately account for the services 
delivered by physical therapists. The commenter asked that, 
alternatively, CMS create a separate HCPCS code that can be used to 
delineate those patients who require individualized physical therapy 
within the pulmonary rehabilitation program. The commenter stated that 
the need for the service that would be reported by the new code would 
be determined by conducting separate screening that has clear and 
distinct criteria that justify the need for the physical therapy 
services.
    Response: Pulmonary rehabilitation is a comprehensive service in 
which it would be inappropriate to create a code for a particular type 
of professional who participates in providing the service. The charge a 
hospital establishes for HCPCS code G0424 is a charge for the 
comprehensive package of services that are encompassed in the pulmonary 
rehabilitation benefit and includes the charge for whatever portion of 
those services may be furnished by a physical therapist. We do not 
believe that it would be appropriate to create a new and separate code 
for the services furnished by a physical therapist as part of a 
comprehensive pulmonary rehabilitation service because those services 
are already included in the charge for HCPCS code G0424. Similarly no 
additional payment should be made for those services because payment 
for HCPCS code G0424 includes payment for the comprehensive package of 
services for which payment is claimed when a hospital reports HCPCS 
code G0424.
    In summary, for CY 2010, we are establishing payment for APC 0102, 
for which HCPCS code G0424 is the only assigned code, based on the 
median cost of approximately $37 that we calculated using 446,456 
single bills of 448,396 total frequency, or nearly 100 percent, of the 
billed lines for HCPCS code G0424 and the most recent hospital cost 
reports for the hospitals whose bills are being used. We are not 
establishing a special purpose cost center for pulmonary rehabilitation 
because the service is largely furnished by respiratory therapists for 
which there is standard cost center (4900, Respiratory Therapy), which 
is already used to reduce most charges for HCPCS code G0424 to costs. 
Therefore, we do not believe that creating a pulmonary rehabilitation 
cost center in addition to the standard respiratory therapy cost center 
is necessary to the calculation of the median cost of HCPCS code G0424.
b. Bronchial Thermoplasty (APC 0415)
    We created two new HCPCS codes, C9730 (Bronchoscopic bronchial 
thermoplasty with imaging guidance (if performed), radiofrequency 
ablation of airway smooth muscle, 1 lobe) and C9731 (Bronchoscopic 
bronchial thermoplasty with imaging guidance (if performed), 
radiofrequency ablation of airway smooth muscle, 2 or more lobes), also 
known as bronchial thermoplasty, and assigned them to APC 0415 (Level 
II Endoscopy lower airway), effective July 1, 2011. Bronchial 
thermoplasty is indicated for the treatment of severe persistent 
asthma, and the bronchial thermoplasty system consists of a 
radiofrequency (RF) controller and a single use device with an 
electrode array that is delivered through the working channel of a 
bronchoscope. The bronchial thermoplasty services, technology, and 
estimated costs came to our attention via an application for the 
services to be placed into a New Technology APC. The APC 0415 median 
cost for the CY 2012 proposed rule is $2,094.64. AMA's CPT Editorial 
Panel has recently created two new Category III CPT codes to be 
effective January 1, 2012, specifically, CPT codes 0276T (Bronchoscopy, 
rigid or flexible, including fluoroscopic guidance, when performed; 
with bronchial thermoplasty, 1 lobe) and 0277T (Bronchoscopy, rigid or 
flexible, including fluoroscopic guidance, when performed; with 
bronchial thermoplasty, 2 or more lobes). At the August 2011 APC Panel 
meeting, the APC Panel heard from a presenter regarding APC placement 
for bronchial thermoplasty, but the Panel did not make any 
recommendations to CMS. We indicated at the August 2011 APC Panel 
meeting that we anticipate retiring HCPCS codes C9730 and C9731, and 
replacing them with CPT codes 0276T and 0277T, respectively, effective 
January 1, 2012. For CY 2012, we proposed maintaining assignment of 
bronchial thermoplasty services to APC 0415.
    Comment: One commenter stated that the bronchial thermoplasty 
codes, HCPCS codes C9730 and C9731, should not be assigned to APC 0415 
for CY 2012 because the resources are not covered by the CY 2012 
proposed rule median cost for APC 0415 of $2,094.64. The commenter's 
estimated costs for the bronchial thermoplasty procedures range from 
approximately $4,130 to $5,087, which includes its estimated cost of 
$2,500 for the single use catheter, while the CY 2012 proposed rule 
median costs of service codes assigned to APC 0415 range from 
approximately $1,780 to $3,122. The commenter contended that no 
existing clinical APCs are appropriate both in terms of clinical 
characteristics and resource costs. On the other hand, the commenter 
requested that CMS consider an assignment of the bronchial thermoplasty 
codes to APC 0423 (Level II percutaneous abdominal and biliary 
procedures). The commenter argued that APC 0423 includes CPT code 32998 
(Ablation therapy for reduction or eradication of one or more pulmonary 
tumor(s) including pleura or chest wall when involved by tumor 
extension,

[[Page 74268]]

percutaneous, radiofrequency, unilateral), a service that the commenter 
claimed is a better comparator for bronchial thermoplasty in terms of 
procedural costs as well as clinical similarity. The commenter stated 
that, clinically, the two procedures entail similar supplies and 
equipment and involve ablative techniques. However, the commenter 
stated that CPT code 32998 is performed percutaneously, while bronchial 
thermoplasty is performed through a bronchoscope. The commenter 
asserted that bronchial thermoplasty requires a disposable catheter 
costing $2,500, while CPT code 32998 requires a disposable probe 
costing approximately $1,375. Also, the commenter asserted that because 
the CY 2012 proposed median cost of CPT code 32998 is approximately 
$3,962 and the CY 2012 proposed median cost of APC 0423 is about 
$4,112, bronchial thermoplasty should be assigned to APC 0423 because 
of greater resource similarity as reflected in the higher median cost. 
The second option recommended by the commenter is to revise existing 
APC 0415 into APCs ``0415A'' and ``0415B'' and place the two bronchial 
thermoplasty codes into an APC 0415B with CPT codes 31626 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with placement of fiducial markers, single or multiple), 
31631 (Bronchoscopy, rigid or flexible, including fluoroscopic 
guidance, when performed; with placement of tracheal stent(s) (includes 
tracheal/bronchial dilation as required)), and 31636 (Bronchoscopy, 
rigid or flexible, including fluoroscopic guidance, when performed; 
with placement of bronchial stent(s) (includes tracheal/bronchial 
dilation as required), initial bronchus). The commenter's third, final 
and preferred recommendation was to assign bronchial thermoplasty codes 
to a New Technology APC.
    Response: As stated above, effective January 1, 2012, newly created 
CPT codes 0276T and 0277T will be the codes used to report bronchial 
thermoplasty, and HCPCS codes C9730 and C9731 will be deleted effective 
that date. Regarding the commenter's recommended option to assign 
bronchial thermoplasty codes to APC 0423, we do not believe that the 
bronchial thermoplasty service is clinically similar to the procedures 
in APC 0423. APC 0423 consists of percutaneous procedures, while CPT 
codes 0276T and 0277T are bronchoscopic procedures, clinically similar 
to services in bronchoscopy APCs. We also do not agree that APC 0415 
needs to be split into 2 APCs at this time. All of the bronchoscopy 
procedures in APC 0415 are clinically similar, and the final rule 
median costs for procedures within APC 0415 range from approximately 
$1,745 to approximately $3,300, with an overall median cost of 
approximately $2,048. We proposed to assign bronchial thermoplasty to 
APC 0415 because it is similar clinically to the bronchoscopy 
procedures in APC 0415, particularly CPT code 31641 (Bronchoscopy, with 
destruction of tumor or relief of stenosis by any method other than 
excision (e.g., laser therapy, cryotherapy)), and because the estimated 
resource costs are approximately similar to the upper end of the range 
of median costs for procedures assigned to APC 0415. We generally 
prefer to wait until median cost claims data are available before 
reassignment of a service to a new APC. We also note that, according to 
our usual practice, when adequate actual hospital reported cost data 
become available for these procedures, we reevaluate their APC 
assignments and may reassign them to another APC, as appropriate. 
Regarding the option to assign the service to a New Technology APC, we 
believe that APC 0415 is an appropriate clinical APC for bronchial 
thermoplasty procedures. Therefore, we are maintaining assignment of 
the bronchial thermoplasty services to APC 0415.
    We are finalizing our proposal to maintain the assignment of 
bronchial thermoplasty procedures (CPT codes 0276T and 0277T beginning 
January 1, 2012) to APC 0415 for CY 2012, which has a final median cost 
of approximately $2,024.
c. Insertion of Bronchial Valve (APC 0415)
    AMA's CPT Editorial Panel created CPT code 0250T (Airway sizing and 
insertion of bronchial valve(s), each lobe) effective January 1, 2011 
to report insertion of a bronchial valve for treatment of prolonged air 
leaks of the lung. CPT code 0250T is an add-on code; therefore, 
hospitals must list the code in addition to the primary bronchoscopy 
procedure code. For 2011, we assigned CPT code 0250T to APC 0415 (Level 
II Endoscopy lower airway), with a payment rate of $1,971.77. We 
believe CPT code 0250T is similar to other services in APC 0415 in its 
clinical characteristics. For 2012, we proposed to maintain the 
assignment of CPT code 0250T to APC 0415, which had a proposed rule 
median cost of approximately $2,095, and a proposed payment rate of 
approximately $2,022. The CPT code 0250T procedure is performed with a 
bronchial valve intended to control prolonged air leaks of the lung 
following three specific surgical procedures: Lobectomy, segmentectomy, 
or lung volume reduction surgery (LVRS).
    Comment: One commenter stated that APC 0415 does not adequately 
cover the resource costs of CPT code 0250T, and recommended that CMS 
create a new clinical APC that would accurately reflect the device and 
procedural costs associated with CPT code 0250T. The commenter claimed 
that the cost for the bronchial valve that is necessary to perform the 
CPT code 0250T procedure is $2,750, and that a total device cost based 
on the number of valves (2.4 mean, or median of 2.0 valves) is $6,600 
based on the mean number of valves and $5,500 based on the median 
valves. The commenter asserted that it certified to the FDA that the 
current price of $2,750 complies with Humanitarian Device Exemption 
(HDE) regulations governing the price of the device. The commenter 
estimated that the CY 2012 total procedural cost for CPT code 0250T is 
$7,268.91 (based on the mean number of valves) or $6,168.91 (based on 
the median). The commenter asserted that the highest paying 
bronchoscopy in APC 0415 does not adequately pay for the cost of CPT 
code 0250T and requested that CMS create a new clinical APC for 
bronchial valve insertion and reassign CPT code 0250T to that APC for 
CY 2012.
    Response: CPT code 0250T is a new code as of January 1, 2011, and 
therefore, we have no CY 2010 claims data for this service for CY 2012 
ratesetting. The commenter apparently agrees that the bronchoscopy APC 
classification is the correct clinical APC type for the CPT code 0250T 
procedure, but that the estimated resource costs support a higher 
paying bronchoscopy APC. We generally wait until median cost claims 
data are available before reassignment to a new APC, particularly when 
there are no comparable clinical procedures that would allow us to 
easily estimate the cost of this new procedure. We again note that CPT 
code 0250T is an add-on code to a base bronchoscopy code.
    After consideration of the public comments we received, we are 
maintaining our assignment of CPT code 0250T to APC 0415 for CY 2012, 
which has a final median cost of approximately $2,024, because it is 
clinically similar to the services in APC 0415. We will review this 
assignment for CY 2013, when we should have some claims data for CPT 
code 0250T to determine the cost of the procedure.

[[Page 74269]]

9. Other Services
a. Skin Repair (APCs 0133, 0134, and 0135)
    For CY 2012, we proposed to reassign CPT code 15004 (Surgical 
preparation or creation of recipient site by excision of open wounds, 
burn eschar, or scar (including subcutaneous tissues), or incisional 
release of scar contracture, face, scalp, eyelids, mouth, neck, ears, 
orbits, genitalia, hands, feet and/or multiple digits; first 100 sq cm 
or 1% of body area of infants and children) from APC 0135 (Level III 
Skin Repair) to APC 0134 (Level II Skin Repair). Similarly, we also 
proposed to reassign CPT code 15430 (Acellular xenograft implant; first 
100 sq cm or less, or 1% of body area of infants and children) from APC 
0135 (Level III Skin Repair) to APC 0134 (Level II Skin Repair). We 
reassigned CPT codes 15004 and 15430 from APC 0135 to APC 0134 to avoid 
a 2 times rule violation in APC 0135.
    For CY 2012, the AMA's CPT Editorial Panel deleted 24 skin 
replacement and skin substitute-related CPT codes and replaced them 
with 8 new CPT codes in the Integumentary System section of the 2012 
CPT code book to describe more accurately the services associated with 
skin replacement procedures. In particular, the CPT Editorial deleted 
24 skin replacement and skin substitute-related CPT codes in the range 
between CPT code 15170 through 15431 and created 8 new CPT codes in the 
range between 15271 through 15278, which will be effective January 1, 
2012.
    Our standard process for dealing with new CPT codes 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. The new CPT code is given a comment 
indicator of ``NI'' (New code, interim APC assignment; comments will be 
accepted on the interim APC assignment for the new code) to identify it 
as a new interim APC assignment for the new year and the APC assignment 
for the new codes is then open to public comment. In the case of the 
new the skin replacement and skin substitute-related CPT codes, we 
crosswalked the existing CY 2011 CPT codes to the new CY 2012 CPT codes 
that appropriately describes them. In assigning the new codes to their 
appropriate APCs, we took into consideration the size of the wound 
described in the code descriptor. Specifically, we assigned the new 
codes to their appropriate APCs based on the following factors:
     New codes whose long descriptors included the words ``each 
additional 25 sq cm'' were assigned to APC 0133;
     New codes whose long descriptors included the words 
``first 25 sq cm or less'' or ``each additional 100 sq cm'' were 
assigned to APC 0134; and
     New codes whose long descriptors included the words 
``first 100 sq cm'' were assigned to APC 0135
    Table 29 below lists the CY 2011 APC assignments for the CY 2011 
CPT codes that will be deleted on December 31, 2011, and crosswalked to 
the replacement codes, which are described by the new CY 2012 CPT codes 
that will be effective January 1, 2012. We note that because the eight 
new CPT codes will be effective January 1, 2012, they are flagged with 
comment indicator ``NI'' in Addendum B of this final rule, which will 
be published and made available only via the Internet on the CMS Web 
site at http://www.cms.gov/.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
    Comment: Some commenters requested CMS to continue to assign CPT 
code 15004 to APC 0135 because the procedure is clinically similar to 
CPT codes 15002, 15003, and 15005, which are in APC 0135.
    Response: As we stated above, we reassigned CPT code 15004 from APC 
0135 to APC 0134 to eliminate a 2 times rule violation in APC 0135. 
Based on our analysis, our claims data show a CPT median cost of 
approximately $278 for CPT code 15004 based on 1,529 single claims (out 
of 5,116 total claims). The median cost of approximately $278 for CPT 
code 15004 is closer to the median cost of approximately $227 for APC 
0134 than to the median cost of approximately $345 for APC 0135. 
Moreover, the range of the median costs for the procedures with 
significant claims data that are assigned to APC 0134 is between $157 
and $291, while the range for the procedures with significant claims 
data that are assigned to APC 0135 is between $284 and $642. The median 
cost of approximately $278 for CPT code 15004 is in the range of median 
costs for the procedures with significant claims data in APC 0134 but 
not in the range of median costs for the procedures with significant 
claims data in APC 0135. Further, we believe that CPT code 15004 is 
similar to the procedures in APC 0134 based on clinical homogeneity and 
resource costs. We remind hospitals that we have more than two levels 
of skin repair APCs. Specifically, we have five levels of skin repair 
APCs as follows:
     APC 0133 (Level I Skin Repair)
     APC 0134 (Level II Skin Repair)
     APC 0135 (Level III Skin Repair)
     APC 0136 (Level IV Skin Repair)
     APC 0137 (Level V Skin Repair)
    Therefore, after consideration of the public comments that we 
received, we are finalizing our CY 2012 proposal, without modification, 
to reassign CPT code 15004 from APC 0135 to APC 0134, which has a final 
CY 2012 APC median cost of approximately $227.
    Comment: Several commenters urged CMS not to finalize its proposal 
to assign CPT code 15430 to APC 0134 and requested that CMS continue to 
assign the code to APC 0135, which is the same APC that is assigned to 
its add-on CPT code 15431 (Acellular xenograft implant; each additional 
100 sq cm, or each additional 1% of body area of infants and children, 
or part thereof). The commenters stated that APC 0135 is the 
appropriate APC assignment for CPT code 15430 based on its clinical 
homogeneity and resource costs to other procedures assigned in APC 
0135. One commenter indicated that the proposed CPT median cost of 
approximately $300 is closer to the proposed payment rate of 
approximately $361 for APC 0135 than to the proposed payment rate of 
approximately $228 for APC 0134.
    Response: Although we proposed to reassign CPT code 15430 from APC 
0135 to APC 0134, the code will be deleted on December 31, 2011, and 
replaced with new CPT codes effective January 1, 2012. As listed in 
Table 29, the replacement codes for CPT code 15430 have been 
crosswalked to APC 0135 based on the code descriptor.
    Comment: One commenter recommended that CMS provide proper notice 
and comment before deleting HCPCS codes from the system. The commenter 
indicated that, in the case of HCPCS code Q4109 (Tissuemend, per square 
centimeter), the public should be provided adequate notice before the 
code is deleted with an explanation for its deletion. This same 
commenter requested that CMS temporarily reassign HCPCS code Q4109 to 
status indicator ``K'' (Nonpass-Through Drugs and Nonimplantable 
Biologicals, Including Therapeutic Radiopharmaceuticals) for CY 2012.
    Response: HCPCS code Q4109 was deleted on December 31, 2010. We are 
not considering a status indicator reassignment for this code because 
the HCPCS code is no longer active. This HCPCS code was assigned to 
status indicator ``D'' (Discontinued Codes) in Addendum B of the CY 
2011 OPPS/ASC final rule with comment period. Every

[[Page 74276]]

year hundreds of new codes are created, revised, and deleted as part of 
the annual HCPCS cycle. In its role as the Level II Alphanumeric HCPCS 
code set maintainer, the CMS HCPCS Workgroup identifies redundancies 
across the HCPCS Level II national code set which reduces opportunities 
for duplicate billing. Because we are not aware of all the coding 
changes for the upcoming year when we publish our proposed rules, we do 
not address the coding changes in the proposed rule. Any interested 
party that disagrees with the coding actions for the Level II 
Alphanumeric HCPCS codes is welcome to submit a request to CMS to 
review the matter by submitting an application using CMS' standard 
procedures. The application will be considered as part of CMS' standard 
code review process, including an opportunity for public comment in 
reaction to a published preliminary HCPCS coding decision. The 
application can be downloaded from this CMS Web site: https://www.cms.gov/MedHCPCSGenInfo/01a_Application_Form_and_Instructions.asp#TopOfPage.
b. Nasal Sinus Endoscopy (APC 0075)
    For CY 2012, we proposed to assign CPT codes 31295 (Nasal/sinus 
endoscopy, surgical; with dilation of maxillary sinus ostium (e.g., 
balloon dilation), transnasal or via canine fossa), 31296 (Nasal/sinus 
endoscopy, surgical; with dilation of frontal sinus ostium (e.g., 
balloon dilation), and 31297 (Nasal/sinus endoscopy, surgical; with 
dilation of sphenoid sinus ostium (e.g., balloon dilation) to APC 0075 
(Level V Endoscopy Upper Airway).
    Comment: One commenter on the CY 2012 OPPS/ASC proposed rule 
objected to the assignment of CPT codes 31295, 31296, and 31297 to APC 
0075 because the commenter believed that the payment rate for APC 0075 
substantially underpays providers. Commenters on the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 71800) relating to 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 addressed the same issue. The commenters suggested that instead 
of assigning CPT codes 31295, 31296, and 31297 to APC 0075, CMS create 
a new device-dependent APC for these three CPT codes. Or, if CMS does 
not decide to create a new device-dependent APC, the commenters 
suggested that the three CPT codes should instead be assigned to one of 
four alternative APCs. The commenters believed that assigning these 
codes to APCs 0056 (Level II Foot Musculoskeletal Procedures), 0083 
(Level I Endovascular Revascularization of the Lower Extremity), or 
0114 (Thyroid/Lymphadenectomy Procedures) would be justified because 
the payment rates for these APCs more closely reflect the costs 
associated with CPT codes 31295, 31296, and 31297. Commenters also 
suggested that another option would be to assign these CPTs to the new 
technology APC 1525 (New Technology--Level XXV ($3500-$4000)) until 
more claims data are accumulated and an appropriate clinical APC can be 
assigned.
    Response: We do not agree that CPT codes 31295, 31296, and 31297 
should be assigned to a new device-dependent APC. When assigning 
procedures to an APC, we first consider the clinical and resource 
characteristics of a procedure and determine the most appropriate APC 
assignment. We believe that the most clinically appropriate APC is APC 
0075, which includes other nasal and sinus endoscopy procedures. The 
APCs suggested by the commenters (APCs 0056, 0083, and 0114) are 
clinically unrelated to the procedures described by CPT codes 31295, 
31296, and 31297. Regarding the resource costs of the procedures in 
question, the commenters asserted costs of approximately $4,000 for 
these procedures, which are currently assigned to the highest paying 
clinically appropriate APC (APC 0075), which is level 5 out of 5 levels 
of APCs for ``endoscopy upper airway.'' The highest median cost of all 
of the procedures assigned to APC 0075 is approximately $4,000. 
Therefore, even the non-claims data-based cost estimate for these 
procedures offered by the commenters is within the approximate range 
(although on the high end of the range) of median costs for procedures 
assigned to APC 0075. Therefore, we believe that, until we have claims 
data to better inform an APC assignment, the current APC assignment is 
the most appropriate. We have no further information at this time that 
indicates that a device-dependent APC, the assignment of status 
indicator ``S'' instead of status indicator ``T,'' or a new technology 
APC would be more appropriate at this time. Once OPPS claims data are 
available for these procedures, we will reevaluate their APC 
assignments, as we do for all procedures on an ongoing and annual 
basis.
c. Bioimpedance Spectroscopy (APC 0097)
    CPT code 0239T (Bioimpedance spectroscopy (BIS), measuring 100 
frequencies or greater, direct measurement of extracellular fluid 
differences between the limbs) was effective January 1, 2011. In 
accordance with our standard policy, we assessed the properties of the 
service as CPT code 0239T was defined by the AMA's CPT Editorial Board. 
We assigned it to the APC that we believed to have the most similar 
clinical characteristics and resource requirements. In the case of CPT 
code 0239T, we assigned bioimpedance spectroscopy to APC 0099 
(Electrocardiogram/Cardiography). For CY 2012, we proposed to continue 
to assign CPT code 0239T, for which we had no claims data on which to 
calculate a median cost, to APC 0099 for CY 2012. We proposed a median 
cost of approximately $28 for APC 0099.
    Comment: One commenter objected to the proposed assignment of CPT 
code 0239T to APC 0099 for CY 2012 on the basis that the proposed 
payment rate for APC 0099 would be inadequate to pay hospitals' costs 
and, therefore, would jeopardize beneficiary access to the service. The 
commenter stated that BIS is a method to aid surgeons and oncologists 
in the pre-surgical assessment and post-operative monitoring of 
unilateral lymphedema of the arm. The commenter also stated that BIS is 
an aid for therapists to assess and monitor the measurement of extra 
cellular fluid volume differences between the arms during the treatment 
phase for early stage lymphedema. The commenter stated that BIS is not 
a diagnostic test but rather an aid to the physician in the clinical 
assessment of the patient because the results require interpretation by 
the physician and review of previous results for clinical relevance.
    The commenter asked that CMS reassign CPT code 0239T from APC 0099 
to APC 0096 (Level II Noninvasive Physiologic Studies). The commenter 
stated that CPT code 239T is not similar to 93701 (Bioimpedance-derived 
physiologic cardiovascular analysis), which the commenter assumed was 
the CMS rationale for also placing 0239T into APC 0099. Instead the 
commenter indicated that CPT code 239T is more similar in resource 
time, for which the commenter stated that physician time is a proxy to 
CPT code 93924 (Noninvasive physiologic studies of lower extremity 
arteries, at rest and following treadmill stress testing, (i.e., 
bidirectional Doppler waveform or volume plethysmography recording and 
analysis at rest with ankle/brachial indices immediately after and at 
timed intervals following performance of a standardized protocol on a 
motorized treadmill plus recording of time of onset of claudication or 
other symptoms, maximal walking time, and time to

[[Page 74277]]

recovery) complete bilateral study). The commenter stated that the work 
description for CPT code 93924 of setting the patient up, taking 
diagnostic measurements, and analyzing and interpreting the records is 
similar to the work involved for CPT code 0239T and, therefore, CPT 
code 0239T should be assigned to APC 0096 rather than to APC 0099. The 
commenter also stated that the resource time for CPT code 0239T is 
similar to the resource time, using physician time as a proxy, for CPT 
code 99214 (Office or other outpatient visit for the evaluation and 
management of an established patient, which requires at least 2 of 
these 3 key components: A detailed history; A detailed examination; 
Medical decision making of moderate complexity). The commenter believed 
that because CPT code 99214 is assigned to APC 0606, which has a median 
cost of approximately $99, CPT code 0239T should be assigned to an APC 
with a comparable payment rate. In addition, the commenter stated that 
the proposed payment for APC 0099 is not adequate to compensate 
hospitals for what the commenter indicated are the cost of the 
necessary machine (approximately $27,000) and supplies (approximately 
$50 per unit). The commenter stated that compensation under APC 0099 
would not be adequate and without adequate compensation, hospitals 
would not provide the service.
    Response: We have no CY 2010 claims data for the service reported 
by CPT code 239T because the CPT code is new for CY 2011. Therefore, 
under our longstanding policy, we assigned the new code to the APC that 
we believed to be most similar clinically and with regard to 
homogeneity of hospital resources. Specifically, we assigned HCPCS code 
0239T to APC 0099 for CY 2011, and we proposed to continue that 
assignment for CY 2012. We disagree with the commenter that BIS is not 
a diagnostic service because the service is used for the diagnosis of a 
clinical condition. However, after examination of the information 
furnished by the commenter, we agree with the commenter that CPT code 
0239T appears to be somewhat dissimilar in resource utilization to the 
services assigned to APC 0099. However, we do not agree with the 
commenters that CPT code 0239T should be assigned to APC 0096 because 
we do not believe that CPT code 0239T rises to the same level of 
complexity as codes that are assigned to APC 0096. For example, we 
believe that CPT code 93924, to which the commenters compared CPT code 
239T, reports a service that is more complex clinically and more costly 
to hospitals than the service reported by CPT code 0239T. Similarly, we 
believe that there is neither clinical similarity nor similarity of 
hospital resources between the services reported by CPT code 0239T, 
which is used to diagnose lymphedema and CPT code 99214, which is an 
established patient outpatient visit.
    Although we do not believe that CPT code 0239T should be assigned 
to APC 0096, we believe that CPT code 0239T is sufficiently more 
complex than the services that are assigned to APC 0099 that it would 
be more appropriately placed in APC 0097, based on its clinical 
homogeneity and resource similarity to other procedures in APC 0097. 
For example, we believe that CPT code 0239T is more similar to CPT code 
93922 (Limited bilateral noninvasive physiologic studies of upper or 
lower extremity arteries, (eg, for lower extremity: ankle/brachial 
indices at distal posterior tibial and anterior tibial/dorsalis pedis 
arteries plus bidirectional, Doppler waveform recording and analysis at 
1-2 levels, or ankle/brachial indices at distal posterior tibial and 
anterior tibial/dorsalis pedis arteries plus volume plethysmography at 
1-2 levels, or ankle/brachial indices at distal posterior tibial and 
anterior tibial/dorsalis pedis arteries with transcutaneous oxygen 
tension measurements at 1-2 levels)), which is assigned to APC 0097, 
both clinically and in resource requirements, than to CPT code 93924. 
Therefore, we are reassigning CPT code 0239T from APC 0099 to APC 0097, 
which has a final median cost of approximately $65 for CY 2012. We will 
reassess the APC placement for CPT code 0239T when we have claims data 
for services furnished on and after January 1, 2011, the effective date 
for CPT code 0239T.
d. Autologous Blood Salvage (APC 0345)
    For CY 2012, we proposed to assign CPT code 86891 (Autologous blood 
or component, collection processing and storage; intra- or 
postoperative salvage) to APC 0345 (Level I Transfusion Laboratory 
Procedures).
    Comment: One commenter objected to the assignment of CPT code 86891 
to APC 0345 because the commenter believed that the payment rate for 
APC 0345 underpays providers. The commenter stated that the reason for 
the inappropriately low payment is that CPT 86891 would never appear on 
a single procedure claim. The commenter suggested that this service 
should be further analyzed and a more appropriate payment level 
established based upon analysis using external data. The commenter 
further stated that the current way in which the groupings and payment 
levels for services under APCs are calculated does not appropriately 
address the autologous blood salvage service performed at hospitals.
    Response: The calculated median cost for CPT code 86891 based on 
2010 claims data for this final rule with comment period is 
approximately $21 based on 124 single procedure claims out of 332 total 
claims. The calculated median cost of approximately $21 for CPT code 
86891 is within the range of the median costs of the other procedures 
assigned to APC 0345, and there is no violation of the 2 times rule. 
Therefore, assignment of CPT code 86891 to APC 0345 satisfies the APC 
assignment requirements of clinical and resource homogeneity. We do not 
agree that additional analysis of external data is necessary. We set 
the payment rates for APCs using our standard OPPS methodology based on 
relative costs from hospital outpatient claims and the most recent cost 
report data that are available. We have no reason to believe that our 
claims and cost report data, as reported by hospitals, do not 
accurately reflect hospitals' costs of the services assigned to APC 
0345, including the service described by CPT code 86891. Furthermore, 
as the service described by CPT code 86891 is a transfusion laboratory 
procedure, this service is appropriately assigned to APC 0345, which is 
titled ``Level I Transfusion Laboratory Procedures'' and includes other 
transfusion laboratory procedures. Therefore, we are finalizing our 
proposal to assign CPT code 86891 to APC 0345 for CY 2012, which has a 
final rule median cost of approximately $15 for CY 2012.

IV. OPPS Payment for Devices

A. 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

[[Page 74278]]

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 are three new device categories eligible for pass-
through payment. These device categories are 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); and 
HCPCS codes C1830 (Powered bone marrow biopsy needle), and C1840 (Lens, 
intraocular (telescopic)), which were made effective for pass-through 
payment October 1, 2011, and announced in Transmittal 2296, Change 
Request 7545, dated September 2, 2011. 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. 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, in the CY 2012 OPPS/ASC proposed rule 
(76 FR 42242), we proposed 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. We will propose 
expiration dates for pass-through payment for device categories C1830 
and C1840 in a future rulemaking.
    Comment: Two commenters indicated that there was only one currently 
approved device for pass-through payment, noting that in the CY 2012 
OPPS/ASC proposed rule, we stated that there was only one device 
category eligible for pass-through payment for CY 2012. These 
commenters opined that there has been a decrease in the number of 
categories eligible for pass-through payment over the past several 
years, and encouraged CMS to approve additional device categories for 
technologies that meet the criteria for pass-through payments. One 
commenter recommended that CMS reevaluate the criteria and approval 
process for device category pass-through eligibility. The commenter 
also recommended that CMS annually publish a list of all pass-through 
applications filed with CMS, along with CMS' determinations and 
rationale for the resulting decisions.
    Response: As indicated, we currently have three device categories 
eligible for pass-through payment, rather than one category as stated 
in the CY 2012 proposed rule, and we believe this shows that we have a 
robust device pass-through evaluation and approval process. The number 
of device pass-through categories eligible for payment will always 
vary, and we believe that the number of active device pass-through 
categories eligible for pass-through payment at any time is a function 
of the quality of applications under consideration, that is, whether 
they fully meet the device pass-through criteria, rather than a 
function of our criteria and approval process, which we believe to be 
appropriate. As we stated in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71922), we will take the recommendation to 
publish a list of all pass-through applications filed with us under 
advisement as we consider our device pass-through criteria and process 
in the future.
    After consideration of the public comments we received, we are 
finalizing our proposal of an expiration date for pass-through payment 
for device category C1749 of December 31, 2012. Therefore, beginning 
January 1, 2013, device category C1749 will no longer be eligible for 
pass-through payments. We remind the public that as of January 1, 2013, 
device category C1749 will still be active for the billing and 
reporting of devices and their charges along with the HCPCS codes of 
the procedures with which they are used. When billing for procedures 
utilizing devices that have active device codes, hospitals are required 
to report the codes for the devices on their claims for the procedure.
2. Provisions for Reducing Transitional Pass-Through Payments to Offset 
Costs Packaged Into APC Groups
a. Background
    We have an established policy to estimate the portion of each APC 
payment rate that could reasonably be attributed to the cost of the 
associated devices that are eligible for pass-through payments (66 FR 
59904). We deduct from the pass-through payments for identified device 
categories eligible for pass-through payments an amount that reflects 
the portion of the APC payment amount that we determine is associated 
with the cost of the device, defined as the device APC offset amount, 
as required by section 1833(t)(6)(D)(ii) of the Act. We have 
consistently employed an established methodology to estimate the 
portion of each APC payment rate that could reasonably be attributed to 
the cost of an associated device eligible for pass-through payment, 
using claims data from the period used for the most recent 
recalibration of the APC rates (72 FR 66751 through 66752). We 
establish and update the applicable device APC offset amounts for 
eligible pass-through device categories through the transmittals that 
implement the quarterly OPPS updates.
    We publish 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

[[Page 74279]]

(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 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. CY 2012 Policy
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42243), we proposed 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 proposed 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 proposed to continue to review each 
new device category on a case-by-case basis to determine whether device 
costs associated with the new category are already packaged into the 
existing APC structure. If device costs packaged into the existing APC 
structure are associated with the new category, we proposed to deduct 
the device APC offset amount from the pass-through payment for the 
device category. As stated earlier, these device APC offset amounts 
also would be used in order to evaluate whether the cost of a device in 
an application for a new device category for pass-through payment is 
not insignificant in relation to the APC payment amount for the service 
related to the category of devices (Sec.  419.66(d)).
    For CY 2012, we also proposed to continue our policy established in 
CY 2010 to include implantable biologicals in our calculation of the 
device APC offset amounts. In addition, we proposed 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 proposed 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 proposed 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.
    Comment: Several commenters recommended that all biological 
therapies, including implantable biologicals that are approved by the 
FDA under biological license applications (BLAs), be treated as drugs 
for pass-through payment status for CY 2012. The commenters claimed 
that Congress intended that all biologicals approved by the FDA under a 
BLA be paid under the current SCOD payment system, including according 
to the drug pass-through provisions. Another commenter requested that 
CMS clarify its policy to state that the device pass-through criteria 
apply only to biologicals with an FDA approved indication or 
indications that are only surgically implanted. This commenter believed 
that the current regulation is unclear regarding how CMS would evaluate 
pass-through eligibility of a biological that has indications in which 
the biological is surgically implanted for one indication and 
nonimplantable for another indication. The commenter recommended that 
CMS revise the regulations text at 42 CFR 419.64(a)(4) so that if 
refers to ``a biological that is not always surgically implanted into 
the body.''
    Response: As stated in the CY 2010 OPPS/ASC final rule with comment 
period and reiterated in the CY 2011 OPPS/ASC final rule with comment 
period, we evaluate implantable biologicals that function as, and are 
substitutes for, implantable devices for OPPS payment purposes. This is 
done

[[Page 74280]]

regardless of their FDA approval route, the intent of which is to 
ensure their safety and effectiveness through appropriate scientific 
review (74 FR 60476; 75 FR 71924).
    We do not agree with the commenters who asserted that Congress 
intended biologicals approved under BLAs to be paid under the statutory 
provisions that apply to SCODs, including the pass-through provisions. 
Moreover, as we stated in the CY 2010 and CY 2011 OPPS/ASC final rules 
with comment period, Congress did not specify in the statute that we 
must pay for implantable biologicals as biologicals rather than 
devices, if these products that function as medical devices also meet 
our criteria for payment as devices (74 FR 60476; 75 FR 71924). We 
continue to believe that implantable biologicals are devices for the 
purposes of OPPS payment, and therefore that it is appropriate for us 
to treat implantable biologicals as implantable devices and not as 
nonimplantable biologicals.
    We appreciate the commenter's request that we clarify our meaning 
of the regulation text at 42 CFR 419.64(a)(4)(iii), which states that a 
biological for pass-through status purposes must meet the following 
condition (among others): ``biological that is not surgically implanted 
or inserted into the body.'' By this regulatory language, we mean to 
exclude from consideration for drug and biological pass-through status 
any biological that has an indication such that it may function as a 
surgically implanted or inserted biological, even if there are also 
other indications in which the biological is not surgically implanted 
or inserted.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue the 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) and that are newly approved for pass-through status on or 
after January 1, 2010, be the device pass-through process and payment 
methodology only. We also are finalizing our other proposals, without 
modification, to continue the following policies regarding device 
offsets: (1) Including implantable biologicals in calculating the 
device APC offset amounts; (2) 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 (3) 
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. 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 final rule with comment 
period, as we proposed, we are continuing 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 cost or with full credit, the hospital is instructed to report 
a token device charge of less than $1.01. In cases in which the device 
being inserted is an upgrade (either of the same type of device or to a 
different type of device) with a full credit for the device being 
replaced, the hospital is instructed to report as the device charge the 
difference between its usual charge for the device being implanted and 
its usual charge for the device for which it received full credit. In 
CY 2008, we expanded this payment adjustment policy to include cases in 
which hospitals receive partial credit of 50 percent or more of the 
cost of a specified device. Hospitals are instructed to append the 
``FC'' modifier to the procedure code that reports the service provided 
to furnish the device when they receive a partial credit of 50 percent 
or more of the cost of the new device.
    We reduce the OPPS payment for the implantation procedure by 100 
percent of the device offset for no cost/full credit cases when both a 
specified device code is present on the claim and the procedure code 
maps to a specified APC. Payment for the implantation procedure is 
reduced by 50 percent of the device offset for partial credit cases 
when both a specified device code is present on the claim and the 
procedure code maps to a specified APC. Beneficiary copayment is based 
on the reduced payment amount when either the ``FB'' or the ``FC'' 
modifier is billed and the procedure and device codes appear on the 
lists of procedures and devices to which this policy applies. We refer 
readers to the CY 2008 OPPS/ASC final rule with comment period for more 
background information on the ``FB'' and ``FC'' payment adjustment 
policies (72 FR 66743 through 66749).
2. APCs and Devices Subject to the Adjustment Policy
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42244 through 42245), 
we proposed for CY 2012 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 stated in the CY 
2012 OPPS/ASC proposed rule (76 FR 42244) that we continue to believe 
it is appropriate to reduce the APC payment in cases in which the 
hospital receives a device without cost, with full credit, or with 
partial credit, in order to provide equitable payment in these cases. 
(We refer readers to section II.A.2.d.(1) of this final rule with 
comment period for a description of our standard ratesetting 
methodology for device-dependent APCs.) Moreover, the payment for these 
devices comprises a

[[Page 74281]]

large part of the APC payment on which the beneficiary copayment is 
based, and we continue to believe it is equitable that the beneficiary 
cost sharing reflects the reduced costs in these cases.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42244), we also 
proposed to continue using the three criteria established in the CY 
2007 OPPS/ASC final rule with comment period for determining the APCs 
to which this policy applies (71 FR 68072 through 68077). Specifically: 
(1) All procedures assigned to the selected APCs must involve 
implantable devices that would be reported if device insertion 
procedures were performed; (2) the required devices must be surgically 
inserted or implanted devices that remain in the patient's body after 
the conclusion of the procedure (at least temporarily); and (3) the 
device offset amount must be significant, which, for purposes of this 
policy, is defined as exceeding 40 percent of the APC cost. We also 
proposed to continue to restrict the devices to which the APC payment 
adjustment would apply to a specific set of costly devices to ensure 
that the adjustment would not be triggered by the implantation of an 
inexpensive device whose cost would not constitute a significant 
proportion of the total payment rate for an APC. We stated in the CY 
2012 OPPS/ASC proposed rule (76 FR 42244) that we continue to believe 
these criteria are appropriate because free devices and device credits 
are likely to be associated with particular cases only when the device 
must be reported on the claim and is of a type that is implanted and 
remains in the body when the beneficiary leaves the hospital. We 
believe that the reduction in payment is appropriate only when the cost 
of the device is a significant part of the total cost of the APC into 
which the device cost is packaged, and that the 40-percent threshold is 
a reasonable definition of a significant cost.
    As indicated in the CY 2012 OPPS/ASC proposed rule (76 FR 42244 
through 42245), 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 the proposed rule, we 
did not propose any changes to the APCs and devices to which this 
policy applies. However, as discussed in section II.A.2.e.(6) of the 
proposed rule, we proposed to delete APC 0418 (Insertion of Left 
Ventricular Pacing Electrode) for CY 2012 and, therefore, proposed 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 of the CY 2012 OPPS/ASC proposed rule (76 FR 42245) listed 
the proposed APCs to which the payment adjustment policy for no cost/
full credit and partial credit devices would apply in CY 2012 and 
displayed the proposed payment adjustment percentages for both no cost/
full credit and partial credit circumstances. We proposed 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 already packaged into the APC). We also proposed 
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 of the CY 2012 OPPS/ASC proposed rule (76 FR 42245) listed the 
proposed devices to which the payment adjustment policy for no cost/
full credit and partial credit devices would apply in CY 2012. We 
stated in the CY 2012 proposed rule (76 FR 42244) that we would update 
the lists of APCs and devices to which the no cost/full credit and 
partial credit device adjustment policy would apply for CY 2012, 
consistent with the three criteria discussed earlier in this section, 
based on the final CY 2010 claims data available for the CY 2012 OPPS/
ASC final rule with comment period.
    Comment: One commenter asserted that the proposed full offset 
amount of 60 percent and proposed partial offset amount of 30 percent 
for APC 0425 is not supported by real world cost data. The commenter 
suggested that, based on its data on resource costs for the devices 
used in the procedures assigned to APC 0425, the full offset amount for 
this APC should be no greater than 40 percent. The commenter argued 
that a 60-percent offset would result in significant financial hardship 
to certain facilities and possibly lead to diminishing patient access 
to critical devices.
    Response: We do not agree with the commenter that the CY 2012 
proposed device offset percentage for APC 0425 is inaccurate. As we 
described in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71926), the device cost is estimated from the device HCPCS codes 
present on hospital claims and charges in the lines for four specific 
revenue codes: 275 (Medical/Surgical Supplies: Pacemaker); 276 
(Medical/Surgical Supplies: Intraocular lens); 278 (Medical/Surgical 
Supplies: Other implants); and 624 (Medical/Surgical Supplies: FDA 
investigational devices). The commenter did not provide the ``real 
world cost data'' upon which it based its assertion that the full 
offset amount for APC 0425 should be no greater than 40 percent. 
Therefore, we do not know why there would be a discrepancy between that 
estimate and our estimated device offset percentage of approximately 60 
percent stated in the proposed rule that was based on actual hospital 
cost as calculated from hospital claims as described above. We have no 
reason to believe that this device offset percentage does not 
accurately reflect the percent of cost attributable to devices in APC 
0425. Therefore, we do not agree that it is necessary to limit the 
device offset percentage for no cost/full credit cases for APC 0425 to 
40 percent, as the commenter suggested.
    Comment: One commenter asked for clarification of CMS' policy for 
instances when a device upgrade occurs and the original device is 
refunded at full cost and the upgraded device is charged at full cost. 
According to the commenter, the new device is often more expensive than 
the original device, thus yielding additional device acquisition costs. 
The commenter believes that the ``FC'' modifier should be used in this 
situation.
    Response: As stated in the Medicare Claims Processing Manual (Pub. 
100-04, Chapter 4, Section 61.3.2), when a hospital replaces a device 
with a more expensive device and receives a credit in the amount that 
the device being replaced would otherwise cost, the hospital must 
append modifier ``-FB'' to the procedure code (not on the device code) 
that reports the service provided to replace the device. The hospital 
must charge the difference between its usual charge for the device 
being implanted and its usual charge for the device for which it 
received credit. This charge should be billed in the covered charge 
field. As we stated in the CY 2009 OPPS final rule with comment period 
(73 FR 68630), we do not agree that we need to modify the no cost/full 
credit and partial credit device adjustment policy to account for the 
cost of more expensive replacement devices when manufacturers provide 
device upgrades. We continue to believe that making the full APC 
payment would result in significant overpayment because, as described 
above, we use only those claims that reflect the full costs of devices 
in ratesetting for device-

[[Page 74282]]

dependent APCs. In cases where a hospital incurs a cost for a device 
upgrade, the difference between the cost of the replacement device and 
the full credit the hospital receives for the device being replaced 
would likely be much less than the full cost of the device that is 
included in the device-dependent APC payment rate. To provide the full 
APC payment in these cases would favor a device upgrade, rather than 
replacement with a comparable device, in warranty or recall cases where 
the surgical procedure to replace the device is only medically 
necessary because of the original defective device, for which the 
manufacturer bears responsibility. Moreover, we also are concerned that 
a new policy to apply a smaller APC payment percentage reduction in an 
upgrade case, if we were eventually able to estimate such a percentage 
from sufficient claims data, could also favor device upgrades, rather 
than replacement with a comparable device in those situations for which 
the upgrade is only being provided because the old model failed (and 
for which the manufacturer provides a full credit) but is no longer 
available for use in the replacement procedure. We recognize that, in 
some cases, the estimated device cost and, therefore, the amount of the 
payment reduction will be more or less than the cost a hospital would 
otherwise incur for a no cost/full credit device. However, because 
averaging is inherent in a prospective payment system, we do not 
believe this is inappropriate. Therefore, we continue to believe that 
the full device offset reduction should be made when hospitals receive 
full credit for the cost of a replaced device against the cost of a 
more expensive replacement device.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 proposals, without modification, to continue the 
established no cost/full credit and partial credit adjustment policies.
    Table 30 below lists the APCs to which the payment adjustment 
policy for no cost/full credit and partial credit devices will apply in 
CY 2012 and displays the final payment adjustment percentages for both 
no cost/full credit and partial credit circumstances. Table 31 below 
lists the devices to which no cost/full credit and partial credit 
device adjustment policy will 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 this final rule with 
comment period. For CY 2012, OPPS payments for implantation procedures 
to which the ``FB'' modifier is appended are reduced by 100 percent of 
the device offset for no cost/full credit cases when both a device code 
listed in Table 31 below, is present on the claim, and the procedure 
code maps to an APC listed in Table 30 below. OPPS payments for 
implantation procedures to which the ``FC'' modifier is appended are 
reduced by 50 percent of the device offset when both a device code 
listed in Table 31 is present on the claim and the procedure code maps 
to an APC listed in Table 30. 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.
    We note that, as discussed in section II.A.2.e.(6) of this final 
rule with comment period, we are finalizing our proposal to delete APC 
0418 for CY 2012 and, therefore, will remove this APC from the list of 
APCs to which the no cost/full credit and partial credit device 
adjustment policy will apply in CY 2012.
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V. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and 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 were assigned status indicator ``G'' in 
Addenda A and B to the proposed rule, which are referenced in section 
XVII. of the proposed rule and this final rule with comment period 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 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 final rule with comment period, 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 final rule with 
comment period, the term ``ASP methodology'' and ``ASP-based'' are 
inclusive of all data sources and methodologies described therein. 
Additional information on the ASP methodology can be found on the CMS 
Web site at: http://www.cms.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 OPPS pass-through payment estimate for drugs and 
biologicals in CY 2012 is $19 million, which is discussed in section 
VI.B. of this final rule with comment period.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/04_passthrough_payment.asp.
2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2011
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42246 through 42247), 
we proposed that the pass-through status of 19 drugs and biologicals 
would expire on December 31, 2011, as listed in Table 26 of the 
proposed rule (76 FR 42246 through 42247). 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 $75), as discussed further in section V.B.2. of 
this final rule with comment period. If the drug's or biological's 
estimated per day cost is less than or equal to the applicable OPPS 
drug packaging threshold, we would package payment for the drug or 
biological into the payment for the associated procedure in the 
upcoming calendar year. If the estimated per day cost of the drug or 
biological is greater than the OPPS drug packaging threshold, we would 
provide

[[Page 74287]]

separate payment at the applicable relative ASP-based payment amount 
(which is ASP+4 percent for CY 2012, as discussed further in section 
V.B.3. of this final rule with comment period). Section V.B.2.d. of 
this final rule with comment period discusses the packaging of all 
nonpass-through contrast agents, diagnostic radiopharmaceuticals, and 
implantable biologicals.
    Comment: A number of commenters requested that CMS continue pass-
through payments for a third year for certain drugs that, as of 
December 31, 2011, will have received pass-through payments for at 
least 2 years and no more than 3 years and which CMS proposed to remove 
from pass-through status in Table 26 of the CY 2012 OPPS/ASC proposed 
rule (76 CR 42246). Several commenters stated that the volume for 
products for which CMS proposed to expire pass-through status had been 
low for some portion of the pass-through period, and asserted that a 
third year of pass-through would permit CMS to collect more accurate 
and complete cost data on the products. Other commenters stated that 
the costs associated with certain drugs for which CMS proposed to 
expire pass-through status are high, so packaging the product in an APC 
is ``not appropriate.'' Several commenters urged CMS to adopt a 3-year 
pass-through period for all eligible products. One commenter requested 
that CMS grant an additional year of pass-through payments for the 
product described by HCPCS code C9248 (Injection, clevidipine butyrate, 
1 mg) that was removed from the pass-through list on December 31, 2010, 
because the product had been subject to a 10-month long voluntary 
manufacturer's recall during its pass-through period.
    Response: As described in section V.A.1 of this final rule with 
comment period, section 1833(t)(6)(C)(i)(II) of the Act permits CMS to 
make pass-through payments 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. We believe this period of 
payment facilitates dissemination of these new products into clinical 
practice and for the collection of hospital claims data reflective of 
their costs for future OPPS ratesetting. Our longstanding practice has 
been to provide pass-through payment for a period of 2 to 3 years, with 
expiration of pass-through status proposed and finalized through the 
annual rulemaking process. Each year, when proposing to expire the 
pass-through status of certain drugs and biologicals, we examine our 
claims data for these products. We observe that hospitals typically 
have incorporated these products into their chargemasters based on the 
utilization and costs observed in our claims data. Under the existing 
pass-through policy, which has been generally supported by commenters, 
we begin pass-through payment on a quarterly basis that depends on when 
applications are submitted to us for consideration and, because we 
expire pass-through status only on an annual basis, there is no way to 
ensure that all pass-through drugs and biologicals receive pass-through 
payment for a full 3 years, while also providing pass-through payment 
for no more than 3 years as the statute requires. Further, based on our 
review of available data, we are confident that the period of time for 
which the products listed in Table 26 of the CY 2012 OPPS proposed rule 
(76 CR 42246) received pass-through payments is adequate for CMS to 
collect sufficient data to make a packaging determination and/or an APC 
assignment in CY 2012. We further note that, consistent with the Act, 
each of these products has received pass-through status for at least 2 
years, but not more than 3 years. As noted in section V.A.1. of this 
final rule with comment period, when a product's pass-through status 
expires, it is either packaged by CMS into an APC if it is either a 
relatively low-cost product that does not exceed the packaging 
threshold or is ``policy packaged'', or, if it is a relatively high-
cost product, it is paid separately on the basis of the product's ASP 
(we refer readers to section V.B.3. of this final rule with comment 
period for more details regarding our payment policy for separately 
payable drugs). Because our policies for drugs with expiring pass-
through status recognize products' relative costliness and establish 
either separate or bundled payment as appropriate, based on such 
costliness, we disagree with commenters that certain relatively high 
cost products currently receiving pass-through payment would not be 
adequately paid if taken off pass-through, and as a result should 
continue with such status.
    Regarding the request for a third year of pass-through status for 
the product described by HCPCS code C9248 (Injection, clevidipine 
butyrate, 1 mg) which was subject to a 10-month recall during its pass-
through period and for which pass-through status expired on December 
31, 2010, we note that because CMS expires pass through status on an 
annual basis, if CMS were to extend the pass-through period for the 
product through CY 2012, as requested by the commenters, this would 
result in the pass-through period being in excess of 3 years; this 
result is not permitted under the statute.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to expire the pass-
through status of the 19 drugs and biologicals listed in Table 32 
below. Table 32 lists the drugs and biologicals for which pass-through 
status will expire on December 31, 2011, the status indicator, and the 
assigned APC for CY 2012.
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3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Status in CY 2012
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42247 through 42249), 
we proposed 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, were 
listed in Table 27 of the proposed rule (76 FR 42248 through 42249). 
The APCs and HCPCS codes for these drugs and biologicals were assigned 
status indicator ``G'' in Addenda A and B, which are referenced in 
section XVII. of the proposed rule and this final rule with comment 
period 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 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 proposed to pay for pass-
through drugs and biologicals at ASP+6 percent, equivalent to the rate 
these drugs and biologicals would receive in the physician's office 
setting in CY 2012. Therefore, the difference between ASP+6 percent and 
ASP+4 percent that we proposed to pay for nonpass-through separately 
payable drugs under the CY 2012 OPPS 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, the 
difference between ASP+6 percent and the ``policy-packaged'' drug APC 
offset amount for the associated clinical APC in which the drug or 
biological is utilized would be the CY 2012 pass-through payment amount 
for these policy-packaged products.
    We note that we proposed 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 in this final rule with comment period, implantable 
biologicals that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) will be evaluated under the 
device pass-through process and paid according to the device payment 
methodology. 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 final rule with comment 
period.
    In addition, we proposed 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 proposed to provide pass-though 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. We specifically review drugs with pass-through status for CY 
2012 that will change from C-code to permanent J-code for CY 2012. For 
our CY 2012 review, we have determined that HCPCS code J1557 
(Injection, immune globulin (Gammaplex), intravenous, non-lyophilized 
(e.g. liquid), 500 mg) describes the product reported under HCPCS code 
C9270 (Injection, immune globulin (Gammaplex), intravenous, non-
lyophilized (e.g. liquid), 500 mg); HCPCS code J0894 (Injection, 
denosumab, 1 mg) describes the product reported under HCPCS code C9272 
(Injection, denosumab, 1 mg); HCPCS code J0840 (Crotalidae Polyvalent 
Immune Fab (Ovine), 1 vial) describes the product reported under HCPCS 
code C9274 (Crotalidae Polyvalent Immune Fab (Ovine), 1 vial); HCPCS 
code J9043 (Injection, cabazitaxel, 1 mg) describes the product 
reported under HCPCS code C9276 (Injection, cabazitaxel, 1 mg); HCPCS 
code J0221 (Injection, alglucosidase alfa (Lumizyme), 1 mg) describes 
the product reported under HCPCS code C9277 (Injection, alglucosidase 
alfa (Lumizyme), 1 mg); HCPCS code J9179 (Injection, eribulin

[[Page 74290]]

mesylate, 1 mg) describes the product reported under HCPCS code C9270 
(Injection, eribulin mesylate, 1 mg); HCPCS code J2507 (Injection, 
pegloticase, 1 mg) describes the product reported under HCPCS code 
C9281 (Injection, pegloticase, 1 mg); HCPCS code J0712 (Injection, 
ceftaroline fosamil, 10 mg) describes the product reported under HCPCS 
code C9282 (Injection, ceftaroline fosamil, 10 mg); HCPCS code J0131 
(Injection, acetaminophen, 10 mg) describes the product reported under 
HCPCS code C9283 (Injection, acetaminophen, 10 mg); and, HCPCS code 
J9228 (Injection, ipilimumab, 1 mg) describes the product reported 
under HCPCS code C9284 (Injection, ipilimumab, 1 mg).
    In CY 2012, as is consistent with our CY 2011 policy for diagnostic 
and therapeutic radiopharmaceuticals, we proposed 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 proposed 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 proposed 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 proposed to provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP.
    Comment: Many commenters supported CMS' proposal to continue 
providing pass-through payments for drugs, biological, and 
radiopharmaceuticals. One commenter stated that it viewed the provision 
of pass-through payments as a ``temporary solution,'' and asserted that 
the global marketplace for Molybdenum and other medical isotopes could 
make historical payment data an inadequate indicator of costs. One 
commenter recommended that CMS require manufacturers to submit ASP data 
for all therapeutic radiopharmaceuticals currently paid under the OPPS.
    Response: We appreciate the commenters' support for our pass-
through payment policy. Although we acknowledge that pass-through 
payments are, by statute, ``temporary'' (section 1833(t)(6)(C)(i)(II) 
of the Act permits CMS to make pass-through payments only for a period 
of at least 2 years, but not more than 3 years), we disagree with the 
commenter's assertion that historical payment data are an inadequate 
indicator of costs. We permit radiopharmaceutical manufacturers to 
voluntarily submit ASP data to us for therapeutic radiopharmaceuticals, 
and for diagnostic radiopharmaceuticals with pass-through status. These 
data are updated regularly, are as current as possible (the most 
recently available ASP data used for this final rule with comment 
period are from October 2011), and are an important component of 
payment. Therefore, we believe that CMS' use of recent ASP data, 
together with the most recently available cost and claims data, are 
adequately responsive to changes in global prices for Molybdenum and 
other medical isotopes.
    We do not believe, however, that requiring manufacturers to submit 
ASP data for all therapeutic radiopharmaceuticals currently paid under 
the OPPS is appropriate. As we stated in the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60524 through 60525), the challenges 
involved in reporting ASP for a radiopharmaceutical are significant, 
given the variety of manufacturing processes in some cases. Therefore, 
due to the fact that the added administrative burden of direct 
reporting outweighs the expected benefits, and given the relative 
accuracy of hospital claims data regarding such drugs, payment based on 
mean unit cost from historical hospital claims data offers the best 
proxy for average hospital acquisition cost and associated handling 
costs for a radiopharmaceutical in the absence of ASP. If ASP 
information is unavailable for a therapeutic radiopharmaceutical, 
meaning that a manufacturer is not willing or not able to submit ASP 
information, we will provide payment based on the mean unit cost of the 
product that is applicable to payment rates for the year the nonpass-
through therapeutic radiopharmaceutical is administered.
    Comment: Several commenters supported CMS' proposal to provide 
payment at ASP+6 percent for drugs, biologicals, contrast agents, and 
radiopharmaceuticals that are granted pass-through status. One 
commenter approved of the proposal to use the ASP methodology that 
would provide payment based on WAC if ASP information is not available, 
and payment at 95 percent of AWP if WAC information is not available. 
Some commenters requested that CMS provide an additional payment for 
radiopharmaceuticals that are granted pass-through status.
    Response: As discussed above, the statutorily mandated pass-through 
payment for pass-through drugs and biologicals for CY 2012 generally 
equals the amount determined under section 1842(o) of the Act minus the 
portion of the otherwise applicable APC payment that CMS determines is 
associated with the drug or biological. Therefore, the pass-through 
payment is determined by subtracting the otherwise applicable payment 
amount under the OPPS (determined to be ASP+4 percent for CY 2012) from 
the amount determined under section 1842(o) of the Act (ASP+6 percent).
    Regarding the comments that CMS should provide an additional 
payment for radiopharmaceuticals that are granted pass-through status, 
we note that for CY 2012, consistent with our CY 2011 payment policy 
for diagnostic and therapeutic radiopharmaceuticals, we proposed to 
provide payment for both diagnostic and therapeutic 
radiopharmaceuticals with pass-through status based on the ASP 
methodology. As stated above, the ASP methodology, as applied under the 
OPPS, uses several sources of data as a basis for payment, including 
the ASP, WAC if ASP is unavailable, and 95 percent of the 
radiopharmaceutical's most recent AWP if ASP and WAC are unavailable. 
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 
proposed to follow the standard ASP methodology to determine its pass-
through payment rate under the OPPS. We have routinely provided a 
single payment for drugs, biologicals, and radiopharmaceuticals under 
the OPPS to account for the acquisition and pharmacy overhead costs, 
including compounding costs. We continue to believe that a single 
payment is appropriate for diagnostic radiopharmaceuticals with pass-
through status in CY 2012, and that the payment rate of ASP+6 percent 
(or payment based on the ASP methodology) is appropriate to provide 
payment for both the radiopharmaceutical's acquisition cost and any 
associated nuclear medicine handling and compounding costs. We refer 
readers to section V.B.3. of this final rule with comment period for 
further discussion of payment for therapeutic radiopharmaceuticals 
based on ASP information submitted by manufacturers and the CMS Web 
site at:

[[Page 74291]]

http://www.cms.gov/HospitalOutpatientPPS/.
    After consideration of the comments we received, we are finalizing 
our proposal to provide payment for both diagnostic and therapeutic 
radiopharmaceuticals that are granted pass-through status based on the 
ASP methodology. If a diagnostic or therapeutic radiopharmaceutical 
receives pass-through status during CY 2012, we will 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 
will 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 will 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 final rule 
with comment period, over the last 4 years, we implemented a policy 
whereby payment for all nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and implantable biologicals is 
packaged into payment for the associated procedure. In the CY 2012 
OPPS/ASC proposed rule (76 FR 42247 through 42248), we proposed to 
continue the packaging of these items, regardless of their per day 
cost. 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 is described in more detail 
in section IV.A.2. of this final rule with comment period. 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 proposed 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 proposed 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 the proposed rule and this final rule with comment 
period and available via the Internet on the CMS Web site).
    Comment: Several commenters supported the CY 2012 proposal to 
continue to set the associated copayment amounts for pass-through 
diagnostic radiopharmaceuticals, contrast agents, and implantable 
biologicals that would otherwise be packaged if the product did not 
have pass-through status to zero. The commenters noted that this policy 
is consistent with statutory requirements and provides cost-saving 
benefits to beneficiaries.
    Response: We appreciate the commenters' support of our proposal. As 
discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42248), we 
believe that, for drugs and biologicals that are ``policy-packaged,'' 
the copayment for the nonpass-through payment portion of the total OPPS 
payment for this subset of drugs and biologicals is accounted for in 
the copayment for the associated clinical APC in which the drug or 
biological is used. According to section 1833(t)(8)(E) of the Act, the 
amount of copayment associated with pass-through items is equal to the 
amount of copayment that would be applicable if the pass-through 
adjustment was not applied. Therefore, we believe that the copayment 
amount should be zero for drugs and biologicals that are ``policy-
packaged,'' including diagnostic radiopharmaceuticals.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 33 drugs and biologicals that we proposed to continue on pass-
through status for CY 2012 or that have been granted pass-through 
status as of July 2011 were displayed in Table 27 of the proposed rule 
(76 FR 42248 through 42249). 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 separately 
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 was not included in Addenda A 
and B of the proposed rule because these Addenda solely reflect codes 
and prices effective as of the second quarter of CY 2011, or April 
2011. The 38 drugs and biologicals that we are continuing on pass-
through status for CY 2012 or that have been granted pass-through 
status as of January 2012 are displayed in Table 33.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR30NO11.056


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[GRAPHIC] [TIFF OMITTED] TR30NO11.057

BILLING CODE 4120-01-C
4. 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

[[Page 74294]]

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 
proposed to continue to package payment for all nonpass-through 
diagnostic radiopharmaceuticals and contrast agents, as discussed in 
section V.B.2.d. of this final rule with comment period.
b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    As previously noted, radiopharmaceuticals are considered to be 
drugs for OPPS pass-through payment purposes. As described above, 
section 1833(t)(6)(D)(i) of the Act specifies that the transitional 
pass-through payment amount for pass-through drugs and biologicals is 
the difference between the amount paid under section 1842(o) 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 A9584 (Iodine I-123 
ioflupane, diagnostic, per study dose, up to 5 millicuries). This 
product, which is presently referred to using HCPCS code A9584, was 
granted pass-through status using HCPCS code C9406 beginning July 1, 
2011, and we proposed that it 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 final rule with comment period, we 
proposed 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 use 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/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 proposed 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 proposed 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 28 
of the proposed rule (76 FR 42250) would be reduced by the full 
``policy-packaged'' offset amount appropriate for diagnostic 
radiopharmaceuticals. Finally, we also proposed 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.
    Comment: Several commenters supported CMS for continuing to require 
that hospitals append modifier ``FB'' to specified nuclear medicine 
procedures when the diagnostic pharmaceutical is received at no cost/
full credit.
    Response: We appreciate the commenters' support for this proposed 
policy.
    Comment: One commenter recommended that CMS extend modifier ``FB'' 
to all procedures involving nuclear medicine in which all diagnostic 
radiopharmaceuticals are received at no cost or full credit. Further, 
the commenter recommended that CMS consider adopting this policy for 
all contrast-enhanced procedures in which the contrast agent is 
provided at no cost/full credit. The commenter stated that CMS could 
then publish a list of appropriate APCs to which contrast-enhanced 
procedures are assigned in a calendar year, and hospitals would then be 
required to list the ``FB'' modifier with the appropriate APC for the 
contrast-enhanced procedure; payment, according to the commenter, could 
then be reduced by a policy-packaged offset amount for contrast agents. 
As in our policy for reporting of diagnostic radiopharmaceuticals in 
nuclear medicine procedures, the commenter suggested that CMS also 
require hospitals report a token charge of less than $1.01 in cases in 
which the contrast agent is furnished without cost or with full credit. 
The commenter asserted that requiring hospitals to report modifier 
``FB'' for contrast agents received at no cost/full credit would lead 
to more accurate payment and would lead to greater consistency between 
drugs.
    Response: In the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71934 through 71936), we discussed our proposed and finalized 
policy requiring that hospitals append modifier ``FB'' to specified 
nuclear medicine procedures when the diagnostic pharmaceutical is 
received at no cost/full credit. The policy, which was finalized in the 
CY

[[Page 74295]]

2011 final rule with comment period and implemented in CY 2011, was 
prompted by questions from hospitals inquiring how to properly bill for 
diagnostic radiopharmaceuticals obtained free of charge, typically in 
cases when the radiopharmaceutical had been provided to the hospital as 
a free sample. Although we have not received similar billing questions 
from hospitals regarding contrast agents, and have no indications about 
how widespread the practice of a manufacturer is of providing 
``sample'' contrast agents at no cost to a hospital, we agree with the 
commenter that requiring modifier ``FB'' in such circumstances would 
lead to more consistency between drugs and, potentially, to more 
accurate payment. As is the case with diagnostic radiopharmaceuticals, 
CMS also annually posts a proposed and final list of APCs to which a 
contrast offset may be applicable. We could foresee this list being a 
possible element of a future policy establishing a modifier ``FB'' 
reporting policy, policy-packaged offset amount, and token charge 
reporting requirement.
    However, we note that contrast agents are different in some regards 
from diagnostic radiopharmaceuticals. Contrast agents are, in general, 
substantially less costly than diagnostic radiopharmaceuticals and are 
subject to a higher level of competition from generic competitors; this 
combination of lower price and higher potential for generic 
substitution may lead to fewer instances of manufacturers providing 
hospitals with free samples. Furthermore, many radiopharmaceuticals 
have a very limited shelf life, often requiring procurement for a 
specific patient or very narrow window. Contrast agents, on the other 
hand, have longer shelf lives, making it much more likely that 
``wastage'' from a large vial could be used to reduce or eliminate the 
costs for a subsequent patient. Splitting single dose vials can be 
acceptable in certain situations and may create ``free'' contrast agent 
for a patient that does not economically justify an ``FB'' adjustment 
by the hospital. These complexities may reduce the utility of the 
``FB'' modifier for contrast agents.
    Regardless of the differences and similarities between diagnostic 
radiopharmaceutical products, and notwithstanding any possible policy 
merits of treating these two types of products similarly with regards 
to modifier ``FB,'' in the CY 2012 OPPS/ASC proposed rule, we did not 
propose to extend the modifier ``FB'' policy to contrast agents. 
However, we are interested in receiving comments from hospitals, 
manufacturers and other interested parties regarding the possible 
application of modifier ``FB'' to contrast agents when the product is 
received at no cost/full credit to the hospital, the establishment of a 
policy-packaged offset amount for contrast agents, and possible 
reporting of a token charge of less than $1.01 in cases in which the 
contrast agent is furnished without cost/full credit. Although we are 
not accepting the commenter's recommendation that CMS extend the 
modifier ``FB'' policy to contrast agents received at no cost/full 
credit to a hospital because it was not proposed by CMS in CY 2012, we 
anticipate considering these modifications for future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue requiring 
hospitals to append modifier ``FB'' to specified nuclear medicine 
procedures when the diagnostic radiopharmaceutical is received at no 
cost/full credit in CY 2012. In addition, we will continue to reduce 
the payment amount for procedures in the APCs listed in Table 34 in 
this final rule with comment period by the full ``policy-packaged'' 
offset amount appropriate for diagnostic radiopharmaceuticals. Finally, 
we also will 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 
proposed to continue to apply the diagnostic radiopharmaceutical offset 
policy to payment for pass-through diagnostic radiopharmaceuticals.
    Comment: One commenter requested that CMS post all data used to 
calculate the offset amounts and stated that, without these amounts, 
the public cannot make comments on the accuracy and appropriateness of 
CMS' calculation of radiopharmaceutical costs packaged into the nuclear 
medicine APC or the corresponding offset amounts for pass-through 
radiopharmaceuticals.
    Response: The exact data used to calculate all of the proposed and 
final payment rates, including the associated offset amounts, for the 
CY 2012 OPPS are available for purchase under a CMS data use agreement 
through the CMS Web site at: http://www.cms.gov/hospitalOutpatientPPS. 
This Web site 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-CMS 
diagnosis codes and revenue code payment amounts. We typically have not 
posted the offset amounts by APC until publication of the final rule 
because we assign services to APCs based on our estimate of their full 
resource cost, including, but not limited to, packaged diagnostic 
radiopharmaceuticals. The offset amount is 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 and has no 
bearing on APC assignment.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue applying the diagnostic 
radiopharmaceutical offset policy to payment for pass-through 
diagnostic radiopharmaceuticals, as described in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42249 through 42250).
    Table 34 below displays the APCs to which nuclear medicine 
procedures will 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.

[[Page 74296]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.058

c. 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 
was proposed to continue with pass-through status in CY 2012. As 
described in section V.A.3 of the proposed rule, we proposed that 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, in 
the CY 2012 OPPS/ASC proposed rule (76 FR 42250 through 42251), we 
proposed 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 proposed to continue to apply this same policy to 
contrast agents. Specifically, we proposed to utilize the ``policy-
packaged'' drug offset fraction for clinical APCs calculated as 1 minus 
(the cost from single procedure claims in the APC after removing the 
cost for ``policy-packaged'' drugs divided by the cost from single 
procedure claims in the APC). In CY 2010, we finalized a policy

[[Page 74297]]

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 proposed to multiply the ``policy-
packaged'' drug offset fraction by the APC payment amount for the 
procedure with which the pass-through contrast agent is used and, 
accordingly, reduce the separate OPPS payment for the pass-through 
contrast agent by this amount. We proposed to continue to 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 of the proposed rule, 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 did not receive any public comments on our proposal 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. We are finalizing, as proposed, our policy to deduct from the 
payment for pass-through contrast agents an amount that reflects the 
portion of the APC payment for pass-through contrast agents, as 
described in the CY 2012 OPPS/ASC proposed rule (76 FR 42250 through 
42251). We also are finalizing the proposed CY 2012 pass-through 
contrast agent offset policy to specify the procedural APCs to which 
offsets for pass through contrast agents would apply. In addition, as 
we proposed, for this final rule with comment period, procedural APCs 
for which we expect a contrast agent offset could be applicable in the 
case of a pass-through contrast agent have been identified as any 
procedural APC with a ``policy-packaged'' drug amount greater than $20 
that is not a nuclear medicine APC identified in Table 34 above, and 
these APCs are displayed in Table 35 below. The methodology used to 
determine a 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 (74 FR 60483 through 60484). We are finalizing this 
methodology for CY 2012 to continue to recognize that, when a contrast 
agent with pass-through status is billed with any procedural APC listed 
in Table 35, 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.
    As we proposed, for this final rule with comment period, we will 
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 
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 the amounts and percentages of APC payment associated with 
packaged implantable devices, ``policy-packaged'' drugs, and 
``threshold-packaged'' drugs and biologicals for every OPPS clinical 
APC.
    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 
34 above and these APCs are displayed in Table 35 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 proposed to continue to recognize that when a contrast 
agent with pass-through status is billed with any procedural APC listed 
in Table 29 of the proposed rule (76 FR 42251), 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.
    We did not receive any public comments regarding this proposal and, 
therefore, are adopting it for CY 2012 without modification.

[[Page 74298]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.059

B. 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.

[[Page 74299]]

(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 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 final rule with comment period.
2. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Background
    As indicated in section V.B.1. of this final rule with comment 
period, in accordance with section 1833(t)(16)(B) of the Act, the 
threshold for establishing separate APCs for payment of drugs and 
biologicals was set to $50 per administration during CYs 2005 and 2006. 
In CY 2007, we used the 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, in the CY 2012 OPPS/ASC proposed 
rule, we used the most recently available 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 rounded the resulting 
dollar amount ($77.63) to the nearest $5 increment, which yielded a 
figure of $80, which we proposed as the packaging threshold for CY 
2012. 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 
did not propose a change to the PPI that is used to calculate the 
threshold for CY 2012; rather, this change in terminology reflects a 
change to the BLS naming convention for this series.) We refer below to 
this series generally as the PPI for Prescription Drugs.
    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 proposed 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. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Nonimplantable Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42252 through 42253), 
we calculated on a HCPCS code-specific basis 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 in order to determine their proposed CY 2012 packaging status. 
We used data from CY 2010 claims processed before January 1, 2011 for 
this calculation. However, we did not perform this calculation for 
those drugs and biologicals with multiple HCPCS codes that include 
different dosages as described in section V.B.2.c. of this final rule 
with comment period or for diagnostic radiopharmaceuticals, contrast 
agents, and implantable biologicals that we proposed to continue to 
package in CY 2012, as discussed in section V.B.2.d. of this final rule 
with comment period.
    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). For each drug and 
nonimplantable biological HCPCS code, we used an estimated payment rate 
of ASP+4 percent (which is the payment rate we proposed for separately 
payable drugs and nonimplantable biologicals for CY 2012, as discussed 
in more detail in section V.B.3.b. of the proposed rule and this final 
rule with comment period) to calculate the CY 2012 proposed rule per 
day costs. 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.

[[Page 74300]]

    As is our standard methodology, for CY 2012 we proposed 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 the proposed rule (which 
were referenced in section XVII. of the proposed rule and available via 
the Internet) because these are the most recent data available for use 
at the time of development of the proposed rule. These data were also 
the basis for drug payments in the physician's office setting, 
effective April 1, 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 proposed 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 
displayed in Addendum B of the proposed rule (which was referenced in 
section XVII. of the proposed rule and available via the Internet) for 
payment in CY 2012.
    Comment: The majority of commenters objected to the proposed 
increase in the OPPS packaging threshold to $80 for CY 2012. Many 
stated that the $10 increase in the threshold from CY 2011 was larger 
than expected because recent increases in the packaging threshold have 
occurred in $5 increments. Several commenters recommended that CMS 
consider either eliminating the drug packaging threshold and providing 
separate payment for all drugs with HCPCS codes or freezing the 
packaging threshold at $70 for CY 2012. One commenter, in particular, 
suggested that CMS freeze the packaging threshold at $70 for at least 3 
years. Many commenters objected to the use of a packaging threshold 
under the OPPS when one is not used for physician's office payment. 
These commenters expressed concern that the packaging threshold may 
impede beneficiary access to lower cost packaged drugs in the HOPD 
setting. A few commenters suggested that CMS limit increases in the 
packaging threshold amount to the market basket update for the year. 
One commenter also recommended that CMS not round up the threshold 
amount to the nearest $5 increment and, instead, defer increases in the 
threshold until changes in prices exceed $5.
    Some commenters believed that eliminating the packaging threshold 
and paying separately for all drugs in the HOPD setting would allow a 
more accurate calculation of the separately payable payment amount for 
drugs (otherwise referred to as the ASP+X calculation).
    Response: As discussed in detail in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66757 through 66758), the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68643), the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60485 through 60487), and the CY 
2011 final rule with comment period (75 FR 71940 through 71943), we 
continue to believe that unpackaging payment for all drugs, biologicals 
and radiopharmaceuticals is inconsistent with the concept of a 
prospective payment system and that such a change could create an 
additional reporting burden for hospitals. The OPPS and the MPFS that 
applies to physician's services are fundamentally different payment 
systems with essential differences in their payment policies and 
structures. Specifically, the OPPS is a prospective payment system 
based on the concept of payment for groups of services that share 
clinical and resource characteristics. Payment is made under the OPPS 
according to prospectively established payment rates that are related 
to the relative costs of hospital resources for services. When 
physician's services are furnished in an office setting, they are paid 
under the MPFS, which is a fee schedule based on the realative value of 
each component. Under the MPFS, separate payment is made for each 
service provided in the physician's office; when individual drugs are 
furnished in the physician's office, they are generally paid under the 
ASP methodology. In contrast, the OPPS includes various drugs within a 
prospective payment system, where payment for certain drugs is packaged 
into the associated procedure payment for the APC group. Given the 
fundamental differences in the way payment is made in an HOPD and a 
physician's office setting, differences in payment are to be expected.
    In general, we do not believe that our packaging methodology under 
the OPPS results in limited beneficiary access to drugs because 
packaging is a fundamental component of a prospective payment system 
that accounts for the cost of certain items and services in larger 
payment bundles, recognizing that some clinical cases may be more 
costly and others less costly, but that, on average, OPPS payment is 
appropriate for the services provided. The growing utilization 
associated with packaged drugs and biologicals in our claims data 
suggests Medicare beneficiaries have sufficient access to these items.
    We note that, in CYs 2005 and 2006, the statutorily mandated drug 
packaging threshold was set at $50, and we continue to believe that it 
is appropriate to continue a modest drug packaging threshold for the CY 
2012 OPPS for the reasons set forth below. As stated in the CY 2007 
OPPS/ASC final rule with comment period (71 FR 68086), we believe that 
packaging certain items is a fundamental component of a prospective 
payment system, that packaging these items does not lead to beneficiary 
access issues and does not create a problematic site of service 
differential, that the packaging threshold is reasonable based on the 
initial establishment in law of a $50 threshold for the CY 2005 OPPS, 
that updating the $50 threshold is consistent with industry and 
government practices, and that the PPI for Prescription Drugs is an 
appropriate mechanism to gauge Part B drug inflation. Therefore, 
because of our continued belief that packaging is a fundamental 
component of a prospective payment system that continues to provide 
important flexibility and efficiency in the delivery of high quality 
hospital outpatient services, we are not adopting the commenters' 
recommendations to pay separately for all drugs, biologicals, and 
radiopharmaceuticals for CY 2012 or to eliminate or to freeze the 
packaging threshold at $70.
    We disagree with the commenters who suggested that CMS should limit 
increases in the outpatient drug packaging threshold amount to the 
market basket update for the year. As stated above, we continue to 
believe that updating the $50 threshold is consistent with industry and 
government practices and that the PPI for Prescription Drugs is an 
appropriate mechanism to gauge Part B drug inflation. As we stated in 
the CY 2007 OPPS/ASC final rule with comment period (71 FR 68085), we 
believe that the PPI for Prescription Drugs reflects price changes at 
the wholesale or manufacturer stage. Because OPPS payment rates for 
drugs and biologicals are generally based on the ASP data that are 
reported by their manufacturers, we believe that the PPI for 
Prescription Drugs is an appropriate price index to use to update the 
packaging threshold for CY 2007 and beyond.
    In contrast, the market basket update contains numerous price 
proxies, including, but not limited to, proxies for wages and salaries, 
utilities, and

[[Page 74301]]

nonlabor-related expenses, that are not related to price increases for 
prescription drugs. Therefore, we believe that the market basket as a 
whole is not an appropriate mechanism for determining the outpatient 
drug packaging threshold amount. Within the calculation of the market 
basket update, we use the PPI for Prescription Drugs specifically to 
measure the price growth for prescription drugs, but price changes for 
prescription drugs are only one component of price changes for the 
numerous items and services hospitals purchase. Additionally, we 
disagree with the commenters' suggestion that we not round up the 
packaging threshold to the nearest $5 increment and, instead, defer any 
increases in the threshold until changes in prices exceed $5. We note 
that we equally round up or round down to the nearest $5 increment, and 
we continue to believe that rounding to the nearest $5 increment more 
accurately updates the 2005 statutorily mandated drug packaging 
threshold.
    Finally, we believe that our continued application of the 
methodology initially adopted in CY 2007 to update the drug packaging 
threshold does not inhibit our ability to pay accurately for drugs and 
biologicals. We have made several refinements to the ASP+X drug payment 
methodology under the OPPS for nonpass-through drugs and biologicals 
over the past several years to improve its accuracy. During that time, 
we have continued to implement our established methodology for annually 
updating the drug packaging threshold. For CY 2010, we finalized an 
overhead adjustment methodology for determining payment for separately 
payable drugs without pass-through status while we have continued to 
consistently apply the methodology described above to update the drug 
packaging threshold.
    Since publication of the CY 2012 OPPS/ASC proposed rule, consistent 
with our policy of updating the packaging threshold with more recently 
available data for the final rule, we have again followed the CY 2007 
methodology for CY 2012 and used updated four quarter moving average 
PPI index levels provided by the CMS Office of the Actuary to trend the 
$50 threshold forward from the third quarter of CY 2005 to the third 
quarter of CY 2012. We then rounded the resulting dollar updated dollar 
amount ($77.44) to the nearest $5 increment, which yielded a figure of 
$75. We note that this calculation, by using the most recent forecast 
of the quarterly PPI index levels, resulted in a decrease in the 
trended dollar amount from $77.63 in the CY 2012 proposed rule to 
$77.44 for this final rule with comment period. Because it is our 
policy to round the dollar amount to the nearest $5 increment, the 
slight decrease in the trended dollar amount has resulted in a reduced 
packaging threshold, from $80 in the proposed rule, to a final CY 2012 
packaging threshold of $75. Therefore, after consideration of the 
public comments we received, and consistent with our established 
methodology for establishing the packaging threshold using the most 
recent PPI forecast data, we are adopting a CY 2012 packaging threshold 
of $75.
    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 with comment period for the update year. Only HCPCS codes that are 
identified as separately payable in the final rule with comment period 
are subject to quarterly updates. For our calculation of per day costs 
of HCPCS codes for drugs and nonimplantable biologicals in this CY 2012 
OPPS/ASC final rule with comment period, we proposed 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 
updated hospital claims data from CY 2010. We note that we also 
proposed to use these data for budget neutrality estimates and impact 
analyses for this 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 this final 
rule with comment period are based on ASP data from the second quarter 
of CY 2011. These data are 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 physician's office 
payment rates will 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 as proposed, we recalculate their mean 
unit cost from all of the CY 2010 claims data and updated cost report 
information available for this 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 final rule with comment period may be different 
from the same drug HCPCS code's packaging status determined based on 
the data used for the proposed rule. Under such circumstances, we 
proposed 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, 
consistent with our historical practice, we applied the following 
policies to these HCPCS codes for drugs, nonimplantable biologicals, 
and therapeutic radiopharmaceuticals whose relationship to the $75 drug 
packaging threshold changes based on the updated drug packaging 
threshold and on the final updated data:
     HCPCS codes for drugs and nonimplantable biologicals that 
were paid separately in CY 2011 and that were proposed for separate 
payment in CY 2012, and that then have per day costs equal to or less 
than $75, based on the updated ASPs and hospital claims data used for 
this CY 2012 final rule with comment period, will 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 $75, 
based on the updated ASPs and hospital claims data used for this CY 
2012 final rule with comment period, will remain packaged in CY 2012.
     HCPCS codes for drugs and nonimplantable biologicals for 
which we proposed packaged payment in CY 2012 but then have per day 
costs greater than $75, based on the updated ASPs and hospital claims 
data used for this CY 2012 final rule with comment period, will receive 
separate payment in CY 2012.
    We did not receive any public comments on our proposal to apply the 
established policies initially adopted for the CY 2005 OPPS (69 FR 
65780) in order to more equitably pay for those drugs whose median cost 
fluctuates relative to the CY 2012 OPPS drug packaging threshold and 
the drug's payment status (packaged or separately payable) in CY 2011. 
Therefore, we are

[[Page 74302]]

finalizing our proposal, without modification, for CY 2012.
    We note that HCPCS codes J2513 (Pentastarch 10% solution), J3310 
(Perphenazine injection), and J9351 (Topotecan) were paid separately 
for CY 2011 and were proposed for separate payment in CY 2012 and had 
final per day costs of less than the $75 drug packaging threshold, 
based on updated ASPs and the CY 2010 hospital claims data available 
for this CY 2012 final rule with comment period. Therefore, HCPCS codes 
J2513, J3310, and J9351 will continue to be paid separately in CY 2012 
according to the established methodology set forth above.
    In addition, we proposed to provide separate payment for HCPCS code 
J2597 (Inj desmopressin acetate) in CY 2012, which was packaged in CY 
2011. Using updated ASPs and the CY 2010 hospital claims data available 
for this final rule with comment period, HCPCS code J2597 now has a per 
day cost of less than $75. In accordance with our established policy 
for such cases, for CY 2012, we are packaging payment for HCPCS code 
J2597.
    We also proposed to package HCPCS codes 90378 (Rsv ig, im, 50mg), 
J0364 (Apomorphine hydrochloride), J1324 (Enfuvirtide injection), J1642 
(Inj heparin sodium per 10 u), J1644 (Inj heparin sodium per 1000u), 
J1756 (Iron sucrose injection), J2700 (Oxacillin sodium injeciton), 
J3030 (Sumatriptan succinate/6 MG), J9070 (Cyclophosphamide 100 MG 
inj), J9185 (Fludarabine phosphate inj), J9206 (Irinotecan injection), 
J9390 (Vinorelbine tartrate inj), and Q4103 (Oasis burn matrix) . Using 
updated ASPs and the CY 2010 hospital claims data available for this 
final rule with comment period, HCPCS codes 90378, J0364, J1324, J1642, 
J1644, J1756, J2700, J3030, J9070, J9185, J9206, J9390, and Q4103 now 
have per day costs greater than $75. In accordance with our established 
policy for such cases, for CY 2012 we will pay for HCPCS codes 90378, 
J0364, J1324, J1642, J1644, J1756, J2700, J3030, J9070, J9185, J9206, 
J9390, and Q4103 separately.
    Finally, because we did not have claims data for HCPCS code J9213 
(Interferon alfa-2a inj) in the CY 2012 OPPS/ASC proposed rule, we had 
proposed a status indicator of ``E'' for this product in CY 2012. 
However, since publication of the proposed rule, we have received 
claims data and, because the per day cost for this product of 
approximately $70 is less than the final $75 CY 2012 packaging 
threshold, the product is packaged and has a CY 2012 status indicator 
of ``N.''
    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. In the CY 2012 OPPS/ASC proposed rule (76 FR 
42252), we proposed for CY 2012 to continue our policy of not exempting 
these 5-HT3 antiemetic products from our standard packaging 
methodology. For CY 2012, we proposed to package payment for all of the 
5-HT3 antiemetics except palonosetron hydrochloride, which for CY 2012 
has an 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).
    Comment: Several commenters suggested that CMS reinstate its policy 
of separate payment for 5-HT3 antiemetics, which are a class of drugs 
often used as part of an anti-cancer treatment regimen to treat nausea.
    Response: We continue to believe that use of these antiemetics is 
an integral part of an anti-cancer treatment regimen and that OPPS 
claims data demonstrate their increasingly common hospital outpatient 
utilization. As we stated in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60488), we no longer believe that a specific 
exemption to our standard drug payment methodology is necessary to 
ensure access to the most appropriate antiemetic products for Medicare 
beneficiaries. We continue to believe that our analysis conducted in 
the CY 2010 OPPS/ASC proposed rule on 5-HT3 antiemetics (74 FR 35320), 
along with the historical stability in prescribing patterns for these 
products and the availability of generic alternatives for several of 
these products, allow us to continue our policy of specifically not 
exempting these products from the OPPS drug packaging threshold.
    Comment: One commenter recommended that CMS not package any drugs 
used in anti-cancer regimens.
    Response: We disagree with the commenter for the reasons mentioned 
above. We believe that packaging certain items, including items used in 
anti-cancer regimens, is a fundamental component of a prospective 
payment system, and is an essential feature that distinguishes a 
prospective payment system from a fee schedule. We do not believe that 
packaging drugs used in an anti-cancer regimen or in outpatient 
treatment of other significant diseases leads to beneficiary access 
issues. This finding is confirmed by our analysis of hospital claims 
data in which we have found that beneficiaries appear to have adequate 
access to cancer treatments, as is signified by ongoing volume growth 
in cancer-related APCs and stability in prescribing products for anti-
cancer drugs such as 5-HT3 antiemetics, for which CMS has continued to 
observe volume growth, even after we ended our multiyear exemption from 
the packaging threshold for these products. In summary, after 
consideration of the public comments we received, we are finalizing our 
proposal to continue our policy of not exempting 5-HT3 antiemetics from 
the drug packaging threshold for CY 2012. In addition, we are not 
providing any exceptions to the standard drug packaging methodology for 
any class of drugs, including anti-cancer therapies, for CY 2012. 
However, we note that the 5-HT3 antiemetic product described by HCPCS 
code J2469 (palonosetron hydrocholride) has a CY 2012 estimated per day 
cost, from the CY 2010 claims data, above the CY 2012 drug packaging 
threshold and, therefore, will receive separate payment in CY 2012.
c. Packaging Determination for HCPCS Codes That Describe the Same Drug 
or Biological But Different Dosages
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS 
codes reporting different dosages for the same covered Part B drugs or 
biologicals in order to reduce hospitals' administrative burden by 
permitting them to report all HCPCS codes for drugs and biologicals. In 
general, prior to CY 2008, the OPPS recognized for payment only the 
HCPCS code that described the lowest dosage of a drug or biological. We 
extended this recognition to multiple HCPCS codes for several other 
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, 
we applied a policy that assigned the status indicator of the 
previously recognized HCPCS code to the associated newly recognized 
code(s), reflecting the 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

[[Page 74303]]

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 included 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, in 
the CY 2012 OPPS/ASC proposed rule (76 FR 42253 through 42255), we 
proposed to continue our policy to make packaging determinations on a 
drug-specific basis, rather than a HCPCS code-specific basis, for those 
HCPCS codes that describe the same drug or biological but different 
dosages 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 of the proposed rule (76 FR 42254 through 42255) had 
ASP pricing information available for the 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).
    Although we did not receive any public comments regarding this 
methodology, as noted in section V.B.2.b. of this final rule with 
comment period, the final CY 2012 drug packaging threshold is $75, and 
not $80 as had been proposed in the CY 2012 OPPS proposed rule. 
Therefore, in preparation for the CY 2012 final rule with comment 
period, we again 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 for those drugs listed in Table 30 of 
the proposed rule (76 FR 42254 through 42255). We then 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 $75 (whereupon all HCPCS codes for 
the same drug or biological would be packaged) or greater than $75 
(whereupon all HCPCS codes for the same drug or biological would be 
separately payable). In repeating this analysis, we found that two 
products for which we had proposed a CY 2012 status indicator of ``N,'' 
HCPCS J1642 (Injection, heparin sodium (heparin lock flush), per 10 
units) and J1644 (Injection, heparin sodium, per 1000 units) had a 
recalculated per day cost in excess of the $75 packaging threshold. 
Therefore, HCPCS J1642 and J1644 are assigned status indicator ``K'' 
and will be separately payable in CY 2012.
    With the exception of the changed status indicators for HCPCS J1642 
and J1644, we are adopting as final the proposed packaging status of 
each drug and biological HCPCS code to which the aforementioned 
methodology applies. The products affected are displayed in Table 36 
below.
BILLING CODE 4120-01-P

[[Page 74304]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.060


[[Page 74305]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.061


[[Page 74306]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.062

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

[[Page 74307]]

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 SCODs for CY 2012. Therefore, in the CY 2012 OPPS/ASC proposed 
rule (76 FR 42255 through 42256), we proposed to continue packaging 
payment for all contrast agents and diagnostic radiopharmaceuticals, 
collectively referred to as ``policy-packaged'' drugs, regardless of 
their per day costs, for CY 2012. We also proposed 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).
    Comment: Several commenters objected to CMS' proposal to package 
payment for all diagnostic radiopharmaceuticals and contrast agents in 
CY 2012. A number of commenters stated that diagnostic 
radiopharmaceuticals and contrast agents with per day costs over the 
proposed OPPS drug packaging threshold are defined as SCODs and, 
therefore, should be assigned separate APC payments. In particular, the 
commenters questioned CMS' authority to classify groups of drugs, such 
as diagnostic radiopharmaceuticals and contrast agents, and implement 
packaging and payment policies that do not reflect their status as 
SCODs. Several comments disagreed with CMS' labeling of 
radiopharmaceuticals as supplies and stated instead that they should be 
treated as other SCODs. The commenters recommended that diagnostic 
radiopharmaceuticals should be subject to the same per day cost drug 
packaging threshold that applies to other drugs, in order to determine 
whether their payment would be packaged or made separately.
    Response: As discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66766), the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645), the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60497), and the CY 2011 final rule with comment 
period (75 FR 71949), we continue to believe that diagnostic 
radiopharmaceuticals and contrast agents are different from other drugs 
and biologicals for several reasons. We note that the statutorily 
required OPPS drug packaging threshold has expired, and we continue to 
believe that diagnostic radiopharmaceuticals and contrast agents 
function effectively as supplies that enable the provision of an 
independent service and are always ancillary and supportive to an 
independent service, rather than themselves serving as the therapeutic 
modality. We packaged their payment in CYs 2008, 2009, 2010, and 2011 
as ancillary and supportive services in order to provide incentives for 
greater efficiency and to provide hospitals with additional flexibility 
in managing their resources. In order for payment to be packaged, it is 
not necessary that all products be interchangeable in every case, and 
we recognized that, in some cases, hospitals may utilize higher cost 
products and, in some cases, lower cost products, taking into 
consideration the clinical needs of the patient and efficiency 
incentives. While we recognize this variability from case to case, on 
average under a prospective payment system, we expect payment to pay 
appropriately for the services furnished. In the past, we have 
classified different groups of drugs for specific payment purposes, as 
evidenced by our CY 2005 through CY 2009 policy regarding 5-HT3 
antiemetics and their exemption from the drug packaging threshold. We 
note that we treat diagnostic radiopharmaceuticals and contrast agents 
as ``policy-packaged'' drugs because our policy is to package payment 
for all of the products in the category.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68634), we also began packaging the payment for all nonpass-through 
implantable biologicals into payment for the associated surgical 
procedure because we consider these products to always be ancillary and 
supportive to independent services, similar to implantable 
nonbiological devices that are always packaged. Therefore, we currently 
package payment for nonpass-through implantable biologicals, also known 
as devices that are surgically inserted or implanted (through a 
surgical incision or a natural orifice) into the body. As we stated in 
the CY 2012 OPPS/ASC proposed rule (76 FR 42256), we continue to 
believe that payment should be packaged for nonpass-through implantable 
biologicals for CY 2012.
    Although our final CY 2009 policy (which we are continuing for CY 
2012 as discussed below) packages payment for all diagnostic 
radiopharmaceuticals,

[[Page 74308]]

contrast agents, and nonpass-through implantable biologicals into the 
payment for their associated procedures, we are continuing to provide 
payment for these items in CY 2012 based on a proxy for average 
acquisition cost, as we did in CY 2009. We continue to believe that the 
line-item estimated cost for a diagnostic radiopharmaceutical, contrast 
agent, or nonpass-through implantable biological in our claims data is 
a reasonable approximation of average acquisition and preparation and 
handling costs for diagnostic radiopharmaceuticals, contrast agents, 
and nonpass-through implantable biologicals, respectively. As we 
discussed in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68645), we believe that hospitals have adapted to the CY 2006 coding 
changes for radiopharmaceuticals and responded to our instructions to 
include charges for radiopharmaceutical handling in their charges for 
the radiopharmaceutical products. Further, because the standard OPPS 
packaging methodology packages the total estimated cost of each 
radiopharmaceutical, contrast agent, or nonimplantable biological on 
each claim (including the full range of costs observed on the claims) 
with the cost of associated procedures for ratesetting, this packaging 
approach is consistent with considering the average cost for 
radiopharmaceuticals, contrast agents, or nonpass-through implantable 
biologicals, rather than the median cost. In addition, as we noted in 
the CY 2009 OPPS/ASC final rule with comment period (72 FR 68646), 
these drugs, biologicals, or radiopharmaceuticals for which we have not 
established a separate APC and therefore, for which payment would be 
packaged rather than separately provided under the OPPS, are considered 
to not be SCODs. Similarly, drugs and biologicals with per day costs of 
less than $75 in CY 2012 that are packaged and for which a separate APC 
has not been established also are not SCODs. This reading is consistent 
with our final payment policy whereby we package payment for diagnostic 
radiopharmaceuticals, contrast agents, and nonpass-through implantable 
biologicals and provide payment for these products through payment for 
their associated procedures.
    Comment: Several commenters disagreed with the proposal to 
distinguish between diagnostic and therapeutic radiopharmaceuticals for 
payment purposes under the OPPS. The commenters noted that CMS' 
identification of HCPCS code A9544 (Iodine I-131 tositumomab, 
diagnostic, per study dose) as a diagnostic radiopharmaceutical is 
inappropriate because this radiopharmaceutical functions as a 
dosimetric radiopharmaceutical and not as a diagnostic 
radiopharmaceutical. A few commenters explained that this particular 
radiopharmaceutical product is used as part of a therapeutic regimen 
and, therefore, should be considered therapeutic for OPPS payment 
purposes.
    Response: As discussed above and in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66641), the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68645), the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60498), and the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71949), we classified each radiopharmaceutical 
into one of the two groups according to whether its long descriptor 
contained the term ``diagnostic'' or ``therapeutic''. HCPCS code A9544 
contains the term ``diagnostic'' in its long code descriptor. 
Therefore, according to our established methodology, we continue to 
classify it as diagnostic for the purposes of CY 2012 OPPS payment. 
While we understand that this item is provided in conjunction with 
additional supplies, imaging tests, and therapeutic 
radiopharmaceuticals for patients already diagnosed with cancer, we 
continue to believe that the purpose of administering the product 
described by HCPCS code A9544 is diagnostic in nature. As we first 
stated in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66641), we continue to believe that the product described by HCPCS code 
A9544 is a diagnostic radiopharmaceutical. While it is not used to 
necessarily diagnose a general disease state, it is used to determine 
whether future therapeutic services would be beneficial to the patient 
and to determine how to proceed with therapy. We note that this is no 
different than the use of a lab test to guide therapy; the fact that 
the diagnostic test, a service which provides information, is used to 
guide therapy does not make it a therapeutic service, one which 
intended to improve a patient's clinical condition. While a group of 
associated services may be considered a therapeutic regimen by some 
commenters, HCPCS code A9544 is provided in conjunction with a series 
of nuclear medicine imaging scans. Many nuclear medicine studies using 
diagnostic radiopharmaceuticals are provided to patients who already 
have an established diagnosis. We continue to consider HCPCS code A9544 
to be diagnostic because this item is provided for the purpose of 
conducting a diagnostic imaging procedure and is used to identify the 
proposed dose of the therapeutic agent to be provided at a later time.
    Comment: Some commenters recommended using the ASP methodology to 
make payment for nonpass-through diagnostic radiopharmaceuticals, 
noting that it would be inconsistent for CMS to treat diagnostic 
radiopharmaceuticals as ``drugs'' for pass-through payment purposes and 
provide payment for diagnostic radiopharmaceuticals that have pass-
through status based on the ASP methodology, and, then, after the 
diagnostic radiopharmaceutical's pass-through payment status expires, 
package the costs included in historical hospital claims data, rather 
than use the ASP methodology to pay for the product and treat the drug 
as a supply. A few commenters suggested that diagnostic 
radiopharmaceuticals could be paid separately as therapeutic 
radiopharmaceuticals are paid, which would allow manufacturers to 
voluntarily submit ASP data, and then default to the mean unit cost 
when ASP data are unavailable. One commenter asserted that CMS, by 
paying separately for diagnostic radiopharmaceuticals, could reduce 
Medicare program expenditures through reduced outlier payments, 
decreased variability in packaged costs, and more accurate payments for 
nuclear medicine procedures. The commenter stated that this would occur 
at ``only a modest cost'' to the OPPS.
    Response: As we stated above, the statutorily required OPPS drug 
packaging threshold has expired, and we continue to believe that 
diagnostic radiopharmaceuticals and contrast agents are always 
ancillary and supportive to an independent service, rather than 
services themselves as the therapeutic modality. We disagree with 
commenters who suggest that nonpass-through diagnostic 
radiopharmaceuticals should be paid under the ASP methodology, that 
nonpass-through diagnostic radiopharmaceuticals should be paid as pass-
through drugs and biologicals, or that nonpass-through diagnostic 
radiopharmaceuticals should be paid similarly to therapeutic 
radiopharmaceuticals. We continue to believe that nonpass-through 
diagnostic radiopharmaceuticals and contrast agents function 
effectively as supplies that enable the provision of an independent 
service. As we noted in the CY 2009 OPPS/ASC final rule with comment 
period (72 FR 68646) and restate above, drugs biologicals, or

[[Page 74309]]

radiopharmaceuticals for which we have not established a separate APC 
will receive packaged payment under the OPPS, and are considered to not 
be SCODs. We are continuing to provide payment for these items in CY 
2012 based on a proxy for average acquisition cost. We continue to 
believe that the line-item estimated cost for a diagnostic 
radiopharmaceutical, contrast agent, or nonpass-through implantable 
biological in our claims data is a reasonable approximation of average 
acquisition and preparation and handling costs for diagnostic 
radiopharmaceuticals, contrast agents and nonpass-through implantable 
biologicals, respectively.
    Further, as we have stated above, we believe that 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. Our policy of packaging payment for 
diagnostic radiopharmaceuticals, contrast agents, and implantable 
biologicals 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. 
Paying separately for diagnostic radiopharmaceuticals, contrast agents, 
or implantable biologicals, when each of these items is ancillary and 
supportive to an independent service, is contrary to this principle of 
a prospective payment system. Moreover, we note that SCODs, the payment 
methodology for which the commenters suggest that CMS adopt for 
diagnostic radiopharmaceuticals and contrast agents, receive OPPS 
payments based on the ASP+X methodology, which has consistently 
resulted in payment rates for SCODs that are equal to some amount 
greater than 100 percent of average sales price for these products; in 
CY 2012, as discussed in section V.B.3.b. of this final rule with 
comment period, SCODs will receive payment equal to 104 percent of ASP 
(ASP+4). We do not agree that payment for diagnostic 
radiopharmaceuticals and contrast agents, were it equal to the SCOD 
reimbursement amount calculated using the ASP+X methodology (or ASP+4 
in CY 2012), could reduce outlier payments or APC variability to an 
extent sufficient enough to offset higher payment rates for these 
products under the ASP+X methodology. Finally, we do not agree with the 
commenter's assertion that separate payment for diagnostic 
radiopharmaceuticals would result in more accurate payment for these 
products. When CMS discussed possible ASP-based payment for diagnostic 
radiopharmaceuticals in the proposed and final rules for OPPS in CY 
2006 (70 FR 68653 through 68657), numerous public commenters advised 
CMS that radiopharmaceuticals are formulated, distributed, compounded, 
and administered in unique distribution channels that preclude the 
determination of ASP relevant to a radiopharmaceutical HCPCS code. 
Further, commenters advised CMS that the manufacturer has no way to 
calculate the ASP of the end product patient dose and, consequently, 
could not supply CMS with accurate ASP data. In the intervening period 
between the CY 2006 final rule with comment period and the present, 
diagnostic radiopharmaceutical use has become more widespread, and 
their formulation more complex. Moreover, we believe that the phenomena 
described by commenters (including radiopharmaceutical manufacturers) 
in the comment period preceding the CY 2006 OPPS final rule, including 
the many preparatory and compounding steps between manufacturer and the 
patient's bedside, remain an impediment to manufacturers' calculations 
of accurate ASP, and thus accurate payment, for these products. 
Therefore, we do not believe that diagnostic radiopharmaceuticals 
should be paid separately under the OPPS such that manufacturers 
voluntarily can submit ASP data and then default to mean unit cost when 
ASP data are unavailable. We believe they are appropriately packaged 
into a single aggregate payment for the accompanying service provided.
    Comment: A few commenters recommended that CMS provide separate 
payment for all diagnostic radiopharmaceuticals with a median per day 
cost greater than $200. The commenters believed that this 
recommendation is most consistent with the APC Panel's recommendation 
to CMS at the Panel's September 2007 meeting (described below). One 
commenter recommended that if CMS does not adopt the recommended $200 
packaging threshold for diagnostic radiopharmaceuticals, that CMS adopt 
alternate packaging criteria providing separate payment when the cost 
of the product is greater than the total APC payment or when the 
coefficient of variation of the radiopharmaceutical exceeds a certain 
threshold.
    Response: As we stated in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60499), at the September 2007 APC Panel meeting, 
the APC Panel recommended that CMS package radiopharmaceuticals with a 
median per day cost of less than $200 but pay separately for 
radiopharmaceuticals with a median per day cost of $200 or more. In the 
CY 2008 OPPS/ASC final rule with comment period (72 FR 66638), we did 
not accept the APC Panel's recommendation, citing an inability to 
determine an empirical basis for paying separately for 
radiopharmaceuticals with a median per day cost in excess of $200. 
Instead, as proposed, for CY 2008, we finalized the packaging of 
payment for all diagnostic radiopharmaceuticals. Consistent with the CY 
2012 OPPS/ASC proposed rule, for this final rule with comment period, 
we continue to believe that diagnostic radiopharmaceuticals are 
ancillary and supportive to the nuclear medicine procedures in which 
they are used and that their costs should be packaged into the primary 
procedures with which they are associated. We do not believe it would 
be appropriate to set a cost threshold for packaging diagnostic 
radiopharmaceuticals because, regardless of their per day cost, they 
are always supportive of an independent procedure that is the basis for 
administration of the diagnostic radiopharmaceutical. We also do not 
believe that it is appropriate to consider alternate packaging criteria 
for nonpass-through diagnostic radiopharmaceuticals. We continue to 
believe that, regardless of their per-day cost, these items are always 
supportive of an independent procedure that is the basis for 
administration of the diagnostic radiopharmaceutical. Therefore, our 
policy of packaging costs for these products into an associated APC 
continues to be the approach best suited for use in a prospective 
payment system.
    Further, we note that the OPPS, as a prospective payment system, 
already includes the costs associated with diagnostic 
radiopharmaceuticals into the APCs for which the product is ancillary 
or supportive. We believe that the cost associated with a given product 
at a given point in time is immaterial because the OPPS, as a 
prospective payment system with payments based on average costs 
associated with a covered procedure, already takes into account both 
higher and lower input costs associated with that procedure. We also 
note that the OPPS, like many of Medicare's prospective payment 
systems, has policies in place to provide hospitals with additional 
outlier payments for certain high-cost cases whose costs exceed certain 
thresholds. This system of outliers already provides hospitals (or, in 
the case of partial hospitalization services, community

[[Page 74310]]

mental health centers) with additional reimbursement to offset costs 
that are high relative to the prospective payment amount, regardless of 
whether the costs are associated with radiopharmaceuticals or another 
relatively high-cost element in the patient's course of care.
    Comment: Several commenters requested that CMS provide the public 
with data detailing how the full costs of diagnostic 
radiopharmaceuticals and contrast agents are reflected in procedural 
APC payments.
    Response: The exact data used to calculate all of the proposed and 
final APC assignments and rates, including costs associated with 
diagnostic radiopharmaceuticals and contrast agents, for the CY 2012 
OPPS are available for purchase under a CMS data use agreement through 
the CMS Web site at: http://www.cms.gov/hospitalOutpatientPPS. This Web 
site 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-CMS diagnosis 
codes and revenue code payment amounts. We typically have not posted 
the offset amounts by APC until publication of the final rule because 
we assign services to APCs based on our estimate of their full resource 
cost, including, but not limited to, packaged diagnostic 
radiopharmaceuticals.
    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-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 proposed to continue to package payment for 
nonpass-through implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) into the 
body, 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 proposed 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. We received no 
comments regarding our proposed packaging of nonpass-through 
implantable biologicals that are surgically inserted or implanted 
(through a surgical incision or a natural orifice) into the body.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 proposals, without modification, to continue to 
package payment for all nonpass-through diagnostic radiopharmaceuticals 
and contrast agents, and implantable biologicals that are surgically 
inserted or implanted into the body through a surgical incision or a 
natural orifice, regardless of their per day costs. Given the inherent 
function of contrast agents and diagnostic radiopharmaceuticals as 
ancillary and supportive to the performance of an independent procedure 
and the similar functions of implantable biologicals and nonbiological 
devices as integral to and supportive of the separately paid surgical 
procedures in which either may be used, we continue to view the 
packaging of payment for contrast agents, diagnostic 
radiopharmaceuticals, and implantable biologicals as a logical 
expansion of packaging payment for drugs and biologicals. In addition, 
as we initially established in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66768), we will continue to identify diagnostic 
radiopharmaceuticals specifically as those Level II HCPCS codes that 
include the term ``diagnostic'' along with a radiopharmaceutical in 
their long code descriptors, and therapeutic radiopharmaceuticals as 
those Level II HCPCS codes that include the term ``therapeutic'' along 
with a radiopharmaceutical in their long code descriptors. We believe 
that the current descriptors accurately discriminate between those 
pharmaceuticals which are used to gather information and those which 
are intended to improve the patient's medical condition.
    In addition, any new biological lacking pass-through status that is 
surgically inserted or implanted through a surgical incision or natural 
orifice would be packaged in CY 2012. For three biologicals with 
expiring pass-through status and which differ from other biologicals 
paid under the OPPS in that they specifically function as surgically 
implanted devices, we are finalizing our proposal to package the 
products described by HCPCS code C9361, C9362, and C9364 and assign 
them status indictor ``N'' for this final rule with comment period.
    We also are finalizing our proposal to package 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 section III.D.1.e. of this final rule 
with comment period for more information on CMS' final echocardiography 
payment policy. For more information on how we set CY 2012 payment 
rates for nuclear medicine procedures in which diagnostic 
radiopharmaceuticals are used and echocardiography services provided 
with and without contrast agents, we refer readers to 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).
3. Payment for Drugs and Biologicals Without Pass-Through Status That 
Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other 
Separately Payable and Packaged Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific

[[Page 74311]]

payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' (SCOD) 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''. 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 sections 1842(o) and 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 proposed rule included a 
proposal to establish three distinct Level II HCPCS C-codes and three 
corresponding APCs for drug handling categories to differentiate 
overhead costs for drugs and biologicals (70 FR 42730). We also 
proposed: (1) To combine several overhead categories recommended by 
MedPAC; (2) to establish three drug handling categories, as we believed 
that larger groups would minimize the number of drugs that may fit into 
more than one category and would lessen any undesirable payment policy 
incentives to utilize particular forms of drugs or specific preparation 
methods; (3) to collect hospital charges for these HCPCS C-codes for 2 
years; and (4) to ultimately base payment for the corresponding drug 
handling APCs on CY 2006 claims data available for the CY 2008 OPPS.
    In the CY 2006 OPPS final rule with comment period (70 FR 68659 
through 68665), we discussed the public comments we received on our 
proposal regarding pharmacy overhead. The overwhelming majority of 
commenters did not support our proposal 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 CY 2006 OPPS/ASC final 
rule with comment period.
    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

[[Page 74312]]

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 our 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 we should pay an acquisition cost of ASP+6 percent for 
separately payable drugs, should substitute ASP+6 percent for the 
packaged cost of all packaged drugs and biologicals on procedure 
claims, and should redistribute the difference between the aggregate 
estimated packaged drug cost in claims and payment for all drugs, 
including packaged drugs at ASP+6 percent, as separate pharmacy 
overhead payments for separately payable drugs. They indicated that 
this approach would preserve the aggregate drug cost observed in the 
claims data, while significantly increasing payment accuracy for 
individual drugs and procedures 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. 
This proposed redistribution 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 the CY 2010 OPPS/ASC proposed rule (74 FR 35326 through 35333), 
we stated that we believed that between one-third and one-half of the 
estimated $395 million total in pharmacy overhead costs included in our 
claims data for coded packaged drugs and biologicals with reported ASP 
data, specifically approximately $150 million of those costs, should be 
attributed to separately payable drugs and biologicals. We stated 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 with comment period data 
would occur only from some drugs and biologicals to other drugs and 
biologicals, thereby maintaining the

[[Page 74313]]

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 in the CY 2010 OPPS/ASC final rule 
with comment period (74 FR 60499 through 60518) 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), should, at least for CY 2010, be attributed to separately 
payable drugs and biologicals based on our standard methodology.
    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 (74 FR 
35328). 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 
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) (74 FR 35332). 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. We 
refer readers to the CY 2010 OPPS/ASC final rule with comment period 
for a complete discussion of the pharmacy overhead adjustment 
methodology (74 FR 60499 through 60518). 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

[[Page 74314]]

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. CY 2012 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 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 final rule with comment period, 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

[[Page 74315]]

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 the CY 2012 OPPS/ASC proposed rule, we proposed 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 of the proposed rule (76 FR 42260) 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.
    Comment: Although many commenters urged CMS to adopt a payment rate 
for separately payable drugs that was at least equivalent to the ASP+6 
payment provided for similar drugs in the physician offices and used 
the methodology described in section 1842(o), section 1847A, or section 
1847B of the Act, commenters were generally supportive of our proposal 
to not use the standard methodology for establishing payment in CY 
2012. Many commenters stated that they believe charge compression, 
which is the hospital practice of attaching a higher mark-up to charges 
for low cost supplies and a lower mark-up to charges for higher cost 
supplies, continues to have a distorting influence on the standard 
methodology. Commenters further asserted that payment for SCODs that is 
based on the standard methodology of ASP-2 would be far below many 
hospitals' acquisition costs for separately payable drugs, and may 
force hospitals to be unable to provide a full range of necessary 
treatment options.
    Response: We appreciate the commenters' support.
    Our findings, based on final rule claims data, 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 is 
displayed in Table 37 below.

[[Page 74316]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.063

    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, in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42260 through 42262), we proposed to continue the 
CY 2010 and CY 2011 overhead adjustment methodology, as first 
implemented in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60501 through 60517), which redistributes $200 million in cost from 
packaged drugs with an ASP and uncoded packaged drugs.
    For CY 2012, we proposed to continue to make an overhead adjustment 
for another year because we believed it was appropriate to account for 
inflation that has occurred since the overhead redistribution amount of 
$200 million was applied in CY 2011. Therefore, we proposed to apply an 
inflation allowance to account for inflation and changes in the prices 
of pharmaceuticals in the overall economy. We proposed 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

[[Page 74317]]

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 final rule with comment period.
    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 for 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, in the proposed rule, 
we also continued 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 
continued 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 proposed 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.
    In the CY 2012 OPPS/ASC proposed rule, we noted 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 noted 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.
    In the CY 2012 OPPS/ASC proposed rule, we estimated 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 
proposed for CY 2012 that any redistribution of pharmacy overhead cost 
would occur only among drugs and biologicals in our claims data, and 
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. We indicated that this would 
result in a proposed CY 2012 payment rate for separately payable drugs 
and biologicals of ASP+4 percent. We noted 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.
    As indicated in Table 31 of the proposed rule (76 FR 42260), 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 had 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. We 
displayed the effect of this proposed adjustment payment methodology in 
Table 32 of the proposed rule (76 FR 42262).
    Comment: The majority of commenters urged CMS to adopt an ASP+X 
amount that is higher than ASP+4 for CY 2012. Many commenters stated 
that CMS should simply adopt the default payment rate of ASP+6 percent 
for CY 2012, rather than use the redistribution methodology proposed in 
the CY 2012 OPPS/ASC proposed rule. Noting that section 1833(t)(14)(A) 
of the Act requires CMS to pay for separately payable drugs at a rate 
that is equal to the average acquisition cost for the drug for a year, 
as determined by the GAO or CMS surveys of hospital acquisition cost, 
and that the most recent survey available is ``outdated'' because it 
was performed in CY 2004 by the GAO, the commenters urged CMS to pay 
for separately payable drugs at ASP+6 percent or the rate applicable in 
the

[[Page 74318]]

physician's office setting. The commenters stated that CMS has the 
authority to pay for separately payable drugs at ASP+6 percent under 
the statute. Many of these commenters suggested that CMS discontinue 
the use of the standard methodology and the overhead redistribution 
methodology, and instead use the default payment rate of ASP+6 percent, 
as is given by Congress in statute.
    Response: While the commenters are correct that the statute 
provides for the use of the methodology described in section 1842(o), 
section 1847A, or section 1847B of the Act, as the case may be, as 
calculated and adjusted by the Secretary as necessary, payment under 
these provisions for a SCOD is required only when the average hospital 
acquisition cost for the drug for that year are unavailable (which at 
the option of the Secretary may vary by hospital group (as defined by 
the Secretary based on the volume of covered OPD services or other 
relevant characteristics)), as determined by the Secretary taking into 
account the hospital acquisition cost survey data under subparagraph 
(D). We continue to believe that we have established both our hospital 
claims data and ASP data as an appropriate proxy for average hospital 
acquisition cost, taking the GAO survey information into account for 
the base year (70 FR 68641). Many of the drugs and biologicals covered 
under the OPPS are provided a majority of the time in the hospital 
setting, and we believe that the ASP information we collect is an 
adequate proxy for hospital acquisition cost. Further, the commenters 
have not disputed the accuracy of the total drug and biological cost 
estimated in our claims data, only the estimated cost of separately 
payable drugs and biologicals. We continue to believe that average 
sales prices for separately paid drugs and biologicals represent a 
generally appropriate source of hospital average acquisition cost for 
drugs and biologicals. As we stated in the CY 2006 OPPS final rule, we 
intend for the quarterly updates of the ASP-based payment rates for 
separately paid drugs and biologicals to function as the surveys of 
hospital acquisition costs that are required by section 
1833(t)(14)(D)(ii) of the Act (70 FR 68641). Prices calculated using 
the ASP methodology account for sales to all purchasers, and are net of 
most discounts, nominal sales, and other sales that are otherwise 
exempt from the Medicaid Best Price calculations. Given that purchase 
price generally equals sales price for any transaction, we believe that 
the ASP is an accurate proxy for hospitals' average acquisition cost 
for separately paid drugs and biologicals. Therefore, we disagree that 
we are not complying with the statute by not performing a survey and 
not paying at the physician's office rate. For the reasons explained 
above, we do not believe that it is appropriate at this time to provide 
payment at an amount other than average acquisition cost based on the 
drug and biological costs observed in hospital claims data and pricing 
information observed in ASP data, as adjusted with a redistribution for 
pharmacy overhead.
    Comment: One commenter stated that the statute requires that CMS 
make payment for SCODs at ASP+6 percent, citing that cost data derived 
from claims data cannot accurately be said to equal average acquisition 
cost. The commenter noted that CMS' methodology in using claims data 
reduced by CCRs to derive proxies for hospital costs is a methodology 
dependent on assumptions about the relationship between charges and 
costs and, therefore, does not typify actual hospital costs for drugs 
and biologicals. These cost data, the commenter argued, therefore 
cannot equal average acquisition cost for drugs and biologicals.
    Response: As we discussed in the response to the previous comment, 
we believe that ASP is an appropriate proxy for the acquisition cost of 
drugs. With respect to establishing the total estimated cost of drugs 
and biologicals, including both pharmacy overhead and acquisition cost 
of drugs and biologicals, we use hospital charges and cost report data. 
We believe that our claims data and cost report data provide the best 
estimate of the national aggregate total cost of drugs and biologicals. 
We do not believe that this methodology for estimating the total cost 
of drugs and biologicals, including pharmacy overhead cost, is based on 
assumptions about costs and charges, but the actual relationship 
between costs and charges for the same hospital for the same services. 
We estimate costs from charges submitted on claims for payment, and 
cost and charge information from cost report data that are certified to 
be correct by the hospital. We note that we view the ASP data, not the 
cost data, to be the appropriate proxy for hospital acquisition cost 
for drugs and biologicals, without pharmacy overhead costs, while the 
cost of drugs and biologicals that we estimate from claims and cost 
report data is the only source of the total cost of drugs and 
biologicals, that includes both pharmacy overhead and acquisition cost.
    Comment: MedPAC remained concerned about our policy of setting 
payment rates for drugs and biologicals as a percentage of ASP because, 
as MedPAC stated, pharmacy overhead, as a percentage of total costs, 
varies widely across individual drugs. MedPAC previously had 
recommended that CMS collect data on hospitals' pharmacy overhead costs 
separately from drug acquisition costs and that these data could be 
used to create separate payment to hospitals for pharmacy overhead and 
drug acquisition costs.
    Response: While we acknowledge that pharmacy overhead varies by the 
drug to which it applies, we believe that as long as payment is 
distributed among hospitals in a manner that, on average, reflects 
relative costs of drugs and biologicals they furnish, including 
pharmacy overhead, the goals of the OPPS are met as it is a system of 
averages. With regard to the comment that CMS should collect data on 
hospitals' pharmacy overhead costs separately from drug acquisition 
costs and that these data could be used to create separate payment to 
hospitals for pharmacy overhead and drug acquisition costs, as we 
discussed in detail above, we proposed to create HCPCS codes for 
pharmacy overhead services so that hospitals could charge for these 
services and provide us a basis for making separate payments for 
pharmacy overhead. However, hospitals strongly objected and provided 
convincing arguments that to do so would impose an enormous burden on 
them and on other payers that would not provide an offsetting benefit. 
We believe that hospitals would find any option requiring them to 
identify the cost associated with the overhead component of a drug or 
biological or a class of drugs or biologicals burdensome and imprecise.
    Comment: A few commenters expressed concern that when CMS applies a 
single CCR to adjust charges to costs for drugs and biologicals, charge 
compression leads to misallocation of pharmacy overhead costs 
associated with high and low cost drugs and biologicals during 
ratesetting. The commenters noted that hospitals disproportionately 
mark up their charges for low cost drugs and biologicals to account for 
pharmacy overhead costs. Therefore, some commenters suggested using the 
costs of both packaged drugs and separately payable drugs when 
calculating the equivalent average ASP-based payment amount for 
separately payable drugs. They argued that this would provide a more 
accurate ASP-based payment amount for separately payable drugs. As

[[Page 74319]]

an alternative, the commenters recommended that CMS eliminate the drug 
packaging threshold and provide separate payment for all Part B drugs 
under the OPPS at an ASP+X percent amount calculated from the cost for 
all drugs with HCPCS codes.
    Several commenters objected to the inclusion of data from hospitals 
that receive Federal discounts on drug prices under the 340B program in 
the ASP calculation for separately payable drugs and biologicals. The 
commenters pointed out that hospital participation in the 340B program 
had grown substantially over the past few years, and will further 
increase due to the provisions in the Affordable Care Act. The 
commenters believed that the costs from these hospitals now constituted 
a significant proportion of hospital drug costs on CY 2010 OPPS claims. 
The commenters stated that including 340B hospital claims data when 
comparing aggregate hospital costs based on claims data to ASP rates 
contributed to an artificially low equivalent average ASP-based payment 
rate because ASP data specifically exclude drug sales under the 340B 
program.
    In addition, MedPAC encouraged CMS to exclude data from 340B 
hospitals from the ratesetting. MedPAC stated that analysis indicates 
that exclusion of the 340B hospitals would increase CMS' estimates of 
the cost of separately paid drugs by about 3.5 percent above the 
estimate obtained when the 340B hospital claims data are included in 
the ratesetting calculations and that excluding the 340B hospital 
claims data would result in payment rates for separately paid drugs 
that more accurately reflect the costs incurred by other hospitals.
    Response: In proposing to continue our CY 2010 overhead adjustment 
methodology for CY 2012, we attempted to address the issue of charge 
compression by redistributing some portion of the estimated overhead 
cost equivalent to the CY 2011 redistribution amount indexed for the 
increase in the PPI for Prescription Drugs for coded packaged drugs 
($161 million), and a conservative estimate of overhead cost in the 
uncoded packaged drug cost ($54 million). Further, we have made several 
proposals in the past to more precisely identify pharmacy overhead 
costs and to address charge compression in the pharmacy revenue center, 
which were not finalized due to objections raised in public comments. 
As we noted in our discussion of the MedPAC comment above, for the CY 
2006 OPPS, we proposed to establish three distinct Level II HCPCS C-
codes and three corresponding APCs for drug handling categories to 
differentiate overhead costs for drugs and biologicals (70 FR 42730). 
In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), we proposed to 
instruct hospitals to remove the pharmacy overhead charge for both 
packaged and separately payable drugs and biologicals from the charge 
for the drug or biological and report the pharmacy overhead charge on 
an uncoded revenue code line on the claim. We believed that this would 
provide us with an avenue for collecting pharmacy handling cost data 
specific to drugs in order to package the overhead costs of these items 
into the associated procedures, most likely drug administration 
services. However, we did not finalize these proposals due to strong 
objection from hospitals. For CY 2009, we proposed to split the ``Drugs 
Charged to Patients'' cost center into two cost centers: One for drugs 
with high pharmacy overhead costs and one for drugs with low pharmacy 
overhead costs (73 FR 41492). We noted that we expected that CCRs from 
the proposed new cost centers would be available in 2 to 3 years to 
refine OPPS drug cost estimates by accounting for differential hospital 
markup practices for drugs with high and low overhead costs. However, 
we did not finalize any of these proposals due to concerns from the 
hospital community that these proposals would create an overwhelming 
burden on hospitals and staff. By proposing to continue our CY 2010 
overhead adjustment methodology, we were once again attempting to 
address the issue of charge compression without requiring any changes 
to current hospital reporting practices.
    It has been our policy since CY 2006 to only use separately payable 
drugs and biologicals in the calculation of the equivalent average ASP-
based payment amount under the OPPS. We do not include packaged drugs 
and biologicals in this standard analysis because cost data for these 
items are already accounted for within the APC ratesetting process 
through the median cost calculation methodology discussed in section 
II.A. of this final rule with comment period. To include the costs of 
coded packaged drugs and biologicals in both our APC ratesetting 
process (for associated procedures present on the same claim) and in 
our ratesetting process to establish an equivalent average ASP-based 
payment amount for separately payable drugs and biologicals would give 
these data disproportionate emphasis in the OPPS by skewing our 
analyses, as the costs of these packaged items would be, in effect, 
counted twice. Accordingly, we are not adopting the suggestion from 
commenters that we include all packaged and separately payable drugs 
and biologicals when establishing an equivalent average ASP-based rate 
to provide payment for the hospital acquisition and pharmacy handling 
costs of drugs and biologicals. However, we remind commenters that 
because the costs of packaged drugs and biologicals, including their 
pharmacy overhead costs, are packaged into the payment for the 
procedures in which they are administered, the OPPS provides payment 
for both the drugs and the associated pharmacy overhead costs through 
the applicable procedural APC payments.
    Furthermore, we disagree with the commenters who recommended that 
we should pay separately for all drugs and biologicals with HCPCS 
codes. We continue to believe that packaging is a fundamental component 
of a prospective payment system that contributes to important 
flexibility and efficiency in the delivery of high quality hospital 
outpatient services. Therefore, we believe it is appropriate to 
maintain a modest drug packaging threshold that packages the costs of 
inexpensive drugs into payment for the associated procedures. We also 
note that hospitals have been particularly sensitive to any increased 
administrative burden, and we are aware that the burden of separate 
reporting for a multitude of very low cost packaged drugs is 
significant.
    With respect to the comment that we should not include data from 
hospitals that receive discounts on outpatient drug prices under the 
340B program in our estimation of the total cost of separately paid 
drugs and biologicals and pharmacy overhead, as we stated in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60517) and the CY 
2011 OPPS/ASC final rule with comment period (75 FR 71963), we continue 
to believe that excluding data from hospitals that participate in the 
340B program from our ASP+X calculation, and paying those hospitals at 
that derived payment amount, would inappropriately redistribute payment 
to drugs and biologicals from payment for other services under the 
OPPS. The ASP-equivalent cost of drugs under the OPPS that would be 
calculated only from claims data for hospitals that do not participate 
in the 340B program, would likely be higher than the cost of all drugs 
from our aggregate claims from all hospitals. To set drug payment rates 
for all hospitals based on a subset of hospital cost data, determined 
only from claims data from hospitals that do not participate in the 
340B program would increase the final APC payment weights for drugs in 
a manner that does not

[[Page 74320]]

reflect the drug costs of all hospitals, although all hospitals, 
including 340B hospitals, would be paid at these rates for drugs. 
Furthermore, as a consequence of the statutory requirement for budget 
neutrality, increasing the payment weights for drugs by excluding 340B 
hospital claims would reduce the relative payment weight for other 
services in a manner that does not reflect the procedural costs of all 
hospitals relative to the drug costs of all hospitals, thereby 
distorting the relativity of payment weights for services based on 
hospital costs. Many commenters on the CY 2009 OPPS/ASC final rule with 
comment period were generally opposed to differential payment for 
hospitals based on their 340B participation status, and we do not 
believe it would be appropriate to exclude claims from this subset of 
hospitals in the context of a CY 2012 drug and biological payment 
policy that is based on average acquisition cost and pays all hospitals 
at the same rate for separately payable drugs and biologicals.
    Comment: One commenter requested that CMS provide more information 
regarding the outcomes of the analysis referenced in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 71962) finding that matching 
the ASP data with the time of the cost report would remove a downward 
bias in the standard methodology, but that the upward bias of later 
charges from claims generally offsets the increases in prices in a more 
recent ASP file. The commenter further stated that they believed the 
use of later ASP data in a final rule may be directly attributable to 
the tendency of the relationship between ASP and total costs of 
separately payable drugs to decline by 1 percentage point in the final 
rule.
    Response: We are uncertain what additional information the 
commenters are seeking regarding our finding in the CY 2011 OPPS/ASC 
final rule with comment period that the slightly higher estimated cost 
created by using a CCR from the year prior to the claim year generally 
offsets the increases in prices in a more recent ASP file (75 FR 
71962). However, as described below, in our analysis of the ASP+X 
methodology for this CY 2012 final rule with comment period, we have 
found that a primary cause in the decline of the methodologically-
derived ASP+X percent is the inclusion of a whole year's data for the 
final rule while keeping the drug overhead redistribution amount 
constant, and not the use of later ASP data, as the commenter 
suggested. Had we finalized our proposed redistribution methodology 
without modification in CY 2012, this would have again yielded a 1 
percent decline, from ASP+4 to ASP+3, in the final CY 2012 ASP+X 
percent.
    Comment: A few commenters recommended that CMS require hospitals to 
bill all drugs with HCPCS codes under revenue code 0636 in order to 
improve its data on packaged drugs. The commenter also recommended that 
CMS require hospitals to report J3490 (Unclassified drugs) for drugs 
without a HCPCS code. One commenter asserted that requiring that 
hospitals take these additional steps for packaged drugs could occur 
with minimal additional administrative burden to hospitals since 
hospitals are now required to report national drug codes (NDCs) to 
State Medicaid programs. Other commenters asked that CMS require 
mandatory reporting of all drugs using either specific HCPCS codes or 
J3490, and that CMS should leave the choice of the revenue code that 
must be reported on the line to the discretion of the hospital.
    Response: We did not propose to require hospitals to report all 
drugs and biologicals using HCPCS codes and report drugs and 
biologicals that do not have specific HCPCS codes using HCPCS code 
J3490 for the CY 2012 OPPS. Therefore, we do not accept the commenters' 
recommendation that CMS require these products to be reported. We do 
not believe that it would be appropriate to impose such a requirement 
without first proposing it and considering the comments of the public.
    However, we continue to believe that OPPS ratesetting is most 
accurate when hospitals report charges for all items and services that 
have HCPCS codes using those HCPCS codes, regardless of whether payment 
for the items and services is packaged. As we state in this final rule 
with comment period, it is our standard ratesetting methodology to rely 
on hospital cost report and charge information as it is reported to us 
through the claims data. We continue to believe that more complete data 
from hospitals identifying the specific drugs that were provided during 
an episode of care will improve payment accuracy for separately payable 
drugs in the future. Therefore, we continue to encourage hospitals to 
change their reporting practices if they are not already reporting 
HCPCS codes for all drugs and biologicals furnished, where specific 
HCPCS codes are available for those drugs and biologicals.
    Comment: Several commenters characterized our proposed 
redistribution methodology as arbitrary in nature, in part because CMS 
does not truly know the amount of overhead to move for the proposed 
overhead adjustment. A few commenters generally agreed with CMS' 
proposal to redistribute pharmacy overhead cost from packaged drugs and 
biologicals to separately payable drugs and biologicals. However, 
several commenters expressed concern that, under this methodology, the 
projected CY 2012 ASP+X amount of ASP+4 percent may decline to ASP+3 
percent in the final rule with comment period. The commenters 
reasserted their belief that payment at less than ASP+6 percent is 
insufficient for payment for separately payable drugs and biologicals.
    Several commenters supported the payment of ASP+6 percent for 
separately paid drugs and biologicals and the redistribution 
methodology on a whole, but did not support the proposed redistribution 
amount of $215 million from packaged drugs and biologicals ($161 
million from coded packaged drugs and biologicals and $54 million from 
uncoded packaged drugs and biologicals). A majority of commenters 
recommended that CMS increase the amount redistributed from coded and 
uncoded packaged drugs and biologicals to separately payable drugs and 
biologicals. A few of these commenters stated that a larger portion of 
the overhead costs should be reallocated from uncoded packaged drugs 
and biologicals to separately payable drugs and biologicals, noting 
that coded and uncoded drugs and biologicals have similar overall 
charge mark-up and, therefore, warrant a similar redistribution of 
costs. Several commenters recommended that an equal or close to equal 
amount of cost should be redistributed from packaged coded and uncoded 
drug and biological cost to separately payable drugs and biologicals.
    Response: We are not convinced by the commenters that we should pay 
separately paid drugs and biologicals at ASP+6 percent or higher for CY 
2012. We disagree with commenters' assertions that payment at less than 
ASP+6 percent would be insufficient to adequately pay for the costs of 
separately paid drugs and biologicals because our review of claims and 
cost report data provides no evidence that supports that payment at 
less than ASP+6 percent is insufficient to pay adequately for the costs 
of separately paid drugs and biologicals. To the contrary, the 
utilization of drugs and biologicals continues to increase. In 
addition, we note that payment for pharmacy overhead is not only paid 
through payment for specifically identified drugs and biologicals, but

[[Page 74321]]

pharmacy overhead payment also is packaged into payment for the 
procedure in which the cost of packaged drugs and biologicals is 
included. When a separately paid drug or biological is furnished during 
a procedure, pharmacy overhead is being paid both through the ASP+X 
percent payment for the separately paid drug and biological and, to 
some extent, in the payment for the procedure, because the APC payment 
for any procedure includes the cost of packaged drugs and the overhead 
cost associated with those packaged drugs and biologicals.
    Although several commenters recommended that CMS reallocate a 
larger portion of the estimated pharmacy overhead costs from packaged 
drugs to separately payable drugs for CY 2012 under the overhead 
adjustment methodology, and other commenters argued that we should 
redistribute an equal or nearly equal amount of cost from both packaged 
drugs and biologicals with HCPCS codes and packaged drugs and 
biologicals without HCPCS codes, for the reasons set forth below and 
consistent with our rationale outlined in the CY 2010 OPPS/ASC final 
rule with public comment period (74 FR 60511 through 60512) and the CY 
2011 OPPS/ASC final rule with comment period (75 FR 71955), we do not 
believe that we should redistribute a higher portion of drug cost from 
coded packaged drugs and biologicals, nor can we assume that uncoded 
packaged drugs and biologicals have the same or higher pharmacy 
overhead costs as coded packaged drugs and biologicals. Therefore, we 
do not believe that we can treat them comparably for purposes of 
estimating overhead. With regard to redistributing more from uncoded 
packaged drugs and biologicals, first, as indicated in the preamble to 
the CY 2011 OPPS/ASC proposed rule (75 FR 46277 through 46278), 
conversations with stakeholders and hospitals have suggested that 
hospitals do not always report HCPCS codes for drugs for a variety of 
reasons. A key premise of the pharmacy overhead adjustment 
redistribution methodology is our assessment of the amount of drug cost 
in the claims data above aggregate ASP available as ``overhead'' for 
redistribution. Knowing the specific HCPCS codes for packaged drugs and 
their associated ASP allows us to assess the difference between the 
aggregate ASP and claims cost for packaged drugs and to assess the 
intensity of pharmacy overhead associated with these drugs. The 
inability to know which drugs are captured by uncoded drug charges on a 
claim is challenging because we cannot know the hospitals' charges for 
the drug, which include overhead costs, or what the overhead complexity 
may be. Therefore, we cannot be certain that the amount of uncoded 
pharmacy overhead costs is as high as the public has suggested or that 
hospitals mark up these uncoded drugs and biologicals in the same way 
as packaged drugs and biologicals with HCPCS codes. Second, we continue 
to believe that the information supplied to us by commenters urging us 
to redistribute a greater (or equivalent) fraction of costs for uncoded 
packaged drugs and biologicals is insufficient to enable us to isolate 
the portion of the uncoded packaged drug and biological cost that is 
pharmacy overhead cost. In order to isolate the portion of uncoded 
packaged drug and biological cost that is pharmacy overhead cost, we 
believe that we would need more drug specific information reported to 
us by hospitals, either through more reporting of packaged drugs on 
claims or through more granular cost centers on the cost report. In 
addition, we note that in our preparation for the CY 2011 rulemaking 
cycle, and as indicated in the CY 2011 OPPS/ASC proposed rule, we have 
also evaluated claims data in an effort to assess how much uncoded 
packaged drugs resemble coded packaged drugs (75 FR 46278). We found 
that most uncoded packaged drug costs appear with surgical services and 
that most coded packaged drug costs appear with medical services. In 
light of this information, we are not confident that the drugs captured 
by uncoded drug costs are the same drugs captured by the coded packaged 
drug cost. Therefore, we do not agree that we can assume that they are 
the same drugs, with comparable overhead and handling costs. Without 
being able to calculate an ASP for these drugs and without being able 
to gauge the magnitude of the overhead complexity associated with these 
drugs, we do not believe we should assume the same or a greater 
proportional overhead is appropriate for redistribution. Third, we also 
disagree with the commenter's assertions that pharmacy services and 
overhead costs for all uncoded packaged drugs are similar to the costs 
associated with coded packaged drugs and are a sufficient basis for 
redistributing equal or close to equal amount of dollars from uncoded 
packaged drugs as from coded packaged drugs to separately paid drugs 
under this overhead adjustment policy. This would be contrary to 
findings from MedPAC in Chapter 6 of its June 2005 Report to Congress 
that linked overhead to the seven complexity categories of delivery; 
this report can be viewed on the MedPAC Web site at: http://www.medpac.gov/publications%5Ccongressional_reports%5CJune05_ch6.pdf. 
As we have stated elsewhere, we remain committed to using hospital data 
as reported to us by hospitals to set OPPS payment rates. Therefore, we 
continue to believe that it would be inappropriate to assume that the 
costs reported under uncoded pharmacy revenue code lines are for the 
same drugs and biologicals with the same ASPs, as the costs of packaged 
drugs and biologicals reported with HCPCS codes. Therefore, for the 
reasons set forth above, we continue to believe that we should not make 
broad assumptions that the same overall charge markup exists for both 
coded and uncoded packaged drugs or that we should redistribute a 
similar or greater amount of cost from both coded and uncoded packaged 
cost to separately payable drugs and biologicals.
    We also do not agree that our pharmacy overhead adjustment 
methodology is arbitrary. The basis for the proposed and final CY 2012 
pharmacy overhead adjustment methodology is the same as our CY 2011 and 
2010 final rules, but with one refinement for this final rule with 
comment period to enhance the intra-rulemaking stability of the ASP+X 
amount, as described below. As we stated in our CY 2010 proposed rule, 
we remain concerned that the ASP value derived using the standard 
methodology has the potential to ``compress'' costs for relatively 
high-cost products, including SCODs, due to hospital charging 
practices, and thus may understate the cost of separately payable drugs 
and biologicals and related pharmacy overhead for those drugs and 
biologicals. We cited the relatively low CY 2010 ASP value of ASP-2 for 
separately covered drugs and biologicals and the relatively high ASP 
value of ASP+247 for packaged drugs and biologicals as evidence of this 
distortion. We further stated that we believe that, according industry 
stakeholders and MedPAC, approximately $150 million of handling and 
pharmacy overhead cost for coded packaged drugs, and approximately $50 
million of costs attributed to pharmacy overhead cost for uncoded 
packaged drugs were appropriate to redistribute to separately payable 
drugs in CY 2010. We believed, and continue to believe, that between 
approximately one-third and one-half of the overhead cost associated 
with coded packaged drugs could be attributable to charge compression 
due to our cost estimation

[[Page 74322]]

methodology and our choice of a packaging threshold. In addition, 
redistributing $50 million of the total cost associated with uncoded 
packaged drugs and biologicals to separately payable drugs and 
biologicals falls in the approximate 8 percent range of total uncoded 
drug and biological costs using CY 2009 claims and the most recently 
available cost report data. This is a conservative estimate as we 
remain unwilling to make sweeping assumptions that uncoded packaged 
drugs and biologicals included a pharmacy overhead amount comparable to 
those of coded packaged drugs and biologicals with an ASP. Using our 
standard methodology to calculate ASP values in the CY 2011 OPPS/ASC 
proposed rule, we again found a relatively low ASP value for separately 
payable drugs and biologicals (ASP+0), and a relatively high ASP value 
for packaged drugs and biologicals (ASP+283). Thus, in the CY 2011 OPPS 
final rule with comment period (75 FR 71953 through 71967), we again 
finalized our proposed redistribution methodology, and redistributed 
$200 million in pharmacy overhead costs from packaged to separately 
payable drugs and biologicals. We note that our proposed CY 2012 policy 
of redistributing $161 million in overhead from coded packaged drugs 
and biologicals with an ASP, or 35 percent, falls within the one-third 
to one-half of the estimated pharmacy overhead cost in coded packaged 
drugs and biologicals. The CY 2010 policy for redistributing $150 
million from coded packaged drugs and biologicals to separately payable 
drugs and biologicals was based on our assessments using both industry 
and MedPAC data (74 FR 60505 through 60507). We believed and continue 
to believe that between approximately one-third and one-half of the 
overhead cost in coded packaged drugs could be attributable to charge 
compression due to our cost estimation methodology and our choice of a 
packaging threshold.
    The proposed CY 2012 policy of redistributing $53 million of the 
total cost of uncoded packaged drugs and biologicals to separately 
payable drugs and biologicals, or approximately 11 percent in overhead 
cost from uncoded packaged drugs and biologicals, falls into the 
parameter of not less than 8 percent of cost associated with these 
items, as discussed in the CY 2010 OPPS/ASC final rule with comment 
period. Further, as we indicated in the CY 2010 OPPS/ASC final rule 
with comment period, the proportion of uncoded packaged drug cost that 
is redistributed is a conservative estimate, as compared to the case of 
coded packaged drugs and biologicals with an ASP and for which we have 
a specific pharmacy overhead cost estimate in relationship to their 
known ASPs. As discussed in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60511), we remain unwilling to make sweeping 
assumptions that uncoded packaged drug and biological cost included a 
pharmacy overhead amount comparable to those of coded packaged drugs 
and biologicals with an ASP. We continue to be confident that a 
conservative estimate of approximately 11 percent (or $54 million for 
redistribution in the proposed rule) from the cost of uncoded packaged 
drugs and biologicals to separately payable drugs and biologicals is an 
appropriate amount in light of our uncertainty about the relationship 
between ASP and pharmacy overhead costs for the uncoded drugs and 
biologicals. We also do not believe our redistribution policy is 
arbitrary because we finalized our CY 2010 policy for an overhead 
adjustment methodology in response to public commenter consensus that 
this approach was an appropriate avenue for addressing charge 
compression in the drug and biological payment rates for separately 
paid drugs. We believe that the consensus among commenters regarding 
the necessity of a redistribution methodology to correct for relatively 
high and low ASP values for packaged and separately payable drugs using 
our standard methodology is further evidence that the policy adopted in 
CY 2010 and CY 2011, and which we are continuing for CY 2012 with one 
refinement (as discussed below), has a rational basis and is not 
arbitrary.
    Although we proposed to continue our established policy to 
redistribute one-third to one-half of overhead cost for coded packaged 
drugs, and not less than 8 percent of cost for uncoded packaged drugs 
and are finalizing this aspect of the proposed policy, we believe the 
intra-rulemaking fluctuation that can occur with the proposed 
methodology can be minimized, as requested by commenters. As commenters 
have stated, and as we warned in the CY 2012 OPPS/ASC proposed rule (76 
FR 42261), the overhead redistribution methodology which we finalized 
in CY 2010 to redistribute $200 million in cost for packaged drugs, 
used again in CY 2011 to redistribute $200 million in cost for packaged 
drugs, and proposed to redistribute $215 million in cost for packaged 
drugs in CY 2012, has led to a decrease in the ASP+X amount between the 
proposed and final rules. Although in CY 2010 the magnitude was not 
large enough to prompt a decline in the final ASP+X percent due to 
rounding and due to the addition of $50 million in cost for uncoded 
packaged drugs in the CY 2010 final rule with comment period, it did 
result in a 1 percent decline in CY 2011 between the proposed rule and 
the final rule with comment period. We believe that this possible 
decrease in the ASP+X percent between the CY 2012 proposed rule and 
this final rule with comment period prompted several commenters, 
especially those commenters representing hospitals and hospital 
associations, to characterize the proposed overhead redistribution 
methodology as unstable.
    In our consideration of commenters' concerns regarding this 
observed intra-rulemaking variability (that is, the fluctuation in the 
derived ASP+X value between the OPPS proposed rule and the final rule), 
in preparation for this CY 2012 final rule with comment period, we 
revisited this issue and analyzed cost and claims data in an effort to 
determine the cause of the fluctuation. We observed that much of this 
fluctuation occurs as a result of CMS adding additional cost and claims 
data between the proposed rule and the final rule with comment period 
in order to include a full year of data and, to a much lesser extent, 
our regular update of the ASP data. For example, in the CY 2012 
proposed rule, we proposed to update the CY 2011 redistribution amount 
of $200 million by the PPI for Prescription Drugs and redistribute $215 
million in overhead cost for packaged drugs, or about $161 million in 
overhead cost for coded packaged drugs and about $54 million in 
overhead cost for uncoded packaged drugs. This proposed redistribution 
amount resulted in a proposed ASP+X percent of ASP+4, because of the 
mathematical relationship between the proposed $215 million in 
redistributed drug overhead cost to the amount of total drug cost 
which, for the proposed rule, was approximately $4.7 billion based on 
the partial year data available to CMS at the time of the proposed 
rule. However, in our analysis of drug cost to derive the final CY 2012 
ASP+X percent, we observed that, due to the inclusion of an entire 
year's worth of cost data (amounting to approximately $5.4 billion) in 
the calculation, the ASP+X percent based on the proposed $215 million 
redistribution of packaged drug overhead cost again dropped 1 percent 
from ASP+4 in the CY 2012 proposed

[[Page 74323]]

rule to ASP+3 if the proposed methodology was used, without 
modification, for the final calculation. We then analyzed our ASP+X 
calculations in 2011, and found the same effect, namely that inclusion 
of an entire year's worth of cost data for each respective year's final 
rule relative to a fixed redistribution amount resulted in a different 
and lower ASP+X value in the final rule than was proposed. Although the 
change in CY 2010 was less than one-half percent and thus prompted no 
change in the final ASP+X percent due to rounding, the inclusion of a 
whole year of costs caused a 1 percent decline in the ASP+X percent in 
CY 2011, just as it would in CY 2012 were CMS to finalize our proposed 
redistribution methodology with a fixed $215 million redistribution. 
This effect is illustrated in the following Table 38.
[GRAPHIC] [TIFF OMITTED] TR30NO11.064

    The observed decline in the ASP+X percent occurs because during the 
CY 2012 proposed rule CMS has only a partial year's worth of cost data 
to calculate the ASP+X percentage, which is itself an expression of the 
ratio of cost to ASP. However, when the analysis is repeated for each 
year's final rule, we use an entire year of cost data but a fixed 
dollar overhead redistribution amount. Because the amount of total drug 
cost data analyzed for the final rule is larger than it was for the 
proposed rule but the redistribution amount remains unchanged, the 
ASP+X value will always experience a decline in the intra-rulemaking 
period. We project that for most years this shrinking in the 
redistributed cost to total drug cost ratio that derives the ASP+X 
percent will cause a decrease in the ASP+X percent of at least 1 
percent between the proposed and final rules when the proposed 
methodology is used. Specifically, as indicated in Table 38, if CMS 
were to finalize for CY 2012 our proposed redistribution of $161 
million in overhead cost from coded packaged drugs and $54 million in 
overhead cost from uncoded packaged drugs, the ASP+X percent would 
decline from ASP+4 in the proposed rule to ASP+3 in the final rule. 
This occurs because an increase in total drug costs of $763 million 
analyzed for the final rule with no change to the redistribution amount 
changes the ratio of redistributed cost to total drug cost changes and 
prompts a 1 percent decrease in the ASP+X percent.
    Comment: In general, commenters urged CMS to increase the stability 
and decrease the volatility of its payment policies wherever possible. 
The commenters stated that instability in the OPPS rates creates 
budgeting, planning, and operating problems for hospitals, and that as 
more care is provided on an outpatient, rather than inpatient basis, 
the need for stable payment rates from one year to the next becomes 
more important to hospitals. Regarding payment for SCODs and the ASP+X 
methodology in particular, commenters also cited instability as being 
problematic, particularly because of the intra-rulemaking decline in 
the ASP+X percent.
    Response: For several years now we have made policy changes in our 
payment for separately payable drugs to ensure adequate and accurate 
payment and enhance the predictability of Medicare payment for these 
products. Although we had adopted the standard method in the CY 2006 
final rule with comment period, we adopted an ASP+X percent of ASP+6 in 
the CY 2007 final rule with comment period in order to provide 
stability while we continued to examine the costs of pharmacy overhead. 
Observing declines in the equivalent average ASP+X percent calculated 
using the standard methodology, we provided a transitional rate of 
ASP+5 and ASP+4 for the CY 2008 and 2009 final rules, respectively, in 
order to enhance the stability of the ASP+X percent for those years. In 
CY 2010, we concluded that charge compression was likely distorting the 
equivalent average ASP+X percent calculated using the standard 
methodology. Therefore, in order to ensure adequate and stable payment, 
we implemented the overhead cost redistribution methodology described 
above and redistributed $200 million from packaged drug overhead cost 
to separately payable drugs in CY 2010 and 2011.
    As in each of these prior years, in CY 2012, CMS' goal is to 
provide accurate payment for separately payable drugs that is based 
upon acquisition costs, while still ensuring stability to the payment 
levels. In continued pursuit of this goal, in CY 2012, we stated that 
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 proposed to apply an inflation allowance equal 
to the PPI for Prescription Drugs to the redistribution amount. The CY 
2011 redistribution amount of $200 million updated by the PPI for 
Prescription Drugs yielded a proposed redistribution amount of $215 
million in CY 2012 ($150 million in overhead cost from coded packaged

[[Page 74324]]

drugs updated by the PPI for Prescription Drugs was $161.25 million; 
$50 million in overhead from uncoded packaged drugs updated by the PPI 
for Prescription Drugs was $53.75 million) and prompted our proposed 
ASP+X value of ASP+4 in CY 2012. However, when we updated our analysis 
using a whole year of cost data in preparation for the CY 2012 final 
rule, holding the redistribution amount of $215 million constant but 
updating the analysis using a full year of costs, we observed a decline 
of 1 percent in the ASP+X amount to ASP+3. This result, and the 
concerns raised by commenters regarding the intra-rulemaking 
fluctuation in the methodologically-derived ASP+X percent with a fixed 
redistribution amount, prompted us to reexamine this issue in order to 
better understand the principal source of the intra-rulemaking 
fluctuation.
    We note that since the implementation of the cost redistribution 
methodology, while we have always used an entire year of cost data to 
calculate the ASP+X percent in the final rule with comment period, we 
have not made adjustments in the redistribution amount to account for 
these additional data in the final rule. After further analysis, 
including 3 years of cost, claims, and redistribution data pertaining 
to the ASP+X calculation, we have determined that holding the 
redistribution amount constant between the proposed and final rules (as 
we did in the CY 2011 OPPS/ASC final rule with comment period and had 
proposed to again do for CY 2012) is the principal contributing factor 
to the intra-rulemaking fluctuation observed by commenters in CMS' 
current ASP+X methodology.
    After performing the analysis described above, we believe the 
fluctuation in the methodologically-derived ASP+X percent in the intra-
rulemaking period (that is, the period of time between the proposed and 
final rule) identified by commenters can be minimized, and greater 
stability in the ASP+X percent during the intra-rulemaking period 
achieved if CMS implements in CY 2012 a refinement to our ASP+X 
methodology that adjusts for the additional cost and claims data 
analyzed for the final rule. This refinement, in which we will 
redistribute a proportional amount of pharmacy overhead and handling 
costs from packaged to separately payable drugs instead of a fixed 
amount, is explained in detail below.
    In the proposed rule, the $161 million of coded drug cost and $54 
million in uncoded drug cost that we calculated using the CY 2011 
redistribution amounts for coded and uncoded drugs indexed by the PPI 
for Prescription Drugs constituted 35 percent and 10.7 percent, 
respectively, of the drug handling and overhead costs for these 
categories. If we had redistributed the same amounts ($161 million of 
coded drug costs and $54 million of uncoded drug costs) for the final 
rule with comment period, due to the inclusion of a whole year's cost 
data in the final ASP+X calculation, each amount would constitute a 
substantially smaller proportion of all drug handling and pharmacy 
overhead costs and would cause the ASP+X to drop. However, because the 
final rule ASP+X calculation uses a whole year of data, while the 
proposed rule is based on a partial year, and because this additional 
data will, in most years, cause a decline in the ASP+X between the 
proposed rule and the final rule with comment period, we now believe 
that it is appropriate to hold constant the proportions of 
redistributed packaged drug cost from the proposed rule to the final 
rule with comment period instead of finalizing our prior years' 
methodology of redistributing a fixed amount of cost from coded and 
uncoded packaged drugs, and holding constant this amount of overhead 
that is redistributed from the proposed to the final rule.
    We now believe that redistributing the same proportion, rather than 
the same amount, of coded and uncoded packaged drug cost in the final 
rule is appropriate because we believe this approach will enhance the 
intra-rulemaking stability for SCOD payment rates; the refinement will 
yield a final ASP +X value that in most cases does not change between 
the proposed rule and the final rule with comment period. Such a result 
occurs because this approach maintains the mathematical relationship 
between redistributed packaged drug pharmacy overhead and handling cost 
and total drug overhead and handling cost, so that when a whole year of 
cost data are analyzed for the final rule, the same proportional amount 
of coded and uncoded packaged drug cost is redistributed in order to 
calculate the ASP+X percent. Therefore, we believe that this approach 
is a small but important refinement in the redistribution methodology 
used to calculate the ASP+X amount and will lead to greater intra-
rulemaking stability for SCOD payment rates.
    It is important to note that this methodology redistributes a fixed 
proportion of the calculated overhead attributable to coded and uncoded 
packaged drugs so that the percent of overhead will not change between 
the proposed rule and the final rule with comment period. However, the 
percentage of total drug cost that is redistributed will be expected to 
change slightly between the proposed rule and the final rule with 
comment period. This is because each drug has a different fraction of 
its total cost attributed to pharmacy overhead and handling, and the 
``mix'' of products (each with an individual pharmacy overhead cost) 
prescribed by physicians and billed to Medicare varies from month to 
month. The additional cost and claim data used to derive the ASP+X 
percent in the final rule with comment period will therefore reflect a 
slightly different mix of drugs and therefore a slightly different 
ratio of handling costs to total drug costs, when compared with the 
ratio from the proposed rule, which used less than a whole year of 
data. Table 39 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 
after application of the final CY 2012 overhead adjustment methodology 
and amounts.

[[Page 74325]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.065

    In summary, for the reasons set forth above and considering the 
data limitations we have previously discussed, we are finalizing our 
proposal to continue our prior CY 2010 and CY 2011 acquisition cost 
proxy methodology and pharmacy overhead redistribution methodology in 
CY 2012, but with one refinement discussed below. In addition, we are 
finalizing our proposal to adjust the $200 million redistribution 
amount finalized in CY 2011 for inflation using the PPI for 
Prescription Drugs. For this final rule with comment period, we have 
analyzed the PPI-updated amount of $215 million, which is comprised of 
$161 million in overhead costs from coded packaged drugs and 
biologicals and $54 million in overhead costs from uncoded packaged 
drugs and biologicals, and noted that these updated amounts translate 
to approximately 35 percent of coded packaged drug overhead costs, and 
approximately 10.7 percent of uncoded packaged drug overhead costs. 
Rather than holding the redistribution amounts constant between the 
proposed rule and the final rule, for this CY 2012 OPPS final rule with 
comment period, we are instead holding constant the redistribution 
proportions of overhead cost for coded and uncoded packaged drugs in 
order to maintain the 35 percent and 10.7 percent ratios. Consequently, 
although the final redistribution amount is higher in this final rule 
with comment period than it was in the proposed rule, the proportion of 
redistributed overhead cost for coded and uncoded packaged drugs 
remains constant between the proposed and final rule. Therefore, for CY 
2012, we will update the CY 2011 redistribution amounts by the PPI for 
Prescription Drugs (yielding $215 million, as described in the proposed 
rule), and then hold the proportions constant between the proposed rule 
and the final rule with comment period in order to redistribute $169 
million (or 35 percent) of coded packaged drug overhead cost, and $71.3 
million (or 10.7 percent) of uncoded packaged drug overhead cost, 
resulting in a total redistribution amount of $240.3 million.
    The redistribution amount of $169 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 amount of 10.7 percent of drug cost 
in uncoded packaged drugs and biologicals would be redistributed to 
separately payable drugs for CY 2012. Therefore, this amount continues 
to be no less than 8 percent of the total uncoded drug and biological 
cost. The result of this methodology is an ASP+4 percent amount for CY 
2012 when applied using July 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. For the reasons set forth above, we are finalizing 
an ASP+X percent of ASP+4 for separately payable drugs in CY 2012.

[[Page 74326]]

    Further, we are finalizing our proposal to continue to include the 
claims data for 340B hospitals in the calculation of payment for drugs 
and biologicals under the CY 2012 OPPS. 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 
finalizing our proposal 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.
    Finally, we are finalizing our proposal 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 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 also 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.
    We also 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 
alternative cost-based methodologies to aid in our ongoing evaluations 
that could improve upon the adopted methodology.
c. Payment Policy for Therapeutic Radiopharmaceuticals
    Beginning in the CY 2005 OPPS final rule with comment period, we 
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 therapeutic 
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

[[Page 74327]]

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, in the CY 2012 OPPS/ASC proposed rule (76 FR 42263), we 
proposed 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 final rule with comment period) 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 proposed 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 were included in Addenda A and 
B to the proposed rule (which is referenced in section XVII. of the 
proposed rule and available via the Internet).
    Comment: A large number of commenters from consumers and disease-
focused advocacy groups submitted comments regarding CMS' payment for 
BEXXAR[supreg] (Tositumomab and Iodine I 131 Tositumomab). The 
commenters stated that CMS payment for this product is inadequate and 
that payment rates may cause hospitals and physicians to be unable to 
make BEXXAR[supreg] available. Commenters also stated that CMS erred in 
treating certain portions of the BEXXAR[supreg] product as diagnostic, 
rather than therapeutic, because the presence of disease has already 
been diagnosed and affirmed prior to the administration of 
BEXXAR[supreg]. A few commenters characterized the proposed CY 2012 
payment rate for BEXXAR[supreg] as being motivated by saving money. 
Some of these commenters stated that CMS was attempting to ``cut 
stipends'' or failing to fund cancer research. Other commenters 
suggested that CMS would no longer cover BEXXAR[supreg] or other 
radioimmunotherapies. One commenter submitted information on studies 
regarding the efficacy of BEXXAR[supreg] for treating Lymphoma. Several 
commenters stated that they were concerned about their ability to 
afford radioimmunotherapy services. One commenter suggested that CMS 
negotiate with drug manufacturers to reduce their charges.
    Response: We do not agree with commenters' assertions that Medicare 
payment through the OPPS for BEXXAR[supreg] is inadequate. We analyzed 
this assertion against our standard methodologies and did not find 
evidence to support the commenters' assertion that OPPS payment for 
BEXXAR[supreg] is unusually low. In the comment letter to CMS, the 
manufacturer of BEXXAR[supreg] stated that it believed hospital 
acquisition cost for BEXXAR[supreg] is approximately $35,657, but the 
amount that Medicare has proposed to pay for CY 2012 is $33,982. We 
note that we pay for the majority of the cost of BEXXAR[supreg] 
treatment under the OPPS based on the manufacturer-supplied ASP plus, 
in CY 2012, 4 percent for hospital pharmacy handling and overhead, an 
amount calculated using hospital claims data. We also note that part of 
the administration costs for any therapy is typically bundled into 
prospective payments such as chemotherapy administration codes. In 
analyzing the elements of the treatment regimen described by 
commenters, we believe that all costs are accounted for in the various 
payment methods used by CMS to reimburse for the hot (therapeutic) and 
warm (diagnostic) doses of Tositumomab.
    We also do not agree that our policy in paying portions of 
BEXXAR[supreg] as a diagnostic (rather than therapeutic) 
radiopharmaceutical is inappropriate. Although we acknowledge that 
certain components of BEXXAR[supreg] are therapeutic, other components 
of the therapy, most notably the ``warm'' dose of Tositumomab, are 
diagnostic in nature and are used in conjunction with imaging studies 
to determine whether future therapeutic services would be beneficial to 
the patient, and how to proceed with therapy. We note that diagnostic 
uses are characterized both by the inclusion of the word ``diagnostic'' 
in HCPCS long descriptors and by the use of the service to obtain 
information as opposed to improving the medical condition of the 
patient. We believe that commenters claiming that CMS is cutting 
stipends or failing to fund cancer research are mistaken; the Medicare 
program generally, and the OPPS in particular, does not provide 
stipends to cancer researchers, nor does it directly fund cancer 
research. We also wish to emphasize that CMS has not changed its 
coverage status for BEXXAR[supreg], which remains a Medicare-covered 
treatment in the hospital outpatient department. Further, CMS has not 
made its proposed payment for BEXXAR[supreg] to save the Medicare 
program money. Payment for BEXXAR[supreg], like most drugs and 
procedures in the OPPS, is determined by statute and is based on 
acquisition data furnished by drug manufacturers and costs reported to 
CMS by hospitals. Year-to-year fluctuations in payment for individual 
items and treatments are often the result of fluctuations in the 
submitted cost data, as it is in this case, and not the result of a 
policy decision to save the Medicare program money.
    Finally, we are sympathetic to commenters' concern regarding the 
high cost of radioimmunotherapy services. We note that the national 
unadjusted copayment for the ``hot'' dose of Iodine I-131 Tositumomab 
is approximately $6,000, and can appreciate how many Medicare 
beneficiaries would have difficulties affording such a large 
coinsurance amount. Although we share commenters' concerns about the 
growth in health costs, CMS does not have the authority to directly 
negotiate with drug manufacturers on behalf of Medicare beneficiaries 
to get manufacturers to reduce their drug prices.
    Comment: Several commenters requested that CMS create a HCPCS J-
code for tositumomab, currently provided under a radioimmunotherapy 
regimen and billed as part of HCPCS code G3001 (Administration and 
supply of tositumomab, 450 mg). The commenter argued that because 
tositumomab is approved by the FDA as part of the BEXXAR[supreg] 
regimen and has its own National Drug Code (NDC), it should be 
recognized as a drug and, therefore, be paid as other drugs are paid 
under the OPPS methodology, instead of having a payment rate determined 
by hospital claims data. The commenters recommended that 
nonradiolabeled Tositumomab receive separate payment.
    Response: We have consistently noted that unlabeled tositumomab is 
not

[[Page 74328]]

approved as either a drug or a radiopharmaceutical. It is a supply that 
is required as part of the radioimmunotherapy treatment regimen (the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68658), the CY 2008 
OPPS final rule with comment period (72 FR 66765), the CY 2006 OPPS 
final rule with comment period (70 FR 68654), and the CY 2004 OPPS 
final rule with comment period (68 FR 63443)). We do not make separate 
payment for supplies used in services provided under the OPPS. Payments 
for necessary supplies are packaged into payments for the separately 
payable services provided by the hospital. Specifically, it is the 
administration of unlabeled tositumomab (the ``cold'' or diagnostic 
dose) that is a complete service that qualifies for separate payment 
under its own clinical APC, 0442. This diagnostic (information 
collecting, nontherapeutic) complete service is currently described by 
HCPCS code G3001, which includes tositumomab as a supply. Therefore, we 
do not agree with the commenter's recommendation that we should assign 
a separate HCPCS code to the supply of unlabeled tositumomab. Rather, 
we will continue to make separate payment for the administration of 
tositumomab, and payment for the supply of unlabeled tositumomab is 
packaged into the administration payment.
    Comment: A majority of commenters supported CMS' proposal to 
continue to pay for 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 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. 
Several commenters disagreed with the proposed payment rate for 
nonpass-through separately payable drugs, biologicals, and therapeutic 
radiopharmaceuticals at ASP+4 and instead recommended that CMS 
reimburse for these products at a set rate of ASP+6.
    Several commenters disagreed with CMS' proposal 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. The commenters suggested that CMS instead use hospitals' 
charges adjusted to cost when ASP data are unavailable for nonpass-
through separately payable therapeutic radiopharmaceuticals. Some 
commenters also recommended that CMS provide cost-based payment to 
hospitals when ASP is not available. A few commenters further noted 
that CMS should require all manufacturers of therapeutic 
radiopharmaceuticals to submit ASP data for all therapeutic 
radiopharmaceuticals currently paid under the OPPS.
    Response: We appreciate the commenters' support. We continue to 
believe that providing payment for nonpass-through separately payable 
therapeutic radiopharmaceuticals based on ASP information, if 
available, for a ``patient ready'' dose, and updated quarterly for 
products for which the manufacturer reported ASP data or mean unit cost 
if ASP information is not available would provide appropriate payment 
for these products. As stated in the CY 2011 OPPS/ASC proposed rule (75 
FR 46276), we believe that the ASP information collected under section 
1847A(b)(1)(A) of the Act and our hospital claims data is a suitable 
proxy for the acquisition cost data, and that ASP+6 is an accurate 
payment for separately covered drugs and biologicals when it is derived 
using these data and our standard methodology. Therefore, we do not 
agree with commenters' assertion that we should as a matter of policy 
set payment for these items at ASP+6. When ASP data are not available, 
we believe that paying for therapeutic radiopharmaceuticals using mean 
unit cost would appropriately pay for the average hospital acquisition 
and associated handling costs of nonpass-through separately payable 
therapeutic radiopharmaceuticals. As we stated in the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 71968) and the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60523), although using mean unit 
cost for payment for therapeutic radiopharmaceuticals when ASP data are 
not available is not the usual OPPS process (that relies on alternative 
data source, such as WAC or AWP, when ASP information is temporarily 
unavailable, prior to defaulting to the mean unit cost from hospital 
claims data), we continue to believe that WAC or AWP is not an 
appropriate proxy to provide OPPS payment for average therapeutic 
radiopharmaceutical acquisition cost and associated handling costs when 
manufacturers are not required to submit ASP data. In addition, we do 
not believe that we should provide payment at charges reduced to cost 
or reasonable cost when ASP data is not available. As we have stated 
previously in the CY 2008 OPPS/ASC final rule with comment period, we 
continue to believe that payment on a claim-specific basis is not 
consistent with the payment of items and services in a prospective 
payment system under the OPPS and may also lead to extremely high or 
low payments to hospitals for radiopharmaceuticals, even when those 
products would be expected to have relatively predictable and 
consistent acquisition and handling costs across individual clinical 
cases and hospitals. For CY 2012, Medicare will pay for only a few 
outpatient services at reasonable cost. These include, but are not 
limited to, corneal tissue acquisition and influenza vaccines. Corneal 
tissue acquisition and influenza vaccines are paid at reasonable cost 
in part because the input costs for future years are hugely 
unpredictable and to set a prospective payment rate for them may result 
in payment that is so deficient that hospitals would not be able to 
provide the services and the general public could be denied the 
benefits. In particular, it is not possible to forecast with confidence 
what the cost of influenza vaccine would be a year in advance because 
the composition of the vaccine is not constant from year to year. In 
contrast, however, the input costs of therapeutic radiopharmaceuticals 
are not hugely unpredictable. Therefore, we do not believe that 
therapeutic radiopharmaceuticals should be paid in the same manner as 
the few outpatient services paid at reasonable cost. We continue to 
believe that when ASP data are unavailable for therapeutic 
radiopharmaceuticals, payment based upon mean unit cost is an 
appropriate proxy for hospitals' acquisition and handling data.
    We disagree with the commenters who suggested that CMS require all 
manufacturers of therapeutic radiopharmaceuticals to submit ASP data 
for all therapeutic radiopharmaceuticals currently paid under the OPPS. 
We continue to believe that requiring ASP data for all therapeutic 
radiopharmaceuticals currently paid under the OPPS would potentially be 
burdensome for manufacturers. Moreover, as we stated in the CY 2011 
OPPS/ASC final rule with comment period (75 FR 71969) and the CY 2010 
OPPS/ASC final rule with comment period (74 FR 60524), the challenges 
involved in reporting ASP for a radiopharmaceutical are significant in 
many cases, given the variety of manufacturing processes and the 
frequent need for patient specific pre-processing. Therefore, due to 
the fact that the added administrative burden of direct reporting 
outweighs the expected

[[Page 74329]]

benefits, and given the relative accuracy of hospital claims data 
regarding such drugs, payment based on mean unit cost from historical 
hospital claims data offers the best proxy for average hospital 
acquisition cost and associated handling costs for a 
radiopharmaceutical in many situations. We continue to believe that we 
should allow, but not require, manufacturers to submit ASP information 
for therapeutic radiopharmaceuticals. If ASP information is unavailable 
for a therapeutic radiopharmaceutical because a manufacturer is not 
willing or not able to submit ASP information, we will provide payment 
based on the mean unit cost of the product that is applicable to 
payment rates for the year the nonpass-through therapeutic 
radiopharmaceutical is administered.
    Comment: One commenter stated that while it supported paying 
separately payable therapeutic radiopharmaceuticals under the ASP+X 
payment methodology established in the CY 2012 proposed rule, it 
believed that payment for radiopharmaceuticals should be made at a 
higher level than other drugs and biologicals because of the unique 
pharmacy handling and overhead costs associated with 
radiopharmaceuticals. Therefore, the commenter recommended that CMS pay 
for radiopharmaceuticals at a payment rate of at least ASP+10 percent 
while continuing to develop detailed data on the overhead and handling 
costs associated with radiopharmaceuticals.
    Response: We continue to believe that paying for therapeutic 
radiopharmaceuticals under the ASP+X payment amount established for 
separately payable drugs and biologicals under the OPPS, established at 
ASP+4 percent for CY 2012, is the most appropriate proxy for 
acquisition and pharmacy overhead and handling costs for separately 
payable therapeutic radiopharmaceuticals, regardless of the amount of 
pre-processing needed to create a ``patient ready'' dose. As we stated 
in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60522), 
we established our interpretation of ``patient-ready'' for purposes of 
the OPPS to mean that the ASP, reported in terms that reflect the 
applicable HCPCS code descriptor, should include the price for all 
component materials of the radiopharmaceutical as well as any 
additional processing, including radiolabeling, that is reflected in 
the price the manufacturer charges for the radiopharmaceutical, so long 
as the fees paid for such additional processing meet the ``bona fide 
service fee'' test under the regulations implementing section 1847A of 
the Act. We explicitly noted that because radiopharmaceuticals uniquely 
require radiolabeling of their component materials, we believe that 
radiolabeling could constitute a bona fide service on behalf of the 
manufacturer and the fees could meet the ``bona fide service fee'' 
test, for purposes of OPPS ASP reporting. Given our position on 
radiolabeling, we similarly believe that significant manufacturer 
processing costs associated with handling radiopharmaceuticals may be 
reflected in the prices used to calculate the manufacturer's ASP data 
for OPPS purposes. Therefore, the combined single payment for nonpass-
through separately payable therapeutic radiopharmaceutical acquisition 
and overhead costs embodied in the ASP+4 percent payment rate for CY 
2012 would address any other processing by the manufacturer for 
purposes of the OPPS, and we continue to believe this payment is 
sufficient to cover additional handling costs borne by the hospital (as 
calculated by hospital cost data). Under this interpretation of 
``patient-ready'' dose, we do not believe that making an additional 
payment for more intensive handling costs is necessary.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to pay all 
nonpass-through, separately payable therapeutic radiopharmaceuticals 
under the ASP+X payment level established using the pharmacy overhead 
adjustment based on a redistribution methodology to set payment for 
separately payable drugs and biologicals (as discussed in section 
V.B.3.b. of this final rule with comment period) 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 CY 2012, nonpass-through separately payable therapeutic 
radiopharmaceuticals will be paid at ASP+4 percent under the ASP+X 
payment methodology for nonpass-through separately payable drugs and 
biologicals. We will base nonpass-through, separately payable 
therapeutic radiopharmaceutical payment rates on mean unit cost derived 
from CY 2010 claims data when ASP pricing is not available. The final 
CY 2012 payment rates for nonpass-through separately payable 
therapeutic radiopharmaceuticals are included in Addenda A and B to 
this final rule with comment period (which are referenced in section 
XVII. of this final rule with comment period and available via the 
Internet).
4. 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42263 through 42264), 
for CY 2012, we proposed to pay for blood clotting factors at ASP+4 
percent, consistent with our proposed payment policy for other nonpass-
through separately payable drugs and biologicals, and to continue our 
policy for payment of the furnishing fee using an updated amount. 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 was 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 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.gov/McrPartBDrugAvgSalesPrice/.
    Comment: A few commenters supported CMS' proposal to continue to 
apply the furnishing fee for blood clotting factors provided in the 
OPD. One commenter stated that the furnishing fee helps ensure patient 
access to blood clotting factors by increasing the payment rate for 
these items. Other commenters supported payment for blood clotting 
factors at no less than ASP+6 percent for CY 2011

[[Page 74330]]

and stated that payment at less than ASP+6 percent for all drugs and 
biologicals, especially blood clotting factors and all drugs and 
biologicals, is inappropriate.
    Response: We appreciate the commenters' support. We continue to 
believe that applying the furnishing fee for blood clotting factors is 
appropriate for CY 2012. However, we see no compelling reason to 
provide payment for blood clotting factors under a different 
methodology for OPPS purposes at this time. For CY 2012, under this 
final rule with comment period, we will pay for blood clotting factors 
under the same methodology as other separately payable drugs and 
biologicals under the OPPS, and we will continue paying an updated 
furnishing fee. For the reasons we discussed in section V.B.3. of this 
final rule with comment period, we believe that the payment rate of 
ASP+4 percent is appropriate payment for the acquisition cost and 
pharmacy overhead related to drugs and biologicals that are not 
packaged, which includes blood clotting factors. In addition, because 
we recognize that there is additional work involved in acquiring the 
product, that is neither acquisition cost nor pharmacy overhead, we 
believe that it continues to be appropriate to pay a furnishing fee for 
blood clotting factors under the OPPS as is done in the physician's 
office setting and the inpatient hospital setting.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 proposal, without modification, to provide 
payment for blood clotting factors under the same methodology as other 
separately payable drugs and biologicals under the OPPS and to continue 
paying an updated furnishing fee. We will announce the actual figure 
for the percent change in the applicable CPI and the updated furnishing 
fee calculation based on that figure through the applicable program 
instructions and postings on the CMS Web site.
5. 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42264 through 42266), 
we proposed 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 proposed 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 believed this proposed policy would ensure 
that new nonpass-through drugs, nonimplantable biologicals and 
therapeutic radiopharmaceuticals would be treated like other drugs, 
nonimplantable biologicals, and therapeutic radiopharmaceuticals under 
the OPPS, unless they are granted pass-through status. Only pass-
through drugs, nonimplantable biologicals, or therapeutic 
radiopharmaceuticals would receive a different payment for CY 2012, 
which would be 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 proposed 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). This is consistent with the 
proposed policy packaging all existing nonpass-through diagnostic 
radiopharmaceuticals, contrast agents and implantable biologicals, as 
discussed in more detail in sections V.B.2.d. and IV.A.2. of this final 
rule with comment period.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, for CY 2012, we proposed to

[[Page 74331]]

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 noted that if the WAC is also 
unavailable, we would make payment at 95 percent of the product's most 
recent AWP. We also proposed to assign status indicator ``K'' (for 
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 proposed 
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 pass-through drugs, nonimplantable biologicals, or 
therapeutic radiopharmaceuticals would receive a different payment for 
CY 2012, which would be 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 proposed 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 proposed to make payment for new therapeutic 
radiopharmaceuticals 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 proposed with new drugs and biologicals, 
we proposed 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, we proposed to announce 
any changes to the payment amounts for new drugs and biologicals in 
this 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 were not available at the time of development of 
the proposed rule. However, these agents are included in Addendum B to 
this CY 2012 OPPS/ASC final rule with comment period (which is 
referenced in section XVII. of this final rule with comment period and 
available via the Internet on the CMS Web site) where they are assigned 
comment indicator ``NI.'' This comment indicator reflects that their 
interim final OPPS treatment is open to public comment in this 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 did not have CY 2010 
hospital claims data available for the 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 proposed 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 proposed for drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals in CY 2012. We 
proposed 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 proposed to continue to package regardless of cost as 
discussed in more detail in section V.B.2.d. of this final rule with 
comment period) in CY 2012. We proposed 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 proposed to use the WAC for the product to establish the 
initial payment rate. However, we noted 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 of the proposed rule (76 FR 
42265).
    Comment: One commenter stated that it had been advised by the 
American Hospital Association Central office on HCPCS to report HCPCS 
code J1826 (Injection, interferon beta-1A-1A, 30 mcg). The commenter 
noted that HCPCS code J1826 currently has a status indicator of ``E'' 
and is not payable under OPPS but, because it is reportable, believed 
that it should receive a status indicator of ``K'' and be assigned to 
an APC. The commenter noted that HCPCS code Q3025 (K Interferon beta 1-
a, 11 mcg for IM use) is reportable and is assigned to APC 9022 with a 
CY 2011 rate of approximately $222.
    Response: HCPCS code J1826 was made effective January 1, 2011, and 
assigned a status indicator of ``E'' under the hospital OPPS and given 
a coverage indicator of ``Not payable by Medicare'' by the HCPCS Work 
Group. Although the HCPCS code is not payable by Medicare, other 
insurers may recognize it. Therefore, we advise hospitals to contact 
their health insurers for further reporting and/or payment information 
related to HCPCS code J1826.
    The commenter is correct that hospitals can report HCPCS code 
Q3025, which is separately reportable under the OPPS. HCPCS code Q3025 
is assigned to APC 9022, and for the July 2011 update, its payment rate 
is approximately $235. Hospitals are reminded that payments for OPPS 
drugs

[[Page 74332]]

are updated quarterly and posted on the CMS OPPS Web site, specifically 
at https://www.cms.gov/HospitalOutpatientPPS/AU/list.asp#TopOfPage. 
Because payments for OPPS drugs are updated on a quarterly basis, 
hospitals are advised to refer to either Addendum A, which is in APC 
order, or Addendum B, which is in HCPCS code order, for the latest 
payment information for items and services paid under the OPPS.
    Comment: One commenter remarked that the ``list of acceptable 
analgesics for long bone fractures'' does not include products such as 
Motrin and ibuprofen. The commenter recommended that CMS add these 
products to the ``list of acceptable medications'' to treat pain for 
long bone fractures.
    Response: We are uncertain what the commenter means in reference to 
a list of acceptable medications to treat long bone fractures as we are 
not aware of any such list established for Medicare payment in the 
hospital outpatient department for such injuries. In the CY 2012 OPPS/
ASC proposed rule, we did not make any specific proposals regarding a 
list of analgesics, nor have we finalized any policies that pertain to 
a list of analgesics. Therefore, we believe that this comment is 
outside the scope of this final rule with comment period. However, we 
note that this discussion of drugs and biologicals discusses payment 
for all medically necessary drugs and therefore applies to those that 
are necessary for the treatment of pain in the HOPD, including NSAIDS 
such as ibuprofen. We further note that, although in most cases drugs 
necessary for the treatment of pain, including NSAIDS such as 
ibuprofen, do not receive separate payment under OPPS, their costs, as 
with costs associated with other supplies necessary during the visit, 
may be packaged into emergency department or clinic visit codes.
    Although we did not receive any specific public comments regarding 
our proposed payment for nonpass-through drugs, biologicals, and 
radiopharmaceuticals with HCPCS codes, but without OPPS hospital claims 
data, many commenters supported our proposal to pay for separately 
payable drugs at ASP+4 percent in CY 2012, and other commenters 
recommended that we pay no less than ASP+6 percent for separately 
payable drugs in CY 2012. However, these comments were not specific to 
new drugs and biologicals with HCPCS codes but without OPPS claims 
data. For more information regarding payment for separately payable 
drugs, including general public comments and our responses, we refer 
readers to section V.B.3.b. of this final rule with comment period. In 
addition, commenters on the CY 2012 OPPS/ASC proposed rule objected to 
packaging payment for diagnostic radiopharmaceuticals and contrast 
agents in general, but these comments were not directed to new 
diagnostic radiopharmaceuticals or contrast agents with HCPCS codes but 
without OPPS claims data. We summarize these comments and provide our 
response in section V.A.2.d. of this final rule with comment period.
    We are finalizing our CY 2012 proposal, without modification, as 
follows: Payment for new drugs (excluding contrast agents and 
diagnostic radiopharmaceuticals), nonimplantable biologicals, and 
therapeutic radiopharmaceuticals with HCPCS codes that do not crosswalk 
to CY 2011 HCPCS codes, but which do not have pass-through status and 
for which we do not have OPPS hospital claims data, will be made at 
ASP+4 percent for CY 2012, consistent with the final CY 2012 payment 
methodology for other new separately payable nonpass-through drugs, 
nonimplantable biologicals and therapeutic radiopharmaceuticals, 
described in section V.B.3.b. of this final rule with comment period. 
In cases where ASP information is not available, payment will be made 
using WAC, and, if WAC is also unavailable, payment will be made at 95 
percent of the product's most recent AWP. Further, payment for all new 
nonpass-through diagnostic radiopharmaceuticals, contrast agents, and 
implantable biologicals with HCPCS codes but for which we do not have 
OPPS claims data will be packaged for CY 2012. Finally, we are 
assigning status indicator ``K'' to HCPCS codes for new drugs and 
nonimplantable biologicals for which we do not have OPPS claims data 
and for which we have not granted pass-through status for CY 2012. With 
respect to new items for which we do not have ASP data, once their ASP 
data becomes available in later quarterly submissions, their payments 
will be adjusted so that the rates will be based on the ASP methodology 
and set to the finalized ASP amount of ASP+4 percent. This policy will 
ensure that payment is made for actual acquisition cost and pharmacy 
overhead for these new products.
    For CY 2012, we also proposed to continue our CY 2011 policy to 
base payment for new therapeutic radiopharmaceuticals with HCPCS codes, 
but which do not have pass-through status and for which we do not have 
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 proposed to make payment for a new therapeutic 
radiopharmaceutical at 95 percent of the product's most recent AWP 
because we would not have mean costs from hospital claims data upon 
which to base payment. Analogous to new drugs and biologicals, we 
proposed to 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.
    We did not receive any public comments specific to our proposal for 
new therapeutic radiopharmaceuticals with HCPCS codes but without pass-
through status. However, commenters on the CY 2012 OPPS/ASC proposed 
rule were generally supportive of the ASP methodology for payment for 
therapeutic radiopharmaceuticals in the HOPD, and we are finalizing an 
ASP payment methodology for separately payable therapeutic 
radiopharmaceuticals for CY 2012, as discussed in section V.B.3.c. of 
this final rule with comment period.
    We are finalizing our CY 2012 proposals, without modification, to 
provide payment based on WAC for new therapeutic radiopharmaceuticals 
with HCPCS codes but without pass-through status and for which we do 
not have claims data, if ASP data for these therapeutic 
radiopharmaceuticals is not available. If WAC information is also 
unavailable, we will make payment for new therapeutic 
radiopharmaceuticals at 95 percent of the product's most recent AWP. In 
addition, we are assigning status indicator ``K'' to HCPCS codes for 
new therapeutic radiopharmaceuticals without claims data in CY 2012 
that do not have pass-through status.
    Consistent with other ASP-based payments, for CY 2012, we proposed 
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 
will 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 were not available at 
the time of development of the

[[Page 74333]]

proposed rule. However, they are included in Addendum B to this CY 2012 
OPPS/ASC final rule with comment period. They are assigned comment 
indicator ``NI'' in Addendum B to reflect that their interim final OPPS 
treatment is open to public comment on this CY 2012 OPPS/ASC final rule 
with comment period.
    We did not receive any public comments on our proposal to announce, 
via the CMS Web site, any changes to the OPPS payment amounts for new 
drugs and biologicals on a quarterly basis. Therefore, for the reasons 
described in the CY 2012 proposed rule, we are finalizing our proposal 
and will update payment rates for new drugs, biologicals, and 
therapeutic radiopharmaceuticals, as necessary, in association with our 
quarterly update process and provide this information on the CMS Web 
site.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2010 and/or CY 2011, for which we did not have CY 2010 
hospital claims data available for the proposed rule and for which 
there were no other HCPCS codes that describe different doses of the 
same drug. These drugs and biologicals do have pricing information 
available for the ASP methodology. In the CY 2012 OPPS/ASC proposed 
rule (76 FR 42265), we noted 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 for each product based on ASP+4 percent, similar to other 
nonpass-through drugs and biologicals paid separately under the OPPS, 
by an estimated average number of units of each product that would 
typically be furnished to a patient during one day in the hospital 
outpatient setting. We proposed to package items for which we estimated 
the per day cost to be less than or equal to $80, which was the general 
packaging threshold that we proposed for drugs, nonimplantable 
biologicals, and therapeutic radiopharmaceuticals in CY 2012. We 
proposed 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 proposed to continue to package regardless of cost (as 
discussed in more detail in section V.B.2.d. of this final rule with 
comment period)) in CY 2012. We proposed 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 used in the physician's office setting, in the absence 
of ASP data, we proposed to use the WAC for the product to establish 
the initial payment rate. However, we noted that if the WAC is also 
unavailable, we would make payment at 95 percent of the most recent AWP 
available.
    We did not receive any public comments on our proposal to use 
estimated per day costs for these drugs and biologicals or on the 
resulting packaging status of these drugs and biologicals. However, 
upon receiving updated CY 2011 claims data for HCPCS codes J0364 
(Injection, apomorphine hydrochloride, 1 mg), J0630 (Injection, 
calcitonin salmon, up to 400 units), and J9216 (Injection, interferon, 
gamma 1-b, 3 million units) for this final rule with comment period, we 
determined that we no longer needed to calculate an estimated average 
number of units for these three items because we now have sufficient 
data upon which to base payment. Therefore, for CY 2011, we calculated 
the packaging status for HCPCS codes J0364, J0630, and J9216 using our 
standard methodology as described above. These codes and their 
packaging status are discussed further in section V.B.2.b. of this 
final rule with comment period. Therefore, for the reasons described in 
our proposed rule, we are finalizing our CY 2012 proposal, with 
modification, to use the estimated number of units per day included in 
Table 40 below to determine estimated per day costs for the 
corresponding drugs and biologicals for CY 2012. Further, as we note in 
section V.B.2.b. of this final rule with comment period, the packaging 
threshold for CY 2012 has changed from $80 in the proposed rule to $75 
in this final rule with comment period. As a result of this change, 
which occurred because of our use of the most recent forecast of the 
quarterly PPI index levels in our update of the CY 2012 packaging 
threshold for the final rule with comment period, we will package those 
drugs with an estimated per day cost less than or equal to $75 and 
provide separate payment for those drugs and biologicals (other than 
diagnostic radiopharmaceuticals, contrast agents and implantable 
biologicals) with estimated per day costs over $75 for CY 2012. For 
those drugs and biologicals without CY 2010 claims data that we 
determine to be separately payable in CY 2012, payment will be made at 
ASP+4 percent. If ASP information is not available, payment will be 
based on WAC, or 95 percent of the most recently published AWP if WAC 
is not available. The final estimated units per day and status 
indicators for these items are displayed in Table 40 below.

[[Page 74334]]

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    Finally, there were five drugs and biologicals, shown in Table 34 
of the proposed rule (76 FR 42266), 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 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 proposed 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 the proposed rule for CY 2012 are displayed in 
Table 34 of the proposed rule (76 FR 42266). If pricing information 
becomes available, we proposed to assign the products status indicator 
``K'' and pay for them separately for the remainder of CY 2012. We did 
not receive any public comments on these proposals.
    We did not receive any public comments on our proposal to change 
the status indicators of drugs and biologicals without CY 2010 claims 
data or pricing information for the ASP methodology. After the proposed 
rule was published, we received pricing information for HCPCS code 
J9213 (Injection, interferon, alfa-2a, recombinant, 3 million units) 
for CY 2012, and it is included in Addendum B to this CY 2012 OPPS/ASC 
final rule with comment period (which is referenced in section XVII. of 
this final rule with comment period and available via the Internet on 
the CMS Web site) with an assigned CY 2012 status indicator of ``N.''
    Further, as we have used updated claims data and ASP pricing 
information for this final rule with comment period, we have newly 
identified HCPCS codes J2265 (Injection, minocycline hydrochloride, 1 
mg), Q4123 (Alloskin RT), Q4125 (Arthroflex), Q4126 (Memoderm), Q4127 
(Talymed), Q4128 (Flexhd or alopatch hd), and Q4129 (Unite biomatrix) 
as lacking CY 2010 claims data and any other pricing information for 
the ASP methodology. Therefore, in addition to the HCPCS codes for 
which we proposed to assign status indicator ``E'' for CY 2012 due to a 
lack of claims data and any other pricing information in the proposed 
rule, we are assigning status indicator ``E'' to HCPCS codes J2265, 
Q4123, Q4125, Q4126, Q4127, Q4128, and Q4129. We are finalizing our CY 
2012 proposal, without modification, to assign status indicator ``E'' 
to these drugs and biologicals. As was our policy in CY 2011, if 
pricing information becomes available for these products in CY 2012 we 
will assign the products status indicator ``K'' and pay for them 
separately for the remainder of CY 2012.
    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 final rule with comment period 
for CY 2012 are displayed in Table 41 below.

[[Page 74335]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.067

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
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). In the CY 
2012 OPPS/ASC proposed rule (76 FR 42266), we proposed for the CY 2012 
OPPS 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 the proposed rule and 
this final rule with comment period, we deduct from the pass-through 
payment for an identified device category eligible for pass-through 
payment an amount that reflects the portion of the APC payment amount 
that we determine is associated with the cost of the device, defined as 
the device APC offset amount, when we believe that 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

[[Page 74336]]

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 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 proposed to pay for most nonpass-through 
separately payable drugs and nonimplantable biologicals under the CY 
2012 OPPS at ASP+4 percent, which represented the otherwise applicable 
fee schedule amount associated with most pass-through drugs and 
biologicals, and because we proposed 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 did not propose 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 the proposed rule.
    In section V.A.4. of the proposed rule and this final rule with 
comment period, we discuss our proposed and final 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, in the proposed rule, we proposed 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 since 
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 the 
proposed rule and this final rule with comment period, the postponement 
of the Part B drug CAP program is still in effect. As in past years, 
for the proposed rule and this final rule with comment period, 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. Estimate of Pass-Through Spending

    In the CY 2012 OPPS/ASC proposed rule (76 FR 42267), we proposed 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).
    At the time of the proposed rule, for the first group of devices 
for pass-through payment estimation purposes, there was one device 
category eligible for pass-through payment for CY 2012, C1749 
(Endoscope, retrograde imaging/illumination colonoscope device 
(implantable)). We estimated that CY 2012 pass-through expenditures 
related to device category C1749 would be approximately $35 million. 
However, for this final rule with comment period, for the first group 
of devices for pass-through payment estimate purposes, there currently 
are three device categories eligible for pass-through payment in CY 
2012: C1749 that became effective October 1, 2010; C1830 (Powered bone 
marrow biopsy needle) that became effective October 1, 2011; and C1840 
(Lens, intraocular (telescopic)) that became effective October 1, 2011. 
For this final rule with comment period, we estimate that CY 2012 pass-
through expenditures related to these 3 categories will be 
approximately $47 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 the proposed rule would be newly eligible for pass-through payment 
in CY 2012 (of which there were 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 the 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 proposed to use the general 
methodology described in the

[[Page 74337]]

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 the proposed rule, the estimate of CY 
2012 pass-through spending for this second group of device categories 
was $10 million. Using our established methodology, we proposed that 
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)) 
be $45 million.
    Comment: One commenter was pleased with our estimate based on the 
one device category, C1749, in the CY 2012 OPPS/ASC proposed rule.
    Response: We appreciate this comment.
    For this CY 2012 OPPS/ASC final rule with comment period, 3 device 
categories, C1749, C1830, and C1840, will be eligible for pass-through 
payment for CY 2012, as mentioned earlier, and the pass-through 
spending estimate for those categories in $47 million. There also are 
possible new device categories for pass-through payment based on 
current applications and future applications. Therefore, the estimate 
of CY 2011 pass-through spending for the second group of device 
categories is $10 million.
    For this CY 2012 final rule with comment period, we are finalizing 
the continued use of our established methodology. Employing our 
established methodology that the estimate of pass-through device 
spending in CY 2012 incorporates CY 2012 estimates of pass-through 
spending for known device categories with continuing pass-through 
status in CY 2012, those known or projected to be first effective 
January 1, 2012, and those device categories projected to be approved 
during subsequent quarters of CY 2011 or CY 2012, we estimate for this 
CY 2012 OPPS/ASC final rule with comment period the total pass-through 
spending for device categories for CY 2011 to be $57 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 proposed to utilize 
the most recent Medicare physician's office data regarding their 
utilization, information provided in the respective pass-through 
applications, historical hospital claims data, pharmaceutical industry 
information, and clinical information regarding those drugs or 
nonimplantable 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 estimated 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 
proposed 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 the CY 
2012 proposed rule, we proposed 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.
    We did not receive any public comments on our proposed methodology 
for calculating the spending estimate for this first group of drugs and 
nonimplantable biologicals. Therefore, for this final rule with comment 
period, we are finalizing our proposed methodology. Using that 
methodology, we calculated a final spending estimate for this first 
group of drugs and biologicals to be $21.5 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 knew at the time of development of 
the 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 proposed to use utilization estimates 
from pass-through applicants, pharmaceutical industry data, clinical 
information, recent trends in the per unit ASPs of hospital outpatient 
drugs, and projected annual changes in service volume and intensity as 
our basis for making the CY 2012 proposed pass-through payment 
estimate. We also considered 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.
    We did not receive any public comments on our proposed policy and, 
therefore, are finalizing our proposed methodology for estimating CY 
2012 pass-through payments for this second group of drugs. For this 
final rule with comment period, we calculated a final spending estimate 
for this second group of drugs and biologicals to be $10.6 million.
    As discussed in section V.A. of the proposed rule and this final 
rule with comment period, radiopharmaceuticals are considered drugs for 
pass-through purposes. Therefore, we included 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)) equaled $19.5 million.
    The final estimate for pass-through spending for the first group of 
drugs and biologicals is $21.5 million for CY 2012. The final estimate 
for pass-through spending for the second group of drugs and biologicals 
is $10.6 million for CY 2012. As discussed in section V.A. of this 
final rule with comment period, radiopharmaceuticals are considered 
drugs for pass-through purposes. Therefore, we included 
radiopharmaceuticals in our final CY 2012 pass-through spending 
estimate for drugs and biologicals. Our CY 2012 allocation in this 
final rule with comment period for total estimated

[[Page 74338]]

pass-through spending for drugs and biologicals is $32.1 million.
    In summary, in accordance with the methodology described above in 
this section, for this final rule with comment period, 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 will be approximately $89.1 million 
(approximately $57 million for device categories and approximately 
$32.1 million for drugs and nonimplantable biologicals), which 
represents 0.22 percent of total projected OPPS payments for CY 2012. 
We estimate that pass-through spending in CY 2012 will not amount to 
2.0 percent of total projected OPPS CY 2012 program spending.

VII. OPPS Payment for Hospital Outpatient Visits

A. Background

    Currently, hospitals report HCPCS visit 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.
    As we proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42268), 
we are continuing 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 42.
BILLING CODE 4120-01-P

[[Page 74339]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.068


[[Page 74340]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.069

BILLING CODE 4120-01-C
    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. In the CY 2012 OPPS/ASC 
proposed rule (76 FR 42269), we indicated that we are adopting these 
recommendations and plan to provide the requested data and analyses to 
the APC Panel at an upcoming meeting.
    At its August 10-11, 2011, meeting, the APC Panel recommended that 
the work of the Visits and Observation Subcommittee continue. We are 
accepting this recommendation.

B. Policies for Hospital Outpatient Visits

1. Clinic Visits: New and Established Patient Visits
    As reflected in Table 42, 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 stated in the CY 2012 OPPS/ASC proposed rule (76 FR 42269) that 
we continue to believe that defining new or established patient status 
based on whether the patient has been registered as an inpatient or 
outpatient of the hospital within the 3 years prior to a visit will 
reduce hospitals' administrative burden associated with reporting 
appropriate clinic visit CPT codes, as we stated in the CY 2009 OPPS/
ASC final rule with comment period (73 FR 68677 through 68680). For CY 
2012, we proposed to continue recognizing 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 proposed rule and consistent with our CY 2011 policy, when 
calculating the median costs for the clinic visit APCs (0604 through 
0608), we proposed 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 stated in the proposed rule 
that we continue to believe that this approach results in the most 
accurate cost estimates for APCs 0604 through 0608 for CY 2012.
    Comment: Some commenters recommended that CMS remove the 
distinction between new and established patient clinic visits, arguing 
that the length of time between a patient's hospital visits has no 
bearing on services or resources provided during a specific hospital 
visit. According to commenters, facilities must expend the same level 
of resources to evaluate, manage, and treat the patient's current 
condition, regardless of whether the patient was registered as an 
inpatient or an outpatient in the hospital within the past 3 years. In 
addition, some commenters stated that there are significant operational 
issues involved with implementing the 3-year criterion for hospital 
clinic visit billing purposes. Some commenters acknowledged that CMS' 
claims data indicate a new patient visit involves more resources than 
an established patient visit, but argued that any differences in costs 
that are evident in claims data for new patient visits versus 
established patient visits would be the result of hospitals' erroneous 
reporting of these codes, rather than any real difference in the level 
of resources

[[Page 74341]]

expended treating a new versus an established patient. The commenters 
suggested that CMS recognize only the established patient visit codes 
and calculate payment rates for those codes by blending median costs 
for both the new and established patient visits. The commenters 
acknowledged this may result in reductions to the APC payment rates for 
established patient visits. The commenters stated that, if CMS chooses 
to continue to require hospitals to report both new and established 
patient visit codes, the distinction should be based upon whether the 
patient has a medical record.
    Response: As we stated in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 71986) and the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60547), because hospital claims data continue to 
show significant cost differences between new and established patient 
visits, we continue to believe it is necessary and appropriate to 
recognize the CPT codes for both new and established patient visits 
and, in some cases, provide differential payment for new and 
established patient visits of the same level. Therefore, we do not 
believe it is appropriate to recognize only the established patient 
visit codes and calculate payment rates for those codes by blending 
median costs for both the new and established patient visits. For 
example, the final CY 2012 median cost for the Level 3 new patient 
clinic visit, described by CPT code 99203 and calculated using over 
259,000 single claims from CY 2010, is approximately $103, while the 
final CY 2012 median cost for the Level 3 established patient clinic 
visit, described by CPT code 99213 and calculated using over 5.1 
million single claims from CY 2010, is approximately $75. We believe 
this difference in median costs warrants continued assignment of these 
CPT codes to different APCs for CY 2012.
    Given that we have a substantial volume of single claims from a 
significant number of hospitals upon which to calculate the median 
costs for all levels of clinic visits, we do not agree with the 
commenters that the differences in costs for new versus established 
patient visits are flawed or the result of hospitals' erroneous 
reporting of these codes. We expect hospitals to report all HCPCS codes 
in accordance with correct coding principles, CPT code descriptions, 
and relevant CMS guidance, which, in this case, specifies that the 
meanings of ``new'' and ``established'' patients as included in the 
clinic visit CPT code descriptors pertain to whether or not the patient 
has been registered as an inpatient or an outpatient of the hospital 
within the past 3 years (73 FR 68679). As we have stated in the past 
(74 FR 60547 and 75 FR 71986), we have no reason to believe that 
hospitals are systematically disregarding these principles to the 
extent that it would cause our median costs for clinic visits, which 
are based on data from millions of single claims, to be artificially 
skewed.
    As we stated in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68678) and the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71986) concerning the commenters' request that the distinction 
between new and established patients be based upon whether the patient 
has a medical record, we continue to believe it is appropriate to 
include a time limit when determining whether a patient is new or 
established because we would expect that care of a patient who was not 
treated at the hospital for several years prior to a visit could 
require significantly greater hospital resources than care for a 
patient who was recently treated at the hospital.
    Comment: One commenter recommended that CMS reassign HCPCS code 
G0379 (Direct admission of patient for hospital observation care) to 
APC 0616 (Level 5 Type A Emergency Visits) because of the consistent 2 
times rule violation in APC 0604 (Level 1 Hospital Clinic Visits) and 
HCPCS code G0379's similarity in both median cost and clinical 
characteristics to CPT code 99285 (Emergency Department Visit Level 5). 
The commenter stated that CMS should create a new APC and assign HCPCS 
code G0379 as a single code to this separate APC if CMS does not agree 
with G0379's assignment to APC 0616. The commenter also stated that 
HCPCS code G0379 should be eligible for assignment to composite APC 
8003 (Level II Extended Assessment and Management) along with CPT codes 
99284 (Emergency Department Visit Level 4), 99285 (Emergency Department 
Visit Level 5), 99291 (Critical Care First Hour), and G0384 (Level 5 
Hospital Type B ED Visit) because of the clinical similarity with the 
higher evaluation and management level codes. According to the 
commenter, the median costs for CPT codes 99205 (Office/Outpatient 
Visit New Level 5) and 99215 (Office/Outpatient Visit Established Level 
5) are significantly lower than the median cost for HCPCS code G0379 
and, therefore, would remain assigned to composite APC 8002 (Level I 
Extended Assessment and Management.)
    Response: Consistent with our longstanding and established policy 
to pay for the direct referral for observation through the lowest level 
clinic APC, originally outlined in the CY 2003 OPPS final rule (67 FR 
66794 though 66796), we believe HCPCS code G0379 is appropriately 
assigned to APC 0604. We continue to believe that the original 
rationale set forth in the CY 2003 OPPS final rule (67 FR 66794 through 
66796) with respect to HCPCS code G0264 (Initial nursing assessment of 
patient directly admitted to observation with a diagnosis other than 
congestive heart failure, chest pain, or asthma), being assigned to the 
lowest level clinic visit APC is applicable to HCPCS code G0379, as 
HCPCS code G0379 may be used to describe services previously identified 
by HCPCS code G0264. Accordingly, we disagree with the commenter that 
HCPCS code G0379 is clinically similar to HCPCS codes 99284, 99285, 
99291, and G0384 and should be eligible for assignment to composite APC 
8003, and we also disagree that HCPCS code G0379 should be assigned to 
APC 0616 or as a single code to a newly created APC. Therefore, we are 
finalizing our proposal to continue to assign HCPCS code G0379 to APC 
0604 and composite APC 8002.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 proposal, without modification, to continue to 
define new or established patient status for the purpose of reporting 
the clinic visit CPT codes, on the basis of whether or not the patient 
has been registered as an inpatient or outpatient of the hospital 
within the past 3 years. We also are finalizing our CY 2012 proposal, 
without modification, to continue our policy of calculating median 
costs for clinic visits under the OPPS using historical hospital claims 
data. As discussed in detail in section II.A.2.e.(1) of this final rule 
with comment period and consistent with our CY 2011 policy, when 
calculating the median costs for the clinic visit APCs (0604 through 
0608), we utilized our methodology that excludes those claims for 
visits that are eligible for payment through the extended assessment 
and management composite APC 8002 (Level I Extended Assessment and 
Management Composite). We continue to believe that this approach 
results in the most accurate cost estimates for APCs 0604 through 0608 
for CY 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

[[Page 74342]]

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 a day, 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 
Medicare-participating hospitals with emergency departments. 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 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.
    We stated in the CY 2012 OPPS/ASC proposed rule (76 FR 42270) that 
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 
proposed 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 noted that, 
as discussed in section II.A.2.e.(1) of the proposed rule and 
consistent with our CY 2011 policy, when calculating the median costs 
for the emergency department visit and critical care APCs (0609 through 
0617 and 0626 through 0630), we proposed 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 
stated that we continue to believe that this approach

[[Page 74343]]

will result in the most accurate cost estimates for APCs 0604 through 
0608 for CY 2012. Table 36 of the proposed rule displayed 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.
    We did not receive any public comments on this proposal. We are 
finalizing our CY 2012 proposal, without modification, to continue 
paying for Type B emergency department visits in CY 2012, consistent 
with their median costs through five levels of Type B emergency 
department visit APCs: APC 0626 (Level 1 Type B Emergency Visits), APC 
0627 (Level 2 Type B Emergency Visits), APC 0628 (Level 3 Type B 
Emergency Visits), APC 0629 (Level 4 Type B Emergency Visits), and APC 
0630 (Level 5 Type B Emergency Visits). We are assigning HCPCS codes 
G0380, G0381, G0382, G0383, and G0384 (the levels 1, 2, 3, 4, and 5 
Type B emergency department visit Level II HCPCS codes) to APCs 0626, 
0627, 0628, 0629, and 0630, respectively, for CY 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 claims data.
    We also note that, as discussed in section II.A.2.e.(1) of this 
final rule with comment period and consistent with our CY 2011 policy, 
when calculating the median costs for the emergency department visit 
and critical care APCs (0609 through 0617 and 0626 through 0630), we 
utilized our methodology that excludes those claims for visits that are 
eligible for payment through the extended assessment and management 
composite APC 8002 (Level I Extended Assessment and Management 
Composite). We continue to believe that this approach will result in 
the most accurate cost estimates for APCs 0604 through 0608 for CY 
2012.
    Table 43 below displays the final median costs for each level of 
Type B emergency department visit APCs under the CY 2012 configuration, 
compared to the final CY 2012 median costs for each level of clinic 
visit APCs and each level of Type A emergency department visit APCs.
[GRAPHIC] [TIFF OMITTED] TR30NO11.070

    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

[[Page 74344]]

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 historical data, into which the cost of the ancillary 
services is intrinsically packaged. We also 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. We noted in the CY 
2011 OPPS/ASC final rule with comment period that our treatment of the 
revised CY 2011 critical care codes was open to public comment for 60 
days following issuance of the CY 2011 OPPS/ASC final rule with comment 
period, and that we would respond to the comments in the CY 2012 final 
rule with comment period.
    Because the proposed CY 2012 median costs for critical care 
services were based upon CY 2010 claims data, which reflect the CPT 
billing guidance that was in effect prior to CY 2011, in the CY 2012 
OPPS/ASC proposed rule (76 FR 42271), we proposed 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 proposed 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.
    Comment: Several commenters who responded to the CY 2011 OPPS/ASC 
final rule with comment period and the CY 2012 OPPS/ASC proposed rule 
supported the proposed policy to continue to conditionally package 
payment for ancillary services that are reported on the same date of 
service as critical care services. Some commenters recommended that a 
modifier be implemented to allow the identification of ancillary 
services provided to critical care patients during the same date of 
service as critical care services, but outside the critical care 
period, so that those services are not inappropriately packaged into 
the critical care services payment. Commenters also recommended that 
CMS, in setting the payment rate for critical care services by 
estimating the costs of the packaged ancillary services, establish a 
methodology that includes review of multiple cost report revenue 
centers and that CMS consult with the hospital industry on the 
appropriate methodology used to calculate the actual cost related to 
the provision of critical care services.
    Response: We believe all services provided in conjunction with 
critical care, as part of a single clinical encounter, are included in 
the critical care period and, therefore, do not support the commenters' 
recommendation that a modifier be implemented to allow the 
identification of ancillary services provided to critical care patients 
during the same date of service as critical care services, but outside 
the critical care period. Hospitals may use HCPCS modifier ``-59'' to 
indicate when an ancillary procedure or service is distinct or 
independent from critical care when performed on the same day but 
during a different encounter. For CY 2012, CMS will continue to 
conditionally package payment for the ancillary services previously 
included in CPT's definition of critical care prior to CY 2011, when 
they are reported on the same date of service as critical care 
services.
    In regard to the commenter who suggested that CMS include review of 
multiple cost report revenue centers when calculating the costs of the 
packaged ancillary services, we note that the methodology the 
commenters recommended is consistent with the methodology we already 
have in place. As discussed in section II.A.1.c. of this final rule 
with comment period, we calculate hospital-specific overall ancillary 
CCRs and hospital-specific departmental CCRs for each hospital for 
which we have claims data. We apply 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. Therefore, 
we base our cost estimation of each packaged ancillary service on the 
most specific cost center to which the revenue code reported with that 
service maps. We then package the cost that we estimate as a result of 
that process into the median cost calculation for critical care.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 proposal, without modification, 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 also will 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 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

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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 there was still a pressing need for 
national guidelines 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 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 and this final rule with 
comment period. Analysis of these data confirm 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. As we did in the proposed rule (76 FR 42272), 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. In the CY 
2012 proposed rule, we welcomed comment on whether this is consistent 
with individual hospitals' experiences in developing, implementing, and 
refining their own guidelines over the last several years.
    Comment: Commenters requested that, with respect to the slight 
shift over time toward higher numbers of Level 4 and Level 5 visits 
relative to the lower visit levels, CMS provide data regarding whether 
it has observed any shift in reporting ``new'' versus ``established'' 
patient visits after instituting the new definition of established 
patient in CY 2009, noting that CMS has 2 years of claims data since 
the definition change. According to commenters, if hospitals changed 
their reporting based on the new definition, the data should reflect a 
shift toward the higher level visits, because more patients would have 
been ``established'' patients under the new definition. The commenters 
stated that if CMS has not noticed this shift in the proportion of new 
and established patient visits beginning with CY 2009 claims, it 
suggested that hospitals may not have begun applying the revised 
definition and a shift in level 4 and 5 visits may have occurred more 
in response to the increasing trend of comorbid conditions in emergency 
department visits than from hospitals' response to CMS' visit 
guidelines. The commenters suggested that CMS evaluate secondary 
diagnoses on Level 4 and Level 5 Type A emergency department visit 
claims.
    Another commenter stated that this trend is consistent with its 
observations and listed the following as possible reasons for the 
higher Medicare acuity: Some patients with low acuity problems are 
seeking care elsewhere because of long emergency department wait times 
and higher copayments; increasing options for faster, less expensive 
care for lower acuity problems (retail and hospital-based clinics and 
extended physician and urgent care office hours); public education 
regarding appropriate reasons for going to the emergency department; 
and patients delaying care for the above reasons and then presenting to 
the emergency department in a relatively sicker condition.
    Response: We appreciate the commenters' discussion of possible 
contributing factors to the shift toward increasing numbers of higher 
level Type A emergency department visits. We will continue to examine 
our data and explore any changes or trends that correlate to the slight 
shift over time toward higher numbers of Level 4 and Level 5 Type A 
emergency department visits relative to the lower Type A emergency 
department visit levels. We note that information about claims volume 
for particular HCPCS codes for a given calendar year, including new and 
established patient visits, is publicly available in the median cost 
file made available for each OPPS final rule with comment period and 
located on the CMS Web site. As we stated in the proposed rule, 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.
    Comment: Some commenters supported CMS' proposal to continue to 
recognize hospital-specific visit guidelines rather than implement 
national guidelines because hospitals have grown accustomed to using 
their own coding systems to assign visit levels. In contrast, many 
commenters urged CMS to move forward with the implementation of 
national guidelines for hospitals to report visits, asserting that CMS 
has poor data upon which to calculate visit APC payment rates because 
there are no standard definitions, and citing the challenges of having 
different guidelines in place by different payers. The commenters 
recommended that, in the absence of national guidelines for hospital 
visit reporting, CMS support a request to the American Medical 
Association CPT Editorial Panel to create unique CPT codes for hospital 
reporting of emergency department and clinic visits based on internally 
developed guidelines. In addition, some commenters expressed their 
appreciation for CMS' encouragement of its contractors to use a 
hospital's own guidelines when auditing and evaluating the 
appropriateness of codes assigned, but requested that hospitals be 
exempt from audits of visit billing until national guidelines are 
implemented.
    Response: As we have in the past (74 FR 60553 and 75 FR 71989 
through 71990), we acknowledge that it would be desirable to many 
hospitals to have national guidelines. However, we also understand that 
it would be disruptive and administratively burdensome to

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other hospitals that have successfully adopted internal guidelines to 
implement any new set of national guidelines while we address the 
problems that would be inevitable in the case of any new set of 
guidelines that would be applied by thousands of hospitals. We will 
continue to regularly reevaluate patterns of hospital outpatient visit 
reporting at varying levels of disaggregation below the national level 
to ensure that hospitals continue to bill appropriately and 
differentially for these services. We reiterate our expectation that 
hospitals' internal guidelines fully comply with the principles listed 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 68805), 
and we encourage hospitals with more specific questions related to the 
creation of internal guidelines to contact their servicing fiscal 
intermediary or MAC. Also, as originally noted in detail in the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66648 through 66649), 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.
    We continue to encourage fiscal intermediaries and MACs to review a 
hospital's internal guidelines when an audit occurs, as indicated in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66806). As 
we have stated in the past (75 FR 71990), if the AMA were to create 
facility-specific CPT codes for reporting visits provided in HOPDs 
[based on internally developed guidelines], we would consider such 
codes for OPPS use.
    After consideration of the public comments we received, we are 
continuing to encourage hospitals to use their own internal guidelines 
to determine the appropriate reporting of different levels of clinic 
and emergency department visits. We note that it remains our goal to 
ensure that OPPS national or hospital-specific visit guidelines 
continue to facilitate consistent and accurate reporting of hospital 
outpatient visits in a manner that is resource-based and supportive of 
appropriate OPPS payments for the efficient and effective provision of 
visits in hospital outpatient settings.

VIII. 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 a program 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 revised 
definition now 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 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 paid 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

[[Page 74347]]

to current physician certification requirements at 42 CFR 424.24 to 
conform our regulations to our longstanding policy (73 FR 68694 through 
68695). 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 CMHCs (for Level I and Level II services) and two for hospital-
based PHPs (for Level I and Level II services). We proposed that CMHC 
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 have 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 was 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 
CMHCs and two for hospital-based PHPs) supported continued access to 
the PHP benefit, while also providing appropriate payment based on the 
unique cost structures of CMHCs 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 the CMHC APC per diem payment rates based solely on CMHC 
data. For CY 2011, under the transition methodology, CMHC APC Level I 
and Level II rates were calculated 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 moved 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 allowing providers time to adjust their business operations and 
protect access to care for beneficiaries. We also stated that we would 
review and analyze the data during the CY 2012 rulemaking cycle and 
may, based on these analyses, further refine the payment mechanism. 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, a CMHC and one of its patients filed an application for a 
preliminary injunction, challenging 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). See Paladin Cmty. Mental Health 
Ctr. v. Sebelius, No. 10-949, 2011 WL 3102049 (W.D.Tex.), appeal 
docketed, No. 11-50682 (5th Cir. July 29, 2011) (Paladin). The 
plaintiffs in the Paladin case challenged the agency's 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), alleging that section 1833(t)(2)(C) of the Act requires that 
such relative payment weights be based on cost data derived solely from 
hospitals. As discussed above, section 1833(t)(2)(C) of the Act 
requires CMS 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, on July 25, 2011, the district 
court dismissed the plaintiffs' complaint and dismissed the plaintiffs' 
application for preliminary injunction. The Court found that ``the 
Secretary has exercised her statutory authority and broad discretion to 
establish the 2011 payment rates for PHP services based on her 
interpretation of the terms of the Act.'' (Paladin at *4).
    For CY 2012, as discussed in the CY 2012 OPPS/ASC proposed rule (76 
FR 42274 through 42275), we proposed 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. 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 and relative payment weights for hospital-based PHP 
services to 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 the CY 2012 OPPS/ASC proposed rule (76 FR 42274) and this 
final rule with comment period, 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

[[Page 74348]]

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 exclusively 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. PHP APC Update for CY 2012

    In the CY 2012 OPPS/ASC proposed rule (76 FR 42274), 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: Days with 3 services; and days with 4 or more services. 
These proposed median per diem costs were computed separately for CMHCs 
and hospital-based PHPs, as shown in Table 37 of the proposed rule, 
which is reprinted below.
[GRAPHIC] [TIFF OMITTED] TR30NO11.071

    Using updated 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 
provider-specific claims data. The data indicate that both CMHCs and 
hospital-based PHPs have a decrease in costs for Level I and Level II 
services from CY 2011 to CY 2012. However, the median per diem costs 
for CMHCs continue to be substantially lower than the median per diem 
costs for hospital-based PHPs for the same units of service. For CY 
2012, the proposed median per diem costs for days with 3 services 
(Level I) were approximately $98 for CMHCs and approximately $162 for 
hospital-based PHPs. The proposed median per diem costs for days with 4 
or more services (Level II) were approximately $114 for CMHCs and 
approximately $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.
    As stated in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 71991 through 71994), CMHCs' costs decreased from approximately 
$139 in CY 2009 (using CY 2007 data) to approximately $108 for CY 2011 
(using CY 2009 data) for Level I services (days with 3 services) and 
from approximately $172 for CY 2009 to approximately $116 for CY 2011 
for Level II services (days with 4 or more services) using only CMHC 
data. For the CY 2012 proposed rule, our analysis of claims data (using 
CY 2010 claims data) showed that CMHCs' approximate median per diem 
costs continued to decrease to approximately $98 for CY 2012 for Level 
I services (days with 3 services), and to approximately $114 for CY 
2012 for Level II services (days with 4 or more services). We 
reasonably attributed 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 (76 FR 42275). In the CY 2012 OPPS/
ASC proposed rule (76 FR 42275), we also noted that hospital-based PHPs 
showed a decrease in costs for CY 2012 (using CY 2010 claims data). 
Although hospital-based PHPs have been historically consistent in their 
median costs since the inception of the OPPS, the CY 2010 claims data 
indicated a decrease in their proposed median per diem costs since last 
year. In the CY 2011 OPPS/ASC final rule with comment period (using CY 
2009 claims data), hospital-based PHPs' median per diem costs were 
approximately $203 for Level I services (days with 3 services) and 
approximately $236 for Level II services (days with 4 or more 
services). In the CY

[[Page 74349]]

2012 OPPS/ASC proposed rule (using CY 2010 claims data), these numbers 
decreased to approximately $162 for Level I services (days with 3 
services) and to approximately $190 for Level II services (days with 4 
or more services). As explained in the CY 2012 OPPS/ASC proposed rule 
(76 FR 42275), we attributed this decrease in costs for CY 2012 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 rate 
setting.
    Based on the results of our analysis of the CY 2010 claims data, in 
the OPPS/ASC proposed rule (76 FR 42275) for CY 2012, we proposed to 
calculate the CMHC PHP APC per diem payment rates for Level I and Level 
II services using only CMHC data and to calculate the 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 invited public comment 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 payment rates using 
only hospital data.
    Comment: Both hospital-based PHP providers and CMHCs expressed 
concern regarding the proposed rate reductions. Several commenters 
requested that CMS freeze the PHP rates at current CY 2011 levels or 
mitigate the rate reductions for both CMHCs and hospital-based PHPs. 
These commenters stated that, by freezing the rates or mitigating any 
payment reductions, providers would be allowed time to assess the 
impact of the rate reductions while ensuring continued beneficiary 
access to the PHP benefit.
    Response: We understand the concerns raised by commenters about the 
proposed CMHC and hospital-based PHP per diem rate reductions and the 
potential impact the reductions may have on access to the PHP benefit 
in both provider settings. In response to hospital-based PHP providers' 
concerns regarding the proposed rate reductions, we believe that the CY 
2012 medians reflect hospital-based PHP providers' typical medians. For 
example, the CY 2009 median per diem costs (using CY 2007 claims data) 
were approximately $157 for Level I services and $200 for Level II 
services (73 FR 68689) and the CY 2010 median per diem costs (using CY 
2008 claims data) were approximately $148 for Level I services and $209 
for Level II services. The CY 2011 median per diem costs (using CY 2009 
claims data) were approximately $203 for Level I services and 
approximately $236 for Level II services. In the CY 2012 proposed rule 
(using CY 2010 data), these numbers decreased to approximately $162 for 
Level I services (for days with 3 services) and to approximately $190 
for Level II services (for days with 4 or more services). We attributed 
the majority of the decrease in costs for CY 2012 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. For this CY 2012 final rule with comment period, our 
analysis of claims data (using CY 2010 claims data) shows that 
hospital-based PHP median per diem costs are approximately $161 for 
Level I services (for days with 3 services) and approximately $191 for 
Level II services (for days with 4 or more services). Again, these 
median per diem costs are more consistent with past median per diem 
costs for this provider type and we believe accurately reflect the cost 
data of the hospital-based PHP provider.
    In response to CMHCs concerns about the rate reductions, in the 
past, we have attempted to control the cost fluctuations in CMHCs in 
order to protect access to care and with the hope that the cost 
structures for both provider types would eventually become more 
consistent. However, the data continue to show the decline in costs for 
CMHCs. We believe that the proposed median per diem costs for CMHCs 
accurately reflect the cost data of the CMHCs.
    For example, for this CY 2012 final rule with comment period, our 
analysis of claims data (using CY 2010 claims data for CMHCs only) 
shows that CMHCs' median per diem costs continue to decrease from 
approximately $108 for CY 2011 (using CY 2009 claims data for CMHCs 
only) to approximately $98 for CY 2012 for Level I services (days with 
3 services), and from approximately $116 for CY 2011 (using CY 2009 
claims data for CMHCs only) to approximately $114 for CY 2012 for Level 
II services (days with 4 or more services). Although we are not exactly 
clear about why the CMHC costs continue to decrease, 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 have considered all suggestions, including the request to freeze 
the PHP payment rates at the CY 2011 levels or to mitigate rate 
reductions. However, we cannot continue to establish payment rates that 
do not accurately reflect the cost data, particularly given a further 
decline in the data for CY 2012. Moreover, we believe we have already 
allowed numerous opportunities for providers to adjust their business 
operations, including mitigating the rate reductions for CY 2011.
    For these reasons, for CY 2012, we are not mitigating or freezing 
the payment rates and are finalizing our proposal to calculate the CMHC 
PHP APC per diem payment rates for Level I and Level II services using 
only CMHC data and to calculate the hospital-based PHP APC per diem 
payment rates for Level I and Level II services using only hospital-
based PHP data. The CY 2012 PHP median per diem costs are as follows: 
For CMHCs, $97.64 for Level I services and $113.83 for Level II 
services and for hospital-based PHPs, $160.74 for Level I services and 
$191.16 for Level II services. We remain committed to the PHP benefit, 
including preserving access for our Medicare beneficiaries, and we plan 
to continue to monitor access to care for the benefit.
    Comment: Almost all commenters expressed some concern that the 
proposed rate reductions would result in adverse outcomes, including 
program closures and subsequent access to care issues, exacerbating an 
existing problem of inadequate inpatient and outpatient hospital 
capacities in many communities caring for individuals with mental 
illness. The commenters reasoned that if closures were to result, this 
would have substantial and serious consequences for hospitals and for 
Medicare beneficiaries requiring PHP services. Several commenters 
stated that the reduction in CMHC rates will lead to closures, where 
critical access points for Medicare beneficiaries would no longer be 
available. The commenters reasoned that if this ``vulnerable 
population'' of Medicare beneficiaries were to go untreated, these 
patients could end up in inpatient hospitals, or in emergency 
departments. Because these are Medicare aged and disabled 
beneficiaries, their care in the inpatient or emergency room setting 
could potentially be more expensive than their PHP treatment would have 
been, thus increasing the overall Medicare costs if

[[Page 74350]]

PHP care is eliminated due to closures. Other commenters also reasoned 
that, without the PHP services, this vulnerable population may also 
enter prison systems, or wind up dead if they do not receive their 
medication. Some commenters asserted that CMS has essentially 
contradicted its principles, by acknowledging a patient's disability; 
but on the other hand, reducing the rate of reimbursement for their 
care. The commenters stated that this has the effect of denying access 
to treatment, which runs counter to ensuring essential care.
    Response: The proposed median per diem costs for CY 2012 reflect 
each PHP provider type's (hospital-based and CMHC) costs, derived from 
CY 2010 claims data. We discussed in our proposed rule (76 FR 42274 and 
42275) how 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 CMHCs 
continue to be substantially lower than the median per diem costs for 
hospital-based PHPs. We also noted that hospital-based PHPs show a 
decrease in costs for CY 2012 based on CY 2010 claims data (76 FR 
42275). Payment rates are based according to each specific provider 
type's own data, that is, CMHC rates are based on CMHC cost data and 
hospital-based PHP providers are based on their own cost data. The 
rates reflect the cost of what each provider type expends to maintain 
such programs so it is unclear why this would lead to program closure. 
The closure of PHPs may be due to any number of reasons, such as poor 
business management or marketing decisions, competition, over-
saturation of certain geographic areas, Federal and State fraud and 
abuse efforts, among others. However, it does not directly follow that 
closure could be due to reduced reimbursement rates alone, especially 
when these rates reflect actual costs of PHP providers. CMS remains 
steadfast in its concern over access to care for all beneficiaries 
while also providing appropriate payments for such care. In terms of 
access to care, PHP for mental health treatment is not the only manner 
in which a Medicare beneficiary is able to receive needed care. 
Although not the equivalent of PHP, Medicare provides payment for 
outpatient mental health services in addition to PHP. Many 
beneficiaries in need of mental health treatment receive other 
outpatient services, and no evidence suggests that there is an increase 
in adverse outcomes, as the commenters suggested, due to lack of access 
to care. Other forms of access to mental health services remain 
available. If certain PHP providers decide for whatever reason to close 
their doors, we do not believe that access to care will become an 
issue, and we do not believe we have acted in a manner that is 
contradictory to our principles. In addition, the Social Security 
Administration has the authority to determine a person's disability, 
not CMS.
    Comment: Some commenters noted that CMS recently issued the 
proposed conditions of participation (CoPs) for CMHCs that they will 
need to observe and, as a result of the Affordable Care Act, will now 
have to provide at least 40 percent of their services to non-Medicare 
patients. The commenters believed that, by adding a payment reduction 
on top of these requirements, CMHCs would be potentially facing 
closure.
    Response: We acknowledge the commenters' concerns with section 1301 
of HCERA, a component of the Affordable Care Act (Pub. L. 111-152, 
enacted on March 30, 2010). Section 1301 requires CMHCs to provide at 
least 40 percent of their services to non-Medicare patients. On June 
17, 2011, CMS published a proposed rule to enforce this provision (76 
FR 35684, 35693) as well as to propose conditions of participation 
addressing basic health and safety issues in CMHCs. By law, CMS must 
update the OPPS payment rates on an annual basis using the most current 
cost data.
    Comment: Some commenters recommended that CMS establish a 
ratesetting task force to develop a new rate methodology that captures 
all relevant data and reflects real-time costs to providers. The 
commenters suggested that the recommended ratesetting task force be 
composed of CMS staff and a diverse group of stakeholders that include 
front-line providers of partial hospitalization services, 
representatives from the National Council for Community Behavioral 
Healthcare, the National Association of Psychiatric Health Systems, the 
American Association of Behavioral Healthcare, the National Alliance 
for the Mentally Ill, and the Medicare Payment Advisory Committee.
    Response: CMS already has positive working relationships with 
various industry leaders representing both CMHCs and hospital-based PHP 
providers with whom we have consistently met with over the years to 
discuss industry concerns and ideas. These relationships have provided 
significant and valued input into PHP rate setting. Furthermore, CMS 
holds Hospital Outpatient Open Door Forum calls monthly, when 
individuals are welcome to participate and/or submit questions 
regarding specific issues, including questions related to PHP programs. 
Given the relationships that CMS has already established with various 
industry leaders, we believe that we receive adequate input regarding 
rate setting and take that input into consideration when applying the 
payment rates. We continue to welcome any input and information that 
the industry is willing to provide.
    Comment: A few commenters stated that CMS misinterpreted the 
original intent of section 1833(t)(2)(C) of the Act and is now making a 
new interpretation of the statute by eliminating the requirement in 
section 1833(t)(2)(C) of the Act.
    Response: As discussed above in this section, we believe 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 and the relative payment weights for hospital-
provided PHP services to 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). 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

[[Page 74351]]

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 exclusively 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.''
    Comment: Several commenters questioned how one provider's cost data 
could impact the rates so dramatically and how can CMS reasonably 
attribute some of the rate fluctuation to targeted fraud and abuse 
efforts on the part of CMS and other agencies. Commenters stated that 
fraud and abuse efforts did not decrease the operating cost of 
providers, but instead resulted in eliminating fraudulent providers 
from the program. Commenters also posed the question of whether CMS 
took into account the number of CMHCs that closed their doors in CY 
2010 or only partially operated in CY 2010 due to inability to continue 
to operate.
    Response: We calculate the PHP per diem medians using all PHP 
claims data. However, a provider who has a high volume of claims will 
impact the medians by either increasing the medians or decreasing the 
medians, depending on its cost data. For example, if a provider that 
has high cost data and a high volume of claims will saturate the 
overall cost data, resulting in high medians. Although fraud and abuse 
efforts do not decrease the operating cost of providers, the removal of 
a particular provider may have dramatic results on the overall medians. 
We acknowledge the commenters' concerns and plan to continue monitoring 
the data.
    We do study the number of PHP provider closings and openings. We 
will continue to monitor any potential access problems.
    Comment: A few commenters expressed concerns that the technical 
data on which CMS relies during the ratesetting process are 
fundamentally flawed, in that the data do not reflect the full scope of 
CMHC costs. These commenters also stated that, due to insufficient cost 
reporting instructions for CMHCs, they continue to incorrectly exclude 
owner's salary costs from their cost reports, contributing to their low 
median costs.
    Response: Data within the cost report remain an essential component 
for CMS rate setting, and it is imperative that cost reports be 
completed with accuracy. Medicare cost reports are Federal documents in 
which providers certify and attest that the information contained in 
them is accurate. As a Medicare participating provider, it is the 
responsibility of the provider to complete and submit an accurate 
Medicare cost report. Because all providers must certify and attest to 
the accuracy of the report, we trust that the data are, in fact, 
accurate. We calculate rates using the data submitted to us.
    There are several free resources available to providers who have 
questions or need help completing cost reports. Providers are always 
encouraged to work with their fiscal intermediaries/MACs to resolve any 
questions, including those related to cost reports. CMS provides manual 
instructions in Chapter 18 of the Provider Reimbursement Manual, Part 
II, located on 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.
    CMS regional office and central office employees, including those 
in the Division of Cost Reporting, are also available resources who can 
answer questions. Furthermore, CMS offers cost reporting software free 
of charge at: http://www.mutualmedicare.com/star/providers/.
    All of the abovementioned resources are free of charge. A provider 
may also purchase the services of accounting professionals to help with 
completing cost reports. We do caution that providers should choose a 
trusted accountant. We have become aware of some providers purchasing 
the services of accountants who profess to know Medicare cost reporting 
requirements, but in reality do not. Again, if an accountant completes 
the cost report, the provider is still responsible for the content of 
the cost report via certification and attestation.
    In summary, after consideration of the public comments we received, 
we are finalizing our CY 2012 proposal, without modification, to update 
the four PHP per diem payment rates based on the median cost levels 
calculated using the most recent claims data for each provider type. 
The updated PHP APCs median per diem costs for PHP services that we are 
finalizing for CY 2012 are shown in Tables 44 and 45 below:

[[Page 74352]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.072

C. 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42275), we proposed to 
continue our policy of identifying 1.0 percent of the aggregate total 
payments under the OPPS for outlier payments for CY 2012. We proposed 
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 the 
proposed rule, for hospital outpatient outlier payments policy, we 
proposed to set a dollar threshold in addition to an APC multiplier 
threshold. 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 did not propose 
to set a dollar threshold for CMHC outlier payments. We proposed 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 
proposed 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.
    We did not receive any public comments regarding our proposed 
outlier policy. Therefore, we are finalizing our CY 2012 proposal to 
set a separate outlier threshold for CMHCs. As discussed in section 
II.G. of this final rule with comment period, using more recent data 
for this final rule with comment period, we set the target for hospital 
outpatient outlier payments at 1.00 percent of total estimated OPPS 
payments. We allocated a portion of that 1.00 percent, an amount equal 
to 0.12 percent of outlier payments or 0.0012 percent of total 
estimated OPPS payments to CMHCs for PHP outlier payments. For CY 2012, 
as proposed, we are setting the outlier threshold at 3.40 multiplied by 
the APC payment amount and the CY 2012 outlier percentage applicable to 
costs in excess of the threshold at 50 percent.

IX. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

    Section 1833(t)(1)(B)(i) of the Act gives the Secretary broad 
authority to determine the services to be covered and paid for under 
the OPPS. Before implementation of the OPPS in August 2000, Medicare 
paid reasonable costs for services provided in the HOPD. The

[[Page 74353]]

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 will be paid by Medicare in CY 2012 only as 
inpatient procedures is included as Addendum E to this final rule with 
comment period (which is referenced in section XVII. of this final rule 
with comment period and available via the Internet on the CMS Web 
site).

B. Changes to the Inpatient List

    In the CY 2012 OPPS/ASC proposed rule (76 FR 42276), we proposed to 
use the same methodology for the CY 2012 OPPS 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 8-
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 (e.g., 
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.
    In the CY 2012 OPPS/ASC proposed rule, for CY 2012, we proposed to 
accept the APC Panel's recommendation 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 evaluation criteria mentioned 
above. We also proposed 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 from the CY 2012 inpatient only 
list because upon further clinical review subsequent to the February 
28-March 1, 2011 APC Panel meeting, we did not believe that these

[[Page 74354]]

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 the 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 noted 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 invited public comment on the inclusion 
of CPT code 54411 on the CY 2012 inpatient list.
    At its August 10-12, 2011 meeting, the APC Panel recommended again 
that CMS remove CPT codes 22551, 22552, 22554, 22585, and 63267 from 
the CY 2012 inpatient only list and that CMS provide the APC Panel with 
clinical information on the appropriateness of removing HCPCS code 
43279 (Laparoscopy, surgical, esophagomyotomy (Heller type), with 
fundoplasty, when performed) from the inpatient-only list and, if 
removed, to which APC it should be assigned.
    Comment: Commenters supported the CMS proposal to accept the APC 
recommendation to remove CPT procedures codes 21346, 35045, and 54650 
from the CY 2012 inpatient only list.
    Response: We appreciate the commenters' support.
    Comment: One commenter requested that CMS remove CPT code 54411 
from the CY 2012 inpatient only list based on the specialty society's 
experience and additionally requested that CMS remove CPT code 54417 
(Removal and replacement of a non-inflatable (semi-rigid) or inflatable 
(self-contained) penile prosthesis through an infected field at the 
same operative session) from the inpatient only list.
    Response: We reevaluated data on CPT codes 54411 and 54417, 
utilizing further clinical review by CMS' medical advisors, and we 
remain convinced that these procedures can be safely performed only in 
the inpatient setting due to the invasive and complicated nature of 
these procedures.
    Comment: One commenter requested that CMS create a modifier similar 
to modifier-CA (procedure payable only in the inpatient setting when 
performed emergently on an outpatient who expires prior to admission) 
to indicate procedure payable only in the inpatient setting when 
performed emergently on an outpatient who is transferred to another 
acute care facility prior to admission.
    Response: We appreciate this comment. However, the issues discussed 
within this comment are outside the scope of the provisions of the 
proposed rule. We will take this comment into consideration in 
developing future rulemaking.
    Comment: Several commenters requested that CMS remove all of the 
CPT codes recommended by the APC Panel, as well as remove 42 additional 
CPT codes from the CY 2012 inpatient only list based on their own 
experience, specialty society recommendation, or designation of a 
procedure as safe in the outpatient setting under one of the many 
clinical guidelines available, such as Milliman Care Guidelines.
    Response: We reevaluated data on the 42 additional CPT codes 
requested by the commenters using more recent utilization data and 
further clinical review by CMS medical advisors. These codes are listed 
in Table 47 below. As a result of the reevaluation, we agree with the 
commenters that it would be appropriate to remove the following seven 
CPT codes from the CY 2012 inpatient only list because patients 
undergoing these procedures can typically be managed postoperatively as 
outpatients: 0184T (Excision of rectal tumor, transanal endoscopic 
microsurgical approach (ie, TEMS), including muscularis propria (ie, 
full thickness)); 20930 (Allograft for spine surgery; morselized); 
20931 (Allograft for spine surgery only; structural (List separately in 
addition to code for primary procedure)); 43281 (Laparoscopy, surgical, 
repair of paraesophageal hernia, includes fundoplasty, when performed; 
without implantation of mesh); 43770 (Laparoscopy, surgical, gastric 
restrictive procedure; placement of adjustable gastric restrictive 
device (eg, gastric band and subcutaneous port components)); 22551 
(Arthrodesis, anterior interbody, including disc space preparation, 
discectomy, osteophytectomy and decompression of spinal cord and/or 
nerve roots; cervical below C2); and 22554 (Arthrodesis, anterior 
interbody technique, including minimal discectomy to prepare interspace 
(other than for decompression); cervical below C2). We also note that 
although commenters requested that CPT code 37221(Revascularization, 
endovascular, open or percutaneous, iliac artery, unilateral, initial 
vessel; with transluminal stent placement(s), includes angioplasty 
within the same vessel, when performed) be removed from the CY 2012 
inpatient only list, CPT code 37221 is not on the current inpatient 
only list, but is currently assigned a status indicator of ``T.'' In 
regard to the other 36 CPT codes that the commenters requested to be 
removed from the CY 2012 inpatient only list, we remain convinced that 
these procedures can be safely performed only in the inpatient setting 
due to the complexity and intensity of these services and the need for 
postoperative inpatient monitoring.
    Comment: A number of commenters suggested that regulations should 
not supersede the physician's level of knowledge and assessment of the 
patient's condition, and that the physician can appropriately determine 
whether a procedure can be performed in a hospital outpatient setting. 
Other commenters stated that physician's payment should be aligned with 
the hospital payment; if the hospital is not paid, the physician 
payment should not be allowed. The commenters further stated that 
physicians have little incentive to ensure that inpatient only 
procedures are performed in the correct setting because their payments 
are not impacted by an incorrect site of service. One commenter 
believed that CMS and hospital efforts to educate physicians have not 
been effective. Many commenters suggested that the inpatient only list 
be eliminated in its entirety. The commenters indicated that hospitals 
already meet minimum safety standards through Joint Commission 
accreditation and the Medicare hospital conditions of participation. 
Commenters suggested that, if the inpatient only list cannot be 
eliminated in its entirety, an appeals process be developed. Commenters 
believed that an appeal process would give the hospital the opportunity 
to submit documentation on the physician's intent, the patient's 
clinical condition, and the circumstances that enabled the patient to 
be sent home safely without an inpatient stay. One commenter requested 
that CMS push its Medicare contractors' medical directors to develop 
local coverage determinations (LCDs) that define when selected 
procedures should be performed as inpatient or outpatient and that CMS 
develop a process to more quickly evaluate procedures for removal from 
the inpatient only list outside of the rulemaking process.
    Response: We appreciate these comments and thoughtful suggestions. 
We continue to believe that the inpatient only list is a valuable tool 
for

[[Page 74355]]

ensuring that the OPPS only pays for services that can safely be 
performed in the hospital outpatient setting, and we will not eliminate 
the inpatient only list at this time. We believe that there are many 
surgical procedures that are never safely performed for a Medicare 
beneficiary in the hospital outpatient setting. Therefore, it would be 
inappropriate for us to assign them separately payable status 
indicators and establish payment rates in the OPPS. We recognize that 
hospitals already meet minimum safety standards through accreditation 
or State surveys which assure compliance with the Medicare hospital 
conditions of participation. However, while accreditation or State 
survey and certification of compliance with the hospital conditions of 
participation ensure that a hospital is generally a safe and 
appropriate environment for providing care, they do not determine 
whether a particular service can be safely provided in the outpatient 
setting to Medicare beneficiaries.
    Although the commenters suggested that we apply the same payment 
restrictions to physicians and hospitals when inpatient procedures are 
performed inappropriately, payment for physicians' services is outside 
the scope of the payment policies governed by the OPPS and the 
provisions of this OPPS/ASC final rule with comment period. 
Notwithstanding concern that education has not yet been able to stop 
some physicians from performing a procedure on the inpatient only list 
in the hospital outpatient setting, we continue to believe that 
education is critical to ensuring that physicians do not inadvertently 
provide services in a hospital outpatient setting that are paid for 
only during an inpatient stay. We expect hospitals to be aware of the 
services that are being provided in the outpatient setting. Therefore, 
we do not believe that it is appropriate to pay the hospital for the 
ancillary services furnished when the patient receives an inpatient 
only service in the hospital outpatient setting. Further, we expect 
hospitals to use this knowledge and to educate physicians with regard 
to the appropriate setting for the procedures they furnish. We 
recognize that there are cases in which the patient expires before he 
or she can be admitted and has received an inpatient only service 
without being admitted. In these cases, we have a longstanding policy 
of making payment for the ancillary services provided to Medicare 
beneficiaries under APC 0375.
    As we have stated in the past, we also are concerned about the 
impact of eliminating the inpatient only list on Medicare beneficiary 
liability. Elimination of the inpatient only list might lead to longer 
periods of stay in the hospital outpatient setting, during which 
Medicare beneficiaries are responsible for copayments for a complex 
surgery and any individual services supporting that surgery, as well as 
financial liability for most self-administrable drugs which are not 
covered under Medicare Part B. Cost-sharing is very different between 
the hospital inpatient setting and the hospital outpatient setting, and 
Medicare beneficiaries may incur higher out-of-pocket costs in the 
hospital outpatient setting for complex surgical procedures. We do not 
plan to adopt a specific appeals process for claims related to 
inpatient only procedures performed in the HOPD. Stakeholders can 
request changes to the inpatient only list through annual rulemaking, 
but they are responsible for knowing what procedures are currently on 
the list. We do not believe that a dedicated appeals process for cases 
involving inpatient only procedures performed in the outpatient setting 
is warranted and such a process could potentially undermine the 
disincentive for performing inpatient only procedures in an outpatient 
setting. We remain committed to reviewing the inpatient only list 
timely to reflect changes in medical practice, and we plan to continue 
our current practice of reviewing procedures for removal from the 
inpatient only list through the notice-and-comment rulemaking process.
    After consideration of the public comments received, for CY 2012, 
we are modifying our proposal to accept the APC Panel's recommendations 
to remove the procedures described by CPT codes 22551 and 22554 from 
the CY 2012 inpatient only list because after additional discussion 
during the August 10-12, 2011 APC Panel meeting and further clinical 
review subsequent to the August 10-12, 2011 APC Panel meeting, we agree 
with the APC Panel that the procedures may be appropriately provided as 
hospital outpatient procedures for some Medicare beneficiaries, based 
upon the evaluation criteria mentioned above. We also are accepting the 
APC Panel's recommendation to provide the APC Panel with clinical 
information on the appropriateness of removing HCPCS code 43279 from 
the inpatient-only list and, if removed, to which APC it should be 
assigned. However, we are not accepting the APC Panel's recommendations 
to remove the procedures described by CPT codes, 22552, 22585, 54411, 
61107, 61210, and 63267, because, upon further clinical review 
subsequent to the August 10-12, 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.
    We are finalizing our proposal, with modifications, to remove CPT 
codes 0184T, 20930, 20931, 21346, 22551, 22554, 35045, 43281, 43770, 
and 54650 from the inpatient only list. The 10 procedures we are 
removing from the inpatient only list for CY 2012 and their CPT codes, 
long descriptors, APC assignments, and status indictors are displayed 
in Table 46 below.
BILLING CODE 4120-01-P

[[Page 74356]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.073


[[Page 74357]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.074


[[Page 74358]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.075


[[Page 74359]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.076


[[Page 74360]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.077

BILLING CODE 4120-01-C

X. 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 
the 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 using 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 (NPP), but his or her physical presence is not required 
during the performance of the service. Direct supervision means that 
the physician or appropriate NPP 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 ``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 1985, the agency defined therapeutic services as those 
services and supplies (including the use of hospital facilities) that 
are incident to the services of

[[Page 74361]]

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)), and 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.  
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 that 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 hospital 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 hospital outpatient 
diagnostic services at this time. The supervision requirements for 
hospital 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 that some hospitals 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 outpatient 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 outpatient 
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 hospital outpatient 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 NPPs 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 hospital 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 benefits for pulmonary rehabilitation (PR), 
cardiac

[[Page 74362]]

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 of hospital 
outpatient therapeutic services, and instead allow the supervisory 
practitioner 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 other types of 
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 a 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 
outpatient 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 NPP 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 NPP, 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 that they have 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 outpatient 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 for hospital outpatient therapeutic services to 
increase flexibility for hospitals while maintaining an appropriate 
level of quality and safety and consistent with the Medicare statute. 
Specifically, for these services 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 NPP has determined that 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 outpatient 
therapeutic 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 that CMS assign supervision levels other than direct 
supervision for specific outpatient hospital therapeutic services. We 
stated that the review entity would evaluate services and recommend 
that CMS assign the same level of supervision (direct supervision), a 
lower level of supervision (general supervision), or a higher level of 
supervision (personal 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 Transitional 
Outpatient Payments (TOPs) criteria, because we believe that

[[Page 74363]]

these hospitals experience resource constraints that are similar to 
CAHs.
    We indicated that we would consider the Federal Advisory Panel on 
Ambulatory Payment Classification Groups (APC Panel) as a potential 
candidate to serve as the independent review entity to consider 
requests for alternative service-specific 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 the CY 2012 OPPS/ASC proposed rule (76 FR 42277 
through 42285), we discussed these comments and further developed 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 did not propose any changes to those requirements in the 
CY 2012 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 2012 OPPS/ASC proposed rule (76 FR 42277 through 42285), 
we proposed to establish an independent technical review process to 
consider service-specific requests that CMS assign supervision levels 
other than direct supervision to hospital outpatient therapeutic 
services. Our proposals 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.
a. Selection of Review Entity
    We proposed that the existing APC Panel serve as the independent 
review entity. However, we proposed to modify the APC Panel's scope and 
composition in order to create a body that is prepared to address 
supervision standards and that reflects the full range of parties 
subject to the standards. Specifically, we proposed to use the 
discretionary authority in the Panel charter to expand its scope to 
include the topic of supervision standards. We proposed to add several 
(2 to 4) representatives of CAHs as Panel members because CAHs are 
subject to the supervision rules for payment. We proposed that we would 
continue to exclude these members from deliberations about APC 
assignments under the OPPS, as these assignments do not affect CAHs. 
CAHs are not paid under the OPPS, and we do not believe that they are 
``appropriate representative providers'' for the Panel's deliberations 
on APC groups and weights under the authorizing section 1833(t)(9) of 
the Act.
    We proposed to use the APC Panel for many reasons. In addition to 
being already established and funded, we believed that the APC Panel 
would be inclusive and well-balanced because it is subject to the FACA 
rules. We also proposed to use the APC Panel because we believed it 
will be 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.
    Comment: Most commenters were in favor of the proposal to use the 
APC Panel, provided that CAHs and small rural PPS hospitals received 
appropriate representation. Many commenters requested that CMS add 4 
representatives of CAHs and an additional 4 representatives of small 
rural PPS hospitals to the current 15 Panel members, to ensure a strong 
voice for small and rural hospitals and because both CAH and non-CAH 
rural hospitals are having difficulty complying with the direct 
supervision requirement. The commenters also recommended that small 
rural hospitals paid under the OPPS be permitted to participate in the 
Panel's deliberations about APC groupings and weights. One commenter 
requested an equal number of rural and urban provider representatives 
on the Panel. Another commenter urged CMS to ensure adherence to the 
FACA rules.
    Response: We agree with commenters that the APC Panel is an 
appropriate entity to serve as the review body, provided CAHs and small 
rural hospitals are given appropriate representation on the Panel. 
Therefore, we are finalizing the APC Panel as the entity that will 
advise and make independent recommendations to the agency regarding the 
appropriate supervision level for individual hospital outpatient 
therapeutic services. We believe that it will be important to obtain 
advice that carries the weight of a Federal advisory recommendation. In 
addition to being already established and funded, the Federal advisory 
APC Panel will, of necessity, be inclusive and well-balanced because it 
is subject to the FACA rules. Panel members bring relevant clinical and 
nonclinical expertise to the discussions. Through amendment of the 
Panel charter, the Panel will be authorized under section 222 of the 
Public Health Service Act (42 U.S.C. 217(a)) to advise the Secretary of 
the Department of Health and Human Services and the CMS Administrator 
on the appropriate supervision level for individual hospital outpatient 
therapeutic services. Under this authority, we will also designate 
representatives of CAHs to serve on the Panel to advise CMS regarding 
supervision but they will not advise CMS regarding APC groups and 
weights.
    As we discuss below, a recent study indicated significant 
differences between CAHs and non-CAH small rural hospitals in 
resources, quality of care, and outcomes (Joynt K, Harris Y, et al. 
Quality of Care and Patient Outcomes in Critical Access Rural 
Hospitals. JAMA. 2011;306(1):45-52). However, as we stated in our CY 
2011 OPPS/ASC final rule with comment period (75 FR 72007), we believe 
that CAHs and small rural PPS hospitals may, at times, face similar 
resource constraints such as workforce shortages, which could lead to 
difficulty in meeting certain supervision standards. We believe that it 
would be appropriate for both small rural PPS hospitals and CAHs to 
have added representation on the Panel in a manner that would be 
balanced under the FACA rules. Therefore, as part of our final policy 
we are adding four new seats to the Panel. Two of these seats will be 
designated for representatives of CAHs and the other two will be 
designated for representatives of small rural PPS hospitals. We are 
defining ``small rural PPS hospital'' in the same manner as we defined 
``small rural hospital'' for the notice of nonenforcement of direct 
supervision of therapeutic services in CAHs and small rural hospitals, 
that is, hospitals with 100 or fewer beds and either geographically 
located in a rural area or paid under the hospital OPPS with a

[[Page 74364]]

rural wage index (75 FR 72007; https://www.cms.gov/HospitalOutpatientPPS/downloads/CMS_1504FC_OPPS_2011_FR_Physician_Supervision_Nonenf_Notice.pdf). This is the same 
definition of small rural hospital that Congress recognizes for TOPs 
under section 1833(t)(7) of the Act. All PPS hospital representatives 
on the Panel, including the representatives of small rural PPS 
hospitals, will continue to advise CMS on the APC groups and weights as 
well as the appropriate supervision levels for individual hospital 
outpatient therapeutic services.
    Comment: Several commenters addressed the types of practitioners 
that should be appointed to the Panel, and the degree to which CMS and 
the Panel should rely on clinical and specialty expertise. Two 
commenters suggested that recommendations and decisions about 
supervision levels be made only by clinicians, and that nonclinicians 
not be permitted to participate in the review process. One commenter 
supported the concept of an independent review process but opposed use 
of the APC Panel, stating that the Panel's members are selected based 
on their knowledge of payment and reimbursement systems rather than 
clinical judgment and expertise. The commenter believed that the 
Panel's recommendations should be based solely on clinical judgment, 
and pointed out that several current Panel members do not have clinical 
expertise. The commenter expressed concern that these individuals' 
recommendations would be based upon payment implications rather than 
clinical criteria. One commenter recommended that CMS involve its 
specialty society in its reviews. Another commenter encouraged CMS to 
include experts on the Panel that specialize in the particular service 
that is being evaluated, and to seek out the resources of specialty 
societies. One commenter noted that in the CY 2011 OPPS/ASC final rule 
with comment period (75 FR 72011), in making the decision to exclude 
chemotherapy administration from the list of extended duration services 
pending an independent assessment, CMS noted a safety standard that was 
published by the American Society of Clinical Oncology and the Oncology 
Nursing Society. The commenter requested information as to how CMS 
might consider such specialty association guidelines in future 
decision-making.
    Response: As we stated in the proposed rule (76 FR 42280), we 
believe that the APC Panel is an appropriate body to review supervision 
levels because, under the FACA rules, it must have a ``balanced'' 
composition. The Panel members must reflect expertise in the areas that 
are important for informed, representative decision-making on 
supervision which we believe includes both clinical and other types of 
expertise. In evaluating the supervision levels that are required for 
payment, we believe that the Panel will need input from individuals 
with knowledge in hospital billing, coding, and administration, as well 
as clinical matters. For example, in the past several OPPS rulemaking 
cycles, commenters have requested that CMS evaluate the surgical 
recovery period for a change in supervision level from direct to 
general supervision. Several commenters to the current (CY 2012) 
proposed rule were seeking additional information on how to request a 
change in supervision level for a ``service'' like the recovery period 
that is not defined by a CPT code but rather by phases assigned by a 
specialty society. As we discuss below, one commenter requested that 
CMS synchronize the supervision requirement for the recovery period 
with the phases into which the American Society of Anesthesiology (ASA) 
divides the recovery period. Individuals with billing and coding 
expertise may help inform these and similar issues.
    In addition, we note that it is possible for both clinicians and 
nonclinicians to make recommendations that are inappropriately based on 
payment implications rather than clinical or other criteria that may be 
set forth. Clinicians must adhere to the supervision rules in order to 
receive payment for their services, and furnishing supervision uses 
resources that might otherwise be devoted to increasing payment by 
furnishing additional services. Thus, we believe there is some 
potential among clinicians and nonclinicians to give inappropriate 
weight to payment implications in making their recommendations. 
Excluding nonclinicians from the Panel would not necessarily prevent 
these types of considerations from affecting decision-making.
    In accordance with the FACA rules, we will maintain balanced 
membership on the Panel. We encourage specialty associations and other 
entities with specialized expertise in services that may be under the 
Panel's consideration to nominate representatives to the Panel. We also 
encourage these groups to participate in the public Panel meetings, and 
to submit public presentations that would inform the Panel's 
deliberations. In setting supervision levels, CMS will continue to 
consider safety and other guidelines published by specialty 
associations, and the Panel may consider them as well.
    Comment: Several commenters requested that Panel members include 
clinicians furnishing hospital outpatient services, certified 
registered nurse anesthetists (CRNAs), and other NPPs who furnish high 
volume services, especially registered nurses (RNs), physical 
therapists, and respiratory therapists. One commenter indicated that 
the Panel should seek input from providers who compete with physicians 
in the marketplace, and not restrict opportunities to inform the Panel 
to medical doctors only. Several commenters expressed concern about 
CMS' policy to not allow certain NPPs to supervise hospital outpatient 
therapeutic services, especially CRNAs and pharmacists. One commenter 
indicated that it will ask the Panel to consider allowing pharmacists 
to supervise hospital outpatient therapeutic services as appropriate, 
for example, medication management and, in States where it is 
authorized, collaborative drug therapy management. The commenter 
requested that, in the course of the review process, the Panel consider 
pharmacists to be NPPs who may furnish supervision. Another commenter 
believed that supervision of RNs by physicians will not necessarily 
prevent medical errors, and also stated that physicians have been 
implicated in the increase in wrong-patient and wrong-site surgical 
errors.
    Response: We note again that, in accordance with the FACA rules, 
CMS will follow a balance plan for the Panel membership. For purposes 
of supervision deliberations, we believe that the clinicians on the 
Panel should largely represent the types of practitioners who furnish 
hospital outpatient services and those with supervisory 
responsibilities because they are most directly impacted by the rules. 
As we discussed in the proposed rule (76 FR 42282), the agency does not 
allow RNs to supervise hospital outpatient therapeutic services because 
they are not authorized under the Act to independently furnish ``would 
be physicians' services.'' For the same reason, CMS does not permit 
pharmacists to supervise these services. CRNAs have a narrow scope of 
practice, and we typically would seek practitioners that furnish a 
broader array of hospital outpatient services to serve as Panel 
members. However, these practitioners are eligible to serve on the 
Panel, depending on their areas of expertise. We note that, currently, 
one Panel member is an RN and Panel members in the past have been 
pharmacists. While we did not receive

[[Page 74365]]

any comments directly on the number of nurse practitioners, physician 
assistants or other supervisory NPPs that should serve on the Panel, we 
would encourage nominations of these types of practitioners, especially 
for the CAH seats because these types of practitioners might be used 
more frequently to furnish supervision in CAHs.
    Regarding the Panel's supervision deliberations, we note that, as 
we proposed, the Panel's scope of review will be limited to addressing 
the level of supervision that should be furnished for a given hospital 
outpatient therapeutic service, and will not include the type of 
practitioner that should be permitted to furnish the supervision. The 
Panel will recommend the appropriate supervision level for a particular 
service, given the type of practitioner that is permitted to furnish 
and supervise the service under the current laws and regulations.
b. Review Process
    We proposed to issue agency decisions based on APC Panel 
recommendations through a subregulatory process. We proposed a process 
similar to the one currently used to set supervision levels for 
diagnostic services under the MPFS, which are also applicable to those 
services when furnished in the hospital outpatient setting. We proposed 
that 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 supervision levels for diagnostic services 
under the MPFS, there is no provision for public comment. However, 
given the strong stakeholder interest in the supervision requirements 
and the extent of prior dialogue with the various stakeholders, we 
proposed to provide a period of notice and comment on our posted 
decisions prior to finalizing them.
    We reasoned that the flexibility of a subregulatory process in 
comparison to annual notice and comment rulemaking would allow 
stakeholders to submit, and for the APC Panel to consider, 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 
to the CY 2011 OPPS/ASC final rule with comment period had requested 
(75 FR 42280). 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 made once a year due to the annual OPPS/ASC rulemaking 
cycle.
    Comment: Most commenters opposed the agency issuing its decisions 
through a subregulatory process. The commenters requested that, to 
ensure the greatest transparency and allow sufficient time and 
opportunity for public comment, CMS subject its decisions to notice and 
comment through rulemaking. One commenter requested a 45- to 60-day 
comment period. A few commenters suggested that, to facilitate 
evaluations more than once a year, CMS could address supervision 
standards using both the OPPS rule and another non-OPPS rule. In 
response to the concerns expressed by the agency in the proposed rule 
that the review process should be nimble and flexible enough to address 
access or other urgent needs, several commenters noted that the agency 
possesses other means of assuring access, for example notices of 
nonenforcement, additional rulemaking, and other administrative powers. 
Several commenters requested that CMS not use any information that is 
presented by stakeholders in the course of the review process for 
enforcement purposes.
    Response: As we indicated in the proposed rule, we believe that 
employing a subregulatory process to establish our final decisions will 
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 a more 
formal opportunity for notice and comment, due to practical 
considerations involved in rulemaking, it is very likely that we would 
only be able to accomplish changes in supervision levels once a year. 
We agree with commenters that the agency has several administrative 
means to respond to urgent problems associated with supervision levels, 
for example exercising our enforcement discretion. However, we believe 
it is preferable to have a more nimble means of addressing access or 
pattern-of-care concerns within a short timeframe. In addition, as we 
noted in the proposed rule, CMS has historically 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 also applicable to those 
services when furnished in the hospital outpatient setting.
    Given the strong stakeholder interest in our consideration of 
changes in supervision levels for hospital outpatient therapeutic 
services, we continue to believe that we should provide an opportunity 
for public comment on our decisions (which will be based upon the 
Panel's recommendations) prior to finalizing them. Therefore, we are 
finalizing our proposal to issue our decisions based on Panel 
recommendations at the subregulatory level. We will post our 
preliminary decisions on the OPPS Web site for public review and 
comment. Given that the issues will be service-specific and therefore 
narrow, we will allow for a 30-day public comment period. We will give 
careful consideration to the comments that we receive, and we 
anticipate finalizing decisions within 60 days of the end of the 
comment period. Our final decisions will be effective either in July or 
January following the most recent APC Panel meeting.
c. Evaluation Criteria
    To begin evaluating services in CY 2012, we proposed to use the 
same APC Panel process that is currently used to solicit requests from 
stakeholders for APC and status indicator changes for services or 
categories of services to construct the agenda to solicit potential 
services for consideration of a change in supervision level. In 
addition, we proposed that CMS would have the ability to request that 
the Panel review the supervision level for services as necessary. If we 
receive an unmanageable number of requests, we proposed to prioritize 
requests by service volume, total expenditures and/or frequency of 
requests. We also proposed to give priority to services requested for 
review through public comment on the CY 2010 and CY 2011 OPPS/ASC 
rules. We proposed to require that requests include a justification for 
the change in supervision level that is sought, supported to the extent 
possible with clinical evidence. We also proposed that we would 
consider these justifications in deciding which services to forward to 
the APC Panel for evaluation.
    We proposed 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. We proposed that the Panel should take into consideration the 
context in which the

[[Page 74366]]

service is delivered, that is, the clinical, payment, and quality 
context of a patient encounter. In recommending a supervision level to 
CMS, we proposed 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 the following:
     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.
    We noted that 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, 75 FR 72007, and 75 FR 72010 through 72012), 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. The 
supervisory practitioner must have, within his or her State scope of 
practice and hospital-granted privileges, the knowledge, skills, 
ability, and privileges to perform the service or procedure. Specially 
trained ancillary staff and technicians are the primary operators of 
some specialized diagnostic or therapeutic equipment, and while in such 
cases CMS does not expect the supervisory practitioner to operate this 
equipment instead of a technician, CMS does expect the practitioner 
that supervises provision of the service to be knowledgeable about the 
test and clinically appropriate to furnish the test. The supervisory 
responsibility includes the ability to furnish assistance and direction 
throughout the performance of a procedure and, as appropriate to the 
supervisory practitioner and the patient, to change a procedure or the 
course of care for a particular patient. CMS would not expect that the 
supervisory practitioner would make all decisions unilaterally without 
consulting the patient's treating physician or NPP. The supervisory 
practitioner should have the training and knowledge to clinically 
redirect the service or provide additional orders.
    We proposed 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. We proposed 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. We proposed that 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, we stated that we anticipated extending through CY 2012 
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). This extension would allow these facilities time to meet 
the appropriate supervision standard and allow us to complete 
supervision policy decisions on many key services during 2012.
    Comment: Commenters largely supported the proposed four clinical 
criteria. One commenter requested that CMS expand these criteria to 
allow exceptions based on changes in technology.
    Response: We believe that a change in technology or practice 
patterns that affects a procedure's level of safety is an appropriate 
additional criterion. Therefore, as part of our final policy, we are 
adding a fifth criterion, ``Recent changes in technology or practice 
patterns that affect a procedure's safety.'' This criterion is similar 
to the criteria CMS will use to determine whether there is a need for 
reconsideration of a particular service as discussed below.
    Comment: Several commenters continued to request that CMS establish 
a default supervision standard of general supervision for all hospital 
outpatient therapeutic services, and assign direct supervision only as 
recommended by the review entity. The commenters reiterated public 
comments on prior rules, stating that the review entity and CMS should 
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 NPP. They again noted that 
certain services are not furnished personally by these practitioners 
and instead are furnished personally by auxiliary personnel such as 
technicians or RNs. However, the 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 contrast, one commenter 
suggested that, to shorten the list of services that need 
consideration, CMS assign personal supervision to all services that 
require the practitioner to personally furnish the service and limit 
the Panel's scope to consideration of any remaining services. One 
commenter requested that the Panel be permitted to advise the agency on 
``alternative'' forms of supervision such as satellite offices and 
telemedicine.
    Response: In the CY 2012 OPPS/ASC proposed rule and the CY 2011 
OPPS/ASC final rule with comment period (76 FR 42281 and 75 FR 72006, 
respectively), 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 requirements for 
physician (or NPP) orders and direct physician involvement in patient 
care stem from our interpretation of the nature of incident to 
physicians' 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 stated in the proposed rule and 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. We 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 majority of hospital outpatient therapeutic 
services and, as such, it is the default supervision standard.
    In the course of evaluating a stakeholder request for review of the 
supervision level required for a given service, the APC Panel may 
recommend that personal supervision is the most

[[Page 74367]]

appropriate level of supervision for that service. It may also be 
appropriate for the Panel to recommend personal supervision for 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 the hospital 
outpatient services that are paid for by Medicare. Accordingly, we 
believe that the APC Panel 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. 
Therefore, we are finalizing our proposal that the Panel shall 
recommend general, direct or personal supervision for a service.
    For situations where the supervisory practitioner is not available 
in person, but only by ``telemedicine'' or in a location such as a 
``satellite office,'' the Panel shall apply the definitions of direct, 
general and personal supervision in accordance with the regulations. 
For example, if a supervisory practitioner is only available via 
telemedicine, meaning telephone or Internet, and is not able to be 
immediately physically present, the supervisory practitioner would be 
furnishing general supervision. If a supervisory practitioner is 
present in a satellite office such as an off-campus PBD and is able to 
be immediately physically present but is not present in the room where 
the service is being furnished, he or she would be furnishing direct 
supervision. As we previously noted in the CY 2011 OPPS/ASC final rule 
with comment period (75 FR 72008), with regard to recognizing 
availability by phone or modes other than in-person, we believe that 
the requirement for physical presence distinguishes direct supervision 
from general supervision because the regulations define general 
supervision as ``the procedure is furnished under the physician's 
overall direction and control, but the physician's presence is not 
required during the performance of the procedure'' (Sec.  
410.32(b)(3)(i)). We believe that it would be out of the APC Panel's 
scope of activities for it to deliberate on the underlying definitions 
of direct, general or personal supervision, or for it to consider 
recommending yet another type of supervision based on a supervisory 
practitioner's location. Any changes to the definitions would be 
proposed and finalized through the notice and comment rulemaking 
process.
    The APC Panel must base its recommendations on the available 
clinical evidence. It shall also take into consideration any known 
impacts of the level 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.
    Comment: With respect to a starting agenda, several commenters 
continued to request that the Panel begin by evaluating all therapeutic 
services with a work RVU < 1.0 under the MPFS, which includes many 
extended duration services. Many commenters requested that the Panel 
review surgical procedures and the surgical recovery period, 
chemotherapy administration, and blood transfusions. A few commenters 
also requested that the Panel evaluate therapies that accompany 
chemotherapy administration such as hydration and anti-emetics. One 
commenter asked how stakeholders could request evaluation of services 
that are not defined by CPT codes, notably the surgical recovery 
period. The commenter requested that CMS allow general supervision 
after ``phase 1'' of the recovery period as designated by the American 
Anesthesiology Association (ASA), and asked that CMS synchronize its 
supervision requirements for the recovery period with the phases 
established by the ASA. Another commenter requested that CMS place on 
the agenda services that are high volume or of high priority for CAHs 
and small rural hospitals.
    Response: In considering our final policy for the appropriate unit 
of service evaluation, we noted that the HCPCS code is a broader unit 
of service than the CPT code, and concluded that it would be more 
appropriate for use to identify services that do not have an assigned 
CPT code. Therefore, we will consider requests, and forward them to the 
APC Panel for evaluation as described above, for service(s) that are 
identified by either a HCPCS code or a CPT code.
    With regard to setting an agenda, we noted in the proposed rule 
that we may receive more requests for evaluation than can be addressed 
at a given Panel meeting. We did not receive any public comments 
regarding criteria for prioritizing requests and services to be 
reviewed at each meeting. Therefore, we will prioritize requests based 
on service volume, total expenditures for the service, and frequency of 
requests. As proposed, we will also give priority to services that the 
public has requested for evaluation in the CY 2010 through CY 2012 
OPPS/ASC rules. In addition, we will give priority to services that 
have not previously been evaluated by the Panel. As we proposed, 
requests must include justification for the change in supervision level 
that is sought, supported to the extent possible with clinical 
evidence. In prioritizing services for review, we also will take these 
justifications into consideration.
    We did not receive any public comments on our proposal that the 
agency would retain the independent discretion to request that the 
Panel evaluate supervision levels for one or more services. Therefore, 
we are finalizing that provision.
    Comment: Several commenters requested that CMS explicitly include 
the place of service as an evaluation criterion, especially when the 
service is furnished in a CAH or rural facility. However, several other 
commenters recommended that supervision requirements should be applied 
based on service type and safety requirements, irrespective of 
location.
    Response: We continue to believe that the overall patient 
experience for a given encounter may differ significantly by facility 
depending on physician practice patterns, the facility's patient and 
payer mix, Medicare payment structure for the facility, applicable 
regulations, quality of care, available resources and practitioners, 
and many other factors. In recent years, researchers have noted an 
undesirable amount of variation in the care that is furnished to 
Medicare patients in both metropolitan and nonmetropolitan areas of the 
country (MedPAC Report to the Congress: Regional Variation in Medicare 
Service Use, January 2011, available at: http://www.medpac.gov/documents/Jan11_RegionalVariation_report.pdf). In addition, according 
to a recent study, the quality of care that is furnished in CAHs 
appears to be worse in comparison to small rural hospitals (Joynt K, 
Harris Y, et al.: Quality of Care and Patient Outcomes in Critical 
Access Rural Hospitals, JAMA. 2011; 306(1):45-52). Joynt et al. found 
significant differences between CAHs and non-CAH small rural hospitals 
in resources, quality of care, and outcomes. In public comments to 
date, there has not been consensus on whether or not CMS should set 
supervision levels for individual services that are unique to CAHs or 
rural facilities. Many commenters opposed the agency's requirement of 
direct supervision of

[[Page 74368]]

outpatient chemotherapy administration in rural areas, citing access 
concerns and potentially lengthy patient commutes for care. However, as 
we discussed above, published safety standards appear to recommend 
direct supervision of chemotherapy administration.
    We continue to believe that in making its recommendations, the 
Panel should consider the context in which care is furnished and that 
CMS should seek balanced input from various groups on these issues, and 
this belief is reflected in our proposed charge to the Panel. To 
emphasize this point, in our final policy, we are incorporating the 
clinical setting as a specific evaluation criterion, thereby 
instructing the Panel to consider the clinical context in which the 
service is delivered when making recommendations on supervision levels.
    Comment: One commenter recommended that, to ensure consistency 
among settings, the Panel should be allowed to set supervision 
requirements no higher than the supervision requirements for a given 
service under the MPFS. Several commenters recommended that CMS require 
the same supervision levels in the hospital outpatient setting and 
ASCs, or among the hospital outpatient setting, ASCs, and physician 
offices.
    Response: We disagree with this commenter. We do not believe that 
supervision requirements should necessarily be the same in the hospital 
outpatient setting and the physician office setting for therapeutic 
services. Various factors contribute to the appropriate level of 
supervision that is needed in different settings, for example, 
differences in patient populations. Patients receiving treatment in a 
hospital are generally sicker that patients treated in physician 
offices. Therefore, in some cases the appropriate level of supervision 
would be higher in the hospital than in a physician office setting.
    Comment: One commenter suggested that CMS allow reconsideration 
requests. One commenter requested that CMS expand its proposed criteria 
to include unique circumstances generally, rather than limiting the 
criteria for conducting another evaluation to changes in technology or 
practice patterns.
    Response: As we indicated in the proposed rule, conducting 
evaluations of services that the Panel has previously considered 
without new evidence supporting a change in the supervision level could 
become burdensome and consume a disproportionate amount of the Agency's 
and the Panel's resources. As our final policy, we are providing that 
the Panel may consider requests for re-review of a service that has 
already been evaluated. The public may request reconsideration of a 
service if new information indicates recent changes in technology or 
practice patterns that affect a procedure's safety. Such a request must 
be substantiated with new information such as a change in clinical 
practice patterns due to new techniques or new technology. If CMS 
believes that another evaluation is warranted, the Panel shall review 
the service again using the same process that it uses to evaluate new 
requests, and shall make another recommendation to CMS that could be 
the same or a different level of supervision.
    Comment: Most commenters supported extending through CY 2012 the 
notice of nonenforcement of the requirement for direct supervision of 
hospital outpatient therapeutic services in CAHs and small rural 
hospitals with 100 or fewer beds.
    Response: Because we will not complete supervision policy decisions 
on many key services until sometime in CY 2012, we are extending the 
notice of nonenforcement for CAHs and small rural hospitals with 100 or 
fewer beds as defined in the notice another year, through CY 2012. The 
purpose of the nonenforcement extension is to allow these facilities 
time to meet the appropriate supervision standard, and to give us an 
opportunity to use the new APC Panel review process to consider certain 
changes in required supervision levels. We will post a notice of the 
extension on the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/01_overview.asp.
    We noted in the proposed rule 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 proposed to allow the independent review 
entity to recommend that CMS assign either personal or general 
supervision to hospital outpatient therapeutic services, we proposed to 
define these terms in the regulations. We proposed to use the 
definitions established for purposes of the MPFS as specified at Sec.  
410.32(b)(3). Specifically, we proposed that ``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 definition that we established for the general supervision portion 
of an extended duration service.
    We did not receive any public comments on this proposal. Therefore, 
in Sec.  410.27(a)(1)(iv)(B), we are finalizing our proposed 
definitions of ``personal supervision'' for hospital outpatient 
therapeutic services to mean the definition specified at Sec.  
410.32(b)(3)(iii), and ``general supervision'' for hospital outpatient 
therapeutic services to mean the definition specified in Sec.  
410.32(b)(3)(i). In addition, we are revising the language in Sec.  
410.27(a)(1)(iv)(C) to clarify that the NPPs that are authorized in 
this section to furnish direct supervision may also furnish general or 
personal supervision (as required by CMS). Specifically, we are 
removing the word ``directly'' and inserting ``the required'' to 
provide that ``nonphysician practitioners may provide the required 
supervision of 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.''
    Comment: One commenter raised an issue that CMS has discussed in 
recent OPPS rules, namely that under the CAH CoP at Sec.  485.618 
governing standards for emergency personnel, in most areas, a physician 
or NPP with training or experience in emergency care must be on call 
and immediately available only by telephone or radio contact, and 
available on site within 30 minutes. The commenter suggested that 
hospitals are only required to adhere to the CoPs in order to submit a 
claim; therefore, they are not required to follow the more strict 
direct supervision rule for payment of services. The commenter also 
recommended that CMS require the same level of supervision for payment 
as the level that is required under the CAH CoP.
    Response: We refer readers to the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72000 through 72010) for a more detailed 
discussion of this issue. We continue to believe that the supervision 
rules are a condition of payment for CAH services, irrespective of 
their CoP staffing standard. In the CY 2011 final rule, we also 
discussed our position that the CoP is a general condition of the CAH's 
participation in the Medicare program, while the supervision standards 
apply to particular individual services furnished by the CAH. The CoP 
and the supervision requirements serve different purposes and are not 
inconsistent with each other. As such, there is no need to reconcile 
them.

[[Page 74369]]

2. Conditions of Payment and Hospital Outpatient Therapeutic Services 
Described by Different Benefit Categories
    Another issue that we addressed in the CY 2012 OPPS/ASC proposed 
rule (76 FR 42277 through 42285) 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 inquirers 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.
    In the proposed rule, we acknowledged that 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. However, we noted that 
CMS has 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 noted 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 
NPP, and by hospital personnel under the direct supervision of a 
physician or appropriate NPP.
    Thus, we have long maintained that all hospital outpatient 
therapeutic services are, according to our policy, 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 hospital outpatient 
therapeutic 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.
    In the CY 2012 OPPS/ASC proposed rule, we proposed to amend our 
regulations to clarify our policy as follows. 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 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 stated our belief 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 proposed 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 proposed 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 outpatients that are not diagnostic services and that aid the 
physician or practitioner in the treatment of the patient.'' We also 
proposed to 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.''
    Comment: Several commenters requested that CMS clarify that certain 
services which are not paid under the OPPS are excluded from the 
requirements of Sec.  410.27 and thus from our proposed clarification, 
especially physical therapy (PT), speech language pathology (SLP) and 
occupational therapy (OT); diabetes self management training (DSMT); 
medical nutrition therapy; end-stage renal disease (ESRD) services; and 
services paid under the MPFS or the Clinical Laboratory Fee Schedule 
(CLFS).
    Response: The requirements of Sec.  410.27 must be met for payment 
of the facility component of hospital outpatient therapeutic services. 
They do not apply to the professional component of the services or to 
services that are paid under other fee schedules such as the CLFS.
    Comment: One commenter noted that because CAHs are paid based on 
reasonable cost and not under the OPPS or the MPFS for outpatient PT/
SLP/OT services, under the proposed clarification, the supervision and 
other requirements of Sec.  410.27 would apply to CAHs but not to 
hospitals that are paid for those services under the MPFS. They 
expressed concern that CAHs will be disproportionately affected by CMS' 
clarification regarding the applicability of the requirements of Sec.  
410.27 to outpatient therapeutic services furnished in CAHs.
    Response: CAHs have long been paid at reasonable cost rather than 
under the MPFS for PT/SLP/OT services, and, as discussed above, CAHs 
and other hospitals have long been subject to the requirements of Sec.  
410.27. We are not imposing any new requirements on CAHs through this 
clarification. We are finalizing our proposed amendment to

[[Page 74370]]

our regulations to clarify our policy as follows. Hospital outpatient 
therapeutic services and supplies, including those services described 
by benefit categories other than the hospital outpatient ``incident 
to'' category under section 1861(s)(2)(B) of the Act, are subject to 
the conditions of payment in Sec.  410.27 when they are paid under the 
OPPS or paid to CAHs under section 1834(g) of the Act.
    We proposed to define more specifically in the regulation text the 
services and supplies to which the requirements at Sec.  410.27 apply. 
Accordingly, we are finalizing our proposed revision of the description 
of the services and supplies addressed in Sec.  410.27(a) by adding the 
term ``therapeutic'' so that paragraph (a) reads, ``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 defining these services, similar to the way they 
are defined in Section 20.5, Chapter 6, of the Medicare Benefit Policy 
Manual, to mean ``all services and supplies furnished to hospital 
outpatients that are not diagnostic services and that aid the physician 
or practitioner in the treatment of the patient.'' Also, as we 
proposed, we are adding the term ``therapeutic'' to the title of Sec.  
410.27 so that it reads, ``Therapeutic outpatient hospital or CAH 
services and supplies incident to a physician's or nonphysician 
practitioner's service: Conditions.''
3. Technical Corrections to the Supervision Standards for Hospital 
Outpatient Therapeutic Services Furnished in Hospitals or CAHs
    In the proposed rule, we noted that CAHs are not specifically named 
in the definition of nonsurgical extended duration therapeutic services 
at Sec.  410.27(a)(1)(v). We proposed to make 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. We did not receive any public comments on this proposal. 
Therefore, we are inserting the words ``or CAH'' after ``hospital'' in 
revised Sec.  410.27(a)(1)(iv)(E) to clarify that CAHs are subject to 
all of the requirements of Sec.  410.27 in the same manner as other 
types of hospitals.
    As we discussed in the proposed rule (76 FR 42284 through 42285), 
we recently noted that the text of 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 proposed 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 proposed to update Sec.  410.27(c) to cross-
reference the sections of the regulation that have replaced Sec.  
410.168, that is, Part 424, Subparts G and H. For this update, we 
proposed 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 proposed to redesignate the existing 
paragraphs (d) through (f) of Sec.  410.27 as paragraphs (e) through 
(g), respectively.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal to correct Sec.  410.27(b) so that it 
cross-references Sec.  410.29 rather than Sec.  410.168 and now reads, 
``Drugs and biological are also subject to the limitations specified in 
Sec.  410.29.'' In addition, we are updating Sec.  410.27(c) to cross-
reference the sections of the regulation that have replaced Sec.  
410.168, that is, Part 424, Subparts G and H. For this update, as we 
proposed, we are revising 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 are adding 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, as we proposed, we are redesignating 
the existing paragraphs (d) through (f) of Sec.  410.27 as paragraphs 
(e) through (g), respectively.

C. Summary of CY 2012 Final Policies on Supervision Standards for 
Outpatient Therapeutic Services in Hospitals and CAHs

    As we have indicated earlier in this section, after consideration 
of the public comments we received, we are finalizing the following 
policies.
1. Independent Review Process
    We are designating the APC Panel as the body that will review and 
advise the agency regarding the appropriate level of supervision for 
individual hospital outpatient therapeutic services. We will amend the 
Panel Charter to add the appropriate statutory authority and to allow 
representatives of CAHs to serve on the Panel for purposes of the 
supervision deliberations. We will add 4 voting seats to the Panel (for 
a current total of 19), and will designate two of these seats for 
representatives of CAHs and two for representatives of small rural PPS 
hospitals. ``Small rural PPS hospital'' means the definition of small 
rural hospital that is used by the Congress for purposes of TOPs, and 
that is used in CMS' notice of nonenforcement of direct supervision of 
outpatient therapeutic services in CAHs and small rural hospitals. With 
respect to supervision policy, the scope of the Panel's activity is 
limited to recommending to CMS the appropriate level of supervision 
(general, direct, or personal) for individual hospital outpatient 
therapeutic services.
    We will issue agency decisions based on Panel recommendations 
through a subregulatory process. We will post our preliminary decisions 
on the OPPS Web site for a 30-day period of public review and comment. 
After consideration of any public comments that we receive, we will 
issue our final decisions which will be effective either in July or 
January following the most recent APC Panel meeting.
    The Panel will be charged with recommending to CMS a supervision 
level (general, direct, or personal) that will ensure an appropriate 
level of quality and safety for delivery of a given service, as defined 
by a HCPCS or CPT code. In recommending a supervision level to CMS, the 
Panel will 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 will consider the 
following factors but may also consider others as appropriate:
     Complexity of the service.
     Acuity of the patients receiving the service.
     Probability of unexpected or adverse patient event.
     Expectation of rapid clinical changes during the 
therapeutic service or procedure.
     Recent changes in technology or practice patterns that 
affect a procedure's safety.
     The clinical context in which the service is delivered.
    As we have discussed above, these criteria include, but extend well 
beyond, the likelihood of the need to manage medical emergencies during 
or

[[Page 74371]]

after the provision of the service. The supervisory responsibility is 
more than the mere capacity to respond to an emergency, and includes 
being available to reassess the patient and potentially modify 
treatment as needed on a nonemergency basis. We will prioritize 
stakeholder requests for APC Panel review of specific services based 
upon service volume, total expenditures for the service and frequency 
of requests. We also will give priority to services that the public has 
requested we evaluate in the CY 2010 through CY 2012 OPPS/ASC rules, 
and to services that have not been previously evaluated by the Panel. 
All requests must include justification for the change in supervision 
level that is sought, supported to the extent possible with clinical 
evidence. In prioritizing services for the agenda, we also will take 
these justifications into consideration.
    We may ask the Panel to consider requests for review of a service 
that has already been evaluated. If there has been a previous 
consideration and decision on the supervision standard for a service, 
the requestor should submit new evidence to support a change in policy. 
For example, the public could request another review of a previously 
reviewed service if new information indicates recent changes in 
technology or practice patterns that affect a procedure's safety. Such 
a request must be substantiated with new information such as a change 
in clinical practice patterns due to new techniques or new technology. 
If CMS believes that another evaluation is warranted, the agency will 
ask the APC Panel to review the service again using the same process 
that it uses to evaluate new requests. The Panel will then make another 
recommendation to CMS that could be the same or a different level of 
supervision than the previous recommendation.
    Because the agency will not complete APC Panel review or 
consideration of changes to supervision levels for many key services 
until sometime in CY 2012, we are extending the notice of 
nonenforcement of the requirement for direct supervision of outpatient 
therapeutic services 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 nonenforcement extension is to allow these 
facilities time to meet the appropriate supervision standard, and to 
allow us time to complete our review of supervision levels for at least 
some services.
    Because the APC Panel may recommend that CMS assign either personal 
or general supervision to services, we are defining these terms for 
hospital outpatient therapeutic services in the regulations at new 
Sec.  410.27(a)(1)(iv)(B). We are revising the language in Sec.  
410.27(a)(1)(iv)(C) to provide that the NPPs that are authorized in 
this section to furnish direct supervision may also furnish general or 
personal supervision as required by CMS.
2. Conditions of Payment and Hospital Outpatient Therapeutic Services 
Described by Different Benefit Categories
    We are finalizing our clarification that 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 subject to the conditions of payment in Sec.  410.27 when they 
are furnished to hospital outpatients and paid under the OPPS or paid 
to CAHs under section 1834(g) of the Act. To that end, we are 
redefining the services described in Sec.  410.27 to clarify the nature 
and scope of the included services.
3. Technical Corrections
    We are correcting Sec.  410.27(b) so that it cross-references Sec.  
410.29 rather than Sec.  410.168 and now reads, ``Drugs and biological 
are also subject to the limitations specified in Sec.  410.29.'' In 
addition, we are updating Sec.  410.27(c) to cross-reference the 
sections of the regulation that have replaced Sec.  410.168, that is, 
Part 424, Subparts G and H. For this update, we are revising 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 are adding 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 redesignating the existing paragraphs (d) through (f) of Sec.  
410.27 as paragraphs (e) through (g), respectively.
    We are inserting the words ``or CAH'' after ``hospital'' in the 
revised Sec.  410.27(a)(1)(iv)(E) to clarify that CAHs are subject to 
the requirements of Sec.  410.27 in the same manner as other types of 
hospitals.

XI. Final CY 2012 OPPS Payment Status and Comment Indicators

A. Final CY 2012 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 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.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 the 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.gov/ HospitalOutpatientPPS.
    As we proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42285 
through 42287), for CY 2012, we are not making 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 final CY 2012 
status indicators and their definitions are listed in the tables under 
sections XI.A.1., 2., 3., and 4. of this final rule with comment 
period.
1. Payment Status Indicators To Designate Services That Are Paid Under 
the OPPS
BILLING CODE 4120-01-P

[[Page 74372]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.078


[[Page 74373]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.079

BILLING CODE 4120-01-C
    We did not receive any public comments related to the definitions 
of payment status indicators to designate services that are paid under 
OPPS. We continue to believe that the proposed definitions of the OPPS 
status indicators continue to be appropriate, and therefore, we are 
finalizing, without modification, our CY 2012 proposal. The final 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.gov/HospitalOutpatientPPS.
2. Payment Status Indicators To Designate Services That Are Paid Under 
a Payment System Other Than the OPPS
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42286), we did not 
propose to make any changes to the definitions of status indicators 
listed below for the CY 2012 OPPS.

[[Page 74374]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.080

    We did not receive any public comments regarding the definitions of 
payment status indicators that designate services that are not 
recognized under the OPPS but that may be recognized by other 
institutional providers. We continue to believe that the proposed 
definitions of the OPPS status indicators continue to be appropriate, 
and therefore, we are finalizing, without modification, our CY 2012 
proposal. The final 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.gov/HospitalOutpatientPPS.

[[Page 74375]]

3. Payment Status Indicators To Designate Services That Are Not 
Recognized Under the OPPS But That May Be Recognized by Other 
Institutional Providers
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42286 through 42287), 
we did not propose to make changes to the definitions of status 
indicators listed below for the CY 2012 OPPS.
[GRAPHIC] [TIFF OMITTED] TR30NO11.081

    We did not receive any public comments related to the definitions 
of payment status indicators that designate services that are paid 
under a payment system other than the OPPS. We continue to believe that 
the proposed definitions of the OPPS status indicators continue to be 
appropriate, and therefore, we are finalizing, without modification, 
our proposal for CY 2012. The final 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.gov/HospitalOutpatientPPS.
4. Payment Status Indicators To Designate Services That Are Not Payable 
by Medicare on Outpatient Claims
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42287), we did not 
propose to make changes to the definitions of payment status indicators 
listed below for the CY 2012 OPPS.

[[Page 74376]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.082

    We did not receive any public comments related to the definitions 
of payment status indicators that designate services that are not 
payable by Medicare on outpatient claims. We continue to believe that 
the proposed definitions of the OPPS status indicators continue to be 
appropriate, and therefore, we are finalizing, without modification, 
our proposal for CY 2012. The final 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.gov/HospitalOutpatientPPS.

B. Final CY 2012 Comment Indicator Definitions

    As we proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42287 
through 42288), for the CY 2012 OPPS, we are using 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 proposed in the CY 2012 OPPS/ASC proposed rule (76 FR 42287) to 
use the ``CH'' comment indicator in this CY 2012 OPPS/ASC final rule 
with comment period to indicate HCPCS codes for which the status 
indicator or APC assignment, or both, will change in CY 2012 compared 
to their assignment as of December 31, 2011. We believe that using the 
``CH'' indicator in this CY 2012 OPPS/ASC final rule with comment 
period will facilitate the public's review of the changes that we are 
making for CY 2012. The use of the comment indicator ``CH'' in 
association with a composite APC indicates that the configuration of 
the composite APC is changed in this CY 2012 OPPS/ASC final rule with 
comment period.
    We did not proposed any changes to 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 is 
labeled with comment indicator ``NI'' in Addendum B to this 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 this 
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 are also labeled with comment 
indicator ``NI'' in Addendum B to this CY 2012 OPPS/ASC final rule with 
comment period.
    Only HCPCS codes with comment indicator ``NI'' in this CY 2012 
OPPS/ASC final rule with comment period are subject to comment. HCPCS 
codes that do not appear with comment indicator ``NI'' in this CY 2012 
OPPS/ASC final rule with comment period are not open to public comment, 
unless we

[[Page 74377]]

specifically request additional comments elsewhere in this final rule 
with comment period. The CY 2012 treatment of HCPCS codes that appear 
in this CY 2012 OPPS/ASC final rule with comment period to which 
comment indicator ``NI'' is not appended were open to public comment 
during the comment period for the proposed rule, and we are responding 
to those comments in this CY 2012 OPPS/ASC final rule with comment 
period.
    We did not receive any public comments on the proposed comment 
indicators. We continue to believe that the proposed definitions of the 
OPPS status indicators continue to be appropriate, and therefore, we 
are finalizing, without modification, our CY 2012 proposal and are 
continuing to use comment indicators ``CH'' and ``NI'' for CY 2012. 
Their final definitions are listed in Addendum D2 on the CMS Web site 
at: http://www.cms.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 2012. 
Absent action by Congress, we are following the statutory requirements 
that govern the amount of the annual OPD fee schedule increase factor 
to the OPPS for CY 2012. We discuss the CY 2012 OPD fee schedule 
increase factor in section II.B. of this final rule with comment 
period.
    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.
    On June 15, 2011, MedPAC released a report to Congress entitled 
``Medicare and the Health Care Delivery System.'' The report did not 
contain recommendations with regard to payment under the OPPS or the 
ASC payment system. The full report can be downloaded from MedPAC's Web 
site at: http://www.medpac.gov/documents/Jun11_EntireReport.pdf.
    On August 30, 2011, MedPAC submitted comments to CMS on the CY 2012 
OPPS/ASC proposed rule. MedPAC submitted comments on the following 
topics, each of which is discussed in the indicated section of this 
final rule with comment period.
     Adjustment to payments for dedicated cancer hospitals 
(section II.F. of this final rule with comment period)
     Payment for pharmacy overhead (section V.B. of this final 
rule with comment period)
     Hospital wage index policy (section II.C. of this final 
rule with comment period)
     Composite APC 8009 cardiac resynchronization therapy 
(section II.A.2.e.(6) of this final rule with comment period)
     Hospital outpatient quality reporting measures (section 
X.G. of this final rule with comment period)
     Ambulatory surgical center quality reporting measures 
(section X.K. of this final rule with comment period)
     Hospital inpatient value based purchasing (section XVI. of 
this final rule with comment period)

B. APC Panel Recommendations

    Recommendations made by the APC Panel meeting held on February 28 
and March 1, 2011 and August 10-12, 2011 are discussed in the sections 
of this final rule with comment period that correspond to topics 
addressed by the APC Panel. The reports and recommendations from the 
APC Panel's February 28 and March 1, 2011 and August 10-12, 2011 
meetings 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 have taken the findings in its 
report into consideration in the development of our final payment 
policy for CY 2012.

XIII. 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

[[Page 74378]]

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) 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, Pub. L. 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 nonfacility 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

[[Page 74379]]

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-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.  416.2 and Sec.  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 the proposed rule and this 
final rule with comment period, 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.
    Comment: Several commenters provided a number of general 
suggestions related to the ASC list of covered surgical procedures. The 
commenters contended that CMS should not restrict which procedures are 
payable in ASCs any more than CMS restricts which procedures are 
payable

[[Page 74380]]

in HOPDs. According to the commenters, when CMS declines to add a 
service to the ASC list that can be performed in hospitals and 
physician offices, CMS should articulate a clinical rationale for why 
the procedure should be excluded from the ASC setting. Commenters also 
stated that the frequency that a surgical procedure is performed in an 
office setting should be included as one of the criteria for inclusion 
on the ASC list of covered surgical procedures. Some commenters urged 
CMS to eliminate unlisted codes from the exclusionary criteria at Sec.  
416.166(c), and other commenters requested that ASCs be allowed to use 
unlisted codes to bill for procedures that are from anatomic sites that 
could not possibly pose a potential risk to beneficiary safety. The 
commenters reported that unlisted codes enable surgeons to utilize 
innovative techniques or new technologies and are paid under the OPPS 
and by commercial insurers.
    Response: We appreciate the commenters' suggestions related to our 
decisions about which procedures are excluded from the ASC list of 
covered surgical procedures. However, as we explained in the August 2, 
2007 final rule (72 FR 42479), we do not believe that all procedures 
that are appropriate for performance in HOPDs are appropriate in ASCs. 
HOPDs are able to provide much higher acuity care than ASCs. ASCs have 
neither patient safety standards consistent with those in place for 
hospitals, nor are they required to have the trained staff and 
equipment needed to provide the breadth and intensity of care that 
hospitals are required to maintain. Therefore, there are some 
procedures that we believe may be appropriately provided in the HOPD 
setting that are unsafe for performance in ASCs. Thus, we are not 
modifying our policy and will continue to exclude certain procedures 
for which payment is made in HOPDs from the ASC list of covered 
surgical procedures.
    We do not agree with the commenters' request that we provide 
specific reasons for our decisions to exclude each procedure from the 
ASC list of covered surgical procedures that can be performed in 
hospitals and physician offices. Our decisions to exclude procedures 
from the ASC list are based on a number of the criteria listed at Sec.  
416.166 of the regulations, and we believe that it would be unnecessary 
and overly burdensome to list each reason for those decisions. As we 
have stated in the past (74 FR 60598), we continue to believe that 
these reasons are sufficiently specific to enable the public to provide 
meaningful comments on our decisions to exclude procedures from the 
list of covered surgical procedures.
    We believe that we should not use the frequency that a procedure is 
performed in the office setting as one of our criteria for additions to 
the ASC list of covered surgical procedures. Because a surgical 
procedure is performed in significant volume in the office setting does 
not automatically mean that the procedure would not be expected to pose 
a significant risk to beneficiary safety when performed in an ASC or 
would not be expected to require active medical monitoring and care at 
midnight following the procedure. We believe that such procedures still 
need to be evaluated using the criteria listed at Sec.  416.166 of the 
regulations.
    We also do not agree with the commenters' recommendation that we 
include unlisted codes or unlisted codes for procedures from certain 
anatomic sites on the list of covered surgical procedures. Even though 
it may be highly unlikely that procedures reported by unlisted codes or 
by unlisted codes for procedures from certain anatomic sites would be 
expected to pose a risk to beneficiary safety when performed in an ASC 
or would be expected to require an overnight stay, we cannot know 
exactly what surgical procedure is being reported by an unlisted code. 
Therefore, as we have explained in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72026 and 72027), because we cannot evaluate any 
such procedure, we continue to believe that we must exclude unlisted 
codes as a group from the list of covered surgical procedures.
    After consideration of the public comments we received, we are 
continuing our established policies without modification for 
determining which procedures are ASC covered surgical procedures and 
covered ancillary services.

B. Treatment of New Codes

1. 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 policies of the revised ASC payment system.
    In Table 41 of the CY 2012 OPPS/ASC proposed rule (76 FR 42291), we 
summarized our process for updating the HCPCS codes recognized under 
the ASC payment system.
    This process is discussed in detail below. We have separated our 
discussion into two sections based on whether we proposed to solicit 
public comments in the CY 2012 OPPS/ASC proposed rule (and respond to 
those comments in this CY 2012 OPPS/ASC final rule with comment period) 
or whether we are soliciting public comments in this 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

[[Page 74381]]

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 Addenda AA and BB to the CY2011 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 stated that we would respond to public comments 
and finalize our proposed ASC treatment of these codes in this CY 2012 
OPPS/ASC final rule with comment period.
    We did not receive any public comments regarding our process for 
recognizing new HCPCS codes under the ASC payment system and are 
implementing our proposed policy as final, without modification, for CY 
2012.

2. Treatment of New Level II HCPCS Codes and Category III CPT Codes 
Implemented in April and July 2011 for Which We Solicited Public 
Comments in the 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 of the CY 2012 OPPS/ASC proposed rule (76 FR 
42292), 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 of the CY 2012 OPPS/ASC proposed rule (76 FR 
42292), we provided separate payment for HCPCS codes C9283 (Injection, 
acetaminophen, 10 mg), C9284 (Injection, ipilimumab, 1 mg), C9285 
(Lidocaine 70 mg/tetracaine 70 mg, 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 replaced HCPCS code J7184 and HCPCS code Q2043 replaced 
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. In the 
CY 2012 OPPS/ASC proposed rule, we solicited 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 of the CY 2012 OPPS/ASC 
proposed rule (76 FR 42292). Those HCPCS codes became payable in ASCs, 
beginning in April or July 2011, 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 were included in Addendum BB to 
the CY 2012 OPPS/ASC proposed rule. We note that all ASC addenda were 
only available via the Internet on the CMS Web site. Because HCPCS 
codes that became effective for July (listed in Table 43 of the CY 2012 
OPPS/ASC proposed rule) were not available to us in time for 
incorporation into the Addenda to the OPPS/ASC proposed rule, our 
policy is to include these HCPCS codes and their proposed payment 
indicators and payment rates in the preamble to the proposed rule but 
not in the Addenda to the proposed rule. These codes and their final 
payment indicators and rates are included in the appropriate Addendum 
to this CY 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 on July 2011 ASP data) that are 
displayed in Table 43 of the CY 2012 OPPS/ASC proposed rule were not 
included in Addendum BB to that proposed rule. The final list of 
covered ancillary services and the associated payment weights and 
payment indicators is included in Addendum BB to this CY 2012 OPPS/ASC 
final rule with comment period, consistent with our annual update 
policy.
    We did not receive any public comments regarding our proposals. We 
are continuing our established policy for recognizing new mid-year 
HCPCS codes. We also are adopting as final for CY 2012 the ASC payment 
indicators for the ancillary services described by the new Level II 
HCPCS codes implemented in April and July 2011 through the quarterly 
update CRs as shown below, in Tables 48 and 49, respectively. These new 
HCPCS codes also are displayed in Addendum BB to this final rule with 
comment period. We note that after publication of the CY 2012 OPPS/ASC 
proposed rule, the CMS HCPCS Workgroup created permanent HCPCS J-codes 
for CY 2012 to replace certain temporary HCPCS C-codes made effective 
for CY 2011. These permanent CY 2012 HCPCS J-codes are listed alongside 
the temporary CY 2011 HCPCS C-codes in Tables 48 and 49 below.

[[Page 74382]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.083

    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 were listed in Table 44 
of the CY 2012 OPPS/ASC proposed rule (76 FR 42292 and 42293), along 
with their proposed payment indicators and proposed payment rates for 
CY 2012. Because new Category III CPT and Level II HCPCS codes that 
became effective for July were 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 are included in Addendum AA to this CY 2012 OPPS/
ASC final rule with comment period. We proposed to assign payment 
indicator ``G2'' (Non-office-based surgical procedure added in CY 2008 
or later; payment based on OPPS

[[Page 74383]]

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 solicited 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 of the CY 2012 OPPS/ASC proposed rule (76 FR 
42292 and 42293). We proposed to finalize their payment indicators and 
their payment rates in this CY 2012 OPPS/ASC final rule with comment 
period.
    We did not receive any public comments regarding this proposal. We 
are continuing our established policy for recognizing new mid-year CPT 
codes for CY 2012. We also are adopting as final for CY 2012 the ASC 
payment indicators for the covered surgical procedures described by the 
new Category III CPT codes implemented in the July 2011 CR as shown 
below in Table 50. The new CPT codes implemented in July 2011 are also 
displayed in Addendum AA to this final rule with comment period (which 
is available via the Internet on the CMS Web site).
[GRAPHIC] [TIFF OMITTED] TR30NO11.084


[[Page 74384]]


3. Process for New Level II HCPCS Codes and Category I and III CPT 
Codes for Which We Are Soliciting Public Comments in This 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. In the CY 
2012 OPPS/ASC proposed rule (76 FR 42293), we proposed to continue this 
process for CY 2012. Specifically, for CY 2012, we proposed 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. We stated that these codes would be 
flagged with comment indicator ``NI'' in Addenda AA and BB to this CY 
2012 OPPS/ASC final rule with comment period to indicate that we have 
assigned them an interim payment status. We also stated that 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.
    We did not receive any public comments regarding this proposed 
process. For CY 2012, we are finalizing our proposal, without 
modification, to continue our established process for recognizing and 
soliciting public comments on new Level II HCPCS codes and Category I 
and III CPT codes that become effective for the following year, as 
described above.

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

1. Covered Surgical Procedures
a. Additions to the List of ASC Covered Surgical Procedures
    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, in the CY 2012 OPPS/ASC proposed rule (76 FR 42293) we did 
not propose additions to the list of ASC covered surgical procedures 
for CY 2012.
    Comment: Commenters requested that CMS add the procedures described 
by the 232 CPT codes displayed in Table 51 below to the list of ASC 
covered surgical procedures as well as several CPT unlisted codes. The 
commenters argued that these procedures are less complex and/or as safe 
as procedures already paid for when performed in the ASC setting.
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    Response: We reviewed all of the surgical procedures that 
commenters requested be added to the ASC list of covered surgical 
procedures. We did not review any of the procedures that may be 
reported by the CPT unlisted codes because those codes are not eligible 
for addition to the ASC list, consistent with our final policy which is 
discussed in detail in the August 2, 2007 final rule (72 FR 42484 
through 42486). We do not agree that most of the procedures recommended 
by the commenters are appropriate for provision to Medicare 
beneficiaries in ASCs. Although the commenters asserted that the 
procedures they were requesting for addition to the list are less 
complex than and as safe as procedures already on the list, our review 
did not support those assertions. We exclude from ASC payment any 
procedure for which standard medical practice dictates that the 
beneficiary who undergoes the procedure would typically be expected to 
require active medical monitoring and care at midnight following the 
procedure (overnight stay) as well as all surgical procedures that our 
medical advisors determine may be expected to pose a significant safety 
risk to Medicare beneficiaries when performed in an ASC. The criteria 
used under the revised ASC payment system to identify procedures that 
would be expected to pose a significant safety risk when performed in 
an ASC include, but are not limited to, those procedures that: 
generally result in extensive blood loss; require major or prolonged 
invasion of body cavities; directly involve major blood vessels; are 
emergent or life threatening in nature; commonly require systemic 
thrombolytic therapy; are designated as requiring inpatient care under 
Sec.  419.22(n); can only be reported using a CPT unlisted surgical 
procedure code; or are otherwise excluded under Sec.  411.15 (we refer 
readers to Sec.  416.166).
    In our review of the procedures listed in Table 51, we found that 
most of the procedures either may be expected to pose a threat to 
beneficiary safety or require active medical monitoring at midnight 
following the procedure. Specifically, we found that prevailing medical 
practice called for inpatient hospital stays for beneficiaries 
undergoing many of the procedures and that some of the procedures 
directly involve major blood vessels and/or may result in extensive 
blood loss. However, we do agree with commenters that the procedures 
described by CPT codes 37201, 37202, 37207, 37208, 59074, and HCPCS 
code G0365 meet the criteria under Sec.  416.166 and would be safely 
performed in the ASC setting and would not require overnight stays. We 
are adding these CPT/HCPCS codes to the ASC list of covered surgical 
procedures for CY 2012.
    After consideration of the public comments we received, we are 
adding six of the procedures requested by the commenters to the CY 2012 
ASC list of covered surgical procedures. The procedures, their 
descriptors, and payment indicators are displayed in Table 52 below.
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b. Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 ASC final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC list of covered surgical procedures in CY 2008 or later years that 
we determine are performed predominantly (more than 50 percent of the 
time) in physicians' offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC list of covered surgical procedures beginning in CY 
2008 that we determined were office-based were identified in Addendum 
AA to that rule by payment indicator ``P2'' (Office-based surgical 
procedure added to ASC list in CY 2008 or later with MPFS nonfacility 
PE RVUs; payment based on OPPS relative payment weight); ``P3'' 
(Office-based surgical procedures added to ASC list in CY 2008 or later 
with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE 
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in 
CY 2008 or later without MPFS nonfacility PE RVUs; payment based on 
OPPS relative payment weight), depending on whether we estimated it 
would be paid according to the standard ASC payment methodology based 
on its OPPS relative payment weight or at the MPFS nonfacility PE RVU-
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-office-based, after taking into 
account updated volume and utilization data.
(2) Changes for CY 2012 to Covered Surgical Procedures Designated as 
Office-Based
    In developing the CY 2012 OPPS/ASC proposed rule (76 FR 42293 
through 42296), 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

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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).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42294), we stated that 
our review of the CY 2010 volume and utilization data resulted in our 
identification of 10 surgical procedures that we believe meet the 
criteria for designation as office-based. We stated that the data 
indicated that the procedures are performed more than 50 percent of the 
time in physicians' offices, and that our medical advisors believed the 
services are of a level of complexity consistent with other procedures 
performed routinely in physicians' offices. The 10 CPT codes we 
proposed to permanently designate as office-based are listed in Table 
45 of the CY 2012 OPPS/ASC proposed rule (76 FR 42294), and are listed 
in Table 53 below.
    Comment: Some commenters expressed their continued disagreement 
with the policy to make payment at the lower of the ASC rate or the 
MPFS nonfacility PE RVU payment amount for procedures we identify as 
office-based and requested that these services be subject to the same 
payment methodology as all other Medicare covered ASC procedures. 
Commenters also recommended that CMS establish a minimum volume 
threshold before designating a procedure office-based and use multiple 
years of data in the calculation in order to ensure that the data used 
to apply this policy are reliable.
    Response: We have responded to this comment in the past and we 
continue to believe that our policy of identifying low complexity 
procedures that are usually provided in physicians' offices and 
limiting their payment in ASCs to the physician's office payment amount 
is necessary and valid. We believe this is the most appropriate 
approach to preventing the creation of payment incentives for services 
to move from physicians' offices to ASCs for the many newly covered low 
complexity procedures on the ASC list. We refer readers to our response 
to this comment in final rules with comment period from prior years: 74 
FR 60605 through 60606 and 75 FR 72034 through 72035.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 proposal to designate the procedures displayed 
in Table 53 below as permanently office-based for CY 2012.
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    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 (eg, retinopathy of prematurity), photocoagulation or 
cryotherapy). Consequently, we proposed in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42294) to maintain their temporary office-based 
designations for CY 2012.
    As a result of our review of the remaining 15 procedures that have 
temporary office-based designations for CY 2011 for which we do have 
claims data, we proposed 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 (eg, 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);
     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, 
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     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 (eg, 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 (eg, intramuscular); less than 1.5 cm); and
     CPT code 28046 (Radical resection of tumor (eg, 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 CY 2012 payment indicator designations that we proposed for the 
23 procedures that were temporarily designated as office-based in CY 
2011 were displayed in Table 46 of the CY 2012 OPPS/ASC proposed rule 
(76 FR 42295). The procedures for which the proposed office-based 
designations for CY 2012 are temporary also were indicated by asterisks 
in Addendum AA to the proposed rule (which was available via the 
Internet on the CMS Web site).
    We did not receive any public comments that addressed our proposal 
to continue to designate the eight procedures listed in Table 46 of the 
CY 2012 OPPS/ASC proposed rule (76 FR 42294) as temporarily office-
based for CY 2012. Therefore, we are finalizing our proposal to 
designate the eight procedures listed in Table 46 of the CY 2012 OPPS/
ASC proposed rule and restated in Table 54 below, which were designated 
as temporarily office-based for CY 2011, as temporarily office-based 
for CY 2012. In addition, we did not receive any public comments that 
addressed our proposal to not designate any of the remaining 15 
procedures as office-based for CY 2012 that were listed in Table 46 of 
the CY 2012 OPPS/ASC proposed rule (76 FR 42295) and designated as 
temporarily office-based in CY 2011. Therefore, we are finalizing our 
proposal to not provide an office-based designation to the 15 
procedures listed in Table 46 of the CY 2012 OPPS/ASC proposed rule, 
and restated below in Table 54, which were designated as temporarily 
office-based for CY 2011.
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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 the CY 2012 OPPS/ASC proposed 
rule (76 FR 42309 and 42310), 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 
proposed to delete payment indicator ``H8'' (Device-intensive procedure 
on ASC list in CY 2007; paid at adjusted rate). We proposed that the 
device-intensive procedures for which the device-intensive payment 
methodology would apply in CY 2012 or later would be assigned payment 
indicator ``J8'' (Device-intensive procedure; paid at adjusted rate).
(2) Changes to List of Covered Surgical Procedures Designated as 
Device-Intensive for CY 2012
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42296), we proposed to 
update the ASC list of covered surgical procedures that are eligible 
for payment according to the device-intensive procedure payment 
methodology for CY 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 the proposed rule. The OPPS device-dependent APCs 
were discussed further in section II.A.2.d.(1) of the proposed rule (76 
FR 42190 through 42191).
    The ASC covered surgical procedures that we proposed to designate 
as device-intensive and that would be subject to the device-intensive 
procedure payment methodology for CY 2012 were listed in Table 47 of 
the CY 2012 OPPS/ASC proposed rule (76 FR 42296 through 42297). 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 were also listed in 
Table 47 of the proposed rule. All of these procedures were included in 
Addendum AA to the proposed rule (which was available via the Internet 
on the CMS Web site).
    We invited public comments on these proposals.
    Comment: Some commenters expressed the same general concerns made 
in prior rulemakings--that is concerns regarding the sufficiency of ASC 
payment for device-related services and recommended modifications to 
the ASC device-intensive payment methodology. The commenters argued 
that CMS should not apply the ASC conversion factor to the device-
related portion of the payment for all procedures for which CMS can 
establish a median device cost, regardless of whether they are 
designated as device-intensive under the established methodology. In a 
related suggestion, the commenters urged CMS to lower the threshold 
used to determine device-intensive procedures stating that the 
designation of a device-intensive procedure based on whether the device 
portion of the cost is greater than 50 percent of the APC median cost 
excludes too many procedures from a reasonable modification to the 
standard ASC payment methodology. Commenters suggested that APCs with a 
device offset percentage greater than 23 percent of the APC median cost 
under the OPPS may be a more appropriate threshold to determine device-
intensive procedures in ASCs. The commenters also made the same 
argument as made

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in prior rulemakings--that CMS should not adjust the device portion of 
the ASC payment for device-intensive procedures by the wage index. 
According to the commenters, the acquisition of devices occurs on a 
national market, and the price is the same regardless of the location 
of the ASC. Commenters also suggested that application of device-
intensive status should supersede the office-based designation. 
Commenters believed that CMS has misapplied its policy in a limited 
number of cases by designating a device-intensive procedure as office-
based and setting the payment for the procedure at the physician fee 
schedule rate.
    Response: In the August 2, 2007 final rule (72 FR 42504), we 
established that the modified payment methodology for calculating ASC 
payment rates for device-intensive procedures shall apply to ASC 
covered surgical procedures that are assigned to device-dependent APCs 
under the OPPS for the same calendar year, where those APCs have a 
device cost of greater than 50 percent of the APC cost (that is, the 
device offset percentage is greater than 50). We continue to believe 
these criteria ensure that ASC payment rates are adequate to provide 
packaged payment for high cost implantable devices and ensure Medicare 
beneficiaries have access to these procedures in all appropriate 
settings of care.
    As we have stated in the past, we do not agree that we should 
change our criteria and treat device-intensive services that are 
assigned to APCs for which the device offset percentage is less than 50 
percent or ASC services that are not assigned to device-dependent APCs 
and we continue to believe that when device costs comprise less than 50 
percent of total procedure costs, those costs are less likely to be as 
predictable across sites-of-service. Accordingly, we believe that it is 
possible for ASCs to achieve efficiencies relative to HOPDs when 
providing those procedures, and that the application of the ASC 
conversion factor to the entire ASC payment weight is appropriate. We 
refer readers to our response to this comment in final rules with 
comment period from prior years: 74 FR 60608 and 60609; 75 FR 72039.
    We also continue to believe it would not be appropriate to vary the 
portion of the national payment that is wage adjusted for different 
services, such as applying the wage index only to the service portion 
of the ASC payment for device-intensive procedures, as the commenters 
requested. Consistent with the OPPS, we apply the ASC geographic wage 
adjustment to the entire ASC payment rate for device-intensive 
procedures. We refer readers to our response to this comment in final 
rules with comment period from prior years: 73 FR 68735; 74 FR 60608 
and 60609; 75 FR 72039.
    As we have noted in the past (73 FR 68735; 74 FR 60609; 75 FR 
72039), MedPAC has indicated its intent to evaluate CMS' method for 
adjusting payments for variations in labor costs in light of 
differences in labor-related costs for device-implantation services. We 
look forward to reviewing the results of its evaluation, as well as any 
recommendations it may provide, regarding the OPPS or ASC wage 
adjustment policy.
    Although the commenter suggested that CMS has applied the office-
based payment methodology to procedures that have been designated as 
device-intensive, the commenter did not provide examples where this 
situation has occurred. If a device-intensive procedure were to meet 
the criteria for the office-based payment methodology, we note that the 
designation of a procedure as device-intensive does supersede the 
office-based designation when setting the ASC payment rates. We have 
reviewed all procedures that are on the ASC list of covered services, 
are in device-dependent APCs, and have device offset percentages 
greater than 50 percent and have ensured that all of these device-
intensive procedures have a payment indicator of ``J8.''
    Comment: One commenter expressed appreciation for the proposed 
increase in payment rates calculated according to the ASC device-
intensive payment methodology for procedures involving auditory 
osseointegrated devices. However, the commenter indicated that the 
proposed payment rates remain insufficient for covering ASCs' costs for 
providing the procedures and requested that CMS further increase these 
rates for CY 2012. The commenter believed that the rates might have a 
negative impact on the availability of these services in an ASC setting 
and therefore might limit patient access.
    Response: We appreciate the commenter's support of the proposed 
payment rates for procedures involving auditory osseointegrated 
devices, but we disagree with the commenters' assertion that we should 
increase payment rates for these procedures further in order to 
maintain beneficiary access. We believe that the final CY 2012 ASC 
payment rates for these procedures, calculated according to the ASC 
device-intensive ratesetting methodology, are appropriate and adequate 
to cover costs for providing the procedures and to ensure beneficiaries 
have access to these procedures in the ASC setting.
    After consideration of the public comments we received, we are 
designating the ASC covered surgical procedures displayed in Table 55 
below as device-intensive for CY 2012. The CPT code, the CPT code short 
descriptor, the final CY 2012 ASC payment indicator, the final CY 2012 
OPPS APC assignment, the CY 2012 OPPS APC Title, and the final CY 2012 
device-dependent APC offset percentage are listed in Table 55. As we 
discuss in section XIII.B.3. of the CY 2012 OPPS/ASC proposed rule (76 
FR 42293) and this final rule with comment period, we incorporate new 
Category I and Category III CPT codes and new Level II HCPCS codes that 
are effective October 1, 2011 and January 1, 2012 in this final rule 
with comment period. Because these codes were not available to us until 
after the CY 2012 OPPS/ASC proposed rule was published, these codes 
were not included in that rule. We have reviewed these new codes and 
have added twelve of these CPT codes to Table 55 because they are ASC 
covered surgical procedures and are assigned to device-dependent APCs 
that meet the ASC device-intensive criteria. It is also our standard 
methodology to review deleted CPT codes annually and remove them from 
all relevant tables in the OPPS/ASC final rule with comment period. 
Therefore, we have also removed CPT codes 64560 (percutaneous 
implantation of neurostimulator electrodes; autonomic nerve) and 64577 
(Incision for implantation of neurostimulator electrodes; autonomic 
nerve) because these CPT codes have been deleted for CY 2012. Each 
device-intensive procedure is assigned payment indicator ``J8.'' All of 
these procedures are included in Addendum AA to this final rule with 
comment period (which is available via the Internet on the CMS Web 
site). The OPPS device-dependent APCs are discussed further in section 
II.A.2.d.(1) of this final rule with comment period.
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d. ASC Treatment of Surgical Procedures Removed 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. For the CY 2012 OPPS/ASC proposed rule, we 
evaluated each of the three procedures we proposed to remove from the 
OPPS inpatient list for CY 2012 according to the criteria for exclusion 
from the list of covered ASC surgical procedures (76 FR

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42298). We stated in the CY 2012 OPPS/ASC proposed rule (76 FR 42298) 
that 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 proposed to remove from the OPPS inpatient list for CY 
2012 may be found in section IX.B. of the CY 2012 OPPS/ASC proposed 
rule (76 FR 42276 and 42277). The CPT codes for these three procedures 
and their long descriptors were listed in Table 48 of the CY 2012 OPPS/
ASC proposed rule (76 FR 42298).
    We did not receive any public comments regarding the procedures 
proposed for exclusion from the ASC list of covered procedures for CY 
2012, that were proposed for removal from the CY 2012 OPPS inpatient 
list. Therefore, we are finalizing our proposal, without modification, 
to continue to exclude the procedures described by the CPT codes listed 
in Table 48 of the CY 2012 OPPS/ASC proposed rule, and restated in 
Table 56 below, from the ASC list of covered surgical procedures.
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2. Covered Ancillary Services
    Consistent with the established ASC payment system policy, in the 
CY 2012 OPPS/ASC proposed rule (76 FR 42298), we proposed 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 the CY 
2012 OPPS/ASC proposed rule (76 FR 42309), was used in Addendum BB to 
that proposed rule (which is available via the Internet on the CMS Web 
site) to indicate covered ancillary services for which we proposed 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 the CY 
2012 OPPS/ASC proposed rule (76 FR 42292), all ASC covered ancillary 
services and their proposed payment indicators for CY 2012 were 
included in Addendum BB to that proposed rule.
    We did not receive any public comments on our proposal. Therefore, 
we are finalizing, without modification, our proposal to update the ASC 
list of covered ancillary services to reflect the payment status for 
the services under the OPPS. All CY 2012 ASC covered ancillary services 
and their final payment indicators are included in Addendum BB to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site).

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

1. Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are fully described in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66828 through 66831). Under our 
established policy for the revised ASC payment system, the ASC standard 
ratesetting methodology of multiplying the ASC relative payment weight 
for the procedure by the ASC conversion factor for that same year is 
used to calculate the national unadjusted payment rates for procedures 
with payment indicator ``G2.'' For procedures assigned payment 
indicator ``A2,'' our final policy established blended rates to be used 
during the transitional period and, beginning in CY 2011, ASC rates 
calculated according to the ASC standard ratesetting methodology. The 
rate calculation established for device-intensive procedures (payment 
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

[[Page 74418]]

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 nonfacility PE 
RVU-based amount (we refer readers to the CY 2012 MPFS final rule with 
comment period) 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. Update to ASC-Covered Surgical Procedure Payment Rates for CY 2012
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42298 and 42299), we 
proposed 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 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 proposed 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 proposed to continue to use 
the amount calculated under the ASC standard ratesetting methodology 
for procedures assigned payment indicator ``G2.'' We proposed 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 the proposed rule (76 FR 42309 
through 42310).
    We proposed 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 proposed 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 proposed CY 2012 MPFS 
nonfacility PE RVU-based amount or the proposed CY 2012 ASC payment 
amount calculated according to the standard ratesetting methodology.
    We did not receive any comments on our proposal to calculate CY 
2012 payment rates for ASC-covered surgical procedures according to our 
established methodologies. Therefore, we are finalizing our CY 2012 
proposal, without modification, to calculate the CY 2012 final ASC 
payment rates for ASC-covered surgical procedures according to our 
established methodologies.
c. Adjustment to ASC Payments for No Cost/Full Credit and Partial 
Credit Devices
    Our ASC policy with regard to payment for costly devices implanted 
in ASCs at no cost/full credit 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 the proposed rule and this final rule with comment 
period. The established ASC policy includes adoption of the OPPS policy 
for reduced payment to providers when a specified device is furnished 
without cost/full credit or partial credit for the cost of the device 
for those ASC covered surgical procedures that are assigned to APCs 
under the OPPS to which this policy applies. We refer readers to the CY 
2009 OPPS/ASC final rule with comment period for a full discussion of 
the ASC payment adjustment policy for no cost/full credit and partial 
credit devices (73 FR 68742 through 68745).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42299 through 42301), 
consistent with the OPPS, we proposed to update the list of ASC covered 
device-intensive procedures and devices that would be subject to the no 
cost/full credit and partial credit device adjustment policy for CY 
2012. Table 49 of the CY 2012 OPPS/ASC proposed rule (76 FR 42299 
through 42301) displayed the ASC covered device-intensive procedures 
that we proposed would be subject to the no cost/full credit or 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 of the CY 2012 OPPS/ASC proposed rule (76 FR 
42301), where that device is furnished at no cost or with full credit 
from the manufacturer, the ASC would append the HCPCS ``FB'' modifier 
on the line with the procedure to implant the device. The contractor 
would reduce payment to the ASC by the device offset amount that we 
estimate represents the cost of the device when the necessary device is 
furnished without cost to the ASC or with full credit. We would provide 
the same amount of payment reduction based on the device offset amount 
in ASCs that would apply under the OPPS under the same circumstances. 
We stated in the CY 2012 OPPS/ASC proposed rule (76 FR 42299) that we 
continue to believe that the reduction of ASC payment in these 
circumstances is necessary to pay appropriately for the covered 
surgical procedure being furnished by the ASC.
    We also proposed to reduce the payment for implantation procedures 
listed in Table 49 of the CY 2012 OPPS/ASC proposed rule (76 FR 42299 
through 42301) 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 of the proposed rule (76 FR 42301). 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

[[Page 74419]]

coinsurance would continue to be based on the reduced payment amount.
    We did not receive any comments on our CY 2012 proposal to continue 
the no cost/full credit and partial credit device adjustment policy for 
ASCs. For CY 2012, as we proposed, we will reduce the payment for the 
device implantation procedures listed in Table 57, below, by the full 
device offset amount for no cost/full credit cases. ASCs must append 
the modifier ``FB'' to the HCPCS procedure code when the device 
furnished without cost or with full credit is listed in Table 58, 
below, and the associated implantation procedure code is listed in 
Table 57. In addition, for CY 2012, we will reduce the payment for 
implantation procedures listed in Table 57 by one half of the device 
offset amount if a device is provided with partial credit, if the 
credit to the ASC is 50 percent or more of the device cost. If the ASC 
receives a partial credit of 50 percent or more of the cost of a device 
listed in Table 58, the ASC must append the modifier ``FC'' to the 
associated implantation procedure code if the procedure is listed in 
Table 57.
    As we discuss in section XIII.B.3. of the CY 2012 OPPS/ASC proposed 
rule (76 FR 42293) and this final rule with comment period, we 
incorporate new Category I and Category III CPT codes and new Level II 
HCPCS codes that are effective October 1, 2011 and January 1, 2012 in 
this final rule with comment period. Because these codes were not 
available to us until after the CY 2012 OPPS/ASC proposed rule was 
published, these codes were not included in that rule. We have reviewed 
these new codes and have added eleven of these CPT codes to Table 57 
because they are ASC covered surgical procedures that are assigned to 
APCs under the OPPS to which the no cost/full credit and partial credit 
device adjustment policy applies. It is also our standard methodology 
to review deleted CPT codes annually and remove them from all relevant 
tables in the OPPS/ASC final rule with comment period. Therefore, we 
have also removed CPT codes 64560 (Percutaneous implantation of 
neurostimulator electrodes; autonomic nerve) and 64577 (Incision for 
implantation of neurostimulator electrodes; autonomic nerve) because 
these CPT codes have been deleted for CY 2012. We also have added two 
device HCPCS codes to Table 58, C1777 (Lead, cardioverter-
defibrillator, endocardial single coil (implantable)) and C1895 (Lead, 
cardioverter-defibrillator, endocardial dual coil (implantable)) 
because these devices are now associated with CPT code 33249 (Insertion 
or replacement of permanent pacing cardioverter-defibrillator system 
with transvenous lead(s), single or dual chamber) due to a descriptor 
change effective January 1, 2012.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
d. Waiver of Coinsurance and Deductible for Certain Preventive Services
    As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42301), 
sections 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, we refer readers to 
the CY 2011 OPPS/ASC final rule with comment period (75 FR 72047 
through 72049). We did not propose any changes to our policies or the 
list of services in the CY 2012 OPPS/ASC proposed rule. We identify 
these services with a double asterisk in Addenda AA and BB to this CY 
2012 OPPS/ASC final rule with comment period.
e. 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 the 
CY 2012 OPPS/ASC proposed rule (76 FR 42203 through 42206), we proposed 
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 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 proposed 
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 proposed 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 services in the 
outpatient setting compared to the inpatient setting.
    Because CPT code 33225 and CPT code 33249 are on the list of ASC 
covered surgical procedures, in the proposed rule (76 FR 42302), we 
proposed 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 services 
furnished in ASCs compared to those furnished in the hospital 
outpatient setting. Because CPT codes 33225 and 33249 are on the 
proposed list of device-intensive procedures for CY 2012, we proposed 
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 proposed 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 and, 
therefore, receive the appropriate payment amount for CRT-D services 
performed in an ASC.
    In a related issue, as detailed in section III.D.6 of the CY 2012 
OPPS/ASC proposed rule (76 FR 42241 through 42242), CPT codes 33225 and 
33249 are the only procedures proposed for inclusion in APC 0108. We 
proposed that these codes would be paid under APC 0108 only if they are 
not reported on the same date of service. Further, we proposed 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 proposed 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

[[Page 74428]]

(which is the lesser of the APC 0108 median cost that we would 
calculate for this CY 2012 OPPS/ASC final rule with comment period or 
the FY 2012 IPPS standardized payment rate for MS-DRG 227).
    We did not receive any public comments on our CY 2012 proposal to 
establish an ASC payment rate for CRT-D services, using the device-
intensive methodology, based on the OPPS payment rate applicable to 
composite APC 8009 when procedures described by CPT codes 33225 and 
33249 are performed on the same date of service in an ASC. However, as 
detailed in section II.A.2.e.(6) of this final rule with comment 
period, after consideration public comments regarding OPPS payment for 
CRT-D services, we are not finalizing our proposal to implement a 
payment cap for CRT-D services and ICD implantation procedures 
performed in a hospital outpatient department based upon the payment 
rate for IPPS MS-DRG 227 as proposed. Instead, under the OPPS, we will 
recognize CPT codes 33225 and 33249 as a single, composite service when 
they are performed on the same day as proposed. However, for CY 2012, 
rather than assigning the procedures described by CPT codes 33225 and 
33249 when they are performed on the same day to composite APC 8009, we 
are assigning them to existing APC 0108. When not performed on the same 
day as the service described by CPT code 33225, the service described 
by CPT code 33249 will continue to be assigned to APC 0108. When not 
performed on the same day as the service described by CPT code 33249, 
the service described by CPT code 33225 will be assigned to APC 0655 
(we note that this is a modification from our proposal to assign CPT 
code 33225 when it does not appear with CPT code 33249 to APC 0108).
    Based on the above modifications to establish the OPPS payment 
amount for CRT-D services, the payment rate for CRT-D services in ASCs 
for CY 2012 will be based on the OPPS payment rate applicable to APC 
0108 when procedures described by CPT codes 33225 and 33249 are 
performed on the same date of service in an ASC. Because CPT codes 
33225 and 33249 are on the list of device-intensive procedures 
finalized for CY 2012, APC payment for CRT-D services will be 
established using the device-intensive payment methodology. ASCs will 
use the corresponding HCPCS Level II G-code (G0448) for proper 
reporting when the procedures described by CPT codes 33225 and 33249 
are performed on the same date of service. When not performed on the 
same day as the service described by CPT code 33225, ASC payment for 
the service described by CPT code 33249 will be based on APC 0108 using 
the device-intensive methodology. When not performed on the same day as 
the service described by CPT code 33249, ASC payment for the service 
described by CPT code 33225 will be based on APC 0655 using the device-
intensive methodology.
2. Payment for Covered Ancillary Services
a. Background
    Our final payment policies under the revised ASC payment system for 
covered ancillary services vary according to the particular type of 
service and its payment policy under the OPPS. Our overall policy 
provides separate ASC payment for certain ancillary items and services 
integrally related to the provision of ASC covered surgical procedures 
that are paid separately under the OPPS and provides packaged ASC 
payment for other ancillary items and services that are packaged under 
the OPPS. Thus, we established a final policy to align ASC payment 
bundles with those under the OPPS (72 FR 42495). 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 nonfacility 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 ASC 
standard ratesetting methodology rather than the MPFS nonfacility PE 
RVU amount, regardless of which is lower. This modification to the ASC 
payment methodology for ancillary services was finalized in response to 
a comment on the CY 2011 OPPS/ASC proposed rule that suggested it is 
inappropriate to use the MPFS-based payment methodology for nuclear 
medicine procedures because the associated diagnostic 
radiopharmaceutical, although 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 nonfacility 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 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. Since December 31, 2009, ASCs have been paid for 
brachytherapy sources provided integral to ASC covered surgical 
procedures at prospective rates adopted under the OPPS.
    Other separately paid covered ancillary services in ASCs, 
specifically

[[Page 74429]]

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 three devices that are 
eligible for pass-through payment in the OPPS are described by HCPCS 
code C1749 (Endoscope, retrograde imaging/illumination colonoscope 
device (Implantable), HCPCS code C1830 (Powered bone marrow biopsy 
needle), and HCPCS code C1840 (Lens, intraocular (telescopic)). Payment 
amounts for HCPCS codes C1749, C1830, and C1840 under the ASC payment 
system are contractor priced.
b. Payment for Covered Ancillary Services for CY 2012
    For CY 2012, we proposed to update the ASC payment rates and make 
changes to ASC payment indicators as necessary to maintain consistency 
between the OPPS and ASC payment system regarding the packaged or 
separately payable status of services and the proposed CY 2012 OPPS and 
ASC payment rates (76 FR 42303). The proposed CY 2012 OPPS payment 
methodologies for separately payable drugs and biologicals and 
brachytherapy sources were discussed in section II.A. and section V.B. 
of that proposed rule, respectively, and we proposed 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 was based on a comparison of the CY 2012 proposed MPFS 
nonfacility PE RVU-based amounts (we referred 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 the 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 proposed to pay based on 
the ASC standard ratesetting methodology are assigned payment indicator 
``Z2'' (Radiology service paid separately when provided integral to a 
surgical procedure on ASC list; payment based on OPPS relative payment 
weight) and those for which the proposed payment is based on the MPFS 
nonfacility PE RVU-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 nonfacility 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 nonfacility PE RVU-based amount, regardless of which is 
lower. In the CY 2012 OPPS/ASC proposed rule (76 FR 42303), we proposed 
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 proposed 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 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 were listed in Addendum BB to the CY 2012 OPPS/ASC proposed 
rule (which was available via the Internet on the CMS Web site).
    Comment: One commenter urged CMS to modify the payment methodology 
for separately payable covered radiology services such that the amounts 
paid are equivalent to the OPPS payment rates, as is the case for 
brachytherapy sources and separately payable drugs and biologicals, 
instead of the lower of the amount calculated according to the standard 
methodology of the ASC payment system or the MPFS nonfacility PE RVU-
based amount. The commenter expressed concern that the payment rates 
for certain separately payable covered radiology services that are 
based on the established methodology are far below the amounts 
necessary to cover the costs involved in providing the service.
    Response: We do not agree with the commenter that we should alter 
our established policy to pay for separately payable covered radiology 
services at the lower of the MPFS nonfacility PE RVU-based amounts and 
the ASC payment rates calculated according to the ASC standard 
ratesetting methodology. We believe that this approach is the most 
appropriate to prevent the creation of payment incentives for services 
to move from physicians' offices to ASCs and that the ASC payment rates 
established under this methodology are adequate to the cover costs for 
providing covered radiology services in ASCs.
    Comment: Commenters requested that CMS pay for low dose rate (LDR) 
prostate brachytherapy services under the ASC payment system based on 
the composite APC methodology used under the OPPS rather than making 
two separate payments for the service reported by CPT codes 55675 
(Transperineal placement of needles or catheters into prostate for 
interstitial radioelement application, with or without cystoscopy) and 
77778 (Interstitial radiation source application; complex). The 
composite APCs were developed for procedures like LDR prostate 
brachytherapy in which two procedures are frequently performed in a 
single hospital visit. The commenters asserted that basing ASC payments 
for the services on the composite APC methodology in which one payment 
is made for the combination of the two services would result in a more 
accurate payment than is currently being made to ASCs because ASC 
payment is based on the median costs from single-service claims that 
CMS has acknowledged are mostly incorrectly coded claims.
    Response: Although we have tried to align the ASC and OPPS 
packaging policies to the fullest extent, we have not done so in the 
case of the LDR prostate brachytherapy composite (APC 8001). We will 
take the commenter's request into consideration in future rulemaking, 
recognizing the lead time that is necessary for the creation of the 
associated G-code that would be used to identify when the procedures in 
the LDR prostate brachytherapy composite

[[Page 74430]]

are performed on the same date of service in an ASC.
    Comment: One commenter indicated that ASCs are experiencing 
problems with obtaining payment from several of the ASC contractors for 
the pass-through device identified by HCPCS code C1749 (Endoscope, 
retrograde imaging/illumination colonoscope device (Implantable)) and 
requests that CMS provide further guidance in the final rule with 
comment period as to the ASC pricing level for the pass-through device.
    Response: Devices that are eligible for pass-through payment under 
the OPPS are separately paid under the ASC payment system and are paid 
at contractor-priced rates. CMS will remind contractors that payment 
for HCPCS code C1749 is not packaged into the payment for the 
associated procedure. However, the local contractor makes final 
decisions regarding coverage determinations and the payment amount for 
the pass-through device.
    After consideration of the public comments we received, we are 
providing CY 2012 payment for covered ancillary services in accordance 
with the policies finalized in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72050), with one modification. As described 
above, we are setting 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, therefore, will 
include the cost for the contrast agent. We also are finalizing 
proposed changes to Sec.  416.171(d). However, we are making a 
technical change to the proposed regulation text to make it clear that 
the proposed reference to paragraphs (d)(1) and (2) is a reference to 
paragraphs (d)(1) and (d)(2). Covered ancillary services and their 
final CY 2012 payment indicators are listed in Addendum BB (which is 
available via the Internet on the CMS Web site) to this final rule with 
comment period.

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. 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 proposed rule.
     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 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 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
    As discussed in the CY 2012 OPPS/ASC proposed rule (76 FR 42303 
through 42309), we received four requests for review to establish a new 
NTIOL class for CY 2012 by the March 5, 2011 due date. Below we 
summarize the evidence that we reviewed, the public comments we 
received timely, and the basis for our determinations in consideration 
of the applications for establishment of a new NTIOL class. For each 
application, we invited public comments on certain specific questions 
as well as all of the NTIOL evaluation criteria. We thank the public 
for their comments concerning our review of the four CY 2012 NTIOL 
requests.

[[Page 74431]]

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. 
These IOLs will be referred to as either blue-light-filtering IOLs or 
blue blocking IOLs. 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 asserted 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 stated that glare reduction 
can help beneficiaries avoid hazards that can be caused by glare. Alcon 
also stated 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 solicited public 
comment on these candidate IOLs with respect to the established three 
major NTIOL criteria and certain specific issues related to this 
application in the CY 2012 OPPS/ASC proposed rule (76 FR 42303 through 
42309). We have reviewed Alcon's request to recognize its AcrySof 
Natural IOLs as NTIOLs and concurrently establish a new class of NTIOLs 
and all of the related comments.
    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-approved labeling for these IOLs do 
not otherwise reference specific clinical benefits of blue-light-
filtering. We were interested in public comments on the clinical 
relevance of blue-light-filtering in an IOL. Specifically, in the 
proposed rule (76 FR 42303 through 42309), we stated that we were 
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 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 driving under glare conditions. In the proposed rule (76 FR 
42303 through 42309), we solicited public comments on whether blue-
light-filtering can be considered the predominant IOL characteristic 
for the model SN60WF IOL. We also welcomed public comments that 
addressed 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. Importantly, the statute specifies the 
following outcomes: (1) Reduced risk of intraoperative or postoperative 
complication or trauma; (2) accelerated

[[Page 74432]]

postoperative recovery; (3) reduced induced astigmatism; (4) improved 
postoperative visual acuity; (5) more stable postoperative vision; or 
(6) other comparable clinical advantages. 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, in the proposed rule (76 FR 42304 through 42309), we 
proposed 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 asserted 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. We believed that Alcon was also claiming that 
its blue-light-filtering IOLs resulted in safer night driving. 
Therefore, we proposed that the most relevant type of currently 
available IOLs against which the Alcon blue-light-filtering IOLs should 
be compared is aspheric IOLs. In particular, we proposed that the 
relevant comparison would be the performance of an aspheric blue-light-
filtering IOL versus an aspheric nonblue-light-filtering IOL. In the 
proposed rule, we sought public comment on our view of ``currently 
available lenses'' for the purposes of evaluating Alcon's candidate 
IOLs against currently available IOLs.
    We reviewed 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 also were interested in what other information the public 
could contribute related to the asserted benefits of the blue-light-
filtering IOL. Specifically, in the proposed rule (76 FR 42304 through 
42309), we sought 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 would 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-
light-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, in the proposed rule, we also sought 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 stated that we would give all comments full 
consideration regarding Alcon's candidate IOLs.
    Comment: Regarding criterion 1, the requestor asserted that the 
AcrySof Natural IOLs contain a blue-light-filtering chromophore that 
reduces glare disability that impairs the ability of individuals to 
differentiate objects from the background. The blue-light-filtering 
chromophore is a characteristic of the AcrySof Natural IOLs that is 
listed in the FDA-approved labeling. Whether the blue-light-filtering 
chromophore has established clinical relevance in comparison with 
currently available IOLs is discussed below under the discussion of 
criterion 3, as the clinical relevance of the blue-light-filtering 
chromophore in comparison with currently available IOLs depends upon 
whether, as required by criterion 3, evidence demonstrates that use of 
the IOL (and in particular the blue-light-filtering chromophore) 
results in measurable, clinically meaningful,

[[Page 74433]]

improved outcomes in comparison with use of currently available IOLs. 
One commenter stated that because Alcon's submission lacks the 
requisite FDA-approved labeling references regarding clinical benefit 
or established clinical relevance for the AcrySof Natural IOLs, it does 
not satisfy criterion 1.
    Response: Our current interpretation of criterion 1, which is based 
on 42 CFR 416.195(a)(1),(2), is that the candidate IOL must have been 
approved by the FDA and have claims of specific clinical benefits and/
or lens characteristics with established clinical relevance in 
comparison with currently available IOLs in the FDA-approved labeling. 
Therefore, there can be either claims of specific clinical benefits in 
the FDA-approved labeling or lens characteristics in the FDA-approved 
labeling with evidence of established clinical relevance in comparison 
with currently available IOLs outside of the FDA-approved labeling, 
such as in peer-reviewed journals. If the evidence for clinical 
relevance of the IOL characteristic was required to be contained in the 
FDA-approved labeling, that would be the same as requiring a claim of 
specific clinical benefit of the IOL in the FDA-approved labeling, 
which would be redundant. As stated above, the clinical relevance of 
the blue-light-filtering chromophore will depend on whether Alcon's 
blue-light-filtering IOLs satisfy criterion 3, which is discussed 
below. In future rulemaking, we may consider exploring refinements to 
the regulations such that a claim of specific clinical benefit of the 
IOL in comparison with currently available IOLs would be required in 
the FDA-approved labeling.
    Comment: Regarding criterion 2, the applicant and several other 
commenters stated that the measured clinical benefit of Alcon's blue-
light-filtering IOLs is improved driving safety under daytime driving 
conditions with glare simulating low-angle sun, not nighttime driving 
conditions with and without glare. They stated that low angle sun 
occurs at sunrise and sunset and cited the article by Gray (which Alcon 
describes as its pivotal study) which states the following: ``In a 
real-world task such as driving, 2 major contributors of glare are the 
headlights of an oncoming car during nighttime driving and low-angle 
sun conditions (e.g., sunset).'' In submitted comments, Alcon clarified 
that its blue-light-filtering IOLs only aid drivers with glare due to 
low angle sun, and not that blue-light-filtering IOLs aid with glare 
from the headlights of an oncoming car during nighttime driving.
    Prior to its clarifying comments, we originally believed that Alcon 
was claiming that its blue-light-filtering IOLs aided drivers with both 
nighttime glare and daytime glare. We now understand that the purported 
clinical benefit of the blue-light-filtering IOLs is improved driving 
during the daytime when the sun is at a low angle and not at nighttime 
when headlights cause glare. This distinction is important in 
evaluating criterion 2, which requires that the blue-light-filtering 
IOLs not be described by an active or expired NTIOL class; that is, the 
blue-light-filtering IOLs do not share the predominant, class-defining 
characteristic associated with the improved clinical outcome with 
designated members of an active or expired NTIOL class. One of the four 
candidate blue-light-filtering IOLs, the AcrySof Natural IQ Aspheric 
IOL model SN60WF, is a member of the expired reduced spherical 
aberration NTIOL class (75 FR 72052).
    The requestor and other commenters argued that because asphericity 
does not contribute to visual performance during daytime driving 
conditions due to pupillary constriction during daytime driving 
conditions, blue-light-filtering is the predominant characteristic of 
the AcrySof Natural IQ Aspheric IOL model SN60WF for the associated 
outcome of improved driving safety under daytime driving conditions 
with glare from low-angle sun. Another commenter stated that because no 
evidence exists to establish the clinical benefit of blue-light-
filtering, it is impossible to separate the predominant characteristic 
of reduced spherical aberration in the AcrySof Natural IQ Aspheric IOL 
model SN60WF from any other lens characteristic with regard to clinical 
benefit. Therefore, this commenter stated that, because the AcrySof 
Natural IQ Aspheric IOL model SN60WF is a member of a recently expired 
category, it should be disqualified from new NTIOL category 
consideration.
    Response: For the purposes of satisfying Sec.  416.195(a)(3), we 
must 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, the model SN60WF IOL would be ineligible under Sec.  
416.195(a)(3). Although we briefly discussed our interpretation of 
Sec.  416.195(a)(3) and the concept of a predominant characteristic as 
it relates to Sec.  416.195(a)(3) in the CY 2007 final rule (71 FR 
68178), we have not further elaborated on the factors that influence a 
determination of predominance regarding different IOL characteristics. 
We believe that when the clinical outcomes associated with different 
lens characteristics are related, comparative clinical data are 
required to demonstrate that one characteristic is predominant over 
another. However, when the clinical outcomes associated with the 
different lens characteristics are sufficiently unrelated, comparative 
clinical data are not required to demonstrate the predominance of a 
characteristic as it relates to the clinical outcome associated with 
the lens characteristic that is the subject of NTIOL review.
    We agree with the requestor and other commenters that, with respect 
to the purported outcome of improved driving safety under daytime 
driving conditions with glare simulating low-angle sun, the predominant 
characteristic of the model SN60WF is blue-light blocking. Pupillary 
constriction from the sun diminishes or negates the benefits of 
asphericity, which was shown to reduce spherical aberration and 
positively affect night driving performance. If a night driving benefit 
were claimed instead of only a daytime driving benefit for Alcon's 
blue-light-filtering IOLs, the determination of the predominant 
characteristic for the model SN60WF would be more complicated. However, 
because the purported clinical benefit of the blue-light-filtering IOLs 
is limited to improved driving safety under daytime driving conditions 
with glare simulating low-angle sun, under these conditions the blue-
light-filtering characteristic is predominant. Also, the description of 
the requestor's proposed new class of NTIOLs should be revised as 
follows: ``Blue-light-filtering intraocular lenses that improve driving 
safety under daytime glare from low angle sun conditions.''
    Comment: Comments on the question regarding whether the blue-light-
filtering characteristic has established clinical relevance and whether 
the Acrysof blue-light-filtering IOLs satisfy criterion 3, addressed 
that the first issue is what are the appropriate currently available 
IOLs to which Alcon's blue blocking IOLs should be compared. The 
requestor and several other commenters believed that an appropriate 
comparator IOL for the blue-light-filtering IOL is a spherical 
monofocal IOL for the following reasons:
     Because market share was not mentioned as a factor in 
considering which lenses are appropriate comparators for other NTIOL 
requests, it should not be a factor in the blue-light-filtering 
request;
     Because the requestor has not claimed that the blue-light-
filtering IOLs affect or improve night driving, it would be illogical 
to suggest that the blue

[[Page 74434]]

blocker IOL should be compared to an aspheric IOL;
     Because in prior rulemaking cycles CMS mentioned PMMA IOLs 
as part of a group of ``currently available IOLs,'' and PMMA IOLs have 
had a low market share for many years, there is a precedent for 
considering low market share IOLs to be currently available IOLs;
     Because an aspheric colorless Acrysof IOL does not exist, 
and other manufacturers' aspheric colorless IOLs are different from 
Acrysof IOLs in many ways, the model SN60WF IOL cannot be appropriately 
compared to an aspheric colorless IOL; and
     It is unfair for CMS to propose an aspheric comparator IOL 
by applying a new definition of ``currently available IOLs'' after this 
year's NTIOL application deadline.
    Response: The requestor, through its comments on the proposed rule, 
has made clear that the only claimed clinical benefit of the blue-
light-filtering IOLs is improved daytime driving under simulated low 
angle sun conditions and not improved night driving under glare from 
car headlights. Therefore, we agree that it is not necessary that the 
blue-light-filtering IOLs be compared to an aspheric IOL because under 
daytime low angle sun glare conditions pupillary constriction would 
generally limit the effect of the aspheric optics. However, we believe 
that it would be beneficial to clarify the meaning of our flexible 
approach to ``currently available IOLs.'' Our flexible approach means 
that the appropriate comparator can vary depending upon the candidate 
IOL and the associated claimed clinical outcome and can also change 
over time. With some candidate IOLs, lens optics may be the focus of 
the claimed benefit, while with others, the IOL material may be the 
focus of the claimed benefit. For example, a new IOL material that 
claimed the elimination of posterior capsular opacity (PCO) would have 
to be compared to IOL materials in which PCO occurred. However, the 
particular optics of the IOLs in this hypothetical case would likely 
not necessarily matter. If the claim was that the candidate IOL 
corrected some type of higher order optical aberration that resulted in 
improved night driving, such an IOL would have to be compared to an 
aspheric IOL to determine whether it improved night driving beyond that 
of an aspheric IOL.
    Furthermore, as IOL use patterns change over time, what is 
considered ``currently available'' will also change over time. Although 
spherical monofocal IOLs have represented the standard, conventional 
IOL, they now represent a relatively small minority of IOLs implanted 
in the United States. This trend is at least partially attributed to 
the NTIOL program for aspheric IOLs and the CMS Rulings for presbyopia 
correcting IOLs and astigmatism correcting IOLs. Therefore, our 
flexible approach to currently available comparator IOLs means that 
manufacturers should account for contemporary practices among U.S. 
cataract surgeons when designing studies and resist the temptation to 
select a comparator IOL that would most likely yield a statistically 
significant result in a study but that may not best fit the proposed 
hypothesis or NTIOL regulatory requirements.
    Regarding the evidence submitted by the requestor in support of its 
proposition that the blue-light-filtering characteristic has 
established clinical relevance and that evidence demonstrates that use 
of the blue-light-filtering IOL results in measurable, clinically 
meaningful, improved outcomes in comparison with use of currently 
available IOLs, the requestor submitted a variety of supporting 
information. However, the requestor relied primarily on the studies by 
Hammond et al. and Gray et al. that are cited above. Therefore, 
although we will discuss other submitted supporting information as 
appropriate, we will focus primarily on the Hammond and Gray studies as 
they are the primary support for the requestor's clinical benefit 
hypothesis. We begin with the Hammond study.
    Comment: Some commenters remarked that the Hammond study provides 
important evidence that supports the requestor's hypothesis that blue 
blocking IOLs improve driving performance while driving in low angle 
sun conditions. Other commenters provided detailed critiques of the 
Hammond study. Because the requestor submitted a similar application 
last year and some of the same comments were made in response to last 
year's application, the requestor has had an opportunity to rebut many 
of these comments. The main points made by some of the commenters on 
the Hammond study and the associated rebuttals by the requestor are 
summarized below:
     Figure 3 in the Hammond study mislabels the gray and blue 
traces. A commenter claims that Xenon's spike is actually in the blue 
part of the spectrum. The commenter claims that this mislabeling hides 
a study bias of having a blue glare source (which would be filtered by 
the blue blocker) but a different wavelength for the target 
illumination source.
    Rebuttal by requestor: Although the figure labels were 
inadvertently reversed, the glare and target sources were correctly 
described in the body of the Hammond paper, and a correction has been 
made through a letter to the journal's editor.
     No IOL or optical filter can decrease disability glare 
when target and glare illumination have the same spectrum because every 
filter decreases target and glare illumination in exactly the same 
proportion. Thus, the retinal image contrast cannot be increased by a 
color filter; therefore, disability glare cannot be decreased by the 
filter. The commenter cited several articles in support of this 
proposition, including a 2007 article (Optom Vis Sci 84: 859-64, 2007) 
by Hammond et al., one of the investigators for the study submitted by 
the requestors as primary support for their NTIOL application. In this 
2007 study macular pigment (MP) was the light filter, and Hammond et 
al. stated the following: ``Increased MP density will also not reduce 
glare disability when the wavelength conditions between the target and 
surround are the same. If MP absorbs light from both the target and the 
surround in equal proportion, that ratio will stay the same 
irrespective of the MP level. In such instances, high MP levels might 
reduce photostress and glare discomfort but it will not make a target 
more visible (that is, improve glare disability). This same 
interpretation could be applied to other yellow filters (for example, 
tinted intra-ocular lenses) and may explain why yellow filters improve 
visibility in some situations but not in others.''
    Rebuttal by requestor: In the real world it is rare that the 
wavelength of the target and the glare source are the same, because 
most glare sources are broad spectrum and most targets have a color 
such that the target absorbs certain wavelengths and reflects others.
     Hammond's heterochromatic contrast threshold testing is 
designed to advantage the blue-light-filtering IOL because it used a 
small yellow target surrounded by a large violet-blue glare source, 
which would be preferentially filtered out by blue blocking IOLs.
    Rebuttal by requestor: There is no extant literature suggesting 
that the glare and target sources should have the same spectral 
characteristics, and shorter wavelengths such as blue light are 
scattered more than longer wavelengths, which makes shorter wavelengths 
more common glare sources and therefore more appropriate for testing.
     The mix of aspheric and spherical blue blocking IOLs in 
that study group is a confounding variable.

[[Page 74435]]

    Rebuttal by requestor: The use of the Maxwellian optical system 
controls for these differences in IOL design. (Several other commenters 
also stressed this point about the importance of Maxwellian optics in 
the Hammond et al. study design.)
     Hammond's photostress tests have no value for assessing 
the visual performance of older adults in real world situations because 
people do not ordinarily stare directly into brilliant, uncomfortable 
light sources for many seconds, and any colored or neutral density 
filter that reduces light exposure will decrease recovery time from 
flash blindness.
    Response: We agree with the requestor that the use of the 
Maxwellian optical system eliminates any potential confounding due to 
the mix of aspheric and spherical lens designs in the blue-light-
filtering IOL study group. However, we agree with the commenters that a 
violet-blue glare source surrounding a yellow target may advantage the 
blue-light-filtering IOL in some of the testing conducted in the 
Hammond study. In the real world, it would seem that, under some 
circumstances, target and glare sources would have similar wavelength 
profiles, and therefore, according to the literature, a filter would 
not affect disability glare. Under other circumstances, the target and 
glares sources may have a different wavelength profile, and then a 
filter such as the blue blocker IOL could be of some benefit. We also 
agree with the commenters that there are significant unanswered 
questions regarding whether the photostress test results are clinically 
meaningful in proving that blue-light-filtering IOLs reduce the effects 
of glare. Overall, there appears to be some significant unanswered 
questions as to how well the Hammond study supports the requestor's 
hypothesis in the real world situation of driving during low angle sun 
conditions.
    While the Hammond study was offered as underlying support for the 
hypothesis that blue-light-filtering IOLs reduce the effects of glare 
on certain aspects of visual performance or visual function, we now 
turn to the study that the requestor has characterized as the 
``pivotal'' study for its application, which was performed by Gray et 
al., and is described above. The Gray study is the primary evidence for 
the purported improved outcome attributed to the blue-light-filtering 
IOLs of improved driving safety under daytime driving conditions with 
glare simulating low-angle sun.
    Comment: The requestor and several other commenters stated that the 
Gray study is sufficient evidentiary support for the blue blocker NTIOL 
application. The requestor and several other commenters stated that the 
Gray study documents a 0.33 second improvement in the safety margin for 
patients with blue-light-filtering IOLs as compared to those with 
colorless IOLs. They maintained that the 0.33 second improvement is 
clinically significant because driving safety experts agree on the 
safety benefits of the Center High Mounted Stop Light, which showed an 
improvement in stopping time of 0.11 seconds, and has been demonstrated 
to have prevented automobile accidents. Some commenters suggested that 
there are flaws in the Gray study. (Again, because the requestor 
submitted a similar application last year and some of the same comments 
were made in response to last year's application, the requestor has 
rebutted many of these comments.) The key points made by some of the 
commenters in critiquing the Gray study and the associated rebuttals by 
the requestor and other commenters are summarized below:
     The computer monitor simulation used by Gray et al. 
created an unlikely situation in which the pseudophakic Medicare 
beneficiary is driving into low-lying sun toward a 4-way intersection 
on a 2 lane rural highway at 55 miles an hour and must make a left hand 
turn with one eye shut in front of an oncoming car that is also 
approaching the intersection at 55 miles per hour.
    Rebuttal by requestor: The Gray study represents a real-world test 
of subject performance to determine critical patient safety 
information.
     The Gray driving simulator was a computer monitor test and 
not a realistic driving simulator with a car body on a moving base with 
a wide-field viewing screen.
    Rebuttal by requestor: The driving simulator used in the Gray study 
is a validated driving simulator.
     The driving simulator used in the Gray study did not 
conform to guidelines for driving simulators outlined in ANSI Z80.12-
2007, Annex G. In particular, the commenters stated that the simulation 
should have been performed binocularly instead of monocularly; the 
study did not mention matching on age, gender, or driving experience; 
the study did not have exclusion criteria for medication that may have 
affected vision or motor abilities; the study did not mention exclusion 
criteria for capsular haze or large capsulotomy.
    Rebuttal by requestor: Patients with pathology including PCO were 
excluded from the Gray study.
     Sampling approach and bias may be problematic because of 
the lack of detail on exactly how the subjects were recruited into the 
study. Potential confounding due to use of a convenience sample, 
meaning that the sample was chosen at the convenience of the researcher 
and that there was little or no demonstrated attempt to ensure that the 
sample accurately represents the target population.
    Rebuttal by requestor: Selection bias was addressed by enrolling 
subjects who were matched for age, time after cataract surgery, and 
visual acuity.
     Commenters further stated that differences in judging 
distance to oncoming vehicles could be attributable to motion 
processing differences between the two groups, which is impaired in 
older drivers.
     The driving simulator used in the Gray study is not a 
valid representation of on-road driving performance in older drivers 
because the validation study cited in the Gray article was done with 
novice drivers.
    Rebuttal by requestor: The trial by Gray et al. used a validated 
driving simulator system that represents the real-world visual 
experience by drivers.
    Response: We believe that the commenters raise important questions 
about the Gray trial design and the driving simulator. The requestor 
has responded to many of these questions and criticisms, but some 
remain at issue. Questions also remain about whether the Gray study 
accurately represents realistic driving by Medicare beneficiaries in 
low angle sun conditions and whether such a small study accurately 
represents the population of Medicare beneficiaries. Furthermore, the 
Gray study is a single 17 patient-per-study arm driving simulator study 
that is the primary support for the requestor's assertion that blue-
light-filtering IOLs result in superior outcomes for Medicare 
beneficiaries as compared to other IOLs. We must evaluate this study in 
the context of the totality of the evidence of the impact of glare on 
driving and the significance of this problem for Medicare 
beneficiaries. We believe that a significant question remains as to 
whether the Gray study results are sufficient to support the conclusion 
of a significant real world improved outcome for blue-light-filtering 
IOLs in Medicare beneficiaries. We discuss these issues below.
    Comment: Commenters asserted that ``studies over the past two 
decades show that glare problems are not associated with crash 
involvement in older drivers.'' In support of this assertion the 
commenters cited several studies,

[[Page 74436]]

including studies by Owsley and Cross. The requestor rebutted the 
commenters' assertion by stating that none of the studies cited by the 
commenters involved driving simulation or other real-world situations, 
and that because of historical limitations in studying glare, the cited 
studies' methods of driving safety are inaccurate and that the studies 
are otherwise methodologically flawed.
    Response: The commenters raise an important issue. The following 
summary on this issue is from a very recent 2010 review article by 
Owsley and McGwin (that was submitted by the requestor in its 
application) and that summarizes the conclusions of the literature 
(some of which was cited by the commenters): ``Disability glare 
(increased glare sensitivity), particularly among older drivers, is 
discussed as a serious threat to the safety of older drivers (e.g., 
Wolbarsht, 1977) but studies have not scientifically supported this 
notion (Ball, et al. 1993; Owsley, Ball, et al., 1998; Owsley, et al., 
2001). This failure to find an association between glare and road 
safety may be attributed to methodological difficulties in defining 
``glare'' and in measuring a multifaceted phenomenon (for example, 
discomfort glare, disability glare), as well as to a poor understanding 
of what people mean when they say they have ``glare'' problems. Rubin 
et al. (2007) reported a seemingly paradoxical relationship between 
disability glare and motor vehicle collisions. They found that 
disability glare reduced crash risk in older drivers with good vision, 
which could not be attributed to changes in driving habits (e.g., 
reduced exposure).'' Section 416.195(a)(2) of our regulations requires 
that the lens characteristic of the candidate IOL have established 
clinical relevance in comparison to currently available IOLs. If, as 
stated above by Owsley and McGwin, the association between glare and 
decreased driving safety among the elderly has not been supported by 
the published scientific evidence as of 2010, a significant question 
remains as to whether the single new 17-patient-per-group study by Gray 
sufficiently establishes the clinical relevance of blue-light-filtering 
IOLs for improving driving safety under glare conditions from low angle 
sun. We believe that in light of the totality of all of the published 
evidence regarding glare and driving in older adults, as summarized 
above by Owsley and McGwin, the lone study by Gray is currently 
insufficient to establish the clinical relevance of the blue-light-
filtering IOLs.
    Comment: One commenter stated that most drivers would use the 
windshield visor and/or sunglasses, or take other common-sense 
precautions to mitigate the effects of glare from low angle sun.
    Response: We believe that this comment introduces a topic that is 
worthy of further discussion. The intent of the Gray study was to test 
driving ability during simulated glare from low-angle sun during the 
daytime. Glare from low angle sun is encountered when driving east 
shortly after sunrise and when driving west shortly before sunset. We 
believe that there is a significant question as to whether the results 
of the experiment performed by Gray (assuming for the purpose of this 
response that the results are valid within Gray's experimental context) 
represent a real-world improved clinical outcome or clinical benefit in 
the context of real-world daytime driving during times of low angle sun 
by Medicare beneficiaries. Most people have experienced the bothersome 
effects of low angle sun (or having the ``sun in your eyes'') during a 
variety of daytime activities including driving. As the commenter 
pointed out, there are currently several daytime glare countermeasures 
that are both widely recommended by ophthalmologists, optometrists, and 
others and that have been widely adopted by the public for mitigating 
the bothersome effects of low angle sun during daytime driving. These 
include (but are not necessarily limited to) the automobile's sun 
visor, tinted windshield glass, polarized sunglasses, and 
antireflective (AR) coatings on glasses. Such daytime glare 
countermeasures are included in the following recommendations for 
mitigation of the effects of glare from low angle sun during driving by 
the Vision Council of America:
     Drive cautiously and leave a proper distance to ensure 
ample reaction time;
     Make it a habit to lower visors, to help block the 
reflected light;
     Avoid using high-gloss cleaners on dashboards;
     Keep the car windshield clean and the windshield washer 
fluid reservoir full;
     When possible, take an alternate route lined with trees or 
tall buildings instead of one with extreme glare;
     Turn on headlights to reduce the possible poor visibility 
of oncoming drivers;
     Most importantly, wear sunglasses at all times. Even more 
important is to wear sunglasses with polarized lenses to reduce glare, 
and lenses with UV protection to shield the eyes from damage (emphasis 
added).
    The benefits of these daytime glare countermeasures are well known 
by both eye care professionals and the general public. Given all of 
these common countermeasures for managing glare from the sun during 
driving, we do not know, despite the Gray study, exactly what 
additional benefit blue-light-filtering IOLs (when combined with the 
common glare countermeasures described above) would provide to Medicare 
beneficiaries while driving at times of low angle sun. For example, the 
Gray study does not assess the function of blue-light-filtering IOLs 
underneath polarized sunglasses that already typically absorb a broad 
spectrum of light including blue light and also reduce glare through 
the polarized property of the lenses in the sunglasses. We believe that 
it would be important to account for these common daytime glare 
countermeasures that are in widespread use when assessing the real-
world benefit of blue-light-filtering IOLs for problems associated with 
low angle sun while driving.
    Comment: One commenter stated that Gray's decision to limit his 
experiments to daytime conditions is a critical problem, because 
nighttime conditions are the greatest challenge to Medicare 
beneficiaries, causing many older drivers to self-restrict their 
driving to avoid driving at night.
    Response: The commenter raises the issue of daytime versus 
nighttime driving, which we believe is an important issue as it relates 
to the purported clinical benefit of blue blocking IOLs to Medicare 
beneficiaries. Specifically, the issue is whether improved driving 
performance during low angle sun conditions is a clinical outcome that 
would satisfy 42 CFR 416.195(a)(4), which states that there must be 
evidence that demonstrates that use of the IOL results in measurable, 
clinically meaningful, improved outcomes in comparison with use of 
currently available IOLs. The statutory provision that is the basis of 
this regulation specifies the following outcomes: (1) Reduced risk of 
intraoperative or postoperative complication or trauma; (2) accelerated 
postoperative recovery; (3) reduced induced astigmatism; (4) improved 
postoperative visual acuity; (5) more stable postoperative vision; or 
(6) other comparable clinical advantages. The question is whether 
improved driving performance during low angle sun conditions is a 
``comparable clinical advantage'' and, therefore, an outcome that would 
satisfy the statutory and regulatory requirements.
    The most analogous clinical outcome associated with an expired 
NTIOL class is the improved night driving associated with the expired 
reduced spherical aberration NTIOL class. However, there

[[Page 74437]]

are significant differences between daytime driving with glare from low 
angle sun and nighttime driving with glare from headlights. The 
nighttime driving benefit of reduced spherical aberration IOLs was a 
clinical benefit to Medicare beneficiaries because (other than 
abstaining from driving at night) there is very little that drivers can 
do at nighttime to mitigate the effect of glare from headlights. 
Therefore, even a modest night driving benefit from a reduced spherical 
aberration IOL can have an overall significant impact on Medicare 
beneficiaries' night driving because of the lack of other 
countermeasures that can assist with night driving. However, with 
daytime driving during low angle sun, an IOL that possibly mitigates 
the effects of glare under these conditions appears less significant 
given all of the other glare countermeasures available to the daytime 
driver.
    Furthermore, the most effective means of mitigating the effects of 
glare is avoidance of the glare source. During nighttime, this is a 
significant inconvenience because to do so means not driving at night. 
However, for glare from the sun, as mentioned above, there are many 
countermeasures for glare caused by low-angle sun, which is only a 
problem for certain drivers (those driving east in the morning and west 
in the evening) during a relatively short period of time each day. For 
these drivers, avoidance can be a practical alternative to driving into 
the bright sun. As mentioned above, the Vision Council of America 
recommends that drivers take a shady route if available. However, even 
if an alternate non-sunny route is not available, Medicare 
beneficiaries who are particularly bothered (despite using all of the 
daytime glare countermeasures such as polarized sunglasses, the car's 
sun visor, among others) by glare from low-angle sun could simply wait 
a short period of time before driving while the angle of the sun 
changes so that the sun is in a less glare-inducing position relative 
to the earth. Unlike nightfall that lasts for hours each day and, 
therefore, is inconvenient to avoid, waiting a short period of time for 
the sun to move a bit higher in the sky would be a relatively minor 
inconvenience for those Medicare beneficiaries who are particularly 
sensitive to glare from low angle sun.
    While this may not be true for the larger working-age population 
who may be locked into a relatively rigid commuting schedule and, 
therefore, may find it difficult due to job obligations to shift their 
commuting schedules even slightly, the overwhelming majority of 
Medicare beneficiaries tend to be retirees who generally do not face 
such rigid transportation schedule restrictions. In their 2007 study, 
Gray and Regan acknowledge this point as follows: ``Our present study 
is restricted to disability glare produced by low sun as experienced by 
very many drivers on their way to work or returning from work'' 
(emphasis added). Furthermore, waiting to drive until the low-angle sun 
has moved slightly in the morning could have a collateral benefit if 
doing so allowed the driver to avoid rush hour traffic. Driving in 
lower density traffic would likely lower the probability of a traffic 
accident thereby promoting driving safety, which seems to be one goal 
of this NTIOL application and other recent developments in IOL 
technology.
    Therefore, given the significant differences between nighttime 
driving and daytime driving, we do not believe that improved driving 
performance limited only to daytime under conditions of glare from low 
angle sun in this context is a ``comparable clinical advantage'' when 
compared to those outcomes listed above and in the statute and the 
outcomes associated with the three expired NTIOL classes, including 
improved night driving under conditions of glare from headlights. For 
this reason (and others discussed elsewhere in this preamble), the 
request does not satisfy 42 CFR 416.195(a)(4) because the purported 
outcome is not a comparable clinical advantage for Medicare 
beneficiaries.
    Comment: Some commenters mentioned certain detrimental effects of 
blue-light-filtering IOLs, such as blue-light-filtering IOLs negatively 
affecting: (1) Certain aspects of photoreceptor function; (2) aspects 
of night vision; (3) sleep and mood; and (4) visual function due to 
glistenings. Other commenters stated that blue-light-filtering IOLs 
have none of these detrimental effects.
    Response: We are aware that there has been, and continues to be, a 
vigorous debate in the literature regarding some of these issues. We do 
not have enough information to evaluate these issues, which we consider 
important but somewhat collateral to the issues under review for this 
NTIOL application. The decision on the blue-light-filtering NTIOL 
request is not based on and does not take into account these particular 
comments except to acknowledge them and the arguments and data 
supporting both sides of these issues. Also, we believe that FDA is 
best situated to address any problems from glistenings.
    In summary, we have reviewed the application and evidence submitted 
by the requestor and the public comments received. We conclude that, 
based on the totality of the available information and our analysis, 
the evidence is insufficient to conclude that the blue-light-filtering 
characteristic of the Acrysof blue-light-filtering IOLs has established 
clinical relevance in comparison to currently available IOLs. We also 
conclude that the evidence does not demonstrate that the use of the 
Acrysof blue-light-filtering IOLs results in measurable, clinically 
meaningful, improved outcomes in comparison with use of currently 
available IOLs. Therefore, Alcon's request for NTIOL status for its 
Acrysof blue-light-filtering IOLs is denied.
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-approved 
labeling for the Xact IOLs.
    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.

[[Page 74438]]

    As with the other CY 2012 NTIOL applications discussed in the CY 
2012 OPPS/ASC proposed rule, we base our determination of the B&L 
application on consideration of the three major evaluation criteria 
that are discussed above. We reviewed B&L's request to recognize its 
Xact IOLs as NTIOLs and concurrently establish a new class of NTIOLs, 
and in the proposed rule we solicited 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-approved labeling 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-approved labeling for the Xact IOLs does not otherwise 
reference specific clinical benefits of the glistening-free property. 
In fact, the above-quoted language on the IDE study from the FDA-
approved labeling states that an ``[a]nalysis of the clinical data 
confirmed no effect of glistenings on visual outcomes.'' In the 
proposed rule (76 FR 42303 through 42309), we stated that we were 
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 were 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. In the proposed rule (76 FR 42303 through 
42309), we welcomed 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 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. In the proposed rule (76 FR 
42303 through 42309), we sought public comment on our view of 
``currently available lenses'' for the purposes of evaluating B&L's 
candidate IOLs against currently available IOLs.
    We reviewed 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 
solicited 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?
    Comment: The requestor asserted that the FDA-approved labeling for 
the Xact IOLs states that these IOLs are glistening-free and that such 
a statement qualifies as a ``lens characteristic'' that satisfies 42 
CFR 416.195(a)(2), and that glistening-free IOLs are not described by 
an expired NTIOL class. One commenter remarked that the term 
glistening-free is imprecise, and wonders whether it means the complete 
absence of any glistenings whatsoever, regardless of severity, and 
whether subclinical glistenings could be present to some degree in a 
glistening-free IOL. Another commenter argued that because the Xact IOL 
label does not identify any approved claim of clinical benefit or any 
lens characteristic with established clinical relevance, it does not 
satisfy the requirements of 42 CFR 416.195(a)(2).
    Response: We agree with the requestor. As stated above, 42 CFR 
416.195(a)(2) can be satisfied by a lens characteristic listed in the 
FDA-approved labeling with the evidence of established clinical 
relevance in comparison with currently available IOLs provided outside 
of the FDA-approved labeling, such as in peer-reviewed journals. The 
Xact IOL FDA-approved labeling states that for patient follow-up up to 
2 years, ``[n]o

[[Page 74439]]

glistenings were observed at any time.'' We accept that statement to 
mean that the Xact IOLs are glistening-free, at least for the time 
period of the study referenced in the FDA-approved labeling. In 
response to the commenter who remarked that the term glistening-free is 
imprecise, and asked whether it means the complete absence of any 
glistenings whatsoever, regardless of severity, and whether subclinical 
glistenings could be present to some degree in a glistening-free IOL, 
we believe that, although this is an important point, it will not be 
discussed further because it is rendered moot by the discussion below. 
We also agree with the requester and other commenters that the proposed 
glistening-free Xact IOLs are not described by an expired NTIOL class.
    Comment: The requestor reiterated its belief that glistenings cause 
compromised visual performance in patients, and that ``[t]he growing 
concern regarding glistenings is evidenced by the high level of 
attention that has been paid to them in the medical literature. A 2010 
review article cited over 70 studies related to glistenings, most 
published after 2000, a staggering figure that itself demonstrates that 
glistenings are widely viewed by clinicians as problematic.'' 
Therefore, according to the requestor, a glistening-free IOL offers the 
clinical benefit of avoiding visual problems associated with 
glistenings. The requestor offers the following information as specific 
evidence that glistenings are clinically significant:
     A study by Gunenc et al. that showed a statistically 
significant difference in contrast sensitivity at high spatial 
frequency between eyes with and without glistenings;
     A study by Christiansen et al. that showed decreased 
visual acuity with a glare source versus without a glare source in 
patients with glistenings and decreased visual acuity in patients with 
severe glistenings versus patients with mild glistenings;
     A case study by Werner et al. in which an IOL with 
glistenings was explanted due to impaired fundus visualization;
     There were 24 reports between 1997 and 2011 of IOL 
explantation due to glistenings from the FDA medical device adverse 
event database.
    Other commenters asserted that the currently available peer-
reviewed literature does not yield any clinical studies supporting a 
clinical benefit associated with the ``glistening-free'' property of 
the Xact IOLs.
    Response: We agree with the commenters who conclude that the 
clinical significance of glistenings is not established in the 
ophthalmic literature and, therefore, there is no proven clinical 
benefit of glistening-free IOLs. The requestor is correct that a high 
level of attention has been paid to glistenings in the ophthalmic 
literature. However, the majority of the literature on glistenings is 
either inconclusive with respect to the clinical significance of 
glistenings or shows no effect on visual function from the glistenings.
    The limited evidence offered by the requestor is not dispositive. 
The requestor is correct that the 2001 Gunenc et al. study showed a 
statistically significant difference in contrast sensitivity at high 
spatial frequency between eyes with and without glistenings. However, 
that study showed no difference in visual acuity and contrast 
sensitivity at low or medium spatial frequencies between eyes with and 
without glistenings. Furthermore, the overall conclusion of the Gunenc 
et al. study is as follows: ``Although glistenings and folding marks 
were observed after the implantation of Acrysof IOLs, they did not 
significantly affect visual function'' (emphasis added).
    Similarly, the conclusion of the 2001 Christiansen et al. study was 
as follows: ``Glistenings occurred frequently in AcrySof IOLs, with 
most cases mild. A larger study of this lens is needed to determine 
whether severe presentations affect visual function and to understand 
how glistenings change over time.'' As noted by some commenters, 
further studies have been performed on the AcrySof IOLs by Colin, 
Monestam and others who did not find that glistenings affected visual 
function. The 2008 Werner et al. paper mentioned by the requestor is a 
single case report of an explanted IOL due to glistenings. Regarding 
this patient, Werner stated that ``[a]lthough it was difficult to 
ascertain the exact effect on the patient's visual function, the 
pattern of glistening formation was very unusual.'' The investigator's 
characterization of the glistening pattern in this case makes this case 
seem more anomalous than typical. More importantly, considering that 
the Werner et al. case report is relatively recent, the authors state 
that ``[t]here is still controversy about whether glistenings affect 
the visual function of the patient and whether they progress over 
time[,]'' and they cite seven articles in support of this statement.
    The lack of a consensus in the literature regarding the clinical 
significance of glistenings is significant for the purposes of this 
NTIOL application because 42 CFR 416.195(a)(2) requires that the lens 
characteristic have established clinical relevance, not merely 
theoretical clinical relevance. If glistenings are not proven through 
proper scientific studies to affect visual function, the clinical 
relevance of the glistening-free lens characteristic is not 
established. Regarding this point, the requestor stated in its comment 
letter that ``[t]he effects of glistenings on a patient's vision are 
not easily captured using existing tests.'' Assuming that this 
statement is true, it presents an issue for this application, because 
42 CFR 416.195(a)(4) requires evidence that demonstrates that use of 
the IOL results in measurable, clinically meaningful, improved outcomes 
in comparison with use of currently available IOLs (emphasis added). If 
clinical visual function testing cannot measure the effect of 
glistenings, then it is impossible to determine the extent to which 
glistenings affects patients' vision. The fourth piece of evidence 
offered by the requestor regarding the clinical significance of 
glistenings is that there were 24 reports between 1997 and 2011 of IOL 
explantation due to glistenings from the FDA medical device adverse 
event database. Assuming that these explantations can be accurately 
attributed to glistenings, 24 cases, among the tens of millions of 
cataract surgeries performed in the United States since 1997, is too 
small to establish clinical relevance. In essence, the requestor 
corrected a perceived problem (glistenings) with the Xact IOLs by 
changing the IOL storage solution that eliminated the glistenings, 
although the glistenings had no effect on visual function in patients 
with the Xact IOLs.
    In summary, because the applicant has not demonstrated the 
established clinical relevance of the glistening-free characteristic of 
the Xact IOLs in comparison to currently available IOLs, these IOLs do 
not satisfy 42 CFR 416.195(a)(2). And, because the evidence is 
insufficient to demonstrate that use of the Xact IOLs result in 
measurable, clinically meaningful, improved outcomes in comparison with 
use of currently available IOLs, they fail to satisfy 42 CFR 
416.195(a)(4). Therefore, the Xact IOL NTIOL application is denied.
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

[[Page 74440]]

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-approved 
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 based our 
determination of the Hoya request on consideration of the three major 
criteria that are discussed above. We reviewed Hoya's request to 
recognize its iSert System as an NTIOL and concurrently establish a new 
class of NTIOLs. In the CY 2012 OPPS/ASC proposed rule, we solicited 
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-
approved labeling for the iSert System states the following under the 
heading ``DEVICE DESCRIPTION'':
    ``The Hoya iSertTM 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-approved labeling for the iSert System states the following 
under the heading INDICATIONS:
    ``The Hoya iSertTM 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-approved labeling for the iSert 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-approved labeling for the iSert System lacks any 
such claims. The only statement in the above-quoted language from the 
FDA-approved labeling 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, in the proposed rule, we solicited public 
comments on this matter and stated that we would give all comments full 
consideration regarding Hoya's candidate IOL.
    Comment: With regard to whether the Hoya iSert System PY-60R IOL 
describes a benefit or characteristic of the IOL itself such that it 
would satisfy the requirements of 42 CFR 416.195(a)(2), two commenters 
stated that the HOYA iSert System has neither an approved claim of 
clinical benefit nor a characteristic with established clinical 
relevance attributable to the actual IOL that is a part of the HOYA 
iSert System, and therefore, the HOYA iSert System is not eligible for 
NTIOL status.
    Response: We agree with these commenters.
    Because the IOL itself within the Hoya iSert System lacks an 
associated claim or IOL characteristic as required by 42 CFR 
416.195(a)(2), the Hoya iSert System is not eligible for NTIOL status, 
and Hoya's request for NTIOL status for the Hoya iSert System is 
denied.
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 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-approved 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 based our determination of the Lenstec application on consideration 
of the three major evaluation criteria that are discussed above. We 
reviewed Lenstec's request to recognize its Softec HD PS IOL as an 
NTIOL and concurrently establish a new class of NTIOLs. In the CY 2012 
OPPS/ASC proposed rule, we solicited public

[[Page 74441]]

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-approved labeling 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-approved 
labeling 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 were 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 in quarter diopter increments is more 
appropriately considered not a lens characteristic per se, but instead 
just a manufacturer specification. In the proposed rule (76 FR 42303 
through 42309), we also sought 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 that 
the predominant characteristic of the Softec HD PS could be 
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. In the proposed rule, we requested 
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 reviewed 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 
(electronic publication in advance of print release), 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 
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 (0.260.23 D) 
than the unlabeled group (0.370.28 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

[[Page 74442]]

within 0.50 D, 84 percent and 69 percent (p=0.06), 
respectively. In the proposed rule (76 FR 42303 through 42309), we 
requested comments from the public regarding the Lenstec NTIOL request 
and the evidence submitted by Lenstec, and in particular we requested 
public 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?
    Comment: Several commenters stated that availability in 0.25 D 
increments with a tolerance of  0.11 D is a lens 
characteristic that satisfies criterion 1. One commenter argued that 
lens power increments are not a characteristic within the meaning of 
the NTIOL regulations, and, even if they are, they have no established 
clinical relevance.
    Response: We agree with the majority of the commenters that, for 
the purposes of this NTIOL application, availability in 0.25 D 
increments with a tolerance of 0.11 D for the HD PS IOL is 
a lens characteristic within the meaning of the regulation. Whether the 
requestor has established the clinical relevance of this characteristic 
is discussed further below.
    Comment: Several commenters believed that, for the purposes of this 
NTIOL application, the predominant characteristic of the HD PS IOL is 
availability in 0.25 D increments with a tolerance of  0.11 
D and not asphericity resulting in reduced spherical aberration. One 
commenter stated that because Lenstec has not presented evidence to 
distinguish the contribution of the 0.25 D increments from the 
contribution of the aspheric optic (an expired NTIOL class) to the 
optical performance of the lens, the 0.25 D increments cannot be 
considered the predominant characteristic and the Lenstec application 
should be disqualified from consideration for a new NTIOL category.
    Response: We agree with the majority of commenters. As discussed 
above, we believe that when the clinical outcomes associated with 
different lens characteristics are related, then comparative clinical 
data are required to demonstrate that one characteristic is predominant 
over another. However, if the clinical outcomes associated with the 
different lens characteristics are sufficiently unrelated, then 
comparative clinical data are not required to demonstrate the 
predominance of a characteristic as it relates to the clinical outcome 
associated with the lens characteristic that is the subject of NTIOL 
review. In the case of this candidate IOL, the purported clinical 
benefit is greater refractive precision whereas the clinical benefit of 
reduced spherical aberration is improved night driving. We believe that 
these outcomes are sufficiently unrelated such that comparative 
clinical data are not required to demonstrate the predominance of the 
0.25 D increments as it relates to greater refractive precision.
    Comment: Many commenters supported NTIOL designation for the HD PS 
IOL. The commenters are primarily ophthalmologists who related their 
anecdotal experience with the HD PS lens stating that it was their 
belief that their patients benefited from this IOL. Many commenters 
also believed that the studies described above are sufficient to 
demonstrate a clinical benefit for the HD PS IOL. Some of these 
commenters reported the results of case series from their practices 
that, according to them, support greater refractive precision of the HD 
PS IOL versus another lens. One commenter summarized data to support 
the position that the HD PS remains in a more stable position in the 
eye postoperatively. Several commenters stated that whether or not a 
patient must wear distance correction postoperatively has no bearing on 
whether greater refractive precision should be considered an improved 
outcome for patients.
    Response: We appreciate these comments and that several 
ophthalmologists believe that the HD PS benefits their patients. 
However, NTIOL status requires evidence of an improved clinical outcome 
versus currently available IOLs, and the underlying studies must be 
well-controlled such that the improved outcome can be appropriately 
attributed to the candidate IOL characteristic. We discuss clinical 
outcomes and the evidentiary requirements in greater detail below.
    Comment: One commenter stated that the results of the HD PS are not 
significantly different than those of other currently available IOLs. 
The commenter cited studies by Aristodemou et al. and Norrby et al. 
using IOLs available in 0.5 D increments showing results that are 
similar to Brown et al., one of the studies submitted by the requestor 
summarized above. The commenter also stated that the results of Brown 
et al. are average and that similar or better results can be obtained 
with lenses supplied in 0.5 D increments by manufacturers adhering to 
the ISO 11979-2 tolerances. In addition, the commenter remarked that 
Brown et al. has several study design flaws and other deficiencies, 
including refractive predictability not being a planned outcome of the 
study, no comparator lens in the study resulting in bias, and 
inappropriate comparison studies. Also, this commenter stated that the 
number of subjects required to show a statistically significant 
difference in refractive error for lenses provided in 0.25 D steps 
versus 0.5 D steps would be many thousands for each IOL type. The 
commenter also criticized the retrospective design of the second study 
submitted by the requestor (summarized above), and stated that the 
results are not significantly different from those of published studies 
of refractive outcomes for IOLs available in 0.5 D increments.
    Response: We agree with this commenter and believe that these 
points merit further discussion. As cataract surgery has improved in 
all aspects over the past several decades, refractive outcomes have 
become even more important as many of the other issues that 
historically have affected the ultimate postoperative outcome, that is, 
how well the patient sees after surgery, have been solved. There is a 
certain intuitive appeal to the hypothesis proffered by the requestor 
that smaller dioptric increments and, therefore, a greater number of 
available individual lens powers requires less rounding or 
approximation of the implant power and therefore a postoperative 
refractive state that is closer to the target.
    As intuitively appealing as this concept is, we believe that it 
should be evaluated in the context of the many factors that affect the 
ultimate refractive state of the patient after cataract surgery. These 
include, but are not limited to, the anatomy and functioning of the 
patient's eye, the surgical technique, aspects of the IOL unrelated to 
the power increment, preoperative refractive error, systemic factors, 
A-scan method, IOL power calculation, and surgeon specific factors, 
among others. All of these factors would have to be properly controlled 
in a large, prospective randomized clinical trial in

[[Page 74443]]

order to try to prove the underlying hypothesis. An appropriate 
control/comparator IOL is absolutely essential. The studies submitted 
by the requestor and the anecdotal reports submitted by the commenters 
who use the HD PS IOL fall far short of this evidentiary requirement. 
In addition, greater refractive precision alone is not enough, as one 
would have to prove a superior outcome of significance to the average 
Medicare beneficiary, such as true spectacle independence for distance 
vision. Most patients would not notice (even if it were the case) that 
their postoperative refractive state was a bit closer (that is, within 
measurement error) to their target refraction if they still had to wear 
spectacles to achieve functional distance vision.
    Comment: One commenter stated that as a practical matter the 
variability in postoperative refractive state due to other factors 
exceeds 0.25 D, and that patients will not benefit from this ``pseudo-
accuracy.'' The commenter suggested that the actual limitation in 
postoperative refractive state currently lies with the preoperative 
measurement techniques, and that when the accuracy of these techniques 
improve, IOLs with 0.25 D increments may be of benefit to patients.
    Response: We generally agree with this commenter, but we are not 
sure whether the HD PS IOL would provide greater actual refractive 
accuracy or, as the commenter stated, ``pseudoaccuracy.'' We also agree 
that the preoperative measurements are critical for accuracy but suffer 
from limitations and are highly variable from surgeon to surgeon. That 
is why a large, prospective, randomized, controlled clinical trial is 
necessary, with careful attention in the trial design to all of the 
factors that influence refractive outcome.
    In summary, we have reviewed the application and evidence submitted 
by the requestor and the comments received. We conclude that because 
the evidence submitted is insufficient to conclude that the 0.25 D 
increment 0.11 D tolerance characteristic of the Lenstec HD 
PS IOL has established clinical relevance in comparison to currently 
available IOLs, and because the evidence presented does not demonstrate 
that the use of the HD PS IOL results in measurable, clinically 
meaningful, improved outcomes in comparison with use of currently 
available IOLs for Medicare beneficiaries, Lentec's request for NTIOL 
status for its HD PS IOL is denied.
    Comment: One commenter suggested certain changes to the NTIOL 
regulations, including having FDA as the only evaluator of clinical 
benefit for candidate IOLs and establishing a timeframe for when a 
candidate IOL can be considered new and therefore eligible for NTIOL 
payments.
    Response: We believe these suggestions may have some merit and will 
consider exploring them in future rulemaking.
    We would like to briefly address what may be a misunderstanding or 
misconception among some of the commenters regarding the purpose and 
role of the NTIOL payment adjustment. Several comment letters from 
ophthalmologists included a statement similar to the following: ``I 
would like to have lens X or a lens with characteristic X available to 
my patients.'' We want to make it clear that the FDA has approved all 
of the IOLs that are the subject of the CY 2012 NTIOL applications, and 
the NTIOL candidate lenses are available on the U.S. market to 
ophthalmologists. Those ophthalmologists along with ASCs can freely 
choose to implant any of this year's candidate IOLs, with payment for 
the IOL bundled into the facility payment for the cataract with IOL 
implantation surgery. From the comments, it appears that at least three 
of the four candidate IOLs have a current following among 
ophthalmologists. In fact, one of this year's candidate IOLs is the 
current U.S. market leader. NTIOL status does not affect U.S. market 
availability or Medicare coverage of an IOL. Instead, the NTIOL payment 
adjustment is reserved for new technology IOLs with sound evidence of 
measurable, clinically meaningful, improved outcomes in comparison with 
currently available IOLs, and these outcomes must have a meaningful 
impact on Medicare beneficiaries.
    Finally, we appreciate IOL manufacturers' interest in the NTIOL 
program, and encourage the submission of future applications as new IOL 
technology is developed. However, we strongly encourage applicants to 
pay close attention to the NTIOL regulatory requirements, which are 
rigorous and are discussed extensively above in this final rule with 
comment period and in prior OPPS/ASC rules. We emphasize that an IOL 
characteristic or claim of superiority and associated data that may be 
useful for marketing purposes are not necessarily sufficient for NTIOL 
status, which requires sound scientific proof of measurable, clinically 
meaningful, improved outcomes in comparison with currently available 
IOLs for Medicare beneficiaries.
4. Payment Adjustment
    The current payment adjustment for a 5-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 did not propose to revise the payment adjustment amount for CY 2012.
    We did not receive any public comments on the amount of the payment 
adjustment, and we are not revising the payment adjustment amount for 
CY 2012.
5. Announcement of CY 2012 Deadline for Submitting Requests for CMS 
Review of Appropriateness of ASC Payment for Insertion of an NTIOL 
Following Cataract Surgery
    In accordance with 42 CFR 416.185(a) of our regulations, CMS 
announces that in order to be considered for payment effective January 
1, 2013, requests for review of applications for a new class of new 
technology IOLs must be received at CMS by 5 p.m. EST, on March 2, 
2012. Send requests to ASC/NTIOL, Division of Outpatient Care, Mailstop 
C4-05-17, Centers for Medicare and Medicaid Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850. To be considered, requests for 
NTIOL reviews must include the information requested on the CMS Web 
site at: http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf.

F. ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we also created final comment indicators for 
the ASC payment system in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66855). We created Addendum DD1 to define ASC payment 
indicators that we use in Addenda AA and BB to provide payment 
information regarding covered surgical procedures and covered ancillary 
services, respectively, under the revised ASC payment system. The ASC 
payment indicators in Addendum DD1 are intended to capture policy 
relevant characteristics of HCPCS codes that may receive packaged or 
separate payment in ASCs, 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

[[Page 74444]]

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 
this CY 2012 OPPS/ASC final rule with comment period, we respond to 
public comments and finalize the ASC treatment of all codes that are 
labeled with comment indicator ``NI'' in Addenda AA and BB to the CY 
2011 OPPS/ASC final rule with comment period. 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 was used in Addenda AA and BB to the 
CY 2012 OPPS/ASC proposed rule (which were available via the Internet 
on the CMS Web site) to indicate that the payment indicator assignment 
has changed for an active HCPCS code; an active HCPCS code is newly 
recognized as payable in ASCs; or an active HCPCS code is discontinued 
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 were provided in Addenda DD1 and DD2 to the CY 2012 OPPS/ASC 
proposed rule (which were available via the Internet on the CMS Web 
site).
2. ASC Payment and Comment Indicators
    The revised ASC payment system included a 4-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 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 4-year transitional payment period has ended and it is 
no longer necessary to identify device-intensive procedures that are 
subject to transitional payments, in the CY 2012 OPPS/ASC proposed rule 
(76 FR 42310), we proposed to delete the ASC payment indicator ``H8.'' 
We proposed 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 proposed 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 proposed 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 the proposed rule (76 FR 42336 
through 42349), we proposed to establish an ASC Quality Reporting 
Program with the collection of seven claims-based quality measures 
beginning in CY 2012. We proposed to require ASCs to report on ASC 
claims a quality data code (QDC) to be used for reporting quality data. 
We proposed 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 adopted 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 ASC 
Quality Reporting Program is provided in section XIV.K. of this CY 2012 
OPPS/ASC final rule with comment period. Additionally, CMS proposed to 
create a new ASC payment indicator ``M5'' (Quality measurement code 
used for reporting purposes only; no payment made) for assignment to 
the QDCs to clarify that no payment is associated with the QDC for that 
claim. We proposed that this payment indicator would be effective 
January 1, 2012.
    We did not propose any changes to the definitions of the ASC 
comment indicators for CY 2012. We refer readers to Addenda DD1 and DD2 
to the CY 2012 OPPS/ASC proposed rule (which were referenced in section 
XVII. of the proposed rule and available via the Internet on the CMS 
Web site) for the complete list of ASC payment and comment indicators 
proposed for the CY 2012 update.
    We did not receive any public comments on the ASC payment and 
comment indicators. Therefore, we are finalizing our proposed CY 2012 
payment and comment indicators, without modification, in Addenda DD1 
and DD2 to this final rule with comment period (which are available via 
the Internet on the CMS Web site).

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 (C) 
and (D) of section 1805(b)(1) of the Act require MedPAC to submit 
reports to Congress not later than March 15 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

[[Page 74445]]

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 applied. Further, we 
noted that that we would update the conversion factor for the CY 2010 
ASC payment system by the percentage increase in the CPI-U (codified at 
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 requiring this 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 ASCs 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 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 did not propose to require ASCs to submit cost data 
(76 FR 42311). However, we did propose to require ASCs to submit 
quality data beginning in CY 2012.
    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. In the CY 2012 OPPS/ASC proposed rule, we proposed 
to require ASCs to report seven quality measures in CY 2012. Details 
associated with ASC quality reporting proposed for CY 2012 were 
discussed in section XIV.K. of the CY 2012 OPPS/ASC proposed rule (76 
FR 42336 through 42349).
    Finally, in the CY 2012 OPPS/ASC proposed rule (76 FR 42311), we 
did not propose 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 requires that the annual ASC 
payment update be reduced by a productivity adjustment. As discussed in 
section XIII.H.2.b. of the proposed rule (76 FR 42312 through 42313), 
the Secretary estimated that the CPI-U is 2.3 percent and the MFP 
adjustment is 1.4 percent. Therefore, we proposed a 0.9 percent update 
for CY 2012.
    Comment: Commenters urged CMS to require ASCs to routinely report 
cost data to allow for future validation of the relative 
appropriateness of ASC payment weights and rates. MedPAC commented that 
ASCs should be required to submit cost and quality data, arguing that 
ASC cost data are needed to examine whether an existing input price 
index is an appropriate proxy for the costs of ASCs or whether an ASC-
specific market basket should be developed. MedPAC pointed out that 
businesses such as ASCs typically keep records of their costs for 
filing taxes and other purposes, and other small providers, such as 
home health agencies and hospices, submit cost data to CMS. MedPAC 
stated that CMS should create a streamlined process for ASCs to submit 
cost data in order to minimize the burden on ASCs and CMS.
    Other commenters, however, supported CMS' proposal not to require 
ASCs to routinely submit cost data, a process that the commenters 
characterized as administratively burdensome. The commenters stated 
that the quality of such data, if required, would be questionable 
because of the varying types of services and cost structures among ASCs 
and would not be suitable for ratesetting.
    Response: We did not propose to require ASCs to submit cost data to 
the Secretary for CY 2012 because, as noted previously in this section 
and in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72058), we continue to believe that our established methodology results 
in appropriate payment rates for ASCs. Therefore, we are finalizing our 
proposal not to require cost reporting in this final rule with comment 
period. We will keep the commenters' perspectives about collecting cost 
information from ASCs in mind as we further consider the adequacy of 
the Medicare ASC payment rates. We also appreciate the commenters' 
perspectives regarding ASC quality reporting and refer readers to 
section XIV.K. of this final rule with comment period for more detailed 
discussion of ASC quality data reporting.

H. Calculation of the ASC Conversion Factor and the 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

[[Page 74446]]

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 covered 
ancillary radiology services involving certain nuclear medicine 
procedures or involving the use of contrast agents, as discussed in 
section XIII.D.2.b. of this final rule with comment period) the 
established policy is to set the relative payment weights so that the 
national unadjusted ASC payment rate does not exceed the MPFS 
unadjusted nonfacility PE RVU-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 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.
    Comment: Several commenters made the same comment that was made in 
the CY 2011 rulemaking--that is that CMS adopt for the ASC payment 
system the same wage index values used for hospital payment under the 
OPPS (75 FR 72059 contains an explanation of such comment). At a 
minimum, commenters recommended that CMS apply the out-migration 
adjustment to ASCs in qualifying counties.
    Response: We have responded to this comment in the past, and 
believe our prior rationale for using unadjusted wage indices is still 
a sound one. We refer readers to our response to this comment in last 
year's final rule with comment period (75 FR 72059). We discuss our 
budget neutrality adjustment for changes to the wage indices below in 
section XIII.H.2.b. of this final rule with comment period.
    After consideration of the public comments we received, we are 
continuing our established policy to account for geographic wage 
variation in labor cost when calculating individual ASC payment by 
applying the pre-floor and pre-reclassified hospital wage index values 
that CMS calculated for payment, using updated CBSAs. For CY 2012, we 
also are continuing our policy established in the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 72058 through 72059) to set the 
ASC wage index by calculating the average of all wage indices for urban 
areas in the state when there is no IPPS hospital whose wage index data 
could be used to set the wage index for that area, and all contiguous 
areas to the CBSA are rural.

[[Page 74447]]

2. 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 nonfacility 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, in the CY 2012 OPPS/ASC proposed rule (76 FR 
42312), we proposed 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 proposed 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 proposed to 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 scaler was 0.9373 
(76 FR 42312) 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. At the time of the CY 2012 proposed rule, we had available 
98 percent of CY 2010 ASC claims data. For this final rule with comment 
period, we have approximately 99 percent of all ASC claims data for CY 
2010.
    To create an analytic file to support calculation of the weight 
scalar 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/ASCRN/itemdetail.asp?filterType=none&filterByDID=-99&sortByDID=3&sortOrder=descending&itemID=CMS1249114&intNumPerPage=10.
    Comment: Many commenters again expressed their opposition to 
scaling the ASC relative payment weights. Many of the commenters on the 
CY 2012 OPPS/ASC proposed rule offered the same views as the public 
commenters on each rule since the CY 2009 OPPS/ASC proposed rule CY 
2009 was the year when CMS first applied the scaling policy that was 
finalized in the August 2, 2007 final rule. The commenters expressed 
many concerns, including that scaling is contrary to the intent of 
using the cost-based OPPS relative payment weights as the basis for 
determining the relative payments for the same services in ASCs and 
that scaling would continue to erode the payment relationship between 
the OPPS and ASC payment system. They asserted that, although scaling 
is intended to maintain budget neutrality within the ASC payment 
system, it is instead creating increasingly large payment differentials 
between the ASC and OPPS payments for the same services without 
evidence of growing differences in capital and operating costs between 
the two settings, and depriving ASCs of real increases in the relative 
costs of procedures. The commenters believed that the OPPS relative 
payment weights represent real growth in the costs of services provided 
in HOPDs and the annual change in relative weights should move in the 
same direction in both the ASC and HOPD setting. The commenters argued 
that the difference in payments between the ASC and HOPD services at 
the aggregate and procedure level should be driven only by changes in 
the conversion factor.
    The commenters also pointed out that, while CMS has suggested that 
scaling of the relative weights is a design element that will protect 
ASCs from changes in the OPPS relative weights that could significantly 
decrease payments for certain procedures, the trend in the OPPS 
relative weights suggests that the scaling factor for ASCs will rarely 
result in an increase in ASC relative weights.
    The commenters argued that CMS is not required to scale the ASC 
relative weights and that it should use its authority to suspend the 
application of scaling the ASC relative weights for CY 2012. They noted 
that the regulations establishing the revised ASC payment system give 
CMS the flexibility to scale ``as needed.'' In addition, some 
commenters stated that Congress imposed a budget neutrality requirement 
on the ASC payment system only during the CY 2008 implementation year, 
and that CMS is under no legal obligation to continue to apply a 
scaling factor.
    Response: Many of these comments are similar to public comments on 
the proposal for the revised ASC payment system that we responded to in 
the August 2, 2007 final rule (72 FR 42531 through 42533). For example, 
with regard to scaling, we addressed these same concerns raised by 
commenters that annual rescaling would cause divergence of the relative 
weights between the OPPS and the revised ASC payment system for 
individual procedures in the August 2, 2007 final rule (72 FR 42532). 
We refer the commenters to that discussion for our detailed response in 
promulgating the scaling policy that was initially applied in CY 2009 
(72 FR 42531 through 42533).
    As we have stated in the past (74 FR 60627), the ASC weight scaling 
methodology is entirely consistent with the OPPS methodology for 
scaling the relative payment weights and, for the most part, the 
increasing payment differentials between the ASC and OPPS payments for 
the same services are not attributable to scaling ASC relative payment 
weights. Considerations of differences between the capital and 
operating costs of ASCs and HOPDs are not part of the ASC standard 
ratesetting methodology, which relies only on maintaining the same 
relativity of payments for services under the two payment systems, as 
well as budget neutrality within each payment system. Furthermore, 
unlike HOPDs, we do not have information about the costs of ASC 
services in order to assess differences in

[[Page 74448]]

capital and operating costs over time between the two settings. In 
order to maintain budget neutrality of the ASC payment system, we need 
to adjust for the effects of changes in relative weights. The ASC 
payment system adopts the OPPS relative weights as the mechanism for 
apportioning total payments, after application of the update factor, 
among all of the services covered by the ASC payment system. The OPPS 
relative weights serve the same purpose in the OPPS. The OPPS relative 
weights do not represent an estimate of absolute cost of any given 
procedure; rather, they reflect our estimate of the cost of the 
procedure within the context of our cost estimation methodology for the 
OPPS. With the exception of services with a predetermined national 
payment amount, the use of a uniform scaling factor for changes in 
total weight between years in the ASC payment system does not alter the 
relativity of the OPPS payment weights as used in the ASC payment 
system. Differences in the relativity between the ASC relative payment 
weights and the OPPS relative payment weights are not driven by the 
application of the uniform scaling factor. The ASC weight scaling 
methodology is entirely consistent with the OPPS weight scaling 
methodology and the weights serve the same purpose in both systems, to 
apportion total budget neutral payment allowed under the update.
    We do not agree with commenters' assertion that we should eliminate 
the scaling methodology because the scaling factor will rarely result 
in an increase in ASC relative weights, therefore continuing to hurt 
rather than protect ASCs in the future. As we stated in the August 2, 
2007 final rule (72 FR 42532), aggregate payments to ASCs could, in the 
absence of rescaling, be affected by changes in the cost structure of 
HOPDs that ought to be relevant only under the OPPS. A sudden increase 
in the costs of hospital outpatient emergency department or clinical 
visits due, for instance, to an increase in the volume of cases, would 
have the effect of increasing the weights for these services relative 
to the weights for surgical procedures in the hospital outpatient 
setting. In the absence of scaling the ASC payment weights, this change 
in the relative weights under the OPPS would result in a decrease in 
the relative weights for surgical procedures under the ASC payment 
system, and, therefore, a decrease in aggregate ASC payments for these 
same procedures. We continue to believe that changes in relative 
weights each year under the OPPS should not, in and of themselves, 
cause aggregate payments under the revised ASC payment system to 
increase or decrease. It is important to note that the specific 
adjustment factor applied in the scaling process could be positive or 
negative in any particular year; the fact that the scaler has not 
resulted in an increase to the ASC payment weights in any given year or 
series of years does not mean the same trend will continue, nor does it 
mean that the principle of preventing the ASC payment weights from 
being affected by fluctuations in the OPPS payment weights is 
inherently flawed.
    As we stated in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68754), with respect to the use of ``as needed'' in the text of 
Sec.  416.171(e)(2) that commenters have interpreted to mean that CMS 
has the authority to suspend scaling the relative payment weights if it 
determines there is not a need to do so, the phrase does not mean that 
we will determine whether or not to adjust for budget neutrality. 
Rather, it means that we adjust the relative payment weights as needed 
to ensure budget neutrality. Therefore, we do not agree with the 
commenters' assertion that we are under no legal obligation to continue 
to apply a scaling factor. If we were not to scale the ASC relative 
payment weights, we estimate that the CY 2012 revisions would not be 
budget neutral.
    Establishing budget neutrality under the OPPS does not result in 
budget neutrality under the revised ASC payment system; it only 
maintains budget neutrality under the OPPS. Scaling the ASC relative 
payment weights is an integral and separate process for maintaining 
budget neutrality under the ASC prospective payment system. Scaling is 
the budget neutrality adjustment that ensures that changes in the 
relative weights do not, in and of themselves, change aggregate payment 
to ASCs. It ensures a specific amount of payment for ASCs in any given 
year. Without scaling, total ASC payment could increase or decrease 
relative to changes in hospital outpatient payment.
    Although the commenters believe that scaling prevents increases in 
ASC spending that may be appropriate because ASC costs have increased 
over time, increases in cost in a prospective payment system are 
handled by the update factor. In a budget neutral system, we remove the 
independent effects of increases or decreases in payments as a result 
of changes in the relative payment weights or the wage indices and 
constrain increases to the allowed update factor. Therefore, changes in 
aggregate ASC expenditures related to payment rates are determined by 
the update to the ASC conversion factor, not by changes in the relative 
payment weights.
    For this final rule with comment period, we used our proposed 
methodology described above to calculate the scaler adjustment using 
updated ASC claims data. The final CY 2012 scaler adjustment is 0.9466. 
This scaler adjustment is necessary to budget neutralize the difference 
in aggregate ASC payments calculated using the CY 2011 ASC relative 
payment weights and the CY 2012 relative payment weights. We calculated 
the difference in aggregate payments due to the change in relative 
payment weights (including drugs and biologicals) holding constant the 
ASC conversion factor, the most recent CY 2010 ASC utilization from our 
claims data, and the CY 2011 wage index values. For this final CY 2012 
calculation, we used the CY 2011 ASC conversion factor updated by the 
CY 2012 CPI-U, which is estimated as 2.7 percent, less the multifactor 
productivity adjustment of 1.1 percent, as discussed below in section 
XV.H.2.b. of this final rule with comment period.
    After consideration of the public comments we received, we are 
finalizing our CY 2012 ASC relative payment weight scaling methodology, 
without modification. The final CY 2012 ASC payment weight scaler is 
0.9466.
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, in 
the CY 2012 OPPS/ASC proposed rule (76 FR 42312 through 42313), we 
proposed to calculate and apply the pre-floor and pre-reclassified 
hospital wage indices that are used for ASC payment adjustment to the 
ASC conversion factor, just as the OPPS wage index adjustment is 
calculated and applied to the OPPS conversion factor. 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

[[Page 74449]]

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)'' of the Act 
(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 the CY 2012 OPPS/ASC proposed 
rule (76 FR 42336 through 42349), we proposed that ASCs begin 
submitting data on quality 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 did not 
propose any changes to the payment methodology. We stated that 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, in the CY 2012 OPPS/ASC proposed rule (76 FR 
42313), we proposed 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, 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 an MFP-adjusted CPI-U update factor 
that is less than zero, 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).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42313), for the 12-
month period ending with the midpoint of CY 2012, the Secretary 
estimated that the CPI-U is 2.3 percent. The Secretary estimated 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. We proposed 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 proposed to apply a 0.9 
percent MFP-adjusted update to the CY 2011 ASC conversion factor.
    For CY 2012, we also proposed 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 resulted in a proposed CY 2012 ASC conversion factor of 
$42.329 (76 FR 42313).
    Comment: As in prior years, many commenters requested that CMS 
adopt the hospital market basket to update the ASC payment system. The 
commenters explained that not only is the CPI-U lower than the hospital 
market basket but it is not appropriate for updating health care 
providers because, unlike the hospital market basket which analyzes 
hospital spending, the CPI-U is designed to capture household spending. 
The commenters stated that, in the most recent years, the CPI-U has 
been dominated by inflation in the housing sector rather than 
healthcare provider spending, and that the goods and services provided 
by ASCs are very similar to those provided by hospitals.
    The commenters also argued that the CPI-U is a poor proxy of ASC 
cost inflation, noting that the CPI-U has faced criticism from 
independent researchers and economists, who indicate that the CPI-U 
consistently underestimates the rate of inflation according to the 
commenters. In addition, because commenters view the CPI-U as a highly 
volatile index, the commenters suggested that CMS adjust for prior year 
forecast errors.
    Commenters stated that adopting the hospital market basket would 
minimize the divergence in CY 2012 payment between the ASC payment 
system and the OPPS and prevent the update from causing further 
divergence when the productivity adjustment is applied to both settings 
in the future. The commenters asserted that CMS has the authority to 
use an alternative update mechanism, and believed CMS should adopt the 
hospital market basket as the update for the ASC payment system.
    Commenters also indicated that the hospital market basket is a more 
appropriate index to use for the ASC update now that CMS is required to 
apply the MFP adjustment to the ASC annual update. Commenters stated 
that, as an output price index, the CPI-U index already accounts for 
productivity thus ASCs, in essence, are receiving a productivity 
adjustment that is twice that applied to the HOPD update. Because CMS 
has discretion regarding

[[Page 74450]]

the index used to update ASCs, but is required in statute to adjust the 
ASC update by the MFP, commenters urged CMS to use the hospital market 
basket, which is an input price index that does not already account for 
productivity, to update ASC payment rates and thereby allow the 
appropriate application of the required productivity adjustment. With 
regard to the MFP adjustment itself, commenters requested that, because 
the MFP is a volatile measure that is subject to substantial year-to-
year fluctuations, the MFP measurement period be uniform across 
providers.
    As mentioned in section XV.G. of this final rule with comment 
period, MedPAC commented that ASCs should be required to submit cost 
and quality data, concurrent with a 0.5 percent increase in ASC payment 
rates for CY 2012, arguing that ASC cost data are needed to examine 
whether an existing input price index is an appropriate proxy for the 
costs of ASCs or whether an ASC-specific market basket should be 
developed.
    Response: While commenters argue that the items included in the 
CPI-U index may not adequately measure inflation for the goods and 
services provided by ASCs and that use of the hospital market basket 
would minimize the divergence in the payment rates between the OPPS and 
ASC payment system, we believe that the hospital market basket does not 
align with the cost structures of ASCs. A much wider range of services, 
such as room and board and emergency services, are provided by 
hospitals but are not costs associated with providing services in ASCs. 
Therefore, at this time, we do not believe that it is appropriate to 
use the hospital market basket for the ASC annual update. We may 
consider, in future rulemaking, suggestions by MedPAC to find a way to 
obtain cost data from ASCs, in a manner that will minimize the burden 
on ASCs and CMS, so that we can examine whether an alternative input 
price index would be an appropriate proxy for ASC costs or whether an 
ASC-specific market basket should be developed.
    We recognize that the CPI-U is an output price index that accounts 
for productivity. However, the agency is required by law to apply the 
MFP adjustment to provider payments according to section 3401(k) of the 
Affordable Care Act and, for the reasons stated above, we do not 
believe that the hospital market basket reflects the cost structures of 
ASCs. Regarding alignment of the MFP adjustment across payment systems, 
for reasons stated in the CY 2011 MPFS final rule (75 FR 73396), we 
believe that it is more appropriate to align the MFP adjustment with 
the CPI-U timeframes rather than aligning the MFP adjustment across 
payment systems. In regards to the commenters' statement on the 
volatility of the MFP and its year-to-year fluctuations, the statute 
requires the MFP adjustment to be equal to the 10-year moving average 
of changes in annual economy-wide private nonfarm business multi-factor 
productivity which lessens and often negates any large year-to-year 
fluctuations.
    Although commenters raise concerns regarding the difference in the 
CPI-U forecast and the actual inflation using historical data, we do 
not believe it is appropriate to provide an adjustment to the ASC 
annual update to correct previous forecast errors. The ASC system is 
prospective and the update provided is based on the most current data 
available to establish a forecast for inflation.
    After consideration of the public comments we received, we are 
applying our established methodology for determining the final CY 2012 
ASC conversion factor. Using more complete CY 2010 data for this final 
rule with comment period than was available for the proposed rule, we 
calculated a wage index budget neutrality adjustment of 1.0004. Based 
on updated data, the CPI-U for the 12-month period ending with the 
midpoint of CY 2012 is now estimated to be 2.7 percent, while the MFP 
adjustment (using the revised IGI series to proxy the labor index used 
in the MFP forecast calculation as discussed and finalized in the CY 
2012 MPFS final rule with comment period) is 1.1 percent, resulting in 
an MFP-adjusted CPI-U update factor of 1.6 percent. The final ASC 
conversion factor of $42.627 is the product of the CY 2011 conversion 
factor of $41.939 multiplied by the wage index budget neutrality 
adjustment of 1.0004 and the MFP-adjusted CPI-U payment update of 1.6 
percent.
3. Display of CY 2012 ASC Payment Rates
    Addenda AA and BB to this CY 2012 OPPS/ASC final rule with comment 
period (which are available via the Internet on the CMS Web site) 
display the final 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 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 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 were 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 CY 2012 payment rate displayed in the ``CY 2012 
Payment'' column, each ASC payment weight in the ``CY 2012 Payment 
Weight'' column was multiplied by the CY 2012 conversion factor of 
$42.627. 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 final rule with comment period).
    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 CY 
2012 national unadjusted ASC payment rates for all items and services. 
The CY 2012

[[Page 74451]]

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 October 2011.
    We did not receive any public comments regarding the continuation 
of our policy to provide CY 2012 ASC payment information as detailed in 
Addenda AA and BB. Therefore, Addenda AA and BB to this final rule with 
comment period (which are available via the Internet on the CMS Web 
site) display the updated ASC payment rates for CY 2012 for covered 
surgical procedures and covered ancillary services, respectively, and 
provide additional information related to the CY 2012 rates.

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 (PQRS) (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 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42314), we invited 
public comment on these principles.
    Comment: Several commenters commended CMS for creating the synergy 
between the Hospital OQR Program and the Hospital IQR Program and noted 
that this is a great opportunity to foster meaningful links between the 
two Medicare programs. The commenters encouraged adherence to the 
National Quality Strategy which transforms national priorities into the 
focal point for measurement, reporting, and financial incentives. 
Commenters added that all HOPD Program measures should be thoroughly 
tested for accuracy, validity and applicability to hospital-level care 
prior to implementation. A commenter recommended that CMS adopt only 
measures endorsed by the National Quality Forum (NQF) and the Measures 
Application Partnership (MAP), and approved by the Hospital Quality 
Alliance (HQA). The commenter also supported public reporting and CMS' 
approach to propose measures well in advance of the payment year 
affected.
    Response: We appreciate the commenters' support and valuable input. 
Generally, we follow the framework of the National Quality Strategy to 
prioritize our measure selection, and implement quality reporting 
initiatives. We are required by statute to select measures for the 
Hospital OQR Program that reflect consensus among affected parties and, 
to the extent feasible and practicable, that these measures include 
measures set forth by one or more national consensus building entities. 
The NQF, MAP, and HQA are organizations composed of a diverse 
representation of consumer, purchaser, provider, academic, clinical, 
and other health care stakeholders with which we consult or convene for 
their input. In instances where we develop our own measures, we 
generally employ a rigorous consensus-based measure development process 
that incorporates broad stakeholder input. Details regarding the 
process we have used in connection with some measures are available on 
our Web site at: http://www.cms.gov/MMS/19_MeasuresManagementSystemBlueprint.asp#TopOfPage. Also, we will continue 
our multi-year approach for proposing and finalizing of measures as it 
has been well-received by most providers.
    Comment: Several commenters praised CMS' shifting approach to focus 
more on outcome measures but they also believed there is value in the 
process measures that are linked to outcomes. One commenter 
specifically urged CMS not to dismiss process measures when there is 
evidence that supports a direct link between the process being measured 
and the patient outcome. One commenter suggested that CMS follow The 
Joint Commission (TJC) (a not-for-profit organization that

[[Page 74452]]

accredits and certifies health care organizations and programs in the 
U.S.) accountability measure criteria as a guide to select quality 
measures for the Hospital OQR Program. The commenter stated that TJC 
defines accountability measures as those for which there are large 
volumes of research linking the measure to improved clinical outcomes; 
the measure accurately captures the evidence-based care delivered; and 
implementation of the measure has minimal unintended adverse 
consequences.
    Response: We agree with the commenters that evidence-based process 
measures that are associated with better outcomes are important to 
include in the Hospital OQR Program and we have taken steps to include 
these types of measures each year. We are aware of TJC's accountability 
criteria for assessment of measures, and consider these criteria, among 
others, in selecting measures for the Hospital OQR Program because we 
agree that accountability is crucial in quality improvement processes. 
We thank the commenters for their support.
    Comment: A commenter expressed concerns that the time span between 
the finalization of the Hospital OQR Program measures and their 
implementation generally does not provide sufficient time for hospitals 
to implement process changes to capture quality data. The commenter 
stated that insufficient preparation would hinder hospital performance 
improvement and accurate reporting of quality data.
    Response: We thank the commenter for this input. We agree that when 
measures require the capture or collection of new chart-abstracted 
measure information not previously captured, hospitals need a 
sufficient amount of time to prepare operationally to meet the new data 
submission requirements. We generally provide four to six months lead 
time to hospitals to collect and submit new data that are needed for 
new measures. However, not all new measures finalized for the Hospital 
OQR Program may require the capture or collection of new data elements 
for chart-abstracted measures.
    Comment: A commenter strongly urged CMS to include an update on the 
NQF status of each quality measure in every proposed and final rule, to 
foster an open and transparent environment, given the significant 
statutory and contractual roles that NQF plays in the hospital quality 
measures.
    Response: We thank the commenter for the input. We note that in our 
rulemakings, we provide the NQF endorsement number and endorsement 
status of each measure when applicable.
    Comment: One commenter urged CMS to consider the relevance of 
Hospital OQR Program measures in rural hospitals and to make 
modifications of the measures as necessary to minimize the burden on 
the small hospitals.
    Response: We believe that the current Hospital OQR Program measures 
are relevant to rural hospitals because they address topics that are 
broadly applicable to hospital outpatient departments, including rural 
hospital outpatient departments. We agree that it is important to seek 
to minimize the collection burden associated with measurement, and that 
some types of providers may be more greatly impacted by collection 
burden than others. In maintaining the measures, we have sought and 
will continue to seek to streamline the data elements needed for the 
measures to the extent possible.
    Comment: A commenter requested that CMS clarify the patient 
population to which the Hospital OQR Program measure applies, for 
example, traditional Medicare patients, Medicare Advantage, and 
Medicare replacement policyholders.
    Response: The Hospital OQR chart-abstracted and NHSN measures apply 
to all patients meeting the inclusion criteria for the measure 
regardless of payer, while the claims-based measures are calculated 
using only Medicare Fee-for-Service claims. The structural measures 
apply to the hospital outpatient department.
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.
    Comment: A commenter requested that for future new measure 
proposals, CMS also post the associated measure specification publicly 
at least 6 months prior to inclusion in a proposed rule.
    Response: We provide specifications or links to specifications as 
part of the proposal. We also seek to incorporate measure 
specifications as quickly as possible into the Hospital OQR 
Specifications Manual in order to provide enough lead time (generally 
six months) prior to the beginning of data collection for the measure 
under the Hospital OQR Program.
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,

[[Page 74453]]

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 non-interactive CMS Web 
sites, affected parties will be notified via CMS listservs, CMS email 
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 OQR Program, including 
measures that we calculate using Medicare claims.
    Comment: A commenter urged CMS to continue using both the 
stakeholder and focus groups to develop and evaluate terminology for 
presenting measurement data to the public to avoid misleading and 
alarming the public unnecessarily.
    Response: We appreciate this feedback. Prior to presenting new 
measurement topics or new types of measures on the Hospital Compare Web 
site, we strive to incorporate stakeholder feedback into the display, 
and to test the display with consumers in order to ensure that the 
concepts are easily understood by consumers and that the display and 
accompanying text will not lead to misinterpretation or inappropriate 
comparisons.
    Comment: Two commenters believed that the imaging measures 
displayed on the Hospital Compare Web site have caused confusion 
regarding how they should be interpreted.
    Response: Currently, we are displaying the imaging efficiency 
measures as rates or ratios as well as observed averages and rates by 
percentile among all those facilities that meet the minimum case count 
(a minimum case count is needed for statistical validity purposes. We 
plan to evaluate whether alternative ways of displaying efficiency 
measures, such as categorical displays, may be more informative to 
consumers than the current method of displaying the measures.
    Comment: A commenter suggested linking cost data to publicly 
displayed quality data. Another commenter was concerned that posting 
data in multiple places other than Hospital Compare may cause 
confusion. A commenter recommended that CMS postpone the display of 
data with issues on Hospital Compare to a later date when the issues 
are resolved rather than displaying them at a different site temporary. 
A few commenters were concerned that the Hospital OQR data on Hospital 
Compare may be outdated, and urged CMS to consider a more current time 
frame for displaying outpatient quality measures to provide more timely 
and accurate information for the public. For future display of e-
measures, a commenter urged CMS to indicate the method of data 
collection (that is, electronic versus chart-abstracted) on Hospital 
Compare so that consumers are aware of the different collection methods 
used.
    Response: We use the Hospital Compare Web site as the primary 
vehicle for displaying hospital quality data reported for the Hospital 
OQR Program. As we stated in the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72070), the data we display on Web sites other 
than Hospital Compare is displayed on a temporary basis because of 
pending display design and other unresolved issues so as to not confuse 
beneficiaries who intend to use data in making healthcare decisions. 
Once an appropriate display mechanism has been determined, the 
information is added to the Hospital Compare Web site. The data for the 
Hospital OQR Program are made available on the Hospital Compare Web 
site as soon as possible, and the most recent time periods for the data 
that are available to us are posted on the Web site. The chart-
abstracted measure data are refreshed on a quarterly basis, and the 
claims-based and structural measures are refreshed once annually. We 
currently provide information on the data sources for the various 
measures on Hospital Compare under the ``information for 
professionals'' link, which is accessible to the public. We will 
consider alternatives to make this information more transparent to the 
public.

B. Revision to Measures Previously Adopted for the Hospital OQR Program 
for the 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:
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[GRAPHIC] [TIFF OMITTED] TR30NO11.125

BILLING CODE 4120-01-C
    We received specific comments, discussed below, on some of these 
previously finalized measures.
     OP-3 Median time to transfer to another facility for acute 
coronary intervention
    Comment: One commenter recommended the retirement of this measure 
but provided no rationale for the recommendation.

[[Page 74455]]

    Response: Periodically, we perform measure review for relevancy, 
potential topped-out status, program alignment, and harmonization. We 
have not observed any evidence indicating that the measure should be 
retired at this time. This measure is important because it measures the 
promptness of care intervention for life threatening coronary events, 
which is associated with better outcomes for patients experiencing such 
events.

 OP-4: Aspirin at Arrival and OP-5: Median Time to ECG

    Comment: A commenter disagreed with the inclusion code for ``Chest 
Pain Not Elsewhere Classified (NEC)'' for the identification of 
probable cardiac chest pain cases in these two measures.
    Response: We disagree with the commenter that this code should be 
excluded. By including this code, we take into account the wide 
variability of patient symptoms and how health care providers use codes 
to capture symptoms of chest pain. According to the ICD-9 manual, this 
code applies to symptoms of discomfort in chest, chest pressure and 
tightness in chest. These symptoms are also associated with cardiac 
chest pain. Because OP-4 and OP-5 are process measures which assess the 
use of aspirin and ECG in patients suspected of having cardiac chest 
pain, we believe that all codes in the claims data that indicate 
capture chest pain should be used to identify these types of patients.

 OP-9: Mammography Follow-up Rates
 OP-10: Abdomen CT--Use of Contrast Material
 OP-14: Simultaneous Use of Brain Computed Tomography (CT) and 
Sinus Computed Tomography (CT) *

    Comment: A few commenters urged CMS to remove the above imaging 
efficiency measures because they have not received NQF endorsement and 
are not HQA-approved. A few commenters were concerned that measures OP-
9 and OP-10 may cause potential harm.
    Response: Many of the concerns raised by the commenters about the 
imaging efficiency measures we adopted for the CY 2011 payment 
determination were also raised at the time these measures were first 
proposed for the CY 2010 payment determination. We responded to these 
concerns when we adopted the measures (73 FR 68762 through 68766). We 
stated that the measures meet the statutory requirement of reflecting 
consensus among affected parties because of their consensus-based 
development, and that the measures address important patient safety 
concerns related to exposure to unnecessary radiation and contrast 
materials. We also stated that the Secretary is not required to limit 
measures considered for Hospital OQR Program adoption only to those 
adopted by the HQA or endorsed by the NQF. We have not found any 
evidence that implementation of these three measures results in patient 
harm.

 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 ED for 
atraumatic headache

    Comment: A commenter recommended that for initial implementation of 
new imaging measures, CMS should keep the ``within range'' rates broad 
so that hospital performance would not be unfairly presented.
    Response: Generally, the hospital outpatient imaging efficiency 
measures that we have implemented do not provide for any targets or 
ranges. However, the OP-9: Mammography Follow-Up rates measure uses 
ranges because the literature supports specified ranges. For the other 
imaging efficiency measures, we provide rates or ratios as well as 
observed averages and rates by percentile among all those facilities 
that meet the minimum case count (a minimum case count is needed for 
statistical validity purposes).

 OP-13: Cardiac imaging for preoperative risk assessment for 
non-cardiac low risk surgery

    Comment: A commenter stated that imaging measures included in the 
Hospital OQR Program are claims-based and may not indicate the 
exclusions and justify the clinical information in context to support 
the clinical decisions for the imaging studies. The commenter gave the 
example of measure OP-13. The commenter believed that exclusions should 
be added that would recognize appropriate use of stress imaging in 
patients with certain clinical events coincidentally around the time of 
the ``non-cardiac'' surgery.
    Response: We believe that the use of claims data is a non-
burdensome data collection approach because hospitals routinely submit 
claims to Medicare for billing purposes. We are also committed to 
regularly review whether additional codes should be added to determine 
exclusions and related clinical information.
    We are aware of the commenter's concerns for measure OP-13. During 
development of the imaging measures, our technical experts determined 
that additional clinical information beyond what is present on claims 
is not necessary to identify exclusions. However, we will further 
consider whether additional clinical information would improve the 
capture of exclusions for this and other imaging measures during the 
regular maintenance process for these measures.

 OP-14: Simultaneous use of brain computed tomography (CT) and 
sinus computed tomography (CT)

    Comment: A commenter believed that prior to measure implementation, 
CMS should include explicit exclusion criteria for patients with signs 
of serious infection.
    Response: We appreciate the commenter's concerns. During the 
development of this imaging efficiency measure, we completed extensive 
literature reviews and analyzed appropriate medical guidelines to 
determine the appropriateness of imaging studies for various medical 
conditions and exclusions. Currently, we exclude claims with primary or 
secondary diagnosis codes related to trauma, tumor, orbital cellulitis, 
or intracranial abscess from the measure as long as these diagnoses 
were included in one of the diagnoses fields on the Brain CT claim. We 
regularly review measures to determine whether additional codes should 
be added in order to determine exclusions. To date, we have not 
identified any scientific literature or guidelines that would indicate 
that simultaneous brain and sinus CT imaging would be necessary for 
patients with signs of serious infection. However, we will review this 
suggestion with our technical experts during regular maintenance of the 
measure.
    Comment: A commenter noted that OP-14 has too many similarities 
with measure OP-15. The commenter believed that there is little benefit 
in this measure because the sample size for patients having both scans 
may be small at many facilities and that more and more facilities have 
multi-slice scanners that are capable of reconstructing the data to 
better evaluate the sinuses without requiring rescanning with 
additional radiation.
    Response: While we recognize that OP-14 and OP-15 may be similar, 
OP-14's specific focus is reducing unnecessary scans of adjacent body 
parts, when one scan is clinically appropriate. We recognize that small 
case counts can be problematic for facilities that do not perform a 
sufficient volume of CT imaging studies. For this reason, we will 
establish a minimum

[[Page 74456]]

case count requirement for these measures for public reporting 
purposes. Regarding the comment on the impact of imaging technology on 
imaging efficiency measure results, currently, we do not collect any 
information regarding what level of CT technology is employed by a 
facility. Therefore, it is not currently possible to adjust the CT 
measures in this manner.

 OP-15: Use of brain computed tomography (CT) in the ED for 
atraumatic headache

    Comment: A commenter noted that certain conditions such as HIV/
AIDS, cancer, visual disturbance, protracted nausea and vomiting should 
be added to the exclusions, as well as structural pathologies and all 
codes for neurological signs of cerebral origin.
    Response: We thank the commenter for the suggestions and will take 
them into consideration in our measure maintenance process.
    Comment: A few commenters opposed measure OP-15 because it is not 
NQF-endorsed. Commenters stated that the measure is a utilization 
measure rather than an efficiency measure. The commenters added that 
there was no scientific basis to suggest this measure addresses patient 
safety. Commenters urged CMS to reconsider the adoption of measure OP-
15, considering potential tort liability in the ED if imaging does not 
occur, and the potential positive impact on quality of life for 
patients.
    Response: The objective of imaging efficiency measures, including 
OP-15, is to promote efficient and high quality patient care in the 
hospital outpatient setting that neither underutilizes nor over 
utilizes healthcare resources. Unnecessary or duplicative studies are 
inefficient and detrimental to the patient because CT exposes the 
patient to higher doses of radiation than conventional x rays and 
increases the patient's risk for cancer. An analysis of 2007 Medicare 
claims data indicated that approximately 200,000 Medicare beneficiaries 
had a visit to the ED with a primary diagnosis of headache with about 
half of them receiving a brain CT during the ED visit. We encourage use 
of this important diagnostic tool when clinically indicated.
    Earlier this year, we conducted a dry run of the measure and 
received many suggestions for refinements to the measure in order to 
better address circumstances in which such imaging is clinically 
indicated. We intend to have our technical expert panel examine the 
suggestions we have received regarding the measure during the dry run 
as well as the comments we have received during this public comment 
period and during the maintenance process for this measure. We intend 
to incorporate refinements arising out of this process, such as the 
formulation and incorporation of addition exclusion criteria to be 
applied to the measure specifications and calculations, prior to 
implementing public reporting of the measure.

 OP-16: Troponin results for ED acute myocardial infarction 
patients or chest pain patients received within 60 minutes of arrival

    Comment: One commenter urged CMS not to adopt this measure, based 
on the assertion that the measure is not a good marker for quality and 
it may have the unintended consequences of prolonging other ED 
patients' wait times for lab results.
    Response: We are aware that Troponin assessment may not be the only 
component of a diagnostic workup of patients with chest pain. The focus 
of this measure is on the timeliness of the receipt of the Troponin 
results and not on its use or interpretation by HOPDs. However, we 
believe that use of the Troponin test facilitates decision making in 
the treatment of time sensitive conditions such as AMI. For this 
reason, we believe timeliness of the availability of the test results 
is a marker of quality because it results more timely treatment 
decisions and treatment delivery, which in turn results in better 
outcomes for patients.

 OP-17: Tracking clinical results between visits

    Comment: A commenter suggested the inclusion of a ``N/A'' option 
for hospital outpatient departments, in the event that lab tests or 
diagnostic studies are ordered by physicians or outside vendors not 
working for the hospital. One commenter believed this measure is more 
appropriate for the HITECH EHR Incentive Program as a meaningful use 
decision support or surveillance element.
    Response: The use of a ``N/A'' option would be inconsistent with 
the intent of the measure. The structural measure is designed to assess 
the ability of HOPDs to track results of clinical tests between the 
patient visits. This would be true of the facility even in cases where 
tests are ordered by someone not employed by the facility. The ability 
to track these results allows facilities to see any changes in values 
or trends which may indicate a change in a patient's condition over 
time.

 OP-19: Transition record with specified elements received by 
discharged patient

    Comment: A few commenters supported providing patients with full 
transition information including diagnosis at discharge or chief 
complaint, patient instructions, plan for follow-up care, and list of 
new medications with quantity dispensed. However, other commenters were 
concerned about the burden in generating and providing patients with a 
copy of all major procedures and tests performed during ED visits. Some 
commenters recommended delaying implementation of this measure until 
EHRs have the functionality to generate real time diagnosis information 
and copies of all major procedures and tests performed during an ED 
visit for patients.
    Response: We appreciate the support and the recommendations from 
the commenters. This measure covers outpatient ED encounters only (not 
other HOPD encounters), and we believe that the HOPD should be able to 
accurately document diagnostic tests and procedures performed at the 
facility during the ED visit. If the principal diagnosis has not been 
determined prior to discharge, the specifications state that the chief 
complaint can be used to comply with the measure.
    We do not believe it is necessary to delay the implementation of 
this measure because many EDs are already keeping track of patient 
encounters and related tests and procedures during the ED visit. We do 
not believe it will incur much burden to report the data. Additionally, 
certified EHR technology already has the functionality to generate real 
time diagnosis information and copies of procedures and tests performed 
during an ED visit.
    Comment: Some commenters requested that CMS clarify on the 
applicability of this measure for patients put on observation. Some 
commenters noted that observations patients may be under the care of 
non-ED physicians.
    Response: Currently, observation patients discharged from the ED 
would be captured. However, not all observation patients at the 
hospital may be seen in or discharged through the ED. We believe this 
information should be provided for all observation patients, regardless 
of whether an ED physician was responsible for their care. We intend to 
revisit how this population can be better defined for the hospital 
outpatient department as a whole with our technical expert panel during 
the maintenance of this measure.
    Comment: A commenter requested the exclusion of the discontinued 
medications from the specified elements for this measure. The commenter 
recommended that only medications prescribed or dispensed by the ED 
should be included since changes to a

[[Page 74457]]

patient's home medication list seldom occur in ED visit. Another 
commenter inquired if all the required data elements for this measure 
are included in the Specifications Manual.
    Response: There is only one data element (Transition Record 
received) in this measure and this data element contains several 
components. Discontinued medications is one of the components in this 
data element on the ED Measure Information Form: List of new 
medications and changes to continued medications that patient should 
take after ED discharge, with quantity prescribed and/or dispensed (OR 
intended duration) and instructions for each medication. The 
medications discontinued as a result of the ED visit should be listed 
to ensure that the patient does not continue taking them after 
discharge. This would mean a change to the list of home medications. 
Thus, documentation of discontinued medication is an essential part of 
the instructions given to a patient upon discharge. Therefore, the 
transition record should contain a summary of the care, including 
discontinued medication instruction provided during the ED encounter.

 OP-21: ED-Median time to pain management for long bone 
fracture

    Comment: Two commenters believed that this measure should include 
NSAIDS, such as ibuprofen on the analgesic medication list as some ED 
physicians use them to treat pain for long bone fractures.
    Response: We acknowledge the importance of listing all possible 
analgesics in the treatment of long bone fractures in the list of 
analgesics for OP-21 provided in Table OP 9.1 Analgesic Medications of 
the Hospital OQR Specifications Manual. We will consider including 
ibuprofen as a recommended medication in the list of analgesics during 
the next Specifications Manual update. However, we emphasize that the 
purpose of OP-21 is to measure the median time to analgesic 
administration in long bone fractures rather than to measure the type 
of analgesic administered. The list of analgesic medications in the 
Specification Manual are only suggestions.
    Comment: A commenter contended that this measure does not account 
for those patients that do not receive pain medication, and questioned 
how patients not being treated would be appropriately captured.
    Response: The commenter is correct, this measure assesses whether 
patients with long bone fracture who received analgesics did so in a 
timely manner. During measure development, our technical expert panel 
decided not to create a measure of administration/lack of 
administration. We will revisit whether a separate measure is needed, 
or whether lack of administration should be addressed in the existing 
measure with our technical expert panel.

 OP-23: ED-Head CT scan results for acute ischemic stroke or 
hemorrhage stroke who received head CT scan interpretation within 45 
minutes of arrival

    Comment: One commenter believed that this measure is more 
appropriate as an inpatient measure rather than an outpatient measure.
    Response: We believe that timely interpretation of head CT scan 
results for acute ischemic stroke or hemorrhage stroke patients is 
important in both inpatient and outpatient settings. This measure is 
appropriate to measure the quality of care in the outpatient setting, 
given that the goals of this measure are to encourage hospitals to 
assess and improve timeliness of diagnostic reports, clinical decision 
making, and as a result, reduce unnecessary length of stay in the ED. 
We expect the measure would reduce radiology report turnaround times 
and expedite the formulation of ED patient treatment plans.
    The measure is limited to patients seen in the ED and subsequently 
discharged or transferred. This measure is designed to capture those 
patients that are not admitted to the facility associated with the ED 
that sees them initially, which would be a significant population not 
accounted for with an inpatient measure.
    Comment: One commenter supported measure OP-23 but requested that 
CMS exclude patients who present to the ED in cardiopulmonary arrest 
and patients who suffer a cardiac or pulmonary arrest requiring 
resuscitation within 45 minutes of arrival to the ED for stabilization, 
before even considering sending them to CT for a head CT.
    Response: We believe that the number of patients who present to the 
ED in cardiopulmonary arrest and who suffer a cardiac or pulmonary 
arrest requiring resuscitation within 45 minutes of arrival to the ED 
for stabilization and eventually survive will be minimal (patients who 
expire are excluded from the measure). However, we will explore whether 
excluding cases with diagnosis codes for either Respiratory Arrest 
(799.1) or Cardiac Arrest (427.5) would be feasible and appropriate 
during the maintenance of the measure.
    Comment: A commenter requested that CMS model measure OP-23 after a 
TJC stroke care measure that requires a brain imaging study to be read 
in the hospital within 45 minutes of the time it was ordered, as 
opposed to within 45 minutes of a patient's arrival (which OP-23 
measures).
    Response: We appreciate this feedback. Because the therapeutic time 
window for treatment possibilities is critical, timely completion and 
results of the CT or MRI scan soon after patient arrival are imperative 
and will directly impact the quality of care a patient receives. 
Because results will only be delivered if ordered, this measure implies 
that tests will be ordered timely as well, so that they can be read 
within 45 minutes of a patient's arrival.
    Comment: A commenter stated that current evidence indicates that as 
an acute stroke brain imaging modality, MRI is equally good or better 
than CT in diagnosing stroke. Therefore, the commenter recommended 
changing the title of the measure to read Brain CT or MRI scan results 
from acute ischemic stroke or hemorrhagic stroke who received brain CT 
or MRI scan interpretation within 45 minutes of arrival.
    Response: We appreciate the feedback and will consider this 
suggestion in our measure review.
    Comment: Several commenters recommended the retirement of all 
structural measures adopted in the Hospital OQR Program as the 
commenters did not believe these measures can be validated and usually 
they are not tied to quality.
    Response: We do not agree with the commenters' statements that 
structural measures are not tied to quality. Structural measures assess 
operational conditions that are associated with better quality, and 
therefore warrant measurement and inclusion in this and other quality 
reporting programs.
2. Revision to OP-22--Left Without Being Seen
    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. In the CY 2012 OPPS/ASC proposed rule (76 FR 42315), we proposed 
that beginning with the CY

[[Page 74458]]

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. We stated that this 
proposed process would be 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 proposed that for the CY 2013 payment determination, data 
submission for this measure would occur between July 1, 2012 and August 
15, 2012. We also proposed 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 invited 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. We made the proposed updated specifications for this 
measure available in the July 2011 Hospital OQR Specifications Manual.
    Comment: A few commenters supported the proposed revision for the 
collection of aggregate counts of the numerator and the denominator for 
measure OP-22 for burden reduction purposes. A commenter suggested CMS 
study the results for systematically higher rates for certain types of 
hospitals such as safety net hospitals so that appropriate adjustments 
can be made. One commenter was concerned about including this measure 
in pay for reporting or public reporting but did not provide a reason. 
Furthermore, the commenter recommended changing this measure into a 
structural measure and having it reported on an annual basis. One 
commenter contended that the measure is not a quality of care measure 
and is hard to validate since there are underlying patient records from 
which to pull the data and added that the measure should not be 
implemented.
    Response: We thank the commenters for their support of aggregate 
reporting for this measure and their suggestions for monitoring this 
measure for differences by type of hospital (for example, safety net 
hospitals). We point out that the measure would be reported once 
annually by hospitals. This measure is NQF-endorsed as a measure of ED 
quality. We have not proposed to validate this measure.
    Comment: Several commenters stated that it is burdensome to 
retrieve the aggregate data retroactively since hospitals may not have 
been accustomed to collecting the data for aggregate reporting 
purposes, and indicated that the time period hospitals should begin 
reporting for this measure should begin after this final rule with 
comment period is issued rather than CY 2011 as proposed. Other 
commenters believed that the long lapse of time between 2011 and 2013 
would make the data irrelevant. One commenter suggested moving the 
reporting window to July 1, 2013 to August 15, 2013 instead of July 1, 
2012 and August 15, 2012 as proposed. Another commenter suggested 
delaying implementation of this measure until the data can be submitted 
electronically.
    Response: We believe that most HOPDs are already tracking the 
number of patients that leave the emergency department without being 
seen through various logs (for example, triage or presentation logs). 
We note that electronic systems are not needed to report the measure. 
However, in response to the public comments we received regarding the 
burden for retroactive retrieval of aggregate data, we will finalize 
the time window for the initial reporting of this measure for the CY 
2013 payment determination to begin on January 1, 2012 through June 30, 
2012. The data submission window for this measure for the CY 2013 
payment determination will be July 1, 2012 through August 15, 2012.
    Comment: One commenter requested clarification regarding whether 
the proposed revisions to the measure are endorsed by the NQF. A 
commenter requested the definitions of ``being seen,'' ``left without 
being seen,'' as well as clarifications for the inclusion or exclusion 
of patients who have been triaged but not evaluated by a physician/
advance practice nurse/physician's assistant, for data collection 
purposes.
    Response: The revisions do not change the NQF endorsed measure 
specifications. Only the form, manner, and timing of data submission to 
CMS are changed. We have not revised this measure or its measure 
specifications. In the current measure specification, we defined 
``being seen'' as being evaluated by a physician or advance practice 
nurse or physician's assistant.
    After consideration of public comment received, we are finalizing 
our proposal that for the CY 2013 payment determination, with respect 
to OP-22-Left Without Being Seen, HOPDs will be required to report only 
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). In response to 
comments, we are finalizing that HOPDs will be required to submit the 
data between July 1, 2012 and August 15, 2012 with respect to the 
period January 1, 2012 through June 30, 2012, and will be required to 
submit the data using a Web-based form for this measure available on 
the QualityNet Web site.

C. 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

[[Page 74459]]

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 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 the CY 2012 OPPS/ASC proposed 
rule (76 FR 42317), we proposed to add new measures to the existing 
Hospital OQR measure set for the CY 2014 payment determination and 
proposed to add new measures for the CY 2015 payment determination.
    Comment: Many commenters strongly supported CMS' goal to move from 
process measures to primarily outcome and patient experience of care 
measures. Commenters encouraged measure alignment across payers using 
NQF-endorsed measures. To alleviate burden from chart-abstraction, 
commenters provided the following suggestions for CMS:
     Identify measures suitable for registry-based reporting in 
the near future. Commenters described many advantages in using 
registries such as less resources are needed to report data, and timely 
analysis of existing practices to improve the quality of care.
     Retire unnecessary measures.
     Add measures linked to health outcomes.
     Limit the number of new chart-abstracted measures in the 
Hospital OQR Program.
    Response: We appreciate the valuable input from commenters. As 
discussed in previous rules, we are supportive of registry-based 
measurement which holds promise for reducing burden. During our measure 
maintenance process, we review the improvement potential for a measure, 
the measure's continued support by scientific

[[Page 74460]]

evidence, any new evidence indicating the measure may cause harm to 
patients or no longer represents best practice, duplicative measures, 
and whether a measure could be replaced by an outcome measure. In our 
discussion of measure selection criteria, we state our intention to 
focus on outcome measures whenever possible. Additionally, our goal is 
to reduce burden and minimize the number of chart-abstracted measures.
    Comment: A commenter strongly recommended that in future measure 
proposals, CMS should: (1) Clearly articulate the specific patient 
inclusion criteria for the measure; and (2) select codes that are 
appropriate for claims-based measures in HOPD settings.
    Response: We note that we provide measure specifications or links 
to measure specifications, including patient inclusion criteria and the 
appropriate codes for claims-based measures for the proposed measures, 
at the time we propose them to assist the public, during the public 
comment process.
2. 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 the CY 2012 
OPPS/ASC proposed rule (76 FR 42317 through 42323), we proposed to 
adopt a number of additional measures for the CY 2014 measure set.
a. Proposed 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 used 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 statute. 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 proposed 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 proposed 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 invited public comment on our 
proposal to adopt this HAI measure into the Hospital OQR Program for 
the CY 2014 payment determination.
    Comment: Some commenters stated it is inappropriate to include the 
surgical site infection measure in the Hospital OQR Program based on 
the measure's NQF endorsement status as an inpatient setting measure. 
The commenters noted that the measure is appropriate for the inpatient 
setting because the majority of patients stay in the hospital several 
days post-surgery. However, the commenters stated that, in the 
outpatient settings, patients are discharged within hours of surgery 
and potential outpatient surgery related infections may not have 
occurred until after discharge. Commenters cited the examples of colon 
surgery and abdominal hysterectomy, specified for reporting in the 
Hospital IQR Program, which are seldom performed in hospital outpatient 
settings.
    Response: We agree that currently, the procedures included in the 
proposed surgical site infection measure do not represent a large 
number of procedures that are performed in hospital outpatient 
departments or in ASCs. Based on the public comments we received, we 
are not finalizing the surgical site infection measure for HOPDs for 
the CY 2014 payment determination at this time. We intend to re-propose 
the measure through future

[[Page 74461]]

rulemaking once measurement and operational issues for HOPDs are 
resolved. We will continue to coordinate with the CDC and monitor 
efforts for adapting the surgical site infection measure to the 
outpatient setting, and will propose a surgical site infection measure 
for the Hospital OQR Program when a more suitable set of procedures has 
been defined for the outpatient setting.
    Comment: A commenter contended that currently, less than half of 
the States required hospitals to report to NHSN. The commenter sought 
clarification on CMS' plan to collect data from facilities that do not 
currently report to NHSN. A commenter requested more detailed 
discussion of the NHSN validation process for HOPDs, such as what kind 
of sample list of patients that hospitals have to provide, and what 
format would be used.
    Response: As of September 2011, 26 States have opted to use NHSN as 
the operational system for HAI reporting mandates in their State. As of 
January 1, 2011, subsection (d) hospitals participating in the Hospital 
IQR Program began submitting CLABSI data to the NHSN. At this time, we 
are not finalizing our adoption of the NHSN SSI measures for HOPDs for 
the CY 2014 payment determination. Should we require reporting through 
NHSN for this program in the future, facilities not currently 
participating in NHSN would need to enroll and submit data to NHSN in 
order to meet the requirements for the Hospital OQR Program. Also, in 
the event that a surgical site infection measure is implemented in the 
future through the NHSN, CMS and CDC will collaborate to develop a 
validation strategy for surgical site infection data.
    Comment: Some commenters applauded the addition of the surgical 
site infection measure in recognition of the significant negative 
impact of HAIs on hospital patients. Commenters recommended that CMS 
adopt one to two of the NQF-endorsed CDC/NHSN outpatient surgical 
procedures initially and they encouraged the inclusion of more HAI 
measures in the Hospital OQR Program in the future. A commenter 
indicated that proposal of this measure aligns with The Joint 
Commission's National Patient Safety Goals.
    Response: We thank the commenters for their support and 
encouragement for HAI measures. To advance the goals of the HHS Action 
Plan to Reduce HAIs in healthcare facilities, we will strive to include 
more HAI measures in the Hospital OQR Program as appropriate in the 
future. As explained above, we are not finalizing our proposal to adopt 
the NHSN HAI surgical site infection measure at this time. We intend to 
propose a surgical site infection measure at such time as a set of 
procedures more suitable for the outpatient setting is identified.
    Comment: A commenter was skeptical about the CDC's system 
capability to handle the influx of NHSN measure data from the Hospital 
OQR and Hospital IQR Programs, as well as the quality reporting 
programs for ASCs, LTCHs and Inpatient Rehabilitation Facilities. A 
commenter noted that CDC is still conducting pilot testing of vendor 
capability to electronically transfer data.
    Response: In preparation for the upcoming influx of data, CDC is 
adding capacity, both personnel and technical infrastructure, to 
support the additional use of NHSN. CDC is confident that these 
upgrades will enable the system to successfully accept data that is 
reported under our quality programs.
    Comment: A commenter stated that some HOPDs could have high 
surgical site infection rates because they have adopted more 
comprehensive and sophisticated surveillance systems.
    Response: Surveillance efforts may initially result in an increased 
number of infections being detected that previously may have gone 
undetected for all HOPDS's participating in the program, because they 
are now required to submit data for this measure. However, accurate 
measurement is necessary in order to assess meaningful improvements in 
outcomes. Accurate measurement of surgical site infections is dependent 
upon standardized data collection protocols for such things as post-
procedure follow up and data validation programs that are consistent 
with already existing post-procedure protocols in HOPDs or that can be 
incorporated into those protocols where they need to be introduced. 
With initiation of this measure, all facilities will be submitting the 
same type of data using a standardized collection protocol, and 
therefore more comprehensive and sophisticated surveillance systems 
would not necessarily equate to a greater number of surgical site 
infections. In many ways those facilities with comprehensive and 
sophisticated surveillance systems may be at an advantage, relative to 
those without sophisticated surveillance systems, in the identification 
of surgical site infections earlier on.
    Comment: A commenter noted that CDC is currently collaborating with 
surgical associations to develop and harmonize a more robust surgical 
site infection measure that would be consistent with the approaches and 
expertise of both organizations. Therefore, the commenter urged 
postponing the surgical site infection measure until the harmonization 
process is complete.
    Response: The commenter is correct in that the CDC is currently 
working with the American College of Surgeons (ACS) to develop a 
harmonized surgical site infection measure. When a measure that is 
better suited for the HOPD setting is fully developed, we will re-
propose the measure. As previously indicated, CMS is not finalizing the 
surgical site infection measure for HOPDs at this time.
    After consideration of the public comments we received, we are not 
finalizing the surgical site infection measure that we proposed to 
adopt for Hospital OQR Program. We intend to re-propose the surgical 
site infection measure though future rulemaking once measurement and 
operational issues for HOPDs are resolved.
b. 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. In the CY 2012 OPPS/ASC proposed 
rule (76 FR 42317 through 42319), we proposed 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 in the proposed rule we solicited comments on using EHR 
for data collection in the future. In addition, in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42319 through 42320), we proposed to adopt a sixth 
new chart-abstracted measure, Cardiac Rehabilitation Patient Referral 
from an Outpatient Setting (NQF 0643), for the CY 2014 payment 
determination.

 Five Diabetes Care Measures

    For detailed descriptions of the five diabetes care measures we 
proposed to

[[Page 74462]]

adopt for the Hospital OQR Program, please refer to the CY 2012 OPPS/
ASC proposed rule (76 FR 42317 through 42319).
    Comment: A few commenters supported the addition of the proposed 
chart-abstracted measures for the CY 2014 payment determination.
    Response: We thank the commenters for their support of these 
measures. We believe they will help assess care provided to patients 
seen in hospital outpatient clinics for management of chronic 
conditions.
    Comment: Many commenters noted that the proposed addition of six 
chart-abstracted measures in the Hospital OQR Program for the CY 2014 
payment determination does not appear to be consistent with CMS' goal 
to reduce burden for providers. One commenter suggested that CMS 
provide per case abstraction time burden in the proposal. Commenters 
strongly recommended that no new chart-abstracted measures should be 
introduced while providers are in transition to ICD-10. Many commenters 
were very concerned about the burden from the proposed addition of 
chart-abstracted measures, in terms of staff training, coordination of 
data submission, data quality checks, and staff resources. Commenters 
recommended delaying the implementation of the proposed chart-
abstracted measures to the CY 2015 payment determination as the target 
date. Other commenters suggested that we delay the implementation for 
these chart-abstracted measures until NQF finishes retooling and 
testing the related specifications, and EHR technology can facilitate 
electronic data transmission.
    Response: We are aware of the burden that HOPDs would face if we 
finalized all of the proposed chart-abstracted measures, as well as the 
challenges that providers may face as they adopt ICD-10. Based upon 
consideration of the public comments we received regarding this burden 
and the need to further specify these diabetes care measures for the 
hospital outpatient setting, we have decided not to finalize the 5 
proposed diabetes care measures at this time. We intend to further 
refine the measures for use in the hospital outpatient setting and re-
propose these measures at a future date when the denominators and 
numerators are more refined for the HOPD setting and they would be less 
burdensome for HOPDs to implement.
    Comment: Many commenters strongly supported the diabetes care 
measure set and believed it would improve quality of care for diabetic 
patients with co-morbidities. However, these commenters were very 
concerned that data collection may be overwhelming without a clear 
definition of the target patient population. Commenters asserted that 
CMS needs to provide more precise specifications to identify the 
appropriate patient population inclusions and exclusions for these 
measures. The commenters explained that many patients that visited 
hospital outpatient departments do so to receive diagnostic reports, 
lab work, and treatments ordered by their primary care physicians. 
Therefore, these commenters believed that hospitals that do not have 
diabetes clinics should be held accountable for outpatients' diabetes 
lab work ordered by primary care physicians practice outside the 
hospital outpatient setting. Some commenters opposed the diabetes care 
measure set and believed they would be better suited for the PQRS 
Program where patients are being followed on a long-term basis whereas 
much of the care in the HOPD setting is episodic or even fragmented. 
One commenter recommended that CMS use data being submitted by HOPDs to 
diabetes registries instead of collecting data.
    Response: Diabetes is prevalent in the Medicare population, and 
many patients with diabetes receive ongoing evaluation management 
services in hospital outpatient department clinics. These diabetes 
measures align with measures which are also currently in use in the 
PQRS and HITECH EHR Incentive Program. We also believe that both the 
facility and the affiliated physician(s) play a role in ensuring that 
their patients received quality and coordinated care. We thank the 
commenter for the suggestion of using registries. Based upon 
consideration of the public comment regarding the burden and the need 
to further specify these measures for the hospital outpatient setting, 
we have decided not to finalize these 5 diabetes care measures at this 
time.
    Comment: A few commenters provided suggestions to modify the 
diabetes care measure specifications to: (1) Limit the denominator 
population to capture only primary care provider-based clinics that are 
under the OPPS system; (2) incorporate electronic lab data; (3) 
evaluate the appropriateness of using CPT-category II codes (not 
currently used in OPPS billing) or a corresponding algorithm to convey 
quality data codes; (4) use NPI specialty numbers to track associated 
clinics responsible for the diabetes care measures; and (5) include at 
least a minimum number of visits per patient before a patient would be 
included in the denominator.
    Response: We thank the commenters for the valuable suggestions and 
will take them into consideration in refinement of the measures for the 
hospital outpatient setting.
    After consideration of the public comment regarding burden and the 
need to further specify these measures for the hospital outpatient 
setting, we have decided not to finalize these 5 diabetes care measures 
at this time. We intend to further refine the measures for use in the 
hospital outpatient setting and re-propose these measures at a future 
date.
Cardiac Rehabilitation Measure: Patient Referral From an Outpatient 
Setting (NQF 0643)
    Cardiac rehabilitation improves the quality of life, reduces 
modifiable cardiovascular risk factors, enhances adherence to 
preventable medications, and lowers morbidity and mortality.\2\ Despite 
these benefits, cardiac rehabilitation is significantly underused 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.\3\ 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.\4\ Evidence from registries 
which include a cardiac rehabilitation performance measure indicated 
that only about 18 percent of eligible patients were referred to 
cardiac rehabilitation.\5\ 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.
---------------------------------------------------------------------------

    \2\ Wenger, N.K.: Current status of cardiac rehabilitation. J. 
Am Coll Cardiol 2008; 51:1619-1631.
    \3\ 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.
    \4\ 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.
    \5\ 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 56(1) 8-14).
---------------------------------------------------------------------------

    In May 2010, the NQF endorsed two cardiac rehabilitation referral 
performance measures as part of the call

[[Page 74463]]

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 proposed 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 proposed 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.
    In the proposed rule we invited public comment on this proposed 
measure.
    Comment: Many commenters were very supportive of the cardiac 
rehabilitation referral measure which they believed would encourage 
hospitals to take responsibility for patient care beyond the 
cardiovascular interventions. Commenters stated that facilities with 
electronic patient management systems would generate more physician 
referrals to cardiac rehabilitation. A commenter recommended that the 
measure should be included in the Hospital IQR Program as well so that 
the continuity of care for cardiovascular events can be better 
enhanced. A commenter alerted CMS that some registries already 
integrate both the inpatient and outpatient cardiac referral measures 
in their systems to collect data.
    Response: We thank the commenters for the support. We agree that a 
similar measure in the hospital inpatient setting would be beneficial 
from a continuity of care perspective and we thank the commenter for 
the suggestion which we will consider in future Hospital IQR Program 
rulemaking.
    Comment: Some commenters did not support this measure for various 
reasons. A commenter did not see the reason for hospitals to report 
this measure because presumably, the cardiologist in the cardiac clinic 
would be reporting this measure. Furthermore, the commenter stated the 
calculation of the percentage of patients evaluated in an outpatient 
setting who in the previous 12 months experienced a major cardiac 
event, such as heart attack, and received treatment for the event in an 
outpatient setting would be very burdensome. The commenter believed 
that only highly integrated care system with well-structured 
coordination like Accountable Care Organizations (ACOs) or 
comprehensive medical homes have the capability to compile the data 
needed for this measure.
    Response: We understand that a cardiologist, who works in a 
cardiology clinic for a hospital outpatient department, may report 
cardiac rehabilitation referral to other reporting programs. However, 
we continue to believe that the measure is valuable because it 
encourages HOPDs to coordinate the care that their patients receive. We 
want to clarify that Cardiac Rehabilitation: Patient Referral From an 
Outpatient Setting (NQF 0643) measures the percentage of 
patients evaluated in an outpatient setting who, in the previous 12 
months, experienced a qualifying cardiovascular event (which is defined 
in the NQF-endorsed measure specifications). Hospital outpatient 
departments are not required under the measure specifications to track 
whether these patients were actually following the qualifying 
cardiovascular event in the last 12 months. The measure focuses on the 
process of referring a patient to a cardiac rehabilitation or secondary 
prevention program. The NQF measure specification for this measure 
available at the link above includes the definition of a referral as 
``an official communication between the healthcare provider and the 
patient to recommend and carry out a referral order to an early 
outpatient cardiac rehabilitation program.'' This includes the 
provision of all necessary information to the patient that would allow 
the patient to enroll in an early outpatient cardiac rehabilitation 
program. This also includes written or electronic communication between 
the healthcare provider or healthcare system and the cardiac 
rehabilitation program that includes the patient's enrollment 
information for the program.
    Comment: A commenter believed that this measure would be very 
challenging and burdensome for a safety net hospital, because such a 
hospital usually does not have an affiliation with a cardiac 
rehabilitation facility, to collect patient data, since its patients do 
not visit the hospital on a regular basis. Another commenter viewed 
this measure as merely reporting whether a referral was made without 
regard to whether the patient ultimately could access or actually 
received cardiac rehabilitation services. Therefore, the commenter did 
not see the tie of this measure to quality improvement.
    Response: We recognize that this measure does not focus on whether 
the patient actually enrolls in a cardiac rehabilitation or secondary 
prevention program. The measure focuses on the process of referring a 
patient to a cardiac rehabilitation or secondary prevention program. We 
believe that care coordination processes such as this are an indicator 
of high quality of care delivered to HOPD patients by hospitals 
including safety net hospitals.
    Comment: A commenter urged delaying implementation of this measure 
until it is e-specified and can be reported via EHRs.
    Response: We do not believe we should delay the implementation of 
this measure given its beneficial impact on

[[Page 74464]]

patient care. We thank the commenter for the input for e-measure 
specification and we will take this into consideration in our e-measure 
development.
    After consideration of the public comments we received, we are 
finalizing the chart-abstracted Cardiac Rehabilitation Measure: Cardiac 
Rehabilitation Patient Referral from an Outpatient Setting measure for 
CY 2014 payment determination. The data collection requirements for 
this measure are detailed in the ``Form, Manner, and Timing'' section 
of this final rule with comment period.

c. New Structural Measures

    In the CY 2012 OPPS/ASC proposed rule (76 FR 42320 through 42323), 
for the CY 2014 payment determination, we proposed 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) 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 \6\. 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.\7\
---------------------------------------------------------------------------

    \6\ 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.
    \7\ 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.\8\ A safe surgery checklist would also reduce the 
potential for human error, which we believe would increase the safety 
of the surgical environment.
---------------------------------------------------------------------------

    \8\ 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:
[GRAPHIC] [TIFF OMITTED] TR30NO11.126

    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/

[[Page 74465]]

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, TJC, 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,\9\ 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.10 11 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 TJC included safe 
surgery checklist practices among those to be used to achieve National 
Patient Safety Goals (NPSGs) adopted for 2011 for surgeries performed 
in ambulatory settings and hospitals.
---------------------------------------------------------------------------

    \9\ 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.
    \10\ 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.
    \11\ Birkmeyer, JD (2010) ``Strategies for Improving Surgical 
Quality--Checklists and Beyond.'' NEJM. 363: 1963-1965.
---------------------------------------------------------------------------

    For the CY 2014 payment determination, we proposed 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. In the 
proposed rule we invited public comments on our proposal to add this 
new structural measure to the CY 2014 Hospital OQR Program measure set.
    Comment: Many commenters supported the measure and were pleased 
that CMS cited the WHO's Surgical Safety Checklist as a reference. A 
commenter recommended incorporating the WHO's Surgical Safety Checklist 
as an Appendix in the Specifications Manual. A few commenters commended 
CMS' efforts to align the Safe Surgery Checklist measure in both 
hospital outpatient departments and ASCs to ensure quality of care 
across settings. Some commenters suggested that CMS adopt the measure 
in the hospital inpatient setting.
    Some commenters appreciated the flexibility provided under the 
measure that would allow facilities to develop a safe surgery checklist 
based on their own needs and populations served. A commenter noted that 
a mandated specific checklist may interfere with the ability to rapidly 
implement new evidence-based processes. A commenter requested 
finalization of a generic checklist(s) that is acceptable to have data 
elements contained in more than one form (for example, intra-operative 
record, anesthesia record, etc.) as appropriate.
    Response: We appreciate the support for the measure designed to 
assess the adoption of a best practice for surgical care to reduce 
preventable medical errors and mortality while giving HOPDs the 
flexibility to develop their own checklist that meets their needs. We 
chose not to finalize any specific checklist but will consider 
providing links to specific examples of Surgical Safety Checklists as 
an Appendix in the Specifications Manual as recommended by the 
commenter. We have proposed the same measure for ASC Quality Reporting 
Program and will consider its inclusion in the Hospital IQR Program, as 
suggested by the commenters, in the future.
    Comment: Some commenters recommended that after implementation, CMS 
should evaluate the appropriate implementation and utilization of the 
use of the safe surgery checklist by providers as indicated in this 
measure. Commenters were concerned that the use of a surgical checklist 
may result in a documentation task which does not result in the 
improved delivery of care for which the checklist is intended.
    Response: We agree with the commenters that the use of a safe 
surgery checklist as indicated in this measure should be implemented 
appropriately to achieve improved delivery rather than just create 
additional documentation. The use of a checklist is intended to help 
prevent serious medical errors involving surgical care such as 
anesthesia dosing errors and allergic reactions, wrong site surgery, 
wrong procedure or wrong patient surgery, and the retention of foreign 
objects in the body. During our measure maintenance process, we will 
review the improvement potential for this measure, like all the 
measures we adopted for the Hospital OQR Program, for indication of 
best practices, among other review criteria.
    Comment: A commenter suggested that this measure should only apply 
to surgeries performed in an operating room setting because many 
hospital outpatient departments perform procedures (for example, 
prostate biopsy, PEG replacement, endoscopy, etc.) in procedure units 
where safe surgery checklist is not used routinely in procedure units.
    Response: This measure applies to any facility where a surgery or 
other invasive procedures occurs rather than to specific surgical 
procedures performed in a HOPD or individual surgical patients. 
Therefore exclusions of this nature are not needed.
    Comment: A few commenters asserted that the proposal is only a 
concept and

[[Page 74466]]

that it is not fully developed or NQF-endorsed. Additionally, one 
commenter noted that the introduction of this measure would create an 
undue burden on hospitals because Medicare National Coverage 
Determinations already specify no Medicare reimbursement for any 
adverse event from any aspects of a surgery. Furthermore, The Joint 
Commission surveys all accredited institutions for surgery checklists 
as part of its patient safety requirements. A few commenters urged CMS 
to seek NQF endorsement. Another commenter was skeptical that the 
proposed Safe Surgery Checklist attestation could be validated by CMS 
and therefore, does not warrant consideration as a structural measure. 
A commenter viewed that the managing of the processes around surgical 
care is what improves quality of care, not the mere use of a checklist.
    Response: We disagree that this measure is only a concept and not a 
measure because it highlights critical elements that HOPDs could 
include in their checklist to avoid preventable medical errors. We 
believe the Safe Surgery Checklist complements the management of 
surgical care processes and ultimately contributes to better patient 
outcomes by increasing safe surgery practices and by reducing 
preventable human error, and minimizing complications and post-surgical 
mortality. To that end, we believe it warrants inclusion in the 
Hospital OQR Program. At this time we have not proposed to validate 
this measure.
    We note that even though this measure is not NQF-endorsed, as we 
had indicated in the proposed rule, the measure reflects significant 
consensus among affected parties. As stated in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42321), the adoption of this structural measure 
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, TJC, the National Association for Healthcare Quality 
and the Association of PeriOperative Registered Nurses (AORN). 
Furthermore, consensus for this measure was reflected through broad 
acceptance and the use of measures. 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. Some State agencies, 
State hospital associations, accrediting organizations, and the 
Veterans Health Administration also have endorsed the use of a safe 
surgery checklist as a best practice.
    Although most of the measures we have adopted for the Hospital OQR 
Program are NQF-endorsed and we prefer to select NQF-endorsed measures 
for the Hospital OQR Program whenever possible, we are not required to 
adopt only NQF-endorsed measures for the Hospital OQR Program. We will 
take the comment regarding seeking endorsement of this measure under 
consideration.
    Comment: A commenter supported the proposed Web-based tool to 
submit data as it was perceived as least burdensome. One commenter 
indicted that additional operational details of the Web-based tool 
should be provided, such as specification of the file format for data 
submission, given that the formats submitted to the QualityNet 
warehouse and to Medicare billing (claims data) are different.
    Response: We thank the commenter, and agree that this collection 
method places minimal burden on HOPDs. The Web-based tool will not 
require uploading files to QualityNet, rather it will require entry of 
responses directly into a Web form. Details regarding submission 
deadlines are provided in the ``Form, Manner and Timing'' section of 
the program requirements included in this final rule with comment 
period.
    After consideration of the public comments we received, we are 
finalizing the Safe Surgery Checklist Use measure for the CY 2014 
payment determination. Data collection and submission requirements are 
shown in the ``Form, Manner and Timing'' section of the Hospital OQR 
Program requirements contained in this final rule.

(2) 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.12, 13, 14 
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 
(surgical site infection, Patient Safety Indicators, and Mortality), in 
order to provide more context to consumers choosing a health care 
provider. The current 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.
---------------------------------------------------------------------------

    \12\ Livingston, E.H.; Cao, J ``Procedure Volume as a Predictor 
of Surgical Outcomes''. Edward H. Livingston, Jing Cao JAMA. 
2010;304(1):95-97.
    \13\ 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.
    \14\ 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. Maltezou, H.C., Drancourt, M.: Nosocomial influenza in 
children. Journal of Hospital Infection 2003; 55:83-91.
---------------------------------------------------------------------------

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

[[Page 74467]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.127

    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 proposed 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.
    In the proposed rule we invited public comment on this proposal.
    Comment: A few commenters agreed that surgical volume can be 
associated with quality but recommended that the volume data should 
always be linked to the corresponding surgical procedures and not the 
type of broad procedure categories as proposed. The commenters asserted 
that the measure as proposed without associated information on outcomes 
or patient-reported assessment of care may have the potential to 
mislead patients and Medicare about the care that providers delivered. 
Another commenter requested that CMS provide data that indicate a 
correlation between all-payer data and Medicare-specific data related 
to outpatient procedure volumes. A commenter requested a snapshot of 
how the surgical procedures volume data would be displayed on the 
Hospital Compare Web site.
    Some commenters opposed the inclusion of the hospital outpatient 
volume for selected outpatient surgical procedures measure because of 
concerns regarding the categories and because of concerns regarding CPT 
codes. Some commenters stated that the proposed procedures are broad 
based categories. The commenter stated that without an associated list 
of individual CPT codes or families of CPT codes for these proposed 
surgical procedures, it would be difficult to differentiate volume 
variations for different procedures within the broad surgical procedure 
categories. Therefore, the broad-based surgical procedure volume 
information may be misinterpreted as overall indicator of quality for 
these particular services. The commenters urged CMS to provide the 
measure specifications for the public to review and comment prior to 
implementation.
    Response: We appreciate the commenters' input on selected surgical 
categories and CPT codes. As discussed in the proposed rule, our goal 
for this measure is to provide consumers with useful information on 
surgical procedure volume in order to assist patients in making 
informed healthcare decisions. Based on the public comment received 
suggesting that the eight broad categories will not be meaningful to 
consumers, we will further identify groupings of key procedure types 
within the 8 broad categories so that they will be more meaningful to 
consumers. We will include these refinements in the specifications for 
the measure that will be in an upcoming release of the Hospital OQR 
Specifications Manual.
    Comment: Some commenters recommended less burdensome alternatives 
to implement this measure as follows: (1) Implement it as a claims-
based measure using the HCPCS codes or CPT codes for hospitals to count 
numerators and denominators; (2) place it in the HITECH EHR Incentive 
Program as one of the meaningful use objectives; (3) reduce the number 
of categories; (4) expand the submission window beyond the proposed 45-
day

[[Page 74468]]

timeframe; (5) only collect information on the most frequently 
performed outpatient surgeries for all patients and for Medicare 
patients rather than the collection of surgical volume by body system 
category; or (6) use a structural measure to assess whether hospitals 
participate in a surgical outcomes registry to build the evidence base 
in this area (that is, linking high volume to better outcomes).
    Response: We thank the commenters for these suggestions. This 
information will be submitted in aggregate counts once annually and the 
counts can be generated by the HOPD using administrative data that is 
already being collected by the HOPD in order to obtain payment for the 
services they render. As a result, we do not believe it would be overly 
burdensome for hospitals to submit this information based on all-
patient data. Currently, we use a standard 45-day collection window for 
all of the structural measures. As previously indicated based on public 
comment, we will further group procedure types within the 8 broad 
categories so that they are more meaningful to consumers. We will 
include these refinements in the specifications for the measure that 
will be in an upcoming release of the Hospital OQR Specifications 
Manual.
    Comment: A commenter stated that it is imperative that the volume 
of procedures be compared to the number of physicians performing such 
procedures at the facility level. The commenter stated the quality 
implication of a hospital reporting 1,000 procedures in a category with 
50 physicians is very different from a hospital reporting 1,000 
procedures with 500 physicians.
    Response: We do not have information about the volume of physicians 
performing the procedures within each facility and did not propose to 
collect such information from facilities in this year's rule. We will 
consider this comment, as well as the feasibility and burden of HOPDs 
reporting this information, for future rules.
    Comment: Some commenters did not support this measure based on the 
assertion that the measure is not NQF-endorsed, not approved by HQA, 
not evidence-based, not a quality measure, and does not meet The Joint 
Commission definition of an accountability measure. Furthermore, the 
commenters stated that the data are already available on many State-
supported or hospital-specific Web sites, and registries. In addition, 
some commenters believed that data collection for this measure would 
create tremendous burden if the population include all patients and not 
just Medicare patients.
    A commenter contended that the proposed measure is only a crude 
measurement tool to monitor surgical volume. A few commenters noted 
that there is a lack of evidence linking volume of surgical procedure 
performed in HOPDs or ASCs to quality, notwithstanding the non-HOPD- or 
ASC-specific literature linking volume of specific high-risk procedures 
to outcomes cited by CMS.
    Response: We do not agree with the comments regarding the 
suitability of this measure. As we indicated in the proposed rule, we 
believe that this measure reflects significant consensus among affected 
parties because of evidence in the peer-reviewed literature and because 
this type of information is frequently displayed on consumer-oriented 
Web sites that feature quality information.
    We do not believe that all-patient volume is burdensome to report, 
as hospitals could use data to generate the aggregate counts that they 
would submit once annually. In the Specifications Manual, we will 
include further reporting instructions if hospitals do not perform 
certain procedures.
    We disagree with the concern expressed regarding the inpatient 
focus of the literature we cited. We believe that this literature is 
also relevant to HOPDs. We note that the number of Medicare-certified 
HOPDs has increased dramatically over the years. In addition, an 
increasing number of procedures that were formerly performed primarily 
in the inpatient setting are now being performed in outpatient settings 
such as HOPDs and ASCs. We believe that this growth in HOPDs and 
procedures performed in HOPDs underscores the importance of providing a 
context for beneficiaries to assess the number of selected procedures 
performed annually by any given HOPD.
    Comment: Several commenters asked CMS to identify which procedures 
are considered high risk in HOPDs and ASCs. According to the 
commenters, high-risk procedures are generally not performed in HOPDs 
or ASCs.
    Response: We disagree with this comment. High risk procedures are 
performed in HOPD facilities. For example, in 2010 there were more than 
25,000 arterial transposition procedures and more than 31,000 
endovascular repairs of the aorta and its branches performed in HOPDs. 
Further, there are risks associated with all surgical procedures, and 
we believe that the more often a surgery is performed in a HOPD, the 
greater the incentive for the HOPD to implement standardized practices 
that can minimize these risks. At this time, a greater number and types 
of surgery are being performed in HOPDs and other outpatient settings. 
By collecting volume of procedures, we will be able to provide 
information about whether facilities perform a specific procedure type, 
and how many per year. This information is crucial for consumers trying 
to make informed decisions about where to have surgery performed. Based 
on commenters' suggestions, we will further define key procedure types 
within each of the 8 broad categories in the Hospital OQR 
Specifications Manual so that the information will be more useful to 
consumers.
    After consideration of the public comments we received, we are 
finalizing the Hospital Outpatient Volume Data on Selected Outpatient 
Surgical Procedures measure for the Hospital OQR Program CY 2014 
payment determination. In response to concerns regarding the utility of 
the 8 broadly specified categories to consumers, we will further 
identify key procedure types within each of the 8 broad categories for 
hospitals to report.
    In summary, in addition to the 23 measures we previously adopted 
for the CY 2014 payment determination in the CY 2011 OPPS/ASC final 
rule with comment period, we are finalizing 1 new chart-abstracted 
measure and 2 new structural measures. The complete measure set (26 
measures) 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 set out in the table below.
BILLING CODE 4120-01-P

[[Page 74469]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.128


[[Page 74470]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.129

BILLING CODE 4120-01-C
3. Hospital OQR Program Measures for the CY 2015 Payment Determination
a. 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, in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42323), we proposed that all of the measures we 
finalize for the CY 2014 payment determination continue to be used for 
the CY 2015 payment determination. We invited public comment on this 
proposal.
    We did not receive any comments objecting to the retention of CY 
2014 Hospital OQR Measures for the CY 2015 payment determination. 
Therefore, we are finalizing the retention of the 26 measures finalized 
for the CY 2014 payment determination for the CY 2015 payment 
determination.
b. Proposed NHSN HAI Measure for the CY 2015 Payment Determination
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42323 through 42324), 
for the measure set to be used for the CY 2015 payment determination, 
we proposed 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.15 16 17
---------------------------------------------------------------------------

    \15\ Maltezou, H.C., Drancourt, M.: Nosocomial influenza in 
children. Journal of Hospital Infection 2003; 55:83-91.
    \16\ Hurley, J.C., Flockhart, S.: An influenza outbreak in a 
regional residential facility. Journal of Infection Prevention 2010; 
11:58-61.
    \17\ 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.\18\ 
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.19 20 21 Such

[[Page 74471]]

findings have led some to call for mandatory influenza vaccination of 
HCP.22 23 24 25 26
---------------------------------------------------------------------------

    \18\ 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.
    \19\ 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.
    \20\ 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.
    \21\ 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.
    \22\ 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.
    \23\ 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.
    \24\ 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.pdf, http://www.apic.org/Content/NavigationMenu/PracticeGuidance/Topics/Influenza/APIC_Position_Paper_Influenza_11_7_08final_revised.pdf.
    \25\ 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.
    \26\ 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/.
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    Until recently, vaccination coverage among HCP has been well below 
the national Healthy People 2010 target of 60 percent,\27\ but 
preliminary data suggest 62 percent of HCP reported receiving seasonal 
influenza vaccine in 2009-2010.\28\ Only 37 percent reported receiving 
the 2009 pandemic A/H1N1 vaccine.\29\
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    \27\ 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.
    \28\ 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.
    \29\ 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.\30\ 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.
---------------------------------------------------------------------------

    \30\ Adapted from: Pearson M.L., Bridges C.B., Harper S.A.: 
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.
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    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.\31\
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    \31\ 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 the NHSN. In September 2009, CDC 
released the Healthcare Personnel Safety (HPS) Component of the 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.\32\ 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.
---------------------------------------------------------------------------

    \32\ Available at: http://www.cdc.gov/nhsn/hps.htmlhttp://www.cdc.gov/nhsn/hps.html.
---------------------------------------------------------------------------

    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 proposed 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 sections XIV.C.2.a. of the proposed rule and this final rule with 
comment period. We proposed that

[[Page 74472]]

hospital outpatient departments use the NHSN infrastructure and 
protocol to report the measure for Hospital OQR purposes. We invited 
public comment on our proposal to adopt this HAI measure into the 
Hospital OQR Program for the CY 2015 payment determination.
    Comment: Many commenters applauded the reporting of the influenza 
vaccination coverage among healthcare personnel measure in recognition 
of its importance in preventing transmission of influenza in hospital 
and ASC settings. However, commenters were concerned that the 
associated data collection is too labor-intensive, since the NQF 
specifications for denominator and numerator involve both employees and 
non-employees. To overcome the data collection challenges, the 
commenters recommended CMS/CDC testing of the NHSN-HCP module, which is 
being modified to accept aggregate data instead of individual level 
data, in inpatient settings prior to implementation in the outpatient 
setting. Commenters noted that the measure should not be finalized 
until NQF has finished its review on the proposed modifications for the 
denominator submitted by CDC. Furthermore, commenters remarked that 
delaying the measure to CY 2016 would allow HOPDs to gain experience 
with the revised NHSN module as well as synchronize the implementation 
date of this measure with that of the ASC Quality Reporting Program.
    Response: We thank the commenters for their support of the measure 
and recognize its significance in preventing influenza transmission. 
CDC has submitted a revised measure proposal to NQF based on results of 
field testing, in its efforts to streamline data collection. The 
revised measure proposal reduces denominator data collection to 
employee healthcare personnel, defined as staff on facility payroll, 
and two categories of non-employee healthcare personnel: (1) Licensed 
independent practitioners, that is, physicians, advance practice 
nurses, and physician assistants, and (2) student trainees and adult 
volunteers. CDC has indicated that NQF's final review of the NHSN-HCP 
module and an endorsement decision are pending. Therefore, we are not 
finalizing this measure for CY 2015 payment determination in this 
rulemaking, but intend to propose an influenza vaccination measure for 
the CY 2016 payment determination.
    Comment: A few commenters stated that the influenza vaccination 
coverage among healthcare personnel measure lacks the supporting 
evidence that links patients contracting influenza to ambulatory 
procedures.
    Response: Several randomized clinical trials in healthy working-age 
adults have shown that influenza vaccination reduces infection, 
illness, antibiotic use, medical visits, and lost work 
days.33 34 Influenza vaccination also reduces influenza 
virus shedding and reduces transmission of influenza to others through 
prevention of infection. In addition, studies show that healthcare 
personnel continue to work while ill, including when ill with 
influenza.\35\ Therefore, preventing influenza illness in healthcare 
personnel is important to reduce patient exposures to influenza-
infected persons in the healthcare setting.
---------------------------------------------------------------------------

    \33\ Bridges CB, Thompson WW, Meltzer MI, et al. Effectiveness 
and cost-benefit of influenza vaccination of healthy working adults: 
a randomized controlled trial. JAMA 2000; 284: 1655-63. (adults 
employed at a manufacturing plant).
    \34\ Bridges CB, Thompson WW, Meltzer MI, et al. Effectiveness 
and cost-benefit of influenza vaccination of healthy working adults: 
A randomized controlled trial. JAMA 2000; 284: 1655-63. (adults 
employed at a manufacturing plant).
    \35\ Wilde JA, McMillan JA, Serwint J, Butta J, O'Riordan MA, 
Steinhoff MC. Effectiveness of influenza vaccine in health care 
professionals. A randomized trial. JAMA 1999;281:908-13.
---------------------------------------------------------------------------

    Although no studies have been done in the outpatient setting to 
assess reductions in illness among patients due to healthcare personnel 
vaccination, studies have been done in hospitals and nursing homes 
demonstrating the risk of healthcare-acquired influenza in these 
settings. One study in a hospital and three studies in long-term care 
facilities have demonstrated reductions in patient illness and 
mortality with healthcare personnel influenza vaccination. The evidence 
that influenza vaccination of healthcare personnel reduces disease in 
hospital and nursing home residents should be generalizable to 
outpatient settings based on knowledge of the benefits of influenza 
vaccination in working-age adults and an understanding of influenza 
transmission.
    Comment: A commenter was concerned that hospitals may be unfairly 
penalized when there is a shortage of flu vaccines.
    Response: We are not finalizing this measure at this time, but we 
intend to re-propose this measure for a future payment determination in 
order to allow more time for CDC to address infrastructure capacity to 
accept the data from an increasing number of provider types. The 
purpose of the measure is to track vaccination rates; therefore, in the 
event of a vaccination shortage, it is still important to monitor and 
track this measure. However, if such a measure is adopted and a large-
scale vaccination shortage occurs, we will consider temporarily 
suspending display of the measure on Hospital Compare.
    Comment: A commenter was concerned about potential duplicative 
efforts since some States already mandate vaccination of healthcare 
workers and public reporting of healthcare vaccination rates.
    Response: We were informed by CDC that in the event that the 
measure is adopted in the Hospital OQR Program, it will strive to 
standardize the reportable quality measure at State and federal levels. 
Standardizing reportable healthcare quality measurements is a priority 
because that reduces reporting burden while preserving the 
opportunities to use those data for different purposes at the State and 
federal levels.
    Comment: A commenter recommended the influenza vaccination measure 
for healthcare personnel be inclusive of all employees of the facility 
and not split out as inpatient and outpatient settings. Another 
commenter stated that the measure should allow healthcare personnel to 
choose the vaccination type or brand most appropriate for them.
    Response: The measure does not specify which vaccination types or 
brand the healthcare personnel should receive. As stated previously, we 
are not finalizing this measure for the Hospital OQR Program at this 
time.
    After consideration of the public comments we received, we are not 
finalizing the HCP Influenza Vaccination measure for CY 2015 payment 
determination in this final rule with comment period, but intend to 
propose a HCP Influenza Vaccination measure for the CY 2016 payment 
determination once measure refinements and operational issues have been 
addressed.
    The complete measure set for the Hospital OQR Program CY 2015 
payment determination is set out in the table below.
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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. In the CY 2012 OPPS/ASC proposed rule, we proposed to add measures 
to the CY 2014 and CY 2015 measure sets addressing care coordination, 
patient safety, volume, and prevention of influenza.
    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 set 
out in the CY 2012 OPPS/ASC proposed rule that we are considering for 
future Hospital OQR payment determinations (beginning with CY 2015) for 
which we solicited public comment. In particular, we sought 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. Therefore, in the proposed 
rule, we sought comment on the potential submission of such measures by 
HOPDs via quality codes submitted on claims in the future. We also 
sought comment on the inclusion of measures of Anesthesia-related 
Complications in the Hospital OQR measurement set.
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    We invited 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 sought suggestions and 
rationales to support the adoption of measures and topics for the 
Hospital OQR Program which do not appear in the table above.
    We received many comments on measures and measurement topics 
considered for the future. We describe them as follows:

[cir] Cancer care

    Comment A commenter noted that the cancer care measures listed are 
duplicative measures of those used in the PQRS. A commenter did not 
support the Needle Biopsy to Establish

[[Page 74477]]

Diagnosis of Cancer Precedes Surgical Excision/Resection measure 
because many cancers do not have needle biopsy as an option for 
diagnosis.
    Response: We thank the commenters for their views and will consider 
them during future measure selection activity.

[cir] Heart failure

    Comment: A few commenters supported the heart failure measures on 
the list. Two commenters noted the Overuse of echocardiography, Left 
ventricular ejection fraction assessment, and the Patients with left 
ventricular systolic dysfunction on combination medical therapy have 
inherent fundamental incompatibilities, given that the first measure 
would likely prohibit the use of echocardiography while the latter two 
measures would presumably encourage the use of echocardiography. The 
commenters were specifically concerned that the first measure may have 
unintended consequences of deterring physicians from ordering 
echocardiography to identify potential heart failure patients.
    Response: We thank the commenters for the valuable suggestions and 
will take them into consideration in our future measure review and 
selection activity.

[cir] Patient experience-of-care

    Comment: Many commenters strongly supported the inclusion of 
patient experience of care measures listed.
    Response: We thank the commenters for this input and will consider 
them during future measure selection activity.

[cir] Anesthesia related complication measures

    Comment One commenter requested that CMS collaborate with 
anesthesiologists and CRNAs to revise the list of anesthesia-related 
complications to codify the definitions of anesthesia related 
complications.
    Response: We thank the commenter for this input and will consider 
it during future measure selection activity.

[cir] Additional measure topics

    Comment A commenter believed the Medication reconciliation measure 
is inappropriate for ED setting since emergency room patients may not 
have the ability to accurately report current medications taken and the 
data collection process may cause a delay in patient care. A commenter 
was concerned that the Post discharge follow-up and the post discharge 
ED visit within 72 hours measure may lead to unintended consequences if 
not constructed prudently, given there are many variables affecting a 
patient's return to an ED. A commenter supported the listed Breast 
cancer detection rate measure for future consideration.
    Response: We thank the commenters for these suggestions and 
support, and will take them into consideration during our future 
measure selection activity.

E. 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 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 final rule with comment period, 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 is an input into the OPPS 
conversion factor, which is used to calculate OPPS payment rates. To 
implement the requirement to reduce the OPD fee schedule increase 
factor 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

[[Page 74478]]

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 
final rule with comment period.
2. Reporting Ratio Application and Associated Adjustment Policy for CY 
2012
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42327 through 42328), 
we proposed to continue our established policy of applying the 
reduction of the OPD fee schedule increase factor through the use of a 
reporting ratio for those hospitals that fail to meet the Hospital OQR 
Program requirements for the full CY 2012 annual payment update factor. 
For the CY 2012 OPPS, the proposed reporting ratio was 0.980, 
calculated by dividing the proposed reduced conversion factor of 
$68.052 by the proposed full conversion factor of $69.420. The final CY 
2012 OPPS reporting ratio is 0.980, calculated by dividing the reduced 
conversion factor of $68.616 by the full conversion factor of $70.016. 
We proposed to continue to apply the reporting ratio to all services 
calculated using the OPPS conversion factor. For the CY 2012 OPPS, we 
proposed to apply the reporting ratio, when applicable, to all HCPCS 
codes to which we have assigned status indicators ``P,'' ``Q1,'' 
``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' and ``X'' (other 
than new technology APCs to which we have assigned status indicators 
``S'' and ``T''). We proposed to continue to exclude services paid 
under New Technology APCs. We proposed to continue to apply the 
reporting ratio to the national unadjusted payment rates and the 
minimum unadjusted and national unadjusted copayment rates of all 
applicable services for those hospitals that fail to meet the Hospital 
OQR Program reporting requirements. We also proposed to continue to 
apply all other applicable standard adjustments to the OPPS national 
unadjusted payment rates for hospitals that fail to meet the 
requirements of the Hospital OQR Program. Similarly, we proposed to 
continue to calculate OPPS outlier eligibility and outlier payment 
based on the reduced payment rates for those hospitals that fail to 
meet the reporting requirements.
    We invited public comments on these proposals. We did not receive 
any public comments on our CY 2012 proposal to apply the HOP QDRP 
reduction in the manner described in the paragraph above and, 
therefore, are finalizing our proposal, without modification.
    Therefore, for the CY 2012 OPPS, we are applying a reporting ratio 
of 0.980 to the national unadjusted payments, minimum unadjusted 
copayments, and national unadjusted copayments for all applicable 
services for those hospitals failing to meet the HOP QDRP reporting 
requirements. This reporting ratio applies to HCPCS codes assigned 
status indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' 
``U,'' ``V,'' or ``X,'' excluding services paid under New Technology 
APCs. All other applicable standard adjustments to the OPPS national 
unadjusted payment rates for hospitals that fail to meet the 
requirements of the HOP QDRP will continue to apply. We continue to 
calculate OPPS outlier eligibility and outlier payment based on the 
reduced rates for those hospitals that fail to meet the reporting 
requirements.

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 600647), 
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 proposed to retain these 
procedures with one modification. In the CY 2012 OPPS/ASC proposed rule 
(76 FR 42328), we proposed to extend these procedures to the submission 
of medical record documentation for purposes of complying with our 
validation

[[Page 74479]]

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, email 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 
emails and notices on the QualityNet Web site.
    In the proposed rule we invited 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.
    Comment: Several commenters supported the proposal to continue the 
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. One commenter noted direct 
experience with medical record documentation destroyed by a recent 
disaster.
    Response: We thank these commenters for supporting our proposal to 
extend our process for granting extraordinary circumstances extensions 
or waivers to the submission of medical record documentation.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification; to continue the existing 
process for granting extraordinary circumstances extensions or waivers, 
to extend this process to the submission of medical record 
documentation for the Hospital OQR Program, and to use this process for 
CY 2012 and subsequent years.

G. 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).
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42328 through 42333), 
with respect to the payment determinations for CY 2013 and subsequent 
years, we proposed 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 proposed 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 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

[[Page 74480]]

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 proposed 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 proposed 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; we 
had experience with reported occurrences as such over the past year. 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 proposed 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 proposed 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 proposed 
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.
    In the proposed rule we invited public comment on these proposed 
Hospital OQR Program administrative requirements for the CY 2013 and 
subsequent years' payment determinations.
    Comment: Some commenters supported requiring hospital outpatient 
departments to report quality data and the 2.0 percent reduction for 
hospitals that do not successfully report quality data to CMS.
    Response: We thank these commenters for supporting hospital 
outpatient quality data reporting under the Hospital OQR Program and 
the use of the 2.0 percentage point reduction for hospitals that do not 
successfully report quality data to CMS.
    Comment: Some commenters supported the proposed administrative 
requirements for the Hospital OQR Program in general.
    Response: We thank these commenters for supporting our proposed 
administrative Hospital OQR Program requirements.
    After consideration of the public comments we received, we are 
finalizing our proposals for Hospital OQR Program administrative 
requirements without modification.
2. Form, Manner, and Timing of Data Submission for CY 2013 and 
Subsequent Years
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42329 through 42332), 
we proposed 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. CY 2013 and CY 2014 Data Submission Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42329 through 42330), 
with respect to the proposed chart-abstracted measures for which 
hospitals would submit data directly to CMS, we proposed 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 
Hospital OQR Program, we proposed 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 CY 
2013 measure set that was finalized in this 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 Hospital OQR Program, we proposed that the

[[Page 74481]]

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 additional 
measures for CY 2014 (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 we are finalizing in this 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 proposed 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 proposed 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 proposed that hospitals must collect Hospital OQR data from 
outpatient hospital encounters to which the required measures apply. In 
previous rulemakings, we have used 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 the Hospital OQR Program, we are 
examining encounters, episodes, or episodes of care and will 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 proposed 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.
    Comment: One commenter requested clarification on data submission 
dates for the chart-abstracted measures OP-16, OP-18 through OP-21, and 
OP-23 due to statements in the CY 2011 OPPS/ASC final rule with comment 
period that data collection for these measures would be due in August 
2012, whereas, in the CY 2012 OPPS/ASC proposed rule, the proposed 
timing for data collection for the CY 2013 payment determination is to 
begin July 1, 2011.
    Response: In the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 72090), we finalized 23 quality measures for the CY 2013 payment 
determination, which included OP-16 through OP-23. We stated in that 
final rule that data submission of the new chart-abstracted measures 
for the CY 2013 payment determination will be due in August 2012. We 
also stated that collection for 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 would begin with January 1, 2012 discharges (75 FR 72083).
    However, in the CY 2012 OPPS/ASC proposed rule, we proposed changes 
to the form and manner for data collection for the chart-abstracted 
measure OP-22: Left Without Being Seen (76 FR 42332). We are finalizing 
this proposal below in section XIV.G.2.g. of this final rule with 
comment period.
    OP-16, OP-18 through OP-21, and OP-23 are chart-abstracted measures 
for which data are submitted directly to CMS. We proposed the form and 
manner for submitting chart-abstracted data for these measures for the 
CY 2013 payment determination in the CY 2012 OPPS/ASC proposed rule (76 
FR 42329 through 42330).
    As discussed above, we have in this final rule with comment period 
finalized our proposal to modify the collection mechanism for OP-22: 
Left Without Being Seen. With respect to the CY 2013 payment 
determination, hospitals must submit data on this measure between July 
1, 2012 and August 15, 2012 with respect to the period January 1, 2011 
through December 31, 2011.
    Comment: One commenter appreciated the discussion related to the 
harmonization of terminology around the use of the terms encounters, 
episodes, and episodes of care as consistent definitions are vital to 
data accuracy.
    Response: We thank this commenter for their appreciation of the 
discussion related to harmonization of this terminology.
    Comment: Some commenters supported the proposed data submission 
requirements for the Hospital OQR Program in general.
    Response: We thank these commenters for their support of our 
proposed data submission requirements.

[[Page 74482]]

    After consideration of the public comments we received, we are 
finalizing our proposals, without modification, regarding CY 2013 and 
CY 2014 data submission requirements for chart-abstracted measure data 
for OP-16, OP-18 through OP-21, and OP-23 submitted directly to CMS. 
Specifically, for the CY 2013 Hospital OQR Program, the applicable 
quarters will be as follows: 3rd quarter CY 2011, 4th quarter CY 2011, 
1st quarter CY 2012, and 2nd quarter CY 2012. Submission deadlines will 
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 to March, 2012) will be on or around August 1, 2012.
b. Eligibility To Voluntarily Sample and 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 proposed 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.
    We did not receive any public comments on our proposal for 
voluntary sampling and data submission exception for low patient volume 
for CY 2013 and subsequent years; therefore, we are finalizing our 
proposal without modification.
c. 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 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42330 through 42331), 
we proposed 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 proposed 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 stated that 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.
    Comment: One commenter was concerned that only 80 percent of 
hospitals are able to submit outpatient quality data meeting 
requirements for case count and sampling minimums aggregate population 
and sample size data. This commenter believed that this should be of 
concern to CMS because the commenter believed that the 20 percent of 
hospitals not meeting the case count or sampling minimum requirements 
are ones that have systematic issues such as ``complex outpatient 
services,'' high volume or services, and/or have some clinics that have 
patients who should have data reported to CMS under the Hospital OQR 
Program, while some other clinics owned by the hospital do not that 
make it difficult for them to accurately determine what minimum number 
of cases or cases sampled are to be submitted to meet program 
requirements.
    Response: The percent of hospitals that show evidence of having 
issues with meeting sampling thresholds is less than 20 percent: more 
precisely, 17.3 percent in the Hospital OQR data

[[Page 74483]]

examined. Over 99 percent of hospitals are voluntarily reporting 
aggregate population and sampling data. However, due to data accuracy 
concerns that may exist for this small set of reporting hospitals, we 
have decided to not finalize this requirement for the CY 2013 payment 
determination.
    After consideration of the public comments we received, we have 
decided to not finalize our proposal to require the reporting of 
population and sample size data and instead will continue our policy of 
accepting the submission of this information on a voluntary basis for 
the CY 2013 payment determination.
d. Claims-Based Measure Data Requirements for the CY 2013 and CY 2014 
Payment Determinations
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42331), for the 
claims-based measures, we proposed 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.
    We did not receive any comments on our proposal regarding the time 
periods for Medicare FFS claims for calculating claims-based measures 
for the CY 2013 and CY 2014 payment determinations; therefore, we are 
finalizing these proposals without modification.
e. Structural Measure Data Requirements for the CY 2013 and CY 2014 
Payment Determinations
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42331), for the CY 
2013 payment determination, we proposed 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 proposed 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 proposed 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.
    Comment: One commenter requested clarification on data submission 
dates for the structural measure OP-17: Tracking Clinical Results 
between Visits, due to statements in the CY 2011 OPPS/ASC final rule 
with comment period that data collection for this measure would start 
January 1, 2012, whereas, in the CY 2012 OPPS/ASC proposed rule, CMS 
proposed that the submission of data for CY 2013 payment determinations 
would begin July 1, 2011.
    Response: In the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 72090), we finalized 23 quality measures for the CY 2013 payment 
determination, which included the structural measure OP-17: Tracking 
Clinical Results between Visits. We stated that hospitals would be 
required to begin submitting data on OP-17 via a Web-based tool on the 
QualityNet Web site in July 2012 for the time period January 1, 2012 
through June 2012.
    In the CY 2012 OPPS/ASC proposed rule, we proposed a modification 
to the timeframe for data collection. We stated that for all of the 
proposed structural measures, including OP-17: Tracking Clinical 
Results between Visits, hospitals would be required to submit data 
between July 1, 2012 and August 15, 2012 with respect to the time 
period of January 1, 2011 to December 31, 2011 (76 FR 42331).
    After consideration of the public comment we received on our 
proposal regarding structural measure data requirements for the CY 2013 
and CY 2014 payment determinations; we are finalizing our proposals, 
with modification. With respect to structural measures for the CY 2013 
payment determination, hospitals will be required to submit data 
between July 1, 2012 and August 15, 2012 with respect to the time 
period from January 1, 2012 to June 30, 2012.
f. Data Submission Deadlines for the NHSN HAI Surgical Site Infection 
Measure for the CY 2014 Payment Determination
    As discussed above, we proposed to adopt a new HAI measure for the 
CY 2014 payment determination: surgical site infection. We proposed 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 proposed 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).
[GRAPHIC] [TIFF OMITTED] TR30NO11.134


[[Page 74484]]


    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 the CY 2014 payment determination, we will 
obtain the hospital-specific calculations generated by the NHSN for the 
Hospital OQR Program.
    Comment: Many commenters stated their belief that data collection 
on NHSN measures by outpatient hospitals should be deferred. Commenters 
cited issues related to NHSN capacity, lack of experience with NHSN 
measures, and applicability to outpatient procedures of the NHSN 
Surgical Site Infection measure.
    Response: We thank the commenters for their input. As discussed 
above, we are not finalizing the collection of any NHSN measures at 
this time. Thus, we are not finalizing our proposals regarding data 
submission deadlines for these measures at this time.
g. Data Submission Requirements for OP-22, ED-Patient Left Without 
Being Seen, for the CY 2013 and CY 2014 Payment Determinations
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42328 through 42333), 
with respect to OP-22: ED-Patient Left Without Being Seen, we proposed 
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 invited public comment on these proposals for data collection 
and submission requirements and these comments are discussed in section 
XIV.B.2.a., above, of this final rule with comment period.
    After consideration of the public comments we received, for OP-22: 
ED-Patient Left Without Being Seen we are finalizing our proposal on 
the form and manner of data collection, with a modification. 
Specifically, as proposed we are finalizing that for the CY 2013 
payment determination, numerator and denominator counts will be 
collected for this measure and that these data are to be submitted to 
CMS via a Web-based tool from July 1, 2012 to August 15, 2012. However, 
based on the comments we received, we are modifying the time frames so 
that data collection will be prospective, and will begin for the time 
period from January 1, 2012 to June 30, 2012.
3. Hospital OQR Program Validation Requirements for Chart-Abstracted 
Measure Data Submitted Directly to CMS: Data Validation Approach for 
the CY 2013 Payment Determination
a. Randomly Selected Hospitals
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42332), similar to our 
approach for the CY 2012 payment determination (75 FR 72103 through 
72106), we proposed 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 proposed 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 
CASPER 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. In our proposed rule, we 
mistakenly stated that a hospital must be coded as open in the OSCAR 
system; this system has been replaced by CASPER. We proposed this 10 
encounter minimum so that we have a sufficient sample size for 
calculating a statistically valid validation score.
    Comment: Several commenters supported the proposal to reduce the 
number of hospitals randomly selected for validation from 800 to 450. 
One of these commenters applauded this proposal, and encouraged 
continued reductions in the number of hospitals selected for validation 
as hospital accuracy increased. One commenter believed that the total 
number of hospitals (up to 500) will remain adequate to assess the 
reporting accuracy of various types of hospitals.
    One commenter expressed concern at the severe reduction in the 
number of hospitals sampled for validation seemingly without 
justification. One commenter strongly opposed this proposal and 
believed that this reduced CMS' burden at the expense of validity of 
data publicly reported on Hospital Compare. One commenter opposed the 
proposed reduction and believed that the number of hospitals selected 
for validation should be increased.
    Response: We thank all of these commenters for their views on the 
number of hospitals that should be selected for validation. Our 
proposal attempts to balance the burden to hospitals and cost to us 
with ensuring the validity of data made publicly available on Hospital 
Compare. As we stated, we have observed high levels of data accuracy, 
we believe that we can reduce the number of hospitals selected for 
validation for the CY 2013 payment determination without compromising 
the accuracy of the data. Under this proposal a sample of approximately 
21,600 randomly selected records would be selected for validation each 
year, and records submitted by up to 50 additional targeted hospitals 
would also be validated (discussed below).
    Comment: One commenter believed that the minimum number of cases a 
hospital should have to be subject to selection for validation should 
be 25 cases rather than 10.
    Response: We considered larger threshold values for hospitals to be 
selected for validation. However, we concluded that because measure 
data submitted by hospitals with small case counts in the denominator 
currently are published on Hospital Compare, we have sought to select a 
minimum number as a threshold for validation. We have selected an 
absolute minimum threshold of 10 cases for validation selection in 
order for a sufficient sample size for calculating a statistically 
valid validation score.
    Comment: Several commenters noted that CMS proposed separate and 
specific procedures for data validation of another NHSN measure under 
the Hospital IQR Program and requested that CMS discuss its plans for 
validation of data submitted through the NHSN for the Hospital OQR 
Program. Some of these commenters requested that in discussing such 
procedures, CMS provide more detail on how hospital outpatient 
departments would submit a list of patients and what format should

[[Page 74485]]

be used. One commenter noted the importance of robust and accurate data 
and encouraged CMS to explicitly discuss its intended plan to validate 
data submitted on the NHSN measures.
    Response: We thank the commenters for their suggestions and agree 
that separate and specific procedures for validation of NHSN measure 
data are warranted. We intend to learn from our experiences with 
validating NHSN measure data under the Hospital IQR Program and apply 
these lessons to our future proposals for validating NHSN measure data 
under the Hospital OQR Program.
    After consideration of the public comments we received, we are 
finalizing our proposals for validation without modification.
b. 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) Targeting Criteria for Data Validation Selection for CY 2013
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42332), in addition to 
proposing to randomly selecting 450 hospitals for validation, we 
proposed 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 proposed 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.\36\ In order to target very extreme values, we proposed 
to target hospitals that greatly exceed this threshold because such 
extreme values strongly suggest that the data submitted is inaccurate. 
Specifically, we proposed 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.
---------------------------------------------------------------------------

    \36\ 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.
---------------------------------------------------------------------------

    Comment: Several commenters supported the use of extreme outliers 
as a criterion for selecting hospitals for validation. Some commenters 
supported using data quality concerns for targeting hospitals for 
validation selection.
    Response: We thank these commenters for their support of our 
extreme outlier proposal and the use of data quality concerns for 
targeting hospitals for validation selection. We note that in our 
proposal we used a standard normal distribution for the selected 
outlier threshold. We have also examined data submitted under the 
Hospital OQR Program and found the 5 standard deviation threshold 
suitable for detecting extreme values for targeting hospitals based 
upon data quality concerns.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification.
c. Encounter Selection
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42332 through 42333), 
for each selected hospital (random or targeted), we proposed 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.
    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: (1) Produce a more reliable 
estimate of whether a hospital's submitted data have been abstracted 
accurately; (2) provide more statistically reliable estimates of the 
quality of care delivered in each measured hospital as well as at a 
national level; and (3) 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 selected.
    For all selected hospitals, we would 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 proposed 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.

[[Page 74486]]

    Comment: One commenter requested that CMS re-evaluate the sampling 
requirements for the Hospital OQR Program to better align them with the 
Hospital IQR Program and requested a reduction in sample size 
requirements to reduce burden on hospitals.
    Response: We interpret the commenter as referring to the Hospital 
IQR Program sampling requirements for validation which stratify by 
measure and/or topic. As we have stated, we are interested in 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. In 
addition, by not stratifying by measure and/or topic, it is possible to 
sample fewer cases and maintain precision for reliability estimates for 
validation purposes.
    Comment: One commenter opposed the proposal to continue the CY 2012 
policy of sampling up to 12 records per quarter from hospitals selected 
for validation, stating their belief that this number should be reduced 
as burden to hospitals should be reduced, not just the burden to CMS. 
One commenter believed that validating a larger number of cases from a 
sample of hospitals has advantages over sampling a smaller number of 
cases from a pool of all hospitals.
    Response: We thank the commenters for their views on the number of 
cases to be sampled from hospitals selected for validation. In setting 
a sample size we are attempting to balance burden to hospitals with 
data accuracy; sentiments mirrored in the comments received. We 
discussed our basis for the selection of up to 12 records per quarter 
or 48 per year in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 72104), and the CY 2012 OPPS/ASC proposed rule (76 FR 42332 
through 42333).
    After consideration of the public comments we received, we are 
finalizing our proposals without modification.
d. Validation Score Calculation
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42333), for the CY 
2013 payment determination, we proposed to use the validation 
calculation approach finalized for the CY 2012 payment determination 
with validation being done for each selected hospital. Specifically, we 
proposed 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 proposed that hospitals must attain at least a 75 percent 
reliability score, based upon the proposed validation process. We 
proposed 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 proposed to 
calculate the validation score using the same methodology we finalized 
for the CY 2012 payment determination (75 FR 72105). We also proposed 
to use the same medical record documentation submission procedures that 
we also finalized for the CY 2012 payment determination (75 FR 72104) 
with one modification.
    We proposed 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 
proposed 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.
    Comment: Many commenters opposed the proposal to reduce the time 
for hospitals to submit medical record documentation for validation. 
Some of these commenters cited burden as an issue. Some commenters 
expressed concern that the shortened timeframe would not allow adequate 
time to review records before submission for validation purposes. One 
commenter stated that hospitals also have records they are required to 
prepare for Recovery Audit Contractor (RAC) purposes. One commenter 
believed that this proposal would be a burden on medical and quality 
staff if a hospital had been selected for both outpatient and inpatient 
hospital quality reporting.
    Response: We thank these commenters for expressing their concerns 
regarding this proposal. Based on these comments, we have decided to 
not finalize our proposal to reduce the time for hospitals to submit 
medical record documentation and, instead, due to issues of burden as 
well as consistency with other CMS programs (for example, the RAC, 
PERM, and CERT programs), we will retain our existing policy. Under 
this existing policy, the CMS contractor must receive the requested 
documentation by 45 calendar days from the date of the request as 
documented in the request letter. Other details of this policy, 
including the issuance of a second request letter if the hospital does 
not respond to the initial request within 30 days are detailed in the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 72104).
    Comment: Some commenters agreed with reducing the time from 45 days 
to 30 days if the timeliness of feedback was improved.
    Response: We thank these commenters for supporting our proposal to 
reduce the time to submit medical records for validation from 45 days 
to 30 days if timeliness of feedback could be improved. We agree that 
improved timelines of feedback is important for quality improvement.
    After consideration of the public comments we received, we have 
decided to not finalize our proposal to reduce the time for hospitals 
to submit medical record documentation. As stated above, we will retain 
the medical record return policy that we finalized in the CY 2011 OPPS/
ASC final rule for the Hospital OQR Program CY 2012 payment 
determination. We did not receive any comments on our proposal 
regarding validation score calculation. Therefore, we are finalizing 
this proposal without modification.
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, in the CY 
2012 OPPS/ASC proposed rule (76 FR 42333), we requested 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

[[Page 74487]]

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.
    In the proposed rule we welcomed public comment on these proposals, 
and noted that we were specifically interested in receiving public 
comments on definitions of low numbers relative to population sizes and 
what would constitute significant numbers of ``Unable to Determine'' 
data elements.
    Comment: Several commenters supported the idea of selecting 
eligible hospitals for validation if not selected in the previous 3 
years, or, in other words, at least once every 4 years for validation. 
One commenter suggested that the time allowance for targeting a 
hospital for validation due to non-selection be increased from 3 years 
to 4 years.
    Response: We appreciate the commenters' support. Regarding the 
suggestion that the time allowance for targeting a hospital for 
validation due to non-selection be increased from three years to four, 
if the time was increased to four years, the maximum number of years 
that a hospital could avoid being selected for validation would be 5 
years. We believe that this timeframe is too long for a hospital that 
has submitted quality measure information to go without their data 
being validated.
    Comment: One commenter expressed concerns about the criteria for 
how to define low numbers relative to population size and significant 
numbers of ``unable to determine'' data elements. The commenter stated 
that without a quality strategy for outpatient care, it is difficult to 
evaluate a low number of encounters relative to population or 
significant numbers of ``unable to determine.'' Another commenter 
suggested that statistical testing be used to determine thresholds for 
these proposed criteria.
    Response: We thank these commenters for their thoughts on how to 
define low numbers relative to population size and significant numbers 
of ``unable to determine'' data elements in formulating these factors 
as targeting criteria for validation. We will take these views under 
consideration as we develop future proposals on these issues. We thank 
the commenters for all their views on these proposed criteria and will 
take them into account as we consider future proposals.

H. 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42333 through 42334), 
we proposed 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:
    [cir] Hospital CCN.
    [cir] Hospital Name.
    [cir] 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.
    [cir] 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.
    [cir] CEO and any additional designated hospital personnel contact 
information, including name, email address, telephone number, and 
mailing address (must include physical address, not just a post office 
box).
    [cir] 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 does not need to 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 proposed 
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 email 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 proposed 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

[[Page 74488]]

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).
    In the proposed rule we invited public comment on our proposed CY 
2013 Hospital OQR Program reconsideration and appeals procedures.
    Comment: Some commenters supported our proposal to continue for CY 
2013 and subsequent years' payment determinations our program 
reconsideration and appeals procedures currently in place.
    Response: We thank these commenters for their support of our 
Hospital OQR Program reconsideration and appeals procedures.
    Comment: One commenter encouraged CMS to be more prescriptive than, 
as stated in the proposal, the intention of having reconsideration 
reviews completed and communication of the results of these 
determinations to hospitals within 90 days given that hospitals were 
not allowed this leeway in submission timeframes.
    Response: We believe that the commenter is stating a desire for a 
commitment that we will complete reconsideration reviews and 
communicate decisions results to hospitals in 90 day days or less after 
the submission deadline timeframe. As reconsideration requests can 
involve extensive research and information review, among other time 
consuming processes, often the full 90 day time-frame is necessary to 
complete the process in a thorough manner. In some more complex cases, 
the 90 days may not be enough. Note that, when the reconsideration 
process can be completed in a shorter time-frame, we can and have 
communicated the results in less than 90 days. We intend where possible 
to complete any reconsideration requests and to communicate the results 
of our decision within 90 days.
    After consideration of the public comments we received, we are 
finalizing our proposals without modification.

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 and OQR 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.
    Comment: A commenter recommended that prior to CY 2015, CMS offer a 
voluntary test period of at least one year and omit public reporting, 
in order to allow hospitals to submit data, refine electronic 
submission process to ensure accuracy and validity of data flows. The 
commenter was also concerned about the potential inaccurate 
calculations generated from certified EHRs and urged CMS not to 
publicly report the Stage 1 clinical quality measure (CQM) data 
reported and not to use them as a baseline for future quality reporting 
programs, such as a value-based purchasing program.
    Response: We understand that hospitals need to gain experience in 
electronic data submission. The 2012 Medicare EHR Incentive Program 
Electronic Reporting Pilot (2012 Electronic Reporting Pilot) (discussed 
below) that we proposed is voluntary and last for one year. This Pilot 
would provide eligible hospitals and CAHs the opportunity to report 
clinical quality measures using certified EHR technology. We thank the 
commenter for the feedback on certified EHR technology and we will 
communicate that to the ONC for further evaluation. We also note that 
at present, CQMs reported through attestation under the EHR Incentive 
Program are not publicly

[[Page 74489]]

reported and we do not plan to publish the CQMs reported through the 
2012 Electronic Reporting Pilot. The only information that we expect to 
make publicly available are the names of hospitals that have received 
an incentive payment under the EHR Incentive Program. We will provide 
further education and outreach to stakeholders on the reporting process 
for the 2012 Electronic Reporting Pilot in FY 2012. For hospitals that 
may be concerned about the accuracy of the results calculated by their 
certified EHR technology, we would suggest that they contact their 
vendors about these issues.
    Comment: A commenter requested clarification regarding the 
validation of quality measures submitted through certified EHR 
technology after manual chart-abstraction is phased out.
    Response: For reporting clinical quality measures under the EHR 
Incentive Program, the eligible hospital or CAH must attest to the 
output that is generated from its certified EHR technology. We are 
still in the process of developing validation strategy for quality 
measures submitted through certified EHR technology after manual chart-
abstraction is phased out.
    Comment: A commenter stated that CMS must ensure that the 
electronic measure is comparable to the original manual chart-
abstracted measure. The commenter noted that any potential electronic 
retooling of the measures must not undermine the scientific basis and 
data integrity of the measures.
    Another commenter suggested that for easy understanding by 
healthcare professionals, the e-specifications for EHR submission of 
quality measures should be written in simple language while maintaining 
the accuracy of data element definitions. The commenter believed it is 
critical for CMS to create measure specifications to ensure discrete 
data are applicable to measures without contradicting documentation in 
``free text'' and ``scanned document'' areas of the medical record.
    Response: We agree that electronic measures should be comparable to 
the original manual chart-abstracted measures and we thank the 
commenter for the suggestions on the creation of user-friendly e-
specifications that align with medial record documentations. We are 
collaborating with the NQF, measure stewards, and the ONC to develop 
the accurate, easy to understand, and medical-record compatible 
electronic specifications while maintaining the integrity of the 
measures as endorsed.
    Comment: Some commenters discussed their CQM reporting experience 
for Stage 1 meaningful use. Commenters indicated that extra efforts 
were required to manipulate the certified EHR products to generate 
accurate quality data. For this reason, some commenters had misgivings 
about the testing of the e-measure specifications. In addition, 
commenters were concerned whether corrections or updates, such as new 
medications to treat patients with stroke, were communicated and 
adopted timely by vendors. Some commenters did not believe EHR vendors 
have the capacity to keep up with the constant changes in electronic 
measures and related specifications. Moving forward, some commenters 
requested that CMS establish a transparent process to manage 
specification updates to quality measures, as well as a mechanism 
through which vendors and providers can provide feedback on problematic 
measures. The commenters noted that the existing CQMs require a level 
of clinical documentation and the use of coded data fields that are far 
more extensive than other Stage 1 Meaningful Use objectives.
    Response: We thank the commenters for the feedback. We are 
continuing to work with ONC to resolve the identified concerns. 
Generally, the e-measure specifications we adopt undergo rigorous 
development processes and e-specification updates and new 
specifications are timely communicated to vendors. We thank the 
commenters for their suggestions on the transparent process to manage 
updates and will take them into consideration for future planning.
    Comment: Commenters recommended that CMS conduct a different pilot 
program to field test the measures used in the HITECH EHR Incentive 
Program for the purpose of determining the ability of vendors and 
hospitals to accurately capture the necessary data in the required 
formats to generate, valid, reliable and comparable quality measures 
directly from the EHRs.
    Response: CMS agrees that it is important to obtain input from the 
vendors, providers, and measure stewards about the electronic 
specifications. We thank the commenters for the suggestions for a pilot 
program to test measures in the field. Currently, we are working with 
the various stakeholders to define this process.
    Comment: A commenter requested clarification whether the 
information related to the Hospital IQR Program contained in CMS' FAQ 
(Answer ID10589: ``CMS does not require any additional information 
beyond what is generated from certified EHR technology in order to 
satisfy the requirement for submitting CQM information'') also applies 
to e-measures in the Hospital OQR Program. If it does, the amount of 
data obtained from e-measures will differ in the Hospital IQR and 
Hospital OQR Programs.
    Response: The reporting requirements are separate for each program. 
At this time there are different and separate reporting requirements 
for the EHR Incentive Program, the Hospital IQR Program, and the 
Hospital OQR Program.

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

1. Background
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42334 through 42336), 
we proposed changes to the methods by which eligible hospitals and CAHs 
would report clinical quality measures for the 2012 payment year and 
subsequent years for the Medicare EHR Incentive Program. Specifically, 
we proposed 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 a proposed 2012 Electronic Reporting Pilot. We proposed to revise 
our regulations at Sec.  495.8(b)(2)(ii) and proposed to add Sec.  
495.8(b)(2)(vi), which would reflect these proposals for reporting CQMs 
through attestation and the 2012 Electronic Reporting Pilot.
2. 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. We proposed 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 an Electronic Reporting Pilot. We proposed 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 encouraged 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

[[Page 74490]]

the EHR Incentive Program. We strongly encouraged 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 proposed 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 for the Medicare and Medicaid EHR Incentive Programs (75 
FR 44418 through 44420) and such information would be obtained from the 
certified EHR technology used by the eligible hospital or CAH.
    We proposed 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.
    We stated that after the eligible hospital or CAH had attested and 
CMS had 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 that do not meet the reporting requirements 
through the Electronic Reporting Pilot may meet such requirement 
through attestation. We proposed that eligible hospitals and CAHs, 
alternatively, may attest, but still participate in the proposed 
Electronic Reporting Pilot.
    Comment: A commenter requested more clarification on the purpose of 
this Pilot, which appears to duplicate other quality measurement 
programs.
    Response: The specific purpose of the 2012 Electronic Reporting 
Pilot is to provide a method for eligible hospitals and CAHs to 
electronically report the clinical quality measures for the EHR 
Incentive Program. We recognize that there may be some overlap between 
the 2012 Electronic Reporting Pilot and other quality reporting 
programs but we expect electronic reporting will be aligned and 
harmonized across Medicare quality reporting programs over time.
    Comment: Some commenters strongly supported the proposed 2012 
Electronic Reporting Pilot, which they perceived as a great opportunity 
for hospitals to test interoperability and functionality of their 
certified EHR technology while allowing CMS to evaluate the 
compatibility of electronic measure specifications and chart-abstracted 
data. Commenters recommended that CMS should be flexible with the 
implementation timelines for the pilot to ensure the viability and 
successful functionality of this new reporting method.
    Response: We appreciate the commenters' support of the proposed 
2012 Electronic Reporting Pilot. If the proposed timelines for the 
Electronic Reporting Pilot are not feasible for an eligible hospital or 
CAH, attestation would continue to be an acceptable method for 
reporting the clinical quality measures for the 2012 payment year.
    Comment: Some commenters believed that the 2012 Electronic 
Reporting Pilot would be instrumental in shaping and facilitating the 
mechanisms for electronic reporting by eligible hospitals and CAHs in 
the near future. A commenter asked CMS to clarify the options for 
attestation and participation in the 2012 Electronic Reporting Pilot.
    Response: We thank the commenters for their support. As we stated 
in the proposed rule, the 2012 Electronic Reporting Pilot would be an 
alternative to reporting CQMs by attestation for the 2012 payment year. 
Eligible hospitals and CAHs may choose to report CQMs by attestation 
and voluntarily participate in the 2012 Electronic Reporting Pilot 
simultaneously. We will provide more education and outreach to 
stakeholders on the reporting process for the 2012 Electronic Reporting 
Pilot in 2012.
    Comment: A commenter recommended making the 2012 Electronic 
Reporting Pilot a viable option for all hospitals, including safety net 
hospitals, so that CMS can gauge the unique challenges to electronic 
reporting by a diverse group of hospitals. Another commenter suggested 
CMS should allow all hospitals to participate in the 2012 Electronic 
Reporting Pilot regardless of whether they participated in the EHR 
Incentive Program. A commenter recommended providing an additional 
incentive for 2012 Electronic Reporting Pilot participants to increase 
participation.
    Response: We plan to engage a variety of hospitals and vendors in 
the testing of the submission of patient level reports for the clinical 
quality measures required in the pilot. The submitter will not be 
required to register in the registration and attestation module before 
submitting the test files. More information about the testing period 
will be available in 2012. Although we appreciate the commenter's 
recommendation, the amounts of the incentive payments are limited by 
statute and we do not have the authority to award additional amounts 
for participation in the 2012 Electronic Reporting Pilot.
    Comment: One commenter requested delaying the 2012 Electronic 
Reporting Pilot until 2013.
    Response: Based on the amount of support from public comments and 
our desire to advance the electronic reporting of quality measures, we 
have decided to implement the Electronic Reporting Pilot for the 2012 
payment year as proposed. We recognize that the 2012 Electronic 
Reporting Pilot may not be suitable for all eligible hospitals and 
CAHs. To that end, we anticipate only those eligible hospitals and CAHs 
that are most ready to transmit clinical quality measure information 
from their certified EHR technology would participate in the 2012 
Electronic Reporting Pilot. Participation in the pilot is not required 
to be a meaningful

[[Page 74491]]

user of certified EHR technology. Eligible hospitals and CAHs that are 
not interested in participating in the pilot would report the clinical 
quality measures by attestation as was required for the 2011 payment 
year. We refer readers to the discussion of the reporting method for 
the 2011 payment year in the HITECH EHR Incentive Program final rule 
(75 FR 44430 through 44431).
    Comment: A commenter requested a detailed analysis of the 
incapability of the PQRI 2009 Registry XML Specification content 
exchange standard in conveying aggregate hospital quality measures data 
from EHRs. The commenter also suggested CMS consult with hospitals and 
vendors on the need to move to electronic reporting from the current 
attestation model, given relative costs and benefits.
    Response: We suggest that the commenter should contact the Office 
of the National Coordinator for Health Information Technology (ONC) 
with any questions or concerns about the PQRI 2009 Registry XML 
Specification content exchange standard. ONC's Web site address is 
http://healthit.hhs.gov. We appreciate the suggestion to consult with 
hospitals and vendors about the need to move from the current 
attestation model to electronic reporting and will take it into 
consideration for future planning.
    After consideration of the public comments we received, we are 
finalizing as proposed the voluntary 2012 Electronic Reporting Pilot 
for eligible hospitals and CAHs participating in the Medicare EHR 
Incentive Program for the 2012 payment year. Eligible hospitals and 
CAHs also may choose to attest to the results of CQMs calculated by 
certified EHR technology as for the 2011 payment year. We also are 
revising our regulations at Sec.  495.8(b)(2) as proposed. Successful 
electronic submission of the 15 CQMs required for eligible hospitals 
and CAHs through this 2012 Electronic Reporting Pilot will be 
sufficient to meet the core objective of reporting hospital CQMs to CMS 
under the Medicare EHR Incentive Program for the 2012 payment year.
3. CQM Reporting Under the Electronic Reporting Pilot
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42336), we proposed 
that eligible hospitals and CAHs participating in the proposed 2012 
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 and based on data obtained from the eligible hospital or 
CAH's certified EHR technology.
    We proposed 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 expected would be Quality Data Reporting 
Architecture (QRDA) Level I. (We note that we used the term ``Level 1'' 
in the CY 2012 OPPS/ASC proposed rule (76 FR 42336). ``Level 1'' is 
used interchangeably with the term ``Category I'' to denote patient-
level data. In order to be consistent with the Implementation Guide for 
Clinical Document Architecture Release 2, we are using the term 
``Category 1'' instead of the term ``Level I'' in this final rule with 
comment period.)
    As noted previously, for the proposed 2012 Electronic Reporting 
Pilot, CQM data on which the eligible hospital or CAH's submission is 
based would be obtained from certified EHR technology. However, the 
functionality of reporting these CQMs to CMS would not rely on the 
certification process. We proposed that 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 2012 
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 
expected would be QRDA Category I. We proposed to 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 2012 Electronic Reporting Pilot.
    Comment: Some commenters stated that if QRDA Category I is going to 
be implemented, vendors will need time to develop, test, and deploy 
this functionality. Commenters urged CMS to provide a Web site for 
vendors to test their implementation of the transmission standard and a 
sample set of test data to ensure that the results are consistent.
    Response: We will provide a test period before and during the 
submission period as well as additional education and outreach to the 
industry in advance to assist 2012 Electronic Reporting Pilot 
participants with transmitting electronic quality measure data. We 
thank the commenters for the suggestions for sample test data and will 
take that into consideration should the Pilot be extended beyond the 
one-year time frame.
    Comment: A commenter supported the collection of patient-level 
data. Another commenter was concerned about the significant resource 
and system burden from the submission of patient-level data. 
Furthermore, the structure and content of the patient-level data 
elements were not clear to the commenter. The commenter urged CMS to 
accept the submission of aggregate-level data which can be compiled 
from certified EHR technology. Additionally, a commenter was concerned 
that QRDA is not a sufficiently well-tested and mature standard, 
compared to the PQRI XML format (contained in the certified EHR 
technology), which the commenter believed is well-tested for submission 
of aggregate quality measure data. The commenter strongly urged CMS to 
strive to modify the PQRI XML format for suitability for electronic 
transmission of patient-level quality measure data for the 2012 
Electronic Reporting Pilot.
    Response: We do not believe there will be additional burdens from 
the submission of patient-level data because eligible hospitals are 
already submitting patient-level data to CMS under the Hospital IQR 
Program. Also, we anticipate that the certified EHR technology vendors 
will work with the requirements necessitated by the Pilot to serve the 
best interest of hospitals. We will strive to ensure that hospitals 
participating in the Pilot are provided with the resources needed to 
understand the structure and content of the patient-level data 
elements. One important purpose of the 2012 Electronic Reporting Pilot 
is to test the QRDA Category I format for the transmission of patient-
level CQM data. Therefore, we do not intend to modify the PQRI XML 
format for suitability to transmit patient-level data.
    Comment: A commenter stated that the proposed 2012 Electronic 
Reporting Pilot seems to require a reporting period of one full year, 
while the reporting

[[Page 74492]]

period for eligible hospitals and CAHs not participating in the pilot 
is only 90 days. The commenter requested standardizing the reporting 
period to 90 days for both the 2012 Electronic Reporting Pilot 
participants and non-participants to level the playing field, based on 
concerns that requiring one full year of data would delay the receipt 
of incentive payments for eligible hospitals and CAHs that are in their 
first payment year. The commenter strongly believed that the proposed 
one-year measurement period is a disincentive for provider 
participation in the pilot, as eligible hospitals and CAHs would have 
to complete one whole year of data collection before receiving their 
EHR incentive payment.
    Response: We understand the commenter's concerns. However, for 
testing purposes, we believe the pilot measurement period should be one 
full year for consistency with the EHR reporting period that is 
required for eligible hospitals and CAHs beginning in their second 
payment year under the Medicare EHR Incentive Program. Eligible 
hospitals and CAHs should note that the 2012 Electronic Reporting Pilot 
is voluntary. Hospitals that begin Stage 1 in FY 2012 would have a 90-
day reporting period if they choose to report CQMs by attestation. We 
encourage participation in the 2012 Electronic Reporting Pilot because 
we believe it is a valuable learning process as we move to electronic 
submission of CQMs.
    Comment: Some commenters recommended that CMS should only collect 
numerator, denominator, and exclusionary data. Commenters also 
requested CMS to provide explanation why aggregate data submission is 
not piloted.
    Response: We still collect numerator, denominator, and exclusion 
data from eligible hospitals and CAHs who choose to report CQMs by 
attestation. The reason we collect patient-level data in the 2012 
Electronic Reporting Pilot is to align with the data reported to the 
Hospital IQR Program, as part of our efforts to reduce burdens on the 
hospitals that participate in that program.
    Comment: A few commenters assumed that CMS intends to test the use 
of the HL7 Standard QRDA Category I, which has been developed to 
support reporting on quality data from EHRs, and may use it for the 
future. Based on this assumption, some commenters requested CMS to 
collaborate with ONC to remove the PQRI 2009 Registry content exchange 
standards from the certification requirements, as they will not be 
used.
    Response: Because this is a pilot and is meant to test alternative 
ways for electronic reporting to take place, we do not believe it is 
necessary or appropriate to collaborate with ONC to remove the PQRI 
2009 XML Registry specification as the basis of certification.
    Comment: One commenter was concerned that the collection of 
patient-level data would not comply with the HIPAA requirements.
    Response: The HIPAA Privacy Rule at 45 CFR 164.512(a) permits 
disclosures of protected health information that are required by law, 
including regulation. Eligible hospitals and CAHs that choose to 
participate in the 2012 Electronic Reporting Pilot would be required to 
submit patient-level data.
    Comment: A commenter recommended the collection of all-payer data, 
instead of just Medicare data, in order to advance the utilization of 
all-payer database.
    Response: We thank the commenter for the suggestion. The pilot is 
designed to collect Medicare patient data. We will analyze the Medicare 
patient data we receive in this 2012 Electronic Reporting Pilot and 
evaluate the feasibility of collecting all-payer data in the future.
    Comment: A commenter was concerned about the significant resource 
and system burden from the submission of patient-level data using QRDA. 
The commenter questioned CMS' ability to receive and analyze the huge 
amount of patient-level data and was concerned that the huge QRDA 
Category I files may slow down CMS' data processing. Some commenters 
recommended that CMS and other measure vendors work with HL7 to create, 
ballot, and test a generic standard (perhaps QRDA Category II) 
conformable to NQF's Quality Data Model and the Model and the Health 
Quality Measure Format (HQMF) standard that would allow for computer-
to-computer interoperable exchange of discrete data.
    Response: We thank the commenters for their valuable input. QRDA 
Category I will be piloted in the 2012 Electronic Reporting Pilot, but 
it may not be the eventual transmission format used for all EHR CQM 
reporting. We will use the 2012 Electronic Reporting Pilot experience 
to evaluate the level of complexity, effort, and burden created by this 
transmission format. This analysis will be considered in future program 
designs.
    Comment: A commenter was concerned about the potential security 
risks of patient data and urged CMS to build a security protection 
mechanism modeled after the Quality Improvement Organization (QIO) 
warehouse system. Some commenters recommended that CMS should require 
providers to submit their patient-level data to a QIO Clinical Data 
Warehouse, which would then transmit quality data to CMS.
    Response: We have security standards in place to receive patient-
level data in the Hospital IQR and OQR Programs. We will continue to 
utilize secure data transmission standards in all reporting programs at 
CMS. We also note that certified EHR technology is a requirement of 
participation in the pilot, and that a core objective of meaningful use 
addresses security validation.
    Comment: A commenter suggested that the 2012 Electronic Reporting 
Pilot also test electronic measures and not just transmission of 
quality data to CMS. The commenter also encouraged CMS to solicit 
feedback from participants and non-participants of the 2012 Electronic 
Reporting Pilot.
    Response: The 2012 Electronic Reporting Pilot will test file 
submission while certified EHR technology is certified for its ability 
to electronically calculate CQM specifications required by CMS. We 
welcome feedback from participants and non-participants in the 2012 
Electronic Reporting Pilot.
    After consideration of the public comments we received, we are 
finalizing our proposals for reporting CQM data under the 2012 
Electronic Reporting Pilot. Among other requirements, eligible 
hospitals and CAHs participating in the 2012 Electronic Reporting Pilot 
must: (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 QRDA Category I format 
data transmission.

K. 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

[[Page 74493]]

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 section1833(t)(17) of the Act, please see the CY 2011 
OPPS/ASC final rule with comment period (75 FR 72064 through 72065) and 
this final rule with comment period.
    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 intend 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, Implant; (5) 
Prophylactic IV Antibiotic Timing; (6) Appropriate Surgical Site Hair 
Removal; (7) Surgical Site Infection; (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, HHS 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 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 the CY 2012 OPPS/ASC proposed rule (76 FR 42336 through 42349), 
we proposed 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.
    Comment: One commenter stated that it was unclear if there are any 
payment penalties for not participating in ASC quality data reporting 
and that if there are payment penalties, how would they be calculated. 
Several commenters stated their belief that the payment penalty for 
non-reporting or not meeting reporting requirements be lowered for at 
least the initial payment penalty year, recommending a 0.4 percentage 
point reduction for CY 2014, rather than a 2 percentage point 
reduction. Some of these commenters noted that a 0.4 percentage point 
reduction is consistent with the Hospital IQR Program.
    Response: The payment reduction for not participating in ASC 
quality reporting is set by statute. 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 as specified will incur a 2.0 
percentage point reduction to any annual increase provided under the 
revised ASC payment system for such year. We intend to propose in the 
CY 2013 OPPS/ASC proposed rule the method for how these payment 
penalties will be calculated. We note that although the payment 
reduction under the Hospital IQR Program was initially a 0.4 percentage 
point reduction to the applicable percentage increase, the payment 
reduction has, since FY 2007, been 2.0 percentage points. (Beginning 
with FY 2015, the payment reduction will be one-quarter of the 
applicable percentage increase (determined without regard to sections 
1886(b)(3)(B)(ix), (xi), or (xii) of the Act).)
    Comment: Many commenters appreciated CMS' plan to implement an ASC 
Quality Reporting Program but strongly urged CMS to delay the start of 
required data submission from the proposed January 1, 2012 to October 
1, 2012 at the earliest, in order for ASCs to have sufficient time to 
prepare and adapt to the new reporting procedures. A few commenters 
noted that a new quality reporting program warrants at least 6 months 
of advance notice to providers, who would have to make substantive 
changes to data elements and operation systems. Commenters cited the 
example of ASCs' inexperience in reporting data using Quality Data 
Codes (QDCs) as well as reporting to NHSN as efforts that would require 
tremendous time, training and resources to initiate.
    Many commenters believed it would be prudent for CMS to allow ASCs 
to submit quality data initially on a trial basis for a time period 
from January 1,

[[Page 74494]]

2012 through September 30, 2012. Commenters asserted that ASCs need 
this trial period to test their systems and resolve any problems that 
may arise.
    Response: We thank the commenters for their support for the ASC 
Quality Reporting Program. We strongly believe this program is an 
important milestone in the alignment of quality of care across HOPDs 
and ASC settings. We acknowledge the new challenges faced by ASCs in 
preparation for this quality reporting program. Based on public 
comments, we will delay required data submission until October 1, 2012 
for the CY 2014 payment determination. More information regarding 
measure submission timeframes and other program requirements can be 
found in the ``Form, Manner and Timing'' section of this final rule 
with comment period.
    After consideration of the public comments we received, we are 
finalizing the ASC Quality Reporting Program, with data collection to 
begin on October 1, 2012.
2. ASC Quality Reporting Program Measure Selection
a. Timetable for Selecting ASC Quality Measures
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42337), we proposed to 
adopt measures for three CY payment determinations for the ASC Quality 
Reporting Program in this rulemaking. We proposed to adopt measures for 
the CYs 2014, 2015, and 2016 payment determinations. We stated, to the 
extent that we finalize some or all of the measures for future payment 
determinations, we would not be precluded from adopting 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. In the proposed rule, we invited public 
comments on this proposal.
    Comment: A few commenters supported the multi-year approach which 
is perceived as great opportunities for ASCs to gain understanding of 
measure specifications, data collection and data submission 
methodologies while CMS develops needed infrastructure to collect 
quality data on ASCs.
    Response: We thank the commenters for the support of the multi-year 
proposals for ASC quality measures.
    After consideration of the public comments we received, we are 
finalizing our proposal to adopt quality measures for the CY 2014, CY 
2015, and CY 2016 payment determinations. We discuss the quality 
measures that we are finalizing for these CYs below.
b. Considerations in the Selection of Measures for the ASC Quality 
Reporting Program
    Section 1833(i)(7)(B) of the Act states that section 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 section 
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 PQRS, 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 VBP Program, we applied the following principles for the 
development and use of measures. In the proposed rule, we invited 
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.

[[Page 74495]]

    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 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 proposed 
for ASCs fall into the parameter of our stated framework for the ASC 
Quality Reporting Program, discussed above. The initial measure set 
that we proposed for the CY 2014 payment determination addresses 
outcome measures and infection control process measures. Six of the 
eight initial measures that we proposed for the CY 2014 payment 
determination are recommended by the ASC Quality Collaborative (ASC QC) 
and are NQF-endorsed. The seventh measure that we proposed is 
appropriate for measuring ambulatory surgical care, is NQF-endorsed, is 
currently in use in the PQRS, and is similar to a measure that is being 
used in the Hospital OQR Program, and therefore aligns across settings 
in which outpatient surgery is performed. We proposed 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 proposed for the CY 2014 payment 
determination is an outcome measure of surgical site infection to be 
submitted in 2013 via the CDC's NHSN. Similarly, hospital inpatient 
departments will begin reporting this measure to the CDC under the 
Hospital IQR Program in 2012, and we also proposed 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.
    Comment: Several commenters supported all the proposed NQF-endorsed 
measures for ASCs and also believed that all ASC quality reporting 
measures should be NQF-endorsed, regardless of the measures' 
endorsement by other national multi-stakeholder organizations. Some 
commenters noted that ASC measures should focus on facility-level data 
and not physician-level data.
    Response: Under section 1833(i)(7)(B) and (t)(17)(C)(i) of the Act, 
except as the Secretary may otherwise provide, the Secretary must 
develop measures that reflect consensus among affected parties and, to 
the extent feasible and practicable, must include measures set forth by 
a national consensus building entity. Whenever possible, we strive to 
adopt NQF-endorsed measures because these measures will meet these 
requirements, as discussed above. However, we believe that 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, and through 
public comments. Further, it may not be feasible or practicable to 
adopt an NQF-endorsed measure, such as when an NQF-endorsed measure 
does not exist. Section 1833(t)(17)(C)(i) 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 do not reflect consensus among 
affected parties and are not endorsed by a national consensus building 
entity. We wish to clarify that these measures would be submitted by 
facilities, not physicians, and that the data for the measures will be 
displayed at the facility level.
    Comment: A commenter stated that several distinct factors should be 
considered in the selection of measures for ASCs: (1) The diversity in 
the case mix across ASCs (that is, a single subspecialty ASC (for 
example, endoscopy centers) versus a ``multi-specialty'' ASC may 
require exemptions based on case mix or low volume); (2) Hospital OQR 
Program measure specifications may not be relevant for all ASCs; (3) 
the reporting burden for most ASCs which are classified as small 
business; and (4) the use of EHRs in ASCs is not widespread.
    Response: We have considered these factors in selecting measures 
for the ASC Quality Reporting Program. In general, we have sought to 
select measures that are broadly applicable to ASCs, given the 
diversity in case mix and ASC specialty. The majority of the measures 
selected for CY 2014, CY 2015 and CY 2016 for this program are 
applicable regardless of the types of procedures performed at a 
particular facility. We will consider the usefulness of specialty-
specific measures as well as exemptions based on case mix or low volume 
for ASCs as we gain experience with the measures we are adopting and as 
we develop future measures. We also sought to align the ASC measures 
with measures selected for other settings/providers that perform 
surgeries, such as HOPDs. However, we acknowledge that not all 
procedures that are performed in HOPDs are performed in ASCs, and hence 
that some Hospital OQR measures may not be as relevant for ASCs or may 
need to be tailored to the types of procedures approved to be performed 
in ASCs. We also understand that most ASCs are small businesses for 
which data collection burden or EHR adoption may pose challenges. 
Therefore, in order to reduce burden, we proposed and are finalizing 
only claims-based measures for the first year of the program and adding 
only structural measures in the second year of the program.
    Comment: A few commenters were disappointed that no patient 
experience of care measures were proposed for ASCs. The commenters 
encouraged CMS to facilitate voluntary patient experience of care 
measures for ASCs.
    Response: We are considering a patient experience of care survey 
for the ASC Quality Reporting Program, and will also consider the 
operational feasibility of allowing voluntary reporting of such a 
measure in the future.

[[Page 74496]]

3. ASC Quality Measures for the CY 2014 Payment Determination
a. Claims-Based Measures Requiring Submission of Quality Data Codes 
(QDCs) Beginning January 1, 2012
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42338 through 42342), 
we proposed 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 
proposed these six measures for use in the CY 2014 payment 
determination.
    The seventh claims-based measure we proposed for the CY 2014 
payment determination is Selection of Prophylactic Antibiotic: First OR 
Second Generation Cephalosporin. 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 is NQF-endorsed. It is an 
infection control process measure and is currently adopted in the 
Hospital IQR Program and the PQRS.
    We proposed to collect all seven measures using the claims-based 
quality data codes (QDCs) data collection mechanism. We proposed to 
require ASCs to report on ASC claims a quality data code (QDC) to be 
used for reporting quality data. We proposed that an ASC would need to 
add a QDC to any claim involving a proposed claims-based quality 
measure. We stated that CMS is in the process of developing QDCs for 
each proposed claims-based quality measure and the QDC would be a CPT 
Category II code or a HCPCS Level II G-code if an appropriate CPT code 
is not available. We stated that more information on the QDCs that 
would be associated with the proposed quality measures will be provided 
in this CY 2012 OPPS/ASC final rule with comment period. Additionally, 
we proposed 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 stated that, 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.\37\ For the seventh 
measure, the specifications can be found on the PQRS Web site at: 
http://www.cms.gov/pqrs/downloads/2011_PhysQualRptg_MeasuresGroups_SpecificationsManual_033111.pdf?agree=yes&next=Accept.
---------------------------------------------------------------------------

    \37\ ASC Quality Measures: Implementation Guide Version 1.4, ASC 
Quality Collaboration, December 2010.
---------------------------------------------------------------------------

    Comment: Commenters generally supported most of the proposed 
measures for CY 2014 and requested harmonization of the measures with 
the Hospital OQR Program as appropriate, so that comparative quality 
data is available to consumers. A commenter requested that CMS provide 
measure benchmarks for ASCs to assess how they stack up against their 
peers.
    Response: We thank the commenters for the support of our intent to 
align and harmonize measures across Hospital OQR and ASC Quality 
Reporting Programs to keep consumers better informed when making 
outpatient care decisions. When publicly displaying measures, we 
provide State and national averages whenever possible for comparative 
purposes. For the Hospital IQR Program, we provide benchmarks using the 
Achievable Benchmarks of Care methodology at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228768205297. We also provide such benchmarks for the Hospital OQR measures 
at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228768205213. However, such information is provided for informational purposes 
and quality improvement purposes and should not be interpreted as 
performance standards.
    Comment: Several commenters believed that the number of measures 
proposed for ASCs is excessive and recommended that CMS adopt three 
patient safety measures initially to allow ASCs more time to gain 
experience with quality reporting.
    Response: We are mindful of the potential burden on ASCs when we 
contemplated measures for ASCs. We determined that the initial adoption 
of claims-based measures would ease the data collection burden on ASCs 
while providing sufficient time for ASCs to gain experience with 
quality reporting. To that end, instead of proposing chart-abstracted 
measures, we proposed seven claims-based measures and 1 NHSN-based 
reporting measure for the first year of ASC Quality Reporting Program. 
As discussed below, in this final rule with comment period, we are 
finalizing only five of the seven claims-based measures we proposed for 
CY 2014 payment determination. In addition, we are delaying the data 
collection until October 1, 2012 for the claims-based measures for the 
CY 2014 payment determination.
    Comment: Several commenters supported the submission of QDCs on 
administrative claims which they believed are less burdensome, given 
that ASCs already submit a CMS-1500 form for each Medicare beneficiary 
served. A few commenters were concerned about the potential burden 
caused by the use CPT II codes--QDCs and questioned why CMS cannot 
adopt the same data

[[Page 74497]]

collection code process used in Hospital OQR Program claims-based 
measures. Some commenters were very concerned that proposed method of 
collection via QDCs has not been tested for the ASC setting. One 
commenter believed that the PQRS experienced problems using QDCs.
    Response: We agree with the commenters that stated that QDCs are a 
low-burden method of collecting quality data. The information needed 
for the current claims-based measures used in the Hospital OQR Program 
can be captured using solely ICD-9 codes and CPT-I codes placed on 
claims submitted to CMS. This is not the case for the ASC quality 
measures, because the type of information needed to assess whether 
numerator events occurred for these measures (and for some of the 
measures, events that help define the denominator) are not captured in 
these two coding systems. This type of information can be captured 
using the CPT-II and G-codes that would be placed on claims in addition 
to the ICD-9 codes and CPT-I codes used to capture diagnoses and 
procedure codes.
    The other method that could have been used to collect information 
for these measures is submission of retrospectively chart-abstracted 
data elements to CMS separately from claims. However, we determined 
that this method of data collection for these measures may be more 
burdensome for ASCs than submitting CPT-II codes and G-codes on the 
claims for these measures in addition to the ICD-9 and CPT-I codes that 
they submit to CMS for payment purposes. In order to submit quality 
data using CPT-II and HCPCS codes, ASCs would need to add the 
appropriate QDCs for measure numerators and denominators on Medicare 
Part B claim forms. Based on the public comments we received, we are 
deferring the start date of required submissions of QDCs for the ASC 
Quality Reporting Program to October 1, 2012.
    The QDCs are a means of data collection for quality measures that 
is already in use in PQRS. PQRS has received quality measure 
information via QDCs reported via claims since the program's inception 
in 2007. From 2007 through 2008, there were instances where QDCs were 
reported incorrectly and therefore deemed invalid due to a number of 
reasons. These reasons included: diagnosis mismatch; gender mismatch; 
reporting the QDC on a denominator code not contained within the 
measure; and reporting an invalid modifier (PQRS uses 1P, 2P, 3P and 8P 
modifiers to represent performance exclusions and performance not met 
instances). However, in recent reporting years, we have seen the QDC 
errors decrease to a very low percentage (less than 1 percent errors 
are QDC-related) attributed to providers' progressive experience with 
QDCs, our education and outreach efforts, as well as our streamlining 
of diagnosis-specific QDCs. Therefore, we believe that over time, ASCs 
will have the same success as PQRS with QDC-based measures.
    Comment: For future options for data submission, a commenter 
suggested using ASC-specific registry which is under consideration for 
development by registry developers.
    Response: We thank the commenter for the suggestion. In our search 
for future quality measures for ASCs, we will consider ASC-specific 
registry-based measures.
    The seven proposed claims-based 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 specifications for this 
NQF-endorsed measure developed by the ASC QC 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 (for example, 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.
    In the proposed rule, we invited 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 
(76 FR 42339). 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 to us 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 who are 
part of the broader population to which the measure applies. As stated 
in the CY 2012 OPPS/ASC proposed rule, if this measure is 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.
    Comment: Several commenters supported the proposed measure, but 
noted that this measure does not apply to GI ASCs since the risk of 
burn in conjunction with endoscopic procedures is rare and minor.
    Response: We thank the commenters for the support of the measure. 
The denominator for the NQF-endorsed

[[Page 74498]]

measure is all ASC admissions. NQF has indicated to us 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. Therefore, the 
measure is applicable to all Medicare Part B ASC admissions It 
addresses ``[u]nintended tissue injury caused by any of the six 
recognized mechanisms: scalds, contact, fire, chemical, electrical or 
radiation (for example, warming devices, prep solutions, and 
electrosurgical unit or laser).'' Although patient burns may be rare in 
GI ASCs, we believe that inclusion of the measure in the ASC Quality 
Reporting Program will help ensure that such burns never happen. We 
refer commenters to the specifications for this measure for more 
information.
    After consideration of the public comments we received, we are 
finalizing this measure for the CY 2014 payment determination with data 
collection to begin on October 1, 2012 (as discussed in section 
XIV.K.1. of this final rule with comment period).
(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 specifications for this NQF-
endorsed measure developed by the ASC QC can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf.
    The ASC QC in its 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.
    In the proposed rule, we invited 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 (76 FR 42339). While the NQF-endorsed specification 
for this measure includes all ASC admissions, our proposal to use 
information submitted on claims to calculate the 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 
to us 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 who are part of the broader population to which the measure 
applies. As stated in the CY 2012 OPPS/ASC proposed rule, if this 
measure is 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.
    Comment: All the commenters who commented on this measure supported 
the proposed measure but were concerned about the proposed data 
collection starting on January 1, 2012.
    Response: We thank the commenters for the support of the measure. 
As stated in XIV.K.1. of this final rule with comment period, we are 
delaying the beginning of the data collection until October 1, 2012.
    After consideration of the public comments we received, we are 
finalizing this measure for the CY 2014 payment determination with data 
collection to begin on October 1, 2012.
(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.\38\ The Joint Commission has issued a 
Universal Protocol to prevent such serious surgical errors.\39\ 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 its ASC Quality Measures: 
Implementation Guide Version 1.4 defines ``wrong'' as ``not in 
accordance with intended site, side, patient, procedure or implant.'' 
The specifications for this NQF-endorsed measure developed by the ASC 
QC can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf.
---------------------------------------------------------------------------

    \38\ http://www.qualityforum.org/Publications/2007/03/Serious_Reportable_Events_in_Healthcare%E2%80%932006_Update.aspx
    \39\ 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

[[Page 74499]]

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.
    In the proposed rule we invited 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 
(76 FR 42340). 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 to us 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 who are 
part of the broader population to which the measure applies. As stated 
in the CY 2012 OPPS/ASC proposed rule, if this measure is 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.
    Comment: All of the commenters who commented on this measure 
supported the proposed measure. However, some commenters indicated that 
this measure may not apply to GI ASCs since the risk of performing 
wrong site, wrong side, wrong patient, wrong procedure, and wrong 
implant in ASC endoscopic procedures is rare (for example, confusion 
over an upper GI endoscopy and colonoscopy, or a single procedure in 
one encounter versus both an upper endoscopy and colonoscopy in the 
same encounter). Also, commenters were concerned about the proposed 
data collection starting on January 1, 2012.
    Response: We thank the commenters for the support of the measure. 
As discussed above, this measure is applicable to all Medicare Part B 
ASC admissions. Although this type of mishap may be rare, we believe 
that inclusion of the measure in the ASC Quality Reporting Program will 
help ensure they will never happen. Note that, as stated in section 
XIV.K.1. of this final rule with comment period, we are delaying the 
beginning of the data collection until October 1, 2012.
    After consideration of the public comments we received, we are 
finalizing this measure for the CY 2014 payment determination with data 
collection to being on October 1, 2012.
(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 specifications for this NQF-endorsed measure developed by the 
ASC QC measure can be found at: http:[sol][sol]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.
    In the proposed rule we invited 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 
(76 FR 42340). 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 to us 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 who are 
part of the broader population to which the measure applies. As stated 
in the CY 2012 OPPS/ASC proposed rule, if the measure is 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.
    Comment: All of the commenters who commented on this measure 
supported the proposed measure. However, one commenter noted that the 
measure should be expanded to include patients who return home after 
ASC procedure, but are then admitted to a hospital shortly after for a 
procedure-related issue. The commenter urged CMS to create methods to 
track the adverse outcomes of these patients.
    Response: We thank the commenters for their support. We also thank 
the commenter for the suggestion, and will consider it in future 
measure development and refinement.
    After consideration of the public comments we received, we are 
finalizing this measure for the CY 2014 payment determination with data 
collection to begin on October 1, 2012 (as discussed in section 
XIV.K.1. of this final rule with comment period).
(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.40 41 42 The measurement of

[[Page 74500]]

timely antibiotic administration for surgical patients is occurring in 
the Hospital IQR Program, Hospital OQR Program and the PQRS. 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 specifications for this NQF-endorsed measure developed by the ASC 
QC measure can be found at: http:[sol][sol]www.ascquality.org/
documents/ASCQualityCollaborationImplementationGuide.pdf.
---------------------------------------------------------------------------

    \40\ Classen, D. et al.: The timing of prophylactic 
administration of antibiotics and the risk of surgical wound 
infection. NEJM. 1992;326(5):281-286.
    \41\ 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.
    \42\ 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 [hellip] 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.
    In the proposed rule, we invited 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 
(76 FR 42341). While the NQF-endorsed specification for this measure 
includes all ASC admissions with a preoperative order for a 
prophylactic IV antibiotic for prevention of surgical site infection, 
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 to us 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 who are part of the broader population 
to which the measure applies. As stated in the CY 2012 OPPS/ASC 
proposed rule, if the measure is 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.
    Comment: A few commenters opposed the measure and believed that 
this measure is not applicable to ASC GI endoscopic centers. A few 
commenters considered the proposed data collection to begin on January 
1, 2012 unreasonable.
    Response: The measure assesses whether an antibiotic is given on 
time prior to a procedure if it was ordered. We note that the 
specifications for the measure list endoscopy as one of the examples of 
procedures. As stated in section XIV.K.1. of this final rule with 
comment period, we are delaying the beginning of data collection until 
October 1, 2012 for the CY 2014 payment determination.
    Comment: A few commenters did not believe this measure is 
burdensome since it is a claims-based measure, but urged that CMS 
provide training to ASCs regarding when to enter the specific QDCs 
appropriately. A commenter asked for clarification whether the proposed 
QDC-codes should be reported with every claim for an ASC procedure or 
only if the adverse event has occurred. One commenter suggested that 
CMS provide education to ASCs regarding whether QDCs need to be 
reported with every claim, or only for those where an adverse event 
occurred.
    Response: We also do not believe submitting QDCs on claims is 
burdensome. In order to submit quality data using CPT-II and HCPCS 
codes, ASCs would need to add the appropriate QDCs for measure 
numerators and denominators on Medicare Part B claim forms. We intend 
to provide education and outreach on data submission for the reporting 
program, and we will publish details about the QDCs and whether they 
will need to be submitted for numerators and denominators in the ASC 
Quality Reporting Program Specifications Manual. We anticipate 
releasing this manual in second quarter 2012.
    Comment: One commenter noted that CMS incorrectly stated that the 
NQF-endorsed specification for this measure includes all ASC 
admissions. The commenter stated that the NQF specification limits the 
denominator to all ASC admissions with a pre-operative order for a 
prophylactic IV antibiotic for the prevention of surgical site 
infection.
    The commenter recommended giving the public the opportunity to 
comment on the QDC descriptors that CMS develops in the future. 
Specifically, the commenter requested the following corrections: (1) 
The required timing of antibiotics begins with the initiation of the IV 
antibiotic, not the pre-operative order; and (2) the specifications 
limit the denominator to all ASC admissions with a preoperative order 
for IV antibiotics, not all ASC admissions. The commenter believed that 
three QDCs are needed to describe: (1) Timely administration; (2) 
untimely administration; and (3) circumstances where no prophylactic 
was ordered.
    Response: The commenter is correct, the denominator for the NQF-
endorsed measure is all ASC admissions with a pre-operative order for a 
prophylactic IV antibiotic for prevention of surgical site

[[Page 74501]]

infections. NQF has indicated to us 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. We correctly described the measure initially but 
then did not state it completely when describing the application of the 
measure to a subset of patients. As the commenter stated, the 
assessment of appropriateness of timing begins with the initiation of 
IV antibiotics relative to the initial surgical incision or the 
beginning of the procedure. We will ensure these aspects of the measure 
are clarified in the Specifications Manual CMS issues for this program.
    Comment: A commenter recommended the discontinuation of this 
measure once the proposed surgical site infection measure is 
implemented to include additional ASC procedures.
    Response: We thank the commenter for the suggestion. As discussed 
in section XIV.K.3.b. below, for the ASC Quality Reporting Program, we 
are not finalizing the surgical site infection measure in this 
rulemaking.
    After consideration of the public comments we received, we are 
finalizing this measure for the CY 2014 payment determination with data 
collection to begin on October 1, 2012 (as discussed in section XIV.K.1 
of this final rule with comment period).
(6) Ambulatory Surgery Patients With Appropriate Method of Hair Removal 
(NQF 0515)
    The ASC QC \43\ 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.'' \44\ 
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.\45\ In 2002, 
the Association of Operating Room Nurses published similar guidelines 
for appropriate hair removal.\46\ 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 the level of adherence to this guideline in outpatient 
surgical settings such as ASCs is not known. Therefore, we believe that 
this measure is still appropriate for use in the ASC setting. In the CY 
2012 OPPS/ASC proposed rule (76 FR 42341 through 42342), we proposed to 
adopt the NQF-endorsed measure to capture the percentage of ASC 
admissions with appropriate surgical site hair removal. The 
specifications for this NQF-endorsed measure developed by the ASC QC 
can be found at: http://www.ascquality.org/documents/ASCQualityCollaborationImplementationGuide.pdf. Read together, sections 
1833(i)(7)(B) and 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 quality of surgical care performed in ASCs, as 
measured by appropriate surgical site hair removal. 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.
---------------------------------------------------------------------------

    \43\ ASC QC Quality measures: Implementation Guide version 1.4. 
ASC Quality Collaboration. December 2010.
    \44\ Seropian, R., Reynolds, B.M.: Wound infections after 
preoperative depilatory versus razor preparation. Am J Surg.1971 
Mar;121(3):251-4.
    \45\ http://www.cdc.gov/ncidod/dhqp/pdf/guidelines/SSI.pdf.
    \46\ Association of Operating Room Nurses. Recommended practices 
for skin preparation of patients. AORN J. 2002 Jan;75(1):184-7.
---------------------------------------------------------------------------

    In the proposed rule, we invited 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 
(76 FR 42341). While the NQF-endorsed specification for this measure 
includes all ASC admissions with surgical site hair removal, our 
proposal to use information submitted on claims to calculate these 
measures necessitates 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 
indicated to us 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 who are part of the broader population 
to which the measure applies. As stated in the CY 2012 OPPS/ASC 
proposed rule, if the measure is 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.
    Comment: A few commenters stated that the measure does not apply to 
endoscopy centers. Several commenters opposed this measure because they 
stated that there is no conclusive clinical evidence that clipping, 
rather than other hair removal techniques, reduces surgical site 
infections across a broad spectrum of surgical procedures. Furthermore, 
the scrotal surgery exclusion does not appear to be present in the ASC 
specifications. Two commenters found it confusing that CMS has 
currently suspended this measure from the Hospital IQR Program due to 
the measure's ``topped-out'' status.
    Response: CMS agrees with these comments, and is not finalizing 
this measure for the ASC Quality Reporting Program. A recently 
published systematic review by Alexander JW et al. (Annals of 
Surgery.2001;253(6):1082-1093) also indicates that not removing hair is 
associated with the least probability of infection.
    Comment: One commenter indicated that CMS incorrectly stated that 
the NQF-endorsed specification for this measure includes all ASC 
admissions. The commenter clarified that the NQF specifications limit 
the denominator to all ASC admissions with surgical site hair removal. 
A commenter noted that the public should have the opportunity to 
comment on the descriptors CMS develops. The commenter believed that a 
correction that needs to be made in the rule: the specifications limit 
the denominator to all ASC admissions with surgical site hair removal, 
not all ASC admissions. Additionally, the commenter believed that a set 
of three QDCs would be needed to describe: (1) Appropriate hair 
removal; (2) inappropriate hair removal; and (3) circumstances where no 
hair was removed or other exclusions.
    Response: As discussed above, we are not finalizing this measure 
for the ASC Quality Reporting Program.
    After consideration of the public comments we received, we are not

[[Page 74502]]

finalizing this measure for 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 proposed 
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. 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 measure development process employed the same process used by 
the American Medical Association Physician Consortium for Performance 
Improvement (AMA-PCPI). The AMA PCPI is a consortium of physicians 
dedicated to improving patient safety by developing evidence based 
performance measures, promoting the implementation of effective and 
relevant clinical performance improvement activities, and advancing the 
science of clinical performance measurement and improvement. The AMA-
PCPI develops many measures for the PQRS program. The AMA-PCPI 
development process for this measure is a consensus-based process that 
involves stakeholder input, including surgeons performing procedures in 
outpatient settings such as ASCs. Because of this, we believe this 
measure meets the requirement of reflecting consensus among affected 
parties.
    Further, 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 PQRS, and a similar measure (NQF 
0528) has been implemented in the Hospital OQR Program and the 
Hospital IQR Program.
    In the proposed rule, we invited 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 
(76 FR 42342). While the NQF-endorsed specification for this measure 
includes all 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, 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 
to us 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 who are part of the broader population to which the measure 
applies. As stated in the CY 2012 OPPS/ASC proposed rule, if the 
measure is 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.
    Comment: Several commenters expressed various concerns regarding 
this measure: A commenter believed this is a physician-level measure 
and not an ASC-level measure. Therefore, the commenter suggested that 
CMS report the antibiotic selection data submitted by physicians for 
this measure by place of service (POS) and aggregate physician 
performance data across surgical settings, including hospital inpatient 
and outpatient settings, and ASC setting.
    A commenter believed that this measure does not represent the most 
prevalent area of services provided by ASCs. A commenter stated that 
data collection for this measure is very burdensome. One commenter 
requested clarification on what procedure codes would allow for the 
best comparison since very few codes in the current denominator set are 
relevant to the ASC setting (according to the commenter, ASCs only 
accounted for 0.16 percent of total Medicare procedures in 2009). A 
commenter asked that CMS clarify and educate ASCs as to whether the 
proposed QDC-codes should be reported with every claim for an ASC 
procedure or only if the adverse event has occurred. A commenter stated 
that this measure should be phased out after the surgical site 
infection measure has been

[[Page 74503]]

expanded to include additional ASC procedures. Given the NQF's 
endorsement for this measure is non-ASC-specific, another commenter 
encouraged CMS to seek NQF endorsement specific to the ASC setting to 
ensure accuracy in data collection and implementation.
    Response: We agree that the measure may not address the most 
prevalent procedures performed by ASCs and we will need to examine how 
the measure may be modified in order to capture those procedures most 
commonly performed in ASCs. Therefore, we are not finalizing this 
measure for the CY 2014 payment determination at this time.
    After consideration of the public comments we received, we are not 
finalizing the selection of prophylactic antibiotic: first OR second 
generation cephalosporin measure for ASCs for 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.\47\ 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 Surgical Site 
Infection 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 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.
---------------------------------------------------------------------------

    \47\ 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 proposed to adopt it for the CY 
2014 Hospital OQR Program. It also has been adopted for the FY 2014 
Hospital IQR Program. Because we proposed the same measure for Hospital 
OQR Program, we refer readers to the discussion of this measure in 
sections XIV.C.2.a. of the proposed rule and this final rule with 
comment period. 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 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 proposed 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 sections XIV.C.2.a. of the proposed rule and this final rule 
with comment period. In the proposed rule, we invited public comment on 
this proposed measure and the reporting mechanism.
    Comment: Some commenters requested clarification on how infections 
will be identified by ASCs in cases where patients go home on the same 
day or go to another hospital for the infection. Commenters believed 
that it would be challenging to survey outpatients, including ASC 
patients, to determine whether an infection has developed and if it 
meets the NHSN definition for surgical site infection.
    Some commenters believed that the NHSN module was not relevant for 
ASCs. A commenter cited the measure specification that ``SSI [surgical 
site infections] are to be identified on original admission or upon 
readmission to the facility of the original operative procedures'' and 
concluded this measure is inappropriate for ASCs due to patients' short 
length of stay and their likely admission to a hospital when an 
infection occurs. Because the commenter believed that the 10 NHSN-
defined operative procedure categories have little relevance to the 
predominant procedures performed in ASCs, the commenter recommended 
that CDC re-specify the measure to include common ASC-specific 
procedures to identify related infections in the numerator.
    One commenter urged CMS to consider facility exemptions in 
implementing this measure. The commenter stated that ASCs seldom 
perform operative procedures as defined by the CDC: ``an operative 
procedures as the one in which a surgeon makes at least one incision 
through the skin or mucous membrane, including laparoscopic approach, 
and closes the incision before the patient leaves the operating room.''
    Another commenter stated that ASCs normally do not have an ongoing 
relationship with patients and recommended that CMS require ASCs to 
conduct follow-up phone calls with patients, caregivers or physicians 
within 30 days of procedures to identify patients who have developed 
surgical site infections. Commenters also recommended that CMS require 
that ASCs include this information in medical records as part of the 
data submission to NHSN, preferably via electronic submission.
    Several commenters supported the surgical site infection measure 
but the disparate codes used by hospital outpatient departments and 
ASCs and the ICD codes used in the NHSN module would create potential 
inaccurate data submission. The commenters believed that the uncommon 
use of NHSN in ASCs would

[[Page 74504]]

add challenges to follow-up surveillance.
    Response: We thank the commenters for their views. As discussed 
below, we are not finalizing this proposed measure.
    Comment: One commenter encouraged CMS to accelerate the timeframe 
for making the surgical site infection measure data for ASCs publicly 
available. The commenter believed that once this outcome measure is 
implemented, two ASC surgical infection control measures (ASC-5: 
Prophylactic IV antibiotic timing, and ASC-7: Prophylactic antibiotic 
selection for surgical patients) can be eliminated from the Hospital 
OQR Program. The commenter suggested harmonization of this measure 
across different HOPD surgical and ASC settings.
    Response: We appreciate this supportive comment. At this time, we 
are not finalizing surgical site infection measures for the Hospital 
OQR Program or the ASC Quality Reporting Program. We will consider 
proposing a surgical site infection measure for the ASC Quality 
Reporting Program in the future. We agree with the commenters that a 
number of procedures frequently performed in outpatient surgical 
settings like ASCs are not addressed in the current surgical site 
infection measure adopted for the Hospital IQR Program, and that a 
follow-up and collection protocol that is better suited to outpatient 
surgical settings for such a measure should be developed. We also agree 
with the suggestion that we harmonize measures between the ASC Quality 
Reporting Program and the Hospital OQR Program, to the extent feasible. 
These comments will be taken into consideration in future surgical site 
infection measurement proposals for the ASC Quality Reporting Program.
    Comment: A commenter believed that the measure should facilitate 
comparisons across ASCs and hospital outpatient surgery setting by 
making the data more patient-centered for easy comprehension.
    Response: We appreciate the input from the commenter. Although we 
are not adopting this measure at this time, we will take this view into 
consideration as we consider proposing a surgical site infection 
measure in the future.
    Comment: A commenter was very concerned about the burden to report 
to NHSN and cited that 40 ASCs that are currently participating in NHSN 
reported registration and data submission are very time-consuming. The 
commenter urged CDC to streamline these processes to make them more 
user-friendly.
    Response: We appreciate the input from the commenter regarding 
potential burden and the need for user-friendly processes. As stated 
above, we are not finalizing this measure for the CY 2014 payment 
determination.
    Comment: Some commenters requested that CMS delay implementation of 
the surgical site infection measure to the CY 2015 payment 
determination with data collection starting on January 1, 2014 through 
June 30, 2014 to allow ASC to gain experience with the NHSN module.
    Response: As stated above, we are not finalizing the surgical site 
infection measure for the CY 2014 payment determination.
    After consideration of the public comments we received, we are not 
finalizing the surgical site infection measure for ASCs for CY 2014 
payment determination. We will consider proposing the measure once a 
suitable set of procedures and a protocol for ASCs and HOPDs has been 
developed.
    In summary, we are finalizing five claims-based measures total 
using the QDC data collection mechanism for the CY 2014 payment 
determination. Based upon the public comment we received, we are 
finalizing the data submission for these five claims-based measures to 
begin on October 1, 2012. This issue is discussed in more detail in the 
Form, Manner and Timing section for this program. The quality measures 
we are adopting for ASCs for the CY 2014 payment determination are 
listed below with the ASC prefix:
[GRAPHIC] [TIFF OMITTED] TR30NO11.135

4. 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 proposed to retain measures from one CY payment 
determination to another. In the CY 2012 OPPS/ASC proposed rule (76 FR 
42343), we proposed to retain the measures we proposed 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. In the proposed rule, we invited public comments on this 
proposal.
    Comment: One commenter supported the proposed retention of the 
measures we finalized for the CY 2014 payment determination for the CY 
2015 payment determination.
    Response: We thank the commenter for supporting the retention of 
these measures.
    After consideration of the public comment we received, we are 
finalizing our proposal to retain measures from one CY payment 
determination to the next. For the CY 2014 payment determination, as 
discussed above, we are finalizing five claims-based measures. 
Therefore, we will retain these five measures for the CY 2015 payment 
determination.
b. Structural Measures for the CY 2015 Payment Determination
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42343 through 42346), 
for the CY 2015 payment determination, we proposed to adopt two 
structural measures: Safe Surgery Checklist Use, and ASC Facility 
Volume Data on

[[Page 74505]]

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 post-surgical 
mortality.\48\ 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.\49\
---------------------------------------------------------------------------

    \48\ 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.
    \49\ 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:
[GRAPHIC] [TIFF OMITTED] TR30NO11.136

    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.\50\ A safe surgery checklist would 
reduce the potential for human error, which would increase the safety 
of the surgical environment. Another 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.
---------------------------------------------------------------------------

    \50\ 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, TJC, 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 sections XIV.C.2.c.1 of the proposed rule and 
this final rule with comment period, 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,\51\ which is 
comprised of the American Association of Nurse Anesthetists, the 
American College of Surgeons, the American Association of Surgical 
Physician Assistants, the

[[Page 74506]]

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,\52\ 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.53 54 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 TJC has included safe surgery checklist practices among 
those to be used to achieve NPSGs adopted for 2011 for surgeries 
performed in ambulatory settings and hospitals.\55\
---------------------------------------------------------------------------

    \51\ http://www.cspsteam.org/safesurgerychecklist/safesurgerychecklist.html.
    \52\ 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.
    \53\ 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.
    \54\ Birkmeyer, JD (2010) ``Strategies for Improving Surgical 
Quality--Checklists and Beyond.'' NEJM. 363: 1963-1965.
    \55\ http://www.jointcommission.org/standards_information/npsgs.aspx.
---------------------------------------------------------------------------

    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 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 also proposed the same measure for the Hospital OQR Program 
for CY 2014 payment determination.
    For the CY 2015 payment determination, we proposed 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.
    In the proposed rule, we invited 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.
    Comment: Several commenters fully supported the Safe Surgery 
Checklist measure and believed the measure helps to ensure safe 
surgical practices prior to administration of anesthesia, incision, and 
the patient's departure from the operating room. A commenter did not 
believe this measure would impose substantial burden on ASCs because 
the data is collected via a Web-based tool. Some commenters appreciated 
the flexibility given to ASCs in the design and use of a specific 
checklist to meet their needs. Commenters urged CMS to revise the 
measure name to include, ``safe surgery/procedure checklist'' and 
modify its purpose statement to indicate the intent of the measure as 
``an assessment whether ASCs use a safe surgery/procedure checklist 
that addresses effective communication and helps ensure that safe 
practices are being performed at three critical perioperative or 
periprocedural periods: (1) Prior to the administrative of anesthesia 
or sedation; (2) prior to incision or the beginning of the procedure; 
and (3) prior to the patient leaving the operating or procedure room.'' 
Commenters urged harmonization with the same measure proposed in the 
Hospital OQR Program.
    Response: We agree with the commenter that this measure would 
impose minimal burden because the data are submitted using a Web-based 
data submission tool. The ASC safe surgery checklist measure is aligned 
with the safe surgery checklist measure that we are adopting for HOPDs.
    Comment: A few commenters recommended a 60-day time period for data 
submission rather than the 45-day window and suggested that CMS change 
this measure into a claims-based measure rather than using an online 
tool. Commenters recommended changing the proposed collection time 
period from January 1, 2012 through December 31, 2012 to January 1, 
2013 through December 31, 2013 and delay the data submission period 
until early 2014. The commenters did not provide a rationale for this 
suggestion.
    Response: The goal of this measure is to assess whether a 
particular ASC is using a safe surgery checklist from January 1, 2012 
until December 31, 2012, requiring one yes/no response for this 
measure, not to assess whether a safe surgery checklist is used for 
each Medicare Part B patient. Therefore, a claims-based measure would 
not be appropriate to measure whether an ASC is using a safe surgery 
checklist because we are not measuring its use on an individual claims-
based level.
    We note that the Web based reporting tool is a minimally burdensome 
method of collecting this facility level information, and is currently 
in use for similar types of measures for both the Hospital IQR and 
Hospital OQR Programs. We seek to align the reporting periods for the 
reporting programs and currently, a 45-day window is being used for 
data collection for some structural measures in the Hospital IQR and 
Hospital OQR Programs. At this time, we are not changing the time 
periods for the structural measures because there is minimal burden and 
advance preparation to collect and report this information to CMS.
    Comment: A few commenters did not support this measure for 
different reasons. Some commenters believed that the use of a checklist 
cannot be validated by CMS, and therefore, it should not be considered 
as a measure. Some commenters noted that it is not NQF-endorsed. Some 
commenters objected to the collection of patient- or procedure-detailed 
level data. Commenters were also concerned about the implementation of 
this measure simultaneously with ICD-10 conversion would further tax 
facilities' resources. A commenter stated this measure is duplicative 
because all accredited ASCs are already required to use a safe surgery 
checklist. Another commenter noted that the safe surgery checklist as 
required in the Conditions for Coverage could also meet the criteria 
for this measure. A few commenters stated this measure does not apply 
to ASCs performing GI surgical procedures and requested the adoption of 
a safe surgery

[[Page 74507]]

checklist that is specific to GI procedures performed in ASCs.
    Response: We acknowledge that this measure cannot be validated 
because it does not use charts or claims. Nonetheless, we believe the 
measure would heighten ASCs' awareness of patient safety during 
surgical procedures and safeguard against preventable human errors. As 
discussed above, we believe this measure meets the statutory 
requirements, even if it is not NQF-endorsed. There is no NQF-endorsed 
measure for 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. As stated 
in previous rulemaking, we believe that consensus among affected 
parties can be reflected through means other than NQF endorsement, 
including consensus achieved during measure development processes, 
consensus shown through broad acceptance and use of measure; and 
consensus through public comment. The use of a safe surgery checklist 
has been adopted by the World Federation of Societies of 
Anesthesiologists, and is one of the safe surgery principles endorsed 
by the Council on Surgical and Perioperative Safety which is comprised 
of multiple medical professional organizations.
    We disagree with the commenters who suggested that a safe surgery 
checklist would not apply to GI procedures. Some GI procedures are 
performed under anesthesia, and wrong site surgery and wrong procedure 
is possible for GI procedures, all of which are general topics that 
would be covered under a safe surgery checklist. Therefore, we believe 
that a well-designed, comprehensive generic safe surgery checklist 
should cover GI-specific surgical procedure elements as well.
    We do not believe that the reporting of this structural measure to 
CMS for this quality reporting program and subsequent public reporting 
is duplicative of accreditation requirements or conditions of coverage 
for ASCs, because these other requirements do not require the reporting 
this information to CMS annually by each eligible facility and the 
subsequent public reporting of this information on a CMS Web site. As 
stated previously, this measure is not collected on an individual 
patient or procedure level and does not involve the use of ICD-9 codes 
or ICD-10 codes.
    After consideration of the public comments we received, we are 
finalizing this measure for CY 2015 payment determination. We are 
finalizing our proposal for the CY 2015 payment determination that ASCs 
would report their yes/no response regarding use of a safe surgery 
checklist between July 1, 2013 and August 15, 2013 for the time period 
from January 1, 2012 through December 31, 2012 using an online measure 
submission Web page available on http://www.qualitynet.org. Details 
regarding measure submission timelines and collection periods are 
discussed in the Form, Manner and Timing section for this program in 
this final rule with comment period.
(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.56 57 58 
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 (surgical site infection, 
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.
---------------------------------------------------------------------------

    \56\ Livingston, E.H.; Cao, J. ``Procedure Volume as a Predictor 
of Surgical Outcomes''. JAMA. 2010;304(1):95-97.
    \57\ 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.
    \58\ 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. In the CY 2012 OPPS/
ASC proposed rule (76 FR 42345), we proposed 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 the proposed rule, we also proposed 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

[[Page 74508]]

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 
use 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 proposed 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. In the CY 2012 OPPS/ASC proposed rule (76 FR 
42346), we included a table which listed 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 would 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). In the 
proposed rule, we invited public comment on this proposal.
    Comment: A commenter questioned why cardiovascular and respiratory 
codes are included for the same measure proposed in the Hospital OQR 
Program and not in the ASC Quality Reporting Program. The commenter 
recommended harmonizing the same categories for both programs for 
consistency.
    Response: The procedures approved for HOPDs and for ASCs are not 
the same in type or frequency. For HOPDs, an analysis of prior years' 
data indicated that procedures performed in the eight broad categories 
that we proposed (eye, cardiovascular, gastrointestinal, genitourinary, 
musculoskeletal, nervous, respiratory, and skin systems) accounted for 
99 percent of the procedures performed in HOPDs. When we assessed the 
frequency of procedures performed by ASCs using prior year's claims, we 
found that the six procedure categories of gastrointestinal, eye, 
nervous system, musculoskeletal, skin and genitourinary constitute 98.5 
percent of the total volume of procedures performed in ASCs. Therefore, 
unlike HOPDs, cardiovascular and respiratory system procedures were not 
included in the list of most common procedures performed in ASCs. These 
two categories combined would account for 1.5 percent of procedures 
performed in ASCs. This is the reason why procedures performed in these 
two anatomic areas were not included in the ASC procedure volume list 
of procedure codes. We will continue to examine claims data on an 
ongoing basis, and should we become aware of commonly performed 
procedures in the Cardiovascular and Respiratory categories for which 
we should collect volume in the future, we will propose to collect ASC 
procedures for those categories in a future rule.
    Comment: A few commenters fully supported the collection of all-
patient volume data on surgical procedure measure and urged 
harmonization with the same measure adopted in the Hospital OQR 
Program. Another commenter noted that the provision of data on high 
volume procedures across hospital outpatient setting and ASC setting 
would facilitate comparisons and subsequent informed decisions. A 
commenter believed that this measure would create incentives for ASCs 
to increase their procedure volumes and improve their performance.
    Response: We appreciate the commenters' support and their insights 
and recommendations. We will continue to work towards harmonizing 
measures, when possible, between different settings and facilities.
    Comment: A few commenters believed that the measure is poorly 
specified, and should be refined to provide meaningful information to 
the consumer. Commenters recommended clarification on the most common 
ASC specialty-specific procedures performed, prior to creation of a 
clearly specified measure. Commenters also urged CMS to solicit input 
from the ASC community to determine how to make publication of volume 
data meaningful prior to implementation. A commenter stated this 
measure is unwarranted as volume data is already available on many 
State-supported or hospital-specific Web sites. Commenters believed 
that reporting volume without providing pertinent information on 
outcomes or patient-reported assessments of care may mislead patients 
about the quality of care delivered.
    Response: Although this measure is not NQF-endorsed, we believed it 
reflects consensus among affected parties as evidenced by peer reviewed 
literature and widespread use on Web sites featuring quality 
information. We believe it is important to provide this information to 
consumers. We agree with commenters that information on outcomes should 
be provided to consumers as well, and we have adopted several surgical 
outcome measures in the ASC Quality Reporting Program so that this 
information can be provided to consumers. As discussed in the proposed 
rule, our goal for this measure is to provide consumers with useful 
information on surgical procedure volume in order to assist patients in 
making informed healthcare decisions. We are aware of Web sites 
reporting volume for some procedures performed in hospitals. However, 
we are not aware of Web sites that are reporting ASC volume by facility 
for commonly performed procedures. We want to create a standardized 
platform for consumers to be able to compare volume information based 
on procedure types commonly performed in ASCs within the 6 broad 
categories.
    However, we agree with commenters that collecting and displaying 
information on the broad categories as currently specified may not be 
meaningful to consumers. Based on the public comments we received that 
the six broad categories will not be meaningful to consumers, we will 
further refine the specification for the categories by grouping the 
codes into procedure types commonly performed in ASCs within the 6 
broad categories so that they are more meaningful to consumers. The 
codes in the 6 broad categories that ASCs would use to collect volume 
remain the same, but the information would be reported to CMS in the 
subcategories that will be defined in the Specifications Manual. We 
will include these refinements in the specifications for the measure 
that will be in an upcoming release of the ASC Specifications Manual. 
We agree with the commenter that obtaining stakeholder input as well as 
consumer testing prior to public reporting of the volume information 
will be beneficial, and will strive to do so, as we have done 
previously for information made available to the public from other 
quality reporting programs.
    Comment: A commenter believed the proposed volume data submission 
via the QualityNet Web site is cumbersome and the implementation should 
be delayed to allow ASCs to gain experience with the online tool.

[[Page 74509]]

    Response: The online tool is a low burden method of collecting 
facility level structural measures, and is currently in use for 
structural measures for both the Hospital IQR and Hospital OQR 
Programs. While the time period for the measure for CY 2015 would be 
calendar year 2012, the information would not be submitted by ASCs 
until mid-2013. Therefore, we do not believe further delay in the 
collection and submission of the measure is necessary.
    After consideration of the public comments we received, we are 
finalizing the proposed ASC facility volume data on selected ASC 
surgical procedures measure for the CY 2015 payment determination, with 
a modification. Based upon public comment received, we will further 
group the codes for commonly performed procedure types within the 6 
broad categories. This information will be provided in an upcoming 
Specifications Manual release. We are finalizing our proposal for the 
CY 2015 payment determination that ASCs would report data with respect 
to these six categories between July 1, 2013 and August 15, 2013 for 
the entire time period from January 1, 2012 through December 31, 2012 
using an online measure submission Web page available on http://
www.qualitynet.org. More information regarding the collection and 
submission requirements for this measure can be found in the Form, 
Manner and Timing section for this program in this final rule with 
comment period.
    In summary, for the CY 2015 payment determination, we are retaining 
the five claims-QDC-based measures finalized for the CY 2014 payment 
determination, and adding two structural measures, safe surgery 
checklist use and ASC facility volume data on selected ASC surgical 
procedures, for a total of 7 measures.
    The measures for ASCs for the CY 2015 payment determination are 
listed below:
[GRAPHIC] [TIFF OMITTED] TR30NO11.137

5. 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 proposed to retain measures from one CY payment 
determination to the next. In the CY 2012 OPPS/ASC proposed rule (76 FR 
42346), we proposed to retain the measures we proposed 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. 
In the proposed rule, we invited public comment on this proposal.
    As discussed previously, we finalized our proposal to retain 
measures from one CY payment determination to another. We did not 
receive any comments objecting to the retention of the measures 
finalized for the CY 2015 payment determination for the CY 2016 payment 
determination. Thus, we are finalizing the retention of the seven 
measures finalized in the CY 2015 payment determination for the CY 2016 
payment determination.

[[Page 74510]]

b. 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:[sol][sol]www.cdc.gov/nhsn/PDFs/
HSPmanual/HPS_Manual.pdf.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42346), for the ASC CY 
2016 payment determination, we proposed to adopt this NQF-endorsed HAI 
measure. We also proposed to adopt this measure for the Hospital OQR 
Program for the CY 2015 payment determination. We refer readers to the 
discussion in sections XIV.C.3.b. of the proposed rule and this final 
rule with comment period for detailed descriptions 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 proposed 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 would begin with 
immunizations from October 1, 2013 to March 31, 2014 for the CY 2016 
payment determination. In the proposed rule, we invited public comment 
on our proposal to adopt this HAI measure into the ASC Quality 
Reporting Program for the CY 2016 payment determination.
    Comment: A few commenters supported the measure, but were concerned 
that ASCs will require many resources to initiate this reporting 
process since they are not accustomed to reporting to NHSN. A commenter 
recommended that the measure be re-specified for the ASC setting to 
include only those employees for which ASCs can reasonably report 
vaccination status. The commenter recommended that CMS postpone data 
collection for immunizations from the proposed October 1, 2013 to March 
31, 2014 to October 1, 2014 through March 31, 2015 for the CY 2016 
payment determination.
    Response: CMS and CDC recognize the potential challenges faced by 
ASCs in data collection for this measure. Recently, CDC submitted a 
revised measure proposal to NQF, based on results of field testing. The 
revised measure proposal reduces denominator data collection to 
employee healthcare personnel, defined as staff on facility payroll, 
and two categories of non-employee healthcare personnel: (1) Licensed 
independent practitioners, that is, physicians, advance practice 
nurses, and physician assistants; and (2) student trainees and adult 
volunteers.
    Based on the public comments we received, we are changing the 
proposed initial reporting period for HCP influenza vaccination 
coverage so that a less burdensome, updated CDC protocol for the 
measures as well as infrastructure upgrades can be incorporated into 
the collection system and ASCs will have enough time to obtain training 
to collect and report the updated measure to NHSN. The reporting period 
will begin October 1, 2014 and continue through March 31, 2015 for ASCs 
as recommended by commenters. Further details on the submission 
requirements for this measure will be proposed in the Form Manner and 
Timing section for this program in a future rulemaking.
    Comment: A commenter cautioned potential duplicative reporting 
efforts since some States already mandate vaccination of healthcare 
workers and public reporting of healthcare vaccination rates.
    Response: We appreciate the commenter's cautionary note and 
recognize that requirements for measurement and reporting of HCP 
vaccination rates, as is the case for other measureable healthcare 
processes and outcomes, may exist at the State and federal levels. 
Standardizing reportable healthcare quality measurements is a priority 
because that reduces reporting burden while preserving the 
opportunities to use those data for different purposes at the State and 
federal levels.
    Comment: A commenter stated that the measure should allow 
healthcare personnel to choose the vaccination type or brand most 
appropriate for them.
    Response: The measure does not require healthcare personnel to 
receive a specific type or brand of influenza vaccine in order to be 
included in the measure.
    After consideration of the public comments we received, we are 
finalizing the proposed Influenza Vaccination Coverage among Healthcare 
Personnel measure for the CY 2016 payment determination, with a 
modification. Because NQF's final review and an endorsement decision 
are pending with respect to the CDC's revised measure proposal and at 
the request of commenters, as discussed above, we are changing the data 
collection timeframe from what we proposed. Data collection via NHSN 
will begin on October 1, 2014 and continue through March 31, 2015. 
Details for submission of this measure will be proposed in a future 
rulemaking.
    In summary, for the CY 2016 payment determination, we are retaining 
the seven measures that we adopted for the CY 2015 payment 
determination and are adding one NHSN HAI measure for a total of eight 
measures.
    The measures for ASCs for the CY 2016 payment determination are 
listed below:
BILLING CODE 4120-01-P

[[Page 74511]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.138

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 sought comment in the CY 2012 OPPS/ASC proposed rule (76 FR 
42347 through 42348).
    In particular, we sought 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, sought 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.

[[Page 74512]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.139


[[Page 74513]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.140

BILLING CODE 4120-01-C
    In the proposed rule, we invited 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 sought suggestions for additional measures and rationales for the 
ASC Quality Reporting Program that are not listed in the table above.
 Patient's Experience of Care Measure
    Comment: One commenter noted that the CAHPS surgical care survey 
was not appropriate for ASCs since it may not address the short patient 
experience with staff performance at ASCs.
    Response: We thank the commenter for the input and we will take it 
into consideration in future measure selection efforts for this 
program.
 Anesthesia Related Complications Measures
    Comment: A commenter supported the anesthesia related complications 
measures listed, including, Use of Reversal Agents, Type of Anesthesia 
and Credentials of the Professional Administering Anesthesia When a 
Complication is Reported, Presence of Physician During Entire Recovery 
Period, and Post Discharge ED Visit within 72 Hours.
    Response: We thank the commenter for the input on anesthesia 
related complications. We will take this input into consideration in 
future measure selection efforts for this program.
 Additional Future Measurement Topics
    Comment: A commenter recommended CMS taking a cautious approach for 
the venous thromboembolism measures: outcome/assessment/prophylaxis 
measure because the incidence of deep vein thrombosis (DVT) and 
pulmonary embolism (PE) following total knee and hip replacement can be 
reduced but not eliminated. The commenter noted the trade off for lower 
DVT/PE rates is more wound complications, including surgical site 
infections.
    Response: We thank the commenter for the input and recommendation. 
We will take them into consideration in future measure selection 
efforts for this program.
 Other Measure Topics
    Comment: A commenter recommended the future inclusion of ASC 
specialty-specific measures, especially ASC-specific GI measures, plan 
for reprocessing endoscope, more measures related to safe injection 
practices, accreditation status, participation in a registry, sedation 
safety, and nursing sensitive structural measures.
    Response: We thank the commenter for the input and recommendations 
for future measurement topics. We will take them into consideration in 
future measure selection efforts for this program.
7. Technical Specification Updates and Data Publication
a. Maintenance of Technical Specifications for Quality Measures
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42348), we proposed 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/pqrs/downloads/2011_PhysQualRptg_MeasuresGroups_SpecificationsManual_033111.pdf?agree=yes&next=Accept; http://www.cdc.gov/vnhsn/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.
    We proposed to maintain the technical specifications for the 
measures adopted for the ASC Quality Reporting Program by updating this 
Specifications Manual, including updating the detailed instructions and 
the calculation of 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 in sections 
XIV.A.3.a. of the proposed rule and this final rule with comment 
period. We proposed to follow the same technical specification 
maintenance process for the ASC Quality Reporting Program measures as 
for the Hospital OQR Program measures and we invited 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

[[Page 74514]]

to seek re-endorsement of that measure. The legal standard for adopting 
Hospital OQR measures is the measure must be appropriate to measure 
quality of care in the setting, there must be consensus among affected 
parties, and to the extent feasible and practicable, measures must be 
set forth by a consensus building entity. 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 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 
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 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 proposed to follow the same subregulatory process 
for the ASC Quality Reporting Program for updates to the technical 
specifications. In the proposed rule, we invited public comments on 
this proposal.
    Comment: A few commenters expressed appreciation of the technical 
specifications maintenance timeline, which proposes that at least 6 
months of advance notice will be provided to participants for 
substantive changes to data elements that would require significant 
system changes and at least three months for substantial changes. A 
commenter noted that the implementation of a new reporting program 
requires even more advance notice and no less than a minimum of 6 
months.
    Response: We appreciate the commenters' support for our proposed 
technical specifications maintenance timeline. We will strive to 
provide as much advance notice as possible when substantive changes to 
technical specifications are made. We are providing more start up time 
for the program by delaying the start of required data submission for 
the program to October 1, 2012.
    After consideration of the public comment we received, we are 
finalizing the policy of providing technical specifications and links 
to technical specifications in a Specifications Manual to be posted 
after publication of this final rule with comment period. However, we 
are finalizing a policy of posting it not only the CMS QualityNet Web 
site as we proposed, but also on a CMS Web site such as http://www.cms.gov because we wish to utilize multiple Web sites to increase 
ASC awareness of our technical and measure specifications in our 
outreach and education. We believe that posting the information on the 
QualityNet Web site would increase ASC awareness of our program's 
specifications. However, we also believe that many ASC's will review 
the CMS Web site, since CMS posts claims processing manuals and other 
documentation that are used by providers and practitioners to submit 
claims to CMS.
    We also are finalizing our proposal to follow the same maintenance 
process used for the Hospital OQR Program, including maintenance of the 
technical specifications for the measures adopted by updating the 
Specifications Manual, and updating the detailed instructions and the 
calculation of algorithms as appropriate. We also are finalizing our 
policy to follow the same subregulatory process for the ASC Quality 
Reporting Program as used for the Hospital OQR Program for updates to 
the technical specifications, including issuing regular manual releases 
at six month intervals, to provide addenda as necessary, and 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.
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. In the CY 2012 OPPS/ASC proposed rule 
(76 FR 42348), we proposed to make data that an ASC has submitted for 
the ASC Quality Reporting Program available on a CMS Web site after 
providing an ASC an opportunity to preview the data to be made public. 
We proposed 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. In the proposed rule, we solicited public comment 
on these proposed processes of making ASC quality data available to the 
public.
    Comment: Commenters overwhelmingly supported transparency in ASC 
quality reporting and cost information and some recommended CMS publish 
the ASC quality data at the earliest opportunity.
    Commenters believed the ASC quality information should be displayed 
in a manner that allows easy comparisons for quality and cost between 
HOPDs and ASCs. Commenters expressed concerns regarding potential 
inappropriate data displayed on Hospital Compare. These commenters 
suggested that, in publicly displaying ASC data, CMS should: (1) 
Provide contact information for program content area experts; (2) 
provide a provider-specific narrative section that would allow 
providers to advise consumers on any concerns the provider has 
regarding the reliability or accuracy of data posted; (3) provide each 
ASC's accreditation status; (4) display Medicare rates and patients' 
out-of-pocket costs for services provided in both HOPD and ASC 
settings; (5) distinguish ASCs where only GI procedures are done, those 
where they are also done, and those where they are not done; and (6) 
stratify performance data when it is publicly posted based on risk 
profiles.
    Response: We thank the commenters for their support and 
suggestions. We will take the suggestions into consideration for future 
public reporting of the data.
    Comment: Some commenters believed that ASCs should have one year of 
confidential feedback on measure participation, data completeness, QDC 
submission errors, and performance details at CCN level, prior to 
publication of the data. Some commenters recommended that an appeals 
process should be put in place for dispute of data accuracy.

[[Page 74515]]

    Response: We will consider these suggestions. We are required to 
make the data submitted under this program available to the public. 
Prior to making the data available to the public, we also are required 
to provide facilities with the opportunity to review their data. We 
intend to propose a reconsideration and appeals process in future 
rulemaking.
    Comment: A few commenters urged CMS to strive for user friendly 
data on the CMS Web site for the ASC Quality Reporting Program.
    Response: We thank the commenters for their suggestion; we intend 
to make the display as consumer friendly as possible.
    After consideration of the public comments we received, we are 
finalizing our proposed policy to make data that an ASC has submitted 
for the ASC Quality Reporting Program available on a CMS Web site after 
providing an ASC an opportunity to preview the data to be made public. 
As we proposed, these data will be displayed at the CCN level.
8. Requirements for Reporting of ASC Quality Data for the CY 2014 
Payment Determination
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42348 through 42349), 
to participate in the ASC Quality Reporting Program for the CY 2014 
payment determination, we proposed that ASCs must meet data collection 
and data submission requirements. We stated that 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.
    Comment: Several commenters stated their concern that 
administrative requirements, data validation and data completeness 
requirements, and reconsideration and appeal processes were not 
proposed or provided in detail. Several commenters suggested that rules 
for data validation and completeness as well as the proposed process 
for reconsideration and appeals be specified in an interim rule in the 
first quarter of 2012. One commenter stated their belief that since the 
use of claims-based quality data codes is a new approach to quality 
data reporting, data validation procedures must be included in a final 
ASC Quality Reporting Program. One commenter wished to consider the 
more detailed proposals intended for publication in later rulemaking 
and encouraged CMS to issue these proposals at the earliest 
opportunity. One commenter believed that the uncertainty associated 
with not knowing what is necessary to be a successful participant in 
the program is an unwanted deterrent to full participation.
    Response: We thank these commenters for expressing their concerns 
regarding the deferring of proposals for administrative requirements, 
data validation and data completeness requirements, and reconsideration 
and appeals processes requirements until the CY 2013 OPPS/ASC proposed 
rule. We fully intend to put forth these proposals as soon as possible 
using the public comments we received on the CY 2012 OPPS/ASC proposed 
rule.
    We agree that it is preferable to issue these proposals as soon as 
possible and based upon the comments received intend to do so in the FY 
2013 IPPS/LTCH PPS proposed rule rather than the CY 2013 OPPS/ASC 
proposed rule. We intend to take this approach because the FY 2013 
IPPS/LTCH PPS proposed rule is scheduled to finalize earlier and prior 
to data collection beginning with October 2012 services. We disagree 
with the comment that the use of claims-based quality codes is a new 
approach to quality data reporting; this mechanism is used to collect 
such information under the PQRS. However, regarding the necessity to 
include data validation procedures in a final ASC Quality Reporting 
Program, we will consider these comments for future rulemaking. We note 
that claims-based and structural measures historically have not been 
validated through independent medical record review in our hospital and 
physician quality reporting programs due to the lack of relevant 
information in medical record documentation for specific data elements, 
such as use of a safe surgery checklist.
    Comment: One commenter stated that QualityNet accounts are 
automatically deactivated after a 120-day period of inactivity and yet 
as proposed, ASCs would only use the QualityNet for data submission 
infrequently. This commenter urged CMS to establish a process to avert 
account deactivation.
    Response: We thank the commenter for raising this issue. While we 
did not make any proposals specifically addressing the need for a 
QualityNet account, we made proposals regarding the entering of 
structural measure data which may necessitate the need for a QualityNet 
account. In finalizing our proposals regarding structural measure data 
entry, we note that we have deferred the data entry for structural 
measure data until 2013; note that a QualityNet account is not 
necessary to access information that is posted to the Web site, such as 
specifications manuals and educational materials. We intend to address 
any QualityNet account requirements for the ASC Quality Reporting 
Program for program requirements in later rulemaking.
a. Data Collection and Submission Requirements for the Claims-Based 
Measures
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42348 through 42349), 
we proposed 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 proposed to use Medicare fee-for-
service ASC claims for services furnished between January 1, 2012 and 
December 31, 2012.
    We proposed 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 proposed 
this approach in order to reduce ASC burden. We stated that we intend 
to provide additional details regarding participation notification and 
other administrative requirements in CY 2013 rulemaking.
    We proposed 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 stated that we intend to 
propose how we will assess data completeness for claims-based measures 
in the CY 2013 OPPS/ASC proposed rule. In the CY 2012 OPPS/ASC proposed 
rule, we requested public comment on these proposals and were 
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.
    Comment: Some commenters supported the proposal to consider an ASC 
as participating in the ASC Quality Reporting Program if the ASC 
includes the QDCs established for finalized claims-based measures on 
its submitted claim forms during the reporting period

[[Page 74516]]

for the CY 2014 payment determination as this approach was seen as 
reasonable and reduced burden.
    Response: We thank these commenters for their support. We agree 
that this method is reasonable and will reduce burden.
    Comment: Many commenters expressed their belief that the time line 
for beginning the reporting of quality data was too aggressive, citing 
issues of time to adapt billing systems and personnel training. Many 
commenters suggested that data collection be delayed, beginning with 
October 1, 2012 services, rather than January 1, 2012 services as 
proposed.
    Response: We thank the commenters for their views. Based upon the 
many comments received regarding the data collection time period for 
the CY 2014 payment determination, we are delaying the beginning of the 
data collection until October 1, 2012. Thus, we will be using the 
claims-based QDC data collection mechanism for ASC services furnished 
for Medicare patients from October 1, 2012 through December 31, 2012 
for the CY 2014 payment determination measures, as discussed in section 
XIV.K.3.a. of this final rule with comment period.
    Comment: One commenter believed that a low threshold for data 
completeness should be established for data collection during CY 2012 
because ASCs will not know the rules by which they are being judged 
until late in 2012 and that reporting thresholds of less than 100 
percent for initial reporting periods are consistent with other CMS 
reporting programs. Some commenters suggested, that due to ASCs not 
being familiar with reporting, successful reporting on a limited number 
of claims, for example, 50 percent should be permitted, a level similar 
to that in the PQRS.
    Response: We thank these commenters for responding to our request 
on what constitutes complete data for our proposed ASC claims-based 
measures. We agree that for the initial year of the program, a low 
threshold should be used and that a level such as the 50 percent used 
in the PQRS would be reasonable. As previously stated, we intend to 
propose how we will assess data completeness for claims-based measures 
in the FY 2013 IPPS/LTCH PPS proposed rule and will consider the 
comments when developing our proposals.
    Comment: Some commenters believed that, given the variability in 
ASC case mix, it can reasonably be anticipated that some measures will 
not apply to all ASCs, and, therefore, that CMS should consider the 
need for exemptions based on case-mix. One commenter believed that some 
smaller facilities may not have any cases for the proposed ASC quality 
measures and that to maintain a process that limits burden, waiving 
data submission requirements when a facility has 5 or fewer cases for a 
measure as is done under the Hospital IQR and Hospital OQR Programs 
could be implemented.
    Response: We thank the commenters for their views regarding 
criteria for reporting exemptions under the ASC Quality Reporting 
Program. We will consider these comments as we develop our proposals in 
future rulemaking. As stated above, based upon the comments received, 
we intend to make further proposals on data completeness in the FY 2013 
IPPS/LTCH PPS proposed rule rather than the CY 2013 OPPS/ASC proposed 
rule as the former rule is scheduled to finalize earlier. We agree that 
waiving data submission requirements for low case loads is reasonable 
and we will consider this comment with all others when developing our 
proposals.
    Comment: One commenter believed that, since the full complement of 
measures are not applicable to all ASCs, G-codes that ASCs can submit 
once during a performance period that indicates the measure is not 
applicable to the ASC should be developed, thereby exempting the ASC 
from data submission for the measure. One commenter believed that it is 
unclear how a facility should report with respect to a measure that may 
not be applicable to the services furnished by that type of ASC. One 
commenter sought clarification that ASCs would not need to report on 
all measures, but only those measures that applied.
    Response: We thank the commenters for their views regarding methods 
to report when an ASC does not have cases for a quality measure. We 
understand that a measure may not be applicable to the services 
furnished by a type of ASC. For the reporting of quality data using 
QDCs, as stated in Section XIV.K.1.a.5, ASCs would add the appropriate 
QDCs for measure numerators and denominators on Medicare Part B claim 
forms to submit quality data. We intend to provide education and 
outreach on data submission for the reporting program, and we will 
publish details about the QDCs and whether they will need to be 
submitted for numerators and denominators in the ASC Quality Reporting 
Program Specifications Manual. We anticipate releasing this manual in 
second quarter 2012.
    Comment: Some commenters believed that what CMS proposed as 
constituting ``successful'' reporting, that is complete submission, was 
vague.
    Response: We are finalizing our proposals to assess the 
completeness of reporting 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 claims. We will be using 
public comments we received that addressed this issue in the 
development of our future proposals. As stated above, we intend to 
propose a specific definition of reporting completeness in the FY 2013 
IPPS/LTCH PPS proposed rule in order to provide opportunity for notice 
and comment prior to October 2012 services.
    After consideration of the public comments received, we are 
finalizing our proposals with some modification. As proposed, we are 
finalizing our proposal that, to be eligible for the full CY 2014 ASC 
annual payment update, an ASC must submit complete data on individual 
quality measures through a claims-based reporting mechanism by 
submitting the appropriate QDCs on the ASC's Medicare claims. Further, 
as proposed, we are finalizing our proposal that data completeness for 
claims-based measures 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. Finally, we are 
deferring the data collection time period for the CY 2014 payment 
determination to a later date, beginning data collection with services 
beginning October 1, 2012, rather than January 1, 2012, while 
maintaining the end date of December 31, 2012.
    We also are finalizing our proposal 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 finalized measures.
b. Data Submission Deadlines for the Surgical Site Infection Rate 
Measure
    As discussed above, we proposed to adopt a HAI measure, Surgical 
Site Infection Rate, for the CY 2014 payment determination. We proposed 
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 the NHSN. We referred readers to the 
CDC's NHSN Web site (http://www.cdc.gov/nhsn) for detailed data 
submission and reporting

[[Page 74517]]

procedures. Our proposal seeks to reduce ASC burden by aligning CMS 
data submission and reporting procedures with NHSN procedures currently 
used by healthcare providers and suppliers. The submission timeframes 
for the CY 2014 payment determination that we proposed to use for the 
proposed Surgical Site Infection Rate measure were shown in the CY 2012 
OPPS/ASC proposed rule (76 FR 42349). We stated that ASCs must submit 
their quarterly data to the NHSN for ASC Quality Data Reporting 
purposes within the date intervals shown in the table set out in the 
proposed rule (76 FR 43249) (any updates to this schedule would be 
posted on the QualityNet and CMS Web sites).
    In the proposed rule, we requested public comments on these 
proposals. We did not receive any comments specifically on the proposed 
timeframes. However, as discussed above, we are not finalizing this 
measure at this time; therefore, we are not finalizing this time table 
for data collection.

XV. Changes to Whole Hospital and Rural Provider Exceptions to the 
Physician Self-Referral Prohibition: Exception for Expansion of 
Facility Capacity; and 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 42 CFR 
411.362, we implemented most of the requirements of section 6001(a) of 
the Affordable Care Act, including patient safety requirements. In 
sections XV.B.2. and C. of the CY 2012 OPPS/ASC proposed rule (76 FR 
42350) and this final rule with comment period, 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 XV.D. of the proposed rule and this final rule with 
comment period, 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 facility 
capacity will protect only those referrals made after the exception is 
granted. In the CY 2012 OPPS/ASC proposed rule (76 FR 42350), 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 new Sec.  411.362(c) set forth the 
process for a hospital to request an exception. Proposed new Sec.  
411.362(c)(2) outlined the requirements for an applicable hospital 
request and Sec.  411.362(c)(3) outlined 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 proposed to interpret the statute to 
impose the same 2-year frequency limit on high Medicaid facilities (as 
discussed in section XV.C.2. of this final rule with comment period).
    We proposed 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 were described in proposed 
new Sec.  411.362(c)(5). Under proposed new Sec.  411.362(c)(5), we 
proposed 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 the 
proposed rule and this final rule with comment period, 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 proposed a 
definition of the ``main campus of the hospital'' at Sec.  411.362(a), 
as discussed below. In addition, we proposed a definition of the 
``baseline number of operating rooms, procedure

[[Page 74518]]

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 the proposed rule and this final 
rule with comment period, 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 by January 1, 2012, concerning the process for a 
hospital to apply for an exception, and implement this process on 
February 1, 2012. In the proposed rule, we proposed an effective date 
of January 1, 2012. Below, we set out our proposals and our final 
policies related to the exception process in greater detail.

C. Process for Requesting 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, in the CY 2012 OPPS/ASC proposed rule (76 FR 
42350), we proposed 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 proposed to define 
the terms ``baseline number of operating rooms, procedure rooms, and 
beds'' and ``main campus of the hospital.'' The process we proposed set 
forth the relevant data sources and the required elements of a complete 
request for an exception. Below we address comments we received on this 
proposal.
1. General Comments
    Comment: Commenters were generally supportive of CMS' overall 
approach to the exception process. One commenter contended that the 
proposed rule honors the purpose and intent of the Affordable Care 
Act's elimination of the whole hospital exception while permitting 
reasonable grandfathering policies to protect self-referrals for 
existing physician-owned hospitals.
    Response: We appreciate the commenters' support.
    Comment: In the proposed rule (76 FR 42350 and 42351), CMS proposed 
that data from the CMS Healthcare Cost Report Information System 
(HCRIS) be used to determine whether a hospital satisfies the inpatient 
Medicaid admissions, bed capacity, and bed occupancy criteria for 
applicable hospitals or the inpatient Medicaid admissions criterion for 
high Medicaid facilities. CMS currently considers 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, CMS proposed 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. CMS proposed that if HCRIS does 
not contain sufficient data for that year, data from the most recent 
year(s) that satisfy the threshold should be used.
    Some commenters supported the CMS proposal to require hospitals to 
use data maintained within HCRIS to demonstrate that they satisfy the 
relevant eligibility criteria. These commenters asserted that use of 
standardized data sets will minimize inconsistent application of the 
eligibility criteria.
    Response: We appreciate the commenters' support.
    Comment: One commenter recommended that CMS consider using the 
Dartmouth Atlas ``Hospital Service Areas'' and the 24-kilometer radius 
around a hospital in determining whether a hospital has a legitimate 
need to increase its number of operating rooms, procedure rooms, and 
beds under the exception process for both applicable hospitals and high 
Medicaid facilities.
    Response: The commenter did not provide details regarding how the 
suggested geographic areas should be considered in the exception 
process. If the commenter is recommending that we use these areas in 
lieu of the county, State, or national data referred to in sections 
1877(i)(3)(E) and 1877(i)(3)(F) of the Act, the recommendation is 
contrary to these statutory directives, and, therefore, we decline to 
adopt it.
2. Applicable Hospital
    Below we separately discuss each of the statutory criteria that a 
hospital must satisfy to qualify as an ``applicable hospital.'' In the 
CY 2012 OPPS/ASC proposed rule (76 FR 42350), we proposed 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 stated in the proposed rule that we 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. 
We stated that hospitals could access these data to assess whether they 
satisfy the respective criteria to qualify as an applicable hospital. 
We also stated that we would make a reasonable effort to ensure that 
the data contained in HCRIS are correct and complete at the time of 
disclosure. We invited 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. We received the following comment regarding the requirement 
that hospitals must use data maintained within HCRIS to demonstrate 
satisfaction of the eligibility criteria.
    Comment: One commenter recommended that CMS permit applicable 
hospitals to use State agency-maintained data to demonstrate that they 
meet the eligibility criteria concerning inpatient Medicaid admissions, 
bed capacity, and bed occupancy. The commenter asserted that State 
agency-maintained data are as accurate as data maintained within HCRIS 
and are often available more quickly.
    Response: We are not persuaded to adopt the commenter's 
recommendation. We will require hospitals to use data maintained within 
HCRIS. We believe this will result in the use of uniform and consistent 
data, which will minimize inconsistent application of the eligibility 
criteria.
a. Percentage Increase in Population
    Section 1877(i)(3)(E)(i) of the Act provides that an applicable 
hospital must be 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 proposed at new 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, we proposed that 
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

[[Page 74519]]

both a county and a county equivalent area.
    We acknowledged 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 proposed 
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 the most recent 
5-year period, which in this example, would include years 2006-2010.
    We also proposed that a 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 using estimates for the most recent 5-year period for 
which the Bureau of the Census has both State and county population 
estimates, which in this example, would include years 2006-2010. We 
proposed 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. We received the 
following comment regarding the population growth criterion for 
applicable hospitals.
    Comment: Two commenters supported the proposal to require hospitals 
to use estimates from the Bureau of the Census for the population 
growth criterion. The commenters asserted that use of common data sets 
will minimize inconsistent application of the eligibility criteria.
    Response: We appreciate the commenters' support for our proposal.
    After consideration of the public comment we received, we are 
adopting as final our proposed new Sec.  411.362(c)(2)(i), without 
modification.
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 proposed at new Sec.  
411.362(c)(2)(ii) to require hospitals to calculate inpatient 
admissions using filed hospital cost report discharge data. We proposed 
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 invited public comment on other data sources that 
could be used to provide an accurate estimate of the annual percent of 
total inpatient Medicaid admissions for the applicable hospital and for 
all hospitals in the same county.
    We did not receive any public comments on our proposal. Therefore, 
we are finalizing our proposal, without modification, to require 
hospitals to use hospital cost report discharge data to estimate the 
annual percentages of total inpatient Medicaid admissions.
    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 proposed at new 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 invited 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 proposed at new 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 
proposed that we would review a request based on the data available as 
of the date the hospital submits its request. We stated that 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 we will determine and 
provide the average percentages of inpatient admissions under Medicaid 
for each county.
    Comment: One commenter contended that CMS exceeded its statutory 
authority in proposing that applicable hospitals must satisfy the 
eligibility criteria concerning inpatient Medicaid admissions, bed 
capacity, and bed occupancy for each of the 3 most recent fiscal years. 
The commenter asserted that the proposal was not supported by the 
statutory text, which imposes such a requirement for high Medicaid 
facilities, but not for applicable hospitals. The commenter noted that 
the Congress could have required applicable hospitals to satisfy these 
criteria for each of the 3 most recent years, but did not.
    Response: We disagree with the commenter that we exceeded our 
statutory authority in proposing the 3-year timeframe. The fact that 
Congress did not specify a timeframe for meeting this criterion does 
not preclude us from imposing a timeframe using our rulemaking 
authority under sections 1871 and 1877(i)(3)(A)(i) of the Act. We 
believe a general timeframe helps identify the need for an exception 
and ensure consistent application of the prohibition.
    Comment: One commenter asserted that it was unreasonable to require 
3 years of data to demonstrate a legitimate need by a hospital to 
expand its capacity. The commenter contended that such a requirement 
would make it virtually impossible for a hospital to qualify as an 
applicable hospital and would unreasonably delay a hospital's ability 
to qualify as an ``applicable hospital.'' The commenter recommended 
that CMS allow applicable hospitals to satisfy the inpatient admission, 
bed capacity, and bed occupancy criteria using data from any 1 of the 
last 3 most recent fiscal years prior to a facility capacity expansion 
request, which would allow hospitals to apply for an exception to the 
capacity restriction much sooner.
    Another commenter expressed concern that 3 years of data on 
hospital admissions, bed capacity, and bed occupancy is too long to 
identify trends in the demand for health services, especially in high-
growth markets with rapidly changing populations, and, therefore, would 
be incapable of identifying legitimate expansion needs in some areas of 
the country. The commenter suggested that data be weighted to identify 
health care demand trends in States and counties with rapidly changing 
populations.
    Response: We are not persuaded to adopt the first commenter's 
proposal. We believe that allowing hospitals to use data from any 1 of 
the last 3 most recent years may result in inconsistent application of 
the eligibility criteria and the approval of an expansion request based 
on anomalous data. However, we have reconsidered our proposal to

[[Page 74520]]

require hospitals to satisfy eligibility criteria for each of the 3 
most recent fiscal years for which data are available. We are adopting 
a modification of this proposal in this final rule with comment period. 
Under this modification, a hospital's eligibility for an exception to 
the prohibition against facility expansion can be established using the 
most recent year of data available regarding each of the criteria 
related to inpatient admission data, bed capacity, and bed occupancy 
rates. We believe that requiring 1 year of data on each of these 
criteria, together with the requirement to satisfy a 5-year population 
growth criterion, is sufficient to identify those hospitals with a 
legitimate need to expand capacity without risking the approval of 
exception requests based on aberrant data. In addition, we believe that 
requiring applicable hospitals to perform calculations and submit 
documentation for 1 year of data, as opposed to 3 years of data, will 
decrease the administrative burden on applicable hospitals.
    With respect to the comment regarding weighted data, the commenter 
did not set forth a specific recommendation demonstrating how the data 
can be weighted. Without further detail, we are unable to adopt the 
commenter's suggestion. Moreover, we believe that our revised policy 
may address some of the commenter's concerns.
    We are modifying proposed new Sec.  411.362(c)(2)(ii), (iv), and 
(v) to provide that hospitals establish compliance with the inpatient 
Medicaid admission, average bed capacity, and average bed occupancy 
criteria for applicable hospitals using the most recent available 
fiscal year data. A hospital may access these data on the CMS Web site 
at: http://www.cms.gov/physicianselfreferral/85_physician_owned_hospitals.asp. If the hospital filed its own cost report for the 
respective year and satisfies the criteria to qualify as an applicable 
hospital, the hospital may submit a request starting on February 1, 
2012.
    Comment: In the proposed rule (76 FR 42351 and 42352), CMS proposed 
that estimates of inpatient Medicaid admissions would be based on filed 
hospital cost report discharge data. In completing the hospital cost 
report, hospitals report the number of discharges for whom Medicaid is 
the primary payer. One commenter recommended that, to estimate the 
annual percent of total inpatient Medicaid admissions, Medicaid should 
be considered as a whole and not broken down by primary and secondary 
payers.
    Response: We do not agree with the commenter. The statute does not 
require Medicaid data to be considered as a whole. In addition, 
hospitals do not submit discharge data in the manner recommended by the 
commenter, and therefore such data are not readily available for use in 
the exception process.
    After consideration of the public comments we received, we are 
finalizing at Sec.  411.362(c)(2)(ii) the Medicaid inpatient admission 
criterion for applicable hospitals. As noted above, the final 
regulatory language has been modified to permit hospitals to satisfy 
this criterion using data for the most recent fiscal year for which 
data are available.
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 proposed to incorporate 
this requirement at new Sec.  411.362(c)(2)(iii) of the regulations.
    We did not receive any public comments regarding the 
nondiscrimination criterion. Therefore, we are adopting, as final, the 
incorporation of the requirement at new Sec.  411.362(c)(2)(iii) 
without modification.
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 proposed at new 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 
invited 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. 
We note that, for the reasons stated in section XV.C.1.b. of this final 
rule with comment period, we are modifying the proposed regulatory 
language to require applicable hospitals to satisfy the bed capacity 
criterion during only the most recent fiscal year for which data are 
available.
    Under our proposed process, we would use filed hospital cost 
reporting data to determine State and national average bed capacities. 
We stated that we plan to issue guidance explaining how we will 
determine and provide the average bed capacities. We proposed that we 
would review a request based on the data available as of the date a 
hospital submits its request. We discuss below the significant points 
raised by commenters to our proposal.
    Comment: One commenter recommended that existing physician-owned 
hospitals should be permitted to expand in counties in which the 
hospital bed capacity per 1,000 population is below the national 
average.
    Response: Section 1877(i)(3)(E)(iv) of the Act provides that an 
applicable hospital must be located in a State that has an average bed 
capacity that is less than the national average bed capacity. We are 
obligated to follow the statutory directive. Therefore, we are not 
adopting the commenter's recommendation to consider bed capacity at the 
county level.
    Comment: One commenter asserted that the proposed criteria appear 
sufficiently flexible to allow hospitals located in areas with a low 
bed capacity and high bed occupancy to be granted an exception from the 
expansion requirements.
    Response: We appreciate the commenter's support for the proposed 
eligibility criteria for applicable hospitals. We believe that our 
modified exception process closely mirrors the statute and will provide 
sufficient flexibility to allow hospitals in areas with a low bed 
capacity and high bed occupancy to be granted an exception.
    After consideration of the public comments we received, we are 
adopting as final our proposed new Sec.  411.362(c)(2)(iv) with the 
modification that the State average bed capacity must be less than the 
national average capacity for the most recent fiscal year for which 
data are available as of the date that a hospital submits its request, 
as discussed above in previous responses to comments.
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

[[Page 74521]]

over which the hospital's average bed occupancy rate must be greater 
than the State average bed occupancy rate. We proposed at new 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 invited 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 note that, for the 
reasons stated in section XV.C.1.b. this final rule with comment 
period, we have modified this proposal and are requiring applicable 
hospitals to satisfy the bed occupancy criterion during only the most 
recent fiscal year for which data are available.
    We proposed at new Sec.  411.362(c)(2)(v) that the hospital use 
filed hospital cost reporting data to calculate its own average bed 
occupancy rate. We stated that we plan to issue guidance explaining how 
the hospital can calculate its bed occupancy rate. The guidance would 
also explain how we will determine and provide the State bed occupancy 
rates. We proposed that we would review a request based on the data 
available as of the date that the hospital submits its request.
    Except for the comments regarding the need to use 3 years of data 
to establish that the bed occupancy criterion is satisfied, we did not 
receive any public comments specific to this criterion. Therefore, as 
discussed in section XV.C.1.b. of this final rule with comment period, 
we are finalizing at Sec.  411.362(c)(2)(v) the requirement that an 
applicable hospital must have an average bed occupancy rate that is 
greater than the average bed occupancy rate in the State in which the 
hospital is located for the most recent fiscal year for which data are 
available as of the date that a hospital submits its request.
3. High Medicaid Facility
    Below we separately discuss each of the statutory criteria that a 
hospital must satisfy to qualify as a ``high Medicaid facility.'' In 
the CY 2012 OPPS/ASC proposed rule (76 FR 42351), we proposed 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.
a. Number of Hospitals in County
    Section 1877(i)(3)(F)(i) of the Act provides that a high Medicaid 
facility must be a hospital that is not the sole hospital in a county. 
We proposed to incorporate this requirement into the regulations at new 
Sec.  411.362(c)(3)(i). We received the following comment regarding our 
proposal.
    Comment: One commenter stated that the proposed rule will not allow 
expansion or construction of a physician-owned hospital that is the 
sole hospital in a county or where no other hospitals exist and 
expressed concern that this will reduce access to quality care.
    Response: Section 1877(i)(3)(F)(i) of the Act provides that a high 
Medicaid facility cannot be the sole hospital in a county. We are 
obligated to follow this statutory directive. Also, we do not believe 
that the requirement reduces access to quality care. Therefore, we are 
not making any changes in response to the commenter's concern.
    After consideration of the public comment we received, we are 
adopting as final our proposed policy under new Sec.  411.362(c)(3)(i) 
without modification.
b. Inpatient Admissions
    Section 1877(i)(3)(F)(ii) of the Act provides that a high Medicaid 
facility must be 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 
hospital located in the county in which the hospital is located. We 
proposed to incorporate this requirement at new Sec.  411.362(c)(3)(ii) 
of the regulations.
    We proposed at new 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 proposed 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 proposed that we would 
review a request based on the data available as of the date that the 
hospital submits its request.
    We proposed to require the applicant hospital to use filed hospital 
cost reporting discharge data as a proxy for inpatient admissions under 
Medicaid. We stated that we would 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 also stated that we plan to issue guidance that further describes 
the process for hospitals to estimate inpatient admissions under 
Medicaid. We address below the specific comments received in response 
to our proposal.
    Comment: In the proposed rule (76 FR 42351 and 42352), CMS proposed 
that estimates of inpatient Medicaid admissions would be based on filed 
hospital cost report discharge data. In completing the hospital cost 
report, hospitals report the number of discharges for whom Medicaid is 
the primary payer. One commenter recommended that, to estimate the 
annual percent of total inpatient Medicaid admissions, Medicaid should 
be considered as a whole and not broken down by primary and secondary 
payers.
    Response: We do not agree with the commenter. The statute does not 
require Medicaid data to be considered as a whole. In addition, 
hospitals do not submit discharge data in the manner recommended by the 
commenter, and therefore such data is not readily available for use in 
the exception process.
    Comment: One commenter stated that the proposed rule did not 
specify whether the average is weighted by total admissions.
    Response: We believe the commenter's statement refers to the 
inpatient Medicaid admissions criteria for high Medicaid facilities. We 
are unsure of the exact position taken by the commenter as the 
commenter did not explain how the average could be weighted by total 
admissions. In the proposed rule (76 FR 42351), we stated that we would 
issue guidance that further describes the process for hospitals to 
estimate inpatient admissions under Medicaid.
    After consideration of the public comment we received, we are 
finalizing our proposed policy at new Sec.  411.362(c)(3)(ii) without 
modification.
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 proposed to incorporate 
this requirement at new Sec.  411.362(c)(3)(iii) of the regulations.
    We did not receive any public comments regarding the 
nondiscrimination criterion. Therefore,

[[Page 74522]]

we are finalizing our proposal at new Sec.  411.362(c)(3)(iii) without 
modification.
4. Procedure for Submitting a Request
    In the proposed rule, we stated that 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 proposed that a hospital submit to CMS a request that includes the 
information and documentation set forth in proposed new Sec.  
411.362(c)(4)(ii).
    We proposed 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 proposed 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 the 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 encouraged hospitals to clearly 
label all documentation submitted with a request and indicate the 
criteria for which the documentation provides supporting information.
    We proposed at new 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.
    We proposed at new 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 proposed at new 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.
    We received the following comment regarding the process for 
submitting a request.
    Comment: One commenter urged CMS to work with hospitals that would 
benefit from expanded capacity and to modify the application process, 
as necessary, in response to difficulties in meeting its requirements. 
The commenter asserted the proposed exception process requires complex 
calculations and substantial documentation. Another commenter had no 
objections to the proposed exception process, while a third commenter 
would not support the elimination of any of the steps in the process.
    Response: The required documentation, set forth in proposed new 
Sec.  411.362(c)(4), includes a statement of whether the hospital is 
seeking an exception as an applicable hospital or high Medicaid 
facility, an explanation of how the hospital satisfies the criteria, 
the submission of the calculations used to support the application, and 
a certification statement that the hospital does not discriminate 
against beneficiaries of Federal health programs. We believe each of 
these requirements is necessary to verify compliance with the statutory 
criteria for an exception to the capacity restrictions. We also note 
that performing these calculations is necessary to demonstrate 
compliance with the statutory criteria. In addition, we carefully 
considered the burden associated with the calculations and 
documentation. As stated above, we have reduced the burden on hospitals 
applying for an exception by requiring certain data from only the most 
recent fiscal year for which data are available. We do not believe any 
other changes to the application process are needed at this time, 
although we may consider changes after we have more experience with the 
process.
    After consideration of the public comments we received, we are 
finalizing the proposed procedure for submitting a request under new 
Sec.  411.362(c)(4) without modification.
5. 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. 
In the proposed rule (76 FR 42352), we proposed to incorporate this 
provision in proposed new Sec.  411.362(c)(5) of the regulations. We 
proposed 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 proposed that individuals and 
entities in the community in which a high Medicaid facility is located 
have the same opportunity to submit written comments.
    We proposed at new 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, we 
stated that 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, we refer readers to 
the CMS Web site at http://www.cms.gov/MLNProducts/downloads/MailingLists_FactSheet.pdf. In addition, we proposed that we will 
publish a notice of the hospital's request in the Federal Register. We 
proposed at new 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.
    We gave examples of community input, such as documentation 
demonstrating that the hospital does not satisfy one or more of the 
data criteria or that the hospital discriminates against beneficiaries 
of Federal health programs. These are examples only; we indicated that 
we were not restricting the type of community input that may be 
submitted. We proposed at new Sec.  411.362(c)(5) that written comments 
must be submitted by mail or electronically to CMS.
    We proposed at new Sec.  411.362(c)(5)(i) that we will consider a 
request complete if we do not receive any written comments during the 
30-day period

[[Page 74523]]

after notice of the hospital's request is published in the Federal 
Register.
    In the proposed rule, we stated that if we receive written 
comments, we will notify the hospital in writing. We proposed at new 
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 stated that we would 
consider the request complete at the end of the 30-day period provided 
for the hospital's rebuttal, regardless of whether the hospital submits 
additional information or documentation. We also stated that we reserve 
the right to perform our own calculations based on a review of the 
material submitted and of information generally available to CMS.
    We address below the comments received in response to our proposal.
    Comment: Two commenters asserted that the proposed exception 
process closely follows the statute and balances efficient processing 
with the statute's requirements, especially those regarding public and 
community input on CMS decisions to grant exceptions. One commenter 
suggested that CMS publish a notice of an exception request in the 
Federal Register within 60 days of receiving it. The commenter asserted 
that such a deadline would reduce delays in obtaining a decision, which 
would allow hospitals to increase capacity sooner, ultimately 
benefiting Medicaid recipients in high growth areas.
    Response: We are not adopting the commenter's suggested deadline. 
There are many factors external to CMS that affect publication dates in 
the Federal Register. However, we will make every effort to expedite 
our process for sending a notice of an exception request to the Office 
of the Federal Register for publication.
    Comment: One commenter expressed concern that entities wishing to 
offer comments or contest an expansion must do so within 30 days of a 
notice being published in the Federal Register. Other commenters 
asserted that under the proposed rule, too much time will elapse 
between the date on which a hospital submits a request and the date 
when a final decision is received.
    Response: In proposing a 30-day comment period, we carefully 
considered the entire exception process from both the viewpoint of the 
requesting hospitals and the individuals and entities in the hospital's 
community. We believe that the 30-day comment period balances a 
requesting hospital's interest in receiving a timely decision with that 
of the individuals and entities in the hospital's community in having a 
reasonable amount of time to provide input.
    Comment: One commenter expressed concern that the proposed methods 
for notifying other area hospitals and the public of an exception 
request are not adequate. The commenter stated that hospitals, 
employers, payors, and members of the community should not have to sign 
up for the CMS Hospital Listserv or search the Federal Register or CMS 
Web site to find out if an application for an exception has been made. 
In addition to the proposed methods of notifications set forth in new 
Sec.  411.362(c)(5), the commenter suggested that CMS require the 
hospital requesting an exception to supply written notification to 
every other hospital in the Metropolitan Statistical Area (MSA) or 
within 50 miles of the hospital, if the hospital is located in a rural 
area.
    Response: We disagree with the commenter's statement that our 
proposed methods of notification are not adequate. Section 
1877(i)(3)(A)(ii) of the Act requires that individuals and entities in 
the community of an applicable hospital or high Medicaid facility be 
allowed an opportunity to provide input on the hospital's request for 
an exception to the prohibition against facility expansion. In the 
proposed rule, we proposed to add new Sec.  411.362(c)(5) to specify 
that a hospital is required to disclose on any public Web site for the 
hospital that it is requesting an exception. We will report that the 
hospital is requesting an exception on the CMS Hospital Listserv. Also, 
we will post the hospital's request for an exception on the CMS Web 
site and will have a notice of the hospital's request published in the 
Federal Register. We believe the proposed methods of notification allow 
sufficient opportunity for individuals and entities in the community to 
provide input. Moreover, we are not persuaded that the additional 
notice advocated by the commenter would be beneficial. We believe that 
written notice would be overly burdensome for hospitals requesting an 
exception and may not effectively provide notice to all interested 
individuals and entities in the hospital's community. For example, if a 
nonrural hospital is located near the perimeter of its MSA, there may 
be other interested hospitals in close proximity to the hospital but 
still located outside that MSA that would not receive individualized 
notice pursuant to this proposal. Additionally, we are not convinced 
that a 50-mile radius in some rural areas would include any interested 
hospitals. In summary, we do not believe that the commenter's suggested 
methods of providing written notice to hospitals will inform all 
individuals and entities in the community in a consistent, beneficial 
manner.
    Comment: One commenter suggested that CMS require the hospital 
requesting an exception to place a notice of its request in the 
newspaper with the largest circulation in the MSA, or, if rural, the 
county in which the hospital is located. The commenter proposed that 
the notice should provide (1) the location where copies of the 
expansion request are available, (2) the timeframe for submitting 
comments, and (3) the name of the designated representative who is 
appointed to receive the comments.
    Response: As stated in the preceding response, we do not believe 
additional notice is necessary. We also are concerned that the 
commenter's proposal would be costly and burdensome for the hospital 
requesting an exception.
    After consideration of the public comments we received, we are 
finalizing the proposals concerning community input and notification at 
new Sec.  411.362(c)(5) without modification.
6. 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. 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 proposed to 
incorporate this definition, with the clarification that it also 
applies to high Medicaid facilities, at new Sec.  411.362(a) of the 
regulations.
    Section 1877(i)(3)(C)(i) of the Act provides that if a hospital 
previously has been granted an exception by the Secretary, the hospital 
may increase the number of its operating rooms, procedure rooms, and 
licensed beds above the number of such rooms and beds for which the 
hospital is licensed after application of the most recent increase 
under such an exception.

[[Page 74524]]

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. In the 
proposed rule (76 FR 42353), we proposed to incorporate this provision 
at new 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 proposed to adopt a parallel limit the 
increase in the number of operating rooms, procedure rooms, and beds 
for which a high Medicaid facility may request an exception. We invited 
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, which is to provide the opportunity 
to expand in areas where a sufficient need for access to high Medicaid 
facilities is demonstrated. We note that, although the statute provides 
that an applicable hospital may request an exception up to once every 2 
years, we proposed to apply the same provision to high Medicaid 
facilities. We believe that providing a high Medicaid facility the 
opportunity to request an exception once every 2 years, while also 
limiting its total growth, as discussed above, balances the Congress' 
intent to prohibit expansion of physician-owned hospitals with the 
purpose of the exception process.
    Comment: Commenters supported the proposal regarding the amount of 
permitted increase.
    Response: We appreciate the commenters' support. Upon further 
review, however, we have concluded that the language of our proposed 
Sec.  411.362(c)(6)(i) is inconsistent with the limitation set forth in 
section 1877(i)(3)(C)(ii) of the Act. Proposed Sec.  411.362(c)(6)(i) 
provides that ``[a] permitted increase under this section may not 
exceed 200 percent of the hospital's baseline number of operating 
rooms, procedure rooms, and beds.'' We have concluded that proposed 
Sec.  411.362(c)(6)(i) does not clearly express that the 200 percent 
limitation applies to the total number of operating rooms, procedure 
rooms, and beds for which the hospital is licensed after a permitted 
increase, as opposed to the number of operating rooms, procedure rooms, 
and beds by which the hospital requests to expand. Therefore, in this 
final rule with comment period, we are modifying our proposed new Sec.  
411.362(c)(6)(i) to more closely track the statute. The modification 
clarifies that a permitted increase may not result in the number of 
operating rooms, procedure rooms, and beds for which the hospital is 
licensed exceeding 200 percent of the hospital's baseline number of 
operating rooms, procedure rooms, and beds.
    Comment: One commenter supported the proposal to apply the same 
limit on total growth to both applicable hospitals and high Medicaid 
facilities. The commenter asserted that applying parallel requirements 
to both applicable hospitals and high Medicaid facilities would result 
in an efficient and consistent process.
    Response: We agree with the commenter regarding our application of 
parallel requirements.
    After consideration of the public comments we received, we are 
finalizing the proposed new Sec.  411.362(c)(6)(i), with the 
modification discussed above.
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. In the proposed rule (76 FR 
42353), we proposed to incorporate this provision at new Sec.  
411.362(c)(6)(ii) of the regulations. We proposed 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 proposed 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. We believe that applying 
the same limitation to applicable hospitals and high Medicaid 
facilities will result in an efficient and consistent process.
    We did not receive any public comments regarding the location of 
the permitted increase. Therefore, we are finalizing the proposed new 
Sec.  411.362(c)(6)(ii) without modification.
7. 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. In the proposed rule (76 FR 42353), we proposed to codify 
this provision at new Sec.  411.362(c)(7). To facilitate access to 
decisions, we proposed to post our decisions on the CMS Web site as 
well. We proposed that the posted information will include the 
hospital's name, address, county, and our final decision. We also 
proposed that if an exception is granted under this section, we would 
post the number of operating rooms, procedure rooms, and beds by which 
the hospital may expand under the granted exception. We stated that 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.
    Comment: One commenter recommended that a request for an exception 
as an applicable hospital should be considered approved if the agency 
fails to publish a final decision in the Federal Register within 60 
days of when the request is considered complete.
    Response: We cannot adopt the commenter's proposal. Although 
section 1877(i)(3)(H) of the Act provides that the Secretary shall 
publish in the Federal Register the final decision with respect to such 
application not later than 60 days after receiving a complete 
application, section 1877(i)(3)(E) of the Act establishes criteria that 
must be met in order for a hospital to be granted an exception as an 
applicable hospital. We are obligated to grant exceptions only to those 
hospitals that meet the statutory criteria.
    After consideration of the public comment we received, we are 
finalizing the proposed new Sec.  411.362(c)(7), without modification.
8. 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 or section 1878 of the Act, or otherwise. We proposed to 
incorporate this limitation on review at proposed new Sec.  
411.362(c)(8) of the regulations. We proposed to interpret this 
limitation on review to mean that CMS' decision with respect to whether 
a hospital qualifies for an exception is not reviewable.
    We did not receive any public comments regarding the limitation of 
review. Therefore, we are finalizing the proposed Sec.  411.362(c)(8) 
without modification.

[[Page 74525]]

9. 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. In the proposed rule (76 FR 42353), we 
proposed to incorporate this provision at new Sec.  411.362(c)(1). 
Using our authority under sections 1871 and 1877 of the Act, we 
similarly proposed 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 proposed to 
consider the date of a CMS decision to be the date of the decision 
letter sent to the requesting party.
    We did not receive any public comments regarding the frequency of 
request. Therefore, we are finalizing our proposed new Sec.  
411.362(c)(1) without modification.

D. 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 required 
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 osteopathy is not present in the hospital 24 
hours a day, 7 days a 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 doctor of medicine or osteopathy is 
present in the 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42354), we stated that 
we have reconsidered the patient safety requirements related to patient 
notification of physician presence, and in the proposed rule, we 
proposed 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, we proposed to require disclosures 
only for those outpatients receiving observation services, surgery, or 
any other procedure requiring anesthesia. We proposed that 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 the proposed rule, we proposed 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 doctor of medicine or osteopathy 
on site 24 hours a day, 7 days a week. We proposed that only those 
outpatients who receive observation services, surgery, or services 
involving anesthesia, must receive such written notice. We stated that 
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 doctor of medicine or osteopathy is not present 
when an emergency develops. (We noted that we were not proposing to 
make any changes to similar patient safety requirements for physician-
owned hospitals at Sec.  411.362(b)(5)(i).) We proposed to add a 
provision that notice would be required at the beginning of a planned 
or unplanned inpatient stay or outpatient visit, and we provided 
explanation of when a planned or unplanned stay or visit begins. We 
proposed 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 
to begin.
    We proposed 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 the hospital or satellites, to make the determination of 
whether notice is required separately at each location providing 
inpatient services. We proposed 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 proposed 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 osteopathy is not present 24 hours 
a day, 7 days a week. We proposed to move language that is

[[Page 74526]]

currently in paragraph (w)(1) to a new paragraph (w)(3), governing the 
content of the written notice. We proposed 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 doctor of medicine or osteopathy 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 proposed 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 proposed 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 osteopathy is not present 24 hours a day, 7 days a week, to 
post a notice conspicuously in a place or places likely to be noticed 
by all individuals entering the dedicated emergency department. We 
proposed that ``dedicated emergency department'' would have the meaning 
found in existing Sec.  489.24(b) of the regulations. We proposed to 
require the notice to state that the hospital does not have a doctor of 
medicine or osteopathy present in the hospital 24 hours a day, 7 days a 
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 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, we 
proposed that the individualized written disclosure and acknowledgment 
would have to be made at the time the patient is admitted.
    Comment: A majority of commenters supported the proposal to limit 
the types of outpatient situations in which notice of physician 
availability is required. Several of these commenters added that, from 
the beginning, they had considered the requirement to provide notice to 
all outpatients as overly burdensome and unnecessary except in the 
limited circumstances reflected in the proposed revision.
    Response: We appreciate the commenters' support.
    Comment: Two commenters objected to any notice to patients 
concerning the onsite availability of a doctor of medicine or 
osteopathy. One commenter indicated the requirement would impose costs 
and potentially alarm patients without any evidence that it will make 
patients safer or improve quality of care. The other commenter believed 
that the information might not be accurate about physician availability 
because a physician who is not on site in a rural setting might be more 
readily available than a physician who is on site at a larger facility.
    Response: We believe our proposal will reduce costs to hospitals 
and critical access hospitals because it would require significantly 
fewer notices than are required under the current regulation, which 
requires notice to all outpatients in affected hospitals and CAHs. In 
the years since the current regulation first took effect, we have not 
received any feedback of patients being unduly alarmed as a result of 
receiving notice. While there may be some individual circumstances in 
which a doctor of medicine or osteopathy who is off site might be able 
to reach a patient experiencing an emergency more quickly than one who 
is on site, we believe that this scenario is likely the exception 
rather than the rule. The complete elimination of the notice 
requirement implicit in the commenters' statements would not be 
appropriate. As we stated when this provision was first adopted, we 
believe consumers have certain expectations concerning availability of 
care by doctors of medicine or osteopathy in hospitals and CAHs, and 
that, as patients, they have a right to make informed decisions 
concerning their care. Consumers may have an expectation that a 
hospital or CAH, as a health care facility that provides services 24 
hours a day, 7 days a week, always has a doctor of medicine or 
osteopathy on site. Therefore, it is important to ensure that patients 
receive notice when a doctor of medicine or osteopathy is not always on 
site, and how the hospital or CAH handles patient emergencies when a 
doctor of medicine or osteopathy is not present.
    Comment: One commenter described the proposal as requiring all 
physician-owned hospitals and CAHs to furnish outpatients receiving 
observation services, surgery or any other procedure requiring 
anesthesia a written notice that a doctor of medicine or osteopathy is 
not on site 24 hours a day, 7 days a week.
    Response: The patient notification provision at proposed Sec.  
489.20(w)(1) would apply to all hospitals, not just physician-owned 
hospitals, and CAHs that do not have a doctor of medicine or osteopathy 
on site 24 hours a day, 7 days a week, and would apply to all 
inpatients and certain categories of outpatients.
    Comment: Two commenters noted and objected to differences in 
requirements for physician-owned hospitals compared to other hospitals 
and CAHs. One commenter stated that the proposed rule at Sec.  
489.20(w) would not apply to physician-owned hospitals and challenged 
the differential treatment. The commenter noted that CMS stated in the 
proposal that the safety of ``these particular outpatients'' [that is, 
those who would not receive notice under the proposed rule] would not 
be compromised if hospitals were not required to provide disclosures, 
and questioned why CMS would not apply that rationale to make the 
change applicable to all hospitals.
    Response: It is not correct that Sec.  489.20(w) does not apply to 
physician-owned hospitals. It applies to all hospitals and CAHs, 
including those that are physician-owned. However, we believe the 
commenter is referring to the fact that there is an additional 
regulation at Sec.  411.362(b)(5)(i) that applies only to physician-
owned hospitals. We did not propose a similar revision to this 
regulation, which requires physician-owned hospitals that do not have a 
doctor of medicine or osteopathy on site 24 hours a day, 7 days a week, 
to provide notice to all inpatients and all outpatients. Section 
411.362(b)(5)(i) was adopted in order to implement provisions of 
section 6001(a) of the Affordable Care Act. That provision pertains 
specifically to physician-owned hospitals and governs the notice to be 
provided to patients when the physician-owned hospital does not have a 
doctor of medicine or osteopathy on site at all times.
    Comment: One commenter requested guidance to ensure that the 
presence of a doctor of medicine or osteopathy includes the presence of 
residents.
    Response: Residents who are doctors of medicine or osteopathy would 
be included when determining whether a hospital or CAH has a doctor of 
medicine or osteopathy on site.
    Comment: One commenter requested further clarification of the 
timing for the disclosure to, and acknowledgement by, an outpatient who 
is not receiving observation services, surgery, or other procedure 
requiring anesthesia, and who experiences a change in medical condition 
which requires immediate surgery or inpatient admission. The commenter 
stated that it might not always be feasible to make the disclosure and 
receive the acknowledgement under these circumstances.

[[Page 74527]]

    Response: When an outpatient encounter that does not require a 
notice involves a medical emergency that requires immediate surgery or 
inpatient admission, the situation is similar to that of a patient who 
presents to a hospital or CAH emergency department and requires 
immediate admission for surgery or other treatment. In our proposal 
with respect to such emergency department patients, we stated that, 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. At the same time, we acknowledge that in some 
circumstances the emergent nature of the patient's condition and need 
to initiate treatment immediately may result in some necessary delay in 
completion of the disclosure and acknowledgment requirements.
    After consideration of the public comments we received, we are 
finalizing the proposed revisions to Sec.  489.20(w), without 
modification, relating to patient notification when a doctor of 
medicine or osteopathy is not on site 24 hours a day, 7 days a week. 
Revised paragraph (w)(1) specifies that only those outpatients who 
receive observation services, surgery, or services involving anesthesia 
must receive written notice if the hospital does not have a doctor of 
medicine or osteopathy on site 24 hours a day, 7 days a week. New 
paragraph (w)(2) requires a hospital that is a main provider, that has 
one or more remote locations of the hospital or satellites, to make the 
determination of whether notice is required separately at each location 
providing inpatient services. New paragraph (w)(3) includes provisions 
(moved from existing paragraph (w)(1)) governing the content of the 
written notice. Paragraph (w)(4) requires the hospital to receive a 
signed acknowledgement from the patient who has received a notice that 
the patient understands that a doctor of medicine or osteopathy may not 
be present during all hours in which services are furnished to the 
patient (previously language in existing paragraph (w)(2); and states 
that, before providing an outpatient service to an outpatient for whom 
a notice is required, the hospital must receive the signed 
acknowledgement. New paragraph (w)(5) requires that every hospital that 
has a dedicated emergency department in which a doctor of medicine or 
osteopathy is not present 24 hours a day, 7 days a week, to post a 
notice conspicuously in a place or places likely to be noticed by all 
individuals entering the dedicated emergency room and sets forth the 
required statements for the notice.

XVI. Additional Hospital Value-Based Purchasing (Hospital VBP) Program 
Policies

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 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, and this amount will 
rise to 1.25 percent in FY 2014.
    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 previously issued the Hospital Inpatient VBP Program Final Rule, 
which implemented the Hospital VBP Program 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 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

[[Page 74528]]

(HAC) measures (76 FR 26511). These measures are discussed more fully 
in the Hospital Inpatient VBP Program Final Rule (76 FR 26510 through 
26511). In the FY 2012 IPPS/LTCH Final Rule, we also adopted a new 
Medicare Spending Per Beneficiary Measure for the FY 2014 Hospital 
Inpatient VBP Program and incorporated the measure into a new 
Efficiency Domain (76 FR 51654).
    We received a number of general comments in response to the 
proposals we made with respect to the FY 2014 Hospital VBP Program in 
the proposed rule. Our responses to these comments appear below.
    Comment: Some commenters argued that the proposed performance 
periods for the HAC and AHRQ composite measures are not statutorily 
compliant because data on the measures will not have been included on 
Hospital Compare for one year prior to the March 3, 2012 performance 
period start date. The commenters also stated that the Medicare 
spending per beneficiary measure is not statutorily compliant because 
it has not been properly specified and data on the measure has not been 
included on the Hospital Compare Web site for a minimum of one year 
prior to the start of the measure's performance period.
    Commenters argued that in order for a measure to be included in the 
Hospital VBP Program, the statute requires that the measure be 
specified under the Hospital IQR Program, which includes publicly 
releasing a document that outlines the numerator, denominator, 
exclusions, and any applicable risk adjustment, as well as following 
the process that the measure undergoes in the Hospital IQR Program. In 
addition, these commenters stated that the measure data must be 
displayed on the Hospital Compare Web site for a year prior to its 
inclusion in the Hospital VBP Program. Citing their interpretation of 
the requirements in section 1886(o) of the Act, their view of Congress' 
intent under the Affordable Care Act, and the need for hospitals to 
understand measures that will be used in the Hospital VBP Program, 
commenters urged CMS to choose different performance periods for the 
HAC, AHRQ, and Medicare spending per beneficiary measures for FY 2014, 
which could necessitate delaying their introduction into the program 
until after FY 2014. Commenters also argued that the proposed 
performance periods for the HAC and AHRQ measures are too short to 
fairly distinguish performance among hospitals.
    Response: One of our most pressing concerns is to improve patient 
safety and efficiency as quickly as the law allows and, therefore, we 
interpreted the requirements under section 1886(o) of the Act in a way 
that enabled us to move swiftly. We also took into account comments 
submitted in response to the Hospital Inpatient VBP Program Proposed 
Rule that encouraged us to move with urgency in adopting measures for 
the Hospital VBP Program. We posted a brief description of each HAC and 
AHRQ measure on Hospital Compare more than 1 year prior to March 3, 
2012, the beginning of the seven month performance period that we 
proposed to adopt for these measures. Likewise, we posted on Hospital 
Compare a brief description of the Medicare spending per beneficiary 
Measure on April 21, 2011, which is more than 1 year prior to the May 
15, 2012 performance period start date.
    However, we acknowledge the suggestion from commenters that 
hospitals would benefit from seeing publicly posted performance data on 
measures before we include those measures in the Hospital VBP Program 
and make them part of the basis for value-based incentive payments, and 
note that we posted HAC and AHRQ measure data on Hospital Compare on 
October 13, 2011.
    We recognize that some commenters seek additional information 
related to the specifications for the Medicare spending per beneficiary 
measure that we previously articulated. In light of these comments, we 
intend to publicly release further details related to the 
specifications for this measure and, in doing so, we will ensure that 
interested parties have an opportunity to comment on them. We also note 
that in light of comments received, we are working expeditiously to 
appropriately post Medicare spending per beneficiary measure data on 
Hospital Compare.
    In addition, we appreciate the commenters' concern that the 
proposed 7-month performance period for the HAC and AHRQ measures may 
be too short to fairly assess hospital performance on these measures. 
Although we do not believe that a low incidence of HAC events 
necessarily results in unstable HAC rates, or that a seven month 
performance period compromises the reliability of the AHRQ composite 
measures, we recognize that a longer performance period would provide 
more data on which to compare hospital performance.
    Taking all of these factors into account, we have concluded that we 
will publicly post hospital performance on all Hospital VBP Program 
candidate measures on Hospital Compare for at least one year prior to 
the time when the performance period for those measures would start 
under the Hospital VBP Program. Hospitals will, thus, have an 
opportunity to become familiar with their performance on a measure 
before the measure is included in the Hospital VBP Program.
    In order to give full effect to the process of posting hospital 
data for one year, and after consideration of the public comments we 
received, we have also decided to suspend the effective dates of the 
HAC, AHRQ, and Medicare spending per beneficiary measures in the 
Hospital VBP Program because data on these measures will not have been 
made publicly available on Hospital Compare for at least one year prior 
to these dates. Because there will not be enough time to both publicly 
post the measure data for a year, as well as collect a requisite amount 
of performance period data to calculate reliable measure scores for FY 
2014, the result of this effective date suspension is that the HAC, 
AHRQ and Medicare spending per beneficiary measures will not be 
included in the FY 2014 Hospital VBP Program. We note that our decision 
to suspend the effective dates of the HAC, AHRQ and Medicare spending 
per beneficary measures in the FY 2014 Hospital VBP Program has no 
effect on the status of these measures under the Hospital IQR Program.
    We believe that the decision to suspend the effective dates of the 
HAC, AHRQ and Medicare spending per beneficiary measures is a logical 
outgrowth of the comments we received in response to the CY 2012 OPPS/
ASC proposed rule, a reasoned response to the concerns raised by the 
public in those comments, and, alternatively, is supported by good 
cause.
    The policies we proposed to adopt in the proposed rule with respect 
to the HAC, AHRQ, and Medicare spending per beneficiary measures rest 
squarely on the foundation that these measures were properly included 
in the Hospital VBP Program in the first place. To the extent that this 
foundation has been called into question by commenters, and to the 
extent that we wish to implement a Hospital VBP Program that both 
responds to this concern and enjoys wide public support, we have 
concluded that it is, at this time, premature to adopt requirements 
that would, in conjunction with the requirements we have previously 
adopted, incorporate these questioned measures into the FY 2014 
program. And, because we do not interpret section 1886(o) of the Act to 
authorize the Secretary to include ``placeholder'' measures in the 
Hospital VBP Program by adopting them but giving them no

[[Page 74529]]

effect, we believe that in order to both implement this posting of data 
process and comply with the statutory requirements, we must suspend the 
effective dates of these measures.
    Therefore, we conclude that we have good cause to waive notice and 
an opportunity to comment under the Administrative Procedure Act with 
respect to our decision to suspend the effective dates of the HAC, AHRQ 
and Medicare spending per beneficiary measures. We seek public comment 
on this issue.
    Finally, for all of the reasons explained above, we are not 
finalizing any proposals in the CY 2012 OPPS/ASC proposed rule relating 
to the HAC, AHRQ and Medicare spending per beneficiary measures at this 
time. We intend to adopt these measures for future years of the 
Hospital VBP Program and will take the comments into account as we 
develop our future policies.
    Comment: Some commenters requested that CMS align Hospital VBP 
rulemaking processes in the future, noting that CMS published details 
on the Hospital VBP Program in three separate regulations.
    Response: We have used more than one regulation to implement the 
Hospital VBP Program in order to meet the aggressive deadlines set 
forth in section 1886(o) of the Act. This approach also enabled us to 
give the public additional time to comment on our proposals. We will 
make every effort to, where possible, reduce the number of the 
rulemaking vehicles for future Hospital VBP Program proposals.
    Comment: Some commenters objected to the Hospital VBP Program's 
structure, arguing that hospitals should be rewarded for meeting 
objective performance criteria instead of competing with other 
hospitals.
    Response: The basic framework of the Hospital VBP Program is set 
forth in section 1886(o) of the Act, which we believe represents the 
culmination of substantial research and stakeholder outreach on the 
topic of value-based purchasing. As detailed in the Hospital Inpatient 
VBP Program Final Rule (76 FR 26493), we developed the 2007 Report to 
Congress as a plan to develop a hospital value-based purchasing program 
after implementing quality reporting in the hospital setting. This 
report is well-known to the public and formed the basis of the Hospital 
VBP Program as structured by the Affordable Care Act. We believe the 
finalized scoring methodology for the Hospital VBP Program provides 
strong incentives to hospitals to provide high quality care and to 
improve their performance over time.
    Comment: Some commenters suggested technical changes to the HF-1 
(Discharge Instructions) quality measure to improve providers' 
compliance. Commenters argued that the measure should capture discharge 
``orders,'' and not the discharge ``summary,'' to avoid unintentionally 
penalizing hospitals when doctors change medication orders after the 
summary is created. Commenters urged CMS to not adopt the HF-1 measure 
for the Hospital VBP Program until such technical changes are made.
    Response: While we are aware of the difficulties hospitals face in 
developing streamlined, effective discharge processes, we believe 
hospitals should be able to align discharge orders and summaries 
without further modifications to this measure.
    Comment: Some commenters reiterated their opposition to the use of 
HAC measures in the Hospital VBP Program, arguing that hospitals are 
already not paid for those conditions and will be subjected to payment 
reductions based on HAC incidents beginning in 2015.
    Response: As noted above, we are suspending the effective date of 
these measures for the Hospital VBP Program. We will take these 
comments into consideration as we develop our future policies.
    Comment: Some commenters called on CMS to thoroughly test and 
monitor measures for continued validity. Commenters also suggested that 
claims-based measures need adequate risk adjustment to be valid for 
public reporting. Some commenters urged CMS to reconsider the policy on 
``topped-out'' measures, arguing that we should continue monitoring 
topped-out measures to ensure that hospitals continue to perform at 
high levels. Commenters also argued that topped-out status should not, 
by itself, be enough to disqualify measures from the Hospital VBP 
Program.
    Response: We agree that measures should be tested and monitored for 
continued validity. We believe that our analysis of ``topped-out'' 
measures described in the Hospital Inpatient VBP Program Final Rule (76 
FR 26496 through 26497) is one component of that monitoring strategy, 
by continuing to measure whether a measure is still ``topped-out'' for 
each year of the program. Although we agree that some claims-based 
measures can and should be risk-adjusted, we do not believe that it is 
appropriate to risk adjust all claims-based measures. For example, many 
of the HAC measures are ``never'' events that we believe should be 
counted in every instance. We also note that the three mortality 
measures we have adopted for the FY 2014 Hospital VBP Program are 
currently undergoing maintenance by the NQF. Should the NQF recommend 
that changes be made to any of these measures, we will take that 
recommendation under advisement as we develop future measure proposals 
for the Hospital VBP Program.
    With regard to ``topped-out'' measures, we have previously stated 
that, as a general matter, we would not adopt topped-out measures for 
the Hospital VBP Program because they present a number of scoring 
challenges and because their use would mask true performance 
differences among hospitals (76 FR 26497). We proposed to adopt an 
exception to this general approach for the eight HAC measures for which 
we are suspending the effective date because we believe the HAC 
measures capture critical patient safety data that are strong 
indicators of the quality of hospital care. We do not believe we should 
create exceptions for other measures at this time. We also note that we 
are not finalizing our proposed HAC scoring methodology at this time 
for the reasons discussed above.
    Comment: Some commenters argued that the Hospital VBP Program 
inappropriately captures mortality data twice in the outcome domain, 
through both the 30-day mortality measures and the AHRQ composite 
measures. Commenters argued that such double-counting will harm 
tertiary care hospitals that often receive dying patients.
    Response: As detailed in the Hospital Inpatient VBP Program Final 
Rule (76 FR 26495 through 26511), we believe the AHRQ composite 
measures and the 30-day mortality measures capture important patient 
safety and quality data in the outcome domain. We note that the two 
sets of mortality measures do not measure the same concepts. The AHRQ 
mortality measures assess in-hospital deaths only and do not use a 
predefined index period. On the other hand, the 30-day mortality 
measures assess deaths that occur 30 days after admission, which, 
depending on the length of stay, may occur post-discharge. The 30-day 
mortality measures also do not count patients receiving comfort care 
only or enrolled in hospice care.
    As noted above, we are suspending the effective date of the AHRQ 
measures for the Hospital VBP Program. Therefore, we will take these 
comments into consideration as we develop our future policies.

[[Page 74530]]

    Comment: Some commenters expressed support for the use of the 
Medicare spending per beneficiary measure, arguing that CMS has met the 
statutory requirements for public display and suggesting that hospitals 
have experience tracking spending through the Medicare low-cost county 
payments created by the Affordable Care Act. These commenters also 
noted that attempts to move toward a value-based payment system must 
include measures for enhancing the efficiency of health care delivery, 
and suggest that CMS' proposed 20 percent weight for the efficiency 
domain underestimated its importance as a method to improve outcomes 
and patient care for Medicare.
    One commenter expressed the belief that CMS' plan to include the 
Medicare spending per beneficiary measure in the FY 2014 Hospital VBP 
Program is consistent with Congress' intent, because Medicare spending 
per beneficiary is the only measure that Congress specifically included 
in the Affordable Care Act, mandating its inclusion in the Hospital VBP 
Program.
    Response: We agree that measurement of efficiency is an important 
goal for the Medicare program, and we thank the commenters for their 
support. However, for the reasons explained above, we are suspending 
the effective date of the Medicare spending per beneficiary measure in 
the Hospital VBP Program. We will take these comments into 
consideration as we develop future proposals regarding this measure.
    Comment: Several commenters expressed their views regarding the 
Medicare spending per beneficiary measure, including the Medicare 
payments to be included, adjustments to be made, length of the episode, 
period of performance, and measure endorsement. Some commenters also 
argued that the Medicare spending per beneficiary measure's performance 
standards do not sufficiently consider the significant variation in 
health care costs per beneficiary throughout the country. Other 
commenters suggested that CMS develop condition-specific spending per 
beneficiary measures in order to appropriately capture each hospital's 
service mix. Several commenters stated that the measure should be 
adjusted for socioeconomic status and hospital case mix.
    Response: We appreciate these comments and refer commenters to the 
FY 2012 IPPS/LTCH PPS final rule where we finalized the Medicare 
spending per beneficiary measure for inclusion in the Hospital IQR 
Program (76 FR 51618 through 51628). However, as noted above, we are 
suspending the effective date of this measure in the Hospital VBP 
Program for FY 2014. Therefore, we will take these comments into 
consideration as we develop future proposals regarding this measure for 
the Hospital VBP Program.
3. Additional FY 2014 Hospital VBP Program Measures
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42355 through 42356), 
for the FY 2014 Hospital VBP Program, we proposed to retain all 13 of 
the measures that we adopted for the FY 2013 Hospital VBP Program, 
which include 12 clinical process of care measures and the patient 
experience of care survey. We also proposed 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 to 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 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.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42356), we listed the 
clinical process of care and patient experience of care measures we 
proposed to adopt for the FY 2014 Hospital VBP Program. We note that 
these measures are currently NQF-endorsed or undergoing NQF review for 
maintenance. 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. In the CY 2012 OPPS/ASC proposed rule (76 FR 42356), we 
noted that to the extent we determine that these measures are topped-
out, we may choose not to finalize them.
    We invited public comment on these proposals.
    Comment: Many commenters expressed support for the proposal to add 
the SCIP-Inf-9 measure to the FY 2014 Hospital VBP Program.
    Response: We thank commenters for their support.
    Comment: Some commenters suggested alternative measures as 
replacements for the SCIP clinical process measures in the Hospital VBP 
Program, such as surgical outcomes measures. Commenters argued the 
alternative measures are risk-adjusted and better capture high quality 
surgeries than the current SCIP measures. Other commenters suggested 
that CMS consider adopting additional HAI process and outcome measures 
in future years.
    Response: We thank commenters for their suggestions. We will 
consider these categories of additional measures for the Hospital VBP 
Program in the future.
    After consideration of the public comments we received, we are 
finalizing for the FY 2014 Hospital VBP Program, the 13 clinical 
process of care measures, including SCIP-Inf-9, and the patient 
experience of care measure, composed of 8 dimensions of the HCAHPS 
survey. Set out in the table below are the finalized clinical process 
of care measure, the patient experience of care measure and the 
mortality measures that will be included in the FY 2014 Hospital VBP 
Program.
BILLING CODE 4120-01-P

[[Page 74531]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.141

BILLING CODE 4120-01-C

[[Page 74532]]

4. 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 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. 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 proposed 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 the proposed rule, that the 
incidence of HACs raises significant safety and quality concerns for 
patients and for the Medicare program. Therefore, we believed 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 proposed 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 anticipated 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. 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 showed that the 
reliability of the outcome domain score would not be significantly 
different as a statistical matter, in the CY 2012 OPPS/ASC proposed 
rule (76 FR 42357), we proposed 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 believed that this proposal was consistent with the 
conclusions reached by Brandeis. In addition, from an inclusiveness 
standpoint, we believed that a 10 measure minimum would maximize 
hospital participation in the FY 2014 Hospital VBP Program.
    Furthermore, because we believed that every domain is an important 
component of an accurate Total Performance Score, we proposed that, in 
order for a hospital to receive a Total

[[Page 74533]]

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 invited public comment on the proposed minimum numbers of cases 
and measures required for the outcome domain in the FY 2014 Hospital 
VBP Program. We also invited 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.
    Comment: Several commenters urged CMS to make public our 
independent analyses of the minimum cases and measures required for the 
various Hospital VBP Program domains, arguing that they could not 
provide informed comments in response to those proposals without the 
analyses.
    Response: To the extent that these analyses are not subject to 
privilege, we will make available additional information, including the 
study results and methods, on the Hospital Value-Based Purchasing Web 
site at http://www.cms.gov/hospital-value-based-purchasing/ within 30 
to 45 days of this final rule with comment period.
    Comment: Some commenters objected to the proposals for minimum 
numbers of cases and measures in the outcome domain, arguing that the 
minimum numbers of cases proposed for HAC and AHRQ measures are too 
low. Commenters argued that these proposals will result in inaccurate 
performance measurement, especially for low-volume hospitals. Some 
commenters suggested that CMS apply the AHRQ composite measures' 
minimum number of cases to each component indicator.
    Response: We thank commenters for their input on appropriate 
minimum numbers of cases for HAC and AHRQ measures. We will consider 
these comments in future rulemaking.
    Comment: Some commenters sought more clarity on the different 
minimum numbers of cases and measures required in various parts of the 
Hospital VBP Program. Commenters argued that CMS should choose a 
consistent standard for minimum cases and measures to avoid provider 
confusion.
    Response: As noted in the Hospital Inpatient VBP Program Final Rule 
(76 FR 26528), we believe the most important factor in setting minimum 
case and measure thresholds for the Hospital VBP Program is to 
determine a combination of thresholds that allows the maximum number of 
hospitals to be scored reliably. While we agree that a single minimum 
cases standard across domains may reduce the potential for confusion, 
we have proposed different standards where we believe them to be 
necessary to accommodate different types of measures and to be as 
inclusive as possible. We believe that our proposals appropriately 
reflect the different types of measure data captured, the relative 
importance of the measures with regard to patient safety and our belief 
that as many hospitals as possible should be allowed to participate in 
the program.
    Comment: Some commenters suggested that CMS use a 25-case minimum 
for the mortality measures, arguing that 25 cases is the standard for 
reporting on Hospital Compare and is recommended by the Institute of 
Medicine.
    Response: We have used a 25-case minimum for public reporting. 
However, our analysis determined that a hospital only needed to report 
a minimum of 10 cases in order to receive a reliable score on the 
mortality measures. We note that this minimum number of cases is also 
consistent with the minimum number of cases required in the clinical 
process of care domain. We believe that this minimum number of cases 
provides us with accurate mortality measure data for use in the outcome 
domain and in the calculation of the Total Performance Score, while 
enabling hospital inclusion and providing consistency with the case 
minimums in the clinical process of care domain.
    Comment: Some commenters noted that if CMS chose to include only 
the three mortality measures in the outcome domain in the FY 2014 
program that it would need to re-evaluate the minimum number of 
measures required for a hospital to be eligible for the domain.
    Response: We thank the commenters for this observation, and agree 
that because we have decided to suspend the effective date of the HAC 
and AHRQ measures, and use only the three mortality measures in the 
outcome domain, we need to re-evaluate the minimum number of measures 
necessary for the domain.
    In conjunction with Brandeis, we reexamined the previous analyses 
regarding the sufficient number of measures needed to produce a 
reliable outcome domain score and have determined that hospitals must 
report on two of the three mortality measures in order to receive an 
outcome domain score. In the analysis, Brandeis noted that the vast 
majority of subsection (d) hospitals admit at least 10 congestive heart 
failure cases and at least 10 pneumonia cases each year. However, many 
fewer hospitals admit more than 10 acute myocardial infarction cases 
annually. The Brandeis study indicated that a large number of these 
hospitals (2,548) would receive an outcome domain score if the minimums 
of 10 mortality cases, 3 AHRQ cases, and 1 Medicare discharge for HAC 
measures are reported. A large number of the remaining hospitals (422) 
would receive an outcome domain score if the AMI mortality measure were 
excluded from this minimum measure threshold. This difference occurs 
because smaller hospitals typically do not treat a sufficient number of 
AMI cases to reach the minimum threshold of ten cases needed to 
generate useful AMI mortality values. If the AMI mortality measure were 
excluded from the minimum measure threshold, approximately 3,000 
hospitals would receive outcome domain scores in the FY 2014 Hospital 
Inpatient VBP Program, which is approximately the same number of 
hospitals able to participate in the FY 2013 Hospital Inpatient VBP 
Program.
    As we noted above, we are suspending the effective date of the AHRQ 
and HAC measures. Therefore, requiring two mortality measures to 
qualify for participation will allow many more hospitals to be included 
in the Hospital VBP Program, which is consistent with our views on the 
appropriate balance between reliability and inclusiveness that we 
described in the Hospital Inpatient VBP Program Final Rule (76 FR 
26529). Most hospitals will report sufficient data on all three 
mortality measures, while almost all hospitals will report sufficient 
data on at least two of the mortality measures. This approach allows us 
to include as many hospitals as possible in the program while ensuring 
the reliability of the domain score. In either case, the outcome domain 
is sufficiently reliable to include as part of the Total Performance 
Score.
    Comment: Some commenters supported the proposal to require 
hospitals to report on all four proposed

[[Page 74534]]

domains in order to receive a Total Performance Score.
    Response: We thank commenters for their support.
    As stated above, we are not finalizing our proposal regarding the 
minimum numbers of cases and measures in the outcome domain insofar as 
that proposal relates to the HAC and AHRQ measures. However, after 
considering the comments, we are finalizing our proposal that a 
hospital must report a minimum of 10 cases to receive a score on a 
mortality measure, and we note that this minimum is consistent with our 
previously finalized policy regarding the minimum number of cases that 
a hospital must report in order to receive a score on a clinical 
process of care measure. As we stated in the proposed rule, this policy 
is consistent with the analyses performed by Brandeis and Mathematica 
(76 FR 42357).
    Accordingly, we are finalizing that the minimum number of measures 
that a hospital must report in order to receive a score on the outcome 
domain is two measures. As discussed further below, we will normalize 
outcome domain scores in order to make fair comparisons in that domain 
between hospitals with scores on two mortality measures and those 
hospitals reporting sufficient data on all three.
    Concurrently, we are finalizing our proposal that hospitals must 
report the minimum number of cases and measures on all finalized 
domains in order to receive a Total Performance Score in FY 2014. 
Because we are suspending the effective date of the Medicare spending 
per beneficiary measure, the number of finalized domains will be three 
instead of four.
5. 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. Clinical Process of Care Domain and Patient Experience of Care 
Domain Performance Period and Baseline Period
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42357 through 42358), 
for the FY 2014 Hospital VBP Program, we proposed 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 Program 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 Hospital VBP Program. We have stated our intent to move 
to a 12-month performance period when feasible. 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 will 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 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 proposed April 1, 
2010 to December 31, 2010 as the baseline period for these proposed 
measures for FY 2014. We invited public comment on these proposals.
    Comment: Many commenters expressed support for the proposed 
clinical process and patient experience performance periods for FY 
2014.
    Response: We thank commenters for their support.
    After consideration of the public comments we received, we are 
finalizing the performance period and baseline period for FY 2014 
clinical process of care and patient experience of care measures as 
proposed.
b. Outcome Domain and 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 performance period end date for these measures in the 
CY 2012 OPPS/ASC proposed rule.
    We noted that 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 
stated 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, in the CY 2012 OPPS/ASC proposed rule (76 FR 42358), we 
proposed 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. We stated that 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.
    We also stated that because we believe that a comparable period 
should be selected for the baseline data, we proposed 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 invited 
public comment on these proposals.
    Comment: Some commenters opposed the performance and baseline 
period proposals, arguing that the various performance period dates 
specified for the measures within each domain is confusing and impose 
hardships on hospitals' quality management staff. Commenters suggested 
that CMS instead

[[Page 74535]]

propose to adopt harmonized performance periods.
    Response: We agree that a single performance period that applies to 
all of the Hospital VBP measures for a particular payment year would be 
desirable and we intend to move towards this goal in future program 
years. In the meantime, we proposed to adopt performance periods that 
take into account the time limitations associated with collecting 
performance data and scoring for different measures. We note that for 
the FY 2014 Hospital VBP Program, the clinical process and patient 
experience of care measures will have the same performance period. We 
believe that all providers will work to track achievement and 
improvement across all measures and we will continue to work towards 
harmonized periods in the future.
    As noted above, we are suspending the effective dates of the AHRQ 
and HAC measures for the Hospital VBP Program, and the mortality 
measures will be the only measures in the outcome domain in FY 2014. 
The following tables include all finalized baseline and performance 
periods for the FY 2013 and FY 2014 program years.
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6. 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.
b. 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 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 and 
benchmarks for these mortality measures (76 FR 26513), as shown below:

[[Page 74536]]

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    We received a few comments on the mortality measure performance 
standards.
    Comment: Some commenters argued that the performance standards for 
the mortality measures are so compressed or ``topped-out'' as to render 
them ineffective measures of quality for performance scoring.
    Response: We disagree with commenters' assertion. As described 
above, we finalized performance standards for the mortality measures 
selected for the FY 2014 Hospital VBP Program in the Hospital Inpatient 
VBP Final Rule and considered comments on this topic there (76 FR 26511 
through 26513).
    As we noted in the Hospital Inpatient VBP Program Final Rule (76 FR 
26496 through 26497), our analysis of possibly topped-out measures was 
not limited to the breadth of the achievement range. We also analyzed 
the variation in measure scores achieved by hospitals, as a small 
coefficient of variation would indicate that the distribution of 
individual hospital scores is clustered tightly around the mean value, 
which would suggest that the measure is not useful to draw distinctions 
between individual hospital performance scores. We do not believe the 
mortality measures meet our criteria for topped-out measures.
c. Clinical Process of Care and Patient Experience of Care FY 2014 
Performance Standards
    As discussed in section XVI.A.5.a. of the CY 2012 OPPS/ASC proposed 
rule (76 FR 42359 through 42360), we proposed 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, in the CY 2012 OPPS/ASC proposed rule (76 
FR 42359), we proposed to use the same approach adopted in the Hospital 
Inpatient VBP Program Final Rule for the FY 2013 Hospital VBP Program. 
That approach, as well as our rationale for adopting it, is explained 
in detail at 76 FR 26511 through 76 FR 26513.
    We proposed 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 proposed 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 proposed to set each benchmark 
for each measure as the mean of the top decile performance of 
applicable hospitals during the proposed baseline period. We invited 
public comment on these proposals.
    Comment: Some commenters asked CMS to release the HCAHPS floors for 
the FY 2014 program year to allow hospitals to plan for quality 
improvement efforts.
    Response: We published the floors (0th percentile) for the eight 
HCAHPS dimensions included in the FY 2013 Hospital VBP Program baseline 
period in the Hospital Inpatient VBP Program Final Rule (76 FR 26519). 
The FY 2014 Hospital VBP Program baseline period floor for each of the 
HCAHPS dimensions appears below.
    Comment: Some commenters were concerned that the risk adjustment 
models for the HCAHPS survey are not adequate and do not control for 
the severity of a patient's condition, socioeconomic status, and 
geographic differences.
    Response: HCAHPS dimensions are currently patient-mix adjusted. We 
adjust HCAHPS data for patient characteristics that are not under the 
control of the hospital that may affect patient reports of hospital 
experiences. The goal of adjusting for patient-mix is to estimate how 
different hospitals would be rated if they all provided care to 
comparable groups of patients. As part of the endorsement process for

[[Page 74537]]

HCAHPS, NQF endorsed the HCAHPS patient-mix adjustment currently in 
use.
    The HCAHPS patient-mix adjustment (PMA) model incorporates 
important and statistically significant predictors of patients' HCAHPS 
ratings that also vary meaningfully across hospitals (O'Malley et al., 
2005). The PMA model includes seven variables, as follows: Self-
reported health status, education, service line (medical, surgical, or 
maternity care), age, response order percentile (also known as 
``relative lag time,'' which is based on the time between discharge and 
survey completion), service line by linear age interactions, and 
primary language other than English.
    Initially the model also included admission through an emergency 
room, but because admission through an emergency room is no longer 
available on the UB-92 Form, this adjustor is no longer available for 
the patient-mix model. We are exploring other options to obtain that 
information in the future.
    We have found that evaluations of care increase with self-rated 
health and age (at least through age 74), and decrease with educational 
attainment. Maternity service has generally more positive evaluations 
than medical and surgical services. Response order percentile (relative 
lag time) findings show that late responders tend to provide less 
positive evaluations than earlier responders. From research conducted 
during the development of HCAHPS, we found little evidence that DRG 
matters beyond the service line, which is included in the patient mix 
model.
    To further address specific concerns about the adjustment model, it 
is important to note that self-reported health status is a widely 
accepted measure of a person's overall health status. In general, ``how 
would you rate your health'' is the most widely used single self-
reported health item and is used in many national health surveys. 
Education also captures important aspects of socio-economic status. 
Income is generally not available to adjust survey data. Patient-mix 
adjustment is based on variation by patient-level factors within 
hospitals so that true differences between hospitals are not included 
in the adjustment. Controlling for geographic region (a hospital-level 
factor) as part of a patient-mix adjustment model could mask important 
differences in quality across the country.
    Comment: A few commenters were concerned that the HCAHPS scores 
publicly reported on Hospital Compare differ by bed size, type of 
hospital and geography and thought the HCAHPS scores should be adjusted 
for these factors. These commenters thought HCAHPS needs to be vetted 
more to understand these differences to ensure that HCAHPS is a 
reliable measure.
    Response: We recognize that HCAHPS results differ by bed size and 
other hospital characteristics. However, we do not interpret these 
differing results to mean that the survey should be risk-adjusted for 
these factors. HCAHPS results also differ among hospitals with the same 
characteristics, which we view as evidence that the results account for 
differences in the quality of care received by patients. In general, 
risk-adjustment models control for exogenous factors that are beyond 
the control of a hospital, not for hospital characteristics that are 
endogenous, or within their control.
    We also believe that the HCAHPS survey has been thoroughly vetted, 
including through reviews in peer reviewed journals and through notice 
and comment rulemaking when we adopted it for the Hospital IQR Program. 
HCAHPS also has been endorsed by the NQF.
    After consideration of the public comments we received, we are 
finalizing the FY 2014 clinical process of care and patient experience 
of care performance standards as proposed. We set out final achievement 
performance standards for the finalized FY 2014 clinical process of 
care and patient experience of care measures using the applicable 
baseline period data in the table below.
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BILLING CODE 4120-01-C
d. AHRQ Measures
    For the reasons we have discussed in the Hospital Inpatient VBP 
Program Final rule (76 FR 26514), in the CY 2012 OPPS/ASC proposed rule 
(76 FR 42360), we proposed 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 proposed 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 proposed 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.
    We did not receive any comments on the proposed AHRQ measures 
performance standards. However, as described above, we will not 
finalize these performance standards.
e. HAC Measures
    We adopted eight HAC measures in the Hospital Inpatient VBP Program 
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 did 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,

[[Page 74541]]

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, in the CY 2012 OPPS/ASC proposed rule (76 FR 
42360 through 42361), we proposed that our topped-out policy would not 
apply to the HAC measures. We also proposed to treat the eight 
individual HAC measures as a single aggregate HAC score for purposes of 
performance scoring, and believe that this approach will enable us to 
calculate meaningful distinction among hospitals and variation in 
hospital performance on these measures. 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 proposed 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 
proposed separate performance standards depending on whether the 
hospitals report on seven or eight HAC measures.
    We proposed to set the achievement performance standard 
(achievement 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 proposed 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 proposed 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 proposed 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 proposed 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 
proposed aggregate HAC scoring methodology.
    We noted that the proposed performance standards for the HAC 
aggregate score were shown as a score composed of all eight individual 
HAC measures. We recognized 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, in the CY 2012 OPPS/ASC proposed 
rule (76 FR 42361), we noted that we intended 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 invited 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.
    Comment: Some commenters asked if CMS had considered how to 
transition performance data on claims-based measures from ICD-9 to ICD-
10. Commenters asked if CMS would consider delaying claims-based 
measures given the burden on providers of implementing ICD-10.
    Response: We are considering how to best conduct the transition 
from ICD-9 to ICD-10 for purposes of performance scoring and will 
provide more details in future rulemaking.
    Comment: Some commenters expressed concerns about the proposals to 
use HAC measures capturing healthcare-associated infections (HAI) data, 
especially vascular catheter-associated bloodstream infections and 
catheter-associated urinary tract infections. Some commenters argued 
that unintended consequences for patient care, such as patient falls, 
may result from catheter removal too quickly. Other commenters argued 
that scoring HAC measures in the aggregate will complicate CMS' stated 
intent to retire claims-based HAI measures when more appropriate 
measures become available. Commenters also argued that aggregating the 
HAC measures may mislead consumers and suggested that CMS remove all 
HACs related to HAIs from the aggregated HAC score. Some commenters 
suggested that CMS use a different methodology to set performance 
standards for the HAC measures, arguing that they are very high 
standards to be attained as proposed. Other commenters argued that HACs 
represent such rare events that the proposed separate performance 
standards for hospitals depending on whether they report 7 or 8 HACs 
could exacerbate scoring reliability problems.
    Response: As explained above, we are not finalizing any proposals 
related to the HAC measures at this time. We thank commenters for their 
input and will consider these comments in future rulemaking.
    After consideration of the public comments we received, we are not 
finalizing the performance standards proposed for the HAC measures.
7. FY 2014 Hospital VBP Program Scoring Methodology
a. 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 lengthy 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 
general methodology for subsequent fiscal years, with appropriate 
modifications to accommodate new domains and

[[Page 74542]]

measures. We finalized a similar scoring methodology for the Medicare 
spending per beneficiary measure in the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51654 through 51656).
    Therefore, in the CY 2012 OPPS/ASC proposed rule (76 FR 42361), we 
proposed 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 invited public comment on this proposal.
    Comment: Some commenters sought clarification on the outcome domain 
calculation, specifically asking if CMS intends to weight measures 
equally within the domain.
    Response: As described in the Hospital Inpatient VBP Program Final 
Rule (76 FR 26525), hospitals' measure scores are ``summed (weighted 
equally) to determine the total earned points for the domain.'' As we 
noted above, since some hospitals will not report the 30-day AMI 
mortality measure, we will convert the points earned for each of the 
remaining mortality measures to a percentage of total points. The 
points earned for each measure that applies to the hospital would be 
summed (weighted equally) to determine the total earned points for the 
domain.
    Comment: Some commenters asked CMS to clarify the Hospital VBP 
scoring methodology, arguing that it is unclear how Hospital Compare 
data are translated into value-based purchasing scores.
    Response: We interpret the commenter to erroneously believe that 
the measure rates currently posted on Hospital Compare are directly 
translated into Hospital VBP scores. That is not the case. Clinical 
process of care and patient experience of care measure rates currently 
displayed on Hospital Compare are calculated using four quarters of 
Hospital IQR Program data added on a rolling basis, while the HAC, AHRQ 
and mortality measure rates currently displayed on Hospital Compare are 
calculated using data from across multiple years. Under the Hospital 
VBP Program, we will use the measure data submitted with respect to the 
applicable performance period to calculate performance scores using the 
scoring methodology finalized for the program.
    Comment: Some commenters argued that CMS should align Hospital 
Compare data with Hospital VBP performance periods to allow hospitals 
to more easily track their performance in the Hospital VBP Program.
    Comment: Some commenters opposed the performance and baseline 
period proposals, arguing that the various dates specified are 
confusing and impose hardships on hospitals' quality management staff. 
Commenters suggested that CMS instead propose harmonized performance 
periods.
    Response: We intend to work towards harmonized performance periods 
in the Hospital VBP Program in future program years, and we will take 
these comments into account as we determine how best to do so in the 
future. We intend to display Hospital VBP data on a section of the 
Hospital Compare Web site, as required by section 1886(o)(10) of the 
Act, and will provide details on those postings in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our general scoring methodology for the clinical process and 
patient experience domains as outlined in the Hospital Inpatient VBP 
Program Final Rule. We are also finalizing our scoring methodology for 
the outcome domain, insofar as it applies to the mortality measures.
b. HAC Measures Scoring Methodology
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42361 through 42362), 
we proposed 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 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 proposed 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 rates 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 welcomed public comment on this proposal.
    Comment: While many commenters generally objected to the proposals 
to use HAC measures, most commenters did not object to the proposed 
aggregated scoring methodology. Commenters argued that CMS must 
finalize a HAC scoring methodology that is statistically reliable in 
order to provide reliable comparisons between hospitals on these 
measures.
    Response: We thank commenters for their support. However, for the 
reasons discussed above, we are not finalizing our proposed scoring 
methodology with respect to the HAC measures at this time. We will 
consider these comments in future rulemaking.
    After consideration of the public comments we received, we are not 
finalizing our proposed methodology to score HAC measures as an 
aggregate.
8. Ensuring HAC Reporting Accuracy
    As described in the FY 2012 IPPS/LTCH PPS proposed rule, 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

[[Page 74543]]

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 welcomed public comments 
regarding our consideration of a HAC validation process. We also noted 
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.
    Comment: Some commenters supported the proposals to validate HAC 
data as long as it does not cause undue burden to hospitals. Other 
commenters suggested that CMS target hospitals with aberrantly high HAC 
rates instead of those with aberrantly low rates. Some commenters noted 
that HAC validation may prove to be difficult and suggested that CMS 
could better identify HACs through data sources other than claims.
    Response: We thank commenters for their support. We intend to 
validate HAC data in such a way as to avoid any undue burden on 
hospitals. We will consider commenters' suggestion that we target 
hospitals with aberrantly high HAC rates in the future. We welcome 
commenters' suggestion that we could identify HACs through other data 
sources and would appreciate input on such sources and methodologies. 
At this time, however, we believe the claims-based HAC measures are the 
best available source for HAC data.
    We thank the commenters for their views and will take them into 
account as we further develop our policies in this area.
9. Domain Weighting for the 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. Thus, as we finalized for the FY 
2013 Hospital VBP Program, in the CY 2012 OPPS/ASC proposed rule (76 FR 
42362 through 42363), we proposed 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 encourages 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 measures are nearly topped-out, in the CY 
2012 OPPS/ASC proposed rule (76 FR 42362 through 42363), we proposed to 
reduce the weighting for the clinical process of care domain in FY 2014 
to 20 percent. We also proposed 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. Accordingly, in the CY 2012 OPPS/ASC 
proposed rule (76 FR 42363), we proposed to weight the efficiency 
domain at 20 percent of the Total Performance Score for the FY 2014 
Hospital VBP Program in order to encourage the delivery of high 
quality, coordinated, and efficient care to Medicare beneficiaries.
    Therefore, we proposed the following domain weights for the FY 2014 
Total Performance Score: outcome domain = 30 percent; clinical process 
of care

[[Page 74544]]

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 invited 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.
    Comment: Several commenters suggested alternative weighting schemes 
for the FY 2014 Hospital VBP Program, some arguing that the patient 
experience of care domain would be weighted too high at 30 percent. 
Some commenters suggested we reconsider the distribution of the 
clinical process of care domain weighting.
    Response: We disagree with commenters' argument that the patient 
experience domain is weighted too high at 30 percent. While hospitals 
have less direct control over the patient experience domain than, for 
example, the clinical process domain, we do not believe that the 
Hospital VBP Program should diminish the importance of the patient's 
experience of care. We believe that hospitals must strive to improve 
the patient's experience concurrently with their efforts to improve 
their performance on other domains as part of a broad quality 
improvement effort. In determining the weighting for clinical process 
of care measures, we consider the available measures in each domain 
while balancing the importance of patient experience and our emphasis 
on outcomes, as discussed below.
    Comment: Commenters disagreed with the proposed outcome domain 
weighting. Some commenters suggested that CMS weight it less than 
proposed, while others suggested that CMS give more weight to the 
outcome measures. Some commenters suggested that CMS redistribute the 
weight of the outcome domain and apply more weight to the clinical 
process of care domain.
    Response: We agree that the outcome domain should be weighted to 
encourage hospitals to improve treatment outcomes. However, because we 
are suspending the effective date of the HAC and AHRQ measures in the 
Hospital VBP Program, the outcome domain will only have three measures 
for the FY 2014 program. Therefore, we believe that it is necessary to 
reduce the weight applied to this domain as a result of our decision to 
suspend the effective date of the HAC and AHRQ measures. However, we 
still believe that outcome measures are critical to patient safety. We 
believe that the three mortality measures serve as very good predictors 
of the quality of care patients receive and that they will serve as a 
good basis to encourage hospitals to improve outcomes. Taking this into 
account, and the fact that we are not finalizing an efficiency domain, 
we are finalizing a weighting methodology that increases the weight of 
the clinical process of care domain, as had been supported by some 
commenters who requested a reduction to the weight of the outcome 
domain. We are also reducing the weight of the outcome domain to 
account for the fact that the domain will only include three measures. 
We believe that this approach reflects our belief regarding the 
importance of these measures and maintains the same weight for the 
patient experience of care domain. For these reasons, for FY 2014, we 
are finalizing a weighting of 25 percent for the outcome domain, 45 
percent for the clinical process of care domain, and 30 percent for the 
patient experience of care domain.
    Comment: Some commenters expressed concern about the proposed 
weighting for the efficiency domain, arguing that 20 percent is too 
high for its first year in the program, especially because it is 
composed of a single, non-NQF endorsed measure. Some commenters 
suggested that CMS did not display this measure on Hospital Compare in 
a timely manner, did not fully specify the measure for the Hospital IQR 
Program, or did not provide hospitals with sufficient data on the 
measure, and that the efficiency domain should therefore be weighted at 
zero. Other commenters expressed general concern about weighting 50 
percent of the program (patient experience and efficiency domains) on 
measures that are somewhat less under a hospital's control than 
clinical process and outcome measures.
    Response: In light of our decision to suspend the effective date of 
the Medicare spending per beneficiary measure in the Hospital VBP 
Program, there is no efficiency domain to weight. We will take these 
comments into consideration as we develop policies in future 
rulemaking.
    Comment: Some commenters argued that domain weighting changes 
should occur gradually to allow hospitals to adjust to program changes.
    Response: We reiterate our belief that strong incentives for 
hospitals to redesign care processes for the delivery of coordinated, 
efficient health care services to Medicare beneficiaries are a 
priority. We intend to revisit the domain weighting in the future. We 
believe the addition of the outcome domain in FY 2014 necessitates 
rapid adoption and significant weighting, particularly because it 
captures important information for quality improvement.
    Comment: Some commenters expressed support for the domain weighting 
proposal, arguing that the emphasis on outcomes and efficiency, as well 
as reduced emphasis on clinical processes, is consistent with the 
National Quality Strategy to promote higher quality health care. Other 
commenters expressed support for giving the proposed outcome domain a 
higher weight than the clinical process domain.
    Response: We thank commenters for their support. After 
consideration of the public comments we received, we are not finalizing 
our FY 2014 domain weighting as proposed. Instead, we will finalize the 
FY 2014 domain weighting as follows: clinical process of care = 45 
percent; patient experience of care = 30 percent; outcome = 25 percent.

B. 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 intent 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

[[Page 74545]]

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 
survey-based patient experience of care measure. In the CY 2012 OPPS/
ASC proposed rule (76 FR 42363 through 42365), we proposed 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. Review and Corrections of Data Submitted to the QIO Clinical 
Warehouse on Chart-Abstracted Process of Care Measures and Measure 
Rates
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42363 through 42364), 
we proposed 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 proposed 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. However, we did not adopt this proposal in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51640 through 51641).) 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. The sum of 
the numerators and the denominators for each measure across the 
performance period is the same as the Hospital VBP measure rate for the 
quarter.
    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 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 proposed that hospitals will have no further 
opportunity to correct such data or measure rates.
    We proposed that once the hospital has an opportunity to review and 
correct quarterly 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. We proposed 
to use this data to calculate the measure scores for purposes of the 
Hospital VBP Program, and these measure scores will be used to 
calculate domain, condition, and Total Performance Scores for the 
Hospital VBP Program without further review and correction. We invited 
public comment on this proposal.
    Comment: Many commenters expressed support for the proposed review 
and corrections process for chart-abstracted measures, noting that the 
Hospital IQR Program's review process is working well.
    Response: We thank commenters for their support.
    Comment: Some commenters asked that CMS provide details on review 
and corrections for claims-based measures, particularly because the 
Affordable Care Act requires that hospitals have an opportunity to 
appeal the measure data submitted.
    Response: We will provide more details on review and corrections 
for claims-based measures in future rulemaking. We also intend to 
propose an appeals process in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing the review and corrections process for chart-abstracted 
measures as proposed.
3. Review and Correction Process for Hospital Consumer Assessment of 
Healthcare Providers and Systems (HCAHPS) Data
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42364 through 42365), 
we proposed 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%20

[[Page 74546]]

Mode%20and%20PMA%20with%20bottom%20box%20modedoc%20April%2030,%202008.pd
f) 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 would 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. 
We finalized this proposal in the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51641 through 51642).
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 future rulemaking.
    In summary, for the chart-abstracted and patient experience of care 
measures, we proposed 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 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 invited public comment on 
these proposals.
    Comment: Some commenters expressed support for the proposed two-
phase review and corrections process, agreeing that it provides an 
appropriate opportunity to review data to be made public.
    Response: We thank commenters for their support.
    Comment: Some commenters recommended that CMS provide clear 
guidance for missing and incorrect data correction in the first phase 
and suggested that CMS reconsider allowing new records to be submitted 
in the second phase.
    Response: In order to create stability in the data submission 
process and ensure adequate time for data cleaning and processing, 
score calculation and report preparation, we have never allowed HCAHPS 
data to be submitted into the data warehouse after the data submission 
deadline. Permitting post-deadline data submissions could result in the 
strategic submission, alteration or withholding of HCAHPS surveys. 
Maintaining a firm data submission deadline is also consistent with CMS 
Data Warehouse policy that applies to all measures. Accordingly, we 
will not allow new records to be submitted or accepted in the data 
warehouse after the end of the data submission period for either Phase 
One or Two of the new Review and Correction process.
    As noted in the FY 2012 IPPS/LTCH PPS final rule and CY 2012 OPPS/
ASC proposed rule, the data submission deadline will occur one week 
earlier than previously in order to allow time for the Phase One Review 
and

[[Page 74547]]

Correction period. During the data submission period, which will last 
approximately 13 weeks, hospitals and survey vendors can submit surveys 
and will also have the opportunity to resubmit surveys to correct any 
issues regarding the patient records. During the new one-week Phase One 
Review and Correction period, hospitals and survey vendors will be 
permitted to correct and resubmit any previously submitted patient 
records. Phase Two of the Review and Correction process will occur 
months after the relevant data submission deadlines and long after the 
HCAHPS Hospital VBP scores have been calculated. Therefore, no HCAHPS 
records could be submitted or accepted at that time; otherwise, HCAHPS 
data could not be finalized in a timely manner.
    We will provide detailed information on the HCAHPS Review and 
Correction process closer to the inaugural Phase One and Phase Two of 
the program.
    Comment: Some commenters opposed the proposal to allow a one-week 
HCAHPS review period, arguing that hospitals need at least two weeks or 
longer to review their results.
    Response: The one-week HCAHPS review and correction period allows a 
formal opportunity for hospitals (or their HCAHPS survey vendors) to 
resubmit data for patients in order to correct errors in the data 
submitted for those patients.
    Given the amount of time necessary for participating hospitals or 
their survey vendors to fully administer the HCAHPS survey, receive 
survey responses, and create the necessary data files, we do not 
believe it is appropriate to further shorten the data submission period 
either by beginning the period sooner, or ending it sooner.
    During the proposed one-week Review and Correction period for Phase 
One, hospitals or their survey vendors will have access to a summary 
report of their data that had been submitted during the data submission 
period. HCAHPS scores would not be available until the Phase Two 
period.
    After consideration of the public comments we received, we are 
finalizing as proposed our two-phase review and corrections process for 
HCAHPS data.

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 with 
comment periods appeared in the printed version of the Federal Register 
as part of the annual rulemakings. However, beginning with the CY 2012 
OPPS/ASC proposed rule (76 FR 42365 through 42366), the Addenda of the 
proposed rules and the final rules with comment period will be 
published and available only via the Internet on the CMS Web site. Our 
existing regulations at Sec. Sec.  416.166(b), 416.171(b), and 416.173 
provide for the publication of covered surgical procedures, covered 
ancillary services, the payment methodology, and the payment rates 
under the ASC payment system in the Federal Register. In the proposed 
rule (76 FR 42365 and 42391 through 42392), we proposed to revise these 
three regulations to make the Addenda for the ASC payment system 
available via the Internet on the CMS Web site.
    We did not receive any public comments regarding publication of the 
Addenda only via the Internet on the CMS Web site. Therefore, we are 
finalizing, without modification, our proposal for CY 2012. We also are 
finalizing the revisions to Sec. Sec.  416.166(b), 416.171(b), and 
416.173 to provide for the publication of covered surgical procedures, 
covered ancillary services, payment methodologies, and payment rates 
under the ASC payment system via the Internet on the CMS Web site. In 
the CY 2012 OPPS/ASC proposed rule, we inadvertently omitted the last 
sentence of existing Sec.  416.171(b), which we did not propose to 
change. In this final rule with comment period, we are finalizing Sec.  
416.171(b) with the inclusion of language to correct this technical 
error.
    To view the Addenda of this final rule with comment period 
pertaining to the CY 2012 payments under the OPPS, go to the CMS Web 
site at: http://www.cms.gov/HospitalOutpatientPPS/HORD and select 
``1525-FC'' from the list of regulations. All Addenda for this final 
rule with comment period are contained in the zipped folder entitled 
``2012 OPPS FC Addenda'' at the bottom of the page.
    To view the Addenda of this final rule with comment period 
pertaining to the CY 2012 payments under the ASC payment system, go to 
the CMS Web site at: http://www.cms.gov/ASCPayment/ASCRN/ and select 
``1525-FC'' from the list of regulations. All Addenda for this final 
rule with comment period are contained in the zipped folder entitled 
``Addenda AA, BB, DD1, and DD2'', and ``Addendum EE'' at the bottom of 
the page.

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

    Addenda A and B provide various data pertaining to the CY 2012 
payment for items and services under the OPPS. Specifically, Addendum A 
includes a list of all APCs that are payable under the OPPS, including 
the scaled relative weights, the national unadjusted payment rates, the 
national unadjusted copayments, and the minimum unadjusted copayments 
for each APC that we are adopting for CY 2012. Addendum B includes a 
list of all active HCPCS codes, including the APC assignments, the 
scaled relative weights, the national unadjusted payment rates, the 
national unadjusted copayments, the minimum unadjusted copayments, and 
the payment status indicators and comment indicators for the 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 payment status indicators that we used in 
Addenda A and B. Addendum D2 defines the comment indicators that are 
used in Addendum B.
    Addendum E lists the HCPCS codes that are only payable to hospitals 
as inpatient procedures and that are not payable under the OPPS for CY 
2012.
    Addendum L contains the out-migration wage adjustment for CY 2012.
    Addendum M lists the HCPCS codes that are members of a composite 
APC and identifies the composite APC to which each is assigned. 
Addendum M also identifies the status indicator for each HCPCS code and 
a comment indicator if there is a change in the code's status with 
regard to its membership in the composite APC. Each of the HCPCS codes 
included in Addendum M has a single procedure payment APC, listed in 
Addendum B, to which it is assigned when the criteria for assignment to 
the composite APC are not met. When the criteria for payment of the 
code through the composite APC are met, one unit of the composite APC 
payment is paid, thereby providing packaged payment for all services 
that are assigned to the composite APC according to the specific I/OCE 
logic that applies to the APC. We refer readers to the discussion of 
composite APCs in section II.A.2.e. of this final rule with comment 
period for a complete description of the composite APCs.
    Addendum N, ``Bypass Codes for Creating `Pseudo' Single Procedure 
Claims for CY 2012 OPPS,'' contains a list of the HCPCS codes that we 
used 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 final rule 
with comment period for a full discussion of the use of this file in 
the

[[Page 74548]]

CY 2012 OPPS ratesetting process. Addendum N contains the following 
elements for the 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 final rule with comment period. The data in Addendum N were 
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 to 
this final rule with comment period 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 CY 2012 ASC Payment System

    Addenda AA and BB provide various data pertaining to the 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 ASC covered surgical procedures, whether the 
procedure is subject to multiple procedure discounting, the payment 
indicator for each procedure, the comment indicator if applicable, and 
the payment weight and rate for each procedure. Addendum BB displays, 
for CY 2012, the ASC covered ancillary services, the payment indicator 
for each service, the comment indicator if applicable, and the payment 
weight and rate for each service.
    Addendum DD1 defines the payment indicators that are used in 
Addenda AA and BB. Addendum DD2 defines the comment indicators that are 
used in Addenda AA and BB.
    Addendum EE lists the surgical procedures to be excluded from 
Medicare payment if furnished in ASCs. The excluded procedures listed 
in Addendum EE are surgical procedures that are assigned to the OPPS 
inpatient list, are not covered by Medicare, are reported using a CPT 
unlisted code, or have been determined to pose a significant safety 
risk to a Medicare beneficiary when performed in an ASC or for which 
standard medical practice dictates that the beneficiary typically 
requires active 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 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 the CY 2012 OPPS/ASC proposed rule, we solicited public comments 
on each of the issues outlined above as discussed below that contained 
information collection requirements.

B. Requirements in Regulation Text

    The CY 2012 OPPS/ASC proposed rule contained 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 estimated 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 estimated 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 estimated that on average each hospital or CAH that is 
subject to the disclosure requirement will make 1,966 disclosures per 
year. The estimated annual burden associated with developing an amended 
form, obtaining patient signatures, and copying and recording the form 
is 138,032 hours at a cost of approximately $2,557,733. We note that 
these numbers reflect correction of a minor arithmetic error reflected 
in our proposal, increasing the cost over our original estimate by 
$6,585.
    We did not receive any public comments on these information 
collection requirements. Therefore, we are finalizing the burden 
estimate as proposed, with the technical correction noted.
2. ICRs Regarding Exceptions Process Related to the Prohibition of 
Expansion of Facility Capacity (Sec.  411.362)
    As discussed in section XV. of the CY 2012 OPPS/ASC proposed rule 
(76 FR 42349 through 42354) and this final rule with comment period, we 
proposed to add a new Sec.  411.362(c) to establish and implement the 
process by which an applicable hospital or high Medicaid facility may 
apply for an exception to the prohibition on expansion of facility 
capacity. We proposed that 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. We proposed that an applicable hospital 
requesting an exception would have to satisfy eligibility criteria for 
3 of the most recent fiscal years for which data are

[[Page 74549]]

available. In addition, the hospital would have to provide supporting 
documentation to CMS regarding the criteria it must satisfy. We 
estimated that 265 physician-owned hospitals would request an 
exception.
    As discussed in section XV. of this final rule with comment period, 
we received a comment contending that 3 fiscal years worth of data was 
excessive. After consideration of this public comment, in this final 
rule with comment, we are modifying the regulations at Sec.  
411.362(c)(2)(ii), (iv), and (v) to require applicable hospitals to 
satisfy the respective criteria for the most recent fiscal year for 
which data are available. Therefore, we have revised our proposed 
estimates. We estimate that it will take each hospital 6 hours and 45 
minutes to complete the request process at the cost of approximately 
$365.65 for each hospital. Overall, the annual burden for this process 
is estimated at approximately 1,789 hours, at the cost of approximately 
$96,897.25. 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 final 
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 are difficult to anticipate, as this is an 
unknown variable.
[GRAPHIC] [TIFF OMITTED] TR30NO11.147

C. Associated Information Collections Not Specified in Regulatory Text

    In the CY 2012 OPPS/ASC proposed rule, we made reference to 
proposed associated information collection requirements that were not 
discussed in the regulation text contained in the proposed rule. The 
following is a discussion of those requirements for the proposals that 
we are adopting in this final rule with comment period.
1. Hospital Outpatient Quality Reporting (Hospital OQR) Program
    As previously stated in section XIV. of the CY 2012 OPPS/ASC 
proposed rule and this final rule with comment period, 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

[[Page 74550]]

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.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR30NO11.148


[[Page 74551]]


b. Additional 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 
final rule with comment period, we are adding, for the CY 2014 payment 
determination, 1 chart-abstracted measure and 2 structural measures 
(including hospital outpatient volume data for selected outpatient 
surgical procedures). Thus, for the CY 2014 payment determination, 
there will be a total of 26 measures. The complete measure set we are 
adopting for the CY 2014 payment determination, including measures we 
have previously adopted, is shown below.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR30NO11.149


[[Page 74552]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.150

BILLING CODE 4120-01-C
    We will calculate the seven claims-based measures using Medicare 
FFS claims data and do not require additional hospital data 
submissions. With the exception of OP-22, 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 four 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. 
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) is the time and 
effort associated with completing the notice of participation form, 
collecting and submitting the data on the 26 measures. For the 15 
chart-abstracted measures (including those measures for which data are 
data is submitted directly to CMS, as well as the OP-22 measure for 
which data will be submitted via a Web-based tool rather than via an 
electronic file), 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 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 1,947,429 cases 
per year, approximately 609 cases per year per respondent. The 
estimated annual burden associated with the submission requirements for 
these chart-abstracted measures is 1,136,000 hours (1,947,429 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 these measures 1,600 hours (3,200 hospitals x 0.167 hours per 
measure x 3 structural measures per hospital).
    For the 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 533 hours (3,200 hospitals x 
0.167 hours

[[Page 74553]]

per measure x 1 all-patient volume measure per hospital).
    Comment: One commenter believed that the estimates within the 
proposed rule are reasonable for the chart-abstraction of cases, but 
that they underestimate the true burden by overlooking the time burden 
for startup and biannual maintenance education of the measure 
specifications, educational research for cases that do not fit within 
the specifications manual, education regarding electronic tool usage, 
coordination of data submission and data quality checks by management 
and/or information technology personnel, and recruitment of abstraction 
personnel by management. The commenter believed that the effect of 
these additional, required activities will double or triple the burden 
estimated within the original proposal document and should not be 
overlooked.
    Response: We thank the commenter for bringing our attention to 
these additional sources of burden and for their support of our 
estimates related to the abstraction of cases. We will consider whether 
future estimates will require consideration of the factors listed.
c. Hospital OQR Program Measures for CY 2015
    In this final rule with comment period, for the CY 2015 payment 
determination, we are retaining 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 retaining 
the measures used for CY 2014 payment determination (including the 
measures adopted in this final rule with comment period) and not adding 
any additional measures at this time.
    For the CY 2015 payment determination, the burden associated with 
these 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 all-patient volume 
data for selected outpatient surgical procedures. For the 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 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 measures, we estimate there will be a 
total of 1,947,429 cases per year, approximately 609 cases per year per 
respondent. The estimated annual burden associated with the 
aforementioned proposed submission requirements for the chart-
abstracted data is 1,136,000 hours (1,947,429 cases per year x 0.583 
hours per case). For the 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 
these measures 1,603 hours (3,200 hospitals x 0.167 hours per hospital 
x 3 structural measures per hospital).
    For the 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 
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 measure 533 hours (3,200 hospitals x 0.167 hours 
per hospital).
    We invited public comment on the burden associated with the 
information collection requirements but did not receive any public 
comment.
    We did not receive any additional comments on these information 
collection requirements.
3. Hospital OQR Program Validation Requirements for CY 2013
    In this final rule with comment period, we are retaining 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 validating 
data from randomly selected hospitals for the CY 2013 payment 
determination, but we are reducing 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 final rule with comment period, we are 
finalizing a policy under which we will select for validation up to 50 
additional hospitals based upon targeting criteria.
    For each selected hospital, generally we will 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 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 data submission requirements. To comply 
with the requirements, we estimate each hospital must submit up to 48 
cases for the affected year for review. All selected hospitals must 
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 data validation process for 
CY 2013 is approximately 6,000 hours.
    We are maintaining the deadline of 45 days for hospitals to submit 
requested medical record documentation to a CMS contractor to support 
our validation process.
    We invited public comment on the burden associated with these 
information collection requirements. We received comments regarding 
increased burden related to reducing the deadline for hospitals to 
submit requested medical record documentation from 45 to 30 days. We 
discuss these comments and state in section XIV.G.3.d. of this final 
rule with comment period that we have decided to not finalize our 
proposal to reduce the time for hospitals to submit medical record 
documentation, and that we are instead retaining our policy of 45 days 
after request.
4. 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

[[Page 74554]]

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 continuing this process for the CY 2013 and 
future years' payment determinations. 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.
    We did not receive any comments on these information collection 
requirements.
5. ASC Quality Reporting Program
    In this final rule with comment period, we are adopting five 
claims-based measures for collection beginning on October 1, 2012; 
these measures will be used for the CY 2014 payment determination. We 
will collect quality measure data for the five claims-based measures by 
using Quality Data Codes (QDCs) placed on submitted claims beginning 
with services furnished from October 1, 2012 through December 31, 2012. 
The five 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)
    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 claims-based measure is prophylatic IV antibiotic 
timing. We estimate the burden associated with submitting QDCs for this 
measures to be 231,851 hours (2,788,640 claims per year x 50 percent of 
claims requiring QDC 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 CY 2015 payment determination, we are retaining the five 
measures we are adopting for CY 2014 payment determination and we are 
adding two structural measures.
    For the structural measures, ASCs will 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 1 measure 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 1 measure 0.167 hours per ASC).
    Comments received regarding burden related to the collection of 
these data are discussed in section XIV.K.3., 4, and 5. of this final 
rule with comment period.
6. 2012 Electronic Reporting Pilot for Eligible Hospitals and CAHs
    Under 42 CFR 495.6(f)(9), we require eligible hospitals and CAHs 
participating in the Medicare EHR Incentive Program (which would 
include those participating in the 2012 Electronic Reporting Pilot) to 
successfully report hospital CQMs to CMS in the manner specified by 
CMS. Although eligible hospitals and CAHs may continue to attest CQMs 
in 2012, they may also choose to participate in the 2012 Electronic 
Reporting Pilot for Hospitals and CAHs which we are finalizing in this 
final rule with comment period. Eligible hospitals and CAHs 
participating in the 2012 Electronic Reporting Pilot must submit CQM 
data on all 15 CQMs (listed in Table 10 of the Medicare and Medicaid 
EHR Incentive Program final rule (75 FR 44418 through 44420)) 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 under the 2012 Electronic Reporting Pilot. Therefore, the 
estimated total burden should all 4,922 Medicare eligible hospitals and 
CAHs (3,620 acute care hospitals and 1,302 CAHs) participate in the 
2012 Electronic Reporting Pilot is 2,461 hours.
    We believe that an eligible hospital or CAH might assign a Computer 
and Information Systems Manager 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 $145,863 ($29.64 x 4,922 hospitals and CAHs).
    We solicited public comments on the estimated numbers of eligible 
hospitals and CAHs that may register for the 2012 Electronic Reporting 
Pilot and that would submit the CQM information via the 2012 Electronic 
Reporting Pilot. We also invited public comments on the type of 
personnel or staff that would mostly likely submit on behalf of 
eligible hospitals and CAHs.
    We did not receive any comments on these information collection 
requirements.
7. Additional Topics
    In addition to soliciting public comments as part of the OMB 
approval process for the proposed information collection requirements 
associated with the Hospital OQR Program, in the proposed rule we 
sought public comment on several issues that may ultimately affect the 
burden associated with the Hospital OQR Program. Specifically, in the 
proposed rule, we proposed to retain measures for the CY 2015 payment 
determinations, to adopt new measures for the CY 2014 and CY 2015 
payment determinations, and we sought comments on other possible 
measures under consideration for adoption into the Hospital OQR 
Program. We also sought 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

[[Page 74555]]

waiver for reporting quality data, and additional data validation 
conditions that we are considering adopting beginning with the CY 2014 
payment determination.
    We also sought public comment on our proposals for an ASC Quality 
Reporting Program for the ASC payment determinations for CYs 2014, 2015 
and 2016.
    We invited public comments on these potential information 
collection requirements.
    Comments and responses for the proposed policies and burden 
associated with these proposed information collection requirements are 
discussed in section XIV. of this final rule with comment period.

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

XX. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of this final rule with comment period 
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 Contract with America Advancement 
Act of 1996 (Pub. L. 104-121) (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 and a 
major rule under the Contract with America Advancement Act of 1996 
(Pub. L. 104-121). 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 this final rule with comment period. In the proposed rule 
(76 FR 42371), we solicited public comments on the regulatory impact 
analysis provided.
2. Statement of Need
    This final rule with comment period is necessary to update the 
Medicare hospital outpatient prospective payment rates and the 
ambulatory surgical center (ASC) prospective payment rates for CY 2012. 
The final rule with comment period is necessary to adopt changes to 
payment policies and payment rates for outpatient services furnished by 
hospitals and CMHCs for CY 2012. We are required under section 
1833(t)(3)(C)(ii) of the Act to update annually the OPPS 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 relative weights at least annually.
    This final rule with comment period is also necessary to update the 
ASC payment rates for CY 2012. The final rule with comment period is 
necessary to enable CMS to adopt 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 relative 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 frequently 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 final 
rule with comment period, we are adopting additional policies affecting 
the Hospital OQR Program for CY 2013, CY 2014, and CY 2015 that 
hospitals will have to meet in order to receive the full OPD fee 
schedule increase factor. In the proposed rule, we solicited public 
comments on these proposed additional policies. Any public comments 
that we received are addressed in section XIV. of this final rule with 
comment period.
    This final rule with comment period is necessary to further 
implement section 6001(a)(3) of the Affordable Care Act. In section XV. 
of this final rule with comment period, we are adopting a 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 adopt 
amendments to the patient safety requirements in the provider agreement 
regulations. In the proposed rule, we solicited public comments on 
these proposed changes. Any public comments that we received are 
addressed in section XV. of this final rule with comment period.
    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 
section XVI. of this final rule with comment period, we are adding one 
chart-abstracted measure for the FY 2014 payment determination under 
the Hospital VBP Program. In the proposed rule, we solicited public 
comments on this proposed additional measure. Any public comments that 
we received are addressed in section XVI. of this final rule with 
comment period.
    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 points in any annual update 
with respect to the year involved, for failure to report on quality 
measures. In section XIV.K. of this final rule with comment period, we 
are establishing an ASC Quality Reporting Program with the collection 
of five quality measures beginning in CY 2012. In the proposed rule, we 
solicited public comments on this program. Any public comments that we 
received are addressed in section XIV.K. of this final rule with 
comment period.

[[Page 74556]]

3. Overall Impacts for OPPS and ASC Provisions
    We estimate that the effects of the OPPS provisions that will be 
implemented by this final rule with comment period will result in 
expenditures exceeding $100 million in any 1 year. We estimate the 
total increase, from changes in this final rule with comment period, in 
expenditures under the OPPS for CY 2012 compared to CY 2011 to be 
approximately $600 million. Because this final rule with comment period 
for the OPPS is ``economically significant'' as measured by the $100 
million threshold, we have prepared a regulatory impact analysis that, 
to the best of our ability, presents the costs and benefits of this 
rulemaking. Table 59 of this final rule with comment period displays 
the redistributional impact of the CY 2012 changes on OPPS payment to 
various groups of hospitals and for CMHCs.
    We estimate that the effects of the ASC provisions that will be 
implemented by this final rule with comment period for the ASC payment 
system will result in expenditures exceeding $100 million in any 1 
year. We estimate the total increase, from changes in this final rule 
with comment period, in expenditures under the ASC payment system for 
CY 2012 compared to CY 2011 to be approximately $45 million. Because 
this final rule with comment period for the ASC payment system is 
``economically significant'' as measured by the $100 million threshold, 
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 61 and Table 62 of this final rule 
with comment period display the redistributional impact of the CY 2012 
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 OPPS Changes in This Final Rule With Comment Period
    We are updating the OPPS payment rates and revising 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 frequently 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 practice 
in this final rule with comment period, we are updating the conversion 
factor and the wage index adjustment for hospital outpatient services 
furnished beginning January 1, 2012, as we discuss in sections II.B. 
and II.C., respectively, of this final rule with comment period. 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 revising 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 continuing the current payment adjustment for rural 
SCHs, including EACHs. Finally, we list the 19 drugs and biologicals in 
Table 32 of this final rule with comment period that we are removing 
from pass-through payment status for CY 2012.
    We estimate that the update change to the conversion factor and 
other adjustments (but not including the effects of outlier payments, 
the pass-through estimates, and the application of the frontier State 
wage adjustment for CY 2012) will increase total OPPS payments by 1.9 
percent in CY 2012. The changes to the APC weights, the changes to the 
wage indices, the continuation of a payment adjustment for rural SCHs, 
including EACHs, and the payment adjustment for cancer hospitals will 
not increase OPPS payments because these changes to the OPPS are budget 
neutral. However, these updates will change the distribution of 
payments within the budget neutral system as shown in Table 59 below 
and described in more detail in this section. We also estimate that the 
total change in payments between CY 2011 and CY 2012, considering all 
payments, including 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 OPD fee schedule increase factor after all adjustments required 
by sections 1833(t)(3)(F) and 1833(t)(3)(G) of the Act, will increase 
total estimated OPPS payments by 1.9 percent.
(1) Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the 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 final rule with 
comment period. To view the hospital-specific estimates, we refer 
readers to the CMS Web site at: http://www.cms.gov/HospitalOutpatientPPS/. At the Web site, select ``regulations and 
notices'' from the left side of the page and then select ``CMS-1525-
FC'' from the list of regulations and notices. The hospital-specific 
file layout and the hospital-specific file are listed with the other 
supporting documentation for this final rule with comment period. We 
show hospital-specific data only for hospitals whose claims were used 
for modeling the impacts shown in Table 59 below. We do not show 
hospital-specific impacts for hospitals whose claims we were unable to 
use. We refer readers to section II.A.2. of this final rule with 
comment period for a discussion of the hospitals whose claims we do not 
use for ratesetting and impact purposes.
    We estimate the effects of the individual policy changes by 
estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our policy changes. In addition, we 
do not make adjustments for future changes in variables such as service 
volume, service-mix, or number of encounters. In the proposed rule, as 
we have done in previous proposed rules, we solicited public comment 
and information about the anticipated effects of our proposed changes 
on providers and our methodology for estimating them. Any public 
comments that we received are addressed in the applicable sections of 
this final rule with comment period that discuss the specific policies.
(2) Estimated Effects of This Final Rule With Comment Period on 
Hospitals
    Table 59 below shows the estimated impact of this final rule with 
comment period on hospitals. Historically, the first line of the impact 
table, which estimates the 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 final 
rule with comment period, we are finalizing an adjustment for certain 
cancer hospitals as required under section 3138 of the Affordable Care 
Act. Because these hospitals will continue to be eligible to receive 
hold harmless payments (under current law), we now include a second 
line for all hospitals, excluding permanently held harmless hospitals 
and CMHCs, and we also include a

[[Page 74557]]

column that shows the impact on other hospitals of the budget neutral 
adjustment accounting for the payment adjustment to cancer hospitals.
    We present separate impacts for CMHCs in Table 59 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 
continuing this APC payment structure and basing 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 policy below, and we discuss the 
impact on hospitals as part of our discussion of the impact of 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 market basket percentage increase 
applicable under section 1886(b)(3)(B)(iii) of the Act, which we refer 
to as the IPPS market basket percentage increase in this discussion, is 
3.0 percent. However, section 1833(t)(3)(F)(i) of the Act reduces that 
3.0 percent by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act, which is 1.0 percentage point (which 
is also the MFP adjustment for FY 2012 as adopted in the FY 2012 IPPS/
LTCH PPS final rule), and sections 1833(t)(3)(F)(ii) and 
1833(t)(3)(G)(ii) of the Act further reduce the market basket 
percentage increase by 0.1 percentage point, resulting in the OPD fee 
schedule increase factor of 1.9 percent, which we are using in the 
calculation of the CY 2012 OPPS conversion factor. We refer readers to 
section II.B. of this final rule with comment period 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 in the CY 2012 estimates in Table 59. 
Additionally, in response to public comments on the proposed rule, we 
are providing the payment impact of the rural floor and the imputed 
floor with budget neutrality at the State level in Table 60, as 
discussed in section II.C. of this final rule with comment period.
    Table 59 shows the estimated redistribution of hospital and CMHC 
payments among providers as a result of the following factors: 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 budget neutral 
adjustment to payments made to the 11 dedicated cancer hospitals that 
meet the classification criteria in section 1886(d)(1)(B)(v) of the 
Act; the frontier State wage index adjustment; and estimated 
redistribution considering all 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 making any changes to the policy 
for CY 2012. Because the updates to the conversion factor (including 
the update of the OPD fee schedule increase factor, that is, the IPPS 
market basket percentage increase 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 hospital 
payment 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 final rule with comment period will redistribute money 
during implementation also will depend on changes in volume, practice 
patterns, and the mix of services billed between CY 2011 and CY 2012 by 
various groups of hospitals, which CMS cannot forecast.
    Overall, we estimate that the OPPS rates for CY 2012 will have a 
positive effect for providers paid under the OPPS, resulting in a 1.9 
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 changes will result in a 1.9 
percent estimated increase in Medicare payments to all other hospitals.
    To illustrate the impact of the CY 2012 changes, our analysis 
begins with a baseline simulation model that uses the final CY 2011 
relative weights, the FY 2011 final IPPS wage indices that include 
reclassifications, and the final CY 2011 conversion factor. Column 2 in 
Table 59 shows the independent effect of the changes resulting from the 
reclassification of services among APC groups and the recalibration of 
APC relative 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 APC recalibration changes for CY 2012 by varying only the 
relative weights (the final CY 2011 relative weights versus the CY 2012 
relative weights calculated using the service-mix and volume in the CY 
2010 claims used for this final rule with comment period) and 
calculating the percent difference in the relative weight. Column 2 
also reflects the effect of the changes resulting from the APC 
reclassification and recalibration changes and any changes in multiple 
procedure discount patterns or conditional packaging that occur as a 
result of the changes in the relative magnitude of payment weights.
    Column 3 reflects the independent effects of the updated wage 
indices, including the application of budget neutrality for the rural 
floor policy on a 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 making 
any changes to the policy for CY 2012. We modeled the independent 
effect of updating the wage indices by varying

[[Page 74558]]

only the wage indices, holding APC relative weights, service-mix, and 
the rural adjustment constant and using the 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 cancer hospital 
payment adjustment. The cancer hospital payment adjustment will be 
provided at cost report settlement rather than through an adjustment to 
APC payments on a claims basis as we proposed. Under this final rule 
with comment period, we will examine each cancer hospital's data at 
cost report settlement, determine the cancer hospital's PCR (before the 
cancer hospital payment adjustment) and in turn determine the lump sum 
necessary (if any) to make the cancer hospital's PCR equal to the 
target PCR. To the extent at cost report settlement a cancer hospital's 
PCR (before the cancer hospital payment adjustment) is above the target 
PCR, a cancer hospital will receive an aggregate payment equal to zero. 
We refer readers to section II.F. of this final rule with public 
comment for complete discussion of our policy for CY 2012 with regard 
to the payment adjustment for dedicated cancer hospitals. We refer 
readers to Table 13 in section II.F. for the estimated CY 2012 
percentage payment adjustment that will be provided to each cancer 
hospital at cost report settlement. The cancer hospital payment 
adjustment is estimated to result in an aggregate increase in OPPS 
payments to cancer hospitals of 34.5 percent. After accounting for 
TOPs, the estimated aggregate increase in OPPS payments for CY 2012 is 
approximately 11.3 percent, after all CY 2012 payment updates have been 
included.
    Column 5 demonstrates the combined ``budget neutral'' impact of APC 
recalibration (that is, Column 2), the wage index update (that is, 
Column 3), as well as the impact of updating the conversion factor with 
the OPD fee schedule increase factor, the 3.0 percent hospital market 
basket percentage increase less the productivity adjustment required by 
section 1833(t)(3)(F)(i) of the Act, which is 1.0 percentage point, 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 1.9 percent. We modeled the 
independent effect of the budget neutrality adjustments and the OPD fee 
schedule increase factor by using the relative 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 budget neutral 
adjustments from Columns 2 through 4, and the OPD fee schedule increase 
factor of 1.9 percent reflected in Column 5, combined with the non-
budget neutral frontier State wage index adjustment, discussed in 
section II.C. of this final rule with comment period. This differs from 
Column 5 solely based on application of the non-budget neutral frontier 
State wage index adjustment.
    Column 7 depicts the full impact of the CY 2012 policies on each 
hospital group by including the effect of all the 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 change to the 
fixed-dollar outlier threshold from $2,100 to $1,900 as discussed in 
section II.G. of this final rule with comment period; the change in the 
Hospital OQR Program 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 final rule with 
comment period); 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 Hospital 
OQR Program reporting requirements for the full CY 2011 update (and 
assumed, for modeling purposes, to be the same number for CY 2012), we 
included 34 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 changes for CY 2012 will increase payments to all 
providers by 1.9 percent for CY 2012. We modeled the independent effect 
of all changes in Column 7 using the final relative weights for CY 2011 
and the relative weights for CY 2012. We used the final conversion 
factor for CY 2011 of $68.876 and the CY 2012 conversion factor of 
$70.016 discussed in section II.B. of this final rule with comment 
period in this model.
    Column 7 also contains simulated outlier payments for each year. We 
used the one year charge inflation factor used in the FY 2012 IPPS/LTCH 
PPS final rule of 3.89 percent (1.0389) to increase individual costs on 
the CY 2010 claims, and we used the most recent overall CCR in the July 
2011 Outpatient Provider-Specific File (OPSF) (76 FR 51794) to estimate 
outlier payments for CY 2011. Using the CY 2010 claims and a 3.89 
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 $2,100 should be approximately 0.93 percent of 
total payments. Outlier payments of 0.93 percent are incorporated in 
the CY 2012 comparison in Column 7. We used the same set of claims and 
a charge inflation factor of 7.94 percent (1.0794) and the CCRs in the 
July 2011 OPSF, with an adjustment of 0.9903, 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 final fixed-dollar threshold 
of $1,900.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 59 shows the total number of 
facilities (4,161), including designated cancer and children's 
hospitals and CMHCs, for which we were able to use CY 2010 hospital 
outpatient and CMHC claims data to model CY 2011 and CY 2012 payments, 
by classes of hospitals, for CMHCs and for dedicated cancer hospitals. 
We excluded all hospitals and CMHCs 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 
final rule with comment period. At this time, we are unable to 
calculate a disproportionate share (DSH) variable for hospitals not 
participating in the IPPS. Hospitals for which we do not have a DSH 
variable are grouped separately and generally include freestanding 
psychiatric hospitals, rehabilitation hospitals, and long-term care 
hospitals. We show the total number (3,895) 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 
204 CMHCs at the bottom of the impact table and discuss that impact 
separately below.

[[Page 74559]]

Column 2: APC Changes Due to Reassignment and Recalibration
    This column shows the combined effects of the reconfiguration, 
recalibration, and other policies (such as setting payment for 
separately payable drugs and biologicals at ASP+4 percent with an 
accompanying reduction in the amount of cost associated with packaged 
drugs and biologicals and changes in payment for PHP services). 
Overall, we estimate that changes in APC reassignment and recalibration 
across all services paid under the OPPS will increase payments to urban 
hospitals by 0.2 percent. We estimate that both large and other urban 
hospitals will 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 will experience decreases ranging from 
0.6 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 payment for APC 0034 (Mental Health Services 
Composite), for which the payment rate is 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 will experience increases of 0.2 to 0.5 percent.
    Overall, we estimate that rural hospitals will experience an 
increase of 0.1 percent as a result of changes to the APC structure. We 
estimate that rural hospitals of all bed sizes will experience no 
change or increases of 0.1 to 0.3 percent as a result of the APC 
recalibration. We estimate that rural hospitals that report fewer than 
5,000 lines for OPPS services will experience a decrease of 0.7 
percent, while rural hospitals that report 5,000 or more lines for OPPS 
services will experience no change or increases of 0.3 to 0.7 percent 
in payment as a result of the APC recalibration.
    Among teaching hospitals, we estimate that the impact resulting 
from APC recalibration will include a decrease of 0.1 percent for major 
teaching hospitals and an increase of 0.3 percent for minor teaching 
hospitals. We estimate that non-teaching hospitals will experience an 
increase of 0.2 percent.
    Classifying hospitals by type of ownership suggests that voluntary, 
proprietary, and governmental hospitals will experience increases of 
0.1 to 0.2 percent as a result of the APC recalibration. Finally, we 
estimate that hospitals for which DSH payments are not available will 
experience a decrease of 6.0 percent and that urban hospitals for which 
DSH is not available will experience a decrease of 6.3 percent. 
Hospitals for which DSH is not available furnish a large number of 
psychiatric services and we believe that the decline in payment for APC 
0176 is the cause for this estimated decline in payment.
Column 3: New Wage Indices and the Effect of the Rural Adjustment
    This column estimates the impact of applying the 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 continuing the rural payment adjustment of 
7.1 percent to rural SCHs for CY 2012, as described in section II.E.2. 
of this final rule with comment period. We estimate that the 
combination of updated wage data and nationwide application of rural 
floor budget neutrality will redistribute payment among regions. We 
also updated the list of counties qualifying for the section 505 out-
migration adjustments. Overall, we estimate that urban hospitals will 
experience no change from CY 2011 to CY 2012, although large urban 
hospitals will experience an increase of 0.1 percent as a result of the 
updated wage indices. Rural hospitals will experience decreases of 0.2 
to 0.4 percent as a result of the updated wage indices. We estimate 
that urban hospitals located in the West South Central, Pacific and 
Puerto Rico regions will experience increases of 0.1 to 0.4 percent. 
Urban regions other than New England will experience no change or 
decreases of 0.1 to 0.8 percent. Hospitals in urban New England are 
expected to see an increase of 4.2 percent as a result of the 
implementation of the rural floor. We refer readers to section II.C. of 
this final rule with comment period for more information and Table 60 
for estimated impact of the rural floor and the imputed floor with 
budget neutrality at the State level. Overall, we estimate that rural 
hospitals will experience a decrease of 0.3 percent as a result of 
changes to the wage index for CY 2012. We estimate that hospitals in 
rural Middle Atlantic, West North Central, and Pacific States will 
experience increases of 0.1 to 1.0 percent, while other rural regions 
will experience decreases from 0.1 to 0.8 percent.
Column 4: Cancer Hospital Payment Adjustment
    This column estimates the budget neutral impact of applying the 
hospital-specific CY 2012 cancer hospital payment adjustment authorized 
by section 3138 of the Affordable Care Act, which is estimated to 
result in an aggregate increase in OPPS payments to dedicated cancer 
hospitals of 11.3 percent for the CY 2012 OPPS after accounting for 
TOPs. We estimate that all other hospitals will experience a payment 
decrease of 0.2 percent in CY 2012 as a result of the budget neutral 
payment adjustment for the dedicated cancer hospitals.
Column 5: All Budget Neutrality Changes Combined With the OPD Fee 
Schedule Increase
    We estimate that, for most classes of hospitals, the addition of 
the OPD fee schedule increase factor of 1.9 percent will mitigate the 
negative impacts created by the budget neutrality adjustments made in 
Columns 2 and 3.
    While most classes of hospitals will receive an increase that is 
more in line with the 1.9 percent overall increase after the update is 
applied to the budget neutrality adjustments, urban hospitals that bill 
fewer than 11,000 lines and hospitals that do not report DSH or for 
which DSH information is not available will experience decreases. In 
particular, urban hospitals that report fewer than 5,000 lines will 
experience a cumulative decrease, after application of the OPD fee 
schedule increase factor and the budget neutrality adjustments, of 3.4 
percent, largely as a result of the decrease in payment for APC 0034 
(Mental Health Services Composite). Similarly, urban hospitals for 
which DSH is not available, and for which DSH is zero will experience 
decreases of 0.1 to 4.0, also largely as a result of the decrease in 
payment for APC 0034. OPPS payment for APC 0034 is continuing to be 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 changes will increase payments to 
urban hospitals by 1.9 percent. We estimate that large urban hospitals 
and ``other'' urban hospitals will also experience increases of 2.0 and 
1.9 percent, respectively. Hospitals in urban New England will 
experience an increase of 5.7 percent, largely as a result of the 
change in wage index shown under column 3 and discussed above. We 
estimate that rural hospitals will experience a 1.5 percent increase as 
a result of the OPD fee schedule increase factor and other budget 
neutrality adjustments.

[[Page 74560]]

    Among teaching hospitals, we estimate that the impacts resulting 
from the OPD fee schedule increase factor and other budget neutrality 
adjustments will include an increase of 1.9 percent for major teaching 
hospitals, minor teaching hospitals and non-teaching hospitals.
    Classifying hospitals by type of ownership suggests that 
proprietary hospitals will experience an estimated increase of 1.7 
percent, while voluntary hospitals will experience an estimated 
increase of 2.0 percent and government hospitals will experience an 
estimated increase of 1.5 percent.
Column 6: All Adjustments With the Frontier State Wage Index Adjustment
    This column shows the impact of all budget neutrality adjustments, 
application of the 1.9 percent OPD fee schedule increase factor, and 
the non-budget neutral impact of applying the frontier State wage 
adjustment (that is, the frontier State wage index change in addition 
to all changes reflected in Column 4). In general, we estimate that all 
facilities and all hospitals will experience a combined increase of 
2.0. Hospitals in the rural Mountain region will experience an increase 
of 2.8 percent, most of which is attributable to the frontier State 
wage adjustment. Similarly, hospitals in the rural West North Central 
region will experience an increase of 2.7 percent, while hospitals in 
the urban West North Central will experience an increase of 2.5 
percent, most of which also is attributable to the frontier State wage 
adjustment.
Column 7: All Changes for CY 2012
    Column 7 compares all changes for CY 2012 to estimated final 
payment for CY 2011, including the changes in the outlier threshold, 
payment reductions for hospitals that failed to meet the Hospital OQR 
Program 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 OQR 
Program reporting requirements; however, we estimate that the 
anticipated change in payment between CY 2011 and CY 2012 for these 
hospitals will be negligible. (We further discuss the estimated impacts 
of hospitals' failure to meet these requirements in section XX.A.4.d. 
of this final rule with comment period.) Overall, we estimate that 
facilities will experience an increase of 1.9 percent under this final 
rule with comment period in CY 2012 relative to total spending in CY 
2011. The projected 1.9 percent increase for all facilities in Column 7 
of Table 59 reflects the 1.9 percent OPD fee schedule increase factor, 
less 0.07 percent for the change in the pass-through estimate between 
CY 2011 and CY 2012, plus 0.07 percent for the difference in estimated 
outlier payments between CY 2011 (0.93 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 1.9 percent 
after rounding. We estimate that the combined effect of all changes for 
CY 2012 will increase payments to urban hospitals by 1.9 percent. We 
estimate that large urban hospitals will experience a 2.0 percent 
increase, while ``other'' urban hospitals will experience an increase 
of 1.9 percent. We estimate that urban hospitals that bill less than 
5,000 lines of OPPS services will experience a decrease of 2.9 percent, 
largely attributable to the 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 will experience increases between 
1.0 percent and 2.3 percent, while urban hospitals that report between 
5,000 and 10,999 lines will experience a decrease of 0.3 percent.
    Overall, we estimate that rural hospitals will experience a 1.5 
percent increase as a result of the combined effects of all changes for 
CY 2012. We estimate that rural hospitals that bill less than 5,000 
lines of OPPS services will experience an increase of 0.6 percent and 
that rural hospitals that bill 5,000 or more lines of OPPS services 
will experience increases ranging from 1.5 to 2.7 percent.
    Among teaching hospitals, we estimate that the impacts resulting 
from the combined effects of all changes will include an increase of 
1.9 percent for major teaching hospitals and non-teaching hospitals. 
Minor teaching hospitals will experience an increase of 1.8 percent.
    In our analysis, we also have stratified hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
will experience an increase of 2.0 percent, proprietary hospitals will 
experience an increase of 1.7 percent, and governmental hospitals will 
experience an increase of 1.6 percent.
(3) Estimated Effects of This Final Rule With Comment Period on CMHCs
    The last line of Table 59 demonstrates the isolated impact on 
CMHCs. In CY 2011, CMHCs are paid under four APCs for services under 
the OPPS: APC 0172 (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 continuing the four APC provider-specific structure we adopted 
for CY 2011 and are finalizing our proposal 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 will 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 final rule with comment period. We 
excluded days with 1 or 2 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 will be a 32.4 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 CY 2012 
wage index values will result in a decrease of 0.3 percent to CMHCs. 
Column 4 shows that CMHCs will experience a 0.2 percent reduction as a 
result of the cancer hospital payment adjustment. We note that all 
providers paid under the OPPS, including CMHCs, will receive a 1.9 
percent OPD fee schedule increase factor. Column 5 shows that combining 
this OPD fee schedule increase factor, along with changes in APC policy 
for CY 2012 and the CY 2012 wage index updates, results in an estimated 
decrease of 30.8 percent. Column 6 shows that adding the frontier State 
wage adjustment results in no change to the cumulative 30.8 percent 
decrease. Column 7 shows that adding

[[Page 74561]]

the changes in outlier and pass-though payments will result in no 
change to the 30.8 percent decrease in payment for CMHCs. This reflects 
all changes to CMHCs for CY 2012.
    The impact of the changes to hospital payment rates for partial 
hospitalization services is reflected in the impact of all 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 and hospitals for which DSH is zero or not 
available.
    All providers paid under the OPPS will receive a 1.9 percent OPD 
fee schedule increase factor under this policy. Combining this OPD fee 
schedule increase factor with changes in APC policy for CY 2012, the CY 
2012 wage index updates, and with changes in outlier and pass-through 
payments, we estimate that the combined impact on hospitals within the 
OPPS system will be a 1.9 percent increase in total payment for CY 
2012. Table 59 presents the estimated impact of the changes to the OPPS 
for CY 2012.
BILLING CODE 4120-01-P

[[Page 74562]]

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[[Page 74563]]


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[[Page 74564]]


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[[Page 74565]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.154

    In response to public comments we received on the proposed rule, we 
are providing the payment impact of the rural floor and imputed floor 
with budget neutrality at the State level in Table 60. Column 1 of the 
table displays the number of hospitals located in each State. Column 2 
displays the number of hospitals in each State that will be receiving 
the rural floor or imputed floor wage index for CY 2012. Column 3 
displays the percentage of total payments each State receives or 
contributes to fund the rural floor and the imputed floor with national 
budget neutrality. This column compares the post-reclassification CY 
2012 wage index of providers before the rural floor and the imputed 
floor adjustment and the post-reclassification CY 2012 wage index of 
providers with the rural floor and the imputed floor adjustment. Column 
4 displays an estimated payment amount that each State will gain or 
lose due to the application of the rural floor and the imputed floor 
with national budget neutrality.

[[Page 74566]]

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[[Page 74567]]


[GRAPHIC] [TIFF OMITTED] TR30NO11.156

BILLING CODE 4120-01-C
(4) Estimated Effect of This Final Rule with Comment Period on 
Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary share of payment will 
increase for services for which the OPPS payments will rise and will 
decrease for services for which the OPPS payments will fall. For 
example, for a service assigned to Level IV Needle Biopsy/Aspiration 
Except Bone Marrow (APC 0037) in the CY 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 national unadjusted copayment for APC 0037 
is $227.40, a decline from the copayment in effect for CY 2011. The 
minimum unadjusted copayment for APC 0037 is $215.00 or 20 percent of 
the CY 2012 national unadjusted payment rate for APC 0037 of $1,074.99. 
The minimum unadjusted copayment will decline because the CY 2011 
payment rate for APC 0037 will decline for CY 2012. For further 
discussion on the calculation of the national unadjusted copayments and 
minimum unadjusted copayments, we refer readers to section II.I. of 
this final rule with comment period. 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 amount 
of the CY 2012 hospital inpatient deductible is $1,156.
    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 
4,161 hospitals and CMHCs on which our modeling is based, that total 
beneficiary liability for copayments will decrease as an overall 
percentage of total payments, from 22.0 percent in CY 2011 to 21.8 
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 
final

[[Page 74568]]

rule with comment period. No types of providers other than hospitals, 
CMHCs and ASCs are affected by the changes in this final rule with 
comment period.
(6) Effects on the Medicare and Medicaid Programs
    The effect on the Medicare program is expected to be $600 million 
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 final rule with comment period.
(7) Alternatives Considered
    Alternatives to the changes we are making and the reasons for our 
selected alternatives are discussed throughout this final rule with 
comment period. Some of the major issues discussed in this final rule 
with comment period 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 finalizing our proposal, with modification, that, for CY 
2012, the OPPS will make payment for separately payable drugs and 
biologicals at ASP+4 percent, and this payment will continue to 
represent combined payment for both the acquisition and pharmacy 
overhead costs of separately payable drugs and biologicals. In 
addition, because we are continuing 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. Further, in order to enhance the 
intra-rulemaking stability of the ASP+X amount between the proposed 
rule and this final rule with comment period, we are modifying the 
proposed redistribution amount of $215 million in order to keep the 
mathematical relationship between the redistribution amount and amount 
of total drug costs (instead of the dollar amount, as was our policy in 
CY 2010 and 2011) the same between the proposed rule and the final 
rule. This approach, described briefly below and in greater depth in 
section V.B.3 of this final rule with comment period, results in a 
total CY 2012 redistribution amount of $240.3 million, or $169 million 
(or 35 percent) in pharmacy overhead cost currently attributed to coded 
packaged drugs, and $71.3 million (or 10.7 percent) in pharmacy 
overhead cost attributed to uncoded packaged drugs.
    Therefore, as discussed in further detail in section V.B.3. of this 
final rule with comment period, we believe that approximately $169 
million in pharmacy overhead cost for packaged drugs and biologicals 
with a separately-reported HCPCS code, and $71.3 million pharmacy 
overhead cost attributed to packaged uncoded drugs and biologicals 
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 finalizing 
our proposal to reduce the cost of packaged drugs and biologicals that 
is included in the payment for procedural APCs to offset the $240.3 
million adjustment to payment for separately payable drugs and 
biologicals. We are finalizing our proposal that any redistribution of 
pharmacy overhead cost that may arise from CY 2012 final rule claims 
data will 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 three 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 was 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 July 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 final rule with comment period, we also 
determined that the combined acquisition and overhead costs of packaged 
drugs are 192 percent of ASP. We did not choose this alternative 
because we believe that this analysis indicates that hospital charging 
practices reflected in our standard drug payment methodology have 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 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 proposed for CY 
2012 is to continue our pharmacy overhead redistribution methodology 
and 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. Using this approach, we 
proposed to adjust the CY 2010 and 2011 pharmacy overhead and handling 
redistribution amount of $200 million using the PPI for Pharmaceuticals 
for Human Use, resulting in a proposed CY 2012 redistribution amount of 
$215 million and payments of ASP+4 percent. In the final rule, 
redistributing $215 million in overhead between packaged drugs and 
biologicals to separately payable drugs and pharmaceuticals would have 
resulted in a combined payment of ASP+3 percent for the acquisition and 
pharmacy overhead costs, a 1-percent decrease in the ASP+X amount from 
the proposed ASP+4 percent. However, as we discuss in section V.B.3.b 
of this final rule with comment period, we determined that this decline 
of the methodologically derived ASP+X percent is due to increasing the 
interim claims data used in the proposed rule calculations to a whole 
year's data for the final rule while keeping the drug overhead 
redistribution amount constant. Further, after additional analysis, we 
believe that this decline in the ASP+X amount for the final rule due to 
the inclusion of a whole year's data will always occur if we were to 
continue to use a fixed overhead redistribution amount while updating 
the amount of total costs included in the analysis for the final rule 
to include a whole year worth of total cost data. Therefore, because we 
believe another policy may promote more stability than the ASP+X 
percent calculation when based on a fixed

[[Page 74569]]

redistribution amount, and because we believe that our proposals should 
always reflect the expected value of the final to the best of our 
ability, we did not finalize our proposal to redistribute a fixed $215 
million pharmacy overhead amount for this final rule with comment 
period.
    The third option that we considered, and the one that we selected 
for CY 2012, is to continue the overhead redistribution methodology 
that we finalized in the CY 2010 OPPS/ASC final rule with comment 
period, employed in CY 2011, and proposed in CY 2012, but with a 
modification. Specifically, in this CY 2012 OPPS/ASC final rule with 
comment period, in order to enhance intra-rulemaking stability, we will 
instead keep the proportions of overhead redistribution to total drug 
and biological costs constant between the proposed rule and the final 
rule, but change the dollar amount of the transfer. Consequently, 
instead of redistributing the proposed $215 million in costs for coded 
and uncoded packaged drugs and biologicals ($54 million in 
redistributed costs for uncoded packaged drugs and biologicals, or 10.7 
percent of total drug and biological costs; and $161 million for coded 
packaged drugs and biologicals, or 35 percent of total costs) we will 
update the redistribution amounts to keep the proportion of 
redistributed costs constant between the proposed rule and the final 
rule. Therefore, for CY 2012 we will redistribute $169 million (or 35 
percent) of coded packaged drug and biological overhead cost, and $71.3 
million (or 10.7 percent) of uncoded packaged drug and biological 
overhead cost, resulting in a total redistribution amount of $240.3 
million. This option keeps the percentage of coded packaged and uncoded 
packaged overhead cost that is redistributed constant between the 
proposed rule and the final rule, and results in a final CY 2012 ASP+X 
percent of ASP+4 percent that is identical to the ASP+X percent in the 
proposed rule.
    We chose this alternative because we believe that it substantially 
enhances the intra-rulemaking stability for the ASP+X amount between 
the proposed rule and the final rule. We believe that this 
redistribution amount provides an appropriate redistribution of 
pharmacy overhead costs associated with drugs and biologicals, based on 
the analyses discussed in section V.B.3. of this final rule with 
comment period.
 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 under section 1833(t)(2)(E) of the Act to reflect these 
higher costs.
    As discussed in detail in section II. F. of this final rule with 
comment period, 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 
finalizing our proposal, with modification after consideration of the 
public comments we received, to provide a payment adjustment for cancer 
hospitals for CY 2012 based on a comparison of costliness relative to 
payments using cost report data. Specifically, the cancer hospital 
payment adjustment amounts will be provided on an aggregate basis at 
cost report settlement and will be equal to the amount of additional 
payment needed for a resulting PCR that is equal to the weighted 
average PCR for other hospitals furnishing services under section 
1833(t) of the Act, which we refer to as the ``target PCR''. The target 
PCR for CY 2012, which is calculated using the most recently submitted 
or settled cost report data that is available at the time of this final 
rule, is 0.91. Based on this target PCR, OPPS payments to cancer 
hospitals are estimated to increase by 34.5 percent and total payments 
to cancer hospitals, including TOPs, are estimated to increase by 11.3 
percent in CY 2012.
    We considered three alternatives for the proposed OPPS payment 
adjustment for certain cancer hospitals. The first alternative we 
considered was 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 was to provide the same 
adjustment to all cancer hospitals based on the difference between the 
weighted average PCR for all cancer hospitals (0.674) and the weighted 
average PCR for all other hospitals (0.907). This class adjustment, 
instead of a hospital-specific adjustment, would provide a 34.6 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

[[Page 74570]]

most cancer hospitals that is higher than the weighted average PCR of 
other hospitals furnishing services under OPPS and a much larger budget 
neutrality adjustment, we did not select this alternative.
    The third alternative we considered, and the one we selected for CY 
2012, is to provide an aggregate payment amount at cost report 
settlement that is equal to the amount of additional payment needed for 
a resulting PCR equal to the target PCR for those cancer hospitals that 
have a PCR that is less than the target PCR. For a cancer hospital with 
an individual PCR that is above the target PCR (before the cancer 
hospital payment adjustment), the aggregate payment amount provided at 
cost report settlement is equal to zero. For purposes of calculating 
the aggregate adjustment amounts to be provided in CY 2012, 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.
 Alternatives Considered for the Supervision of Hospital 
Outpatient Therapeutic Services
    We are finalizing our proposal to establish the APC Panel as the 
independent advisory body that will recommend to CMS the appropriate 
supervision level for individual hospital outpatient therapeutic 
services. We will modify the Panel's scope and composition in order to 
create a body that is prepared to address supervision standards and 
reflects the range of parties subject to the standards. We will issue 
final decisions on the required supervision levels, taking the Panel's 
recommendations into consideration, through a subregulatory process 
that will include a period of informal public notice and comment.
    We considered several alternatives with respect to the number and 
nature of the representatives that we are adding to the APC Panel. 
Stakeholders requested that we add four positions for representatives 
of CAHs and an additional four seats for small rural hospitals that are 
paid under the OPPS. We did not choose this alternative because we do 
not believe that it would maintain balanced membership on the Panel in 
accordance with the FACA requirements.
    The alternative that we considered and chose was to add four 
positions that will be divided evenly among representatives of CAHs and 
small rural PPS hospitals. We chose this alternative because we believe 
that it will lead to balanced Panel membership in accordance with the 
FACA requirements. Because currently there is little representation of 
small rural PPS hospitals on the Panel, we believe that additional 
representation of these providers is appropriate.
    We also considered an alternative with respect to how CMS will 
issue final decisions on required supervision levels. We considered 
subjecting our decisions to notice and comment rulemaking because most 
public commenters requested this option. We did not choose this 
alternative because we believe that a more flexible process that allows 
more frequent evaluations and reduces administrative burden will best 
meet the needs of hospitals and beneficiaries. Public commenters who 
responded to the proposed rule and to the CY 2011 OPPS/ASC final rule 
with comment period requested that CMS provide such flexibility. In 
addition, there is precedent for setting outpatient supervision levels 
using a subregulatory process. Our final policy is similar to the 
process that the agency uses to set the supervision levels for 
outpatient diagnostic services under the MPFS, which are then adopted 
for the OPPS. In contrast to the process for diagnostic services, we 
are providing a period of public notice and comment to increase 
transparency and opportunity for public input.
    In summary, the APC Panel has an exemplary history of providing 
valuable advice to CMS with regard to the payment and clinical issues 
associated with the APC groupings of hospital outpatient therapeutic 
services under the OPPS. 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 advice considering 
the full spectrum of hospital stakeholders.
b. Effects of ASC Payment System Changes in This Final Rule With 
Comment Period
    On August 2, 2007, we published in the Federal Register the final 
rule for the revised ASC payment system, effective January 1, 2008 (72 
FR 42470). In that final rule, we adopted the methodologies to set 
payment rates for covered ASC services to implement the revised payment 
system so that it would be designed to result in budget neutrality as 
required by section 626 of Public Law 108-173; established that the 
OPPS relative payment weights would be the basis for payment and that 
we would update the system annually as part of the OPPS rulemaking 
cycle; and provided that the revised ASC payment rates would be phased 
in over 4 years. During the 4-year transition to full implementation of 
the ASC payment rates, payments for surgical procedures 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 2008, we paid 
ASCs using a 25/75 blend, in which payment was calculated by adding 75 
percent of the CY 2007 ASC rate for a surgical procedure on the CY 2007 
ASC list of covered surgical procedures and 25 percent of the CY 2008 
ASC rate calculated according to the ASC standard ratesetting 
methodology for the same procedure. 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 final rule with comment period, we set the CY 
2012 ASC relative payment weights by scaling CY 2012 ASC relative 
payment weights by the ASC scaler of 0.9466. 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 61 and 62 
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

[[Page 74571]]

be 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). We calculated the CY 2012 ASC conversion factor by adjusting 
the CY 2011 ASC conversion factor by 1.0004 to account for changes in 
the pre-floor and pre-reclassified hospital wage indices between CY 
2011 and CY 2012 and by applying the CY 2012 MFP-adjusted CPI-U update 
factor of 1.6 percent (2.7 percent CPI-U minus a productivity 
adjustment of 1.1 percentage points). The CY 2012 ASC conversion factor 
is $42.627.
(1) Limitations of Our Analysis
    Presented here are the projected effects of the 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 CY 2012 changes will be small in the 
aggregate for all ASCs. However, such changes may have differential 
effects across surgical specialty groups as ASCs continue to adjust to 
the payment rates based on the policies of the revised ASC payment 
system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs will experience changes 
in payment that differ from the aggregated estimated impacts presented 
below.
(2) Estimated Effects of This Final Rule With Comment Period on 
Payments to ASCs
    Some ASCs are multispecialty facilities that perform the gamut of 
surgical procedures, from excision of lesions to hernia repair to 
cataract extraction; others focus on a single specialty and perform 
only a limited range of surgical procedures, such as eye, digestive 
system, or orthopedic procedures. The combined effect on an individual 
ASC of the update to the CY 2012 payments will depend on a number of 
factors, including, but not limited to, the mix of services the ASC 
provides, the volume of specific services provided by the ASC, the 
percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the CY 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 61 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 62 shows a comparison of 
estimated CY 2011 payments to estimated CY 2012 payments for procedures 
that we estimate will receive the most Medicare payment in CY 2012.
    Table 61 shows the estimated effects on aggregate Medicare payments 
under the revised ASC payment system by surgical specialty or ancillary 
items and services group. We have aggregated the surgical HCPCS codes 
by specialty group, grouped all HCPCS codes for covered ancillary items 
and services into a single group, and then estimated the effect on 
aggregated payment for surgical specialty and ancillary items and 
services groups. 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 61.
     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 will be attributable to updates to ASC payment rates for CY 
2012 compared to CY 2011.
    As seen in Table 61, we estimate that the update to ASC rates for 
CY 2012 will result in a 1 percent change in aggregate payment amounts 
for eye and ocular adnexa procedures, a 4 percent increase in aggregate 
payment amounts for digestive system procedures, and a 0 percent change 
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 hematologic 
and lymphatic systems procedures will increase by 5 percent, whereas 
auditory system procedures will decrease by 2 percent under the CY 2012 
rates.
    An estimated increase in aggregate payment for the specialty group 
does not mean that all procedures in the group will experience 
increased payment rates. For example, the estimated 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 
will increase by 29 percent for CY 2012.
    Also displayed in Table 61 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 or CY 2012 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 will decrease by 
26 percent for CY 2012.

[[Page 74572]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.157

    Table 62 below shows the estimated impact of the 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 update.
    As displayed in Table 62, 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 61 the estimated effects of the CY 2012 
update on ASC payment for individual procedures shown in Table 62 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 
update to the ASC rates will result in a 1 percent increase for this 
procedure in CY 2012. The estimated payment effects on two of the other 
four eye and ocular adnexa procedures included in Table 62 are slightly 
more significant. We estimate that the payment rate for CPT code 67904 
(Repair eyelid defect) will increase by 3 percent and payment for CPT 
code 67042 (Vit for macular hole) will increase by 4 percent.
    We estimate that the payment rates for all of the digestive system 
procedures included in Table 62 will change by -1 to +5 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 CY 2012 update on the eight nervous 
system procedures for which the most Medicare ASC payment is estimated 
to be made in CY 2011 will be variable. Our estimates indicate that the 
CY 2012 update will result in payment increases of 2 to 3 percent for 7 
of the 8 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 3 
percent.

[[Page 74573]]

    The estimated payment effects for most of the remaining procedures 
listed in Table 62 will be neutral or will increase by 2 to 4 percent 
except CPT code 29826 (Shoulder arthroscopy/surgery), which is 
estimated to decrease by 37 percent, code 29827 (Arthroscop rotator 
cuff repr), which is estimated to increase by 23 percent, and CPT code 
52000 (Cystoscopy), which is estimated to decrease by 5 percent. 
Musculoskeletal procedures in general 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 will increase 
under the revised payment system in CY 2012.
BILLING CODE 4120-01-P

[[Page 74574]]

[GRAPHIC] [TIFF OMITTED] TR30NO11.158

BILLING CODE 4120-01-C
    The previous ASC payment system served as an incentive to ASCs to 
focus on providing procedures for which they determined Medicare 
payments would

[[Page 74575]]

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 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 will be especially noticeable increases in spending for 
the hematologic and lymphatic systems compared to the previous ASC 
payment system.
(3) Estimated Effects of This Final Rule With Comment Period on 
Beneficiaries
    We estimate that the CY 2012 update to the ASC payment system will 
be generally positive for beneficiaries with respect to the new 
procedures that we are adding to the ASC list of covered surgical 
procedures and for those that we are designating as office-based for CY 
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, in almost all cases, the 
ASC payment rates under the revised payment system are lower than 
payment rates for the same procedures under the OPPS. Therefore, the 
beneficiary coinsurance amount under the ASC payment system almost 
always will be less than the OPPS copayment amount for the same 
services. (The only exceptions 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 will provide beneficiaries access to more surgical 
procedures in ASCs. Beneficiary coinsurance for services migrating from 
physicians' offices to ASCs may decrease or increase under the revised 
ASC payment system, depending on the particular service and the 
relative payment amounts for that service in the physician's office 
compared to the ASC. However, for those additional procedures that we 
are designating as office-based in CY 2012, the beneficiary coinsurance 
amount would be no greater than the beneficiary coinsurance in the 
physician's office because the coinsurance in both settings is 20 
percent.
(4) Alternatives Considered
    Alternatives to the changes we are making and the reasons that we 
have chosen specific options are discussed throughout this final rule 
with comment period. Some of the major ASC issues discussed in this 
final rule with comment period and the options considered are discussed 
below.
 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 final rule with comment period, 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 final rule with comment period, we are finalizing our proposal to 
newly designate 10 surgical procedures as permanently office-based and 
finalizing our proposal 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 10 procedures we proposed to designate as permanently office-based 
and the 8 procedures we proposed 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 proposed to 
designate as permanently office-based, as well as the 8 procedures that 
we proposed 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 proposed to designate as 
permanently office-based and the 8 procedures we proposed 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 selecting 
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

[[Page 74576]]

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 final rule with 
comment period. The first accounting statement, Table 63 below, 
illustrates the classification of expenditures for the CY 2012 
estimated hospital OPPS incurred benefit impacts associated with the CY 
2012 OPD fee schedule increase shown in this final rule with comment 
period, based on the FY 2012 President's Budget. The second accounting 
statement, Table 64 below, illustrates the classification of 
expenditures associated with the 1.6 percent CY 2011 update to the 
revised ASC payment system, based on the provisions of this final rule 
with comment period and the baseline spending estimates for ASCs in the 
FY 2012 President's Budget. Lastly, both tables classify all estimated 
impacts as transfers.
[GRAPHIC] [TIFF OMITTED] TR30NO11.159

d. Effects of 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 final 
rule with comment period, we are finalizing our proposal to adopt 
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 2.0 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

[[Page 74577]]

this approach was suitable for the CY 2012 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 final rule with comment period, we are finalizing our 
proposal 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. We also 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 will 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 will 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 finalized for the CY 
2013 payment determination, respectively, we will 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, because we will 
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 final rule with comment period, for the CY 2013 payment 
determination, we are not finalizing our proposal to reduce the time 
from 45 days to 30 days for hospitals to submit requested medical 
record documentation to meet our validation requirement. Instead, we 
are maintaining the 45-day timeframe. The total burden would be a 
maximum of 12 charts for each of the four quarters that must be copied 
and mailed within a 45-day period after the end of each quarter.
e. Effects of 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, 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 regulations we are finalizing at Sec.  411.362(c) set forth the 
process for a hospital to request an exception to the prohibition on 
expansion of facility capacity. 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 new 
regulations 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 is 
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 will be 
minimal.
    Our new regulations require each hospital requesting an exception 
to provide documentation supporting its calculations to demonstrate 
that it satisfies the relevant criteria. Our new regulations further 
require each hospital to provide documentation to support information 
related to its number of operating rooms, procedure rooms, and beds. 
This information includes, 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 also is required to provide a detailed explanation regarding 
whether and how it satisfies each of the relevant criteria. We believe 
physician-owned hospitals will be minimally affected by these 
requirements.
    Our regulations require each hospital requesting an exception to 
disclose on a public Web site for the hospital that it is requesting an 
exception. Our new regulations 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 new regulations, if CMS were to receive input from the

[[Page 74578]]

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 is minimal.
    We believe the proposals that we are finalizing will 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 final rule with comment 
period as a result of their ownership interests in hospitals.
    The 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 
requirements will present a negligible impact on physician-owned 
hospitals. Physician-owned hospitals will 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 will 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 will be minimal.
    We believe that beneficiaries may be positively impacted by these 
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 regulatory changes are necessary to conform our regulations to the 
amendments to section 1877 of the Act. We also believe the new 
regulations will 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 the proposed rule, we solicited public comments on each of the 
issues outlined above that contain estimates of the costs and benefits 
of the proposed rule. We did not receive any public comments on our 
estimates.
f. Effects of Changes to Provider Agreement Regulations on Patient 
Notification Requirements
    In section XV.D. of this final rule with comment period, 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 a day, 7 days a 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 final rule with comment period, we are 
finalizing our proposal 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 24 
hours a day/7 days a week. We are finalizing our proposal 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 changes to the provider agreement regulations will 
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 hours a day, 7 days a 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 will fall into this category. Rather, the primary 
impact of the regulations is a change in the number of annual written 
disclosures given by hospitals to patients. We believe the cost of 
implementing these provisions borne by hospitals will 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 changes will 
have any significant economic impact on hospitals.
    We do not anticipate that the proposals we are finalizing 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 
final rule with comment period will affect mostly hospitals, 
physicians, and beneficiaries. The changes we are finalizing concerning 
the disclosure of the presence of a doctor of medicine or a doctor of 
osteopathy in hospitals are consistent with the current practices of 
most hospitals. Thus, our physician presence disclosure proposal will 
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 new policies make no significant change that has the 
potential to impede patient access to health care facilities and 
services. In fact, we believe that our policies 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 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

[[Page 74579]]

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 2.0 percent.
    In section XVI.A.3. of this final rule with comment period, we are 
finalizing additional requirements for the FY 2014 Hospital VBP 
Program. Specifically, we are finalizing our proposal to add one chart-
abstracted measure to the Hospital VBP measure set for the FY 2014 
payment determination. Although this additional measure is chart-
abstracted, it is required for the Hospital IQR Program. Therefore, 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 2012 Electronic Reporting Pilot
    Under section XIV.J. of this final rule with comment period, we are 
finalizing our proposal to allow eligible hospitals and CAHs that are 
participating in the Medicare EHR Incentive Program to meet the CQM 
reporting requirement of the program for payment year 2012 by 
participating in the 2012 Electronic Reporting Pilot. This alternative 
will 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 are encouraging eligible hospitals and CAHs 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 and CAHs to send, 
and for CMS, in the future, to receive, quality measures via hospital 
EHRs for the Hospital IQR Program's measures. Eligible hospitals and 
CAHs that choose to participate in this 2012 Electronic Reporting Pilot 
for the purpose of meeting the CQM reporting requirement of the 
Medicare EHR Incentive Program will be taking those first steps toward 
reporting clinical quality data in such a way.
i. Effect of Requirements for the Ambulatory Surgical Center (ASC) 
Quality Reporting Program
    In section XIV.K. of this final rule with comment period, we are 
finalizing our proposal to adopt requirements for ASCs to report 
quality data under the ASC Quality Reporting Program in order to 
receive the full ASC annual payment update factor for CY 2014-2016.
    We are unable at this time to estimate the number of ASCs that may 
not receive the full ASC annual payment update factor in CY 2014, CY 
2015, and CY 2016.

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 ``Table of Small Business Size 
Standards'' at http://www.sba.gov/content/table-small-business-size-standards.
    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 final rule with comment period 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 final rule with 
comment period does not mandate any requirements for State, local, or 
tribal governments, nor will it affect private sector costs.

D. Conclusion

    The changes we are finalizing will affect all classes of hospitals 
paid under the OPPS and will affect both CMHCs and ASCs. We estimate 
that most classes of hospitals paid under the OPPS will experience a 
modest increase or a minimal decrease in payment for services furnished 
under the OPPS in CY 2012. Table 59 demonstrates the estimated 
distributional impact of the OPPS budget neutrality requirements that 
will result in a 1.9 percent increase in payments for all services paid 
under the OPPS in CY 2012, after considering all changes to APC 
reconfiguration and recalibration, as well as the OPD fee schedule 
increase factor, wage index changes, including the frontier State wage 
index adjustment, the addition of an adjustment for dedicated cancer 
hospitals, estimated payment for outliers, and changes to the pass-
through payment estimate. However, some classes of providers that are 
paid under the OPPS will experience significant gains and others will 
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, will receive an increase in payments under the OPPS of 13.7 
percent for CY 2012. In contrast, we estimate that CMHCs will see an 
overall decrease in payment of 30.8 percent as a result of the 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 updates to the ASC payment system for CY 2012 will affect each 
of the approximately 5,000 ASCs currently approved for participation in 
the Medicare program. The effect on an individual ASC will depend on 
its mix of patients, the proportion of the ASC's patients that are 
Medicare beneficiaries, the degree to which the payments for the 
procedures offered by the ASC are changed under the revised payment 
system, and the extent to which the ASC provides a different set of 
procedures in the coming year. Table 61 demonstrates the estimated 
distributional impact among ASC surgical specialties of the MFP-
adjusted CPI-U update of 1.6 percent 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 final 
rule with comment period in accordance

[[Page 74580]]

with Executive Order 13132, Federalism, and have determined that they 
will not have a substantial direct effect on State, local or tribal 
governments, preempt State law, or otherwise have a Federalism 
implication. As reflected in Table 59 of this final rule with comment 
period, we estimate that OPPS payments to governmental hospitals 
(including State and local governmental hospitals) will increase by 1.6 
percent under this final rule with comment period. While we do not know 
the number of ASCs or CMHCs with government ownership, we anticipate 
that it is small. We believe that the provisions related to payments to 
ASCs or CMHCs in CY 2012 will not affect payments to any ASCs or CMHCs 
owned by government entities.
    The analyses we have provided in section XX.A. of this final rule 
with comment period, in conjunction with the remainder of this 
document, demonstrates that this final rule with comment period is 
consistent with the regulatory philosophy and principles identified in 
Executive Order 12866, the RFA, and section 1102(b) of the Act.
    This final rule with comment period will affect payments to a 
substantial number of small rural hospitals and a small number of rural 
ASCs, as well as other classes of hospitals, CMHCs, 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, 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 amending 42 CFR Chapter IV as set 
forth below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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

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


0
2. Section 410.27 is revised to 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;
    (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 provide the required supervision 
of 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.
    (b) Drugs and biologicals are also subject to the limitations 
specified in Sec.  410.129.
    (c) Rules on emergency services furnished to outpatients by 
nonparticipating hospitals are specified in subpart G of Part 424 of 
this chapter.
    (d) Rules on emergency services furnished to outpatients in a 
foreign country are specified in subpart H of Part 424 of this chapter.
    (e) Medicare Part B pays for partial hospitalization services if 
they are--
    (1) Prescribed by a physician who certifies and recertifies the 
need for the

[[Page 74581]]

services in accordance with subpart B of part 424 of this chapter; and
    (2) Furnished under a plan of treatment as required under subpart B 
of part 424 of this chapter.
    (f) Services furnished by an entity other than the hospital are 
subject to the limitations specified in Sec.  410.42(a).
    (g) For purposes of this section, ``nonphysician practitioner''' 
means a clinical psychologist, licensed clinical social worker, 
physician assistant, nurse practitioner, clinical nurse specialist, or 
certified nurse-midwife.

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

0
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).


0
4. Section 411.362 is amended by--
0
a. Under paragraph (a), adding the definitions of ``Baseline number of 
operating rooms, procedure rooms, and beds'' and ``main campus of the 
hospital'' in alphabetical order.
0
b. Revising paragraph (b)(2).
0
c. Adding a new 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 during the most 
recent fiscal year 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 during the most recent fiscal year 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 during the most recent fiscal year 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:
    (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

[[Page 74582]]

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 result in the number of operating rooms, procedure 
rooms, and beds for which the hospital is licensed exceeding 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

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

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and1395hh).


0
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.
* * * * *

0
7. Section 416.171 is amended by--
0
a. Revising paragraph (b).
0
b. Revising paragraph (d).
    The revisions 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. If a 
payment rate is not available, the following items and services are 
designated as contractor-priced:
* * * * *
    (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 (d)(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 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.
* * * * *

0
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

0
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), and 1395hh).


0
10. Section 419.32 is amended by:
0
a. Revising paragraph (b)(1)(iv)(A).
0
b. Removing the word ``and'' that appears at the end of paragraph 
(b)(1)(iv)(B)(1).
0
c. Removing the period and adding ``; and'' in its place at the end of 
paragraph (b)(1)(iv)(B)(2).
0
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.

[[Page 74583]]

    (B) * * *
    (3) For calendar year 2012, a multifactor productivity adjustment 
(as determined by CMS) and 0.1 percentage point.
* * * * *

0
11. Section 419.43 is amended by adding a new 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 (PCR) before the cancer hospital payment 
adjustment (as determined by the Secretary at cost report settlement) 
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 at the time of the applicable CY Hospital Outpatient 
Prospective Payment System/Ambulatory Surgical Center final rule with 
comment period) (referred to as the Target PCR), for covered hospital 
outpatient department services, the aggregate payment amount provided 
at cost report settlement to such hospital is equal to the amount 
needed to make the hospital's PCR at cost report settlement (as 
determined by the Secretary) equal to the target PCR (as determined by 
the Secretary).
    (ii) If a hospital described in section 1886(d)(1)(B)(v) of the Act 
has a payment-to-cost ratio (PCR) before the cancer hospital payment 
adjustment (as determined by the Secretary at cost report settlement) 
that is greater than the weighted average PCR of other hospitals 
furnishing services under section 1833(t) of the Act (as determined by 
the Secretary at the time of the applicable CY Hospital Outpatient 
Prospective Payment System/Ambulatory Surgical Center final rule with 
comment period) (referred to as the Target PCR), for covered hospital 
outpatient department services, the aggregate payment amount provided 
at cost report settlement to such hospital is equal to zero.
    (3) Budget neutrality. CMS establishes the payment adjustment under 
paragraph (i)(1) of this section in a budget neutral manner.


0
12. Section 419.70 is amended by--
0
a. Revising the introductory text of paragraph (d)(2).
0
b. Revising paragraph (d)(6).
    The revisions 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

0
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).


0
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 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

[[Page 74584]]

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

0
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).


0
16. Section 495.8 is amended by--
0
a. Revising paragraph (b)(2)(ii).
0
b. Adding a new paragraph (b)(2)(vi).
    The revision and addition 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: October 26, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & MedicaidServices.
    Dated: October 28, 2011
Kathleen Sebelius,
Secretary.
[FR Doc. 2011-28612 Filed 11-1-11; 4:15 pm]
BILLING CODE 4120-01-P